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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Shaftesbury Plc | LSE:SHB | London | Ordinary Share | GB0007990962 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 421.60 | 419.00 | 420.20 | 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
TIDMSHB
RNS Number : 8859F
Shaftesbury PLC
23 May 2017
SHAFTESBURY 2017 HALF YEAR RESULTS
Growth in earnings, dividend and capital values
Shaftesbury, the Real Estate Investment Trust and owner of an exceptional 14.5 acre property portfolio in the heart of London's West End, today announces its results for the six months ended 31 March 2017.
Highlights
Hot Features
Premium
* London's West End continues to flourish, with good
trading and footfall across our locations
* Continuing good occupier demand across all uses
delivering rental growth and low vacancy
* Strong growth in earnings from increased contracted
income and reduced finance costs, following
refinancing in October 2016. Interim dividend
increase of 10.5% to 7.9p per share.
* EPRA NAV growth(4) of 2.7% over six months driven by
portfolio valuation growth(1) of 2.0%
* Extensive asset management activity, with schemes
across 216,000 sq. ft. (11.9%), including major
projects in Seven Dials, Chinatown and Carnaby
* GBP48.1 million invested during the period: GBP28.1
million of acquisitions and GBP20.0 million of
capital expenditure
------------------------------------------------------------------
Growth in income, earnings, dividend and NAV
Six months
ended
Statement of Comprehensive
Income 31.3.2017 31.3.2016 Change
---------------------------- ------- ---------- --------- -------
Reported results
Net property income GBPm 43.8 42.1 +4.0%
Profit after tax GBPm 102.4 80.1 +27.8%
Basic earnings per share Pence 36.7 28.8 +27.4%
Interim dividend per share Pence 7.9 7.15 +10.5%
EPRA results(3,4)
Earnings GBPm 22.8 20.2 +12.9%
Earnings per share Pence 8.2 7.3 +12.3%
---------------------------- ------- ---------- --------- -------
-- Dividend fully covered by EPRA earnings per share(4) and adjusted earnings per share(4,5)
Balance Sheet 31.3.2017 30.9.2016 Change ----------------------------- ------ ---------- --------- ------- Reported Net assets GBPm 2,469 2,387 +3.4% Diluted net asset value per share(4) GBP 8.83 8.54 +3.4% EPRA(3,4) Net assets GBPm 2,551 2,482 +2.8% Net asset value per share GBP 9.12 8.88 +2.7% ----------------------------- ------ ---------- --------- -------
-- Increase in EPRA NAV(4) over 12 months to 31.3.2017: 43p (4.8%) before a reduction of 24p as a result of refinancing activity reported in the results for the year ended 30.9.2016.
-- Net asset value return(4) for six months ended 31.3.2017: 3.6% (12 months: 6.5% before exceptional refinancing costs noted above).
Continued growth in contracted rents, ERVs and portfolio value(6)
-- Portfolio valuation(4) : GBP3.45 billion. Capital value growth(1) over the six months: +2.0% (12 months: +3.9%).
-- ERV increased by GBP3.5 million to GBP142.2 million. Growth(1) over six months: 1.9% (12 months: +4.3%). CAGR(1) over 10 years: 4.8%.
-- Portfolio reversionary potential has grown by GBP1.1 million to GBP30.2 million, 27.0% above current annualised income, of which GBP14.2 million relates to refurbishment schemes in progress at 31 March 2017.
-- Equivalent yields unchanged. Wholly-owned portfolio: 3.56% (30.9.2016: 3.57%); Longmartin joint venture: 3.79% (30.9.2016: 3.79%).
Good demand for available space
-- EPRA vacancy(2) at 31 March 2017: 3.0% of ERV, including 0.8% in respect of the recently completed Thomas Neal's Warehouse scheme. 1.0% of EPRA vacancy was under offer.
-- Commercial lettings, lease renewals and rent reviews(2) (rental value: GBP9.3 million) concluded at an average 5.6% above 30 September 2016 ERV and 9.7% above ERV at 31 March 2016.
Further investment in our portfolio
-- Redevelopment and refurbishment schemes during the period across 216,000 sq. ft. (11.9% of floor space(1) ). Capital expenditure(2) : GBP20.0 million.
-- Major schemes: Thomas Neal's Warehouse completed and shortlist of proposals from interested parties being evaluated. Central Cross (Charing Cross Road/Chinatown) completing in May; marketing has commenced and initial interest is encouraging. 57 Broadwick Street progressing well with completion in phases from autumn 2017; marketing has recently commenced.
-- Continuing to identify further asset management initiatives across the portfolio to increase rental potential and unlock value.
-- Acquisitions, totalling GBP28.1 million, of properties offering potential for good rental and capital growth.
-- Disposals of non-core assets, totalling GBP5.4 million, including four apartments sold at 9.2% above book value at 30 September 2016.
Strong Balance Sheet
-- Conservative loan-to-value ratio(4,6,7) : 26.1% (30.9.2016: 25.8%).
-- Weighted average maturity of debt(4,6,7) :10.3 years (30.9.2016:10.8 years).
-- Weighted average cost of debt(4,6,7) : 3.7% (30.9.2016: 3.9%).
-- Committed unutilised facilities: GBP178.4 million. Marginal cost on these facilities: 1.3%.
Brian Bickell, Chief Executive, commented:
"This has been another busy period for Shaftesbury, with the benefit of asset management activity across the portfolio and last year's refinancing initiatives delivering growth in earnings, the interim dividend and portfolio value.
Across our portfolio, the data we collect is showing a clear trend of year-on-year turnover growth for our restaurant, leisure and retail tenants, reflecting the buoyancy of the West End's economy. Occupier demand for these uses, and our office and residential space, is good and vacancy levels remain low.
Looking ahead, the UK faces a period of uncertainty as it negotiates its exit from the EU. Whilst this brings a risk of lower business and consumer confidence, we expect the West End, underpinned by its wide appeal and dynamic economy, will maintain its long record of resilience. Our exceptional portfolio, located in its most popular destinations, continues to flourish. With the benefit of our forensic local knowledge and enterprising management, we are confident it will continue to deliver sustained long-term growth in income, capital values and returns to shareholders."
22 May 2017
For further information:
Shaftesbury PLC 020 7333 RMS Partners 020 3735 6551
8118 Simon Courtenay
Brian Bickell, Chief Executive
Chris Ward, Finance Director
MHP Communications 020
3128 8100
John Olsen/Reg Hoare
1. Like-for-like.
2. Wholly-owned portfolio.
3. Calculated in accordance with EPRA Best Practice Recommendations.
4. An alternative performance measure ("APM"). The Group uses a number of APMs to assess and explain its performance, some of which are considered to be APMs as they are not defined under IFRS. Where appropriate, reconciliations to IFRS reported figures are provided within the half year results.
5. After adding back the non-cash accounting charge for share options. 6. Includes 50% of the Longmartin joint venture.
7. Comparative stated pro-forma for refinancing of our Debenture Stock on 7 October 2016 and cancellation of interest rate swaps on notional principal of GBP55m, in October 2016.
See Glossary of terms below.
This announcement includes inside information.
There will be a presentation to equity analysts at 9.30am on Tuesday 23 May 2017, at The London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.
There is a live audio webcast of the analyst presentation which you can access via the following link: https://goo.gl/74V1Uh or from our website. A playback facility of this presentation will be available on the Group's website www.shaftesbury.co.uk by the end of the day. The presentation document is available on the Group's website www.shaftesbury.co.uk
Forward-looking statements
This document may contain certain 'forward-looking' statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements.
Any forward-looking statements made by, or on behalf of, Shaftesbury PLC speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Shaftesbury PLC does not undertake to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.
Information contained in this document relating to Shaftesbury PLC or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.
Ends.
Half year results
Introduction
This has been another busy period for Shaftesbury, with the benefit of asset management activity across the portfolio and last year's refinancing initiatives delivering growth in earnings, the interim dividend and portfolio value.
The global appeal of London's West End underpins its broad-based economy and future prospects. For visitors, whether local, domestic or international, the unique mix of world-class historic and cultural attractions, together with an exciting, innovative dining and leisure scene and a world-renowned choice of shopping, combine to offer a city destination experience estimated to attract 300 million visits annually. Forecasts show this exceptional footfall will continue to grow in the years ahead, particularly with the improved connectivity the opening of the Elizabeth Line will bring when services start next year.
Office occupiers, ranging from local SMEs to international businesses, particularly those in the arts, media and technology sectors, continue to seek a base in, or close to, the West End, giving them access to an unmatched pool of creative talent and knowledge in a business-friendly environment.
The performance of the UK economy has been resilient since the EU referendum last June, although there are currently some national indications of slowing domestic consumer spending and confidence. In contrast, the West End continues to benefit from increasing numbers of international visitors, whose spending power has been enhanced by the recent strength of their local currencies against Sterling since the referendum.
Across our portfolio, the data we collect is showing a clear trend of year-on-year turnover growth for our restaurant, leisure and retail tenants, reflecting the buoyancy of the West End's economy. Occupier demand for these uses, and our office and residential space, is good and vacancy levels remain low.
Looking ahead, the UK faces a period of uncertainty as it negotiates its exit from the EU. Whilst this brings a risk of lower business and consumer confidence, we expect the West End, underpinned by its wide appeal and dynamic economy, will maintain its long record of resilience. Our exceptional portfolio, located in its most popular destinations, continues to flourish. With the benefit of our forensic local knowledge and enterprising management, we are confident it will continue to deliver sustained long-term growth in income, capital values and returns to shareholders.
Our business
Accumulated over 30 years, our exceptional portfolio is entirely in the liveliest parts of London's West End. Extending to almost 14.5 acres, together with a 50% share of 1.9 acres held in joint venture, it comprises nearly 600 buildings, mainly clustered in Carnaby, Seven Dials and Chinatown, as well as substantial ownerships in east and west Covent Garden, Soho and Charlotte Street.
We focus on restaurants, leisure and retail. Our 583 restaurants, cafés, pubs and shops extend to 1.1 million sq. ft. and provide 70% of our current income. In the West End, there is a long history of sustained demand for this space but a number of structural factors limit its availability, which has resulted in low vacancy and stable, long-term rental growth. As we provide restaurant, leisure and retail space in shell-form, without capital contribution to tenants' fit-out, our exposure to obsolescence is limited. These are important factors in our portfolio's prospects and shareholder returns.
Generally, the upper floors in our buildings comprise small offices and rental apartments, which provide 30% of our current income. In our locations, the long-term trend is for demand to exceed supply of this space.
Fundamental to the management of our portfolio is a long-term strategy aimed at curating distinctive, lively, and interesting destinations, which attract footfall and spending, offering prosperity for our tenants.
Focused on long-term sustainable income and value creation, elements of the strategy include:
-- Selecting new restaurant, leisure and retail formats to respond to ever-changing tastes and expectations;
-- Working with our tenants to promote our areas across a wide range of media channels;
-- Improving and reconfiguring buildings to provide more efficient accommodation for occupiers, maximising valuable restaurant, leisure and retail space wherever possible; and
-- Investing in the public realm to increase pedestrian capacity and raise the quality of streetscapes.
With our clusters of ownerships, the improvements we make to individual buildings or streets bring compound benefits to our adjacent and nearby holdings.
Portfolio review
Lower floors - 70% of current income(1)
Wholly-owned Longmartin(2)
------------------------------------ ------------- --------------
Restaurants, cafés and leisure
- 36% of current income(1)
Number 282 10
Area (sq. ft.) 600,000 45,000
Retail - 34% of current income(1)
Number 301 21
Area (sq. ft.) 471,000 67,000
1. Wholly-owned portfolio
2. Shaftesbury has a 50% interest
-- Restaurants, cafés and leisure
With increasing numbers of visitors to the West End, and the widely-recognised growth in interest and spending on leisure activities, our 282 restaurants, cafés and pubs are important drivers of footfall and trading in our locations. We are the largest single provider of dining and leisure space in the West End, curating high-profile and busy destinations such as Kingly Court, Neal's Yard, Chinatown and the Opera Quarter. The majority of our restaurants offer casual dining, with a focus on atmosphere, quality and experience, increasingly with an all-day offer.
Operators are attracted to the West End as it provides access to exceptional daily footfall throughout the year and a discerning, affluent customer base of domestic and international visitors and a large working population. The independent sector is particularly active, reflecting the demand from diners to experience high quality, creative and accessible new food concepts, often then sharing their experiences on social media.
Availability of space remains constrained by planning policies, which restrict large-scale development in our locations and discourage conversion of existing space to leisure uses, and the reluctance of operators to relinquish their valuable space other than for significant premiums. Against this backdrop of strong occupier demand and limited supply of space, competition for any of our available space is intense and vacancy rates are low.
During the period, we completed leasing transactions in the wholly-owned portfolio with a rental value of GBP4.5 million, of which rent reviews accounted for GBP3.4 million.
Six months
Six months ended 31.3.2017 ended 31.3.2016
---------------------------------
Rental value % of use Rental value
Number GBPm ERV GBPm
------- ------------- --------- -----------------
Lettings and
renewals 8 1.1 2.4% 0.5
Rent reviews 22 3.4 7.6% 4.0
------- ------------- --------- -----------------
30 4.5 10.0% 4.5
-------------- ------- ------------- --------- -----------------
Additionally, our share of leasing transactions in the Longmartin joint venture was GBP0.9 million (31.3.2016: GBP0.2 million).
