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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| St.modwen Properties Plc | LSE:SMP | London | Ordinary Share | GB0007291015 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 559.00 | 559.00 | 560.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSMP
RNS Number : 3435T
St. Modwen Properties PLC
03 July 2018
Date of issue: 3 July 2018
LEI: 213800WMV4WVES8TQH05
This announcement contains inside information
ST. MODWEN PROPERTIES PLC
("St. Modwen" or "the Company")
Results for the half year ended 31 May 2018
ST. MODWEN DELIVERS STRONG PROGRESS IN EXECUTING NEW STRATEGY
Mark Allan, Chief Executive of St. Modwen, commented:
"We have had a good start to 2018. Our expectations for the full year remain unchanged and we are firmly focused on executing the new strategy we established a year ago. We have sold GBP635m of assets since then, improving our portfolio mix and allowing us to reduce borrowings, whilst accelerating the delivery of our substantial industrial/logistics and regional housebuilding pipeline. Despite ongoing uncertainty in the external environment, structural growth drivers in both sectors remain positive, so we anticipate delivering a meaningful improvement in earnings and return on capital in the medium term."
Financial highlights
Hot Features
Premium
Non-statutory measures(1) May Prior Statutory measures May 2018 Prior period(2)
2018 period(2)
--------------------------- ----- ---------- ------------------------ -------- ---------------
EPRA NAV per share (pence) 474.4 471.2 NAV per share (pence) 455.4 450.9
Total accounting return Interim dividend per
(%) 2.0 2.9 share (pence) 3.10 2.02
Adjusted EPRA earnings
(GBPm) 13.9 13.1 Profit before tax (GBPm) 25.9 31.6
Adjusted EPRA EPS (pence) 6.3 5.9 Basic EPS (pence) 9.4 12.1
See-through loan-to-value Group net borrowings
(%) 24.2 24.2 (GBPm) 366.0 433.8
--------------------------- ----- ---------- ------------------------ -------- ---------------
-- NAV per share up 1.0% over the six months to 455.4 pence (Nov 2017: 450.9 pence).
-- Total accounting return for the half year of 2.0% (2017: 2.9%) due to disposals.
-- Group net borrowings down GBP67.8m over the half year to GBP366.0m (Nov 2017: GBP433.8m).
-- See-through LTV stable since year end at 24.2% (Nov 2017: 24.2%).
-- Adjusted EPRA EPS for the half year up 0.4 pence to 6.3 pence (2017: 5.9 pence).
-- Interim dividend up 53.5% to 3.10 pence per share (2017: 2.02 pence per share).
Operational highlights
Considerable progress in repositioning our portfolio towards sectors with better long-term growth prospects and accelerating the delivery of our substantial development pipeline.
-- Portfolio focus and capital discipline:
o Sold GBP350m of assets since the end of 2017, bringing total disposals since announcement of new strategy a year ago to GBP635m, driving significant improvement in portfolio mix.
o Expect to exceed full year target to sell GBP100-150m of retail and small assets, with the sale of 28% of our retail portfolio for GBP95m during the half year and a further c. GBP70m of retail and small assets under offer.
o Recycling capital out of existing assets into industrial/logistics pipeline to drive significant pick-up in
income, reduction in costs and improvement in growth prospects in medium term.
-- Accelerate our commercial development activity:
o Increased committed industrial/logistics pipeline from 1.0m sq ft to 1.3m sq ft since start of the year, of which approximately two-thirds will be retained, with an ERV of GBP6.1m.
o Obtained consent for 1.2m sq ft at key strategic sites at Chippenham Gateway and Copthorne, Gatwick with combined ERV of over GBP8m.
o Prepared industrial/logistics pipeline for future growth; over 10m sq ft development potential across key strategic sites with ERV of over GBP60m deliverable over 5-8 years, partly subject to planning, plus over 5m sq ft development potential on smaller sites with over GBP30m ERV.
-- Grow our residential and housebuilding business:
o Delivered 31% growth in St. Modwen Homes' volumes with 302 units sold in the first half (2017: 230 units), delivering a 23.3% increase in profit to GBP11.1m reflecting the low level of affordable completions during the previous period. Expectation of up to 25% volume growth and 0.5ppt margin improvement for full year remains unchanged.
o Sold 21 acres of residential land to third party housebuilders for GBP27m (2017: GBP14m), in line with book value, well on track versus our target to sell at least GBP56m this year.
-- Cement and grow our regeneration reputation:
o Released GBP141m of capital out of first phases of development at Longbridge and Swansea to bring forward significant residual development opportunities.
o Preparing next phase of student housing and academic facilities at Swansea for delivery by 2021 and enhancing Longbridge vision ahead of employment-led next phase.
Enquiries: St. Modwen Properties PLC Mark Allan, Chief Executive Tel: 0121 222 9400 Rob Hudson, Chief Financial Officer www.stmodwen.co.uk Kathryn Edwards, Interim Head of Corporate Communications FTI Consulting Dido Laurimore Tel: 020 3727 1015 Tom Gough stmodwen@fticonsulting.com Ellie Sweeney
A presentation for analysts and investors will be held at 9.30am today at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD.
If you would like to attend, please contact Ellie Sweeney at FTI on +44 (0)20 3727 1622 or stmodwen@fticonsulting.com. A live webcast of the presentation will be available at www.stmodwen.co.uk and presentation slides will also be available to download.
Alternatively, details for the live dial-in facility are as follows:
Participants (UK): Tel: 020 3936 2999 Other Locations: Tel: +44 20 3936 2999 Password: 04 90 49 Webcast link: https://www.investis-live.com/st-modwen/5b1aac5582f6f70a00b61348/zeuy
This announcement contains inside information as set out in Article 17 of the Market Abuse Regulation (MAR).
(1) Reconciliations between all the statutory and non-statutory measures and the explanations as to why the non-statutory measures give valuable further insight into the Group's performance are given in note 2 to the condensed Group financial statements.
(2) Prior period measures are for the six months ended 31 May 2017 other than EPRA NAV per share, NAV per share, see-through loan-to-value and Group net borrowings, which are as at 30 November 2017. Comparative references to 2017 are for the six months ended 31 May 2017 and comparative references to Nov 2017 are as at 30 November 2017.
This announcement contains certain forward-looking statements which, by their nature, 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 the Company are made in good faith based on the information available at the time the statement is made; 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. The Company 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. Nothing in this announcement should be construed as a profit forecast.
CHIEF EXECUTIVE'S REVIEW
Overview
We have had a good start to 2018 and our expectations for the full year remain unchanged. Our focus is firmly on executing the new, more focused strategy we set out a year ago, based on our four strategic objectives: portfolio focus and capital discipline; accelerate our commercial development activity; grow our residential and housebuilding business; and cement and grow our regeneration reputation.
Our successful execution to date is starting to pave the way for a meaningful improvement in earnings and return on capital in the years to come. Recycling capital out of our student housing, retail and smaller assets into retaining our industrial/logistics developments is expected to increase rental income and reduce costs, whilst delivering up to 25% growth in volume per year and a further improvement in margins in our St. Modwen Homes housebuilding business is expected to drive significant growth in residential profits. Importantly, we can deliver all this from our existing pipeline of opportunities and capital base without having to acquire further assets or rely on a general market recovery.
Our results for the first half year were solid. NAV per share increased 1.0% to 455.4 pence (Nov 2017: 450.9 pence) which, combined with dividends paid during the period, resulted in a total accounting return of 2.0% (2017: 2.9%). EPRA NAV per share increased 0.7% to 474.4 pence (Nov 2017: 471.2 pence). As we flagged at the start of the year, disposals have resulted in some short-term volatility in rental income, ahead of reinvesting the proceeds in our industrial/logistics pipeline. This was offset by lower interest costs, partly due to a GBP220.7m reduction in see-through net borrowings since 31 May 2017, so adjusted EPRA EPS increased 0.4 pence to 6.3 pence (2017: 5.9 pence). In line with the new policy we set at the start of 2018, we are increasing our interim dividend to 3.10 pence (2017: 2.02 pence).
Key financial performance metrics May 2018 Prior period Change ----------------------------------------------------- -------- ------------ -------
NAV per share (pence) 455.4 450.9 +1.0% EPRA NAV per share (pence) 474.4 471.2 +0.7% Interim dividend per share (pence) 3.10 2.02 +53.5% Total accounting return (%) 2.0 2.9 -0.9ppt Adjusted EPRA earnings (GBPm) 13.9 13.1 +6.1% Profit before tax (GBPm) 25.9 31.6 -18.0% Earnings per share (pence) 9.4 12.1 -22.3% Adjusted EPRA earnings per share (pence) 6.3 5.9 +6.8% See-through net borrowings(1) (GBPm) 359.6 388.2 -7.4% See-through loan-to-value(1) (%) 24.2 24.2 - See-through loan-to-value (excluding residential)(1) (%) 39.8 37.2 +2.6ppt ----------------------------------------------------- -------- ------------ -------
(1) Including the Group's share of net borrowings and property held in joint ventures and associates.
Portfolio focus and capital discipline: GBP635m of disposals over past year
We continue to make good progress in reshaping our portfolio. Excluding newly built homes and land transferred to St. Modwen Homes, we sold assets for GBP350m during the half year which means we have now sold GBP635m of assets since we announced our new strategy in June 2017, on average in line with book value. Representing 35% of our portfolio value a year ago, this has driven a clear improvement in our portfolio mix and, having reduced our exposure to more challenging sectors such as London residential land and UK retail by over GBP300m, materially improves our total return prospects.
In February we sold the first phase of student accommodation at Swansea Bay Campus for GBP139m, releasing GBP87m of proceeds net of an associated finance lease. The disposal of Longbridge Shopping Park, announced in May, also completed during the period, whilst the disposal of Wembley, announced at the same time, is expected to complete in the near term. Combined with the sale of a small asset in Liverpool, we have sold 28% of our overall retail portfolio by value within the last two months. The total proceeds of GBP95m were 4% below the November 2017 book value, reflecting the challenging UK retail environment, but we believe the benefits from reinvesting this capital into our higher yielding, higher growth industrial/logistics pipeline far outweigh the small initial loss.
In addition, we have agreed terms on a further c. GBP70m of smaller and retail assets disposals. Combined with the GBP95m retail disposals above this means we expect to exceed our target to sell GBP100-150m retail and small assets during 2018 and we now anticipate selling GBP150-175m of these assets this year.
Following the latest disposals, we have c. GBP70m of small assets and GBP255m of retail assets left. Approximately half of our remaining retail assets are in London or leisure oriented, where fundamentals are better than in the wider UK retail market. We expect to sell our remaining small assets and around two-thirds of our residual retail assets in the next two years, whilst we plan to retain the residual small part of our retail portfolio for the time being to explore larger mixed-use development opportunities. These disposals will allow us to keep our borrowings firmly under control as we reinvest in accelerating our residential and industrial/logistics pipeline. Despite part of our disposals completing after the period end and our continued reinvestment in the business, net borrowings reduced further during the first half of the year and our see-through LTV was maintained at 24.2% (Nov 2017: 24.2%) - down from 33.1% a year ago. We continue to expect leverage to reduce slightly over time.
Accelerating our commercial development activity: pipeline to drive strong income growth
Since the start of 2018 we have increased our committed industrial/logistics pipeline from 1.0m sq ft to 1.3m sq ft, of which we plan to retain approximately two-thirds. We continue to see healthy occupier demand for the assets we build and have agreed GBP2.3m of development lettings since the start of the year. As such, we now have terms agreed on 15% of the GBP6.1m ERV we plan to retain. Total development costs on our overall commercial development pipeline stand at GBP270m, of which 50% is now pre-let/pre-sold. We continued to prepare our pipeline in line with our objective to grow industrial/logistics development activity by up to 25% per year by 2020. During the half year we secured outline planning consent for a 1.0m sq ft scheme at Chippenham Gateway, adjacent to junction 17 of the M4, and cleared planning conditions and finalised consents for a 0.2m sq ft scheme at Copthorne, Gatwick, adjacent to junction 10 of the M23. With a potential ERV of over GBP8m, these sites are expected to become an important part of our income portfolio in the medium term, alongside our other key strategic sites.
In total, our key strategic sites offer over 10m sq ft of development potential, predominantly situated at our largest sites in the best locations. These sites could deliver over GBP60m of ERV over the next 5-8 years, partly subject to planning. In addition, we have over 5m sq ft of development potential on smaller sites, which could deliver over GBP30m of ERV in the medium term. We recently appointed a national Head of Leasing to further develop our occupier relationships and accelerate our leasing activity.
The average yield on cost on this pipeline is c. 8%, with a yield on incremental capex of c. 9%. With a gross yield on the retail, small and student housing assets we sell of c. 7%, recycling capital into our pipeline is expected to drive meaningful income growth in the medium term. In addition, with property operating costs on our older retail and small assets of c. 30%, we expect a marked reduction in costs, as we build up a modern, more efficient industrial/logistics-oriented income portfolio in the next 3-5 years.
Growing our residential and housebuilding business: 31% growth in Homes volumes
The residential market in the UK regions remains resilient. We continue to see good demand from third party housebuilders for oven-ready development land and sold GBP27m of land during the first six months, in line with book value. This was nearly double the GBP14m we sold in the first half of 2017, leaving us well on track to meet our target of selling at least GBP56m for the full year, as we sold last year. We also forward-sold our 207-unit PRS scheme in Uxbridge for GBP75m, allowing us to bring forward the next phase of development of 101 apartments for private sale by St. Modwen Homes by 12-18 months.
Our housebuilding business St. Modwen Homes continues to see strong growth. The volume of units sold in the first six months increased 31% to 302 units (2017: 230 units), with growth for the full year expected to be in line with our target of up to 25%. The business is now sales active on 19 sites, up from 16 at the end of last year, with a further three outlets due to be opened in the second half. Average private sales prices increased 8% to GBP283,000, with like-for-like prices up 2% and the remainder driven by changes in mix and unit size. We sold 64 affordable units during the half year relative to an unusually low 10 units in the first half of 2017, so our operating margin reduced to a more normalised level of 14.6% (2017: 15.3%), in line with our target to improve margins for the full year by c. 0.5ppt (Nov 2017: 13.9%).
St. Modwen Homes profit for the first half year increased 23.3% to GBP11.1m (2017: GBP9.0m). This increase was offset by a reduction in profit from our Persimmon JV to GBP1.6m (2017: GBP4.4m), but we expect the profit growth in St. Modwen Homes to exceed the reduction in profits in the Persimmon JV for the full year. We have started to roll out initiatives to improve margins by 2-3ppt over the medium term and have secured the pipeline to grow volumes by up to 25% p.a. by 2021. This is expected to drive significant growth in residential profits in 2018 and beyond and more than offset the reduction in Persimmon JV profits as it continues to wind down its activity over the next two years.
Cementing and growing our regeneration reputation: further progress at major schemes
In addition to the GBP190m cash generated by the sale of the first 10 acres of land at New Covent Garden Market in the second half of 2017, the first half of 2018 saw us release GBP141m of capital out of the first phases of development at our other two major regeneration schemes, Swansea Bay Campus and Longbridge, Birmingham, allowing us to progress the significant opportunities that remain at these sites.
Following the sale of the 2,005 student beds in Swansea in February, we expect to complete the next 411 beds in early 2019 and the latest 40,000 sq ft of academic facilities this autumn. We are now progressing plans for the delivery of a further 600 beds and 150,000 sq ft of academic space by 2021. After the GBP54m sale of the shopping park at Longbridge, we have started works on enhancing the vision for the next phase of this important scheme to make sure it fits our placemaking ambitions and creates a lasting legacy. Whilst the first phase was predominantly retail and residential led, this next phase is employment and residential led and could see us deliver around 0.7m sq ft of employment space.
