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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Urban&civic Plc | LSE:UANC | London | Ordinary Share | GB00BKT04W07 | ORD 20P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 344.50 | 344.50 | 345.00 | 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
TIDMUANC
RNS Number : 5355A
Urban&Civic plc
30 May 2019
Urban&Civic plc
("Urban&Civic", the "Company" or the "Group")
RESULTS FOR THE SIX MONTHS TO 31 MARCH 2019
DELIVERING ON THE MASTER DEVELOPER MODEL
Urban&Civic plc (LSE: UANC) announces its unaudited results for the six months to 31 March 2019.
Hot Features
Premium
Six months to Year ended Six months
to
31 March 30 September 31 March
2019 2018 2018
-------------------------------------- ------------- -----------
EPRA NAV (GBPm) 497.3 481.2 458.8
EPRA NAV per share (p) 340.6 331.8 316.0
Profit before tax (GBPm) 5.1 22.3 10.1
Residential plot completions 365 445 174
Total shareholder return (%) (8.5) 19.1 19.4
Dividend per share (p) 1.4 3.5 1.3
------------------------------ ------ ------------- -----------
Financial highlights
-- EPRA net asset value up 3.3 per cent at GBP497.3 million (30 September
2018: GBP481.2 million).
-- EPRA net assets 340.6p per share: up 2.7 per cent from 30 September
2018 and 7.8 per cent, year on year.
-- Profit before tax for the six months to 31 March 2019 GBP5.1 million
(GBP10.1 million to 31 March 2018),
-- 365 residential plots completions at four strategic land sites in
delivery (against annual target of 635 plots).
Further 335 sales expected at Europa Way in the second half, taking
full year target to 970 plots.
-- Large site discount represented a further GBP203 million at 31 March
2019, equivalent to 139.0p per share (30 September 2018: 145.0p per
share).
-- 31 March 2019 EPRA NAV + large site discount = 479.6p per share (30
September 2018: 476.8p per share)
-- Total shareholder return down 8.5 per cent on a share price of 276p
(close of business 28th May 2019; 326p).
-- Interim dividend 1.4p per share, up 7.7 per cent year on year to recognise
maintaining progress.
Operational highlights
-- Housebuilders increasingly looking to outsource front end project
planning and site servicing challenges to preserve ROCE, leaving clear
space for Master Developer.
-- Planning system has encouraged move to larger projects, particularly
in SE England, where barriers to entry are highest.
-- Urban&Civic has interests in more than 32,000 approved or allocated
residential plots on 7 strategic project sites, with 2 further projects
under promotion. All are on or outside the M25 with good demographics
and within commuting distance of London.
-- Licence model establishes alignment with housebuilders on sales but
with lower cost pressures.
-- Result is sharply escalating receipts profile; annual contracted minimums
from housebuilders increased more than tenfold over 3 years to current
GBP26.8 million.
-- Resolution to Grant at Waterbeach, 3 miles north of Cambridge, represents
a significant post balance sheet addition.
Urban&Civic's largest single application to date and in the most supply
constrained location.
-- Urban&Civic transferred to the Premium Listing segment of the London
Stock Exchange on 30 April 2019.
-- Platform reputation as preeminent Master Developer is enabling tightening
selection criteria for new projects.
Commenting on the results, Nigel Hugill, Chief Executive, said:
"This is a market in which housebuilders are going well and estate agents badly. Urban&Civic creates value by obtaining planning consents and delivering new environments in which housebuilders want to build and new homeowners want to live. Demand in our identified locations is driven by simple demographics. Projects like ours disproportionately attract first time buyers and growing families in search of excellent schools; precisely the groups with the highest current tendency to move. We expect to exceed previous sales guidance for the current year."
For further information, please contact:
Urban&Civic plc +44 (0)20 7509 5555 Nigel Hugill/David Wood FTI Consulting +44 (0)20 3727 1000 Giles Barrie/Dido Laurimore/Ellie urban&civic@fticonsulting.com Sweeney
A presentation for analysts and investors will be held at 09.30 am 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 1000 or urban&civic@fticonsulting.com. A live webcast of the presentation will be available at www.urbanandcivic.com or via the following link http://webcasting.brrmedia.co.uk/broadcast/5c9a0e21ec650d01c34f4309 and presentation slides will also be available to download.
Alternatively, details for the live dial-in facility are as follows:
Participants: Tel: +44 (0)330 336 9125 Passcode: 1327706
Chief Executive's statement
Summary
Urban&Civic continues to gain projects and build value. The Group has made further progress against stated KPIs on our strategic projects. Total number of plot sales to September 2019 is expected to exceed the November 2018 guidance of 970 for the year, with maintaining housebuilder enthusiasm for new Urban&Civic licences (if anything, demand has lifted in a flatlining land market). The recent Resolution to Grant at Waterbeach constitutes an important further step forward, as does the addition of a prospective new settlement adjoining the M25 at Tyttenhanger in Hertfordshire, to take the number of strategic projects to nine.
All achieved in conjunction with strong realisations in Catesby.
Introduction and commentary
Starting with our preferred measure, EPRA net asset value as at 31 March 2019 reached GBP497.3 million. EPRA net asset value per share was 2.7 per cent per share over 30 September 2018, or a year on year rise from 31 March 2018 of 7.8 per cent. The appraised increases ran significantly above national land indices reflecting the benefits of our licence model.
Profit before tax to 31 March 2019 at GBP5.1 million on revenues of GBP30.9 million were both lower than last year but the residential licence contribution continues to grow. The 2018 interim figures (pre-tax profit GBP10.1 million on revenues of GBP84.0 million) were inflated by the Stansted Hilton sale, as precursor to a switch in October 2017 into the investment in Priors Hall in Northamptonshire. Purchased at a cost of GBP40.5 million and now valued at GBP59.1 million, Priors Hall has been the strongest performing Urban&Civic strategic asset in the period since acquisition. Stripping the Stansted sale out of the previous interim figures, leaves comparables of pre-tax profits of GBP1.7 million in six months to March 2018 and revenues of GBP35.5 million.
Resolution to Grant at Waterbeach to the immediate north of Cambridge obtained on 13th May 2019 represents a significant post balance sheet event that will be recognised in the full year accounts to 30 September 2019. The determined application is for 6,500 new homes on 716 brownfield acres and in a highly supply constrained location. The land remains majority owned, ultimately by the Ministry of Defence, subject to a participation in favour of Urban&Civic.
The application at Manydown, on the outskirts of Basingstoke, is also scheduled to come to planning committee before the summer and with a recommendation to approve. On that basis and by 30 September 2019, Group strategic projects are expected to aggregate 32,000 approved plots with a sharply escalating monetisation profile. 25 licence arrangements over 3,300 plots are contracted currently with a further (mostly smaller) 11 under negotiation.
Large site discount
Discount calculated at 139.0p per share, so that the add back was (139.0p+340.6p) = 479.6p per share at 31 March 2019, as compared with (145.0p+331.8p) = 476.8p at 30 September 2018.
The calculation is made only on consented strategic sites, once infrastructure spend is commenced, and represents the difference between the current open market value of a typical retail parcel of 150 housing plots as appraised by CBRE and the discount for bulk or wholesale disposal as carried in the statutory accounts. The comparison between the current open market retail valuation of standard parcels and the wholesale figures included in our reported EPRA NAV amounted to an estimated GBP203 million, or 41 per cent of EPRA NAV at 31 March 2019. This represents a store of future value. On flat house price and cost assumptions, the discount will unwind automatically through the profit and loss account with successive future sales. The reduction over the past six months reflects there being no major new consents within the strategic portfolio during the period under review.
Dividend
The Board has approved the payment of an interim dividend of 1.4p per share. The dividend will be payable on 12 July 2019 to shareholders on the register on 7 June 2019. As with last year, the payment represents a 7.7 per cent increase over twelve months previous. The growth profile remains upward and the payment is in line with the increase in EPRA NAV per share over the same period. A scrip dividend alternative will be made available, for which I shall be electing. Investors choosing to participate in the dividend reinvestment scheme will need to make their election by 21 June 2019.
Strategic site plot carrying values
31 March 2019 carrying values on unserviced plots amounted to GBP28,800 at Alconbury; GBP24,900 at Wintringham, GBP20,300 at Rugby; GBP12,500 at Priors Hall Corby and GBP6,700 at Newark. In all instances, the March 2019 figures remain below half of current realised sales values having accounted for infrastructure spend and Section 106 costs. The valuations were appraised on the basis of assumed average house prices of GBP300 per sq. ft. at Alconbury and Wintringham, GBP280 per sq.ft. at Rugby; GBP235 per sq.ft. at Priors Hall Corby and GBP215 per sq.ft. at Newark. All other strategic land holdings were valued at cost at 31 March 2019, including Waterbeach.
Trading conditions
The consensus of recent housebuilder updates is that demand continues to hold up outside London, albeit with only localised house price pressure, which accords directly with house buyer evidence from our strategic sites. Sales rates are averaging around 40 per outlet per year amongst the larger builders. Note also that the average national increase in annual output amongst our core housebuilder customers is over 7 per cent, as compared with 2.1 per cent reported by the three majors. Accordingly, the current expectation is that we will exceed the previous guidance of 635 sales on strategic sites for the year to 30 September 2019 (itself a 40+ per cent increase over the previous year), with a further 335 sales on the infrastructured Catesby site at Europa Way at Warwick. Prices across our strategic sites are broadly flat with little upward movement, other than at Priors Hall where the early benefits of the more rigorous Urban&Civic approach continue to be recognised. The tone of house price sales at Priors Hall has risen approximately 10 per cent over the 18 months since acquisition.
The same housebuilding commentaries that describe maintaining demand warn that Returns on Capital Employed ("ROCE") are under some pressure with costs going up faster than prices nationally. The difference for Urban&Civic is that, whilst the licence model means that our income on strategic projects is derived from the same source as housebuilders (typically, we receive around one third of realised house sales prices), the cost base and any concomitant pressures, is quite different. Housebuilders have spoken recently of annual build cost pressures running at up to 5 per cent. The equivalent on civils infrastructure spend for us is more like 1-2 per cent. The contracting personnel are also predominantly domestic, so there is not the same Brexit exposure.
When increasing build costs and static house prices threaten housebuilder ROCEs, the options are quite limited. They can look to build faster; pay less for land or contract with Urban&Civic. The success rate on speculative residential appeals peaked in Q4 2016, which is likely to impact on land availability in the medium term, especially in supply constrained locations. Meanwhile, our Master Developer approach is enabling housebuilders to outsource planning and front end timing risks precisely as those become more pressing under the capital lite, rapid circulation, high dividend payout model favoured by the listed sector. The arrangements work for us due to our longer time horizons for sustained value creation (the minimum commitments assumed by the housebuilders means that we are 3.6 years forward sold on contracted plots); inherently lower land entry costs; reduced inflationary pressures on infrastructure spend and access to funding from Homes England.
Increasing institutional investment into a new asset class
Homes England confirmed as part of the Premium Listing exercise that their current intention was to make additional facilities available on new Urban&Civic strategic projects, subject to existing assessments and credit evaluations being met. There are also signs that as the new asset class of strategic land holdings becomes established, the nature of core holding investors is changing. No question that the evidence is slowly improving and, importantly, the nature of purchasers is moving away from private equity to long dated investing institutions.
