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Urban&Civic plc Results for the six months to 31 March 2020

11/06/2020 7:00am

UK Regulatory (RNS & others)


Urban&civic (LSE:UANC)
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From Jun 2020 to Aug 2020

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TIDMUANC

RNS Number : 6027P

Urban&Civic plc

11 June 2020

Urban&Civic plc

("Urban&Civic", the "Company" or the "Group")

RESULTS FOR THE SIX MONTHS TO 31 MARCH 2020

MASTER DEVELOPER WORKING THROUGH THE PANDEMIC

Urban&Civic plc (LSE: UANC) announces its unaudited results for the six months to 31 March 2020.

 
                                      Six months to     Year ended           Six months 
                                                                                     to 
                                           31 March   30 September             31 March 
                                               2020           2019                 2019 
---------------------------------------------------  -------------  ------------------- 
 EPRA NAV (GBPm)                              487.8          527.5                497.3 
 EPRA NAV per share (p)                       335.1          360.3                340.6 
 EPRA NNNAV per share (p)                     318.3          339.5                322.4 
 Large site discount per share (p)              145            135                  139 
 EPRA NAV + large site discount per share 
  (p)                                         480.1          495.3                479.6 
 Profit before tax (GBPm)                       0.2           16.3                  5.1 
 Residential plot completions                   382            665                  365 
 Total shareholder return (per cent)         (35.0)            7.8                (8.5) 
 Dividend per share (p)                           -            3.9                  1.4 
------------------------------------------  -------  -------------  ------------------- 
 

In reaction to market conditions arising from pandemic -

 
 --   Opportunistic acquisitions and maintained infrastructure investment 
       prioritised; discretionary spend curtailed; dividend decision postponed. 
 

Financial highlights -

 
 --    EPRA net assets per share + large site discount (335.1p + 145p) = 
        480.1p at 31 March 2020: 
        3.1 per cent down on September 2019 year end but marginally up over 
        12 months. 
 --    Group share of current contracted forward revenues increased to GBP107.7 
        million (30 September 2019: GBP101.7 million). 
 --    Headline EPRA net asset value per share down 1.6 per cent over the 
        year at 335.1p (31 March 2019: 340.6p; 30 September 2019: 360.3p), 
        reflecting valuation uncertainties in light of Covid-19 crisis. 
 --    EPRA triple net asset value per share 318.3p down 1.3 per cent from 
        31 March 2019 ( 30 September 2019: 339.5p). 
 --    Large site discount highest ever at GBP212 million (43 per cent of 
  --    EPRA NAV); or 145p per share. 
        Profit before tax for the six months to 31 March 2020 GBP0.2 million 
        (six months to 31 March 2019: GBP5.1 million); fall predominantly 
        due to property revaluations. 
 --    Decision to pay an interim dividend postponed, having regard to the 
        deferral of cash receipts associated with residential sales. 
 

Operational highlights -

 
 --   Platform advantage as preeminent Master Developer providing unusually 
       attractive project opportunities consequent upon Covid-19 disruptions 
       in the land market. 
 --   2 new strategic sites, prospectively adding a minimum of 10,000 new 
       homes to pipeline. 
 --   Terms settled on 6 new land promotions by Catesby for a further prospective 
       1,000 units. 
 --   3 new licences + a land sale totalling 594 plots signed since March; 
       3 medium/ large private housebuilders and 1 public; 
       1 existing and 3 new customers. 
 --   Delivery spend supported by GBP96 million of new Government and Homes 
       England facilities. 
 --   Continued to work through lockdown. 
 --   GBP18.6 million post balance sheet sale of accommodation at Waterbeach 
       converted to housing for medical staff from Papworth Hospital Trust 
       exceeded valuation. GBP18.2 million of proceeds received by Urban&Civic 
       to clear all amounts previously advanced at Waterbeach. 
 

Commenting on the results, Nigel Hugill, Chief Executive, said:

" Actions speak louder than words. This is the first time that the Urban&Civic Master Developer Model has been tested under stress. Prevailing uncertainties are providing exceptional opportunities to enlarge our strategic portfolio, with minimal acquisition risk. We have secured land holdings for two potential new settlements in the last fortnight. Government backing on projects in delivery has been terrific in enabling us prudently to maintain and accelerate spend. As the housebuilders rebuild output, the reasonable presumption is that capital lite, serviced plots will be at the top of their want list. Whatever the behavioural changes from this awful pandemic, it is hard to see well-planned housing with gardens, good connections, great schools, decent broadband and guaranteed access to green spaces being disadvantaged. Witness four new licences and land sales signed since March."

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 as a live webcast at 9.30am today and the presentation will be available at www.urbanandcivic.com or via the following link: https://webcasting.brrmedia.co.uk/broadcast/5ed7692de9f4830247c9a151 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:            7236035 

Chief executive's statement

Summary

Urban&Civic was established in the teeth of the last recession. Our Master Developer model was designed to sustain through economic cycles. The immensely challenging coronavirus environment is reflected in our first ever fall in net asset value. Up to the end of February, the Group was on track to meet or exceed guidance on plot realisations for the current year. That has obviously been superseded but mostly as a deferral, rather than actual loss, of revenues. Our valuers, CBRE, also made a precautionary move on discount rates with a corresponding reduction in current valuations and increase in the large site discount. Adding that back, EPRA NAV + large site discount was almost unchanged on March 2019. That feels about right. Having regard for the delay in cash receipts, a decision in relation to the payment of the interim dividend is being postponed until the current financial year end.

On the other hand, disruptions in the land market combined with our platform advantage as preeminent Master Developer are providing singular opportunities. Discretionary spend has been curtailed with absolute priority afforded to maintained infrastructure investment and new project acquisitions. Two new strategic projects with the potential for 10,000 new homes have been contracted in the last fortnight. In addition, Catesby has settled terms on 6 further land promotions prospectively totalling 1000 units. There is continuing housebuilder demand for our serviced parcels. Four new licences or land sales across three different strategic sites, together aggregating 594 plots, split between new and existing customers, have been contracted since March, with two signed in the past three weeks. There are clear indications that our model is particularly attractive to housebuilders in the current climate enabling them to accelerate build-out, whilst limiting their capital commitments.