People
The strong progress we have made in executing our strategy reflects the high level of performance and commitment from our teams across the business. Our people have responded well to our new organisational design, which provides much clearer alignment between individual roles and strategy and allows for an appropriate balance of empowerment and accountability.
A skilled and committed workforce will remain key to us achieving our ambitions. Alongside recruitment into new roles to help facilitate growth, we are also investing significantly in training and development at all levels within the business with encouraging early results.
Looking forward
In line with our outlook in February this year, 2018 is shaping up to be a year of growth, focus and portfolio transition for St. Modwen as we remain firmly focused on executing our new strategy.
The wider UK economic and political environment is still uncertain and likely to remain so for some time to come. Although we are of course exposed to any cyclicality in the wider UK economy, the structural growth fundamentals in our key areas of regional housebuilding and industrial/logistics, remain positive. This provides us with confidence as we accelerate our development activity, although the short-cycle nature of our projects does mean we have flexibility to adjust our pipeline to any sudden changes in demand.
Since we announced our new strategy a year ago we have made considerable progress. Our organisational structure is better aligned to our strategy, our forward pipeline of projects is clear, our net borrowings are down by over GBP220m and with the sale of GBP635m of assets we have seen a significant shift in our portfolio mix. This will continue in the years ahead, as we recycle capital out of existing assets and build up a modern industrial/logistics portfolio with better long-term growth prospects by retaining the majority of our own developments.
The c. 9% yield on incremental capex on our industrial/logistics pipeline is well ahead of the c. 7% gross yield on the assets we sell, whilst the operating costs attached to the older retail and small assets we are selling are well above more efficient, new-built assets. Although disposals will continue to create some volatility in rental income and therefore earnings in the short term, we are confident our portfolio transition will drive strong earnings growth in the medium term - further enhanced by growing volumes in our housebuilding business by up to 25% p.a.
We can deliver all of this from our existing portfolio and capital base, without having to acquire or rely on a general market upturn. Building on our strong track record and expertise, we are therefore well placed to deliver a meaningful improvement in return on capital over the medium term.
PORTFOLIO AND OPERATIONAL REVIEW
Portfolio focus and capital discipline
Valuation performance
Adjusted for investments and disposals, our portfolio value increased 1.5% during the first half of the year and is now valued at GBP1.5bn. Our income producing portfolio makes up 47% of this, with the balance split between land held for future development (29%) and current developments (24%).
Our income producing assets increased in value by 1.2%. The value of our industrial/logistics portfolio, which is now the largest segment of our income producing portfolio, increased by 2.3% benefitting from modest yield compression, partly offset by a GBP2.3m write-down on our asset in Stafford where the tenant is closing its operations. As expected, general retail values remained under pressure as valuation yields softened, although the negative effect of this was offset by a strong uplift in value of our Trentham leisure/retail asset which continues to experience high growth in visitor numbers and rental income. Overall, our income producing portfolio was valued at an 8.0% equivalent yield at the end of May, which was up slightly compared to the end of 2017 on a like-for-like basis. Commercial developments were up 9.2% in value and commercial land, the vast majority of which is earmarked for industrial/logistics development, increased in value by 0.8%, with residential land increasing by 0.6% during the period.
EPRA net
Valuation initial Equivalent LFL equivalent
Value movement(1) yield yield yield shift LFL ERV growth
GBPm % % % bps %
---------------------------- ----- ------------ -------- ---------- -------------- --------------
Industrial/logistics 334 2.3 7.2 8.0 (10) -
Retail 291 0.2 6.6 8.0 30 0.4
Other 67 - 5.9 8.2 (10) (2.6)
---------------------------- ----- ------------ -------- ---------- -------------- --------------
Income producing portfolio 692 1.2 6.8 8.0 10 (0.2)
---------------------------- ----- ------------ -------- ---------- -------------- --------------
Residential developments(2) 273 N/A
Commercial developments 90 9.2
---------------------------- ----- ------------
Total developments(3) 363 9.2
Residential land 310 0.6
Commercial land 122 0.8
---------------------------- ----- ------------
Total land 432 0.7
Total portfolio 1,487 1.5
---------------------------- ----- ------------ -------- ---------- -------------- --------------
(1) Portfolio valuation movements exclude current residential developments.
(2) Includes land held by St. Modwen Homes for future development.
(3) Excludes inventories of GBP4m included within the income producing portfolio.
Our outlook for the market remains broadly unchanged compared to the start of the year. The challenges in the UK retail market are well-publicised, which is resulting in subdued investment volumes and we expect retail values will see some further softening. However, there continues to be investor demand for retail assets which are realistically priced, as shown by the disposal of 28% of our retail portfolio at a modest 4% discount to the November 2017 book value. Following these disposals retail will represent just 18% of our overall portfolio, of which half is located in London or leisure oriented and benefits from a stronger outlook.
Occupier and investment demand for industrial/logistics remains robust. Although speculative supply has started to pick up, this remains relatively modest and take-up remains strong, so we expect this will continue to underpin capital values in this sector and add to the attraction of our substantial development pipeline. With general house price inflation broadly offset by construction cost inflation, we expect upside in land values to be modest and remain largely reliant on potential further planning gains.
Operational performance
At the end of May, the annualised passing rent on our GBP692m income producing portfolio stood at GBP48.5m. This was down GBP11.7m since the end of 2017, primarily due to the disposal of Swansea and Longbridge, as like-for-like rents increased 3.5% compared to the same period last year, with rental growth in industrial well ahead of retail, at 5.8% versus 0.4%. The disposal of Wembley which is expected to complete in the near future will further reduce annualised passing rent.
Overall vacancy is up from 11.7% in November 2017 to 12.5%, but this solely reflects the disposal of assets with no or very little vacancy, principally the Swansea student accommodation and Longbridge Shopping Park, as on a like-for-like basis our overall vacancy decreased by 0.4ppt since the end of 2017. Part of our vacant space continues to be deliberately held back for future developments.
Across our income producing portfolio we signed 1.9m sq ft of new leases and lease renewals during the half year, generating GBP5.8m of annualised rental income. On average, this was 31% above previous passing rent and 2% above November 2017 ERVs. The average remaining lease term to first break for our portfolio decreased from 5.3 years at the end of 2017 to 4.3 years. This chiefly reflects the sale of Longbridge, which reduced the average for the portfolio by 0.8 years.
ERV Passing rent(1) Vacancy LFL rent growth
GBPm GBPm % %
----------------------- ---- --------------- ------- ---------------
Industrial/logistics 29.0 22.6 11.1 5.8
Retail 26.8 21.0 12.9 0.4
Other 5.5 4.9 18.7 4.0
----------------------- ---- --------------- ------- ---------------
Total income producing
portfolio 61.3 48.5 12.6 3.5
----------------------- ---- --------------- ------- ---------------
(1) Excluding GBP0.4m of passing rent on land (ERV GBP1.9m) and GBP0.7m of annualised turnover rent at Trentham Gardens.
Our income producing portfolio has historically been relatively inefficient to manage, principally due to the high c. 30% of property outgoings associated with our older retail assets and a tail of very small assets. Recycling capital out of these assets into retaining our high quality, modern industrial/logistics developments will therefore significantly improve our operational efficiency in the years to come. In addition, the creation of our dedicated asset management function during the second half of 2017 is expected to further improve the operational performance of our retained assets.
Investments and disposals
During the first half of the year we continued the significant reshaping of our portfolio we initiated a year ago. Since we announced our new strategy in June 2017 we have now sold GBP635m of assets, on average in line with book value, which equates to 35% of our portfolio value at 31 May 2017. During the first half of 2018 we sold GBP350m of assets, which more than offset our GBP102m investment in acquisitions and developments during the same period (excluding housebuilding activities).
As we continue to see much higher returns from investing our capital in our own development pipeline than buying assets in the current investment market, we remain selective in acquisitions. All of our GBP21m acquisitions during the period therefore comprised drawdowns of land under existing development agreements for near-term development starts, principally for St. Modwen Homes.
Following GBP285m of disposals during the second half of 2017, the largest deal during the first half of 2018 was the disposal of our 45-year leasehold interest in the first phase of student accommodation at Swansea Bay Campus for GBP139m in February. We also forward sold our 207-unit PRS scheme at Uxbridge for GBP75m, which allowed us to bring forward the next phase of development of 101 private-sale apartments for St. Modwen Homes by 12-18 months.
In May we announced that we had exchanged contracts for the disposal of Longbridge Shopping Park and Wembley Central shopping centre via two separate transactions. The sale of Longbridge completed during the same month, whilst the sale of Wembley is expected to complete in the near future. Combined with the disposal of a small retail asset in Liverpool this means we have now sold GBP95m of retail assets, on average 4% below their November 2017 book value. We also sold 21 acres of residential land for GBP27m during the first six months, in line with book value, as the market for oven-ready residential land remains resilient.
Amount(1) Initial yield(2)
GBPm %
-------------------------------------- --------- ----------------
Acquisitions during the six months to
31 May 2018
Residential land 21 N/A
Total 21 N/A
-------------------------------------- --------- ----------------
Disposals during the six months to 31
May 2018(3)
Swansea student accommodation 139 5.4
Retail 95 5.6
Industrial 10 8.1
PRS/other 75 N/A
Small assets 2 N/A
Residential land 27 N/A
Commercial land 2 N/A
Total 350 5.6
-------------------------------------- --------- ----------------
(1) Based on the Group's share of amounts relating to joint ventures.
(2) EPRA net initial yield on income producing assets excluding land.
(3) Excluding land transfers to St. Modwen Homes and completed home sales.
Looking forward, we will continue to reposition our portfolio to further optimise its return prospects and momentum in this remains positive. In addition to the GBP350m of assets we have sold so far this year, we have already agreed terms on the disposal of a further c. GBP70m of small and retail assets. As such, we expect to exceed our target to sell GBP100-150m of retail and small assets for the full year and we now anticipate selling GBP150-175m of these assets during 2018.
We expect to sell our residual c. GBP70m of small assets and around two-thirds of our remaining GBP255m retail assets over the next two years, whilst we plan to retain the small residual part of our retail portfolio for the time being in order to explore potential larger-scale mixed-use development opportunities. We plan to recycle the proceeds from our disposals into retaining the majority of our industrial/logistics developments, as we aim to build up a high quality, efficient income portfolio. Although the share of income producing assets as part of our overall portfolio reduced from 51% to 47% over the last six months, primarily due to the disposal of Swansea and Longbridge, we plan to increase this to c. 60-65% over time as we intend to reduce our exposure to land, recognising the significant cost of holding a large amount of non-income producing land on our balance sheet for a longer period.
Commercial development
We increased our investment in commercial development during the first half of the year to GBP81m (2017: GBP70m), delivering GBP10.9m in profits (2017: GBP9.5m). Our committed development pipeline increased to 1.8m sq ft with a total development cost of GBP270m, up from 1.6m sq ft at the start of the year. This includes 1.3m sq ft of industrial/logistics space with a total cost of GBP131m, of which we plan to retain approximately two-thirds - a level which we expect to increase over the next few years. With an ERV of GBP6.1m the yield on cost on these projects equates to an attractive 8%, whilst the yield on incremental capex is over 9%. We have secured 15% of the associated rent on these schemes. In total, we agreed GBP2.3m of development lettings since the start of the year, in line with our expected ERVs, including 153,000 sq ft at Tamworth and 35,000 sq ft at Avonmouth to pharma logistics firm Movianto.
Our overall committed commercial pipeline is now 50% pre-let or pre-sold, up from 41% at the start of the year, with around 85% of our non-industrial/logistics pipeline comprising our forward-sold PRS scheme in Uxbridge and the latest phase of development at Swansea Bay Campus.
No. of Area Total cost(1) Cost to complete ERV Pre-let/sold
projects m sq ft GBPm GBPm GBPm %
--------------------- -------- ------- ------------- ---------------- ---- ------------
Industrial/logistics
- retained 10 0.9 78 49 6.1 15
Industrial/logistics
- other 6 0.4 53 28 64
--------------------- -------- ------- ------------- ---------------- ---- ------------
Industrial/logistics
- total 16 1.3 131 77 33
Retail 2 0.1 13 7 59
Other 6 0.4 126 54 68
--------------------- -------- ------- ------------- ---------------- ---- ------------
Total 24 1.8 270 138 50
--------------------- -------- ------- ------------- ---------------- ---- ------------
(1) Including land.
We have continued to prepare our future pipeline to deliver up to 25% growth per year in the amount of industrial/logistics space we deliver over 2018-2020, although the short lead-time of our projects means we retain flexibility to adjust our pipeline to any potential changes in occupier demand. During the half year we secured outline planning consent for our 1.0m sq ft scheme at Chippenham Gateway, adjacent to junction 17 of the M4, and cleared planning conditions and finalised consents for a 0.2m sq ft scheme at Gatwick, adjacent to junction 10 of the M23. With a potential ERV of over GBP8m, these sites are expected to become an important part of our income portfolio in the medium term.
Our focus is on bringing forward these and other key strategic schemes in our pipeline, which have a combined development potential of over 10m sq ft and a potential ERV of over GBP60m. These key strategic schemes generally comprise large projects in our best locations, which are expected to form the core of our future income portfolio and which could be delivered over the next 5-8 years, partly subject to planning. In addition, we have a number of smaller projects capable of delivering over 5m sq ft potential industrial/logistics space, with a potential ERV of over GBP30m. Albeit smaller, these projects are in good locations and support the near-term replacement of income from selling retail and smaller assets.
The average yield on cost on these schemes is c. 8%, with a yield on incremental capex of c. 9%. This is well above the c. 7% gross yield on our student housing, retail and smaller asset disposals, so combined with the much lower property outgoings and maintenance capex associated with newly developed industrial/logistics assets, recycling capital out of existing assets into retaining the majority of our industrial/logistics pipeline is expected to drive strong income growth over the medium term.
Residential development - housebuilding
The market for new-built housing in the UK regions remains robust and we continue to see good demand for the new homes built by our housebuilding business St. Modwen Homes. We sold 302 units during the first half of the year, which marks an increase of 31% vs the same period last year (230 units), so we are well on track to realise the up to 25% growth in volumes we target for the full year compared to the 694 units we sold in 2017.
The average private sales price increased 8% to GBP283,000 (2017: GBP262,000), with like-for-like prices up 2% driven by the good demand for the high-quality homes we build and the remainder driven by changes in the mix of units and sites. St. Modwen Homes is now sales active on 19 outlets, with a further three outlets coming forward in the second half of the year. Quality and safety remain a key focus for us as we continue to grow and we retained our RoSPA Gold accreditation.
St. Modwen Homes' operating margin for the half year was 14.6%, which was down compared to the first half of 2017 due to an unusually low level of affordable sales last year, but which is in line with our target of improving our margin by c. 0.5ppt this year (Nov 2017: 13.9%). As we transfer land to St. Modwen Homes at market value shortly before it starts construction, upside in land values from planning gains or house price inflation is captured elsewhere in the Group through property revaluations, which reduces our operating margin by c. 2-3ppt compared to housebuilder peers who carry their land at historic cost.