-- Retail
Providing 77% of our current retail income, Carnaby and Seven Dials make an important contribution to the West End's reputation as a leading global shopping destination. We have a wide range of shop sizes and rental levels across our buildings and streets, allowing us to provide a variety of retail formats, from start-ups to more established operators, whilst offering retailers flexibility to expand or introduce new concepts. Importantly, rental levels in our high-footfall and spending locations are competitive compared with nearby streets.
We continue to have good interest for space, both from domestic and overseas retailers. A key aspect of our strategy to create and maintain distinctive retail locations is tenant selection, focussing on interesting concepts rather than high street brands, and maintaining flexibility in our leasing so we are able to respond to ever-changing tastes in fashion and lifestyle shopping.
We completed leasing transactions in the wholly-owned portfolio with an ERV of GBP2.9 million in the period. The volume of lettings was lower than for the same period last year, reflecting the lack of space available to let.
Six months
Six months ended 31.3.2017 ended 31.3.2016
---------------------------------
Rental value % of use Rental value
Number GBPm ERV GBPm
------- ------------- --------- -----------------
Lettings and
renewals 8 1.0 2.2% 3.5
Rent reviews 10 1.9 4.1% 1.4
------- ------------- --------- -----------------
18 2.9 6.3% 4.9
-------------- ------- ------------- --------- -----------------
Our share of lettings and rent reviews in the Longmartin joint venture was GBP0.5 million (31.3.2016: GBP0.7 million).
Upper floors - 30% of current income(1)
Wholly-owned Longmartin(2)
--------------------------------------- ------------- --------------
Offices - 17% of current income(1)
Area (sq. ft.) 405,000 102,000
Residential - 13% of current income(1)
Number 570 75
Area (sq. ft.) 338,000 55,000
1. Wholly-owned portfolio
2. Shaftesbury has a 50% interest
-- Offices
With 405,000 sq. ft. of office space, let to 248 tenants, we are an important provider of small and flexible office accommodation in the core West End. Our average letting is 1,400 sq. ft. at GBP52 per sq. ft. (30.9.2016: GBP51 per sq. ft.) and average ERV is GBP63 per sq. ft. (30.9.2016: GBP61 per sq. ft.).
Demand for the smaller, flexible space we offer remains good, particularly from the media, creative and tech sectors, which often find their natural home in Soho and Covent Garden. In contrast to large, modern offices, availability of this type of space remains low across our locations and, throughout the period, leasing terms have remained broadly unchanged and occupancy levels have been high.
During the period, wholly-owned office lettings, renewals and rent reviews with a rental value of GBP1.9 million were completed.
Six months
Six months ended 31.3.2017 ended 31.3.2016
---------------------------------
Rental value % of use Rental value
Number GBPm ERV GBPm
------- ------------- --------- -----------------
Lettings and
renewals 26 1.8 7.2% 1.4
Rent reviews 1 0.1 0.4% -
------- ------------- --------- -----------------
27 1.9 7.6% 1.4
-------------- ------- ------------- --------- -----------------
Our share of office lettings and rent reviews in the Longmartin joint venture was GBP1.4 million (31.3.2016: GBP0.1 million).
-- Residential
Our 570 flats are mainly studios and one or two bedroom apartments, many of which have been created by converting small office space back to its original residential use. Demand for our mid-market apartments remains good, resulting in high occupancy levels and a stable cash flow. During the period, there has been a slight softening in achieved rental levels, owing to increased availability of newly-built buy-to-let flats across central London. We continue our rolling programme to reconfigure and upgrade our apartments, to ensure they offer a specification to match this newer accommodation and maintain our high occupancy rates.
Wholly-owned residential lettings and renewals with a rental value of GBP4.6 million were completed in the period.
Six months
Six months ended 31.3.2017 ended 31.3.2016
---------------------------------
Rental value % of use Rental value
Number GBPm ERV GBPm
------- ------------- --------- -----------------
Lettings and
renewals 167 4.6 28.2% 2.8
-------------- ------- ------------- --------- -----------------
Our share of residential letting activity in the Longmartin joint venture was GBP0.2 million (31.3.2016: GBP0.4 million).
Leasing and occupancy
During the six months ended 31 March 2017, we concluded leasing transactions in the wholly-owned portfolio with a rental value of GBP13.9 million (31.3.2016: GBP13.6 million). Of this, commercial transactions totalled GBP9.3 million (31.3.2016: GBP10.8 million) and residential lettings and renewals amounted to GBP4.6 million (31.3.2016: GBP2.8 million). Rents for commercial uses were, on average, 5.6% above ERV at 30 September 2016 and 9.7% ahead of ERV twelve months ago.
Six months
Six months ended 31.3.2017 ended 31.3.2016
----------------------------------------
GBPm GBPm
------------- ----- --------------------------------- ----------------
Commercial
Lettings and +4.9% vs 30 September 2016
renewals 3.9 ERV 5.3
+24.8% vs previous rent (5-year
Rent reviews 5.4 CAGR: 4.4%) 5.5
----- ----------------
+5.6% vs 30 September 2016
9.3 ERV 10.8
Residential
Lettings and
renewals 4.6 -0.5% vs previous rent 2.8
----- ----------------
Total 13.9 13.6
------------- ----- --------------------------------- ----------------
Our share of leasing transactions in the Longmartin joint venture was GBP3.0 million (31.3.2016: GBP1.4 million), with commercial rents achieved, on average, 0.2% and 2.7% ahead of ERV at 30 September 2016 and 31 March 2016 respectively. Accounting for GBP2.7 million of the total, rent reviews delivered average increases of 35.8% compared with previous rental levels, an equivalent 5-year CAGR of 6.3%.
EPRA vacancy at 31 March 2017(1)
% of total
ERV
Restaurants,
cafés
and leisure Shops Offices Residential Total 31.3.17 30.9.16
GBPm GBPm GBPm GBPm GBPm % %
----------------- ------------ ----- ------- ----------- ----- ------- -------
Under offer 0.2 0.3 0.5 0.3 1.3 1.0% 1.1%
Available-to-let 0.2 1.5 0.4 0.5 2.6 2.0% 0.5%
------------ ----- ------- ----------- ----- ------- -------
EPRA vacancy 0.4 1.8 0.9 0.8 3.9 3.0% 1.6%
------------ ----- ------- ----------- ----- ------- -------
Area ('000
sq. ft.) 6 28 13 17 64 31
----------------- ------------ ----- ------- ----------- ----- ------- -------
1. Wholly-owned portfolio
With good demand for space, occupancy levels remained high throughout the period. At 31 March 2017, EPRA vacancy was 3.0% of ERV, an increase of 1.4% compared with 30 September 2016, reflecting a number of scheme completions just before 31 March 2017.
-- Thomas Neal's Warehouse
Completing during the period, our Thomas Neal's Warehouse scheme accounted for 0.8% of available-to-let ERV at 31 March 2017.
Our retail-led reconfiguration scheme of this listed Victorian warehouse to provide a unit of 22,700 sq. ft., of which 3,000 sq. ft. is available for restaurant use, completed in October 2016. This project has provided a once-in-a-generation opportunity to add a flagship unit to the Seven Dials district, and introduce an exciting new retail concept, which will greatly enhance the profile and appeal of this already popular destination, five minutes' walk from the Tottenham Court Road transport hub.
The space has attracted considerable interest from both domestic and international businesses. We are currently evaluating a shortlist of proposals for trading formats which could be accommodated in this historic building and which are consistent with our strategic tenant-mix aspirations for the area as a whole.
Public realm improvements to Cambridge Circus are now underway and works to the western section of Earlham Street will begin this summer. We expect these schemes, together with the opening of the Elizabeth Line and the successful letting of Thomas Neal's Warehouse, will over time, materially improve footfall across Seven Dials, bringing benefits particularly to those streets where rental values are currently materially below their long-term potential.
-- Other vacancy
Available-to-let vacancy, excluding Thomas Neal's Warehouse, comprised three shops (ERV: GBP0.4 million), one restaurant (ERV: GBP0.2 million), 6,300 sq. ft. of office space (ERV: GBP0.4 million) and 21 apartments (ERV: GBP0.5 million). This unusually large number of vacant flats reflects scheme completions towards the end of the period, the majority of which were let or went under offer in April 2017.
Space under offer included one restaurant, two cafés, one large shop, two small shops, 6,800 sq. ft. of offices and ten apartments.
In the Longmartin joint venture, two shops and 1,100 sq. ft. of office space were available to let. The ERV of our 50% share of this space was GBP0.2 million.
Portfolio investment
Space under refurbishment Capital expenditure Acquisitions Disposals during the period GBP20.0m 216,000 sq. ft. GBP28.1m GBP5.4m --------------------------- --------------------- -------------- -----------
High levels of refurbishment activity continue across our portfolio, improving our buildings to increase income and unlock value. Capital expenditure during the six months to 31 March 2017 totalled GBP20.0 million and included schemes extending to 216,000 sq. ft. (11.9% of wholly-owned floor space).
Vacant space held for, or under, refurbishment at 31 March 2017(1)
% of total
ERV
Restaurants,
cafés
and leisure Shops Offices Residential Total 31.3.17 30.9.16
GBPm GBPm GBPm GBPm GBPm % %
------------------ ------------- ------ -------- ------------ ------ -------- --------
Major schemes(2) 1.8 2.9 1.7 0.1 6.5 4.9% 5.7%
Other schemes 2.6 2.2 1.6 1.2 7.6 5.7% 5.3%
------------- ------ -------- ------------ ------ -------- --------
Total 4.4 5.1 3.3 1.3 14.1 10.6% 11.0%
------------- ------ -------- ------------ ------ -------- --------
Area ('000
sq. ft.) 45 64 46 25 180 202
------------------ ------------- ------ -------- ------------ ------ -------- --------
1. Wholly-owned portfolio
2. Central Cross, Chinatown and 57 Broadwick Street, Carnaby. 30.9.2016 also included Thomas Neal's Warehouse, Seven Dials
Space held for, or under, refurbishment decreased over the period by 0.4% to 10.6% of total ERV. The ERV of schemes completed during the period, including Thomas Neal's Warehouse, totalled GBP3.3 million. Schemes with an ERV of GBP3.8 million commenced in the period.
With strong occupier demand across our locations, we continue to identify opportunities to implement further asset management initiatives to improve the rental prospects and value of buildings across our portfolio. This often involves negotiations to secure vacant possession of space to enable us to accelerate the implementation of our ideas. During the period, we secured the early surrender of leases extending to 14,300 sq. ft., including a 6,200 sq. ft. restaurant unit which we are reconfiguring to provide two valuable additions to Carnaby's casual dining offer.
In the Longmartin joint venture, the ERV of our 50% share of space held for refurbishment was GBP0.1 million.
Progress on major schemes
-- Central Cross (Charing Cross Road/Chinatown)
Our Central Cross scheme, at the eastern gateway to Chinatown, will complete at the end of May 2017. The total cost is GBP14.7 million, of which GBP13.3 million had been incurred by 31 March 2017.
Located next to Leicester Square Underground station and a few minutes' walk from Tottenham Court Road station, which is set to become the busiest transport hub in the West End when the Elizabeth Line service commences in 2018, it is well-positioned to benefit from high and growing footfall.
We have created exceptional, double-height accommodation with five shops, totalling 35,000 sq. ft., on Charing Cross Road and three large and four smaller restaurants fronting Newport Court and Newport Place, extending to 13,500 sq. ft.. The units vary in size, offering a range of opportunities both for domestic and international operators.
Marketing of the scheme has now commenced in earnest as works have progressed sufficiently to allow potential occupiers to appreciate the exceptional configuration of the internal space. Initial interest has been encouraging. It is likely that letting periods will be longer than the smaller space we traditionally offer, as careful tenant selection will be critical to the long-term success of the scheme and occupiers will be investing considerable sums in fitting out these large, prominent units.
Work on Westminster City Council's public realm scheme for Newport Place and Newport Court will start in early autumn and is scheduled for completion in summer 2018. This new public space will be traffic free each day, other than for servicing between 7am and noon, providing the opportunity, subject to planning and licensing approvals, for al fresco dining outside the new restaurants.
-- 57 Broadwick Street, Carnaby
Construction at our mixed-use project at 57 Broadwick Street, at the eastern entrance to Carnaby, is progressing well. Located within a few minutes' walk of the new western entrance to Tottenham Court Road station, on Dean Street, the scheme will provide:
-- 8,000 sq. ft. of flagship retail and restaurant space over the lower floors; -- 20,000 sq. ft. of new grade A office accommodation across the upper floors; and -- two apartments totalling 2,000 sq. ft.
Completing in phases from autumn 2017, the scheme is expected to cost GBP14.5 million, of which GBP5.3 million had been incurred by 31 March 2017. Marketing of space has recently commenced.
As a thoroughfare designated as a priority pedestrian route by Westminster City Council, there have already been improvements to the public realm at the eastern end of Broadwick Street and we are now working with the City Council on plans to improve the streetscape around 57 Broadwick Street and the eastern entrance to Carnaby.