Assets and receipts

The headline EPRA net asset value as at 31 March 2020 was GBP487.8 million, or 335.1p per share. EPRA triple net assets were also down at GBP463.3 million, or 318.3p per share. Depending upon the measure, the reductions were in the range 6.2 - 7.5 per cent against those at 30 September 2019, or 1.3 - 1.9 per cent as against 31 March 2019. In contrast, the large site discount rose relative to the year end figure to the equivalent of 145p per share. EPRA NAV + large site discount at 31 March 2020 amounted to 480.1p per share, compared with 495.3p per share six months previous.

Revenues, including the Group share of joint ventures and associates were up slightly at GBP47.6 million, compared with GBP47.3 million for the first half of last year. Profit before tax was down at GBP0.2 million (2018/19 interim: GBP5.1 million) with the entirety of the difference accounted for by the reduction in value of investment assets. In providing guidance as to plot realisations and proceeds last November, the expectation was for cash receipts in FY 2019/20, including joint ventures pro rata, of the order of GBP60 million. The revised full year figure is GBP35 million, of which approximately GBP20 million was received in the first half.

Timing differences consequent upon Covid-19

The shortfall against second half receipts mostly represents delayed timings. The eventual quantum is unlikely to be much altered. GBP10 million of the difference relates to delayed housing completions, including first occupations at Wintringham, a good proportion of which are on house sales that are either reserved or exchanged. In any event, receipts are underpinned by minimum commitments from the housebuilders averaging approximately 85 per cent of estimated sales value, with the remainder payable once houses are sold. Half of the remaining anticipated receipts were conditional on detailed planning approvals that will now go past September 2020 due to the delays in local planning departments moving online. An anticipated land sale of 360 plots at Houlton, Rugby has been restructured and split into two parcels, at least one of which is expected to complete in the second half.

All housebuilders have now returned to site and have stated universally that the priority will be to complete the existing sales pipeline. The level of reported cancellations remains low. Moreover, unlike our housebuilding partners, the contracted receipts to Urban&Civic require no further material capital investment.

The value of minimum receipts at times of stress

Minimum payments to which the housebuilders commit as a condition of our licences afford considerable land value protection under the Master Developer model. Our percentage participation in the realised value of individual house sales varies between contracts but is typically around one-third of the net purchase price. We share an element of downside price risk with our customers but this is collared by the minimum receivable on each plot. The position is correspondingly defensive. As at 31 March 2020, the minimum contracted share of future land receipts continued to exceed GBP100 million, representing 3.1x future annual minimum sales.

The proportion of percentage participations accounted for by minimums has been bid up progressively. The early 2016/17 contracts contained minimums which proved to be between 60 - 70 per cent of actual proceeds received from our participations. In more recent years, this has risen to 85 - 100 per cent. Most of the contracts are Retail Price Index linked. As illustration, minimum payments underpin approaching 90 per cent of the proceeds from estimated sales over the next two years, based on our revised pricing expectations and including existing exchanges. The obligations over the next two years are spread across ten housebuilders, with a very heavy weighting towards those commanding 4- and 5-star ratings. The security position under our licence arrangements is also much stronger than a conventional land creditor. Urban&Civic retain our charge over plots being built out to the point of sale to the homeowner, when housebuilder WIP is at its highest. As of April 2020, housebuilders on our strategic sites had almost 1,000 homes in the course of construction.

Around half of contracted minimum receipts are due from listed housebuilders, with a further 20 per cent from substantial private housebuilders who have made payments already, most recently in February 2020, arising from late starts. The model is not untested.

Strategic site plot carrying values and large site discount

31 March 2020 carrying values of housing plots net of servicing costs plots were GBP28,600 at Alconbury; GBP18,900 at Houlton; GBP27,300 at Wintringham; GBP13,400 at Priors Hall; GBP16,000 at Waterbeach and GBP6,600 at Newark. Those valuations are after the large site discount for scale or wholesale disposal and were appraised on house prices of market units at GBP300psf at Alconbury, GBP280psf at Rugby, GBP300psf at Wintringham, GBP235psf at Priors Hall, GBP380psf at Waterbeach and GBP220psf at Newark respectively.

The large site discount affords a further level of defensiveness against the actual quantum of future receipts. The calculation is made only on consented sites, once infrastructure spend has commenced, and represents the difference between the current open market of a typical retail parcel of 150 housing plots as appraised (often on the basis of our own sales evidence) and the estimated discount for bulk or wholesale disposal to establish the carrying value in the Group statutory accounts. On average, we would expect to receive around twice book via a licence sale. The contracted minimum receipts represent 1.7x weighted average March 2020 carrying values.

The average net of inflation discount rate used by CBRE in the 31 March 2020 valuation was increased by 0.25 per cent to 6.5 per cent. The consequences of that move are significant. Three quarters of the reported reduction in gross assets compared with last September came from the higher discount rates applied to the strategic land portfolio, which accounts for approximately 85 per cent of total property assets. The comparison between the current open market retail valuation of standard parcels and the wholesale figure included in our reported EPRA NAV amounted to a highest ever large site discount of GBP212 million, or 43 per cent of EPRA NAV at 31 March 2020.

The reasonable assumption is for the discount rate to narrow in more normal market conditions.

Homes England

The objectives and priorities of Urban&Civic as Master Developer run parallel with those of Homes England. The business was founded on the simple demographic proposition that it was not possible to meet housing need in South East England without a significantly greater contribution from large sites. This certainty was underpinned by conviction that strategic projects can make a contribution to the environment and sense of community that infill sites never can. This has been amply demonstrated by our residents pulling together over the past three months.

The interrelationship with national policy is reflected in continued Government backing to accelerate delivery. Two new project loans were signed at the onset of lockdown in March. The first was a GBP60.7 million infrastructure facility at Waterbeach from Homes England; near 11 years on our normal terms with interest accrued and payable only out of realised sales proceeds. The second was a GBP35.6 million repayable grant from the Department for Education to fund the early construction of a new secondary school at Houlton. The advance is to our joint venture company and will be returned in line with existing section 106 obligations, with final repayment date projected to be beyond 20 years.

Total facilities (including undrawn amounts) from Homes England, Local Authorities and the Department for Education across the five strategic sites in delivery aggregate GBP351 million, of which our pro rata share amounts to GBP258 million. There are no Group covenants attaching to those loans.