St. Modwen Homes: key operating May 2018 May 2017 Change metrics ------------------------------------- -------- -------- -------- Private units sold 238 220 8.2% Affordable units sold 64 10 540.0% ------------------------------------- -------- -------- -------- Total units sold 302 230 31.3% ------------------------------------- -------- -------- -------- Private sales rate (units/week) 0.8 0.8 - Average sales-active sites 17 13 30.8% Average private selling price (GBPk) 283 262 8.0% Average affordable selling price (GBPk) 129 86 50.0% Operating margin (%) 14.6 15.3 (0.7)ppt ------------------------------------- -------- -------- --------
Given the continued ramp up in activity, profit from our housebuilding activities is weighted towards the second half of the year and our expectation that, for the full year, growth in profits from St. Modwen Homes will more than offset the planned reduction in profits from our JV with Persimmon remains unchanged. This is balanced towards the second half of the year, as for the first half of 2018 our overall residential profits reduced slightly to GBP12.7m (2017: GBP13.4m). Within this, St. Modwen Homes profits rose 23.3% to GBP11.1m (2017: GBP9.0m), but this was offset by a planned reduction in profit from our Persimmon JV to GBP1.6m (2017: GBP4.4m), as the JV continues to wind down its activity over the next two years.
Looking beyond 2018, we have now secured the pipeline for St. Modwen Homes to deliver up to 25% growth in volumes per year over 2019-2021 and we have started to roll out initiatives to improve our operating margin by c. 2-3ppt over the medium term, in part through optimising site coverage, but also due to improved efficiency from scale benefits and a range of other initiatives. Combined, this is expected to drive strong growth in our overall residential profits over the next few years, as the expected growth in St. Modwen Homes profits more than compensates for the planned reduction in Persimmon JV profits.
Residential development - residential land
In addition to growing our own housebuilding business, we further accelerated the release of capital by selling residential land to third party housebuilders. Demand for oven-ready land remains good, reflecting the positive outlook for housebuilding in the regions, so we capitalised on this by selling 921 plots in the first six months of the year for GBP27m, principally at Mill Hill and Longbridge. This is nearly double the amount we sold in the same period last year (2017: GBP14m), leaving us well on track to meet our full year target to sell at least GBP56m of land.
Combined with the disposals in the second half of 2017, we have now sold GBP260m of residential land since we announced our new strategy a year ago, on average at or above book value. In addition, we have significantly de-risked our land holdings, as our exposure to London has come down from 46% a year ago to 10% now.
Our overall land bank currently consists of 21,000 plots (Nov 2017: 22,000), excluding plots where development is subject to third party consent. This remains more than we need to facilitate the growth in our own housebuilding activities, so we will continue to crystallise the value in our land bank, as we intend to reduce the proportion of land as part of our overall portfolio value. In addition to traditional housebuilding, we will continue to progress the PRS opportunities in our pipeline, but we do not envisage owning and managing these assets ourselves for the longer term.
Major regeneration projects
During the half year we have continued to progress the delivery of our three major regeneration projects, Longbridge, Swansea and New Covent Garden Market, releasing significant capital out of the first phases of development to bring forward the next phases of these successful schemes.
At Longbridge, we sold the 320,000 sq ft shopping park which made up the core of the first phase of the town centre development for GBP54m. The scheme continues to see further phases of new homes being delivered and we have started to work on enhancing the vision for the 468-acre site, which is now c. 50% developed. Whilst the first phase was predominantly retail and residential-led, the next phase will see us deliver c. 0.7m sq ft of employment space. Inspired by our core purpose: 'Changing places. Creating better futures.', we want to make sure this next phase fits our placemaking ambitions to create a lasting legacy at this important scheme.
At Swansea Bay Campus, we reported in February that we sold the first phase of student housing, comprising 2,005 beds, to UPP for GBP139m, releasing GBP87m of proceeds net of an associated finance lease liability. The next 411 student rooms are expected to complete in early 2019 and we are on track to complete a 40,000 sq ft academic building which is pre-sold to global education provider Navitas later this year, with a combined development cost of GBP40m. We are also progressing plans for the next 150,000 sq ft of academic facilities and a further 600 student beds for delivery by 2021.
Following the sale of Nine Elms Square in the second half of 2017, we have continued to work on the relocation of the existing market facilities at New Covent Garden Market via our JV with VINCI as planned. This remains a long-term project and one that will release further land for development in due course.
At our more recently added schemes, we expect to start selling the first homes at our 1,500-unit project in Wantage and we are progressing planning for our 3,000-home Buckover Garden Village scheme. We continue to pursue new regeneration opportunities on a 'capital light' basis, but by nature these projects are opportunistic, so it is difficult to make specific forecasts for this.
FINANCIAL REVIEW
Overview
Our financial performance over the first six months of the year was solid and in line with our expectations for the full year. NAV per share increased 1.0% to 455.4 pence (Nov 2017: 450.9 pence) and EPRA NAV per share increased 0.7% to 474.4 pence (Nov 2017: 471.2 pence). As we flagged at the start of the year, disposals created some short-term volatility in rental income, but this was offset by a marked reduction in interest costs, so adjusted EPRA earnings were GBP0.8m higher than in the first half of 2017 at GBP13.9m. As a result, adjusted EPRA EPS increased to 6.3 pence (2017: 5.9 pence). Whilst we expect disposals to continue to weigh on rental income in the short term, we expect earnings to increase materially over time as our industrial/logistics pipeline starts to generate income. Against a backdrop of a GBP220.7m reduction in see-through net borrowings over the past 12 months, our total accounting return including dividends paid over the first six months was down slightly at 2.0% (2017: 2.9%).
Presentation of financial information
Due to the number of significant joint venture arrangements, the statutory financial statement disclosures do not always provide a straightforward way of understanding our business. Reconciliations between all the statutory and non-statutory measures and the explanations as to why the non-statutory measures give valuable further insight into the Group's performance are given in note 2 to the condensed Group financial statements. The Group has four material joint ventures, three of which are in partnership with VINCI and one in partnership with Salhia. The VINCI joint ventures comprise the NCGM operation and joint ventures at Uxbridge and Mill Hill (the latter through The Inglis Consortium), both of which are engaged in the remediation and subsequent sale of land. The Salhia JV, Key Property Investments (KPI), owns a portfolio of principally income producing industrial assets acquired between 1998 and 2002.
We use adjusted EPRA earnings and an adjusted EPRA EPS as key performance measures, which exclude non-cash valuation gains and losses. As our residential developments are built to sell, residential profits are cash-based and therefore included in this metric, but as our commercial developments will be predominantly built to hold, commercial development profits will be largely non-cash in the future. As such, these are excluded from adjusted EPRA earnings, other than development fee income.
Our dividend policy is aligned to cash profitability and we intend to pay a dividend equivalent to c. 50% of adjusted EPRA EPS per year, with the aim of providing a sustainable, progressive dividend for our shareholders. Reflecting this, we will pay an interim dividend of 3.10 pence per share for the first half of 2018, marking an increase of 53.5% compared to last year (2017 interim: 2.02 pence per share), to be paid on 4 September 2018 to shareholders on the register as at 10 August 2018.
Six months to 31 May Six months to 31 May 2017
2018
Trading Trading
Total(1) profit Other Total(1) profit Other
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- ------- ----- ----------- -------- ------
Gross rental income 32.6 32.6 - 30.7 30.7 -
Property outgoings (6.9) (6.9) - (5.7) (5.7) -
Other net income 0.5 0.5 - 2.0 2.0 -
-------------------------------------- -------- ------- ----- ----------- -------- ------
Net rental and other income 26.2 26.2 - 27.0 27.0 -
Housebuilding operating profit 12.7 12.7 - 13.4 13.4 -
Development fee income 1.4 1.4 - 1.8 1.8 -
Administrative expenses (14.4) (14.4) - (14.0) (14.0) -
Net interest costs (8.9) (8.9) - (11.5) (11.5) -
Taxation on adjusted EPRA earnings (3.1) - (3.1) (3.5) - (3.5)
Less non-controlling interests - - - (0.1) - (0.1)
-------------------------------------- -------- ------- ----- ----------- -------- ------
Adjusted EPRA earnings 13.9 17.0 (3.1) 13.1 16.7 (3.6)
Property development gains 9.5 9.5 - 7.7 7.7 -
Property disposal (losses)/gains (4.9) (4.9) - 2.0 2.0 -
Property revaluation gains 9.0 - 9.0 20.0 - 20.0
Change in estimated cost to establish
a market at Nine Elms - - - (9.2) - (9.2)
Net other finance costs (5.5) - (5.5) (7.9) - (7.9)
Taxation on other earnings (1.2) - (1.2) 1.1 - 1.1
Profit attributable to owners
of the Company 20.8 21.6 (0.8) 26.8 26.4 0.4
-------------------------------------- -------- ------- ----- ----------- -------- ------
Earnings per share (pence) 9.4 12.1
-------------------------------------- -------- ------- ----- ----------- -------- ------
(1) This table is presented on a proportionally consolidated basis, including the Group's share of profits and losses of joint ventures and associates in the income statement categories to which they relate, rather than on a statutory basis as one line representing the share of net losses of those joint ventures and associates.
Net rental and other income
The Group's share of net rental and other income in the first half of the year decreased to GBP26.2m (2017: GBP27.0m). Disposals reduced net rental income by GBP2.4m, partly offset by GBP0.6m growth in like-for-like income, GBP0.3m income from acquisitions and GBP0.7m income from retained developments. With the disposals of Longbridge Shopping Park close to the end of May and Wembley after the period end, we expect net rental income in the second half of the year to be below the first half, reflecting the time lag of recycling capital into industrial/logistics developments
Administrative expenses
Administrative expenses for the first half year increased slightly to GBP14.4m (2017: GBP14.0m) due to our investment in preparing our business for future growth, partly offset by the capitalisation of GBP0.4m of costs directly related to commercial development activities. The capitalisation of these has no impact on our overall profit or accounting return, as the benefit to overhead costs is offset by lower property development or valuation gains. However, it improves the consistency of adjusted EPRA earnings, as property development and valuation gains are excluded from this measure. Our expectation for overhead costs for the full year to be c. 5% ahead of the GBP30.5m underlying level last year remains unchanged.
Interest and other finance costs
Net interest costs for the half year fell to GBP8.9m (2017: GBP11.5m) on a see-through basis, principally due to a reduction in debt due to our disposals, the lower average cost of borrowing following the refinancing of our bank facilities in December 2017 and the capitalisation of GBP0.5m interest costs on commercial developments. Similar to capitalised overhead costs, the latter has no impact on our overall profit or accounting return for the year, as the benefit to net finance cost is offset by a reduction in property development or valuation gains. As our net borrowings reduced slightly, we expect interest costs for the second half of the year to be slightly lower than the first half.
Net other finance costs were GBP5.5m (2017: GBP7.9m). This includes a GBP1.9m charge for discount unwinds, principally on our share of the long-term commitment to deliver the NCGM project, and a GBP0.8m charge for the amortisation of arrangement fees in relation to our loan facilities. Combined, these two costs have been just over GBP7m p.a. over the last two years and we expect these to recur at relatively constant levels. It also includes a GBP3.6m one-off expense related to the refinancing of our secured debt facilities in December. The final element of our non-cash finance costs relates to the mark-to-market valuation of our convertible bond and derivatives, which is driven by the movement in our share price and swap rates and resulted in a GBP0.8m credit in the first half.
Investment property revaluation and disposal gains/losses
All our investment properties are independently valued every six months by our external valuers Cushman & Wakefield and Jones Lang LaSalle (the latter for NCGM only), who base their valuations upon an open market transaction between a willing buyer and a willing seller at the balance sheet date. In accordance with accounting standards, valuation movements are reflected as gains or losses in the income statement. We also independently assess our work in progress for any impairment issues. Where applicable asset valuations have been validated with reference to open market transactions.
Over the first six months our portfolio saw a total valuation gain of GBP9.0m. During the first half of 2017 the portfolio recorded a gross revaluation gain of GBP20.0m, which was partly offset by a GBP9.2m cost impairment related to NCGM. During the first half of 2018 we recorded a GBP4.9m loss on property disposals (2017: GBP2.0m gain), principally related to Longbridge Shopping Park.
Taxation and IFRS net profit
Our total tax charge (including joint venture tax) for the half year was GBP4.3m (2017: GBP2.4m) resulting in IFRS net profit after tax of GBP20.8m (2017: GBP26.9m).
As a property group, tax and its treatment is often an integral part of transactions. The outcome of tax treatments, including tax planning, is recognised by the Group to the extent that the outcome is reasonably certain. Overall, the Group effective tax rate for the half year was above the same period last year at 17.7% (2017: 15.1%), resulting predominantly from the freezing of indexation allowance from 31 December 2017. As signalled previously, the effective tax rate is expected to remain at broadly similar levels, slightly below the standard rate of tax of 19%.
Balance sheet and net asset value
The net asset value attributable to shareholders of the Group increased to GBP1,011.0m (Nov 2017: GBP1,000.3m) or 455.4 pence per share, which represents a 1.0% increase over the six-month period (Nov 2017: 450.9 pence). Combined with the 2017 final dividend of 4.26 pence per share paid during the period, this reflects a total accounting return of 2.0% (2017: 2.9%). EPRA NAV per share increased by 0.7% to 474.4 pence (Nov 2017: 471.2 pence), as the crystallisation of GBP5.1m interest rate swap liabilities upon refinancing our bank facilities in December reduced EPRA NAV by 1.9 pence per share.
31 May 2018 30 Nov 2017
Joint ventures
Group and associates Total(1) Total(1)
GBPm GBPm GBPm GBPm
------------------------------ ------- --------------- -------- -----------
Property portfolio 1,368.5 118.9 1,487.4 1,664.0
Other assets 104.4 96.4 200.8 167.5
------------------------------ ------- --------------- -------- -----------
Gross assets 1,472.9 215.3 1,688.2 1,831.5
Net borrowings (366.0) 6.4 (359.6) (388.2)
Finance leases (5.2) (0.9) (6.1) (57.9)
Other liabilities (175.8) (130.0) (305.8) (379.4)
------------------------------ ------- --------------- -------- -----------
Gross liabilities (547.0) (124.5) (671.5) (825.5)
------------------------------ ------- --------------- -------- ----------- Net assets 925.9 90.8 1,016.7 1,006.0 Non-controlling interests (5.7) - (5.7) (5.7) ------------------------------ ------- --------------- -------- ----------- Equity attributable to owners of the Company 920.2 90.8 1,011.0 1,000.3 ------------------------------ ------- --------------- -------- ----------- NAV per share (pence) 455.4 450.9 EPRA NAV per share (pence) 474.4 471.2 ------------------------------ ------- --------------- -------- -----------
(1) This table is presented on a proportionally consolidated basis, including the Group's share of assets and liabilities of joint ventures and associates in the balance sheet categories to which they relate, rather than on a statutory basis as one line representing the share of net assets of those joint ventures and associates.
Net borrowings
Cash generated before new investment, tax and dividends during the first half year increased to GBP256.4m (2017: GBP144.3m) and was well in excess of new investment, largely driven by our substantial disposals, whilst inventories increased by GBP7.6m at GBP369.5m (Nov 2017: GBP361.9m).
As a result, see-through gross borrowings fell GBP73.7m during the first half of the year to GBP389.6m (Nov 2017: GBP463.3m). See-through net borrowings reduced by GBP28.6m to GBP359.6m (Nov 2017: GBP388.2m), as the reduction in gross borrowings was partly offset by the fact that during the period GBP37.5m of cash (representing our 50% share) held in a Development Account for the delivery of the NCGM project was placed in a one-year deposit so this no longer qualifies as cash in our net borrowings calculation. The sale of Swansea reduced our finance lease liabilities by GBP51.8m to GBP6.1m.