Other schemes
We had 50 other schemes underway at 31 March 2017, extending to 101,000 sq. ft. and representing 5.7% of ERV. These included 24,000 sq. ft. of shops (ERV: GBP2.2 million), 28,000 sq. ft. of restaurants and cafés (ERV: GBP2.6 million), 26,000 sq. ft. of office space (ERV: GBP1.6 million), and 39 apartments either being created or up-graded (ERV: GBP1.2 million).
In our Longmartin joint venture, we shall shortly be commencing the redevelopment of the prominent 13,000 sq. ft. mixed-use building on the corner of Long Acre and Upper St Martin's Lane. Our share of the cost of this scheme is expected to be GBP4.5 million.
Acquisitions
During the six months to 31 March 2017, we acquired five properties at a total cost of GBP28.1 million. These comprised two restaurants, two shops, one pub and 3,700 sq. ft. of office space, of which 2,300 sq. ft. has planning consent for residential use. Three of these buildings were acquired with vacant possession. Through short and medium-term asset management initiatives, these additions each offer the potential for good rental and capital growth, either individually or in combination with our existing ownerships.
We continue to identify and investigate opportunities to increase our ownerships, concentrating on buildings in, and around, our villages which have a predominance of, or potential for, restaurant, leisure and retail uses and which offer the opportunity for future rental growth. As ever, the availability of buildings which fit these strict investment criteria remains limited, with existing owners reluctant to sell assets in this exceptionally prosperous and resilient area.
Disposals
Disposals of non-core assets in the period totalled GBP5.4 million. These included four apartments, sold at 9.2% above book value at 30 September 2016, and 1,500 sq. ft. of ancillary commercial basement space, which was sold to an adjoining owner.
Portfolio valuation
Portfolio valuation(1) Capital value growth(1,2) ERV growth(1,2)
GBP3.45bn 2.0% 3.9% 1.9% 4.3%
6 months 12 months 6 months 12 months
------------------------ ----------------- ----------------- ------------- --------------
1. Including our 50% share of the Longmartin joint venture. See presentation of financial information below
2. Like-for-like (see Glossary below)
Valuation increase driven by rental growth
At 31 March 2017, the valuation of our portfolio, including our 50% share of the Longmartin joint venture was GBP3.45 billion. Like-for-like capital valuation growth over the period was 2.0% (12 months: 3.9%), driven by growth in contracted income and estimated rental values.
Topped-up
Fair Current initial Equivalent
value % of income ERV yield yield
GBPm portfolio GBPm GBPm % %
-------------------- ------- ----------- -------- ------ --------- ----------
Wholly-owned
portfolio
Carnaby 1,195 35% 39.2 50.0 3.12% 3.64%
Covent Garden 894 25% 28.0 36.6 2.88% 3.56%
Chinatown 762 22% 22.6 30.2 3.08% 3.42%
Soho 253 7% 8.8 10.4 3.35% 3.64%
Charlotte Street 122 4% 4.4 5.0 3.14% 3.53%
------- ----------- -------- ------ --------- ----------
Wholly-owned
portfolio 3,226 93% 103.0 132.2 3.09% 3.56%
Longmartin
joint venture(1) 226 7% 9.0 10.0 3.36% 3.79%
------- ----------- -------- ------
Total portfolio(2) 3,452 100% 112.0 142.2
-------------------- ------- ----------- -------- ------ --------- ----------
1. Our 50% share
2. Portfolio excluding non-core asset acquired in a portfolio
Like-for-like capital value growth
Six months Six months Year to 3 year
Village ended 30.9.2016 ended 31.3.2017 31.3.2017 CAGR
------------------- ---------------------- ---------------------- ---------------- ------------
Carnaby 2.3% 2.0% 4.3% 15.4%
Covent Garden 1.4% 1.2% 2.6% 10.9%
Chinatown 1.9% 2.6% 4.5% 11.6%
Soho 2.7% 3.7% 6.5% 11.8%
Charlotte Street 1.7% 2.7% 4.4% 12.9%
---------------------- ---------------------- ---------------- ------------
Wholly-owned
portfolio 2.0% 2.1% 4.1% 12.8%
Longmartin
joint venture(1) 0.4% 0.6% 1.0% 12.9%
---------------------- ---------------------- ---------------- ------------
Total portfolio 1.9% 2.0% 3.9% 12.9%
------------------- ---------------------- ---------------------- ---------------- ------------
1. Our 50% share
Continuing growth in contracted rents and ERVs
With sustained demand for space across our portfolio, together with the impact of our ongoing extensive asset management activity, the portfolio's reversionary potential continues to be converted into contracted income, whilst ERVs have grown further.
Rental growth(1,2) Current Reversionary
income ERV potential
GBPm GBPm GBPm
------------------------- -------- ------- -------------
At 30 September 2016 109.6 138.7 29.1
Acquisitions 0.2 1.0 0.8
Disposals (0.1) (0.1) -
Like-for-like growth(3) 2.3 2.6 0.3
-------- ------- -------------
At 31 March 2017 112.0 142.2 30.2
-------- ------- -------------
Like-for-like growth(3)
* 6 months 2.1% 1.9%
* 12 months 3.9% 4.3%
------------------------- -------- ------- -------------
1. Including our 50% share of the Longmartin joint venture
2. Portfolio excluding a non-core asset acquired as part of a portfolio
3. See Glossary below
Annualised current income stood at GBP112.0 million at 31 March 2017, following like-for-like increases of 2.1% and 3.9% over 6 months and 12 months respectively. The ERV of our portfolio, which is based on current rental tones and largely reflects rental evidence we have established through our leasing transactions, was assessed by our valuers at GBP142.2 million, GBP30.2 million or 27.0% above current income. Like-for-like ERV growth over the period was 1.9%, bringing the total for the past 12 months to 4.3%. Over the last ten years, our wholly-owned portfolio has delivered compound like-for-like ERV growth of 4.8% p.a.
Components of the reversionary potential(1)
Expected
term to
GBPm realisation How it will be realised
----------------- ----- ------------- -----------------------------
Contracted 2.7 Near term On expiry of rent-free
income periods
----------------- ----- ------------- -----------------------------
EPRA vacancy 4.1 Near term Upon letting of space
available at 31 March
2017
----------------- ----- ------------- -----------------------------
Space held 14.2 Near to On completion and letting
for, or under, medium of schemes at 31 March
refurbishment term 2017
----------------- ----- ------------- -----------------------------
Under-rented 9.2 Near to Through the normal cycle
leases medium of rent reviews, lease
term renewals and lettings.
This is typically converted
to income over a 3 - 5
year period.
----------------- ----- ------------- -----------------------------
30.2
----------------- ----- ------------- -----------------------------
1. Including our 50% share of the Longmartin joint venture
63% of the uncontracted reversion is accounted for by restaurants, leisure and retail. In our locations, these uses have a long history of sustained demand, which, together with a restricted availability of space, underpins their growth prospects. We remain confident that, with our proven long-term management strategy, we shall not only continue to convert this rental potential into cash flow, but also deliver further long-term growth in rental values.
Strong investor demand yet limited supply of assets to acquire
Equivalent yields attributed by our external valuers were broadly unchanged over the period with the wholly-owned portfolio at 3.56% (30.9.2016: 3.57%) and the Longmartin joint venture at 3.79% (30.9.2016: 3.79%).
The buildings we seek to acquire are typically in long-term private ownership and existing owners remain reluctant to sell. Consequently, it would be virtually impossible, now, to replicate a portfolio such as ours in this vibrant and prosperous location. Against this background of limited availability of properties to buy, investor interest remains strong for properties like ours, which provide investment security, low vacancy, the prospect of growing returns and limited exposure to obsolescence.
Cushman & Wakefield, independent valuer of our wholly-owned portfolio, has continued to note that:
-- our portfolio is unusual in its substantial number of predominantly restaurant and retail properties in adjacent, or adjoining, locations in London's West End; and
-- there is a long record of strong occupier demand for these uses in this location and, as a result, high occupancy levels throughout the portfolio.
Consequently, they have reiterated to the Board that some prospective purchasers may recognise the rare and compelling opportunity to acquire, in a single transaction, substantial parts of the portfolio, or the portfolio in its entirety. Such parties may consider a combination of some, or all, parts of the portfolio to have a greater value than currently reflected in the valuation included in these financial statements, which has been prepared in accordance with RICS guidelines.
Financial results
Reported results
+3.4%(1) +4.0%(2) 27.4%(2) +10.5%(2)
GBP8.83 GBP43.8m 36.7p 7.9p
Diluted NAV Net property Basic EPS Interim dividend
income per share
------------- -------------- --------------- ------------------
EPRA results
+2.7%(1) +12.9%(2) +12.3%(2)
GBP9.12 +3.6%(3) GBP22.8m 8.2p
EPRA NAV NAV return EPRA earnings EPRA EPS
------------- -------------- --------------- ------------------
1. vs. 30.9.2016
2. vs. 6 months ended 31.3.2016
3. 6 month period ended 31.3.2017
Presentation of financial information
Our property portfolio is a combination of properties that are wholly owned by the Group and a 50% share of property held in joint venture.
The financial statements, prepared under IFRS, includes the Group's interest in its joint venture as one-line items in the Income Statement and Balance Sheet. The analysis below is based on the IFRS financial statements.
Internally, management review the valuation of properties and our debt position on a proportionally consolidated basis, including our 50% share of the joint venture. Consequently the analysis of the valuation above and the finance review below is presented on this proportional consolidated basis. We consider that this presentation better explains to stakeholders the Group's activities and financial position.
Income statement
Reported earnings
Profit after tax for the six months was GBP102.4 million (31.3.2016: GBP80.1 million) and basic earnings per share was 36.7p (31.3.2016: 28.8p). The increase was largely due to the decrease in the fair value deficit of our interest rate swaps which added 5.8p in the period, compared with an increase in this deficit in the corresponding period in 2016 which reduced earnings per share by 4.3p last year. This was partly offset by a decrease in our share of the post-tax profits from our joint venture, largely driven by a lower revaluation surplus.
EPRA earnings
As is usual practice in our sector, we produce an alternative measure for certain indicators, including earnings, making adjustments set out by EPRA in its Best Practice and Policy Recommendations. EPRA earnings are a measure of the level of underlying operating results and an indication of the extent to which current dividend payments are supported by recurring earnings. In our case, EPRA earnings excludes valuation movements in respect of our properties and interest rate swaps, and ignores deferred tax arising in our Longmartin joint venture, as set out in the reconciliation below.
Six months ended Year ended
EPRA earnings 31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
----------------------------------------------------- ---------- --------- ----------
IFRS profit after tax 102.4 80.1 99.1
Adjusted for:
* Change in value of investment properties (61.6) (58.2) (108.3)
* Profit on disposal of investment properties (0.3) - -
* Change in fair value of financial instruments (16.1) 12.1 34.9
* Recognition of fair value of Debenture Stock - - 29.2
Adjustments in respect of the
Longmartin joint venture:
* Change in value of investment properties (1.5) (10.4) (11.3)
* Deferred tax (0.1) (3.4) (4.6)
---------- --------- ----------
EPRA earnings 22.8 20.2 39.0
---------- --------- ----------
EPRA EPS 8.2p 7.3p 14.0p
----------------------------------------------------- ---------- --------- ----------
EPRA earnings increased by 12.9% to GBP22.8 million (31.3.2016: GBP20.2 million) resulting in EPRA EPS of 8.2p, 12.3% above the first half of last year (31.3.2016: 7.3p). This increase was principally driven by growth in net property income as we continue to crystallise our portfolio's reversionary potential and lower finance costs, following our recent refinancing (see below for details).
Net property income
Rents receivable have increased by 3.5% to GBP50.9 million (31.3.2016: GBP49.2 million). Like-for-like growth was 3.9%, which reflects the continued conversion of our portfolio's reversionary potential into contracted cash flow. Acquisitions contributed GBP0.6 million to the increase, whilst vacancy arising from our major schemes reduced rents receivable by GBP0.8 million compared with the same period last year.
Irrecoverable property charges were unchanged compared with the first half last year at GBP7.1 million (31.3.2016: GBP7.1 million), representing 13.9% of rents receivable (31.3.2016: 14.4%). After these costs, net property income was GBP43.8 million, up 4.0% on the same period last year (31.3.2016: GBP42.1 million).
Administrative expenses
Administrative expenses, excluding the charge for share options, totalled GBP6.0 million (31.3.2016: GBP4.9 million). This includes a provision for annual bonuses of GBP1.1 million (31.3.2016: GBP0.7 million). Reflecting growing activity within our portfolio, administrative costs, excluding the bonus provision, increased by GBP0.7 million to GBP4.9 million (31.3.2016: GBP4.2 million), mainly due to increased employment costs, including additional headcount. We do not capitalise administrative costs.
The share options charge was GBP0.8 million (31.3.2016: GBP1.5 million). This comprised a non-cash accounting provision of GBP0.7 million (31.3.2016: GBP1.2 million) and a charge for employer's National Insurance of GBP0.1 million (31.3.2016: GBP0.3 million).