The purchase by Legal & General of a 2,750 unit scheme with outline consent at North Horsham in Sussex from Liberty Property Trust in February 2019 represents a case in point. The second largest investment management business in Europe made specific reference to its entrance into the "underserved" market area of Master Development and to the suitability of patient capital for strategic projects. Ultimately this ought to go to lower discount rates. Early mover advantage combined with demonstrable delivery has enabled the Group to accumulate nine projects, with more in the pipeline. The scarcity of consents and the long lead times are such that it will not be easy for others to catch up, irrespective of the extent of available resources.
Tyttenhanger
The Tyttenhanger Estate, over which we signed conditional contracts in March, constitutes 2,000 acres of land predominantly to the immediate north of junction 22 to the M25 approximately 18 miles from Marble Arch in Central London and equidistant between St Albans and Potters Bar. The Development Management agreement provides for Urban&Civic taking responsibility for planning and delivery, including site servicing costs, receiving a substantial minority participation. The acquisition reflects an increasing emphasis on identifying new projects requiring the stewardship of a Master Developer in heavily supply constrained locations. Tyttenhanger exhibits all the core geographic and demographic criteria that we look for in new strategic projects; prospectively strong transport connectivity, high employment, consistent population growth and lower house prices relative to the surrounding areas. To date our rule has been outside the M25 and within 100 miles of London. My expectation is that second parameter may tighten. In the process, we will promote some releases from the Green Belt, such as Tyttenhanger but only where councils have no viable alternative. The Government identified housing need for Hertsmere is 714 houses per year in a Borough that is 79 per cent designated Green Belt.
Priors Hall
Priors Hall straddles Corby Borough and East Northamptonshire District and was already in the process of development on acquisition in October 2017. Urban&Civic purchased 3,656 uncontracted plots and the benefit of overage receipts from earlier sales at a net actual purchase consideration of GBP7,700 per plot. Total homes sold to date (including pre Urban&Civic acquisition) approach 1,200, all on land in Corby Borough. The values in East Northamptonshire are likely to be higher. A revised planning application for a total of 5,316 new homes (including those built to date) is about to be submitted with a larger weighting of houses in East Northamptonshire.
Waterbeach
Resolution to Grant consent, subject inter alia to our entering into the associated Section 106 agreement, was granted on 13 May, 2019 to a 6,500 home mixed-use development for which application was submitted jointly by Urban&Civic and the Secretary of State for Defence in February 2017. The former Barracks site is 3 miles north of the Cambridge Science and Business Parks, in a location of exceptionally high, employment driven demand and heavily constrained supply. The Royal Engineers left behind a fully mature 23 acre lake, which will be the centrepiece around which first construction is orientated. Preparatory works have commenced and we are aiming to sign the Section 106 agreement with a full start on site prior to September.
Catesby
Good first half profit performance. Reported six month pre tax profit of GBP2.1 million after overheads. EPRA valuations in accordance with accounting practice amounted to another GBP4.0 million, the majority of which arose from a sale that has since completed. The aggregated net after tax contribution to EPRA NAV from Catesby was GBP5.7 million. The uplift on sale will give rise to an EPRA reversal and likely Catesby pre-tax profit of the order of GBP4.8 million for the full year.
Civic Living
First occupation of a home built by our fledgling Civic Living, backed by Homes England as a new entrant into the market, has taken place at Alconbury.
Premium Listing
Urban&Civic shares transferred to the Premium Listing on the official list of the Financial Conduct Authority in accordance with Rule 5.4A of the Listing Rules on 30 April 2019. The Company's stock should be included in the relevant Stock Exchange indices from June 2019 onwards.
Outlook
This is a market in which housebuilders are going well and estate agents badly. There are good grounds for thinking that the current equilibrium of sufficient demand and anaemic prices will maintain. First time buyers and new housing both constitute an increasing proportion of lower transaction levels, traditionally a sign of price stability. New housing starts in England over the past 2 years have been running at about 16 per cent of total transactions, a full 20 per cent up on the previous 10 year average. First time buyers now almost certainly account for over 1/3 of new house purchases. Projects like ours disproportionately attract first time buyers and growing families; precisely the groups with the highest current tendency to move. Affordability outside London is already better than long-term averages and will be improved further by a lack of price inflation.
As we report in the immediate aftermath of European elections that few wanted, political uncertainties cannot be disregarded. Causality runs both ways between house prices and the macroeconomy. Even then, the contracted annual minimums in the Urban&Civic model provide unusual downside income protection. The extent of that protection is increasing. Three years ago our first licence minimum was 57 per cent of then projected sales value. The equivalent written into our most recent licences is 93 per cent. Expressed as contracted revenues, the minimum entitlement on existing licence arrangements pro rata to percentage holdings was GBP1.7 million at 31 March 2016 and now aggregates GBP26.8 million per year. From here, our upside sensitivity is much more to sales rates than to prices.
The Urban&Civic business is founded on simple demographics. It is not realistic to meet housing demand in south east England without the incorporation of more large sites. The planning presumptions have moved towards large sites. The barriers to entry as Master Developer and to project enlargement are extremely high. We offer ROCE protection to our housebuilding customers when that is coming under pressure elsewhere. Those customers, typically one level below the largest, are increasing annual output at 3.5x the rate of the UK's biggest housebuilders. Ours is a singularly resilient model that provides a robust platform on which to build.
Nigel Hugill
Chief Executive
29 May 2019
Financial review
Introduction
Over the last six months there have been 365 residential plot completions at four of the Group's nine strategic land sites, generating GBP18.3 million of cash for the Group. These sales, representing 57.5 per cent of the 635 plot annual target, together with GBP95.9 million of contracted minimum forward sales under the Group's licencing arrangements and Catesby planning consents, have helped underpin a 3.3 per cent growth in EPRA Net Asset Value.
All consented strategic land sites, other than Wintringham which has just commenced infrastructure works and Waterbeach which received a resolution to grant consent after the period-end, are now witnessing house completions.
Gross profits, including the Group's share of joint ventures on a pro-rata basis are slightly up on last year and have all been derived through residential and Catesby sales rather than the historic commercial property disposals.
Key performance indicators
The Group's key performance indicators for the six months to 31 March 2019 (set out in the table below) remain consistent with those detailed in the Strategic Report section of the 2018 Annual Report and Accounts.
Six months Six months Year ended Annual Six monthly
to 31 March to 31 March 30 September increase/ increase/
2019 2018 2018 (decrease) (decrease)
----------------------------- ------------- ------------- -------------- ------------ ------------
EPRA NAV GBP497.3m GBP458.8m GBP481.2m 8.4% 3.3%
EPRA NAV per share 340.6p 316.0p 331.8p 7.8% 2.7%
EPRA NNNAV GBP470.8m GBP439.0m GBP458.1m 7.2% 2.8%
EPRA NNNAV per share 322.4p 302.4p 315.9p 6.6% 2.1%
Total shareholder return (8.5)% 19.4% 19.1% (27.9)% (27.6)%
----------------------------- ------------- ------------- -------------- ------------ ------------
Gearing - EPRA NAV basis 18.2% 19.5% 16.3% (1.3)% 1.9%
Look-through gearing - EPRA
NAV basis 24.6% 22.9% 20.6% 1.7% 4.0%
Plot completions(1) 365 plots 174 plots 445 plots 109.8% n/a
Cash flow generation from GBP18.3m GBP9.5m GBP21.0m 92.6% n/a
plot completions(2)
Large site discount per
share(3) 139p 88p 145p 58.0% (4.1)%
----------------------------- ------------- ------------- -------------- ------------ ------------
1. Includes 60 plots at Alconbury (six months ended 31 March 2018: 49; year ended 30 September 2018: 100); 62 at Rugby (six months to 31 March 2018: 10; year ended 30 September 2018: 78); 63 at Newark (six months to 31 March 2018: nil; year ended 30 September 2018: 37); 47 plots from new contracts at Priors Hall and 133 plots from pre-acquisition contracts at Priors Hall (acquisition to 31 March 2018: 115; acquisition to 30 September 2018: 230).
2. Represents Urban&Civic's (U&C's) share of cash generated by plot completions.
3. Large site discount represents the difference between the unserviced land values ascribed by CBRE strategic site valuations (which take into account site scale and build-out duration among other matters) and the current retail prices being achieved on smaller parcel sales.
We maintain that total shareholder return and EPRA NAV metrics remain appropriate principal measures with which to assess business performance, and in particular value growth, particularly where residential plot sales at the Group's strategic land sites continue to grow. To remind the reader, EPRA balance sheet measures record the net asset value attributable to equity shareholders, adjusted for the revaluation of trading properties with tax (EPRA triple net asset value) or without tax (EPRA net asset value). The basis for selecting the other KPI's is set out in the 2018 Annual Report.
Net Asset Value - EPRA and IFRS
I have presented below a non-statutory analysis explaining the movements in EPRA NAV in the last six months and comparable periods.
Six months to Six months Year ended
31 March 2019 to 30 September
31 March 2018 2018
--------------------------------------------- ----------------- ----------------
Joint
venture Pence Pence
Group and associates Total Pence Total per Total per
GBPm GBPm GBPm per share GBPm share GBPm share
--------------------------- ------ ---------------- ------ ----------- -------- ------- ------- -------
Revaluation of
investment properties
and receivable
and write downs
of trading properties(1) 1.6 - 1.6 1.0 5.6 3.9 9.1 6.3
Profit on trading
and investment
property sales(2) 4.3 5.1 9.4 6.5 11.6 8.0 27.6 19.0
Rental and other
income 3.1 - 3.1 2.1 2.0 1.4 5.5 4.0
Administrative
expenses (8.8) - (8.8) (6.0) (7.1) (4.9) (18.8) (13.0)
Other income statement
movements (1.6) 0.1 (1.5) (1.0) (3.2) (2.2) (4.6) (3.2)
--------------------------- ------ ---------------- ------ ----------- -------- ------- ------- -------
Total comprehensive
income movement (1.4) 5.2 3.8 2.6 8.9 6.2 18.8 13.1
Dividends paid (3.2) - (3.2) (2.2) (2.6) (1.8) (4.5) (3.1)
Other equity movements 2.3 - 2.3 1.5 2.0 1.4 2.9 2.0
Effect of IFRS
15 adoption(2) 2.4 0.8 3.2 2.2 - - - -
--------------------------- ------ ---------------- ------ ----------- -------- ------- ------- -------
IFRS movement 0.1 6.0 6.1 4.1 8.3 5.8 17.2 12.0
Revaluation of
retained trading
properties(1) 14.4 0.2 14.6 10.0 21.7 14.9 35.1 24.2
Release of trading
property revaluations
on disposals(2) (2.7) (2.7) (1.8) (10.8) (7.4) (11.6) (8.0)
Deferred taxation 1.3 - 1.3 0.9 0.3 0.2 1.2 0.8
Effect of IFRS
15 adoption(1) (2.4) (0.8) (3.2) (2.2) - - - -
--------------------------- ------ ---------------- ------ ----------- -------- ------- ------- -------
EPRA movement 10.7 5.4 16.1 11.0 19.5 13.5 41.9 29.0
--------------------------- ------ ---------------- ------ ----------- -------- ------- ------- -------
Effect of share
issues and dilutive
options - (2.2) - (1.9) - (1.6)
--------------------------- ------ ---------------- ------ ----------- -------- ------- ------- -------
Movement in the
period 16.1 8.8 19.5 11.6 41.9 27.4
--------------------------- ------ ---------------- ------ ----------- -------- ------- ------- -------
EPRA NAV at start
of period 481.2 331.8 439.3 304.4 439.3 304.4
EPRA NAV at end
of period 497.3 340.6 458.8 316.0 481.2 331.8 --------------------------- ------ ---------------- ------ ----------- -------- ------- ------- -------
1. Classified as property revaluations for the purposes of the below EPRA NAV growth commentary.
2. Classified as profit on property sales for the purposes of the below EPRA NAV growth commentary.
Following the adoption of IFRS 15 'Revenue from Contracts with Customers' overages as well as minimums are now recognised ahead of house exchanges or house completions to the extent they are not expected to reverse in the future. The GBP3.2 million total set out in the table above represents the estimated additional discounted overages, net of tax, receivable up to 30 September 2018 and is accounted for as an opening reserve adjustment.