Consequently, our see-through loan-to-value was stable at 24.2% (Nov 2017: 24.2%), or 21.7% including the cash held on one-year deposit. Excluding residential investments, our see-through loan-to-value increased slightly to 39.8% (Nov 2017: 37.2%), or decreased to 35.6% including the cash on one-year deposit, which remains within our target of sub 40%. Since we announced our new strategy a year ago, see-through net borrowings have come down GBP220.7m whilst our 24.2% LTV is down 8.9ppt.
31 May 2018(1) 30 Nov 2017(1)
Gross borrowings (GBPm) 389.6 463.3
Net borrowings (GBPm) 359.6 388.2
Loan-to-value(2) (%) 24.2 24.2
Loan-to-value (excluding residential)(2)
(%) 39.8 37.2
----------------------------------------- -------------- --------------
(1) Proportionally consolidated, including the Group's share of joint ventures and associates.
(2) See-through loan-to-values are reconciled in note 2j to the condensed Group financial statements.
Financing
As reported previously, in December we refinanced GBP488m of secured bilateral debt facilities expiring in 2019/2021 with a new GBP475m unsecured club facility with a maturity of five years and an option to extend this to seven years, improving flexibility and resulting in initial interest savings of c. GBP2.5m p.a. As a result, our average duration of debt increased to 3.6 years, or 5.0 years including the extension options. Our first debt maturities are our GBP100m convertible bond and GBP80m retail bond which mature in 2019 and which have an average borrowing cost of 4.4%. With total committed see-through facilities of GBP693m (Nov 2017: GBP703m) compared to GBP359.6m see-through net borrowings, we maintain substantial financial headroom.
31 May 2018 30 Nov 2017
----------------------------------- ----------- -----------
Average duration of facilities
(years) 3.6 2.7
Weighted average interest rate(1)
(%) 4.1 4.4
Percentage of net borrowings fixed
or hedged (%) 66.9 82.8
------------------------------------ ----------- -----------
(1) The weighted average interest rate is calculated using current interest rates, commitment fees and hedging profile applied to the Group net borrowings at 31 May 2018, thereby assuming constant net borrowing levels for 2018.
Hedging and cost of debt
The refinancing of our bank facilities in December reduced our weighted average cost of borrowing from 4.4% to 3.7%, although this has increased to 4.1% since then due to the GBP73.7m reduction in our overall gross borrowings, which increased the proportion of our gross borrowings relating to our bonds, which have a higher cost of debt than our bank borrowings.
As we aim to have predictable costs attached to our borrowings our policy is to hedge a significant portion of our interest rate risk. The proportion of borrowings which are fixed or hedged is 66.9% (Nov 2017: 82.8%) and we continue to manage our ongoing interest rate risk via a combination of caps and hedges.
Corporate funding covenants
Covenant compliance continues at all levels and across all metrics and we continue to operate with considerable headroom against all measures. Our portfolio could withstand more than a 35% fall in values before our covenants would be breached.
Mark Allan Rob Hudson Chief Executive Chief Financial Officer
2 July 2018
CONDENSED GROUP INCOME STATEMENT
for the six months ended 31 May 2018
Unaudited Unaudited Audited
31 May 2018 31 May 2017 30 Nov 2017
Notes GBPm GBPm GBPm
-------------------------------------- ----- ----------- ----------- -----------
Revenue 1 211.9 151.4 318.6
-------------------------------------- ----- ----------- ----------- -----------
Net rental income 1 22.9 22.4 48.8
Development profits 1 15.4 25.0 58.9
Investment property disposal gains 1 7.4 1.0 6.7
Investment property revaluation gains 12.8 9.3 16.2
Other net income 1 0.5 2.0 2.0
Net (loss)/profit of joint ventures
and associates (post-tax) 4 (2.9) 0.4 (8.5)
Administrative expenses (18.1) (17.0) (35.9)
-------------------------------------- ----- ----------- ----------- -----------
Profit before interest and tax 38.0 43.1 88.2
Finance costs 5 (13.7) (17.0) (30.0)
Finance income 5 1.6 5.5 12.1
-------------------------------------- ----- ----------- ----------- -----------
Profit before tax 25.9 31.6 70.3
Taxation 8a (5.1) (4.7) (10.2)
-------------------------------------- ----- ----------- ----------- -----------
Profit for the period 20.8 26.9 60.1
-------------------------------------- ----- ----------- ----------- -----------
Attributable to:
Owners of the Company 20.8 26.8 59.6
Non-controlling interests - 0.1 0.5
-------------------------------------- ----- ----------- -----------
Profit for the period 20.8 26.9 60.1
-------------------------------------- ----- ----------- ----------- -----------
Unaudited Unaudited Audited
31 May 2018 31 May 2017 30 Nov 2017
Notes Pence Pence Pence
-------------------------------------- ----- ----------- ----------- -----------
Basic earnings per share 6 9.4 12.1 26.9
Diluted earnings per share 6 8.8 12.0 26.7
-------------------------------------- ----- ----------- ----------- -----------
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 May 2018
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
GBPm GBPm GBPm
----------------------------------------- --------- ----------- -----------
Profit for the period 20.8 26.9 60.1
Items that will not be reclassified
to profit and loss:
Pension fund actuarial losses - - (0.1)
Total comprehensive income for the
period 20.8 26.9 60.0
------------------------------------------ --------- ----------- -----------
Attributable to:
Owners of the Company 20.8 26.8 59.5
Non-controlling interests - 0.1 0.5
------------------------------------------ --------- ----------- -----------
Total comprehensive income for the
period 20.8 26.9 60.0
------------------------------------------ --------- ----------- -----------
CONDENSED GROUP BALANCE SHEET
as at 31 May 2018
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
Notes GBPm GBPm GBPm
----------------------------------------- ----- --------- ----------- -----------
Non-current assets
Investment properties 979.2 1,167.2 1,168.5
Operating property, plant and equipment
and intangibles 6.8 4.4 5.1
Investments in joint ventures and
associates 90.8 180.2 119.6
Trade and other receivables 2.2 2.1 2.3
1,079.0 1,353.9 1,295.5
----------------------------------------- ----- --------- ----------- -----------
Current assets
Inventories 358.5 298.7 352.7
Trade and other receivables 89.3 123.6 72.1
Derivative financial instruments 7 0.9 1.4 0.8
Cash and cash equivalents 2.0 8.8 0.5
Assets held for sale 8f 36.0 - -
486.7 432.5 426.1
----------------------------------------- ----- --------- ----------- -----------
Current liabilities
Trade and other payables (137.3) (144.9) (176.0)
Derivative financial instruments 7 - (8.7) (4.8)
Borrowings and finance lease obligations (100.1) (0.4) (0.6)
Current tax liabilities (4.3) (8.9) (6.2)
(241.7) (162.9) (187.6)
----------------------------------------- ----- --------- ----------- -----------
Non-current liabilities
Trade and other payables (17.0) (3.7) (20.1)
Borrowings and finance lease obligations (273.1) (619.6) (491.3)
Deferred tax (17.2) (20.5) (16.6)
(307.3) (643.8) (528.0)
----------------------------------------- ----- --------- ----------- -----------
Net assets 1,016.7 979.7 1,006.0
----------------------------------------- ----- --------- ----------- -----------
Capital and reserves
Share capital 22.2 22.2 22.2
Share premium account 102.8 102.8 102.8
Retained earnings 837.0 797.5 825.7
Share incentive reserve 4.2 6.3 5.1
Own shares (1.4) (0.7) (1.7)
Other reserves 46.2 46.2 46.2
----------------------------------------- ----- --------- ----------- -----------
Equity attributable to owners of the
Company 1,011.0 974.3 1,000.3
Non-controlling interests 5.7 5.4 5.7
Total equity 1,016.7 979.7 1,006.0
----------------------------------------- ----- --------- ----------- -----------
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 May
2018
Six months ended 31 May 2018 (unaudited)
Equity
attribut-able
Share Share to owners
Share premium Retained incentive Own Other of the Non-control-ling Total
capital account earnings reserve shares reserves Company interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Equity at 1
December
2017 22.2 102.8 825.7 5.1 (1.7) 46.2 1,000.3 5.7 1,006.0
Profit for the
period
attributable
to
shareholders - - 20.8 - - - 20.8 - 20.8
Total
comprehensive
income
for the
period - - 20.8 - - - 20.8 - 20.8
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Share-based
payments - - - 1.0 - - 1.0 - 1.0
Deferred tax
on
share-based
payments - - - (0.2) - - (0.2) - (0.2)
Settlement of
share-based
payments - - - (1.7) 0.3 - (1.4) - (1.4)
Dividends paid - - (9.5) - - - (9.5) - (9.5)
-------------- -------- -------- -------- --------- ------- -------- ------------- ----------------
Equity at 31
May 2018 22.2 102.8 837.0 4.2 (1.4) 46.2 1,011.0 5.7 1,016.7
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Six months ended 31 May 2017 (unaudited)
Equity
attribut-able
Share Share to owners
Share premium Retained incentive Own Other of the Non-control-ling Total
capital account earnings reserve shares reserves Company interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Equity at 1
December
2016 22.2 102.8 779.7 4.9 (0.6) 46.2 955.2 6.9 962.1
Profit for the
period
attributable
to
shareholders - - 26.8 - - - 26.8 0.1 26.9
Total
comprehensive
income
for the
period - - 26.8 - - - 26.8 0.1 26.9
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Share-based
payments - - - 1.2 - - 1.2 - 1.2
Deferred tax
on
share-based
payments - - - 0.3 - - 0.3 - 0.3
Settlement of
share-based
payments - - - (0.1) (0.1) - (0.2) - (0.2)
Dividends paid - - (9.0) - - - (9.0) (1.6) (10.6)
--------------
Equity at 31
May 2017 22.2 102.8 797.5 6.3 (0.7) 46.2 974.3 5.4 979.7
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Year ended 30 November 2017 (audited)
Equity
attribut-able
Share Share to owners
Share premium Retained incentive Own Other of the Non-control-ling Total
capital account earnings reserve shares reserves Company interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Equity at 1
December
2016 22.2 102.8 779.7 4.9 (0.6) 46.2 955.2 6.9 962.1
Profit for the
year
attributable
to
shareholders - - 59.6 - - - 59.6 0.5 60.1
Pension fund
actuarial
losses - - (0.1) - - - (0.1) - (0.1)
Total
comprehensive
income
for the year - - 59.5 - - - 59.5 0.5 60.0
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Share-based
payments - - - 1.8 - - 1.8 - 1.8
Deferred tax
on
share-based
payments - - - 0.3 - - 0.3 - 0.3
Settlement of
share-based
payments - - - (1.9) (1.1) - (3.0) - (3.0)
Dividends paid - - (13.5) - - - (13.5) (1.7) (15.2)
--------------
Equity at 30
November
2017 22.2 102.8 825.7 5.1 (1.7) 46.2 1,000.3 5.7 1,006.0
-------------- -------- -------- -------- --------- ------- -------- ------------- ---------------- ---------
Own shares represent the cost of 360,983 (31 May 2017: 251,820, 30 November
2017: 519,906) shares held by The St. Modwen Properties PLC Employee Share
Trust. The open market value of the shares held at 31 May 2018 was GBP1,441,766
(31 May 2017: GBP875,830, 30 November 2017: GBP2,031,793).
The other reserves comprise a capital redemption reserve of GBP0.3m (31 May
2017: GBP0.3m, 30 November 2017: GBP0.3m) and the balance of net proceeds
in excess of the nominal value of shares arising from an equity placing in
2013 of GBP45.9m (31 May 2017: GBP45.9m, 30 November 2017: GBP45.9m).
CONDENSED GROUP CASH FLOW STATEMENT
for the six months ended 31 May 2018
Unaudited Unaudited Audited
31 May 31 May
2018 2017 30 Nov 2017
GBPm GBPm GBPm
---------------------------------------------------- --------- --------- -----------
Operating activities
Profit before interest and tax 38.0 43.1 88.2
Investment property disposal gains (7.4) (1.0) (6.7)
Net loss/(profit) of joint ventures and associates
(post-tax) 2.9 (0.4) 8.5
Investment property revaluation gains (12.8) (9.3) (16.2)
Depreciation 0.4 0.3 1.1
Net realisable value provisions 0.4 0.2 2.0
Decrease/(increase) in inventories 27.6 (55.0) (97.7)
(Increase)/decrease in trade and other receivables (19.5) (15.2) 36.1
(Decrease)/increase in trade and other payables (33.8) (11.3) 17.4
Share options and share awards (0.6) 1.3 (1.2)
Tax paid (6.4) (4.4) (16.2)
Net cash (outflow)/inflow from operating activities (11.2) (51.7) 15.3
---------------------------------------------------- --------- --------- -----------
Investing activities
Proceeds from investment property disposals 131.4 15.5 60.1
Investment property additions (46.2) (34.6) (61.6)
Interest received 0.6 5.1 12.3
Capital injection into joint ventures and
associates (0.4) - (1.4)
Property, plant and equipment additions (2.1) (0.5) (2.0)
Dividends received from joint ventures and
associates 26.3 5.0 58.1
Net cash inflow/(outflow) from investing activities 109.6 (9.5) 65.5
---------------------------------------------------- --------- --------- -----------
Financing activities
Dividends paid (9.5) (9.0) (13.5)
Dividends paid to non-controlling interests - (1.6) (1.7)
Interest paid (9.0) (11.2) (26.1)
Repayment of obligations under finance lease
arrangements (0.4) (1.6) (3.3)
Refinancing outflows (11.7) - -
Borrowings drawn 423.0 133.2 209.2
Repayment of borrowings (489.3) (44.0) (249.1)
Net cash (outflow)/inflow from financing activities (96.9) 65.8 (84.5)
---------------------------------------------------- --------- --------- -----------
Increase/(decrease) in cash and cash equivalents 1.5 4.6 (3.7)
---------------------------------------------------- --------- --------- -----------
Cash and cash equivalents at start of period 0.5 4.2 4.2
Cash and cash equivalents at end of period 2.0 8.8 0.5
---------------------------------------------------- --------- --------- -----------
CONDENSED GROUP ACCOUNTING POLICIES
for the six months ended 31 May 2018
Basis of preparation
The annual financial statements of the St. Modwen Properties PLC group (the
Group) are prepared in accordance with International Financial Reporting Standards
(IFRSs) as issued by the International Accounting Standards Board (IASB) and
as adopted by the European Union (EU), applied in accordance with the provisions
of the Companies Act 2006. The condensed Group financial statements included
in this half year results announcement have been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU.
The condensed Group financial statements have been prepared on the basis of
the accounting policies and methods of computation as set out in the notes
to the Group's annual financial statements for the year ended 30 November 2017.
In the six months ended 31 May 2018 the Group has adopted:
-- Amendments to IAS 7 Disclosure Initiative
-- Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses
-- Amendments to IFRSs Annual Improvements to IFRSs 2014 - 2016 Cycle
The adoption of the above amendments has had no material impact on the condensed
Group financial statements.
The financial information for the year ended 30 November 2017 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006, but
is derived from those accounts. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor reported on those
accounts: their report was unqualified, did not draw attention to any matters
by way of emphasis and did not contain a statement under sections 498(2) or
(3) of the Companies Act 2006.
All results are derived from continuing activities, which the directors do
not consider to be seasonal.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the half year
results. The directors have considered these factors and reviewed the financial
position of the Group, including its joint ventures and associates.