Profit on disposal of investment properties
Net profit from disposals was GBP0.3 million. See above for further details.
Revaluation surplus
The surplus arising on the revaluation of our wholly-owned portfolio amounted to GBP61.6 million (31.3.2016: GBP58.2 million). This represented a like-for-like increase of 2.1%, principally driven by like-for-like ERV growth of 2.0%. Further details are provided above.
Finance costs
Net finance costs (excluding the change in fair value of our interest rate swaps) decreased by GBP0.5 million to GBP16.1 million (31.3.2016: GBP16.6 million). This reflects the benefits of reduced borrowing costs following the refinancing reported last year, partly offset by higher net debt as a result of acquisitions and further investment in our portfolio.
The movement in the fair value of our interest rate swaps resulted in a credit to the Statement of Comprehensive Income during the period of GBP16.1 million. This included a reduction in the deficit in respect of those interest rate swaps still in place at 31 March 2017 of GBP12.2 million, following an increase in long-dated interest rates during the period. Additionally, it reflects a profit of GBP3.9 million from terminating swaps at better rates than those prevailing at the year end.
The Board regularly reviews the Group's interest hedging strategy and the impact these derivatives have on the long-term financing of the business.
Longmartin results
Our share of post-tax profit from the Longmartin joint venture decreased by GBP11.4 million to GBP3.5 million (31.3.2016: GBP14.9 million), largely due to a smaller revaluation surplus of GBP1.5 million (31.3.2016: GBP10.4 million). Our share of net property income increased by GBP0.9 million, following the successful conclusion of a number of rent reviews which contributed to a like-for-like increase in rents receivable, compared with the same period last year, of 27.8%.
Tax
As a REIT, the Group's activities are largely exempt from corporation tax and, as a result, there is no tax charge in the period (31.3.2016: GBPNil).
Interim dividend
The Board has declared an interim dividend of 7.9p per share, an increase of 10.5% on last year's interim dividend of 7.15p. This increase reflects growth in net property income and earnings enhancements from the refinancing reported last year. See below for further details.
As a REIT, we are required to distribute a minimum of 90% of net rental income, calculated by reference to tax rather than accounting rules, as a PID. Notwithstanding this, our dividend policy is to maintain steady growth in dividends, reflecting the long-term trend in our income and EPRA earnings, adjusted to add back the non-cash accounting charge for equity-settled remuneration. To the extent that dividends exceed the amount available to distribute as a PID, we pay the balance as ordinary dividends.
Whilst the exceptional charges associated with the refinancing activities in October 2016 were accounted for in the 2016 financial statements, they are charged against our current year qualifying REIT income. Since these charges outweigh qualifying income to date, the interim dividend, to be paid on 7 July 2017, will be paid as an ordinary dividend. It is likely that any further dividend in relation to the year ending 30 September 2017 will be also paid as an ordinary dividend, with PIDs resuming next year.
The dividend is covered 1.04 times by EPRA earnings and 1.07 times by adjusted earnings, after adding back the non-cash accounting charge in the period for equity-settled remuneration of GBP0.7 million.
Balance Sheet
Net asset value per share
Diluted net asset value per share increased by 29p to GBP8.83 (30.9.2016: GBP8.54) largely due to the revaluation surplus on our investment properties, which contributed 22p. The decrease in the fair value deficit attributable to our interest rate swaps added 6p, whilst our share of the Longmartin joint venture contributed 1p.
EPRA net asset value
EPRA NAV is a sector-recognised benchmark, which makes adjustments to reported NAV to provide a measure of the fair value of net assets on a long-term basis. Assets and liabilities that are not expected to crystallise in normal circumstances are excluded. In our case, the calculation excludes the fair value of interest rate swaps, other than those expected to be terminated, and deferred tax related to property valuation surpluses in the Longmartin joint venture.
31.3.2017 31.3.2016 30.9.2016
EPRA NAV GBPm GBPm GBPm
------------------------------------------- ---------- ---------- ----------
IFRS net assets 2,468.9 2,387.1 2,387.1
Effect of exercise of options 0.5 0.4 0.5
---------- ---------- ----------
Diluted net assets 2,469.4 2,387.5 2,387.6
Adjusted for:
* Fair value of financial instruments 63.9 91.3 76.1
Adjustment in respect of the
Longmartin joint venture:
* Deferred tax 17.9 19.1 18.0
---------- ---------- ----------
EPRA NAV 2,551.2 2,497.9 2,481.7
---------- ---------- ----------
EPRA NAV per share GBP9.12 GBP8.93 GBP8.88
------------------------------------------- ---------- ---------- ----------
EPRA NAV per share increased over six months by 24p (2.7%) to GBP9.12 (30.9.2016: GBP8.88). EPRA earnings of 8.2p per share were offset by the 2016 final dividend (7.55p per share). The revaluation surpluses from the wholly-owned portfolio and the Longmartin joint venture added 23p. The cancellation of interest rate swaps in October 2016, at more favourable rates than those prevailing at 30 September 2016, contributed 1.4p. Growth over 12 months was 2.1%, after exceptional refinancing costs charged in 2016 (24p per share).
Net asset value return measures shareholder value creation, taking into account the growth in EPRA NAV together with dividends paid in the period. The net asset value return was 3.6% during the period, and 3.8% over twelve months.
Six months ended Year ended
31.3.2017 31.3.2017
----------------------- ---------------- ----------
EPRA NAV growth 2.7% 2.1%
Net asset value return 3.6% 3.8%
----------------------- ---------------- ----------
Cash flows and net debt
Net debt increased by GBP79.0 million to GBP831.1 million over the period (30.9.2016: GBP752.1 million). The major cash flows were:
-- Operating cash inflow totalling GBP21.6 million. -- Dividends paid amounting to GBP21.3 million. -- Net capital investment in our portfolio of GBP44.3 million. -- Termination of interest rate swaps at a cost of GBP34.1 million.
Finance review
GBP178.4m 26.1% 10.3 years
Available facilities(1) Loan-to-value(1) Weighted average debt
maturity(1)
-------------------------- ------------------- ------------------------
1. Including our 50% share of the Longmartin joint venture
Having issued GBP285 million of bonds at 2.487% in October 2016, we refinanced our legacy GBP61 million Debenture Stock and terminated interest rate swaps with a notional principal of GBP55 million. The surplus proceeds of GBP165.5 million were used to reduce drawings against our revolving credit facilities. This refinancing significantly increased our financial resources, reduced the blended cost of our debt and extended its average maturity.
Since then, we have funded net investment in our portfolio through further drawings against these facilities, which, with a marginal cost of 1.3% has reduced our blended cost of debt to 3.7%. If these facilities were fully drawn, this weighted average cost would fall to 3.3%.
Debt summary
Reported Pro-forma(1) Reported
31.3.2017 30.9.2016 30.9.2016
GBPm GBPm GBPm
-------------------------------- ------------ ----------------------- ----------------------- ---------
Debt excluding Longmartin
JV
* Fixed/hedged debt(2) 794.8 794.8 657.0
* Drawn unhedged bank debt 46.6 10.4 110.7
------------ ----------------------- ----------------------- ---------
Wholly-owned 841.4 805.2 767.7
Longmartin non-recourse
debt (50% share) 60.0 60.0 60.0
------------ ----------------------- ----------------------- ---------
Total debt(3) 901.4 865.2 827.7
------------ ----------------------- ----------------------- ---------
Wholly-owned Total Wholly-owned Total Wholly-owned Total
debt(3) debt(3) debt(3)
-------------------------------- ------------ --------- ------------ --------- ------------ ---------
Undrawn floating rate
facilities 178.4 178.4 214.6 214.6 59.3 59.3
Loan-to-value(2,3) 26.1% 26.1% 25.8% 25.8% 24.6% 24.7%
Gearing(2,3,4) 35.3% 35.3% 34.7% 34.9% 33.1% 33.4%
Interest cover(3) 2.3x 2.4x 2.3x 2.3x 2.1% 2.1x
% debt fixed(3) 94% 95% 99% 99% 86% 87%
Blended cost(3,5) 3.7% 3.7% 3.9% 3.9% 4.5% 4.5%
Marginal cost of undrawn
facilities 1.3% 1.3% 1.2% 1.2% 1.3% 1.3%
Weighted average maturity(3)
(years) 10.4 10.3 10.9 10.8 9.2 9.2
-------------------------------- ------------ --------- ------------ --------- ------------ ---------
1. Pro-forma for the issue of 2.487% Mortgage Bonds 2031 and redemption of 8.5% Debenture Stock 2024, and for the cancellation of interest rate swaps with a notional principal of GBP55m in October 2016
2. Based on the nominal value of debt 3. Including our 50% share of the Longmartin joint venture 4. Based on EPRA net assets 5. Including non-utilisation fees on undrawn bank facilities
The maturity profile of our debt is set out below. The Board reviews this regularly and plans to refinance facilities ahead of their contractual maturities.
Debt maturity profile
Year of maturity Facility type Total facility
GBPm
------------------ ----------------------- ---------------
2018 Bank 150
2020 Bank 125
2021 Bank 75
Term loan (Longmartin
2026 joint venture) 60(1)
2029 Term loan 135
2030 Term loan 130
2031 Mortgage bonds 285
2035 Term loan 120
------------------ ----------------------- ---------------
1. Shaftesbury Group's 50% share. This loan is without recourse to Shaftesbury
Brian Bickell Chris Ward
Chief Executive Finance Director
22 May 2017
Portfolio analysis
Wholly-
At 31 March Covent Charlotte owned Total
2017 Note Carnaby Garden Chinatown Soho Street portfolio Longmartin(1) portfolio
--------------------------- ----- -------- -------- ---------- ------- ---------- ---------- -------------- ----------
Fair value
Portfolio (GBPm) 1,14 1,194.6 893.8 762.1 253.3 122.1 3,225.9 225.9 3,451.8
-------------- ----------- ----- -------- -------- ---------- ------- ---------- ---------- -------------- ----------
% of total
fair value 35% 25% 22% 7% 4% 93% 7% 100%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- -------------- ----------
Current
income
(GBPm) 2,14 39.2 28.0 22.6 8.8 4.4 103.0 9.0 112.0
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- -------------- ----------
ERV (GBPm) 3,14 50.0 36.6 30.2 10.4 5.0 132.2 10.0 142.2
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- -------------- ----------
Restaurants,
cafés
and leisure Number 59 91 79 30 23 282 10
-------------- ----------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Area -
sq. ft. 109,000 176,000 211,000 58,000 46,000 600,000 45,000
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
% of current
income 4 16% 39% 61% 38% 51% 36% 16%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
% of ERV 4 16% 34% 59% 38% 51% 34% 15%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Average
unexpired
lease length
- years 5 10 9 11 9 9 10 13
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Shops Number 97 95 61 39 9 301 21
-------------- ----------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Area -
sq. ft. 179,000 143,000 92,000 43,000 14,000 471,000 67,000
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
% of current
income 4 50% 28% 22% 27% 15% 34% 35%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
% of ERV 4 46% 32% 26% 28% 14% 35% 39%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Average
unexpired
lease length
- years 5 4 3 5 4 4 4 4
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Area -
Offices sq. ft. 249,000 82,000 28,000 36,000 10,000 405,000 102,000
-------------- ----------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
% of current
income 4 28% 12% 5% 16% 9% 17% 35%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
% of ERV 4 32% 15% 4% 17% 9% 19% 33%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Average
unexpired
lease length
- years 5 4 3 2 2 3 3 4
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Residential Number 98 223 129 69 51 570 75
-------------- ----------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
Area -
sq. ft. 55,000 137,000 84,000 37,000 25,000 338,000 55,000
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
% of current
passing
rent 4 6% 21% 12% 19% 25% 13% 14%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
% of ERV 4 6% 19% 11% 17% 26% 12% 13%
-------------------------- ----- -------- -------- ---------- ------- ---------- ---------- --------------
1. Shaftesbury Group's 50% share
Basis of valuation
Wholly-
At 31 March Covent Charlotte owned
2017 Note Carnaby Garden Chinatown Soho Street portfolio Longmartin
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Overall initial
yield 7 3.02% 2.78% 2.95% 3.12% 3.08% 2.95% 3.35%
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Topped-up initial
yield 8 3.12% 2.88% 3.08% 3.35% 3.14% 3.09% 3.36%
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Overall equivalent
yield 9 3.64% 3.56% 3.42% 3.64% 3.53% 3.56% 3.79%
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Tone of retail 3.35 3.60 3.50 3.75 3.40
equivalent yields 10 - 4.25% - 4.50% - 4.50% - 4.50% 3.50-4.75% - 4.15%
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Tone of retail GBP78
ERVs - ITZA - GBP710
GBP per sq. GBP125 GBP75 GBP140 GBP154 GBP100-
ft. 10 - GBP515 - GBP525 - GBP355 - GBP275 GBP215
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Tone of restaurant 3.58 3.50 3.50 3.75 3.75
equivalent yields 10 - 5.00% - 4.25% - 3.75% - 3.90% 3.60-4.15% - 4.0%
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Tone of restaurant GBP90
ERVs - GBP per GBP100 - GBP138
sq. ft. - GBP124
GBP270
GBP100 GBP55 - GBP400 (GBP275 GBP90
10 - GBP135 - GBP179 ITZA ITZA) - GBP110
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Tone of office 4.00 4.00 4.25 4.50 4.25
equivalent yields 10 - 4.50% - 4.25% - 4.50% - 4.60% 4.50-4.75% - 4.65%
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Tone of office GBP50
ERVs - GBP per GBP58 GBP50 GBP43 GBP50 GBP45 - GBP78
sq. ft. 10 - GBP83 - GBP80 - GBP55 - GBP73 - GBP60
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Average residential
ERVs - GBP per GBP46
sq. ft. per
annum 10 GBP53 GBP51 GBP41 GBP48 GBP54
--------------------- ----- ---------- ---------- ---------- ---------- ----------- ----------- -----------
Notes
1. The fair values at 31 March 2017 (the "valuation date") shown in respect of the individual villages are, in each case, the aggregate of the fair values of several different property interests located within close proximity which, for the purpose of this analysis, are combined to create each village. The different interests within each village were not valued as a single lot.