Urban&Civic currently has available GBP136.4 million of undrawn facilities on a look-through basis. 74 per cent of total facilities (drawn and undrawn) are without recourse to the Group.

Trading developments including two new strategic acquisitions

Demand for serviced land parcels on our strategic sites continues: two new licences were signed in March 2020 at Wintringham and Houlton, another in June at Houlton, coupled with a recent land sale at Corby. Together the transactions aggregate 594 new plots: one existing and three new customers. The terms were in line with pre-Covid-19 expectations.

We are intent on using the interlude to enlarge holdings within our core target areas and have entered into legal agreements on two new projects of potentially regional significance in the past fortnight. The more advanced is at Tempsford in Central Bedfordshire. Options have been taken over more than 2,100 acres in a highly strategic location midway between Cambridge and Milton Keynes identified as a prospective development node within the Oxford to Cambridge arc. The land is accessible directly from the A428, which is being upgraded to provide a dual carriage way link between the adjoining A1 and the upgraded A14 with a committed budget of GBP1 billion. The now identified East West Rail preferred route corridor intersects with the East Coast Main Line across the site. The entire land is included within an area cited recently as a development corporation candidate by MHCLG.

Separately, we have entered into option arrangements on a substantial landholding within commuting distance to Cambridge. Our preliminary assessments are that the two combined could accommodate in excess of 10,000 new homes. The underlying interests remain subject to planning and the entry costs are modest, allowing us to build future positions for low initial capital outlay and managed acquisition risk.

Catesby

Catesby pre-tax profits for the first half amounted to GBP4.4 million after overheads. EPRA uplifts on new consents added GBP2.5 million. Netting out EPRA reversals on disposals and tax meant that there was no material change in net assets. The current moratorium on land acquisitions announced by several listed housebuilders and the procedural chaos in many planning authorities caused by the inability to conduct public meetings is likely to restrict immediate performance. The base case is for no further disposals until 2021, although the signs already are that may prove overly pessimistic. Several competitors, notably those carrying bank debt, are having to retrench. In contrast, Catesby is continuing to build pipeline with terms settled on 6 new land promotions prospectively totalling 1000 new homes. Again, entry premiums are low and the percentage participations somewhat better than we have seen for some time. The number of residences being promoted by Catesby will soon exceed 15,000.

Post balance sheet realisations

The sale has been completed of the key worker housing for Papworth Hospital at Waterbeach for GBP18.625 million, which is above business plan. The cost of conversion of two modern barracks blocks was funded by Urban&Civic. Proceeds from realisation were returned to the Group under the waterfall arrangements and cleared all advanced amounts relating to the consented 6,500 new homes, including planning costs and accrued project management charges. Initial Phase 1 marketing is proceeding well to both housebuilders and build to rent investors, notwithstanding the current logistical complications in undertaking viewings.

Build to rent

Residential construction is programmed to commence at Waterbeach in 2021. Given the location, three miles from Cambridge Science Park with direct cycle routes, the development is planned to include build to rent from the outset. The priority on our other sites had been to establish brand identification and location through owner occupation. Those foundations having now been established, discussions are taking place with build to rent operators and investors across all Urban&Civic strategic sites in delivery. This may also incorporate modular construction. After extensive research and due diligence, we have agreed in principle to run a pilot construction programme with Top Hat as our modular provider at Houlton. Build to rent affords considerable potential to increase absorption rates without cutting across core private sales. Modular construction is better suited to the demands of that particular market. We are also exploring cost effective methods of delivering build to rent using more traditional means. We see the two delivery routes as providing more design flexibility and being complementary. Should purchases prove slow to recover post Covid-19, institutional rentals could compensate for any weakened demand for owner occupation.

Dividend

Have regard for cash receipts being pushed back, the Board has elected to postpone a decision in relation to the payment of dividends. All discretionary expenditure has also been curtailed. The absolute priorities are to take advantage of current market conditions to add prudently to our portfolio of strategic assets and Catesby promotions, whilst maintaining infrastructure investment for future delivery.

The Board is acutely conscious of the balance in making dividend payments to shareholders and will reappraise the position at the current financial year end. No application has been made under the Government's Coronavirus Large Business Interruption Loan scheme.

Outlook

The consensus expectation amongst analysts and valuers appears to be for the UK housing market to suffer a 12 month period of hibernation. The real imponderable is what all this means for housing demand, in our case in areas of good historic affordability. Recent monthly price statistics cannot be taken as fully reliable but almost certainly point to a low level of overall housing transactions for the rest of the year. Hibernation supports our approach of strong backbone backed by continued Homes England investment. If anything, enforced saving through and coming out of lockdown helps housing deposit accumulation. Working from home determines the merits of having more space in which to live. Structurally low interest rates and the drop in petrol prices will go straight to net disposable income in Middle England for those that remain in work. The sheer impracticalities of viewing occupied properties may favour new builds, particularly where no onward chain is involved. There is the spectre of job insecurity and higher unemployment but our strategic projects provide immediate build to rent options. Plus, we can expect enormous political pushback if the additional debt burden from the pandemic were to be shouldered by young new house buying households.

As lockdown preoccupations abate, we will see new Government policies to promote a green economic recovery. The Real Estate sector has a big role to play. ESG considerations are baked into our Master Developer model without the need for material incremental spend. Clear demonstration of the resulting positive environmental and social impacts will remain one of our absolute priorities.

Conclusion

Urban&Civic is well set to perform in an economic downturn. The Group has contracted minimums representing 3.1x future annual sales without further material capital outlay. We would only lose real ground if housing demand fails to recover over the next three years, not in the second half of the current reporting year. That absence in demand recovery would also have to include new housing to rent. Accordingly, we have kept up school construction and civils preparation ready for the next set of licences. The listed majors have mostly suspended land acquisitions but as they look to start rebuilding output, we can expect that capital-lite, serviced plots will be at the top of their want list. Four new agreements since March with predominantly private housebuilders provide good support to that conclusion.