You will also note from the table that property revaluations contributed 8.8p(1) to the Group's EPRA NAV growth of 8.8p, while profits on property sales contributed a further 6.9p(2) . Overheads, dividends and the dilutive effect of share options net 10.4p from these gains.
A more detailed reconciliation between IFRS and EPRA NAV is provided in note 18.
Total shareholder return
Urban&Civic's share price fell 28.0p or 9.2 per cent over the period (from 304.0p at 30 September 2018 to 276.0p at 1 April 2019) which, combined with the payment of a 2.2p final dividend, has resulted in total shareholder return falling by 8.5 per cent. This compares with a 0.6 per cent reduction in the FTSE 350 Real Estate Index and a 3.6 per cent fall in the FTSE All Share Index over the same period and also follows the July 2018 placing of 40.4 million shares held by GIP U&C S.À R.L (representing 27.9 per cent of issued share capital).
Subsequent to the period-end Urban&Civic's share price has rallied and at the close of business on 28th May 2019 reached 326.0p (equivalent to a total shareholder return of 8.0 per cent since 30 September 2018).
Consolidated statement of comprehensive income
Gross profits, including the Group's share of joint ventures, have improved slightly despite not making any commercial asset disposals in the last six months (which have been a feature of periods past) and the Group's profit before tax was down GBP5.0 million over the comparative period. Given the compensating movement in gross profit this is predominantly as a result of lower property revaluations going through the income statement, following the reclassification of the majority of the Group's property interests into trading stock in this and prior periods.
I have provided further explanation of the income statement movements below.
Six months to Six months to Year ended
31 March 2019 31 March 2018 30 September 2018
----------------------------- ------------------------------ --------------------------------
Joint Joint Joint
venture venture venture
and and and
Group associates Total Group associates Total Group associates Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ------ ------------- ------ ------ -------------- ------ ------- -------------- -------
Revenue 30.9 16.4 47.3 84.0 1.8 85.8 150.4 8.8 159.2
--------------------- ------ ------------- ------ ------ -------------- ------ ------- -------------- -------
Profit on trading
property sales(1) 4.3 5.1 9.4 11.3 0.3 11.6 24.3 2.1 26.4
Rental and other
property profits 2.2 - 2.2 1.1 - 1.1 3.8 - 3.8
Hotel operating
profit 0.9 - 0.9 0.9 - 0.9 1.8 - 1.8
Write down of
trading
properties - - - (1.7) - (1.7) (2.6) - (2.6)
--------------------- ------ ------------- ------ ------ -------------- ------ ------- -------------- -------
Gross profit 7.4 5.1 12.5 11.6 0.3 11.9 27.3 2.1 29.4
Administrative
expenses
(net of capitalised
costs) (8.8) - (8.8) (7.1) - (7.1) (18.8) - (18.8)
Profit on investment
property sales - - - - - - 1.2 - 1.2
Surplus on
revaluation
of investment
properties
and receivables 1.6 - 1.6 5.6 - 5.6 11.7 - 11.7
Share of post-tax
profit from joint
ventures 5.2 (5.2) - 0.8 (0.8) - 2.1 (2.1) -
Other (0.3) 0.1 (0.2) (0.8) 0.5 (0.3) (1.2) - (1.2)
--------------------- ------ ------------- ------ ------ -------------- ------ ------- -------------- -------
Profit before tax 5.1 - 5.1 10.1 - 10.1 22.3 - 22.3
--------------------- ------ ------------- ------ ------ -------------- ------ ------- -------------- -------
1. Including residential property sales and revenue on construction contracts as disclosed in note 2.
Gross profit
Gross profit is broadly in line with last year at GBP12.5 million (including GBP5.1 million generated by joint ventures); predominantly due to increased trading property profits (up GBP6.7 million) and significantly lower property write-downs (down GBP1.7 million) compensating for reduced commercial asset disposal profits (down GBP8.9 million reflecting last year's sale of the Stansted Hilton Hotel development and Skelton Retail Park).
Profits from trading property sales of GBP9.4 million include residential profits at Alconbury, Newark and Priors Hall (GBP1.1 million), GBP5.1 million in respect of Urban&Civic's share of residential profits at Rugby and GBP3.2 million of Catesby land promotion profits.
Residential profits at Alconbury, Newark and Priors Hall comprise GBP0.8 million generated by the sale of 16 Hopkins homes and pre-completion profit recognition of discounted overages of GBP0.3 million across all three sites. Rugby's profits include Urban&Civic's share of the contractual minimums and discounted overages following the completion of the sale of a 248 plot parcel to Redrow (GBP4.1 million) and GBP1.0 million of other profits from Davidsons Homes, Morris Homes and Crest Nicholson agreements.
I have provided a breakdown of plot completions by site, with comparatives, as a footnote to the KPI table above. You should note that 133 completions at Priors Hall in the period relate to existing contracts that were in place when the Group purchased the site in October 2017 and therefore receipts have been credited against the acquisition trade receivable on the balance sheet as opposed to being recognised through the income statement.
The terms minimums, overages and licences have been defined within the glossary on the last page of these interim statements.
Administrative expenses
Gross administrative costs have increased GBP1.0 million to GBP10.9 million in the six months to 31 March 2019, largely as a result of increased share based payment charges and one off costs associated with the Group's move to the Premium Listing segment of the London Stock Exchange.
We continue to capitalise overheads associated with development activity although in the six months to 31 March 2019 the proportion capitalised fell to around 20 per cent compared to 28 per cent last year thereby increasing net overheads by GBP1.6 million.
Surplus on revaluation of investment properties
We expect, in the near future, to submit a residential-led planning application for the Alconbury expansion land, better known as Grange Farm and therefore, and on commencement of early development works, we have reclassified this property into trading stock on 1 October 2018.
Following this reclassification, and as a result of prior period reclassifications and disposals, the Group's only investment properties now comprise commercial buildings and development land at Alconbury and a proportion of the Group's interest in Waterbeach, which could deliver both commercial buildings and residential rental properties in the future. Consequently there are very few property revaluations accounted for through the income statement under International Financial Reporting Standards.
In order to help the reader understand the value of the Group's total property portfolio we continue to publish EPRA metrics which allow for the non-statutory revaluation of trading properties. The table below sets out not only the investment property valuation movements that are accounted for within the primary statements, but also details the trading uplifts recognised by EPRA measures.
Properties Trade
Property porfolio Investment Trading within and other
GBPm properties properties PPE receivables Total
----------------------------------- ------------ ------------ ----------- ------------- -------
Valuation at 1 October 2018 86.9 475.6 3.7 42.9 609.1
----------------------------------- ------------ ------------ ----------- ------------- -------
Less: EPRA adjustment (trading
properties) - 85.3 - - 85.3
----------------------------------- ------------ ------------ ----------- ------------- -------
Carrying value in financial
statements at
1 October 2018 - including
joint ventures and associates 86.9 390.3 3.7 42.9 523.8
----------------------------------- ------------ ------------ ----------- ------------- -------
Less: joint ventures and
associates - 116.5 - 11.6 128.1
----------------------------------- ------------ ------------ ----------- ------------- -------
Carrying value in financial
statements at
1 October 2018- wholly
owned 86.9 273.8 3.7 31.3 395.7
Impact of adopting IFRS
15 - - - 3.9 3.9
----------------------------------- ------------ ------------ ----------- ------------- -------
Carrying value in financial
statements at
1 October 2018- wholly
owned as restated 86.9 273.8 3.7 35.2 399.6
Capital expenditure (including
capitalised overheads) 0.5 20.2 - - 20.7
Transfer to trading properties (41.9) 41.9 - - -
Disposal/depreciation - (15.1) (0.3) (5.9) (21.3)
Revaluation movements (investment
properties) 1.0 - - - 1.0
----------------------------------- ------------ ------------ ----------- ------------- -------
Carrying value in financial
statements at 31 March 2019
- wholly owned 46.5 320.8 3.4 29.3 400.0
Add: joint ventures and
associates - 129.3 - 21.4 150.7
----------------------------------- ------------ ------------ ----------- ------------- -------
Carrying value in financial
statements at
31 March 2019 - including
joint ventures and associates 46.5 450.1 3.4 50.7 550.7
----------------------------------- ------------ ------------ ----------- ------------- -------
Add: EPRA adjustment (trading
properties) - 93.5 - - 93.5
----------------------------------- ------------ ------------ ----------- ------------- -------
Valuation at 31 March 2019 46.5 543.6 3.4 50.7 644.2
----------------------------------- ------------ ------------ ----------- ------------- -------
Memo: movement in EPRA adjustment
(trading properties) - 8.2 - - 8.2
----------------------------------- ------------ ------------ ----------- ------------- -------
Comprising:
----------------------------------- ------------ ------------ ----------- ------------- -------
Effect of IFRS 15 adoption - (3.9) - - (3.9)
EPRA adjustment on sites
sold - (2.6) - - (2.6)
EPRA adjustment on retained
properties - 14.7 - - 14.7
----------------------------------- ------------ ------------ ----------- ------------- -------
From the above table you can see that investment properties generated GBP1.0 million of revaluation surpluses in the period with a further GBP14.7 million derived from retained trading properties at the EPRA level. Against this GBP6.5 million of EPRA adjustments have been reversed as properties have been disposed of or profits recognised.
Of the total GBP15.7 million uplift, Alconbury accounted for GBP6.7 million, Priors Hall generated GBP3.1 million and Catesby planning consents yielded a further GBP6.6 million.
The revaluation movements in respect of Alconbury and Priors Hall reflect on-site progress, both in terms of sales and infrastructure works and Catesby uplifts are derived from changes in planning status of a number of its promotion sites. Alconbury remains the Group's most significant property asset comprising 44 per cent of the total property portfolio value.
The Directors have once again valued Waterbeach interests at cost at 31 March 2019 on the basis that the resolution to grant planning consent for 6,500 new homes was not gained until after that date (see post balance sheet events for further details).
Taxation expense
The tax charge as a proportion of profits has increased over recent reporting periods as historic tax losses have been utilised and changes in legislation have restricted how much of these historic tax losses can be utilised in any one period. In the six months to 31 March 2019 the Group's tax charge of GBP1.3 million amounted to 24.5 per cent of profit before tax, higher than the 19 per cent UK corporation tax rate; predominantly due to share based payments being non-deductible until settlement. Taxable profits relate in most part to residential property sales and Catesby disposals.