2. Current income includes total annualised actual and 'estimated income' reserved by leases. No rent is attributed to leases which were subject to rent-free periods at the valuation date. Current income does not reflect any ground rents, head rents nor rent charges and estimated irrecoverable outgoings at the valuation date. 'Estimated income' refers to gross estimated rental values in respect of rent reviews outstanding at the valuation date and, where appropriate, ERV in respect of lease renewals outstanding at the valuation date where the fair value reflects terms for a renewed lease.
3. ERV is the respective valuers' opinion of the rental value of the properties, or parts thereof, reflecting the terms of the relevant leases or, if appropriate, reflecting the fact that certain of the properties, or parts thereof, have been valued on the basis of vacant possession and the assumed grant of a new lease. Where appropriate, ERV assumes completion of developments which are reflected in the valuations. ERV does not reflect any ground rents, head rents nor rent charges and estimated irrecoverable outgoings.
4. The percentage of current income and the percentage of ERV in each of the use sectors are expressed as a percentage of total income and total ERV for each village.
5. Average unexpired lease length has been calculated by weighting the leases in terms of current rent reserved under the relevant leases and, where relevant, by reference to tenants' options to determine leases in advance of expiry through effluxion of time.
6. Where mixed uses occur within single leases, for the purpose of this analysis, the majority use by rental value has been adopted.
7. The initial yield is the net initial income at the valuation date expressed as a percentage of the gross valuation. Yields reflect net income after deduction of any ground rents, head rents and rent charges and estimated irrecoverable outgoings at the valuation date.
8. The topped-up initial yield, ignoring contractual rent free periods, has been calculated as if the contracted rent is payable from the valuation date and as if any future stepped rental uplifts under leases had occurred.
9. Equivalent yield is the internal rate of return, being the discount rate which needs to be applied to the expected flow of income so that the total amount of income so discounted at this rate equals the capital outlay at values current as of the valuation date. The equivalent yield shown for each village has been calculated by merging together the cash flows and fair values of each of the different interests within each village and represents the average equivalent yield attributable to each village from this approach.
10. The tone of rental values and yields is the range of rental values or yields attributed to the majority of the properties.
11. All commercial floor areas are net lettable. All residential floor areas are gross internal.
12. For presentation purposes some percentages have been rounded to the nearest integer.
13. The analysis includes accommodation which is awaiting, or undergoing, refurbishment or development and is not available for occupation at the date of valuation.
14. The analysis excludes a non-core asset, acquired as part of a portfolio during the six-month period ended 31 March 2017.
Principal Risks and Uncertainties
The principal strategic risks and uncertainties are those which might prevent the Group from achieving its goal of long-term sustainable growth in rental income. The risks and uncertainties facing the Group for the remaining six months of the financial year are summarised below. These risks and uncertainties are largely consistent with those set out on pages 66 to 69 in the Annual Report for the year ended 30 September 2016. Details of how we manage risk are set out on pages 63 to 65 of the Annual Report.
Geographic concentration risk
Risk of a sustained fall in visitor numbers and/or spending
Risk Potential impact Mitigation
---------------------------------------------- -------------------------------------------------- ------------------------------------------------------------
Events which discourage
visitors to the * Reduced visitor numbers, spending and occup * Inherent risk given the geographic concentration of
West End e.g. ier demand our investments in a high profile location
* Acts or threats of terrorism
* Reduced rental income and/or capital values * Insurance cover maintained for terrorism-related
* Major, long-term disruption to the publ damage and associated loss-of-rent
ic transport
network upon which the area depends * Potential increased vacancy and declining
profitability * Close liaison with statutory authorities to maximise
safety of visitors
* Health concerns (e.g. pandemics)
* Damage to property
* Detailed emergency response plans
---------------------------------------------- -------------------------------------------------- ------------------------------------------------------------
Competing destinations
lead to long-term * Reduced visitor numbers and occupier demand * Ensure our villages maintain a distinct identity
decline in footfall
in our villages
* Reduced rental income and/or capital values * Management strategies to create prosperous
destinations within which tenants can operate
* Potential increased vacancy and declining
profitability * Seek out new concepts, brands and ideas to keep our
villages vibrant and appealing
* Consistent strategy on tenant mix, which evolves over
time
* Marketing and promotion of our villages
* KPI to deliver sustainable rental growth
* Regular board monitoring of performance and prospects
---------------------------------------------- -------------------------------------------------- ------------------------------------------------------------
Regulatory risk
Risk Potential impact Mitigation -------------- --------------------------------------------- ------------------------------------------------------------ All our properties * Limit our ability to optimise revenues * Ensure our properties are operated in compliance with are in the local regulations boroughs of * Reduced profitability Westminster * Make representations on proposed policy changes, to and Camden. ensure our views and experience are considered Changes to * Reduced capital values national or local * Mix of uses in our portfolio means we are not reliant policies, on income from one particular use particularly planning and licensing, could have a significant impact on our ability to maximise the long-term potential of its assets -------------- --------------------------------------------- ------------------------------------------------------------
Economic risk
Risk Potential impact Mitigation
---------------------- ------------------------------ --------------------------------------------------------------
Periods of economic
uncertainty and * Pressure on rents * Focus on assets, locations and uses in a global
lower confidence destination and which:
could reduce consumer
spending, tenant * Declining profitability
profitability and * are not solely reliant on the UK economy; and
occupier demand
* Reduced capital values
* have historically proved to be economically resilient
* have demonstrated much lower valuation volatility
than the wider market
* Diverse tenant base with limited exposure to any one
tenant
* Tenant deposits held against unpaid rent obligations
at 31 March 2017: GBP18.1m
---------------------- ------------------------------ --------------------------------------------------------------
Decline in the
UK real estate * Reduced capital values * Focus on assets, locations and uses which have
market due to historically proved to be economically resilient and
macro-economic have demonstrated much lower valuation volatility
factors e.g. global * Decrease in NAV, ampli than the wider market
political landscape, fied by gearing
currency
expectations, * Regular review of investment market conditions
bond yields, interest * Loan covenant defaults including bi-annual external valuations
rate expectations,
availability and
cost of finance, * Maintain conservative levels of leverage
relative
attractiveness
of property compared * Quarterly forecasts including covenant headroom
with other asset review
classes
* Substantial pool of uncharged assets available to top
up security held by lenders
---------------------- ------------------------------ --------------------------------------------------------------
Unaudited Group Statement of Comprehensive Income
For the six months ended 31 March 2017
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
Notes GBPm GBPm GBPm
------------------------------------ ------- ---------- ---------- ----------
Revenue 2 54.9 53.4 106.2
Property charges 3 (11.1) (11.3) (22.1)
---------- ---------- ----------
Net property income 43.8 42.1 84.1
------------------------------------ ------- ---------- ---------- ----------
Administrative expenses (6.0) (4.9) (11.6)
Charge in respect of equity-settled
remuneration 4 (0.8) (1.5) (2.5)
---------- ---------- ----------
Total administrative expenses (6.8) (6.4) (14.1)
------------------------------------ ------- ---------- ---------- ----------
Operating profit before
investment property disposals
and valuation movements 37.0 35.7 70.0
Profit on disposal of investment
properties 0.3 - -
Net surplus on revaluation
of investment properties 9 61.6 58.2 108.3
---------- ---------- ----------
Operating profit 98.9 93.9 178.3
------------------------------------ ------- ---------- ---------- ----------
Finance income - 0.1 0.1
Finance costs 5 (16.1) (16.7) (33.7)
Recognition of fair value
of Debenture Stock - - (29.2)
Change in fair value of
derivative financial instruments 16 16.1 (12.1) (34.9)
---------- ---------- ----------
Net finance costs - (28.7) (97.7)
------------------------------------ ------- ---------- ---------- ----------
Share of post-tax profit
from joint venture 11 3.5 14.9 18.5
---------- ---------- ----------
Profit before tax 102.4 80.1 99.1
Tax charge for the period 6 - - -
---------- ---------- ----------
Profit and total comprehensive
income for the period 102.4 80.1 99.1
---------- ---------- ----------
Earnings per share: 7
Basic 36.7p 28.8p 35.6p
Diluted 36.6p 28.7p 35.5p
EPRA 8.2p 7.3p 14.0p
------------------------------------ ------- ---------- ---------- ----------
Please see below for an explanation of the EPRA measures used in these financial statements.
Unaudited Group Balance Sheet
As at 31 March 2017
31.3.2017 31.3.2016 30.9.2016
Notes GBPm GBPm GBPm
--------------------------------- ----- --------- --------- ---------
Non-current assets
Investment properties 9 3,216.4 3,022.2 3,111.6
Accrued income 10 9.5 9.9 9.8
Investment in joint venture 11 147.1 143.4 146.4
Property, plant and equipment 1.3 1.4 1.4
Other receivables 13 3.7 3.7 3.7
3,378.0 3,180.6 3,272.9
Current assets
Trade and other receivables 12 16.8 19.0 19.3
Cash and cash equivalents 13 10.3 7.2 15.6
--------- --------- ---------
Total assets 3,405.1 3,206.8 3,307.8
--------- --------- ---------
Current liabilities
Trade and other payables 14 40.3 38.8 45.3
Borrowings 15 - - 92.2
Non-current liabilities
Borrowings 15 832.0 689.6 669.1
Derivative financial instruments 16 63.9 91.3 114.1
--------- --------- ---------
Total liabilities 936.2 819.7 920.7
--------- --------- ---------
Net assets 2,468.9 2,387.1 2,387.1
--------- --------- ---------
Equity
Share capital 17 69.8 69.7 69.7
Share premium 124.8 124.7 124.8
Share-based payments reserve 2.3 2.7 3.6
Retained earnings 2,272.0 2,190.0 2,189.0
--------- --------- ---------
Total equity 2,468.9 2,387.1 2,387.1
--------- --------- ---------
Net asset value per share: 18
Basic GBP8.85 GBP8.57 GBP8.57
Diluted GBP8.83 GBP8.53 GBP8.54
EPRA GBP9.12 GBP8.93 GBP8.88
--------------------------------- ----- --------- --------- ---------
Unaudited Group Cash Flow Statement
For the six months ended 31 March 2017
As restated
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
Notes GBPm GBPm GBPm
----------------------------------- ----- ------------ ----------- ----------
Cash flows from operating
activities
Cash generated from operating
activities 19 37.6 38.9 76.9
Interest received - 0.1 0.1
Interest paid (16.0) (16.1) (32.7)
------------ ----------- ----------
Net cash generated from operating
activities 21.6 22.9 44.3
------------ ----------- ----------
Cash flows from investing
activities
Investment property acquisitions (28.3) (43.2) (62.0)
Investment property disposals 5.2 - -
Capital expenditure on investment
properties (21.2) (11.1) (29.2)
Purchase of property, plant
and equipment (0.1) (0.1) (0.3)
Dividends received from joint
venture 2.8 1.1 1.7
Decrease in loans to joint
venture - 0.5 0.5
Net cash used in investing
activities (41.6) (52.8) (89.3)
------------ ----------- ----------
Cash flows from financing
activities
Proceeds from exercise of
share options - - 0.1
Proceeds from borrowings 88.9 64.9 114.5
Repayment of borrowings (208.0) (16.0) (23.5)
Proceeds from issue of mortgage
bond 15 203.2 - -
Repayment of debenture stock 15 (10.4) - -
Loan issue costs (3.6) - -
Termination of derivative
financial instruments 16 (34.1) - -
Equity dividends paid 8 (21.3) (19.5) (38.2)
------------ ----------- ----------
Net cash from financing activities 14.7 29.4 52.9
------------ ----------- ----------
Net change in cash and cash
equivalents (5.3) (0.5) 7.9
Cash and cash equivalents
at the beginning of the period 13 15.6 7.7 7.7
------------ ----------- ----------
Cash and cash equivalents
at the end of the period 13 10.3 7.2 15.6
----------------------------------- ----- ------------ ----------- ----------
Proceeds and repayment of borrowings have been restated at 31 March 2016 to present these movements on a gross basis. This has no impact on the net change in cash and cash equivalents, net assets, or reported results in any of the periods presented.