The review included an assessment of future funding requirements based on cash
flow forecasts extending to 30 November 2019, valuation projections and the
ability of the Group to meet covenants on existing borrowing facilities. The
directors were satisfied that the forecasts and projections were based on realistic
assumptions and that the sensitivities applied in reviewing downside scenarios
were appropriate.
Having refinanced all our bank debt facilities in December 2017, the directors
are satisfied that the Group will have sufficient ongoing facilities available
to meet its financing requirements.
Based on their assessment, the directors believe the Group has adequate available
resources to fund its operations for the foreseeable future and so determine
that it remains appropriate for the condensed Group financial statements to
be prepared on a going concern basis.
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS
for the six months ended 31 May 2018
1. Segmental information
a. Reportable segments
IFRS 8 Operating Segments requires the identification of the Group's operating
segments, defined as being discrete components of the Group's operations whose
results are regularly reviewed by the chief operating decision maker (being
the Chief Executive) to allocate resources to those segments and to assess
their performance. The Group divides its business into the following segments:
-- housebuilding activity through St. Modwen Homes and the Persimmon joint
venture; and
-- the balance of the Group's portfolio of properties which the Group manages
internally, and reports, as a single business segment.
The accounting policies of the reportable segments are the same as the Group's
accounting policies.
b. Segment revenues and results
Six months ended 31 May 2018 (unaudited)
Portfolio House-building Total
GBPm GBPm GBPm
------------------------------------------------- ------------ --------------------- -------
Rental income 29.5 - 29.5
Development sales 96.0 84.9 180.9
Other income 1.5 - 1.5
Revenue 127.0 84.9 211.9
------------------------------------------------- ------------ --------------------- -------
Six months ended 31 May 2017 (unaudited)
Portfolio Housebuilding Total
GBPm GBPm GBPm
------------------------------------------------- ------------ --------------------- -------
Rental income 27.2 - 27.2
Development sales 43.7 77.6 121.3
Other income 2.9 - 2.9
Revenue 73.8 77.6 151.4
------------------------------------------------- ------------ --------------------- -------
Year ended 30 November 2017 (audited)
Portfolio Housebuilding Total
GBPm GBPm GBPm
------------------------------------------------- ------------ --------------------- -------
Rental income 61.0 - 61.0
Development sales 57.8 195.3 253.1
Other income 4.5 - 4.5
Revenue 123.3 195.3 318.6
------------------------------------------------- ------------ --------------------- -------
All revenues in the table above are derived from continuing
operations exclusively in the UK.
Six months ended 31 May 2018 (unaudited)
Portfolio House-building(1) Total
GBPm GBPm GBPm
------------------------------------------------- ------------ --------------------- -------
Net rental income 22.9 - 22.9
Development profits (1.1) 16.5 15.4
Investment property disposal gains 7.4 - 7.4
Investment property revaluation gains 12.8 - 12.8
Other net income 0.5 - 0.5
Losses of joint ventures and associates(2) (2.3) - (2.3)
Administrative expenses (14.3) (3.8) (18.1)
Allocation of administrative expenses 2.1 (2.1) -
Interest costs (note 5) (9.0) - (9.0)
Interest income (note 5) 1.0 - 1.0
Attributable profit 20.0 10.6 30.6
------------------------------------------------- ------------ --------------------- -------
Other losses of joint ventures and associates(2) (0.6)
Other finance costs (note 5) (4.7)
Other finance income (note 5) 0.6
Profit before tax 25.9
------------------------------------------------- ------------ --------------------- -------
Six months ended 31 May 2017 (unaudited)
Portfolio House-building(1) Total
GBPm GBPm GBPm
--------------------------------------------------- ------------ --------------------- -------
Net rental income 22.4 - 22.4
Development profits 8.4 16.6 25.0
Investment property disposal gains 1.0 - 1.0
Investment property revaluation gains 9.3 - 9.3
Other net income 2.0 - 2.0
Profits of joint ventures and associates(2) 0.5 - 0.5
Administrative expenses (13.8) (3.2) (17.0)
Allocation of administrative expenses 2.0 (2.0) -
Interest costs (note 5) (11.5) - (11.5)
Interest income (note 5) 5.5 - 5.5
Attributable profit 25.8 11.4 37.2
--------------------------------------------------- ------------ --------------------- -------
Other losses of joint ventures and associates(2) (0.1)
Other finance costs (note 5) (5.5)
Other finance income (note 5) -
Profit before tax 31.6
--------------------------------------------------- ------------ --------------------- -------
Year ended 30 November 2017 (audited)
Portfolio House-building(1) Total
GBPm GBPm GBPm
--------------------------------------------------- ------------ --------------------- -------
Net rental income 48.8 - 48.8
Development profits 20.3 38.6 58.9
Investment property disposal gains 6.7 - 6.7
Investment property revaluation gains 16.2 - 16.2
Other net income 2.0 - 2.0
Losses of joint ventures and associates(2) (7.4) - (7.4)
Administrative expenses (28.7) (7.2) (35.9)
Allocation of administrative expenses 3.9 (3.9) -
Interest costs (note 5) (23.7) - (23.7)
Interest income (note 5) 9.0 - 9.0
Attributable profit 47.1 27.5 74.6
--------------------------------------------------- ------------ --------------------- -------
Other losses of joint ventures and associates(2) (1.1)
Other finance costs (note 5) (6.3)
Other finance income (note 5) 3.1
Profit before tax 70.3
--------------------------------------------------- ------------ --------------------- -------
(1) In the half year results, operating profit from the housebuilding segment
of GBP12.7m (six months ended 31 May 2017: GBP13.4m, year ended 30 November
2017: GBP31.4m) is stated before the allocation of administrative expenses
of GBP2.1m (six months ended 31 May 2017: GBP2.0m, year ended 30 November 2017:
GBP3.9m). Housebuilding operating profit comprises GBP11.1m (six months ended
31 May 2017: GBP9.0m, year ended 30 November 2017: GBP23.3m) from St. Modwen
Homes and GBP1.6m (six months ended 31 May 2017: GBP4.4m, year ended 30 November
2017: GBP8.1m) from the Persimmon joint venture.
(2) Stated before other finance costs and income (being amortisation and movements
in the fair value of derivative financial instruments) and tax of GBP2.3m (six
months ended 31 May 2017: GBP5.5m, year ended 30 November 2017: GBP1.1m). These
amounts are reclassified to other losses of joint ventures and associates.
c. Segment assets and liabilities
As at 31 May 2018 (unaudited)
Portfolio House-building Total
GBPm GBPm GBPm
----------------------------------------------- ---------- --------------- -------
Investment property 979.2 - 979.2
Inventories 96.0 262.5 358.5
Assets held for sale 36.0 - 36.0
Investments in joint ventures and associates 90.8 - 90.8
Attributable assets 1,202.0 262.5 1,464.5
----------------------------------------------- ---------- --------------- -------
Operating property, plant and equipment and
intangibles 6.8
Trade and other receivables 91.5
Cash and cash equivalents 2.0
Trade and other payables (154.3)
Derivative financial instruments 0.9
Borrowings and finance lease obligations (373.2)
Tax payable (4.3)
Deferred tax (17.2)
Net assets 1,016.7
----------------------------------------------- ---------- --------------- -------
As at 31 May 2017 (unaudited)
Portfolio Housebuilding Total
GBPm GBPm GBPm
----------------------------------------------- ---------- --------------- -------
Investment property 1,167.2 - 1,167.2
Inventories 141.9 156.8 298.7
Investments in joint ventures and associates 180.2 - 180.2
Attributable assets 1,489.3 156.8 1,646.1
----------------------------------------------- ---------- --------------- -------
Operating property, plant and equipment and
intangibles 4.4
Trade and other receivables 125.7
Cash and cash equivalents 8.8
Trade and other payables (148.6)
Derivative financial instruments (7.3)
Borrowings and finance lease obligations (620.0)
Tax payable (8.9)
Deferred tax (20.5)
Net assets 979.7
----------------------------------------------- ---------- --------------- -------
As at 30 November 2017 (audited)
Portfolio Housebuilding Total
GBPm GBPm GBPm
----------------------------------------------- ---------- --------------- -------
Investment property 1,168.5 - 1,168.5
Inventories 161.1 191.6 352.7
Investments in joint ventures and associates 119.6 - 119.6
Attributable assets 1,449.2 191.6 1,640.8
----------------------------------------------- ---------- --------------- -------
Operating property, plant and equipment and
intangibles 5.1
Trade and other receivables 74.4
Cash and cash equivalents 0.5
Trade and other payables (196.1)
Derivative financial instruments (4.0)
Borrowings and finance lease obligations (491.9)
Tax payable (6.2)
Deferred tax (16.6)
Net assets 1,006.0
----------------------------------------------- ---------- --------------- -------
Investment and commercial property assets as defined in our banking facility
agreement at 31 May 2018 was GBP763.7m (30 November 2017: GBP958.2m).
2. Non-statutory information
The purpose of this note is to explain, analyse and reconcile a number of non-statutory
financial performance and financial position metrics, which are used extensively
by the Group to monitor its performance. These metrics reflect the way in which
the Group is run, that the Group is in the real estate sector, and in particular
that the Group reviews and reports performance of its joint ventures and associates
in the same way as it would if they were subsidiaries. This means that proportionally
consolidated measures (often referred to as see-through in the half year results)
are particularly relevant, whilst also having the benefit of removing the taxation
effects on equity accounted entities from the statutory profit before tax figure.
A number of these measures are explained below, together with the EPRA-based
measures that are discussed in note 3.
Trading profit (See note 2a): Trading profit is calculated on a proportionally
consolidated basis and is stated before the principal non-cash income statement
items, being revaluation gains and losses, changes in the estimate of the obligation
to establish the new Covent Garden flower market, non-cash financing charges
and tax. For a property group with a low depreciation charge and no intangible
amortisation charge, this has historically represented a more useful measure
than the EBITDA alternative performance measure used by many other companies.
Total accounting return (see note 2f): The Group's shareholders measure their
returns in terms of both the Group's growth and the dividend return and total
accounting return combines these two items. Whilst this is often measured by
Total Shareholder Return which combines share price growth and dividend return,
in the real estate sector, it is also insightful to consider net asset growth,
which therefore directly reflects the most recent valuation of assets.
The Group's definition of total accounting return was revised during the second
half of the year ended 30 November 2017 to represent the movement in net asset
value per share for the year plus dividends paid per share during the year,
expressed as a percentage of net asset value per share at the start of the
year. Previously, this measure was defined using EPRA net asset value rather
than net asset value. This change reflected that the Group's strategy includes
the repositioning and recycling of the Group's portfolio towards sectors with
strong structural growth, whereas the EPRA model assumes that properties are
retained.
In particular, the disposal of a property for its carrying value in the financial
statements and the resulting payment of its recognised deferred tax liability
does not result in a change in net assets, but does result in a decrease in
EPRA net assets because the deferred tax that crystallises on disposal is no
longer adjusted for in arriving at EPRA net assets. Total accounting return
previously reported for the six months ended 31 May 2017 under the previous
definition was 2.6%. Under the new definition and now reported in note 2f,
total accounting return for the six months ended 31 May 2017 was 2.9%.