Dividend
Given the Group's continuing sales and development progress at its strategic land sites the Board has decided to maintain a progressive dividend by approving the payment of a 1.4p interim dividend. This represents an annualised increase of 7.7 per cent over last year and the dividend will be paid on 12 July 2019 to those shareholders on the register at 7 June 2019. Investors choosing to participate in the dividend reinvestment scheme will need to make their election by 21 June 2019.
The Group paid its 2018 final dividend of 2.2p per share (GBP3.2 million) in February 2019.
Consolidated balance sheet
Overview
At 31 March At 31 March At 30 September
2019 2018 2018
-------------------------------- --------------------------------- --------------------------------
Joint Joint Joint
venture venture venture
and and and
Group associates Total Group associates Total Group associates Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------- ------------ -------- -------- ------------- -------- ------- ------------- --------
Investment
properties 46.5 - 46.5 95.7 - 95.7 86.9 - 86.9
Trading
properties 320.8 129.3 450.1 289.6 85.5 375.1 273.8 116.5 390.3
Properties
within
PPE 3.4 - 3.4 3.9 - 3.9 3.7 - 3.7
--------------- -------- ------------ -------- -------- ------------- -------- ------- ------------- --------
Properties(1) 370.7 129.3 500.0 389.2 85.5 474.7 364.4 116.5 480.9
Investment in
joint
ventures and
associates 113.6 (113.6) - 81.9 (81.9) - 103.4 (103.4) -
Trade and
other
receivables
-------- ------------ -------- -------- ------------- -------- ------- ------------- --------
Non-current
property(1) 20.0 18.9 38.9 22.9 8.7 31.6 20.4 11.6 32.0
Current
property(1) 9.3 2.5 11.8 8.0 2.2 10.2 10.9 - 10.9
Current -
other 14.3 12.6 26.9 18.9 1.7 20.6 18.1 10.0 28.1
-------- ------------ -------- -------- ------------- -------- ------- ------------- --------
43.6 34.0 77.6 49.8 12.6 62.4 49.4 21.6 71.0
Cash 28.2 3.5 31.7 14.7 1.6 16.3 16.6 0.5 17.1
Borrowings (118.6) (35.5) (154.1) (104.3) (17.2) (121.5) (94.9) (21.3) (116.2)
Deferred tax
liability
(net) (4.9) - (4.9) (2.6) - (2.6) (4.1) - (4.1) Other net liabilities (37.5) (17.7) (55.2) (48.5) (0.6) (49.1) (45.8) (13.9) (59.7) --------------- -------- ------------ -------- -------- ------------- -------- ------- ------------- -------- Net assets 395.1 - 395.1 380.2 - 380.2 389.0 - 389.0 EPRA adjustments - property(1) 76.2 17.3 93.5 56.0 16.7 72.7 67.4 17.9 85.3 EPRA adjustments - deferred tax 8.7 - 8.7 5.9 - 5.9 6.9 - 6.9 --------------- -------- ------------ -------- -------- ------------- -------- ------- ------------- -------- EPRA net assets 480.0 17.3 497.3 442.1 16.7 458.8 463.3 17.9 481.2 --------------- -------- ------------ -------- -------- ------------- -------- ------- ------------- --------
1. Total property related interests: GBP644.2 million (31 March 2018: GBP589.2 million; 30 September 2018: GBP609.1 million).
Non-current assets
Investment properties
Investment properties at 31 March 2019 amounted to GBP46.5 million and comprised the commercial development area at Alconbury (GBP42.3 million) and a proportion of the Waterbeach site that could deliver both commercial buildings and residential properties for rent in due course (GBP4.2 million).
The Group's total period-end property portfolio, irrespective of balance sheet classification, was valued at GBP644.2 million, 90 per cent by independent valuers CBRE and 10 per cent by Directors.
Investment in equity accounted joint ventures and associates
The Group's joint venture in Rugby has been included in the balance sheet at GBP80.0 million, which along with a half interest in the 351 apartment scheme known as Manchester New Square (GBP15.1 million), a one-third interest in a 400 acre (162.3 hectares) site at Wintringham Park, St. Neots (GBP15.9 million) and GBP2.6 million of other residual interests combine to form an overall Group investment in joint ventures and associates of GBP113.6 million.
During the period the Group advanced GBP4.2 million to Rugby and Wintringham to fund infrastructure works and sales at Rugby generated a further GBP6.0 million of profits (including GBP0.8 million on adoption of IFRS 15).
Non-current trade and other receivables
The GBP20.0 million disclosed on the face of the balance sheet comprises both the non-current proportions of the acquired Priors Hall receivables and the discounted values of the contractual minimums and pre-completion discounted overages with Morris Homes and Redrow at Alconbury, Kier at Corby and Avant at Newark.
Equivalent receivables (U&C's share) are owed to the Rugby joint venture by Crest Nicholson (GBP3.3 million) and again Morris Homes (GBP4.0 million) and Redrow (GBP11.6 million).
All sums due will be received as and when the houses to which they relate are sold, or if earlier, when the housebuilders are contractually obliged to pay minimum sums.
Current assets
Trading properties
The carrying value of trading properties increased by GBP47.0 million in the period to GBP320.8 million.
This increase was the result of capital expenditure of GBP16.8 million (including GBP12.5 million in respect of Alconbury and Priors Hall development works), capitalised overheads amounting to GBP2.1 million, capitalised finance costs of GBP1.3 million and GBP41.9 million of reclassified investment properties - all net of GBP15.1 million of disposals (including residential disposals at Alconbury and Priors Hall of GBP8.4 million and GBP6.5 million in respect of the sale of Catesby sites including Bude).
Cash
Group cash balances at the period-end totalled GBP28.2 million, up GBP11.6 million since last year-end; largely due to a loan drawdown being held on deposit, which was used to pay down creditors just after the period-end. Sales receipts (GBP25.8 million) and loan drawdowns (GBP24.3 million) have exceeded development expenditure (GBP20.7 million),loan repayments (GBP1.7 million), loans to joint ventures (GBP4.2 million) and other expenses (GBP11.9 million).
Sales receipts comprised GBP10.3 million of Catesby promotion receipts (including cost reimbursement) and GBP15.5 million of residential sales receipts.
Liabilities
Current and non-current borrowings
The Group has put in place three new facilities in the six months to 31 March 2019: the first is effectively a 5 year extension of the expiring Revolving Credit Facility with HSBC Bank, the second is an GBP8.6 million, three year and ten month, housebuilding facility at Alconbury with Homes England and the third is a GBP26.0 million infrastructure loan for our Wintringham joint venture, again with Homes England.
At the period-end, total Group borrowing amounted to GBP118.6 million (30 September 2018: GBP94.9 million) with the Group's share of joint ventures borrowing a further GBP35.5 million (30 September 2018: GBP21.8 million).
During the period the Group made GBP10.3 million of further drawings from the Alconbury Homes England facility, together with GBP7.9 million from the Revolving Credit Facility and GBP6.6 million from the Civic Living facility. All other movements in respect of Group facilities were the result of either capitalisation of interest net or loan amortisations (following residential disposals at Newark).
Joint ventures made further drawings during the period of GBP1.6 million under the Homes England Wintringham facility and GBP12.1 million from the Manchester New Square development facilities; all sums reflecting U&C's share.
Financial resources and capital management
The Group's net debt position at 31 March 2019 totalled GBP90.4 million (30 September 2018: GBP78.3 million), comprising external borrowings of GBP118.6 million and cash reserves of GBP28.2 million, producing a net gearing ratio of 22.9 per cent (30 September 2018: 20.1 per cent) on an IFRS NAV basis and 18.2 per cent (30 September 2018: 16.3 per cent) on an EPRA NAV basis.
On a full look-through basis, which additionally includes the Group's share of joint ventures' net debt, gearing on an EPRA NAV basis increases to 24.6 per cent (30 September 2018: 20.6 per cent). Gearing on all measures continues to remain within our self-imposed limit of 30 per cent.
Of the GBP156.6 million of borrowings at the period-end, which includes the Group's share of joint ventures' borrowings, GBP110.4 million or 70 per cent relates to facilities with Homes England, Local Authorities or the Housing Infrastructure Fund.
The Group's weighted average loan maturity at 31 March 2019 was 7.5 years (30 September 2018: 7.9 years) and weighted average cost of borrowing on drawn debt was 3.7 per cent (30 September 2018: 3.3 per cent).
The Group has no loans maturing over the next three years, with the exception of the Newark Homes England facility (GBP9.9 million currently drawn) and the joint venture development loans at Manchester New Square. The Newark facility is amortising along with residential plot sales and is due for repayment by March 2021 and the Manchester New Square borrowings will be repaid from sale proceeds.
A new GBP13 million investment facility with HSBC, secured against the Group's hotel in Deansgate Manchester, is expected to be in place shortly and discussions with Homes England are ongoing in relation to an extension to the Newark facility.
The Group continues to assess its long-term viability using the procedures set out on page 35 of the 2018 Annual Report and Accounts.
Post balance sheet events
Resolution to grant consent at Waterbeach
Waterbeach strategic land site received a resolution to grant consent for 6,500 new homes and other commercial uses on 13 May 2019. The Group's interest in the site is held through a Development Management Agreement with the Secretary of State for Defence and is carried at a value of GBP20.1 million (reflecting planning and development expenditure incurred to date) in the 31 March 2019 balance sheet. CBRE will be asked to value our interest at 30 September 2019.
Transfer to the Premium Listed segment of the London Stock Exchange
On 30 April 2019 Urban&Civic plc transferred from the Standard Listed segment of the London Stock Exchange to the Premium Listed segment.
Principal risks and uncertainties
The principal risks of the business are set out on pages 38 to 43 of the 2018 Annual Report and Accounts and include commentary on their potential impact, links to the Group's strategic priorities and the relevant mitigation factors. Since the publication of the 2018 Annual Report and Accounts, the Board believes that there has been no material change to the principal risks and the reported mitigation actions remain appropriate to manage the risks.
Responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and a description of where to find the principal risks and uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).