Statement of Changes in Equity
For the six months ended 31 March 2017
Share-based
Share Share payments Retained Total
capital premium reserve earnings equity
Notes GBPm GBPm GBPm GBPm GBPm
------------------------------- ----- -------- -------- ----------- --------- -------
At 1 October 2016 69.7 124.8 3.6 2,189.0 2,387.1
Profit and total comprehensive
income for the period - - - 102.4 102.4
Transactions with
owners:
Dividends paid 8 - - - (21.3) (21.3)
Exercise of share
options 0.1 - - (0.1) -
Fair value of share-based
payments 4 - - 0.7 - 0.7
Release on exercise
of share options - - (2.0) 2.0 -
-------- -------- ----------- --------- -------
At 31 March 2017 69.8 124.8 2.3 2,272.0 2,468.9
At 1 October 2015 69.6 124.7 4.0 2,127.1 2,325.4
Profit and total comprehensive
income for the period - - - 80.1 80.1
Transactions with
owners:
Dividends paid 8 - - - (19.5) (19.5)
Exercise of share
options 0.1 - - - 0.1
Fair value of share-based
payments 4 - - 1.0 - 1.0
Release on exercise
of share options - - (2.3) 2.3 -
-------- -------- ----------- --------- -------
At 31 March 2016 69.7 124.7 2.7 2,190.0 2,387.1
At 1 October 2015 69.6 124.7 4.0 2,127.1 2,325.4
Profit and total comprehensive
income for the year - - - 99.1 99.1
Transactions with
owners:
Dividends paid 8 - - - (39.4) (39.4)
Exercise of share
options 0.1 0.1 - (0.1) 0.1
Fair value of share-based
payments 4 - - 1.9 - 1.9
Release on exercise
of share options - - (2.3) 2.3 -
-------- -------- ----------- --------- -------
At 30 September 2016 69.7 124.8 3.6 2,189.0 2,387.1
------------------------------- ----- -------- -------- ----------- --------- -------
Notes to the half year results
For the six months ended 31 March 2017
1. Accounting policies
Basis of preparation
The Group's condensed consolidated half year financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, Interim Financial Reporting, as adopted by the European Union. They should be read in conjunction with the annual financial statements for the year ended 30 September 2016, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), IFRS Interpretations Committee interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial information in these condensed consolidated half year financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information presented for the year ended 30 September 2016 is derived from the statutory accounts for that year. Statutory accounts for the year ended 30 September 2016 were approved by the Board of directors on 29 November 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.
The condensed consolidated half year financial statements have been reviewed, not audited.
Going concern
The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least the next 12 months from the date the financial statements were approved. Therefore, they continue to adopt the going concern basis in preparing the condensed consolidated half year financial statements.
Critical judgements, assumptions and estimates
The preparation of these financial statements requires the Board to make judgements, assumptions and estimates that affect amounts reported in the Statement of Comprehensive Income and Balance Sheet. The directors consider the valuation of investment property to be a critical judgement because of the level of complexity, judgement or estimation involved and its impact on the financial statements. This is consistent with the financial statements for the previous year end. Full disclosure of the critical judgements, assumptions and estimates is included in the 2016 financial statements.
Changes in accounting policies
The accounting policies adopted and methods of computation used are consistent with those of the previous financial year.
New accounting standards and interpretations
a) The following amendments to Standards and Interpretations were mandatory for the first time for the financial year beginning 1 October 2016:
Effective
Standard or Interpretation from
----------------------------------------------- ---------
Annual Improvements 2012-2014 1 January
2016
----------------------------------------------- ---------
Amendment to IFRS 11 Joint arrangements
on acquisition of an interest in a joint 1 January
operation 2016
----------------------------------------------- ---------
Amendments to IAS 16 and IAS 38 on depreciation 1 January
and amortisation 2016
----------------------------------------------- ---------
Amendments to IAS 27 Separate financial 1 January
statements on equity accounting 2016
----------------------------------------------- ---------
Amendments to IFRS 10, 12 and IAS 28 1 January
on consolidation for investment entities 2016
Amendments to IAS 1 Presentation of financial 1 January
statements disclosure initiative 2016
----------------------------------------------- ---------
No material changes to accounting policies arose as a result of these amendments.
b) The following new Standards are relevant to the Group, are not yet effective in the year ending 30 September 2017 and are not expected to have a significant impact on the Group's financial statements:
Effective
Standard or Interpretation from
--------------------------------------------- ---------
IFRS 15 Revenue from contracts with customers 1 January
2018
IFRS 9 Financial instruments 1 January
2018
IFRS 16 Leases 1 January
2019
--------------------------------------------- ---------
c) There are no other Standards or Interpretations that are not yet effective that would be expected to have a material impact on the Group.
Segmental information
The Group's properties, which are all located in London's West End, are managed as a single portfolio. Its properties, which are of a similar type, are combined into villages. All of the villages are geographically close to each other and have similar economic features and risks. In view of the similar characteristics and the reporting of all investment, income and expenditure to the Board at an overall Group level, the aggregation criteria set out in IFRS 8 have been applied to give one reportable segment.
The Board assesses the performance of the reportable segment based on net property income and investment property valuation. Financial information provided to the Board is prepared on a basis consistent with these financial statements.
2. Revenue
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
------------------------------ ---------- ---------- ----------
Rents receivable 50.9 49.2 98.4
Recoverable property expenses 4.0 4.2 7.8
---------- ---------- ----------
54.9 53.4 106.2
------------------------------ ---------- ---------- ----------
Rents receivable includes a charge of GBP0.3 million from amortisation of accrued income in respect of lease incentives (31.3.2016: credit of GBP0.6 million; 30.9.2016: credit of GBP0.5 million).
3. Property charges
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
-------------------------------- ---------- ---------- ----------
Property operating costs 3.1 3.1 6.5
Fees payable to managing agents 1.2 1.1 2.3
Letting, rent review, and
lease renewal costs 1.8 1.8 3.3
Village promotion costs 1.0 1.1 2.2
---------- ---------- ----------
Property outgoings 7.1 7.1 14.3
Recoverable property expenses 4.0 4.2 7.8
---------- ---------- ----------
11.1 11.3 22.1
-------------------------------- ---------- ---------- ----------
4. Charge in respect of equity-settled remuneration
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
------------------------------------ ---------- ---------- ----------
Charge for share-based remuneration 0.7 1.2 1.9
Employer's national insurance 0.1 0.3 0.6
---------- ---------- ----------
0.8 1.5 2.5
------------------------------------ ---------- ---------- ----------
5. Finance costs
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
----------------------------- ---------- ---------- ----------
Debenture stock interest and
amortisation 0.1 2.5 5.0
Mortgage bond interest 3.4 - -
Bank and other interest 12.0 13.7 27.7
Loan issue cost amortisation 0.6 0.5 1.0
16.1 16.7 33.7
----------------------------- ---------- ---------- ----------
6. Tax charge for the period
The Group's wholly-owned business is subject to taxation as a REIT. Under the REIT regime, income from its rental business (calculated by reference to tax rather than accounting rules) and chargeable gains from the sale of its investment properties are exempt from corporation tax.
7. Earnings per share
Basic and diluted earnings per share
31.3.2017 31.3.2016 30.9.2016
-------------------- ------------------ ------------------ ------------------
Profit Profit Profit
after Earnings after Earnings after Earnings
tax per share tax per share tax per share
GBPm pence GBPm pence GBPm pence
-------------------- ------ ---------- ------ ---------- ------ ----------
Basic 102.4 36.7 80.1 28.8 99.1 35.6
Dilutive effect
of share options - (0.1) - (0.1) - (0.1)
------ ---------- ------ ---------- ------ ----------
Diluted 102.4 36.6 80.1 28.7 99.1 35.5
------ ---------- ------ ---------- ------ ----------
Number of shares
for Basic and
EPRA EPS (million) 278.8 278.3 278.4
Number of shares
for Diluted EPS
(million) 279.5 279.3 279.4
-------------------- ------ ---------- ------ ---------- ------ ----------
EPRA earnings per share
The calculations below are in accordance with the EPRA Best Practice Recommendations.
31.3.2017 31.3.2016 30.9.2016
------------------------ -------------------- -------------------- -------------------
Profit Profit Profit Earnings
after Earnings after Earnings after per
tax per share tax per share tax share
GBPm pence GBPm pence GBPm pence
------------------------ -------- ---------- -------- ---------- --------- --------
Basic 102.4 36.7 80.1 28.8 99.1 35.6
EPRA adjustments:
Investment property
valuation surplus
(note 9) (61.6) (22.1) (58.2) (20.9) (108.3) (38.9)
Profit on disposal
of investment
properties (0.3) (0.1) - - - -
Movement in fair
value of derivatives
(note 16) (16.1) (5.8) 12.1 4.3 34.9 12.5
Recognition of
fair value of
Debenture stock - - - - 29.2 10.5
Adjustments in
respect of the
joint venture:
Investment property
valuation surplus (1.5) (0.5) (10.4) (3.7) (11.3) (4.1)
Deferred tax (0.1) - (3.4) (1.2) (4.6) (1.6)
-------- ---------- -------- ---------- --------- --------
EPRA earnings 22.8 8.2 20.2 7.3 39.0 14.0
------------------------ -------- ---------- -------- ---------- --------- --------
8. Dividends paid
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
----------------------------- ---------- ---------- ----------
Final dividend for:
Year ended 30 September 2016
at 7.55p per share 21.3 - -
Year ended 30 September 2015
at 6.925p per share - 19.5 19.5
Interim dividend for:
Year ended 30 September 2016
at 7.15p per share - - 19.9
Dividends for the period 21.3 19.5 39.4
Timing difference on payment
of withholding tax - - (1.2)
---------- ---------- ----------
Dividends cash paid 21.3 19.5 38.2
----------------------------- ---------- ---------- ----------
An interim dividend of 7.9p per share in respect of the six months ended 31 March 2017 was declared by the Board on 22 May 2017. The interim dividend will be paid as an ordinary dividend on 7 July 2017 to shareholders on the register at 16 June 2017. The dividend will be accounted for as an appropriation of revenue reserves in the year ending 30 September 2017.
9. Investment properties
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
----------------------------------- --------- --------- ---------
At beginning of period 3,111.6 2,908.0 2,908.0
Acquisitions 28.1 43.2 62.7
Disposals (4.9) - -
Refurbishment and other capital
expenditure 20.0 12.8 32.6
Net surplus on revaluation
of investment properties 61.6 58.2 108.3
--------- --------- ---------
Book value at end of period 3,216.4 3,022.2 3,111.6
----------------------------------- --------- --------- ---------
Fair value at end of period:
Properties valued by Cushman
& Wakefield 3,228.1 3,034.3 3,123.6
Less: unamortised lease incentives
(note 10) (11.7) (12.1) (12.0)
--------- --------- ---------
Book value at end of period 3,216.4 3,022.2 3,111.6
----------------------------------- --------- --------- ---------
The investment properties valuation comprises:
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
--------------------- --------- --------- ---------
Freehold properties 2,956.6 2,789.1 2,864.8
Leasehold properties 271.5 245.2 258.8
--------- --------- ---------
3,228.1 3,034.3 3,123.6
--------------------- --------- --------- ---------
Investment properties were subject to external valuation as at 31 March 2017 by qualified professional valuers, being members of the Royal Institution of Chartered Surveyors, working for Cushman & Wakefield, Chartered Surveyors, acting in the capacity of external valuers.
All properties were valued on the basis of fair value and highest and best use in accordance with the RICS Valuation Standards - Professional Standards 2014 and IFRS 13. When considering the highest and best use a valuer considers its actual and potential uses which are physically, legally and financially viable. Where the highest and best use differs from the existing use, the valuer considers the use a market participant would have in mind when formulating the price it would bid and reflects the cost and likelihood of achieving that use.
The external valuers use information provided by the Group, such as tenancy information and capital expenditure expectations. The valuers, in forming their opinion make a series of assumptions. The assumptions are typically market related, such as yields and rental values, and are based on the valuers' professional judgement and market observations. The major inputs to the external valuation are reviewed by the senior management team. In addition, the valuers meet with external auditors and members of the Audit Committee.
The fair value of the Group's investment properties has primarily been determined using a market approach, which provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available. There are a number of assumptions that are made in deriving the fair value, including equivalent yields and ERVs. Equivalent yields are based on current market prices, depending on, inter alia, the location and use of the property. ERVs are calculated using a number of factors which include current rental income, market comparatives and occupancy levels. Whilst there is market evidence for these inputs, and recent transaction prices for similar properties, there is still a significant element of estimation and judgement. As a result of adjustments made to market observable data, these significant inputs are deemed unobservable.
The Group considers all of its investment properties to fall within Level 3 of the hierarchy in IFRS 13, as set out below. The Group's policy is to recognise transfers between fair value hierarchy levels as at the date of the event or change in circumstances that caused the transfer. There have been no transfers during the period (31.3.2016: none; 30.9.2016: none).
Hierarchy Description
--------- ------------------------------------------------
Level 1 Quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Level 2 Inputs other than quoted prices included within
level 1 that are observable for the asset or
liability, either directly (that is, as prices)
or indirectly (that is, derived from prices).
Level 3 Inputs for the asset or liability that are
not based on observable market data (that is,
unobservable inputs). Discounted cash flows
are used to determine fair values of these
instruments.