Whatever the behavioural changes and eventual outcomes to this pandemic, it is hard to see them as being bad for well-planned, countryside facing developments with good transport connections, great schools, decent broadband and guaranteed access to green spaces. ESG attributes may have taken something of a back seat while investors try to figure out what is going on in the world but look set to return stronger when attention switches to building a greener and more resilient future. The result for us would be a powerful alignment of government, investor and house-buyer interests. The current land market dislocations work in our favour. The housebuilders will seek to preserve immediate margin, whereas we will look to acquire for the future. Additional pipeline developments beyond the two further strategic projects contracted in the past fortnight are anticipated.

Nigel Hugill

Chief Executive

10(th) June 2020

Financial review

Introduction

I would like to start by highlighting the immediate and principal impacts that Coronavirus has had on the Group.

During the two weeks or so preceding the Government's lockdown on 23 March, sales completions and reservations at our sites understandably fell as visitor numbers slowed. Housebuilders ultimately closed their sales offices making reservations and completions more challenging.

These events principally affected the Group in two ways. Firstly, the Group's independent valuers (CBRE) reduced their valuations at the half year due to market uncertainties, and secondly receipts under our licence agreements slowed.

Although this slowdown of receipts did not significantly impact the period under review it will make achievement of our previous guidance for the full financial year unlikely.

Residential sales equivalent to 382 plots were made in the interim period generating GBP20.1 million of cash for the Group. This total is up 9.8 per cent over the comparable period and, although it represents only 33.5 per cent of the GBP60 million annual cash generation target, this was in line with our expectations as these targets were skewed towards increased second half performance - reflecting the progress of pipeline transactions at the forecast date and the expectation that Wintringham would start generating income from the third quarter this year.

Although a fully functioning market is of course preferable for all, the Group's cashflows are protected to an extent through its GBP107.7 million of forward contracted sales (up from GBP101.7 million at 30 September 2019). These forward contracts specify minimum annual sums which the housebuilders are required to pay whether houses are built or not. Although each contract is assessed on a 12-month look-back basis, meaning that the minimum sums will be receivable at different times, in the aggregate they are worth the equivalent of GBP34.9 million per annum to the Group (30 September 2019: GBP30.7 million) over 3.1 years.

In addition to reducing completions, the increased market uncertainty and consequently lower CBRE valuations have caused EPRA metrics to fall around 7 per cent across all measures at the half year. If, however, the large site discount (which represents the aggregated difference between the bulk land values ascribed by CBRE's strategic site valuations and the current retail prices being achieved on smaller parcel sales) is added to the EPRA NAV per share measure, this fall reduces to 3.1 per cent (see the Key Performance Indicator Table below).

Key Performance Indicators

The Group's Key Performance Indicators for the six months to 31 March 2020 remain consistent with those detailed in the Strategic Report section of the 2019 Annual Report and Accounts:

 
                                       Six months     Six months      Year ended                 Annual    Six monthly 
                                      to 31 March    to 31 March    30 September    (decrease)/increase    (decrease)/ 
                                             2020           2019            2019                              increase 
----------------------------------  -------------  -------------  --------------  ---------------------  ------------- 
 EPRA NAV (EPRA net assets)             GBP487.8m      GBP497.3m       GBP527.5m                 (1.9)%         (7.5)% 
 EPRA NAV per share                        335.1p         340.6p          360.3p                 (1.6)%         (7.0)% 
----------------------------------  -------------  -------------  --------------  ---------------------  ------------- 
 EPRA NNNAV (EPRA triple net 
  assets)                               GBP463.3m      GBP470.8m       GBP497.0m                 (1.6)%         (6.8)% 
 EPRA NNNAV per share                      318.3p         322.4p          339.5p                 (1.3)%         (6.2)% 
----------------------------------  -------------  -------------  --------------  ---------------------  ------------- 
 Total shareholder return                 (35.0)%         (8.5)%            7.8% 
----------------------------------  -------------  -------------  --------------  ---------------------  ------------- 
 Total NAV return                          (5.5)%           2.8%            8.6% 
 Gearing - EPRA NAV basis                   25.0%          18.2%           19.9% 
 Strategic site plot                    382 plots      365 plots       665 plots                   4.7%            n/a 
 completions(1,2) 
 Europa Way plots completions           133 plots              -       401 plots 
 Cash flow generation from               GBP20.1m       GBP18.3m        GBP34.3m                   9.8%            n/a 
  plot completions(3) 
 Large site discount per share(5)            145p           139p            135p                   4.3%           7.4% 
----------------------------------  -------------  -------------  --------------  ---------------------  ------------- 
 EPRA NAV per share + large 
  site discount per share (gross 
  of tax)(4)                               480.1p         479.6p          495.3p                   0.0%         (3.1)% 
----------------------------------  -------------  -------------  --------------  ---------------------  ------------- 
 

1. Includes 239 of actual plot completions and land sales equivalent to 143 plots (Alconbury: 4; Rugby: 65; Newark: 64; Wintringham: 10).

2. Actual plot completions include 55 plots at Alconbury (six months ended 31 March 2019: 60; year ended 30 September 2019: 144); 93 at Rugby (six months ended 31 March 2019: 62; year ended 30 September 2019: 155); 35 at Newark (six months ended 31 March 2019: 63; year ended 30 September 2019: 87); 18 plots from new contracts at Priors Hall and 38 plots from pre-acquisition contracts at Priors Hall (six months ended 31 March 2019: 180; year ended 30 September 2019: 279).

   3.   Represents Urban&Civic's (U&C's) share of cash generated by strategic site plot completions. 

4. EPRA NNNAV per share + large site discount per share (net of tax) equates to 435.8p (31 March 2019: 435.0p; 30 September 2019: 448.9p). The tax allowance was calculated by applying a tax rate of 19 per cent to the gross large site discount.

5. Large site discount represents the difference between the unserviced land values ascribed by CBRE strategic site valuations (which consider site scale and build-out duration among other matters) and the current retail prices being achieved on smaller parcel sales.

Although currently in an exceptional period of disruption, we maintain that EPRA NAV metrics and TSR remain the most reliable and therefore most appropriate principal measures by which to assess business performance, particularly when considering value growth.

In order to underpin the EPRA metrics, we engage CBRE Limited (independent valuers) to provide Red Book valuations for all our consented strategic land sites (as well as other assets). Having highlighted the reliability of EPRA metrics, at this half year, in common with the vast majority of 31 March valuations, CBRE's valuation report carries material uncertainty wording that states they are attaching less weight to previous market evidence for comparison purposes when forming opinions of value and that a higher degree of caution should be exercised when considering these valuations.