Signed on behalf of the Board on 29 May 2019
David Wood
Group Finance Director
Consolidated statement of comprehensive income
For the six month period-ended 31 March 2019
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
-------------------------------------------- --------- ----------- -------------
Revenue 2 30,894 83,989 150,398
Direct costs 2 (23,587) (72,392) (123,127)
--------------------------------------- --- --------- ----------- -------------
Gross profit 2 7,307 11,597 27,271
Administrative expenses (8,779) (7,137) (18,812)
Surplus on revaluation of investment
properties 9 1,046 5,606 10,582
Surplus on revaluation of receivables 14 528 324 1,090
Share of post-tax profit from joint
ventures and associates 11 5,240 786 2,059
Profit on disposal of investments - - 94
(Loss)/profit on disposal of investment
properties - (19) 1,244
Operating profit 3 5,342 11,157 23,528
Finance income 5 531 506 866
Finance costs 5 (774) (1,564) (2,127)
--------------------------------------- --- --------- ----------- -------------
Profit before taxation 5,099 10,099 22,267
Taxation expense 6 (1,250) (1,219) (3,572)
--------------------------------------- --- --------- ----------- -------------
Total comprehensive income 3,849 8,880 18,695
-------------------------------------------- --------- ----------- -------------
Basic earnings per share 7 2.7p 6.2p 13.0p
--------------------------------------- --- --------- ----------- -------------
Diluted earnings per share 7 2.6p 6.1p 12.9p
--------------------------------------- --- --------- ----------- -------------
The Group had no amounts of other comprehensive income for the current or prior periods and the profit for the respective periods is wholly attributable to equity shareholders.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Consolidated balance sheet
As at 31 March 2019
31 March 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ---------- -------------
Non-current assets
Investment properties 9 46,553 95,708 86,918
Property, plant and equipment 10 4,223 4,845 4,508
Investments in joint ventures
and associates 11 113,624 81,854 103,418
Deferred tax assets 12 3,808 3,307 2,788
Trade and other receivables 14 19,953 22,938 20,445
------------------------------ --- ---------- ---------- -------------
188,161 208,652 218,077
----------------------------------------------- ---------- -------------
Current assets
Trading properties 13 320,750 289,557 273,770
Trade and other receivables 14 22,875 26,914 29,039
Cash and cash equivalents 28,165 14,738 16,638
----------------------------------- ---------- ---------- -------------
371,790 331,209 319,447
----------------------------------------------- ---------- -------------
Total assets 559,951 539,861 537,524
----------------------------------- ---------- ---------- -------------
Non-current liabilities
Borrowings 16 (117,560) (103,965) (73,973)
Deferred tax liabilities 12 (8,713) (5,900) (6,851)
------------------------------ --- ---------- ---------- -------------
(126,273) (109,865) (80,824)
----------------------------------------------- ---------- -------------
Current liabilities
Borrowings 16 (1,000) (360) (20,891)
Trade and other payables 15 (37,555) (49,466) (46,786)
(38,555) (49,826) (67,677)
Total liabilities (164,828) (159,691) (148,501)
----------------------------------- ---------- ---------- -------------
Net assets 395,123 380,170 389,023
----------------------------------- ---------- ---------- -------------
Equity
Share capital 17 29,023 29,005 29,009
Share premium account 169,065 168,824 168,881
Capital redemption reserve 849 849 849
Own shares (4,261) (3,930) (4,748)
Other reserve 113,785 113,785 113,785
Retained earnings 86,662 71,637 81,247
----------------------------------- ---------- ---------- -------------
Total equity 395,123 380,170 389,023
----------------------------------- ---------- ---------- -------------
NAV per share 18 270.6p 261.9p 268.3p
------------------------------ --- ---------- ---------- -------------
EPRA NAV per share 18 340.6p 316.0p 331.8p
------------------------------ --- ---------- ---------- -------------
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Consolidated statement of changes in equity
For the six month period-ended 31 March 2019
Share Capital
Share premium redemption Own Other Retained
capital account reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- ----------- -------- -------- --------- --------
Balance at 1
October 2018 29,009 168,881 849 (4,748) 113,785 81,247 389,023
Effect of adoption
of IFRS 15 - - - - - 3,203 3,203
-------------------- ------- -------- ----------- -------- -------- --------- --------
Balance at
1 October 2018
as
restated 29,009 168,881 849 (4,748) 113,785 84,450 392,226
Shares issued under
scrip dividend
scheme 14 184 - - - - 198
Share-based
payment expense - - - - - 2,023 2,023
Deferred bonus
award and share
option exercise
satisfied out
of own shares - - - 762 - (504) 258
Purchase of own
shares - - - (275) - - (275)
Total comprehensive
income for
the period - - - - - 3,849 3,849
Dividends paid - - - - - (3,156) (3,156)
Balance at 31
March 2019
(unaudited) 29,023 169,065 849 (4,261) 113,785 86,662 395,123
-------------------- ------- -------- ----------- -------- -------- --------- --------
Balance at 1
October 2017 28,993 168,648 849 (4,003) 113,785 63,608 371,880
Shares issued under
scrip dividend
scheme 12 176 - - - - 188
Share-based
payment expense - - - - - 1,779 1,779
Share option exercise
satisfied out
of own shares - - - 168 - - 168
Purchase of own
shares - - - (95) - - (95)
Total comprehensive
income for
the period - - - - - 8,880 8,880
Dividends paid - - - - - (2,630) (2,630)
-------------------- ------- -------- ----------- -------- -------- --------- --------
Balance at 31
March 2018
(unaudited) 29,005 168,824 849 (3,930) 113,785 71,637 380,170
-------------------- ------- -------- ----------- -------- -------- --------- --------
Balance at 1
October 2017 28,993 168,648 849 (4,003) 113,785 63,608 371,880
Shares issued under
scrip dividend
scheme 16 233 - - - - 249
Share option exercise
satisfied out
of own shares - - - 647 - - 647 Purchase of own shares - - - (1,392) - - (1,392) Share-based payment expense - - - - - 3,434 3,434 Total comprehensive income for the year - - - - - 18,695 18,695 Dividends paid - - - - - (4,490) (4,490) -------------------- ------- -------- ----------- -------- -------- --------- -------- Balance at 30 September 2018 (audited) 29,009 168,881 849 (4,748) 113,785 81,247 389,023 -------------------- ------- -------- ----------- -------- -------- --------- --------
Consolidated cash flow statement
For the six month period-ended 31 March 2019
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ----------- -------------
Cash flows from operating activities
Profit before taxation 5,099 10,099 22,267
Adjustments for:
Surplus on revaluation of investment
properties (1,046) (5,606) (10,582)
Surplus on revaluation of receivables (528) (324) (1,090)
Share of post-tax profit from joint venture (5,240) (786) (2,059)
Finance income (531) (506) (866)
Finance costs 774 1,564 2,127
Depreciation charge 502 484 1,148
Write down of trading properties - - 2,570
Loss/(profit) on disposal of investment
properties - 19 (1,244)
Profit on disposal of investments - - (94)
Loss on sale of property, plant and equipment 9 2 2
Share-based payment expense 2,023 1,779 3,434
----------------------------------------------- -------- ----------- -------------
Cash flows from operating activities before change
in working capital 1,062 6,725 15,613
(Increase)/decrease in trading properties (3,770) 1,307 631
Decrease/(increase) in trade and other
receivables 10,761 (17,262) (15,284)
(Decrease)/increase in trade and other
payables (9,703) 526 (2,330)
----------------------------------------------- -------- ----------- -------------
Cash absorbed by operations (1,650) (8,704) (1,370)
Finance costs paid (549) (1,827) (3,476)
Finance income received 36 42 39
Tax paid (806) - (111)
----------------------------------------------- -------- ----------- -------------
Net cash flows from operating activities (2,969) (10,489) (4,918)
----------------------------------------------- -------- ----------- -------------
Investing activities
Additions to investment properties (503) (10,787) (14,174)
Additions to property, plant and equipment (225) (232) (558)
Loans advanced to joint ventures (4,185) (4,407) (9,685)
Loans repaid by joint ventures and associates - - 2
Proceeds from disposal of investment
properties - 21,013 38,925
Proceeds on sale of investments - 94 94
Net cash flows from investing activities (4,913) 5,681 14,604
----------------------------------------------- -------- ----------- -------------
Financing activities
New loans 24,340 41,792 42,818
Issue costs of new loans (43) (368) (408)
Repayment of loans (1,656) (31,531) (42,015)
Purchase of own shares (275) (95) (1,392)
Dividends paid (2,957) (2,442) (4,241)
----------------------------------------------- -------- ----------- -------------
Net cash flows from financing activities 19,409 7,356 (5,238)
----------------------------------------------- -------- ----------- -------------
Net increase in cash and cash equivalents 11,527 2,548 4,448
Cash and cash equivalents at start of
period 16,638 12,190 12,190
----------------------------------------------- -------- ----------- -------------
Cash and cash equivalents at end of period 28,165 14,738 16,638
----------------------------------------------- -------- ----------- -------------
Notes to the condensed consolidated interim financial statements
For the six month period-ended 31 March 2019
1. Basis of preparation
These condensed consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2018 Annual Report and Accounts. The financial information for the six months ended 31 March 2019 and 31 March 2018 does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 and is unaudited.
The statutory annual accounts of Urban&Civic plc for the year ended 30 September 2018 have been reported on by the Company's auditor and have been delivered to the Registrar of Companies. The independent auditor's report on the annual accounts for 2018 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.
Significant accounting policies
In the current period, the Group has adopted IFRS 9 "Financial Instruments" and IFRS 15 'Revenue from Contracts with Customers' which has resulted in a change to certain of the Group's accounting policies.
The adoption of IFRS 9 has not had any transitional impact on the Group. Financial assets previously accounted for as loans and receivables continue to be measured at amortised cost and financial assets previously accounted for at fair value through profit and loss continue to be measured at fair value. No material amendment to provisioning adjustments was required as a result of applying the expected credit loss model when assessing financial assets for impairment principally because:
-- development values are considered sufficient, even in the worst case scenario, to enable repayment of loans to joint ventures; and
-- receivables from housebuilders are secured on land which is valued in excess of the amounts due.
The adoption of IFRS 15 has resulted in additional revenue being recognised in relation to the variable consideration to which the Group is entitled under a certain number of its land parcel sales to housebuilders. The impact on the Group's balance sheet at 1 October 2018 has been to increase contract receivables by GBP3,078,000, increase the investment in joint ventures by GBP781,000, increase the deferred tax liability by GBP656,000 and increase retained earnings by GBP3,203,000. The Group's new accounting policy in respect of revenue recognition is as follows:
Revenue is recognised to the extent that a significant reversal is not expected in future periods and performance obligations have been satisfied. The following recognition policies have been applied:
Trading property sales The sale of trading properties, including beneficial interests held indirectly through land promotion and other contractual agreements usually have contractual performance obligations that are satisfied at a point in time. Consequently, revenue is recognised when control of the Group's interest has passed to the buyer, usually on completion of contracts. Residential property sales The sale of residential property, including land parcels sold to housebuilders for residential development, usually has performance obligations satisfied at a point in time. Revenue is recognised when control of the property has passed to the buyer. Any variable consideration including overages are estimated taking into consideration the time to recover overage amounts as well as factors which may give rise to variability and are recognised to the extent that it is highly probable that there will not be a significant reversal in the future. This is assessed on inception and throughout the duration of the sales contracts. Revenue on construction contracts Revenue on construction contracts is recognised in line with when performance obligations are deemed to be satisfied. Where performance obligations are determined as being satisfied over time, revenue is recognised as these obligations are
satisfied, which is usually on the basis of percentage of work completed reflecting the enhancement in value of the customer's asset. Where performance obligations are determined as being satisfied at a point in time, revenue is recognised at the point of satisfaction of the relevant performance obligations. Costs on construction contracts are recognised as incurred. Rental and other property income Rental income arising from property is accounted for on a straight line basis over the term of the lease. Lease incentives, including rent free periods and payments to tenants, are allocated to the consolidated statement of comprehensive income on a straight line basis over the lease term as a deduction from rental income. Hotel income Hotel income includes revenues derived from hotel operations, including the rental of rooms and beverage sales. Revenue is recognised at the point in time when rooms are occupied and services rendered. Project management fees and other income Fees from development management service arrangements and other agreements are determined by reference to the relevant agreement and recognised over time as the services are provided.