--------- ------------------------------------------------
The key assumptions made by the valuers are set out in the basis of valuation above. The Group's acquisition and capital expenditure activity is discussed above.
As noted in the critical judgements, assumptions and estimates section on page 124 in the 2016 Annual Report, the valuation of the Group's property portfolio is inherently subjective. As a result, the valuations the Group places on its property portfolio are subject to a degree of uncertainty and are made on the basis of assumptions which may not prove to be accurate, particularly in periods of volatility or low transaction flow in the commercial property market.
The key unobservable inputs are inter-dependent. All other factors being equal, a higher equivalent yield would lead to a decrease in the valuation of a property, and an increase in the ERV would increase the capital value, and vice versa.
At 31 March 2017, the Group had capital commitments of GBP25.0 million (31.3.2016: GBP13.9 million; 30.9.2016: GBP31.3 million).
10. Accrued income
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
----------------------------- --------- --------- ---------
Accrued income in respect
of lease incentives 11.7 12.1 12.0
Less: included in trade and
other receivables (note 12) (2.2) (2.2) (2.2)
--------- --------- ---------
9.5 9.9 9.8
----------------------------- --------- --------- ---------
Lease incentives are allocated between amounts to be charged against rental income within one year of the Balance Sheet date and amounts which will be charged against rental income in subsequent years.
11. Investment in joint venture
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
---------------------------- --------- --------- ---------
Group
At 1 October 146.4 129.6 129.6
Share of profits 3.5 14.9 18.5
Dividends received (2.8) (1.1) (1.7)
--------- --------- ---------
Book value at end of period 147.1 143.4 146.4
---------------------------- --------- --------- ---------
The summarised Statement of Comprehensive Income and Balance Sheet used for consolidation purposes are presented below:
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
----------------------------------- ---------- ---------- ----------
Statement of Comprehensive
Income
----------------------------------- ---------- ---------- ----------
Rents receivable 9.2 7.2 15.1
Recoverable property expenses 0.8 0.7 1.4
----------------------------------- ---------- ---------- ----------
Revenue from properties 10.0 7.9 16.5
----------------------------------- ---------- ---------- ----------
Property outgoings (1.0) (0.9) (1.6)
Recoverable property expenses (0.8) (0.7) (1.4)
----------------------------------- ---------- ---------- ----------
Property charges (1.8) (1.6) (3.0)
---------- ---------- ----------
Net property income 8.2 6.3 13.5
Administrative expenses (0.1) (0.3) (0.4)
---------- ---------- ----------
Operating profit before investment
property valuation movements 8.1 6.0 13.1
Net surplus on revaluation
of investment properties 3.0 20.7 22.5
---------- ---------- ----------
Operating profit 11.1 26.7 35.6
Net finance costs (3.4) (3.3) (6.6)
---------- ---------- ----------
Profit before tax 7.7 23.4 29.0
----------------------------------- ---------- ---------- ----------
Current tax (0.9) (0.4) (1.2)
Deferred tax 0.2 6.8 9.1
----------------------------------- ---------- ---------- ----------
Tax (charge)/credit for the
period (0.7) 6.4 7.9
---------- ---------- ----------
Profit and total comprehensive
income for the period 7.0 29.8 36.9
---------- ---------- ----------
Profit attributable to the
Group 3.5 14.9 18.5
----------------------------------- ---------- ---------- ----------
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
------------------------------ --------- --------- ---------
Balance Sheet
Non-current assets
Investment properties at book
value 458.2 452.1 455.0
Accrued income 3.7 4.2 4.0
Other receivables 1.3 1.3 1.3
--------- --------- ---------
463.2 457.6 460.3
Cash and cash equivalents 4.4 4.0 4.1
Current assets 2.6 2.6 4.0
--------- --------- ---------
Total assets 470.2 464.2 468.4
--------- --------- ---------
Current liabilities 9.9 9.3 9.4
Non-current liabilities
Secured term loan 120.0 120.0 120.0
Other non-current liabilities 46.1 48.1 46.3
--------- --------- ---------
Total liabilities 176.0 177.4 175.7
--------- --------- ---------
Net assets 294.2 286.8 292.7
--------- --------- ---------
Net assets attributable to
the Group 147.1 143.4 146.4
------------------------------ --------- --------- ---------
Knight Frank LLP, acting in the capacity of external valuers, value the investment properties owned by the joint venture.
12. Trade and other receivables
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
------------------------------ --------- --------- ---------
Amounts due from tenants 9.6 11.8 10.5
Provision for doubtful debts (0.4) (0.5) (0.5)
--------- --------- ---------
9.2 11.3 10.0
Accrued income in respect
of lease incentives (note
10) 2.2 2.2 2.2
Amount due from joint venture 0.9 0.9 0.9
Prepayments 4.2 4.1 4.4
Other receivables 0.3 0.5 1.8
--------- --------- ---------
16.8 19.0 19.3
------------------------------ --------- --------- ---------
At 31 March 2017, cash deposits totalling GBP18.1 million (31.3.2016: GBP17.7 million; 30.9.2016: GBP18.0 million) were held against tenants' rent payment obligations. The deposits are held in bank accounts administered by the Group's managing agents.
13. Cash and cash equivalents
Cash and cash equivalents at 31 March 2017 were GBP10.3 million (31.3.2016: GBP7.2 million; 30.9.2016: GBP15.6 million).
Non-current other receivables include GBP3.7 million at 31 March 2017 (31.3.2016: GBP3.7 million; 30.9.2016: GBP3.7 million) which relate to cash held on deposit as security for certain secured term loans, and where there are certain conditions restricting its use. Holding cash in restricted accounts does not prevent the Group from earning returns by placing these monies in interest-bearing accounts or on deposit.
14. Trade and other payables
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
----------------------------------- --------- --------- ---------
Rents and service charges
invoiced in advance 22.1 20.8 21.3
Amounts due in respect of
property acquisitions 0.5 - 0.7
Trade payables and accruals
in respect of capital expenditure 4.0 3.6 5.2
Other taxation and social
security 4.3 4.9 6.1
Other payables and accruals 9.4 9.5 12.0
--------- --------- ---------
40.3 38.8 45.3
----------------------------------- --------- --------- ---------
15. Borrowings
Unamortised
Nominal issue
value costs 31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm GBPm GBPm
----------------------- ------- ----------- --------- --------- ---------
Current borrowings
Debenture stock - - - - 92.2
------- ----------- --------- --------- ---------
Non-current borrowings
Mortgage bonds 285.0 (3.5) 281.5 - -
Debenture stock - - - 63.1 -
Secured bank loans 171.6 (1.4) 170.2 246.6 289.0
Secured term loans 384.8 (4.5) 380.3 379.9 380.1
------- ----------- --------- --------- ---------
Total non-current
borrowings 841.4 (9.4) 832.0 689.6 669.1
------- ----------- --------- --------- ---------
Total borrowings 841.4 (9.4) 832.0 689.6 761.3
----------------------- ------- ----------- --------- --------- ---------
Net debt
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
------------------------------ --------- --------- ---------
Nominal borrowings - gross 841.4 703.3 767.7
Cash balances set-off against
certain borrowings - (8.9) -
--------- --------- ---------
841.4 694.4 767.7
Cash and cash equivalents
(note 13) (10.3) (7.2) (15.6)
--------- --------- ---------
831.1 687.2 752.1
------------------------------ --------- --------- ---------
On 7 October 2016, Shaftesbury Carnaby PLC, a subsidiary of Shaftesbury PLC (the Company), issued GBP285 million of Guaranteed First Mortgage Bonds (the bonds) with a coupon of 2.487% and maturity in September 2031. The bonds are secured by fixed charges over the properties held by Shaftesbury Carnaby PLC and a floating charge over Shaftesbury Carnaby PLC's assets. They also benefit from an unsecured guarantee from Shaftesbury PLC.
On the same day, the Company's existing GBP61.0 million Debenture Stock (the stock) was redeemed in full, being satisfied by existing holders of the stock exchanging their stock for new bonds, or taking cash. Of the GBP285 million proceeds raised by the issue of the new bonds, GBP92.2 million was used to redeem the existing stock. This was satisfied by GBP10.4 million of cash and GBP81.8 million of new bonds. The fixed and floating charges relating to the stock were released.
The Group's borrowings are secured by fixed charges over certain investment properties held by subsidiaries, with a carrying value of GBP2,700.9 million (31.3.2016: GBP2,525.7 million; 30.9.2016: GBP2,436.9 million), and by floating charges over the assets of the Company and certain subsidiaries.
Availability and maturity of borrowings
Facilities
-------------------------- -------------------------
Committed Drawn Undrawn
GBPM GBPM GBPM
-------------------------- --------- ----- -------
Repayable within 1 year - - -
Repayable between 1 and 5
years 350.0 171.6 178.4
Repayable after 10 years 669.8 669.8 -
--------- ----- -------
At 31 March 2017 1,019.8 841.4 178.4
--------- ----- -------
At 31 March 2016 795.8 694.4 101.4
--------- ----- -------
At 30 September 2016 827.0 767.7 59.3
-------------------------- --------- ----- -------
Interest rate profile of interest bearing borrowings
31.3.2017 31.3.2016 30.9.2016
------------------------- --------------- --------------- ---------------
Debt Interest Debt Interest Debt Interest
GBPm rate GBPm rate GBPm rate
------------------------- ----- -------- ----- -------- ----- --------
Floating rate borrowings
LIBOR-linked loans
(including margin) 46.6 1.49% 68.6 1.88% 110.7 1.75%
Hedged borrowings
Interest rate swaps
(including margin) 125.0 6.02% 180.0 6.13% 180.0 6.17%
----- -------- ----- -------- ----- --------
Total bank borrowings 171.6 4.79% 248.6 4.96% 290.7 4.49%
----- ----- -----
Fixed rate borrowings
Secured term loans 384.8 3.85% 384.8 3.85% 384.8 3.85%
Mortgage bonds 285.0 2.49% - - - -
8.5% First Mortgage
Debenture Stock -
book value - - 63.1 7.93% 92.2 7.93%
--------
Weighted average cost
of drawn borrowings 3.58% 4.61% 4.45%
------------------------- ----- -------- ----- -------- ----- --------
The Group also incurs non-utilisation fees on undrawn facilities. At 31 March 2017, the weighted average charge on the undrawn facilities of GBP178.4 million (31.3.2016: GBP101.4 million; 30.9.2016: GBP59.3 million) was 0.70% (31.3.2016: 0.69%; 30.9.2016: 0.70%).
The Group has in place interest rate swaps to hedge GBP125.0 million of floating rate bank debt, at fixed rates in the range 4.68% to 5.16%, with a weighted average rate at 31 March 2017 of 4.89%. The swaps, which are settled against three month LIBOR, expire between August 2028 and October 2038. If mutual break or counterparty early termination options are exercised the weighted average term is 3.1 years (31.3.2016: 3.6 years; 30.9.2016: 3.1 years).
Details of the Group's current financial position are discussed above.
16. Financial instruments
Fair value of financial instruments
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
--------------------------------------- --------- --------- ---------
Interest rate swaps
At beginning of period (114.1) (79.2) (79.2)
Swap contracts terminated 34.1 - -
Fair value movement credited/(charged)
to the Statement of Comprehensive
Income 16.1 (12.1) (34.9)
--------- --------- ---------
At end of period (63.9) (91.3) (114.1)
--------------------------------------- --------- --------- ---------
In October 2016, the Group terminated interest rate swap contracts with a notional principal of GBP55.0 million. These swaps, with an average rate of 4.76%, had expiry dates between August 2028 and November 2038, and included counterparty early termination options in November 2018. The cost of terminating these swaps was GBP34.1 million. They were included in the Balance Sheet at 30 September 2016 at a fair value of GBP38.0 million. The difference between the fair value of these interest rate swaps at 30 September 2016 of GBP38.0 million and the cost of termination of GBP34.1 million, is included in the fair value movement credited to the Statement of Comprehensive Income for the period of GBP16.1 million.
Changes in the fair value of the Group's interest rate swaps, which are not held for speculative purposes, are reflected in the Statement of Comprehensive Income as the Group has chosen not to adopt hedge accounting under the provisions of IAS 39 'Financial Instruments: Recognition and Measurement'.
The extent to which the fair value deficit will crystallise will depend on the course of interest rates over the life of the swaps. The weighted average maturity of the swaps at the Balance Sheet date is set out in note 15.
The fair value of the interest rate swaps has been estimated using the mid-point of the relevant yield curve prevailing at the reporting date, and represents the net present value of the differences between the contractual rate and the valuation rate through to the contracted expiry date of the swap contract. The valuation technique falls within Level 2 of the fair value hierarchy (see note 9 for definition). The swaps are valued by J.C Rathbone Associates Limited.
Interest rate swaps are the only financial instruments which are held at fair value. There have been no transfers between hierarchy levels during the period (31.3.2016: none; 30.9.2016: none).