The basis for selecting our other KPI's is set out in the 2019 Annual Report.

Net Asset Value - EPRA and IFRS

Presented below is 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 2020                       to            30 September 
                                                                           31 March 2019          2019 
                             -----------------------------------------  -----------------  ---------------- 
                                           Joint                                    Pence             Pence 
                               Group    ventures    Total        Pence    Total       per    Total      per 
                                GBPm        GBPm     GBPm    per share     GBPm     share     GBPm    share 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 Rental, hotel and 
  other property profits         0.7       (0.1)      0.6          0.4      1.1       0.7      2.3      1.6 
 Revaluation of investment 
  properties and write 
  downs of trading 
  properties(1,2)              (6.1)       (0.7)    (6.8)        (4.7)      1.0       0.6      5.1      3.5 
 Profit on trading 
  property sales(3,4)           10.7         2.6     13.3          9.1     10.0       6.9     27.4     18.7 
 Project management 
  and other fees                 1.1           -      1.1          0.8      2.0       1.4      2.9      2.0 
 Administrative expenses       (7.6)       (0.1)    (7.7)        (5.3)    (8.8)     (6.0)   (20.0)   (13.7) 
 Tax and other income 
  statement and retained 
  earnings movements           (1.5)         0.1    (1.4)        (0.9)    (1.5)     (1.0)    (5.1)    (3.5) 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 Total comprehensive 
  income movement              (2.7)         1.8    (0.9)        (0.6)      3.8       2.6     12.6      8.6 
 Dividends paid                (3.6)           -    (3.6)        (2.5)    (3.2)     (2.2)    (5.2)    (3.5) 
 Other equity movements          0.1           -      0.1          0.1      2.3       1.5      3.3      2.3 
 Effect of IFRS 15 
  adoption(4)                      -           -        -            -      3.2       2.2      3.2      2.2 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 IFRS movement                 (6.2)         1.8    (4.4)        (3.0)      6.1       4.1     13.9      9.6 
 Revaluation of retained 
  trading properties(2)       (22.2)       (7.3)   (29.5)       (20.3)     14.6      10.0     39.3     26.8 
 Release of trading 
  property revaluations 
  on disposals(4)              (6.6)           -    (6.6)        (4.5)    (2.7)     (1.8)    (4.7)    (3.2) 
 Deferred taxation(2)            0.8           -      0.8          0.5      1.3       0.9      1.0      0.7 
 Effect of IFRS 15 
  adoption(2)                      -           -        -            -    (3.2)     (2.2)    (3.2)    (2.2) 
 Effect of shares 
  and dilutive options             -           -        -          2.1        -     (2.2)        -    (3.2) 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 EPRA NAV movement            (34.2)       (5.5)   (39.7)       (25.2)     16.1       8.8     46.3     28.5 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 Deferred taxation               6.0           -      6.0          4.0    (3.4)     (2.3)    (7.4)    (4.9) 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 EPRA NNNAV movement          (28.2)       (5.5)   (33.7)       (21.2)     12.7       6.5     38.9     23.6 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 EPRA NAV at start 
  of period                                         527.5        360.3    481.2     331.8    481.2    331.8 
 EPRA NAV at end 
  of period                                         487.8        335.1    497.3     340.6    527.5    360.3 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 EPRA NNNAV at start 
  of period                                         497.0        339.5    458.1     315.9    458.1    315.9 
 EPRA NNNAV at end 
  of period                                         463.3        318.3    470.8     322.4    497.0    339.5 
---------------------------  -------  ----------  -------  -----------  -------  --------  -------  ------- 
 

1. Comprises deficits on the revaluation of investment properties (GBP4.8 million) and trading property write downs (GBP2.0 million; GBP0.7 million of which relate to joint ventures). 31 March 2019 comparable comprises GBP1.0 million of investment property revaluation surpluses. 30 September 2019 comparable comprises GBP5.8 million of investment property revaluation surpluses and trading property write downs of GBP0.7 million.

2. Total classified as property revaluations for the purposes of the below EPRA NNNAV growth commentary.

3. Comprises profits from trading and residential property sales (GBP9.4 million) and construction contracts (GBP1.1 million), whether earned by subsidiaries or joint ventures, as well as unwinding discounts applied to long-term residential property sales debtors (GBP2.7 million) and surpluses on revaluation of overage elements that were acquired with the Priors Hall asset (GBP0.1 million).

4. Total classified as profit on property sales for the purposes of the below EPRA NNNAV growth commentary.

From the table above it can be noted that property revaluations (identified by a superscript 2.) accounted for (24.5)p of the Group's (25.2)p EPRA NAV contraction, while overheads, dividends and the dilutive effect of share options have netted a further (5.7)p from EPRA NAV. Profits on property sales contributed a positive 4.6p (identified by a superscript 4.).

A more detailed reconciliation between IFRS, EPRA NAV and EPRA NNNAV is provided in note 18.

Total shareholder return

Having hit an all-time high share price of 375p per share on 19 February, the price fell back to 208p per share by 31 March - meaning U&C shares have fallen 116p per share or 35.8 per cent since 30 September 2019. Combined with the payment of a 2.5p final dividend, this has resulted in total shareholder return being minus 35.0 per cent.

Total NAV return, which substitutes movements in EPRA NNNAV for movements in share prices when compared to shareholder return calculations, is minus 5.5 per cent over the six months to 31 March 2020.

Consolidated statement of comprehensive income

Gross profit and loss/profit after tax (including the Group's share of joint ventures) have fallen GBP2.3 million and GBP4.7 million respectively. These decreases are predominantly due to downward property revaluations (as set out in the table below).