a. Income statement
The non-statutory measures of adjusted EPRA earnings and trading profit, which
include the Group's share of joint ventures and associates, are calculated
as set out below:
Six months ended 31 May 2018 (unaudited)
Joint
ventures
Group and associates Total Trading profit Other
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------ --------------- ------ -------------- -----
Gross rental income 29.5 3.1 32.6 32.6 -
Property outgoings (6.6) (0.3) (6.9) (6.9) -
Other net income 0.5 - 0.5 0.5 -
Net rental and other income 23.4 2.8 26.2 26.2 -
Housebuilding operating profit
(note 1) 12.7 - 12.7 12.7 -
Development fee income (note
2b) 1.4 - 1.4 1.4 -
Administrative expenses (note
1) (14.3) (0.1) (14.4) (14.4) -
Interest costs (note 5) (9.0) (1.6) (10.6) (10.2) (0.4)
Interest income (note 5) 1.0 0.7 1.7 1.3 0.4
Taxation on adjusted EPRA earnings (2.8) (0.3) (3.1) - (3.1)
Adjusted EPRA earnings 12.4 1.5 13.9 17.0 (3.1)
Property development gains (note
2b) 9.5 - 9.5 9.5 -
Property disposal losses (note
2b) (4.2) (0.7) (4.9) (4.9) -
Property revaluation gains/(losses)
(note 2c) 12.4 (3.4) 9.0 - 9.0
Other finance costs (note 5) (4.7) (1.8) (6.5) - (6.5)
Other finance income (note 5) 0.6 0.4 1.0 - 1.0
Taxation on other earnings (2.3) 1.1 (1.2) - (1.2)
Profit for the period attributable
to owners of the Company 23.7 (2.9) 20.8 21.6 (0.8)
--------------------------------------- ------ --------------- ------ -------------- -----
Six months ended 31 May 2017 (unaudited)
Joint
ventures
Group and associates Total Trading profit Other
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------ --------------- ------ -------------- -----
Gross rental income 27.2 3.5 30.7 30.7 -
Property outgoings (4.8) (0.9) (5.7) (5.7) -
Other net income 2.0 - 2.0 2.0 -
Net rental and other income 24.4 2.6 27.0 27.0 -
Housebuilding operating profit
(note 1) 13.4 - 13.4 13.4 -
Development fee income (note
2b) 1.8 - 1.8 1.8 -
Administrative expenses (note
1) (13.8) (0.2) (14.0) (14.0) -
Interest costs (note 5) (11.5) (5.5) (17.0) (16.6) (0.4)
Interest income (note 5) 5.5 - 5.5 5.1 0.4
Taxation on adjusted EPRA earnings (3.6) 0.1 (3.5) - (3.5)
Less non-controlling interests on
adjusted EPRA earnings (0.1) - (0.1) - (0.1)
Adjusted EPRA earnings 16.1 (3.0) 13.1 16.7 (3.6)
Property development gains (note
2b) 6.8 0.9 7.7 7.7 -
Property disposal gains (note
2b) 1.0 1.0 2.0 2.0 -
Property revaluation gains (note
2c) 9.1 10.9 20.0 - 20.0
Change in estimated cost to establish
a market in Nine Elms - (9.2) (9.2) - (9.2)
Other finance costs (note 5) (5.5) (2.7) (8.2) - (8.2)
Other finance income (note 5) - 0.3 0.3 - 0.3
Taxation on other earnings (1.1) 2.2 1.1 - 1.1
Profit for the period attributable
to owners of the Company 26.4 0.4 26.8 26.4 0.4
--------------------------------------- ------ --------------- ------ -------------- -----
Year ended 30 November 2017 (audited)
Joint
ventures
Group and associates Total Trading profit Other
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------ --------------- ------ -------------- ------
Gross rental income 61.0 6.6 67.6 67.6 -
Property outgoings (12.2) (1.6) (13.8) (13.8) -
Other net income 2.0 - 2.0 2.0 -
Net rental and other income 50.8 5.0 55.8 55.8 -
Housebuilding operating profit
(note 1) 31.4 - 31.4 31.4 -
Development fee income (note
2b) 3.8 - 3.8 3.8 -
Administrative expenses (note
1) (28.7) (0.3) (29.0) (29.0) -
Interest costs (note 5) (23.7) (9.7) (33.4) (32.6) (0.8)
Interest income (note 5) 9.0 0.3 9.3 8.4 0.9
Taxation on adjusted EPRA earnings (7.8) (0.6) (8.4) - (8.4)
Less non-controlling interests on
adjusted EPRA earnings (0.1) - (0.1) - (0.1)
Adjusted EPRA earnings 34.7 (5.3) 29.4 37.8 (8.4)
Property development gains (note
2b) 18.5 0.9 19.4 19.4 -
Property disposal gains (note
2b) 6.7 0.7 7.4 7.4 -
Property revaluation gains (note
2c) 14.2 20.4 34.6 - 34.6
Change in estimated cost to establish
a market in Nine Elms - (24.6) (24.6) - (24.6)
Other finance costs (note 5) (6.3) (5.3) (11.6) - (11.6)
Other finance income (note 5) 3.1 0.8 3.9 - 3.9
Taxation on other earnings (2.4) 3.9 1.5 - 1.5
Less non-controlling interests on
other earnings (0.4) - (0.4) - (0.4)
--------------------------------------- ------ --------------- --------------
Profit for the year attributable to
owners of the Company 68.1 (8.5) 59.6 64.6 (5.0)
--------------------------------------- ------ --------------- ------ -------------- ------
b. Portfolio property profits
Non-housebuilding property profits, including the Group's share of joint ventures
and associates, comprise development fee income and gains and losses arising
from property development and property disposals, as shown in note 2a. These
are derived from development profits in the condensed Group income statement
as set out below:
Six months ended 31 May 2018 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
----------------------------------------------------- ---------- ---------------------- --------
Inventory development gains 20.8 - 20.8
Inventory disposal losses (11.6) - (11.6)
Pre-sold property construction contract profits 4.8 - 4.8
Development fee income 1.4 - 1.4
Development profits 15.4 - 15.4
Investment property disposal gains/(losses) 7.4 (0.7) 6.7
Net realisable value provisions (note 2c) 0.4 - 0.4
Less residential development profits (note
1) (16.5) - (16.5)
Portfolio property profits 6.7 (0.7) 6.0
----------------------------------------------------- ---------- ---------------------- --------
Development fee income (note 2a) 1.4 - 1.4
Property development gains (note 2a) 9.5 - 9.5
Property disposal losses (note 2a) (4.2) (0.7) (4.9)
Portfolio property profits 6.7 (0.7) 6.0
----------------------------------------------------- ---------- ---------------------- --------
Six months ended 31 May 2017 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
------------------------------------------------------ ---------- ---------------------- --------
Inventory development gains 19.3 0.9 20.2
Pre-sold property construction contract profits 3.9 - 3.9
Development fee income 1.8 - 1.8
Development profits 25.0 0.9 25.9
Investment property disposal gains 1.0 1.0 2.0
Net realisable value provisions (note 2c) 0.2 - 0.2
Less residential development profits (note
1) (16.6) - (16.6)
Portfolio property profits 9.6 1.9 11.5
------------------------------------------------------ ---------- ---------------------- --------
Development fee income (note 2a) 1.8 - 1.8
Property development gains (note 2a) 6.8 0.9 7.7
Property disposal gains (note 2a) 1.0 1.0 2.0
Portfolio property profits 9.6 1.9 11.5
------------------------------------------------------ ---------- ---------------------- --------
Year ended 30 November 2017 (audited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
------------------------------------------------------ ---------- ---------------------- --------
Inventory development gains 50.5 0.9 51.4
Pre-sold property construction contract profits 4.6 - 4.6
Development fee income 3.8 - 3.8
Development profits 58.9 0.9 59.8
Investment property disposal gains 6.7 0.7 7.4
Net realisable value provisions (note 2c) 2.0 - 2.0
Less residential development profits (note
1) (38.6) - (38.6)
Portfolio property profits 29.0 1.6 30.6
------------------------------------------------------ ---------- ---------------------- --------
Development fee income (note 2a) 3.8 - 3.8
Property development gains (note 2a) 18.5 0.9 19.4
Property disposal gains (note 2a) 6.7 0.7 7.4
Portfolio property profits 29.0 1.6 30.6
------------------------------------------------------ ---------- ---------------------- --------
c. Property valuations
Property valuations, including the Group's share of joint ventures and associates,
are calculated as set out below:
Six months ended 31 May 2018 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
------------------------------------------------------ ---------- ---------------------- --------
Investment property revaluation gains/(losses) 12.8 (3.4) 9.4
Net realisable value provisions (0.4) - (0.4)
Property valuation gains/(losses) 12.4 (3.4) 9.0
------------------------------------------------------ ---------- ---------------------- --------
Six months ended 31 May 2017 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
------------------------------------------------------ ---------- ---------------------- --------
Investment property revaluation gains 9.3 10.9 20.2
Net realisable value provisions (0.2) - (0.2)
Property valuation gains 9.1 10.9 20.0
------------------------------------------------------ ---------- ---------------------- --------
Year ended 30 November 2017 (audited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
------------------------------------------------------ ---------- ---------------------- --------
Investment property revaluation gains 16.2 20.4 36.6
Net realisable value provisions (2.0) - (2.0)
Property valuation gains 14.2 20.4 34.6
------------------------------------------------------ ---------- ---------------------- --------
d. Balance sheet
The balance sheet, including the Group's share of joint ventures and associates,
is derived from the Group balance sheet as detailed below:
As at 31 May 2018 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
------------------------------------------------ -------- ---------------- ---------
Property portfolio 1,368.5 118.9 1,487.4
Other assets 104.4 96.4 200.8
Gross assets 1,472.9 215.3 1,688.2
------------------------------------------------ -------- ---------------- ---------
Net borrowings (366.0) 6.4 (359.6)
Finance leases (5.2) (0.9) (6.1)
Other liabilities (175.8) (130.0) (305.8)
Gross liabilities (547.0) (124.5) (671.5)
------------------------------------------------ -------- ---------------- ---------
Net assets 925.9 90.8 1,016.7
Non-controlling interests (5.7) - (5.7)
------------------------------------------------ -------- ---------------- ---------
Equity attributable to owners of the Company 920.2 90.8 1,011.0
------------------------------------------------ -------- ---------------- ---------
As at 31 May 2017 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
------------------------------------------------ -------- ---------------- ---------
Property portfolio 1,462.0 351.4 1,813.4
Other assets 135.4 33.0 168.4
Gross assets 1,597.4 384.4 1,981.8
------------------------------------------------ -------- ---------------- ---------
Net borrowings (554.6) (25.7) (580.3)
Finance leases (56.2) (0.9) (57.1)
Other liabilities (187.1) (177.6) (364.7)
Gross liabilities (797.9) (204.2) (1,002.1)
------------------------------------------------ -------- ---------------- ---------
Net assets 799.5 180.2 979.7
Non-controlling interests (5.4) - (5.4)
------------------------------------------------ -------- ---------------- ---------
Equity attributable to owners of the Company 794.1 180.2 974.3
------------------------------------------------ -------- ---------------- ---------
As at 30 November 2017 (audited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
------------------------------------------------ -------- ---------------- ---------
Property portfolio 1,516.0 148.0 1,664.0
Other assets 85.5 82.0 167.5
Gross assets 1,601.5 230.0 1,831.5
------------------------------------------------ -------- ---------------- ---------
Net borrowings (433.8) 45.6 (388.2)
Finance leases (57.0) (0.9) (57.9)
Other liabilities (224.3) (155.1) (379.4)
Gross liabilities (715.1) (110.4) (825.5)
------------------------------------------------ -------- ---------------- ---------
Net assets 886.4 119.6 1,006.0
Non-controlling interests (5.7) - (5.7)
------------------------------------------------ -------- ---------------- ---------
Equity attributable to owners of the Company 880.7 119.6 1,000.3
------------------------------------------------ -------- ---------------- ---------
e. Property portfolio
The property portfolio, including the Group's share of joint ventures and associates,
is derived from the Group balance sheet as detailed below:
As at 31 May 2018 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
----------------------------------------------- --------- --------------- ---------------
Investment properties 979.2 108.8 1,088.0
Less assets held under finance leases not
subject to revaluation (5.2) (0.9) (6.1)
Inventories 358.5 11.0 369.5
Assets held for sale 36.0 - 36.0
Property portfolio 1,368.5 118.9 1,487.4
----------------------------------------------- --------- --------------- ---------------
As at 31 May 2017 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
----------------------------------------------- --------- --------------- ---------------
Investment properties 1,167.2 346.3 1,513.5
Less assets held under finance leases not
subject to revaluation (3.9) (0.9) (4.8)
Inventories 298.7 6.0 304.7
Property portfolio 1,462.0 351.4 1,813.4
----------------------------------------------- --------- --------------- ---------------
As at 30 November 2017 (audited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
----------------------------------------------- --------- --------------- ---------------
Investment properties 1,168.5 139.7 1,308.2
Less assets held under finance leases not
subject to revaluation (5.2) (0.9) (6.1)
Inventories 352.7 9.2 361.9
Property portfolio 1,516.0 148.0 1,664.0
----------------------------------------------- --------- --------------- ---------------
The property portfolio, including the Group's share of joint ventures can be
split by category as detailed below:
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
GBPm GBPm GBPm
----------------------------------------------- --------- --------------- ---------------
Industrial and logistics 333.6 267.8 305.8
Retail 291.0 341.9 342.8
Residential and other 67.4 165.7 194.9
Income producing property 692.0 775.4 843.5
Residential land 582.9 782.8 561.2
Commercial land 212.5 255.2 259.3
Property portfolio 1,487.4 1,813.4 1,664.0
----------------------------------------------- --------- --------------- ---------------
f. Total accounting return
Total accounting return is calculated as set
out below:
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
Pence per
share Pence per share Pence per share
----------------------------------------------- --------- --------------- ---------------
Net asset value per share at end of year (note
3) 455.4 439.6 450.9
Less net asset value per share at start of
year (note 3) (450.9) (431.0) (431.0)
----------------------------------------------- --------- --------------- ---------------
Increase in net asset value per share 4.5 8.6 19.9
Dividend paid per share 4.3 4.1 6.1
-----------------------------------------------
Total accounting return per share 8.8 12.7 26.0
----------------------------------------------- --------- --------------- ---------------
Total accounting return 2.0% 2.9% 6.0%
----------------------------------------------- --------- --------------- ---------------
g. Cash generated before new investment,
tax and dividends
Cash generated before new investment, tax and dividends is derived from the
Group cash flow statement as set out below:
Six months ended 31 May 2018 (unaudited)
Operating Investing Financing Joint ventures
activities activities activities Total and associates Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ----------- ----------- ------- --------------- -------
Net rent and other income 23.4 - - 23.4 2.8 26.2
Overheads and interest (14.5) 0.6 (20.7) (34.6) (1.0) (35.6)
Property disposal and development
proceeds 177.5 131.4 - 308.9 34.8 343.7
Finance leases - - (0.4) (0.4) - (0.4)
Working capital and other movements (35.1) (2.5) - (37.6) (39.9) (77.5)
Cash generated before new investment,
tax and dividends 151.3 129.5 (21.1) 259.7 (3.3) 256.4
Taxation (6.4) - - (6.4) (5.7) (12.1)
Net dividends - 26.3 (9.5) 16.8 (26.3) (9.5)
Property acquisitions (22.2) (7.3) - (29.5) - (29.5)
Property and development expenditure (133.9) (38.9) - (172.8) (3.9) (176.7)
Net repayment of borrowings - - (66.3) (66.3) (4.3) (70.6)
Movement in cash and cash equivalents (11.2) 109.6 (96.9) 1.5 (43.5) (42.0)
-------------------------------------- ----------- ----------- ----------- ------- --------------- -------
Six months ended 31 May 2017 (unaudited)
Operating Investing Financing Joint ventures
activities activities activities Total and associates Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ----------- ----------- ------- --------------- -------
Net rent and other income 24.4 - - 24.4 2.6 27.0
Overheads and interest (15.4) 5.1 (11.2) (21.5) (5.7) (27.2)
Property disposal and development
proceeds 119.8 15.5 - 135.3 45.8 181.1
Finance leases - - (1.6) (1.6) - (1.6)
Working capital and other movements (23.1) - - (23.1) (11.9) (35.0)
Cash generated before new investment,
tax and dividends 105.7 20.6 (12.8) 113.5 30.8 144.3
Taxation (4.4) - - (4.4) (1.0) (5.4)
Net dividends - 5.0 (10.6) (5.6) (5.0) (10.6)
Property acquisitions (34.6) (12.4) - (47.0) - (47.0)
Property and development expenditure (118.4) (22.7) - (141.1) (3.5) (144.6)
Net drawing/(repayment) of borrowings - - 89.2 89.2 (6.6) 82.6
Movement in cash and cash equivalents (51.7) (9.5) 65.8 4.6 14.7 19.3
-------------------------------------- ----------- ----------- ----------- ------- --------------- -------
Year ended 30 November 2017 (audited)
Operating Investing Financing Joint ventures
activities activities activities Total and associates Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ----------- ----------- ------- --------------- -------
Net rent and other income 50.8 - - 50.8 5.0 55.8
Overheads and interest (36.0) 12.3 (26.1) (49.8) (9.7) (59.5)
Property disposal and development
proceeds 260.8 60.1 - 320.9 258.8 579.7
Finance leases - - (3.3) (3.3) - (3.3)
Working capital and other movements 53.5 (3.4) - 50.1 (80.1) (30.0)
Cash generated before new investment,
tax and dividends 329.1 69.0 (29.4) 368.7 174.0 542.7
Taxation (16.2) - - (16.2) (7.8) (24.0)
Net dividends - 58.1 (15.2) 42.9 (58.1) (15.2)
Property acquisitions (50.8) (17.5) - (68.3) - (68.3)
Property and development expenditure (246.8) (44.1) - (290.9) (15.5) (306.4)
Net repayment of borrowings - - (39.9) (39.9) (21.7) (61.6)
Movement in cash and cash equivalents 15.3 65.5 (84.5) (3.7) 70.9 67.2
-------------------------------------- ----------- ----------- ----------- ------- --------------- -------
h. Movements in net borrowings and net debt
The movements in net borrowings and net debt are set out below:
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
GBPm GBPm GBPm
--------------------------------------------------- --------- ------------ ------------
Movement in cash and cash equivalents 1.5 4.6 (3.7)
Borrowings drawn (423.0) (133.2) (209.2)
Repayment of borrowings 489.3 44.0 249.1
Increase/(decrease) in net borrowings 67.8 (84.6) 36.2
Fair value movement on convertible bonds 0.6 (4.0) (4.2)
Finance leases - 0.6 (0.2)
--------------------------------------------------- --------- ------------ ------------
Increase/(decrease) in net debt 68.4 (88.0) 31.8
--------------------------------------------------- --------- ------------ ------------
i. Net borrowings and net debt
Net borrowings and net debt are calculated
as set out below:
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
GBPm GBPm GBPm
--------------------------------------------------- --------- ------------ ------------
Cash and cash equivalents 2.0 8.8 0.5
Borrowings due within one year (100.0) - -
Borrowings due after more than one year (268.0) (563.8) (434.9)
Adjustment to restate convertible bond at
book value - 0.4 0.6
--------------------------------------------------- --------- ------------ ------------
Net borrowings (366.0) (554.6) (433.8)
Reversal of adjustment to restate convertible
bond at book value - (0.4) (0.6)
Finance lease liabilities due within one year (0.1) (0.4) (0.6)
Finance lease liabilities due after more than
one year (5.1) (55.8) (56.4)
--------- ------------ ------------
Net debt (371.2) (611.2) (491.4)
--------------------------------------------------- --------- ------------ ------------
j. Gearing and loan-to-value
The Group's capacity to borrow is primarily linked to the value of the property
portfolio excluding assets held under finance leases. Accordingly, both adjusted
gearing and see-through loan-to-value are calculated using the comparable measure
of net borrowings and see-through net borrowings respectively. Reflecting that
residential assets are less attractive asset for security purposes, we also
disclose see-through loan-to-value (excluding residential) using the comparable
measure of see-through net borrowings. These terms are defined as follows:
Net borrowings: total borrowings (at amortised cost and excluding finance leases
and fair value movements on the Group's convertible bond) less cash and cash
equivalents.