The mortgage bonds and the Group's secured term loans are held at amortised cost in the Balance Sheet. The fair value of these financial instruments is in excess of book value. This excess, which is not recognised in the reported results for the period, is GBP37.4 million (31.3.2016: GBP31.7 million; 30.9.2016: GBP52.5 million). The fair values have been calculated based on a discounted cash flow model using the relevant reference gilt and appropriate market spread. The valuation technique falls within Level 2 of the fair value hierarchy (see note 9 for definition).
The Group has no obligation to repay its secured term loans in advance of their maturities on 2 May 2029, 19 March 2030, and 31 July 2035.
Other financial instruments
The fair values of the Group's cash and cash equivalents, and those financial instruments included within trade and other receivables, interest bearing borrowings, (excluding the mortgage bonds and the secured term loans), and trade and other payables are not materially different from the values at which they are carried in the financial statements.
17. Share capital
During the period, 451,000 ordinary 25p shares were issued in connection with the exercise of nil cost options granted under the 2006 LTIP.
18. Net asset value per share
The calculations below are in accordance with the EPRA Best Practice Recommendations.
As restated
31.3.2017 31.3.2016 30.9.2016
Net assets Net assets Net assets
--------------------------- --------------- --------------- ---------------
Net Per Net Per Net Per
assets share assets share assets share
GBPm GBP GBPm GBP GBPm GBP
--------------------------- ------- ------ ------- ------ ------- ------
Basic 2,468.9 8.85 2,387.1 8.57 2,387.1 8.57
Dilutive effect of
share options 0.5 0.4 0.5
------- ------ ------- ------ ------- ------
Diluted 2,469.4 8.83 2,387.5 8.53 2,387.6 8.54
Fair value of derivatives 63.9 0.23 91.3 0.33 76.1 0.27
Deferred tax* 17.9 0.06 19.1 0.07 18.0 0.07
------- ------ ------- ------ ------- ------
EPRA NAV 2,551.2 9.12 2,497.9 8.93 2,481.7 8.88
Fair value of derivatives (63.9) (0.23) (91.3) (0.33) (76.1) (0.27)
Deferred tax* (17.9) (0.06) (19.1) (0.07) (18.0) (0.07)
Excess of fair value
over carrying value
of debt:
Secured term loans* (49.0) (0.18) (25.6) (0.09) (64.9) (0.23)
Mortgage bond 2.3 0.01 - - - -
Debenture stock - - (14.5) (0.05) - -
------- ------ ------- ------ ------- ------
EPRA NNNAV 2,422.7 8.66 2,347.4 8.39 2,322.7 8.31
------- ------ ------- ------ ------- ------
Number of shares (million) 279.0 278.5 278.6
Number of diluted
shares (million) 279.8 279.7 279.6
--------------------------- ------- ------ ------- ------ ------- ------
* Includes our 50% share of deferred tax and excess of fair value over carrying value of secured term loans in the Longmartin joint venture.
The calculations of diluted net asset value per share show the potentially dilutive effect of share options outstanding at the Balance Sheet date and include the increase in shareholders' equity which would arise on the exercise of those options.
In accordance with EPRA recommendations, the adjustment for the fair value of derivatives at 30 September 2016 excludes those interest rate swaps which were cancelled in October 2016 (see note 16).
The fair value of secured term loans at 31 March 2016 has been restated by GBP8.4 million to include the fair value in excess of book value for the debt in the joint venture. This has decreased EPRA NNNAV net assets by GBP8.4 million and EPRA NNNAV net asset value per share by GBP0.03.
19. Cash flows from operating activities
Six months Six months Year
ended ended ended
31.3.2017 31.3.2016 30.9.2016
Operating activities GBPm GBPm GBPm
------------------------------------ ---------- ---------- ----------
Profit before tax 102.4 80.1 99.1
Adjusted for:
Lease incentives recognised
(note 2) 0.3 (0.6) (0.5)
Charge for share-based remuneration
(note 4) 0.7 1.2 1.9
Depreciation 0.2 0.2 0.4
Investment property valuation
movements (note 9) (61.6) (58.2) (108.3)
Profit on disposal of investment
properties (0.3) - -
Net finance costs - 28.7 97.7
Share of profit from joint
venture (note 11) (3.5) (14.9) (18.5)
---------- ---------- ----------
Cash flows from operations
before changes in working
capital 38.2 36.5 71.8
Changes in working capital:
Change in trade and other
receivables 2.5 2.3 2.1
Change in trade and other
payables (3.1) 0.1 3.0
---------- ---------- ----------
Cash generated from operating
activities 37.6 38.9 76.9
------------------------------------ ---------- ---------- ----------
20. Movement in borrowings
Non-cash
1.10.2016 Cash flows items 31.3.2017
GBPm GBPm GBPm GBPm
------------------------------ --------- ---------- -------- ---------
Group
Mortgage bonds - (203.2) (81.8) (285.0)
8.5% First Mortgage Debenture
Stock 2024 (92.2) 10.4 81.8 -
Secured bank loans (290.7) 119.1 - (171.6)
Secured term loans (384.8) - - (384.8)
Loan issue costs 6.4 3.6 (0.6) 9.4
--------- ---------- -------- ---------
Six months ended 31 March
2017 (761.3) (70.1) (0.6) (832.0)
--------- ---------- -------- ---------
Six months ended 31 March
2016 (640.3) (48.9) (0.4) (689.6)
--------- ---------- -------- ---------
Year ended 30 September
2016 (640.3) (91.0) (30.0) (761.3)
------------------------------ --------- ---------- -------- ---------
21. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Transactions and balances between the Company and its joint venture, which have not been eliminated on consolidation are summarised below:
31.3.2017 31.3.2016 30.9.2016
GBPm GBPm GBPm
--------------------------------- --------- --------- ---------
Transactions with joint venture:
Administrative fees receivable 0.1 0.2 0.2
Dividends receivable 2.8 1.1 1.7
Interest receivable - - 0.1
Balance with joint venture:
Amount due from joint venture 0.9 0.9 0.9
--------------------------------- --------- --------- ---------
Responsibility Statement
The directors confirm that the condensed consolidated half year financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union and that the half year management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- important events that have occurred during the first six months and their impact on the condensed set of half year financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related party transactions in the first six months and a fair review of any material changes in the related party transactions described in the last Annual Report.
The maintenance and integrity of the Shaftesbury website is the responsibility of the directors. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislations in other jurisdictions.
The directors of Shaftesbury PLC are listed in its Annual Report for the year ended 30 September 2016.
A list of current directors is maintained on the Shaftesbury PLC website: www.shaftesbury.co.uk.
On behalf of the Board
Brian Bickell
Chief Executive
Chris Ward
Finance Director
22 May 2017
Independent Review Report to Shaftesbury PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 which comprises the Unaudited Group Statement of Comprehensive Income, the Unaudited Group Balance Sheet, the Unaudited Group Cash Flow Statement, the Unaudited Group Statement of Changes in Equity and the related notes to the financial statements 1 to 21. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
22 May 2017
Shareholder Information
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex, BN99 6DA
Telephone 0371 384 2294 (International +44 121 415 7047). Lines open 8.30am to 5.30pm, Monday to Friday.
Shareholder accounts may be accessed online through www.shareview.co.uk. This gives secure access to account information instructions. There is also a Shareview dealing service which is a simple and convenient way to buy or sell shares in the Group.
Effect of REIT status on payment of dividends
As a REIT, we do not pay UK corporation tax in respect of rental profits and chargeable gains relating to our property rental business. However, we are required to distribute at least 90% of the qualifying income (broadly calculated using the UK tax rules) as a PID.
Certain categories of shareholder may be able to receive the PID element of their dividends gross, without deduction of withholding tax. Categories which may claim this exemption include: UK companies, charities, local authorities, UK pension schemes and managers of PEPs, ISAs and Child Trust Funds.
Further information and the forms for completion to apply for PIDs to be paid gross are available on the Group's website or from the registrar.
Where the Group pays an ordinary dividend this will be treated in the same way as dividends from non-REIT companies. The 2017 interim dividend is being paid entirely as an ordinary dividend.
Corporate Timetable
Financial Calendar
Trading Statement (second half) September 2017 Annual Results November 2017 Annual General Meeting February 2018
Dividends and Mortgage Bond interest
Proposed 2017 interim dividend:
Ex-dividend 15 June 2017 Record date 16 June 2017 Payment date 7 July 2017 Mortgage Bond interest 30 September 2017
Glossary of terms
Alternative Performance Measure (APM)
A financial measure of historical or future financial performance, position or cash flows of the Group which is not a measure defined or specified in IFRS.
Capital value growth
The valuation movement and realised surpluses or deficits arising from the Group's investment property portfolio expressed as a percentage return on the valuation at the beginning of the period adjusted, on a time weighted basis, for acquisitions and capital expenditure. When measured on a like-for-like basis, the calculation excludes those properties acquired or sold during the period.
Compound Annual Growth Rate (CAGR)
The year-on-year growth rate of an investment over a specified period of time.
Current income
Total annualised actual and 'estimated income' reserved by leases at a valuation date. No rent is attributed to leases which were subject to rent-free periods at that date. Current income does not reflect any ground rents, head rents nor rent charges and estimated irrecoverable outgoings at the valuation date. 'Estimated income' refers to gross ERVs in respect of rent reviews outstanding at the valuation date and, where appropriate, ERV in respect of lease renewals outstanding at the valuation date where the fair value reflects terms for a renewed lease.
Like-for-like growth in current income is the change in current income during a period, adjusted to remove the impact of acquisitions and disposals, expressed as a percentage of current income at the start of the period.
Diluted net asset value per share
Net asset value per share taking into account the dilutive effect of potential vesting of share options.
EPRA adjustments
Standard adjustments to calculate EPS and NAV as set out by EPRA in its Best Practice and Policy Recommendations.
EPRA EPS
EPRA EPS is the level of recurring income arising from core operational activities. It excludes all items which are not relevant to the underlying and recurring portfolio performance.
EPRA NAV
EPRA NAV aims to provide a consistent long-term performance measure, by adjusting reported net assets for items that are not expected to crystallise in normal circumstances, such as the fair value of derivative financial instruments and deferred tax on property valuation surpluses. EPRA NAV includes the potentially dilutive effect of outstanding options granted over ordinary shares.
EPRA net assets
Net assets used in the EPRA NAV calculation, including additional equity if all vested share options were exercised.
EPRA NNNAV
EPRA NAV incorporating the fair value of debt which is not included in the reported net assets.
EPRA vacancy
The rental value of vacant property available expressed as a percentage of ERV of the total portfolio.
Equivalent yield
Equivalent yield is the internal rate of return from an investment property, based on the gross outlays for the purchase of a property (including purchase costs), reflecting reversions to current market rent, and such items as voids and non-recoverable expenditure but disregarding potential changes in market rents.
European Public Real Estate Association (EPRA)
EPRA develops policies for standards of reporting disclosure, ethics and industry practices.
Estimated rental value (ERV)
ERV is the market rental value of properties owned by the Group, estimated by the Group's valuers.
Like-for-like ERV growth is the change in ERV during a period, adjusted to remove the impact of acquisitions and disposals, expressed as a percentage of ERV at the start of the period.
Fair value
The amount at which an asset or liability could be exchanged between two knowledgeable, willing and unconnected parties in an arm's length transaction at the valuation date.
Gearing
Nominal value of Group borrowings expressed as a percentage of EPRA net assets.
Initial yield
The initial yield is the net initial income at the date of valuation expressed as a percentage of the gross valuation. Yields reflect net income after deduction of any ground rents, head rents, rent charges and estimated irrecoverable outgoings.
Interest cover
The interest cover is a measure of the number of times the Group can make interest payments with its operating profit before investment property disposals and valuation movements.
Like-for-like growth in rents receivable
The increase in rents receivable during an accounting period, adjusted to remove the impact of acquisitions, disposals and changes as a result of major refurbishment schemes, expressed as a percentage of rents receivable in the corresponding previous accounting period.
Loan-to-value
Nominal value of borrowings expressed as a percentage of the fair value of property assets.
Long Term Incentive Plan (LTIP)
An arrangement under which an employee is awarded options in the Company at nil cost, subject to a period of continued employment and the attainment of NAV and TSR targets over a three-year vesting period.
Net asset value (NAV)
Equity shareholders' funds divided by the number of ordinary shares at the balance sheet date.
Net asset value return
The change in EPRA NAV per ordinary share plus dividends paid per ordinary share during the period of calculation, expressed as a percentage of the EPRA NAV per share at the beginning of the period.
Portfolio reversionary potential
The amount by which the ERV exceeds current income, measured at a valuation date.
Property Income Distribution (PID)
A PID is a distribution by a REIT to its shareholders paid out of qualifying profits. A REIT is required to distribute at least 90% of its qualifying profits as a PID to its shareholders.
Real Estate Investment Trust (REIT)
A REIT is a tax designation for an entity or group investing in real estate that reduces or eliminates corporation tax on rental profits and chargeable gains relating to the rental business, providing certain criteria obligations set out in tax legislation are met.
Topped-up initial yield
An adjusted initial yield which assumes rent free periods or other unexpired lease incentives, such as discounted rent periods and step ups, have expired.
Total Shareholder Return (TSR)
The change in the market price of an ordinary share plus dividends reinvested expressed as a percentage of the share price at the beginning of the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KMGZKKZDGNZM
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