Other than as described above, the same accounting policies, presentation and method of computation are followed in these condensed interim financial statements as were applied in the Group's latest audited financial statements and the accounting policies used in preparing these condensed interim financial statements are those which are expected to be applied for the financial year ending 30 September 2019.
The Group continues to consider the impact of new standards not yet applied (IFRS 16 'Leases' (effective date: 1 January 2019)) on the financial position and performance of the Group, which will depend on projects undertaken at the time of initial application. There have been no identified changes to the initial assessment set out in the 2018 annual report.
Use of estimates and judgements
Revenue recognition
Judgement is involved when determining how much revenue to recognise at a point in time in respect of residential property sales where there is variable consideration which is only determined at the point of the future onward sale of constructed homes by the Group's housebuilder customers. In determining the amount of revenue recognised, the Directors consider factors that may give rise to significant reversals and for this period have assessed that a 20 per cent reduction in house prices, being the approximate peak to trough fall in house prices in the last two recessions, and a 1 year delay in receipt of overage payments, to take into account a significant fall in sales rates in a downturn, are appropriate reductions to cover the risk of significant reversal.
Other than as described above, there have been no new or material revisions to the nature and amount of estimates reported in the 2018 accounts, other than changes to certain assumptions applied in the valuation of properties. Details of the key assumptions applied at 31 March 2019 are set out in note 9.
Going concern
The Directors are required to make an assessment of the Group's ability to continue to trade as a going concern. The Directors have given this matter due consideration and have concluded that it is appropriate to prepare the interim financial information on a going concern basis.
2. Revenue and gross profit
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----------- -------------
Trading property sales 8,863 58,044 91,213
Residential property sales 10,964 17,236 34,457
Revenue on construction contracts 3,243 - 6,688
Rental and other property income 1,357 2,979 5,618
Recoverable property expenses 735 591 1,458
Hotel income 3,761 4,287 7,973
Project management fees and other income 1,971 852 2,991
------------------------------------------ --------- ----------- -------------
Revenue 30,894 83,989 150,398
------------------------------------------ --------- ----------- -------------
Cost of trading property sales (6,402) (47,941) (73,918)
Cost of residential property sales (9,498) (15,996) (29,391)
Costs of construction contracts (2,917) - (4,724)
Direct property expenses (1,114) (2,788) (4,942)
Recoverable property expenses (735) (591) (1,458)
Cost of hotel trading (2,921) (3,380) (6,124)
Write down of trading properties - (1,696) (2,570)
------------------------------------------ --------- ----------- -------------
Direct costs (23,587) (72,392) (123,127)
------------------------------------------ --------- ----------- -------------
Gross profit 7,307 11,597 27,271
------------------------------------------ --------- ----------- -------------
3. Operating profit
Operating profit is arrived at after allocating GBP2,142,000 of administrative expenses to the cost of investment and trading properties (six months to 31 March 2018: GBP2,834,000; year ended 30 September 2018: GBP4,724,000).
4. Segmental information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker and within the 2018 Annual Report and Accounts. The chief operating decision maker has been identified as the Board of Directors.
The segmental results that are monitored by the Board include all the separate lines making up the segmental IFRS operating profit. This excludes central overheads and taxation which are not allocated to operating segments.
Consolidated statement of comprehensive income
For the six month period-ended 31 March 2019
Strategic land Commercial Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ----------- ------------ ---------
Revenue 24,419 6,475 - 30,894
Direct costs (20,030) (3,557) - (23,587)
--------------------------------------- --------- ----------- ------------ ---------
Gross profit 4,389 2,918 - 7,307
--------------------------------------- --------- ----------- ------------ ---------
Share-based payment expense - - (2,023) (2,023)
Other administrative expenses - - (6,756) (6,756)
--------------------------------------- --------- ----------- ------------ ---------
Administrative expenses - - (8,779) (8,779)
Surplus on revaluation of investment
properties 1,046 - - 1,046
Surplus on revaluation of receivables 528 - - 528
Share of post-tax profit from joint
ventures and associates 5,231 9 - 5,240
Operating profit/(loss) 11,194 2,927 (8,779) 5,342
Net finance income/(cost) 362 (605) - (243)
--------------------------------------- --------- ----------- ------------ ---------
Profit/(loss) before tax 11,556 2,322 (8,779) 5,099
--------------------------------------- --------- ----------- ------------ ---------
Consolidated balance sheet
As at 31 March 2019
Strategic land Commercial Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ------------ ----------
Investment properties 46,553 - - 46,553
Property, plant and equipment 3,359 485 379 4,223
Investments in joint ventures
and associates 95,859 17,765 - 113,624
Deferred tax assets - - 3,808 3,808
Trade and other receivables 19,953 - - 19,953
------------------------------- ---------- ----------- ------------ ----------
Non-current assets 165,724 18,250 4,187 188,161
------------------------------- ---------- ----------- ------------ ----------
Trading properties 291,893 28,857 - 320,750
Trade and other receivables 16,996 5,879 - 22,875
Cash and cash equivalents - - 28,165 28,165
------------------------------- ---------- ----------- ------------ ----------
Current assets 308,889 34,736 28,165 371,790
------------------------------- ---------- ----------- ------------ ----------
Borrowings (91,275) - (27,285) (118,560)
Trade and other payables (25,729) (11,826) - (37,555) Deferred tax liabilities (8,071) - (642) (8,713) ------------------------------- ---------- ----------- ------------ ---------- Total liabilities (125,075) (11,826) (27,927) (164,828) ------------------------------- ---------- ----------- ------------ ---------- Net assets 349,538 41,160 4,425 395,123 ------------------------------- ---------- ----------- ------------ ----------
Consolidated statement of comprehensive income
For the six month period-ended 31 March 2018
Strategic land Commercial Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ----------- ------------ ---------
Revenue 20,602 63,387 - 83,989
Direct costs (19,847) (52,545) - (72,392)
--------------------------------------- --------- ----------- ------------ ---------
Gross profit 755 10,842 - 11,597
--------------------------------------- --------- ----------- ------------ ---------
Share-based payment expense - - (1,779) (1,779)
Other administrative expenses - - (5,358) (5,358)
--------------------------------------- --------- ----------- ------------ ---------
Administrative expenses - - (7,137) (7,137)
Surplus on revaluation of investment
properties 4,913 693 - 5,606
Surplus on revaluation of receivables 324 - - 324
Share of post-tax profit from joint
ventures and associates 666 120 - 786
Loss on disposal of investment
properties - (19) - (19)
Operating profit/(loss) 6,658 11,636 (7,137) 11,157
Net finance income/(cost) 479 (810) (727) (1,058)
--------------------------------------- --------- ----------- ------------ ---------
Profit/(loss) before tax 7,137 10,826 (7,864) 10,099
--------------------------------------- --------- ----------- ------------ ---------
Consolidated balance sheet
As at 31 March 2018
Strategic land Commercial Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ------------ ----------
Investment properties 78,338 17,370 - 95,708
Property, plant and equipment 3,470 842 533 4,845
Investments in joint ventures
and associates 79,240 2,614 - 81,854
Deferred tax assets - - 3,307 3,307
Trade and other receivables 22,938 - - 22,938
------------------------------- ---------- ----------- ------------ ----------
Non-current assets 183,986 20,826 3,840 208,652
------------------------------- ---------- ----------- ------------ ----------
Trading properties 240,281 49,276 - 289,557
Trade and other receivables 18,999 7,915 - 26,914
Cash and cash equivalents - - 14,738 14,738
------------------------------- ---------- ----------- ------------ ----------
Current assets 259,280 57,191 14,738 331,209
------------------------------- ---------- ----------- ------------ ----------
Borrowings (71,489) (6,025) (26,811) (104,325)
Trade and other payables (28,966) (20,500) - (49,466)
Deferred tax liabilities (5,335) - (565) (5,900)
------------------------------- ---------- ----------- ------------ ----------
Total liabilities (105,790) (26,525) (27,376) (159,691)
------------------------------- ---------- ----------- ------------ ----------
Net assets 337,476 51,492 (8,798) 380,170
------------------------------- ---------- ----------- ------------ ----------
5. Finance income and finance costs
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ----------- -------------
Interest receivable from cash deposits 33 49 37
Unwinding of discounts applied to long-term
debtors 497 457 826
Other interest receivable 1 - 3
--------------------------------------------- -------- ----------- -------------
Finance income 531 506 866
--------------------------------------------- -------- ----------- -------------
Interest payable on borrowings (1,813) (1,633) (3,089)
Amortisation of loan arrangement costs (258) (915) (1,220)
--------------------------------------------- -------- ----------- -------------
Finance costs pre-capitalisation (2,071) (2,548) (4,309)
Finance costs capitalised to trading
properties 1,297 984 2,182
Finance costs (774) (1,564) (2,127)
--------------------------------------------- -------- ----------- -------------
Net finance costs (243) (1,058) (1,261)
--------------------------------------------- -------- ----------- -------------
Interest is capitalised at the same rate as the Group is charged on respective borrowings.
6. Tax on profit on ordinary activities
(a) Analysis of tax charge in the period
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ----------- -------------
Current tax:
Adjustments in respect of previous periods (6) 38 5
UK corporation tax on profits for the
year 1,070 - 916
------------------------------------------------ ------ ----------- -------------
Total current tax charge 1,064 38 921
------------------------------------------------ ------ ----------- -------------
Deferred tax:
Origination and reversal of timing differences 186 1,275 2,746
Adjustments in respect of previous periods - (94) (95)
------------------------------------------------ ------ ----------- -------------
Total deferred tax charge 186 1,181 2,651
------------------------------------------------ ------ ----------- -------------
Total tax charge 1,250 1,219 3,572
------------------------------------------------ ------ ----------- -------------
(b) Factors affecting the tax charge for the period
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----------- -------------
Profit attributable to the Group before
tax 5,099 10,099 22,267
----------------------------------------- -------- ----------- -------------
Profit multiplied by the average rate of UK corporation tax of 19
per cent (31 March 2018 and 30 September
2018: 19 per cent) 969 1,919 4,231
Expenses not deductible for tax purposes 379 422 694
Differences arising from taxation of chargeable gains and property
revaluations 1,037 (1,215) (1,384)
Tax losses and other items (1,135) 150 121
1,250 1,276 3,662
Adjustments to tax charge in respect
of previous periods - (57) (90)
----------------------------------------- -------- ----------- -------------
Total tax charge 1,250 1,219 3,572
----------------------------------------- -------- ----------- -------------
7. Earnings per share
Basic earnings per share
The calculation of basic earnings per share is based on a profit of GBP3,849,000 (six months to 31 March 2018: GBP8,880,000; year ended 30 September 2018: GBP18,695,000) and on 143,397,834 (six months to 31 March 2018: 143,422,387; year ended 30 September 2018: 143,413,414) shares, being the weighted average number of shares in issue during the period less own shares held.
Diluted earnings per share
The calculation of diluted earnings per share is based on a profit of GBP3,849,000 (six months to 31 March 2018: GBP8,880,000; year ended 30 September 2018: GBP18,695,000) and on 145,875,912 (six months to 31 March 2018: 145,111,843; year ended 30 September 2018: 145,156,832) shares, being the weighted average number of shares in issue, less own shares held and the dilutive impact of share options granted.