See-through net borrowings: total borrowings (at amortised cost and excluding
finance leases and fair value movements on the Group's convertible bond) less
cash and cash equivalents (all including the Group's share of its joint ventures
and associates).
See-through loan-to-value: see-through net borrowings expressed as a percentage
of the Group's property portfolio excluding valued assets held under finance
leases, calculated on a proportionally consolidated basis (including the Group's
share of its joint ventures and associates).
See-through loan-to-value (excluding residential): see-through net borrowings
expressed as a percentage of the Group's property portfolio excluding valued
assets held under finance leases and residential land and developments, calculated
on a proportionally consolidated basis (including the Group's share of its joint
ventures and associates).
As at 31 May 2018 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
----------------------------------------------- -------- ----------------- -------
Property portfolio (note 2e) 1,368.5 118.9 1,487.4
Less residential assets (note 2e) (545.8) (37.1) (582.9)
----------------------------------------------- -------- -----------------
Net property portfolio (excluding residential) 822.7 81.8 904.5
----------------------------------------------- -------- ----------------- -------
Total equity 1,016.7 N/A 1,016.7
Net debt (note 2i) 371.2 (5.5) 365.7
Net borrowings (note 2i) 366.0 (6.4) 359.6
----------------------------------------------- -------- ----------------- -------
Gearing 36.5% 36.0%
Adjusted gearing 36.0% 35.4%
Loan-to-value 26.7% 24.2%
Loan-to-value (excluding residential) N/A 39.8%
----------------------------------------------- -------- ----------------- -------
As at 31 May 2017 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
----------------------------------------------- -------- ----------------- -------
Property portfolio (note 2e) 1,462.0 351.4 1,813.4
Less valued assets held under finance leases (59.3) - (59.3)
----------------------------------------------- -------- ----------------- -------
Net property portfolio 1,402.7 351.4 1,754.1
Less residential assets (note 2e) (518.6) (264.2) (782.8)
----------------------------------------------- -------- -----------------
Net property portfolio (excluding residential) 884.1 87.2 971.3
----------------------------------------------- -------- ----------------- -------
Total equity 979.7 N/A 979.7
Net debt (note 2i) 611.2 26.6 637.8
Net borrowings (note 2i) 554.6 25.7 580.3
----------------------------------------------- -------- ----------------- -------
Gearing 62.4% 65.1%
Adjusted gearing 56.6% 59.2%
Loan-to-value 39.5% 33.1%
Loan-to-value (excluding residential) N/A 59.7%
----------------------------------------------- -------- ----------------- -------
As at 30 November 2017 (audited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
----------------------------------------------- -------- ----------------- -------
Property portfolio (note 2e) 1,516.0 148.0 1,664.0
Less valued assets held under finance leases (59.0) - (59.0)
----------------------------------------------- -------- ----------------- -------
Net property portfolio 1,457.0 148.0 1,605.0
Less residential assets (note 2e) (504.1) (57.1) (561.2)
----------------------------------------------- -------- -----------------
Net property portfolio (excluding residential) 952.9 90.9 1,043.8
----------------------------------------------- -------- ----------------- -------
Total equity 1,006.0 N/A 1,006.0
Net debt (note 2i) 491.4 (44.7) 446.7
Net borrowings (note 2i) 433.8 (45.6) 388.2
----------------------------------------------- -------- ----------------- -------
Gearing 48.8% 44.4%
Adjusted gearing 43.1% 38.6%
Loan-to-value 29.8% 24.2%
Loan-to-value (excluding residential) N/A 37.2%
----------------------------------------------- -------- ----------------- -------
3. EPRA performance measures
This note sets out two performance measures of the European Public Real Estate
Association (EPRA), calculated in accordance with their Best Practices Recommendations
(BPR). These measures are intended to provide comparability and are explained
in detail below:
EPRA earnings (see note 3a): For investors of real estate companies, a key measure
of ongoing operational performance and the extent to which dividend payments
are underpinned by earnings is the level of income arising from operational
activities. EPRA earnings exclude unrealised valuation movements and profits
on disposal to provide an indicator of the leasing and property management performance
of a business.
Adjusted EPRA earnings (see note 3a): Whilst EPRA earnings provides a comparable
measure for investors, it is not a relevant measure for housebuilders as it
excludes all profits from such activity. On the basis that these profits are
realised in cash and represent a core ongoing activity for the Group, a company
specific adjustment is made to EPRA earnings in respect of this profit. Furthermore,
the amortisation of loan arrangement fees represents a non-cash interest charge
on an ongoing basis and therefore a further company specific adjustment is made
for this. After adjusting these two items for tax, EPRA earnings can be reconciled
to adjusted EPRA earnings, which provides a relevant cash-based profit measure
that underpins the dividend policy of the Group.
EPRA net asset value (see note 3b): The objective of EPRA net asset value is
to highlight the fair value of net assets on an ongoing, long-term basis. Assets
and liabilities that are not expected to crystallise in normal circumstances
such as the fair value of derivative financial instruments and deferred taxes
on property valuation surpluses are therefore excluded, which facilitates a
more objective comparison with peer companies.
a. Adjusted EPRA earnings
Adjusted EPRA earnings is calculated as set
out below:
Six months ended 31 May 2018 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
---------------------------------------------------------- ---------- ---------------------- --------
Profit for the period and profit for the period
attributable to owners of the Company 23.7 (2.9) 20.8
Investment property revaluation (gains)/losses (12.8) 3.4 (9.4)
Investment property disposal (gains)/losses (7.4) 0.7 (6.7)
Inventory development gains(2) (17.0) - (17.0)
Pre-sold property development gains(3) (4.8) - (4.8)
Inventory disposal losses 11.6 - 11.6
Amortisation of discount on deferred payment
arrangements(4) 0.1 1.8 1.9
Taxation in respect of gains or losses on
disposal 5.6 0.5 6.1
Movement in fair value of financial instruments (0.4) (0.4) (0.8)
Deferred tax in respect of EPRA adjustments (0.1) (1.6) (1.7)
EPRA earnings (1.5) 1.5 -
Residential operating profit 12.7 - 12.7
Amortisation of loan arrangement fees 4.4 - 4.4
Taxation in respect of company specific adjustments (3.2) - (3.2)
Adjusted EPRA earnings 12.4 1.5 13.9
---------------------------------------------------------- ---------- ---------------------- --------
Six months ended 31 May 2017 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
-------------------------------------------------------- ---------- ---------------------- --------
Profit for the period 26.5 0.4 26.9
Less non-controlling interests (0.1) - (0.1)
-------------------------------------------------------- ---------- ---------------------- --------
Profit for the period attributable to owners
of the Company 26.4 0.4 26.8
Investment property revaluation gains (9.3) (10.9) (20.2)
Investment property disposal gains (1.0) (1.0) (2.0)
Change in estimated cost to establish a market
in Nine Elms(1) - 9.2 9.2
Inventory development gains(2) (16.1) (0.9) (17.0)
Pre-sold property development gains(3) (3.9) - (3.9)
Amortisation of discount on deferred payment
arrangements(4) 0.3 2.6 2.9
Taxation in respect of gains or losses on
disposal 5.2 (1.2) 4.0
Movement in fair value of financial instruments 4.1 (0.3) 3.8
Deferred tax in respect of EPRA adjustments (1.3) (1.0) (2.3)
EPRA earnings 4.4 (3.1) 1.3
Residential operating profit 13.4 - 13.4
Amortisation of loan arrangement fees 1.1 0.1 1.2
Taxation in respect of company specific adjustments (2.8) - (2.8)
Adjusted EPRA earnings 16.1 (3.0) 13.1
-------------------------------------------------------- ---------- ---------------------- --------
Year ended 30 November 2017 (audited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
-------------------------------------------------------- ---------- ---------------------- --------
Profit for the year 68.6 (8.5) 60.1
Less non-controlling interests (0.5) - (0.5)
-------------------------------------------------------- ---------- ---------------------- --------
Profit for the year attributable to owners
of the Company 68.1 (8.5) 59.6
Investment property revaluation gains (16.2) (20.4) (36.6)
Investment property disposal gains (6.7) (0.7) (7.4)
Change in estimated cost to establish a market
in Nine Elms(1) - 24.6 24.6
Inventory development gains(2) (43.3) (0.9) (44.2)
Pre-sold property development gains(3) (4.6) - (4.6)
Amortisation of discount on deferred payment
arrangements(4) 0.3 4.9 5.2
Taxation in respect of gains or losses on
disposal 13.7 14.2 27.9
Movement in fair value of financial instruments 1.1 (0.8) 0.3
Deferred tax in respect of EPRA adjustments (5.0) (18.0) (23.0)
Non-controlling interests in respect of the
above 0.4 - 0.4
EPRA earnings 7.8 (5.6) 2.2
Residential operating profit 31.4 - 31.4
Amortisation of loan arrangement fees 1.8 0.4 2.2
Taxation in respect of company specific adjustments (6.3) (0.1) (6.4)
Adjusted EPRA earnings 34.7 (5.3) 29.4
-------------------------------------------------------- ---------- ---------------------- --------
(1) The change in estimated cost to establish a market in Nine Elms represents
a loss on property development and therefore forms part of the profits or losses
on sale of trading properties that should be adjusted in arriving at EPRA earnings.
(2) Inventory development gains exclude overheads directly attributable to the
residential housebuilding business as these form part of the profits or losses
on sale of trading properties that should be adjusted in arriving at EPRA earnings.
(3) Pre-sold property development gains arise from property disposals and their
development and therefore should be adjusted in arriving at EPRA earnings.
(4) The unwinding of discounts on deferred payment arrangements are linked to
the disposal of either investment properties or inventory and are therefore
adjusted in arriving at EPRA earnings.
Whilst the BPR defines EPRA earnings with reference to adjustments to the reported
profit for the year, it can also be presented in the form of an income statement,
comprising those items in the income statement not adjusted for in the reconciliation
above:
Six months ended 31 May 2018 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
---------------------------------------------------------- ---------- ---------------------- --------
Net rental and other income 23.4 2.8 26.2
Development fee income 1.4 - 1.4
Administrative expenses (14.3) (0.1) (14.4)
Finance costs(1) (13.4) (1.6) (15.0)
Finance income(2) 1.0 0.7 1.7
Taxation in respect of EPRA earnings measures 0.4 (0.3) 0.1
EPRA earnings (1.5) 1.5 (0.0)
Housebuilding operating profit 12.7 - 12.7
Amortisation of loan arrangement fees 4.4 - 4.4
Taxation in respect of company specific adjustments (3.2) - (3.2)
Adjusted EPRA earnings 12.4 1.5 13.9
---------------------------------------------------------- ---------- ---------------------- --------
Six months ended 31 May 2017 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
---------------------------------------------------------- ---------- ---------------------- --------
Net rental and other income 24.4 2.6 27.0
Development fee income 1.8 - 1.8
Administrative expenses (13.8) (0.2) (14.0)
Finance costs(1) (12.6) (5.6) (18.2)
Finance income(2) 5.5 - 5.5
Taxation in respect of EPRA earnings measures (0.8) 0.1 (0.7)
Non-controlling interests in respect of the
above (0.1) - (0.1)
EPRA earnings 4.4 (3.1) 1.3
Housebuilding operating profit 13.4 - 13.4
Amortisation of loan arrangement fees 1.1 0.1 1.2
Taxation in respect of company specific adjustments (2.8) - (2.8)
Adjusted EPRA earnings 16.1 (3.0) 13.1
---------------------------------------------------------- ---------- ---------------------- --------
Year ended 30 November 2017 (audited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
---------------------------------------------------------- ---------- ---------------------- --------
Net rental and other income 50.8 5.0 55.8
Development fee income 3.8 - 3.8
Administrative expenses (28.7) (0.3) (29.0)
Finance costs(1) (25.5) (10.1) (35.6)
Finance income(2) 9.0 0.3 9.3
Taxation in respect of EPRA earnings measures (1.5) (0.5) (2.0)
Non-controlling interests in respect of the
above (0.1) - (0.1)
EPRA earnings 7.8 (5.6) 2.2
Housebuilding operating profit 31.4 - 31.4
Amortisation of loan arrangement fees 1.8 0.4 2.2
Taxation in respect of company specific adjustments (6.3) (0.1) (6.4)
Adjusted EPRA earnings 34.7 (5.3) 29.4
---------------------------------------------------------- ---------- ---------------------- --------
(1) Finance costs for the purposes of EPRA earnings exclude movements in the
fair value of financial instruments and amortisation of discount on deferred
payment arrangements, as set out in note 5.
(2) Finance income for the purposes of EPRA earnings excludes movements in the
fair value of financial instruments, as set out in note 5.
Six months ended 31 May 2018 (unaudited)
GBPm Pence per share(1) Percentage movement(2)
---------------------------------------------------- ----- ------------------ ----------------------
Earnings 20.8 9.4 (22.3)%
EPRA earnings - - N/A
Adjusted EPRA earnings 13.9 6.3 6.8%
---------------------------------------------------- ----- ------------------ ----------------------
Six months ended 31 May 2017 (unaudited)
GBPm Pence per share(1) Percentage movement(2)
---------------------------------------------------- ----- ------------------ ----------------------
Earnings 26.8 12.1 N/A
EPRA earnings 1.3 0.6 N/A
Adjusted EPRA earnings 13.1 5.9 N/A
---------------------------------------------------- ----- ------------------ ----------------------
Year ended 30 November 2017 (audited)
GBPm Pence per share(1) Percentage movement(2)
---------------------------------------------------- ----- ------------------ ----------------------
Earnings 59.6 26.9 11.6%
EPRA earnings 2.2 1.0 (266.7)%
Adjusted EPRA earnings 29.4 13.3 37.1%
---------------------------------------------------- ----- ------------------ ----------------------
(1) The number of shares in issue used to calculate the earnings per share is
221,906,003 (six months ended 31 May 2017: 221,613,476, year ended 30 November
2017: 221,697,244), as disclosed in note 6, excluding those shares held by The
St. Modwen Properties PLC Employee Share Trust.