 
                             Six months to                  Six months to                       Year ended 
                             31 March 2020                  31 March 2019                    30 September 2019 
                      --------------------------  --------------------------------  ---------------------------------- 
                                                                     Joint                              Joint 
                                   Joint                           venture                            venture 
                       Group    ventures   Total   Group    and associates   Total    Group    and associates    Total 
                        GBPm        GBPm    GBPm    GBPm              GBPm    GBPm     GBPm              GBPm     GBPm 
--------------------  ------  ----------  ------  ------  ----------------  ------  -------  ----------------  ------- 
 Revenue                33.0        14.6    47.6    30.9              16.4    47.3    102.1              29.4    131.5 
--------------------  ------  ----------  ------  ------  ----------------  ------  -------  ----------------  ------- 
 
 Rental, hotel and 
  other property 
  profits                0.7       (0.1)     0.6     1.1                 -     1.1      2.3                 -      2.3 
 Profit on trading 
  property 
  sales(1,2)             8.8         1.7    10.5     4.3               5.1     9.4     16.7               7.2     23.9 
 Project management 
  and other fees(3)      1.1           -     1.1     2.0                 -     2.0      2.9                 -      2.9 
 Write down of 
  trading 
  properties(4)        (1.3)       (0.7)   (2.0)       -                 -       -    (0.7)                 -    (0.7) 
--------------------  ------  ----------  ------  ------  ----------------  ------  -------  ----------------  ------- 
 Gross profit            9.3         0.9    10.2     7.4               5.1    12.5     21.2               7.2     28.4 
 Administrative 
  expenses             (7.6)       (0.1)   (7.7)   (8.8)                 -   (8.8)   (19.9)             (0.1)   (20.0) 
 (Deficit)/surplus 
  on revaluation of 
  investment 
  properties 
  and receivables(4)   (4.8)           -   (4.8)     1.1                 -     1.1      5.8                 -      5.8 
 Surplus on 
  revaluation 
  of receivables(2)      0.1           -     0.1     0.5                 -     0.5      0.9                 -      0.9 
 Impairment of loans 
  to joint ventures 
  and share of 
  post-tax 
  profit from joint 
  ventures               1.8       (1.8)       -     5.2             (5.2)       -      8.0             (8.0)        - 
 Unwinding of 
  discount 
  applied to 
  long-term 
  debtors(2)             1.8         0.9     2.7     0.3               0.2     0.5      1.7               0.9      2.6 
 Tax and other 
  income 
  statement 
  movements            (1.5)         0.1   (1.4)   (1.9)             (0.1)   (2.0)    (5.1)                 -    (5.1) 
--------------------  ------  ----------  ------  ------  ----------------  ------  -------  ----------------  ------- 
 (Loss)/profit after 
  tax                  (0.9)           -   (0.9)     3.8                 -     3.8     12.6                 -     12.6 
--------------------  ------  ----------  ------  ------  ----------------  ------  -------  ----------------  ------- 
 

1. Comprises profits from trading and residential property sales (GBP9.4 million; GBP1.7 million of which relate to join ventures) and construction contracts (GBP1.1 million).

2. Total classified as profit on trading and investment property sales in the EPRA movement table above.

3. Recurring project management fees comprise GBP0.9 million of the total (31 March 2019: GBP1.0 million; 30 September 2019: GBP2.1 million) and are earned through recharging administrative expenses to joint venture partners where Group employees are engaged in joint venture activities.

4. Total classified as revaluation of investment properties and write downs of trading properties in the EPRA movement table above.

Gross profit

Gross profit is down GBP2.3 million on last year (to GBP10.2 million including GBP0.9 million generated by joint ventures) reflecting

increased trading profits (up GBP1.1 million to GBP10.5 million), greater trading property write downs (up GBP2.0 million), reduced non-recurring fees (down GBP0.9 million) and lower profits from hotel operations (down GBP0.5 million).

Of the GBP10.5 million of profits from trading property sales, residential profits at Alconbury, Newark and Priors Hall accounted for GBP2.2 million, GBP1.7 million was earned in respect of Urban&Civic's share of residential profits at Rugby and Wintringham, GBP5.2 million was generated by Catesby land promotion sales, GBP1.1 million came from Europa Way residential parcel sales and GBP0.3 million was accounted for by non-core property disposals.

Consistent with prior periods, residential profits include profits from the Group's strategic site licence arrangements.

Due to the complexity of these licence arrangements from an accounting perspective, it is worth noting that profit under licences are predominantly recognised in two places in the income statement, although often at different points in time. In the first instance, we will typically recognise the full cost of sale together with the total minimum amounts due under a licence arrangement when the land has been transferred to the housebuilder (usually on contract completion). This minimum sum is discounted and recorded through the gross profit line together with an estimate of the overages that the Group expects to collect from the housebuilder when the homes are ultimately sold. This overage sum is also discounted, due to the length of time it takes to earn that overage, and it is only recognised if we do not believe there is a high probability that it will reverse due to market conditions prior to collection.

At each subsequent reporting period our estimates will be compared with what has taken place and adjustments made.

The second place where you might consider that 'residential profits' are recorded is through the finance income line. This is where the discount applied to the long-term minimums and overage debtors unwind; through either the passage of time or upon receipt of the licence proceeds, minimum sum and/or overage.

In the six months to 31 March 2020, GBP2.2 million of residential profits (associated with overages at Alconbury Weald, Newark and Priors Hall) were recognised through gross profit with a further GBP1.8 million of discount unwinding (in respect of minimum and overage receivables) being recognised in finance income.

Of the GBP1.7 million of joint venture residential profits (U&C's share), GBP0.6 million was attributable to the contractual minimums and discounted overages following the sale of a 235-plot parcel to Morris Homes at Wintringham, with a further GBP1.1 million of overages and other profits from Davidsons Homes, Morris Homes and Crest Nicholson agreements at Rugby. Joint ventures booked a further GBP0.9 million of discount unwinding (U&C's share), in respect of the overage receivables, through finance income, which has been consolidated into the Group's share of profits from joint ventures.

A breakdown of sales completions by site, with comparatives, has been included as a footnote to the KPI table above. These footnotes also set out how many of these sales completions relate to land sales as opposed to actual plot completions.

The terms minimums, overages and licences have been defined within the glossary on the last page of this interim statement.

Administrative expenses

Gross administrative costs have fallen GBP0.7 million to GBP10.2 million in the six months to 31 March 2020, largely as a result of decreased share based payment charges (following reduced EPRA and TSR performance over the last six months) and not having to incur the one off costs associated with the Group's move to the Premium Listing segment of the London Stock Exchange (which was completed last year).