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
Weighted average number of shares Number Number Number
------------------------------------- ------------ ------------ -------------
In issue at start of period 145,044,582 144,964,808 144,964,808
Effect of shares issued under scrip
dividend scheme 12,664 12,176 40,878
Effect of own shares purchased and
transferred (1,659,412) (1,554,597) (1,592,272)
------------------------------------- ------------ ------------ -------------
Weighted average number of shares
during the period - basic 143,397,834 143,422,387 143,413,414
Dilutive effect of share options 2,478,078 1,689,456 1,743,418
------------------------------------- ------------ ------------ -------------
Weighted average number of shares
during the period - diluted 145,875,912 145,111,843 145,156,832
------------------------------------- ------------ ------------ -------------
8. Dividends
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----------- -------------
Final dividend of 2.2p per share proposed 2,957 - -
and paid February 2019
Final dividend of 2.2p per share granted 199 - -
via scrip dividend
Interim dividend of 1.3p per share paid
July 2018 - - 1,799
Interim dividend of 1.3p per share granted
via scrip dividend - - 61
Final dividend of 2.0p per share proposed
and paid February 2018 - 2,442 2,442
Final dividend of 2.0p per share granted
via scrip dividend - 188 188
3,156 2,630 4,490
--------------------------------------------------- ----------- -------------
An interim dividend of 1.4p per share was approved by the Board on 29 May 2019 and is payable on 12 July 2019 to shareholders on the register on 7 June 2019. Investors choosing to participate in the dividend reinvestment scheme will need to make their election by 21 June 2019. The interim dividend is not recognised as a liability in the interim financial information. Dividends are not paid on the shares held by the Employee Benefit Trust.
9. Investment properties
GBP'000
-------------------------------------------
Valuation
At 1 October 2017 99,846
Additions at cost 11,288
Disposals (21,032)
Surplus on revaluation 5,606
-------------------------------- ---------
At 31 March 2018 95,708
Additions at cost 2,884
Disposals (16,650)
Surplus on revaluation 4,976
-------------------------------- ---------
At 30 September 2018 86,918
Additions at cost 504
Transfer to trading properties (41,915)
Surplus on revaluation 1,046
-------------------------------- ---------
At 31 March 2019 46,553
-------------------------------- ---------
Transfer of properties
On 1 October 2018, based on the site intention set out in the submitted development plan and the commencement of development works, the Group agreed that the strategy for Grange Farm at Alconbury Weald previously held within investment properties was to develop it for sale. Accordingly, on 1 October 2018 this element of the property was reclassified as a trading property.
Fair value measurement
The Group's principal investment properties comprise commercial buildings and development land at Alconbury Weald, which represent 91 per cent of the period-end carrying value (31 March 2018: 79 per cent, 30 September 2018: 97 per cent). These are valued on a semi-annual basis by CBRE Limited (CBRE), an independent firm of chartered surveyors, on the basis of fair value. The valuation at each period-end is carried out in accordance with guidance issued by the Royal Institution of Chartered Surveyors. Fair value represents the estimated amount that should be received for selling an investment property in an orderly transaction between market participants at the valuation date.
The Group's investment properties are all classified as level 3 within the fair value hierarchy as some of the inputs used in determining the fair value are based on unobservable market data. The valuation technique used in measuring the fair value of Alconbury Weald, investment properties, as well as the significant unobservable inputs, is summarised below.
Valuation technique
Discounted cash flows: the valuation model for the Group's investment properties considers the present value of net cash flows to be generated from the properties (reflecting the current approach of constructing the infrastructure and discharging the Section 106 cost obligations), taking into account expected land value growth rates, build cost inflation, absorption rates and general economic conditions. The expected net cash flows are discounted using risk-adjusted discount rates and the resultant value is benchmarked against transaction evidence.
Significant unobservable inputs
The key inputs to the valuation of the principal investment properties at Alconbury Weald, included:
-- expected annual land price inflation (3.0 per cent); -- expected annual cost price inflation (2.0 per cent); -- commercial land value (GBP400,000 per acre); and -- risk adjusted discount rate (7.5 per cent).
The inter-relationship between the unobservable inputs set out above and the fair value measurement is unchanged from that reported in the 2018 Annual Report and Accounts.
10. Property, plant and equipment
Furniture
Freehold Leasehold and
property property equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- --------
Cost
At 1 October 2017 5,425 730 1,372 7,527
Additions - 33 199 232
Disposals - - (139) (139)
----------------------- ------ ---------- ---------- --------
At 31 March 2018 5,425 763 1,432 7,620
Additions - 53 273 326
Disposals - (76) (109) (185)
----------------------- ------ ---------- ---------- --------
At 30 September 2018 5,425 740 1,596 7,761
Additions - 17 209 226
Disposals - - (197) (197)
----------------------- ------ ---------- ---------- --------
At 31 March 2019 5,425 757 1,608 7,790
----------------------- ------ ---------- ---------- --------
Depreciation
At 1 October 2017 1,313 330 784 2,427
Charge for the period 247 65 172 484
Release on disposals - - (136) (136)
----------------------- ------ ---------- ---------- --------
At 31 March 2018 1,560 395 820 2,775
Charge for the period 212 118 334 664
Release on disposals - (76) (110) (186)
----------------------- ------ ---------- ---------- --------
At 30 September 2018 1,772 437 1,044 3,253
Charge for the period 213 65 224 502
Release on disposals - - (188) (188)
----------------------- ------ ---------- ---------- --------
At 31 March 2019 1,985 502 1,080 3,567
----------------------- ------ ---------- ---------- --------
Net book value
31 March 2019 3,440 255 528 4,223
----------------------- ------ ---------- ---------- --------
31 March 2018 3,865 368 612 4,845
30 September 2018 3,653 303 552 4,508
----------------------- ------ ---------- ---------- --------
11. Investments
Investments in joint ventures and associates
Joint ventures Associates Total
GBP'000 GBP'000 GBP'000
----------------------------------------------- ----------- --------
Cost or valuation
At 1 October 2017 76,755 2 76,757
Loans advanced 4,407 - 4,407
Share of post-tax profit 692 94 786
Distributions paid - (94) (94)
Loans repaid - (2) (2)
At 31 March 2018 81,854 - 81,854
Loans advanced 5,279 - 5,279
Share of post-tax profit 1,367 - 1,367
Additions 14,918 - 14,918
At 30 September 2018 103,418 - 103,418
Effect of adoption of IFRS 15 781 - 781
------------------------------------- -------- ----------- --------
As at 30 September 2018 as restated 104,199 - 104,199
Loans advanced 4,185 - 4,185
Share of post-tax profit 5,240 - 5,240
At 31 March 2019 113,624 - 113,624
------------------------------------- -------- ----------- --------
At 31 March 2019 the Group's interests in its joint ventures were as follows:
Manchester New Square 50% Property development
LP
SUE Developments LP 50% Property development
Achadonn Limited 50% Property development
Altira Park JV LLP 50% Property development
Wintringham Partners 33% Property development
LLP
---------------------- ---- ---------------------
SUE Wintringham Achadonn Altira Manchester
Park
Developments LP Partners Limited JV LLP New Square Total
LLP LP
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------------ --------- -------- ----------- --------
The carrying value consists of:
Group's share of
net assets 31,301 (3) - 608 - 31,906
Loans 48,654 15,907 2,102 - 15,055 81,718
Total investment in joint ventures
and associates 79,955 15,904 2,102 608 15,055 113,624
------------------ ------- ------------ --------- -------- ----------- --------
12. Deferred tax
The net movement on the deferred tax account is as follows:
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------- -------------
At start of period (4,063) (1,412) (1,412)
Effect of adoption of IFRS 15 (656) - -
---------------------------------- -------- ----------- -------------
At start of period as restated (4,719) (1,412) (1,412)
Movement in the period (see note
6) (186) (1,181) (2,651)
---------------------------------- -------- ----------- -------------
At end of period (4,905) (2,593) (4,063)
---------------------------------- -------- ----------- -------------
The deferred tax balances are made up as follows:
At At At
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
----------------------------------------- --------- -------------
Deferred tax assets
Tax losses 3,808 3,307 2,788
--------------------------------- ------ --------- -------------
3,808 3,307 2,788
----------------------------------------- --------- -------------
Deferred tax liabilities
Revaluation surpluses 8,125 5,900 6,851
Revenue recognised under IFRS 15 588 - -
--------------------------------- ------ --------- -------------
8,713 5,900 6,851
----------------------------------------- --------- -------------
At 31 March 2019, the Group had unused tax losses of GBP22,477,000 (31 March 2018: GBP28,004,000; 30 September 2018: GBP23,118,000), of which GBP21,956,000 (31 March 2018: GBP18,202,000; 30 September 2018: GBP16,302,000) has been recognised as a deferred tax asset. A further GBP96,000 (31 March 2018: GBP9,098,000; 30 September 2018: GBP6,227,000) has been applied to reduce the Group's deferred tax liability recognised at the balance sheet date as required by IAS 12 'Income Taxes' in respect of tax potentially payable on the realisation of investment properties at fair value at the balance sheet date. No deferred tax asset is recognised in respect of realised or unrealised capital losses if there is uncertainty over future recoverability.
Tax losses of GBP424,000 (31 March 2018: GBP704,000; 30 September 2018: GBP589,000) have not been recognised as it is not considered sufficiently certain that there will be appropriate taxable profits available in the foreseeable future against which these losses can be utilised.
The Group's deferred tax balances have been measured at rates between 17 and 19 per cent (2018: 17 and 19 per cent), being the enacted rates of corporation tax in the UK at the balance sheet date against which the temporary differences giving rise to the deferred tax are expected to reverse. The UK corporation tax rate reduced to 19 per cent from 1 April 2017 and will reduce to 17 per cent from 1 April 2020, which will reduce the amount of UK corporation tax that the Group will have to pay in the future.
13. Trading properties
Six months to Six months Year ended
to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------------------------------------ ----------- -------------
At start of period 273,770 289,707 289,707
Additions at cost 20,166 73,808 90,057
Costs written back - - (2,570)
Disposals (15,101) (73,958) (103,424)
Transfer from investment properties 41,915 - -
At end of period 320,750 289,557 273,770
------------------------------------- --------- ----------- -------------
Capitalised interest of GBP4,706,000 is included within the carrying value of trading properties as at 31 March 2019 (31 March 2018: GBP2,752,000; 30 September 2018: GBP3,449,000).
14. Trade and other receivables
At At At
31 March 31 March 30 September
2019 2018 2018
Non-current GBP'000 GBP'000 GBP'000
------------------------------------- -------- --------- -------------
Trade receivables 17,802 22,938 17,338
Other receivables 2,151 - 3,107
19,953 22,938 20,445
----------------------------------------------- --------- -------------
At
At At
31 March 31 March 30 September
2019 2018 2018
Current GBP'000 GBP'000 GBP'000
------------------------------------- -------- --------- -------------
Trade receivables 15,382 10,463 19,034
Less: provision for impairment of
trade receivables (80) (67) (29)
------------------------------------- -------- --------- -------------
Trade receivables (net) 15,302 10,396 19,005
Other receivables 3,526 6,596 5,348
Contract assets- amounts recoverable
under contracts 1,346 - 1,350
Prepayments and accrued income 2,701 9,922 3,336
------------------------------------- -------- --------- -------------
22,875 26,914 29,039
----------------------------------------------- --------- -------------
Trade receivables include minimum and overage amounts due from housebuilders on strategic land parcel sales.