(2) Percentage movements are in comparison to the equivalent period in the previous
financial year.
b. EPRA net asset value
EPRA net asset value is calculated as set
out below:
As at 31 May 2018 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
---------------------------------------------------- ----- ------------------ ----------------------
Total equity 925.9 90.8 1,016.7
Less non-controlling interests (5.7) - (5.7)
---------------------------------------------------- ----- ------------------ ----------------------
Net asset value 920.2 90.8 1,011.0
Adjustments of inventories to fair value 19.6 0.9 20.5
---------------------------------------------------- ----- ------------------ ----------------------
EPRA triple net asset value 939.8 91.7 1,031.5
Deferred tax on capital allowances and revaluations 18.8 3.1 21.9
Mark-to-market of derivative financial instruments (0.6) 0.4 (0.2)
----------------------------------------------------
EPRA net asset value 958.0 95.2 1,053.2
---------------------------------------------------- ----- ------------------ ----------------------
As at 31 May 2017 (unaudited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
---------------------------------------------------- ----- ------------------ ----------------------
Total equity 799.5 180.2 979.7
Less non-controlling interests (5.4) - (5.4)
---------------------------------------------------- ----- ------------------ ----------------------
Net asset value 794.1 180.2 974.3
Adjustments of inventories to fair value 10.7 - 10.7
---------------------------------------------------- ----- ------------------ ----------------------
EPRA triple net asset value 804.8 180.2 985.0
Deferred tax on capital allowances and revaluations 23.4 22.4 45.8
Mark-to-market of derivative financial instruments 6.3 1.1 7.4
----------------------------------------------------
EPRA net asset value 834.5 203.7 1,038.2
---------------------------------------------------- ----- ------------------ ----------------------
As at 30 November 2017 (audited)
Joint ventures
Group and associates Total
GBPm GBPm GBPm
---------------------------------------------------- ------- ------------------ ----------------------
Total equity 886.4 119.6 1,006.0
Less non-controlling interests (5.7) - (5.7)
---------------------------------------------------- ------- ------------------ ----------------------
Net asset value 880.7 119.6 1,000.3
Adjustments of inventories to fair value 16.2 0.2 16.4
---------------------------------------------------- ------- ------------------ ----------------------
EPRA triple net asset value 896.9 119.8 1,016.7
Deferred tax on capital allowances and revaluations 18.8 4.2 23.0
Mark-to-market of derivative financial instruments 5.0 0.7 5.7
----------------------------------------------------
EPRA net asset value 920.7 124.7 1,045.4
---------------------------------------------------- ------- ------------------ ----------------------
As at 31 May 2018 (unaudited)
GBPm Pence per share(1) Percentage movement(2)
---------------------------------------------------- ------- ------------------ ----------------------
Net asset value 1,011.0 455.4 1.0%
EPRA triple net asset value 1,031.5 464.6 1.4%
EPRA net asset value 1,053.2 474.4 0.7%
---------------------------------------------------- ------- ------------------ ----------------------
As at 31 May 2017 (unaudited)
GBPm Pence per share(1) Percentage movement(2)
---------------------------------------------------- ------- ------------------ ----------------------
Net asset value 974.3 439.6 2.0%
EPRA triple net asset value 985.0 444.4 1.6%
EPRA net asset value 1,038.2 468.4 1.7%
---------------------------------------------------- ------- ------------------ ----------------------
As at 30 November 2017 (audited)
GBPm Pence per share(1) Percentage movement(2)
---------------------------------------------------- ------- ------------------ ----------------------
Net asset value 1,000.3 450.9 4.6%
EPRA triple net asset value 1,016.7 458.3 4.8%
EPRA net asset value 1,045.4 471.2 2.3%
---------------------------------------------------- ------- ------------------ ----------------------
(1) The number of shares in issue used to calculate the net asset values per
share is 222,016,005 (six months ended 31 May 2017: 221,625,168, year ended
30 November 2017: 221,857,082), excluding those shares held by The St. Modwen
Properties PLC Employee Share Trust.
(2) Percentage movements are in comparison to 30 November of the
previous financial year.
4. Joint ventures and associates
The Group's share of the results for the six months ended 31 May 2018 of its
joint ventures and associates is:
Six months ended 31 May 2018 (unaudited)
VSM Estates
Key Property Uxbridge VSM Estates Other joint
Investments (Group) (Holdings) VSM (NCGM) ventures and
Ltd Ltd Ltd Ltd associates Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Net rental income 2.7 - - - 0.1 2.8
Investment property disposal
losses (0.3) - (0.4) - - (0.7)
Investment property revaluation
(losses)/gains (2.6) (0.2) - (0.7) 0.1 (3.4)
Administrative expenses (0.1) - - - - (0.1)
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
(Loss)/profit before interest
and tax (0.3) (0.2) (0.4) (0.7) 0.2 (1.4)
Finance costs (0.8) (0.6) (0.1) (1.8) (0.1) (3.4)
Finance income 0.4 - 0.3 0.4 - 1.1
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
(Loss)/profit before tax (0.7) (0.8) (0.2) (2.1) 0.1 (3.7)
Taxation 0.1 0.3 - 0.4 - 0.8
(Loss)/profit for the period (0.6) (0.5) (0.2) (1.7) 0.1 (2.9)
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Six months ended 31 May 2017 (unaudited)
VSM Estates
Key Property Uxbridge VSM Estates Other joint
Investments (Group) (Holdings) VSM (NCGM) ventures and
Ltd Ltd Ltd Ltd associates Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Net rental income 2.6 (0.1) - - 0.1 2.6
Development profits 0.9 - - - - 0.9
Investment property disposal
gains/(losses) 1.1 - (0.1) - - 1.0
Investment property revaluation
gains/(losses) 3.7 (2.5) 0.3 9.4 - 10.9
Change in estimated cost to
establish a market in Nine Elms - - - (9.2) - (9.2)
Administrative expenses (0.1) - (0.1) - - (0.2)
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Profit/(loss) before interest
and tax 8.2 (2.6) 0.1 0.2 0.1 6.0
Finance costs (1.0) (1.0) (0.6) (5.5) (0.1) (8.2)
Finance income 0.3 - - - - 0.3
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Profit/(loss) before tax 7.5 (3.6) (0.5) (5.3) - (1.9)
Taxation (0.5) 0.8 - 2.0 - 2.3
Profit/(loss) for the period 7.0 (2.8) (0.5) (3.3) - 0.4
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Year ended 30 November 2017 (audited)
VSM Estates
Key Property Uxbridge VSM Estates Other joint
Investments (Group) (Holdings) VSM (NCGM) ventures and
Ltd Ltd Ltd Ltd associates Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Net rental income 4.9 (0.1) - - 0.2 5.0
Development profits 0.9 - - - - 0.9
Investment property disposal
gains/(losses) 0.1 - (0.2) 0.8 - 0.7
Investment property revaluation
gains/(losses) 9.5 (2.3) (1.5) 14.5 0.2 20.4
Change in estimated cost to
establish a market in Nine Elms - - - (24.6) - (24.6)
Administrative expenses (0.1) - (0.1) (0.1) - (0.3)
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Profit/(loss) before interest
and tax 15.3 (2.4) (1.8) (9.4) 0.4 2.1
Finance costs (2.0) (2.2) (1.9) (8.8) (0.1) (15.0)
Finance income 0.8 0.1 - 0.2 - 1.1
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
Profit/(loss) before tax 14.1 (4.5) (3.7) (18.0) 0.3 (11.8)
Taxation (0.9) 0.5 (0.5) 4.2 - 3.3
Profit/(loss) for the year 13.2 (4.0) (4.2) (13.8) 0.3 (8.5)
--------------------------------- ------------ ----------- ----------- ---------- ------------- ------
In the half year results, a series of commercial contracts with Persimmon is
referred to as the 'Persimmon joint venture'. This is not a statutory entity
and the results from these commercial contracts are not included in the figures
disclosed in this note. Revenue and profit from the Persimmon joint venture
are recognised in Group development profit on legal completion of housing unit
sales to third party customers.
5. Finance costs and finance income
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
GBPm GBPm GBPm
----------------------------------------------- --------- ----------- -----------
Interest costs
Interest payable on borrowings 8.2 10.1 20.8
Interest payable on finance lease obligations 0.4 1.0 2.1
Interest on pension scheme liabilities 0.4 0.4 0.8
Interest costs 9.0 11.5 23.7
----------------------------------------------- --------- ----------- -----------
Other finance costs
Amortisation of loan arrangement fees 4.4 1.1 1.8
Amortisation of discount on deferred payment
arrangements 0.1 0.3 0.3
Movement in fair value of convertible bond - 4.0 4.2
Movement in fair value of derivative financial
instruments 0.2 0.1 -
Other finance costs 4.7 5.5 6.3
----------------------------------------------- --------- ----------- -----------
Total finance costs 13.7 17.0 30.0
----------------------------------------------- --------- ----------- -----------
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
GBPm GBPm GBPm
----------------------------------------------- --------- ----------- -----------
Interest income
Interest receivable 0.6 5.1 8.1
Interest income on pension scheme assets 0.4 0.4 0.9
Interest income 1.0 5.5 9.0
----------------------------------------------- --------- ----------- -----------
Other finance income
Movement in fair value of convertible bond 0.6 - -
Movement in fair value of derivative financial
instruments - - 3.1
Other finance income 0.6 - 3.1
----------------------------------------------- --------- ----------- -----------
Total finance income 1.6 5.5 12.1
----------------------------------------------- --------- ----------- -----------
6. Earnings per share
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
Number
of shares Number of shares Number of shares
---------------------------------------------- ----------- ---------------- ----------------
Weighted number of shares in issue 221,906,003 221,613,476 221,697,244
Weighted number of diluted shares relating
to the convertible bond 19,177,294 - -
Weighted number of diluted shares relating
to share options 2,097,723 1,952,433 1,832,311
---------------------------------------------- ---------------- ----------------
Weighted number of shares for the purposes
of diluted earnings per share 243,181,020 223,565,909 223,529,555
---------------------------------------------- ----------- ---------------- ----------------
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
GBPm GBPm GBPm
---------------------------------------------- ----------- ---------------- ----------------
Earnings for the purposes of basic earnings
per share being net profit attributable to
owners of the Company 20.8 26.8 59.6
Effect of dilutive potential ordinary shares:
Interest on convertible bond (net of tax) 1.2 - -
Movement in fair value of the convertible
bond (0.6) - -
Earnings for the purposes of diluted earnings
per share 21.4 26.8 59.6
---------------------------------------------- ----------- ---------------- ----------------
Unaudited Unaudited Audited
31 May
2018 31 May 2017 30 Nov 2017
Pence Pence Pence
---------------------------------------------- ----------- ---------------- ----------------
Basic earnings per share 9.4 12.1 26.9
Diluted earnings per share 8.8 12.0 26.7
---------------------------------------------- ----------- ---------------- ----------------
Shares held by The St. Modwen Properties PLC Employee Share Trust are excluded
from the above calculation.
Note 3 sets out details of EPRA and adjusted EPRA
earnings per share.
7. Financial instruments held at fair
value
Derivative financial instruments and the convertible bond are externally valued
based on the present value of future cash flows estimated and discounted based
on the applicable yield curves derived from market expectations for future interest
rates at the balance sheet date. Where applicable, the value of early termination
or conversion options in favour of the issuing party are included in the external
valuations. The following table sets out the net assets and liabilities in respect
of financial instruments held at fair value through profit or loss:
Unaudited Unaudited Audited
31 May 31 May
2018 2017 30 Nov 2017
GBPm GBPm GBPm
----------------------------------------------- --------- ---------- --------- -----------
Derivative financial instrument assets Level 2 0.9 1.4 0.8
Derivative financial instrument liabilities Level 2 - (8.7) (4.8)
Convertible bond liability Level 2 (100.0) (100.4) (100.6)
Financial instruments held at fair value through
profit or loss (99.1) (107.7) (104.6)
---------------------------------------------------------- ---------- --------- -----------
Fair value hierarchy
Assets and liabilities that are measured subsequent to initial recognition at
fair value must be grouped into Levels 1 to 3 based on the degree to which the
fair value is observable.
-- Level 1 fair value measurements are those derived from quoted prices (unadjusted)
in active markets for identical assets.
-- Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from valuation techniques
that include inputs for the asset that are not based on observable market data
(unobservable inputs).
8. Other information
a. Taxation
The effective rate of Group tax for the period is 17.7% (six months ended 31
May 2017: 15.1%, year ended 30 November 2017: 12.9%).
As a property group, this rate benefits predominantly from capital allowances,
land remediation and other reliefs on certain property expenditure. Previously
this rate has benefited from certain investment gains not being taxable because
of indexation, but this has been phased out from 1 January 2018.
b. Dividends
The proposed interim dividend of 3.10 pence (six months ended 31 May 2017: 2.02
pence) per share was approved by a Committee of the Board on 2 July 2018 and
will amount to GBP6.9m (six months ended 31 May 2017: GBP4.5m).
c. Valuation of investment properties
Investment properties were valued at 31 May 2018, 30 November 2017 and 31 May
2017 by Cushman & Wakefield and Jones Lang LaSalle for New Covent Garden Market,
both Chartered Surveyors, in accordance with the Appraisal and Valuation Manual
of the Royal Institution of Chartered Surveyors, on the basis of market value.
Both Cushman & Wakefield and Jones Lang LaSalle are professionally qualified
independent external valuers and had appropriate recent experience in the relevant
location and category of the properties being valued.
d. Related party transactions
There have been no material new related party transactions in the six months
ended 31 May 2018 or any material changes to those related party transactions
described in the Group financial statements for the year ended 30 November 2017.
e. Pensions
The Group operates a UK based pension scheme, the St. Modwen Pension Scheme,
with both defined benefit and defined contribution sections. The defined benefit
section is closed to both new members and future accrual. The unrecognised surplus
arising on the fair value of assets over the actuarial value of liabilities
in the defined benefit section of the scheme was GBP4.2m (six months ended 31
May 2017: GBP3.8m, year ended 30 November 2017: GBP3.2m).
f. Non-current assets held for sale
The Group exchanged contracts during the six months ended 31 May 2018 for the
disposal of Wembley Central in London, which comprises an 118,000 sq ft shopping
centre and 86-bed Travelodge. This transaction has not completed at the date
of approval of these condensed financial statements but is expected to complete
during the second half of the year ending 30 November 2018. As the Group considers
that this transaction satisfied the requirements of IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations, the property has been classified
as an asset held for sale at 31 May 2018. No gain or loss has been recognised
on the value of this property during the six months ended 31 May 2018 as a result
of this treatment.
DIRECTORS' RESPONSIBILITY STATEMENT
for the six months ended 31 May 2018
We confirm that to the best of our
knowledge:
(a) the condensed Group financial statements have been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU; and
(b) the half year results include a fair review of the information required
by:
(i) 4.2.7R of the Disclosure and Transparency Rules, being an
indication
of important events that have occurred during the first
six months of
the financial year, and their impact on the condensed
Group financial
statements, and a description of the principal risks and
uncertainties
for the remaining six months of the financial year; and
(ii) 4.2.8R of the Disclosure and Transparency Rules, being
material related
parties transactions that have taken place in the first
six months of
the current financial year and any material changes in the
related parties
transactions described in the last Annual Report.
A list of the current directors of St. Modwen Properties PLC is maintained on
the Company's website at www.stmodwen.co.uk.
By order of the Board
Mark Allan Rob Hudson
Chief Executive Chief Financial Officer
2 July
2018
INDEPENDENT REVIEW REPORT TO ST. MODWEN PROPERTIES PLC
for the six months ended 31 May 2018
Conclusion
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 May
2018 which comprises the condensed Group income statement, the condensed Group
statement of comprehensive income, the condensed Group balance sheet, the condensed
Group statement of changes in equity, the condensed Group cash flow statement,
the condensed Group accounting policies and the related explanatory notes.
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 May 2018 is not prepared, in all material
respects, in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules (the DTR) of the UK's
Financial Conduct Authority (the UK FCA).
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 UK. 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. We read the other information
contained in the half-yearly financial report and consider whether it contains
any apparent misstatements or material inconsistencies with the information
in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) 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.
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 DTR of the UK FCA.
As disclosed in the condensed Group accounting policies, the annual financial
statements of the group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are responsible for
preparing the condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the EU.
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.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Bill Holland
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E15 5GL
2 July 2018
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR EAEXAEEKPEAF
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