We continue to capitalise overheads associated with development activity by reference to the amount of time spent by our employees on those activities. In the six months to 31 March 2020 this capitalised proportion increased to around 25 per cent compared to 20 per cent last year thereby reducing net overheads by GBP2.5 million.

No material benefit has been received under the Covid-19 job retention scheme, reflecting the Group's high activity levels during lockdown. A maximum of 10 employees, associated with administrative duties at the Group's offices or estate management at the strategic land sites, were furloughed at any one time. No employees remain furloughed.

Surplus on revaluation of investment properties

Investment properties now only comprise commercial buildings and commercial 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 revaluation movements accounted for through the income statement under IFRS.

In order to help the reader understand the value of the Group's total property portfolio, as well as reconcile the movements at both IFRS and EPRA levels, the below table has been produced.

 
                                                                                                                   Trade 
                                                                             Trade                             and other 
                                                          Properties           and                 Trading   receivables        Total 
                                Investment      Trading       within         other              properties        (share   (including 
                                properties   properties          PPE   receivables   Subtotal       (share            of        share 
Property portfolio                 (wholly      (wholly      (wholly       (wholly    (wholly     of joint         joint     of joint 
 GBPm                               owned)       owned)       owned)        owned)     owned)    ventures)     ventures)    ventures) 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
Valuation at 
 1 October 2019                       52.9        402.4          3.2          52.6      511.1        163.7          27.7        702.5 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
Less: EPRA adjustment 
 (trading properties)                    -         95.4            -             -       95.4         20.6             -        116.0 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
IFRS carrying value 
 at 
 1 October 2019                       52.9        307.0          3.2          52.6      415.7        143.1          27.7        586.5 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
Capital expenditure 
 (including capitalised 
 overheads)                            1.8         22.9            -             -       24.7         17.0             -         41.7 
Disposals/depreciation/write 
 downs                               (1.5)       (20.6)        (0.1)           1.1     (21.1)        (8.2)           3.6       (25.7) 
Revaluation movements 
 (investment properties)             (4.8)            -            -             -      (4.8)            -             -        (4.8) 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
IFRS carrying value 
 at 
 31 March 2020                        48.4        309.3          3.1          53.7      414.5        151.9          31.3        597.7 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
Add: EPRA adjustment 
 (trading properties)                    -         68.4            -             -       68.4        -11.5             -         79.9 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
Valuation at 31 March 
 2020                                 48.4        377.7          3.1          53.7      482.9        163.4          31.3        677.6 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
Memo: movement in 
 EPRA adjustment (trading 
 properties)                             -       (27.0)            -             -     (27.0)        (9.1)             -       (36.1) 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
Comprising: 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
EPRA adjustment on 
 sites sold                              -        (6.6)            -             -      (6.6)            -             -        (6.6) 
EPRA adjustment on 
 retained properties                     -       (20.4)            -             -     (20.4)        (9.1)             -       (29.5) 
-----------------------------  -----------  -----------  -----------  ------------  ---------  -----------  ------------  ----------- 
 

Investment properties fell in value by GBP4.8 million in the period with a further GBP29.5 million reduction in value coming from the revaluation of retained trading properties at the EPRA level.

In addition to these movements, GBP6.6 million of EPRA adjustments have been reversed as properties have been disposed of or profits recognised.

Out of the total GBP34.3 million revaluation deficit in respect of retained properties, GBP12.2 million was attributable to a 4.3 per cent fall in the value of Alconbury.

Other reductions in value across our property portfolio included Rugby (U&C's share: GBP5.6 million), Newark (GBP3.9 million), Priors Hall (GBP3.8 million) and the Manchester commercial assets (U&C's share: GBP5.7 million). Catesby planning consents yielded the Group's only valuation surpluses in the period with GBP2.2 million being generated from achieving planning consents on three sites.

The revaluation deficits reflect the current market uncertainties and in arriving at their valuations, CBRE have increased discount rates, reduced sales rates and lowered both house price and serviced land value inflation assumptions within their discounted cashflow models. Servicing works continue across all of the Group's consented strategic sites.

As previously mentioned in the KPI section above, and in common with substantially all valuation reports at this date, the independent valuer's opinion for this half year carries a material uncertainty qualification due to the lack of market evidence at this time.

Alconbury remains the Group's most significant property asset comprising 40.5 per cent of the total property portfolio value.

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 accessed in any one period.

In the six months to 31 March 2020 the Group's tax charge totalled GBP1.1 million compared to a profit before taxation of GBP182,000. This is the result of additional deferred tax being provided for at an increased rate of 19 per cent this period, rather than the 17 per cent applied at the year end following the Government's decision not to enact the intended reduction in tax rates to 17 per cent (GBP561,000), and deficits on revaluation of investment properties not being a recognised deduction for tax purposes (GBP868,000) among other matters.

Dividend

Despite the Group's development progress at its strategic land sites the Board has elected to postpone a decision in relation to the payment of dividends due to the current market volatility, which has affected both our property portfolio values and growth in plot completions and cash generation.

The Board intends to reappraise the position at the year end.

The Group paid its 2019 final dividend of 2.5p per share (GBP3.6 million) in February 2020.