Included within current (GBP1,458,000) and non-current (GBP2,151,000) other receivables are amounts totalling GBP3,609,000 (31 March 2018: GBP6,352,000; 30 September 2018: GBP6,582,000) relating to overage entitlements that were acquired with the Priors Hall asset in the prior year and attributed a purchase price allocation of GBP9,366,000.
The asset is measured at fair value through profit and loss using a discounted cash flow model and is categorised as level 3 in the fair value hierarchy.
The key assumptions applied in the valuation at 31 March 2019 are current expectations over future house price values, the timing of housebuilder delivery and a discount rate of 8.8 per cent. The fair value movement since 30 September 2018 is GBP528,000 (31 March 2018: GBP324,000; 30 September 2018: GBP1,090,000) which has been credited to the income statement for the period.
Amounts totalling GBP7,375,000 (31 March 2018: GBP3,338,000; 30 September 2018: GBP3,874,000) have been collected by 31 March 2019.
15. Trade and other payables
At At At
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
----------------------------------------- --------- -------------
Trade payables 7,771 11,301 7,978
Taxes and social security costs 1,467 360 3,124
Other payables 8,379 11,236 8,628
Accruals 18,118 22,577 24,985
Deferred income 1,820 3,992 2,071
-------------------------------- ------- --------- -------------
37,555 49,466 46,786
----------------------------------------- --------- -------------
16. Borrowings
At At At
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
--------------------- --------- -------------
Bank loans 27,285 32,836 19,891
Other loans 91,275 71,489 74,973
------------ ------- --------- -------------
118,560 104,325 94,864
--------------------- --------- -------------
At At At
31 March 31 March 30 September
2019 2018 2018
Maturity profile GBP'000 GBP'000 GBP'000
--------------------------- -------- --------- -------------
Less than one year 1,000 360 20,891
Between one and five years 37,228 45,530 11,424
More than five years 80,332 58,435 62,549
--------------------------- -------- --------- -------------
118,560 104,325 94,864
------------------------------------- --------- -------------
Other loans comprise borrowings from Homes England and a conditional grant. Interest on borrowings from Homes England is charged between 2.2 and 2.5 per cent above the EC Reference Rate and the facilities are secured against specific land holdings. The GBP1,000,000 grant is conditional on certain milestones of construction being achieved before 2020. The grant is only repayable if these are not reached.
Bank loans are secured against specific property holdings.
17. Share capital
At At At
31 March 31 March 30 September
2019 2018 2018
Urban&Civic plc GBP'000 GBP'000 GBP'000
-------------------- -------- --------- -------------
Issued and fully paid
Shares of 20p each 29,023 29,005 29,009
-------------------- -------- --------- -------------
Movements in share capital in issue
Issued and fully paid
Ordinary shares GBP'000 Number
------------------------------------ -------- ------------
At 1 October 2017 28,993 144,964,808
Shares issued under scrip dividend
scheme 12 61,558
------------------------------------ -------- ------------
At 31 March 2018 29,005 145,026,366
Shares issued under scrip dividend
scheme 4 18,216
------------------------------------ -------- ------------
At 30 September 2018 29,009 145,044,582
Shares issued under scrip dividend
scheme 14 72,024
------------------------------------ -------- ------------
At 31 March 2019 29,023 145,116,606
------------------------------------ -------- ------------
Transactions in own shares
At the end of the period the Employee Benefit Trust held 1,589,015 20p shares in Urban&Civic plc (31 March 2018: 1,535,868; 30 September 2018: 1,769,935) at a cost of GBP4,261,000 (31 March 2018: GBP3,930,000; 30 September 2018: GBP4,748,000), which had a market value of GBP4,449,000 (31 March 2018: GBP4,700,000; 30 September 2018: GBP5,381,000). The movement is as follows:
Cost
----------------------------------------- -----------------
Employee Benefit Trust Number of shares GBP'000
----------------------------------------- ----------------- --------
At 1 October 2017 1,569,437 4,003
Share purchase 32,195 95
Transferred to employees on share
option exercise (65,764) (168)
At 31 March 2018 1,535,868 3,930
Share purchase 420,633 1,297
Transferred to employees on share
option exercise (186,566) (479)
At 30 September 2018 1,769,935 4,748
Share purchase 103,215 275
Transferred to employees under deferred
bonus scheme arrangements and on share
option exercise (284,135) (762)
At 31 March 2019 1,589,015 4,261
----------------------------------------- ----------------- --------
Share options
During the six month period to 31 March 2019 the Company granted 1,981,452 share options to employees (six months to 31 March 2018: 2,090,636; year ended 30 September 2018: 2,090,636), 163,084 share options were exercised (six months to 31 March 2018: 153,205; year ended 30 September 2018: 339,976) and 450,284 options lapsed (six months to 31 March 2018: 1,528,563; year ended 30 September 2018: 1,633,666). The number of share options outstanding at 31 March 2019 was 6,544,122 (31 March 2018: 5,467,912; 30 September 2018: 5,176,038).
18. Net asset value and EPRA net asset value per share
Net asset value and EPRA net asset value per share are calculated as the net assets or EPRA net assets of the Group attributable to shareholders at each balance sheet date, divided by the number of shares in issue and to be issued at that date, adjusted for own shares held and the dilutive effect of outstanding share options.
At At At
31 March 31 March 30 September
2019 2018 2018
Unaudited Unaudited Audited
------------------------------------------------------ ------------ -------------
Number of shares in issue 145,116,606 145,026,366 145,044,582
Own shares held (1,589,015) (1,535,868) (1,769,935)
Dilutive effect of share options 2,478,078 1,689,456 1,743,418
---------------------------------------- ------------ ------------ -------------
146,005,669 145,179,954 145,018,065
------------------------------------------------------ ------------ -------------
NAV per share 270.6p 261.9p 268.3p
---------------------------------------- ------------ ------------ -------------
Net asset value (GBP'000) 395,123 380,170 389,023
Effect of adoption of IFRS 15 - 4,199 3,859
Net asset value as restated (GBP'000) 395,123 384,369 392,882
Revaluation of trading property held as current assets (GBP'000)
- Alconbury Weald 42,107 36,998 36,536
- Rugby 8,240 8,268 9,781
- Priors Hall 12,466 - 9,384
- Newark (1,560) (1,528) (668)
Wintringham St Neots 10,052 7,660 8,461
- Manchester sites 5,224 6,532 5,023
- Land promotion sites 15,461 9,342 11,667
- Other 1,425 1,218 1,292
---- ---------------------------------- ------------ ------------ -------------
93,415 68,490 81,476
Deferred tax liability (GBP'000) 8,713 5,900 6,851
---------------------------------------- ------------ ------------ -------------
EPRA NAV (GBP'000) 497,251 458,759 481,209 ---------------------------------------- ------------ ------------ ------------- EPRA NAV per share 340.6p 316.0p 331.8p ---------------------------------------- ------------ ------------ ------------- Deferred tax (GBP'000) (26,461) (19,711) (23,065) ---------------------------------------- ------------ ------------ ------------- EPRA NNNAV (GBP'000) 470,790 439,048 458,144 ---------------------------------------- ------------ ------------ ------------- EPRA NNNAV per share 322.4p 302.4p 315.9p ---------------------------------------- ------------ ------------ -------------
19. Contingent liabilities, capital commitments and guarantees
Capital commitments relating to the Group's development sites are as follows:
At At At
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
-------------------------------------- --------- -------------
Contracted but not provided
for 51,359 31,095 54,744
----------------------------- ------- --------- -------------
20. Related party transactions
There have been no material changes to the nature of the related party transactions described in the 2018 Annual Report and Accounts.
Details of transactions with and amounts owed from joint ventures and associates are given in note 11.
21. Post balance sheet events
Post balance sheet events are disclosed within operational highlights at the beginning of this announcement.
Independent review report to Urban&Civic plc
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2019 which comprises the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, United Kingdom
29 May 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Glossary of terms
Company Urban&Civic plc
Earnings per share (EPS) Profit after tax divided by the weighted average
number of shares in issue
EBT Urban&Civic Employment Benefit Trust
EC Reference Rate European Commission Reference Rate
EPRA European Public Real Estate Association
EPRA net asset value (EPRA Net assets attributable to equity shareholders
NAV) of the Company, adjusted for the revaluation
surpluses on trading properties and eliminating
any deferred taxation liability for revaluation
surpluses
EPRA net gearing Total debt less cash and cash equivalents divided
by EPRA net assets
EPRA triple net asset value EPRA net asset value adjusted to include deferred
(EPRA NNNAV) tax on property valuations and capital allowances
Fair value The price that would be required to sell an asset
or paid to transfer a liability in an orderly
transaction between market participants at a
measureable date (i.e. an exit price)
Group Urban&Civic plc and subsidiaries, joint ventures
and associates
Gearing Group bank borrowings as a proportion of net
asset value
Homes England Homes England, formerly Homes and Communities
Agency
IAS International Accounting Standards
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards
Key performance indicators Significant areas of Group operations that have
(KPIs) been identified by the Board capable of measurement
and are used to evaluate Group performance
Large site discount Represents the difference between the unserviced
land values ascribed by CBRE strategic site valuations
(which take into account site scale and build-out
duration among other matters) and the current
retail prices being achieved on smaller parcel
sales.
Licences Agreements entered into with housebuilders, which
typically comprise a fixed element (the Minimums)
due to the Group upon reaching unconditional
exchange and a variable element (the Overage)
which is dependent on the final selling price
of the house.
Look-through gearing Gearing including the Group's balance sheet attributable
to the owners of the Company
Minimums Contractual right to receive a minimum plot value
in respect of a minimum number of plots each
year, These minimums are payable on a look back
basis if minimum sales are not achieved.
Net asset value (NAV) Value of the Group's balance sheet attributable
to the owners of the Company
Net gearing Total debt less cash and cash equivalents divided
by net assets
Overage Variable consideration which applies an agreed
percentage to the house sales price and then
nets off any Minimum already paid. No overage
is payable where Minimums are not achieved.
Private rented sector (PRS) A sector of the real estate market where residential
accommodation is privately owned and rented out
as housing, usually by an individual landlord,
but potentially by housing organisations
Resolution to Grant (planning Where a Local Authority planning committee resolves
consent) to grant planning permission subject to the completion
of a planning agreement (such as a Section 106
agreement)
Return on Capital Employed A financial ratio that measures how well a company
(ROCE) is generating profits from its capital
Total return Movement in the value of net assets, adjusted
for dividends paid, as a proportion of opening
net asset value
Section 106 agreement Planning obligations under Section 106 of the
Town and Country Planning Act. These obligations
focus on mitigating site specific impacts of
development and include, by way of example, developer
contributions to schools and/or highways.
Total shareholder return Growth in the value of a shareholding, assuming
(TSR) reinvestment of any dividends into shares, over
a period
Urban&Civic plc Parent company of the Group
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.
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