Consolidated balance sheet

Overview

 
                           At 31 March                      At 31 March                       At 30 September 
                               2020                             2019                                2019 
                 ------------------------------  ---------------------------------  ---------------------------------- 
                                                                   Joint                               Joint 
                                                                 venture                             venture 
                                Joint                                and                                 and 
                    Group    ventures     Total     Group     associates     Total     Group      associates     Total 
                     GBPm        GBPm      GBPm      GBPm           GBPm      GBPm      GBPm            GBPm      GBPm 
---------------  --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 Investment 
  properties         48.4           -      48.4      46.5              -      46.5      52.9               -      52.9 
 Trading 
  properties        309.3       151.9     461.2     320.8          129.3     450.1     307.0           143.1     450.1 
 Properties 
  within 
  PPE                 3.1           -       3.1       3.4              -       3.4       3.2               -       3.2 
---------------  --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 Properties(1)      360.8       151.9     512.7     370.7          129.3     500.0     363.1           143.1     506.2 
 Investment in 
  joint 
  ventures and 
  associates        123.6     (123.6)         -     113.6        (113.6)         -     121.3         (121.3)         - 
 Trade and 
 other 
 receivables 
                 --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 Non-current 
  property(1)        37.1        26.5      63.6      20.0           18.9      38.9      45.9            22.1      68.0 
 Current 
  property(1)        16.7         4.7      21.4       9.3            2.5      11.8       6.7             5.6      12.3 
 Current - 
  other              14.6         7.5      22.1      14.3           12.6      26.9      11.8            12.6      24.4 
                 --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
                     68.4        38.7     107.1      43.6           34.0      77.6      64.4            40.3     104.7 
 Cash                12.7         6.2      18.9      28.2            3.5      31.7      24.4             3.0      27.4 
 Borrowings       (134.8)      (58.7)   (193.5)   (118.6)         (35.5)   (154.1)   (129.3)          (47.6)   (176.9) 
 Deferred tax 
  liability 
  (net)             (6.2)           -     (6.2)     (4.9)              -     (4.9)     (5.9)               -     (5.9) 
 Other net 
  liabilities      (25.9)      (14.5)    (40.4)    (37.5)         (17.7)    (55.2)    (35.0)          (17.5)    (52.5) 
---------------  --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 Net assets         398.6           -     398.6     395.1              -     395.1     403.0               -     403.0 
 EPRA 
  adjustments 
  - property(1)      68.4        11.5      79.9      76.2           17.3      93.5      95.5            20.5     116.0 
 EPRA 
  adjustments 
  - deferred 
  tax                 9.3           -       9.3       8.7              -       8.7       8.5               -       8.5 
---------------  --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 EPRA NAV           476.3        11.5     487.8     480.0           17.3     497.3     507.0            20.5     527.5 
---------------  --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 EPRA NNNAV 
  adjustments      (24.5)           -    (24.5)    (26.5)              -    (26.5)    (30.5)               -    (30.5) 
---------------  --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 EPRA NNNAV         451.8        11.5     463.3     453.5           17.3     470.8     476.5            20.5     497.0 
---------------  --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 EPRA NNNAV per 
  share                                  318.3p                             322.4p                              339.5p 
---------------  --------  ----------  --------  --------  -------------  --------  --------  --------------  -------- 
 

1. Total property related interests: GBP677.6 million (31 March 2019: GBP644.2 million; 30 September 2020: GBP702.5 million).

Investment properties

Investment properties at 31 March 2020 amounted to GBP48.4 million and comprised the commercial development area at Alconbury (GBP39.4 million) and the proportion of the Waterbeach site that could deliver both commercial buildings and residential properties for rent (GBP9.0 million).

The Group's total period-end property portfolio, irrespective of balance sheet classification, was valued at GBP677.6 million, 95 per cent by independent valuers CBRE and 5 per cent by Directors.

Trading properties

The carrying value of trading properties increased by GBP2.3 million in the period to GBP309.3 million.

This increase was the result of capital expenditure of GBP14.4 million (including GBP10.0 million in respect of Alconbury and Priors Hall development works), capitalised overheads amounting to GBP2.3 million, capitalised finance costs of GBP1.9 million - all net of GBP15.0 million of disposals (including residential disposals at Alconbury and Newark of GBP12.3 million and GBP2.5 million in respect of the sale of Catesby sites) and GBP1.3 million of write downs (in respect of non-core properties).

Investment in joint ventures and associates

The Group's joint venture in Rugby has been included in the balance sheet at GBP88.7 million, which along with a half interest in the 351 apartment scheme known as Manchester New Square (GBP15.2 million), a one-third interest in a 400 acre (162.3 hectares) site at Wintringham Park, St. Neots (GBP17.9 million) and GBP1.8 million of other residual interests combine to form an overall Group investment in joint ventures and associates of GBP123.6 million.

Trade and other receivables

At the half year, non-current and current trade and other receivables (totalling GBP68.4 million) included acquired Priors Hall receivables (GBP1.2 million), discounted contractual minimum receivables (GBP45.4 million) and pre-completion discounted overages (GBP2.1 million) with Morris Homes, Redrow, Crest Nicholson and Hopkins Homes at Alconbury, Kier at Corby and Avant and Bellway at Newark. Also included is GBP5.1 million in respect of deferred consideration on the sale of a parcel at Newark to Countryside in the period.

Equivalent receivables (U&C's share) are owed to the Rugby joint venture by Crest Nicholson (GBP1.6 million) and again Morris Homes (GBP4.3 million) and Redrow (GBP12.6 million) and to the Wintringham joint venture by Cala (GBP6.4 million) and Morris Homes (GBP6.3 million).

These property receivables 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. The discounts applied to these balances will unwind through finance income over time.

Cash

Group cash balances at the period end totalled GBP12.7 million, down GBP11.7 million since last year end; largely due to property additions (GBP18.0 million), admin expenses (GBP13.9 million), loan repayments (GBP3.7 million) and payment of dividend (GBP3.6 million) exceeding sales receipts (GBP21.6 million) and loan drawdowns (GBP10.1 million).

Sales receipts comprised GBP8.5 million of Catesby promotion proceeds (including cost reimbursement) and GBP13.1 million of residential sales receipts.

Subsequent to 31 March, Urban&Civic received GBP18.2 million under the Development Management Agreement arrangement at Waterbeach (see post balance sheet matters note below).

Current and non-current borrowings - financial resources and capital management

In the six months to 31 March 2020 the Group has put in place GBP96.2 million of additional financial resources in the form of a loan from Homes England and an amortising grant from the Department for Education (DfE); which has been recorded as an 'other creditor' within joint ventures in the financial statements.

The GBP60.6 million loan is a ten year and nine-month Homes England infrastructure facility at Waterbeach and the interest free amortising grant from the DfE is for GBP35.6 million, which will be used to fund the early construction of a new secondary school at Houlton, Rugby. The DfE grant will be repaid in line with the Houlton's existing Section 106 obligations (attaching to the provision of secondary school), meaning that the final repayment date is anticipated to be mid-2042.

This additional financial resource means that the Group now benefits from GBP136.4 million of undrawn facilities on a look-through basis (U&C's share GBP111.6 million), 86.0 per cent of which is with Homes England, Local Authorities, DfE and other government bodies.

In response to Covid-19 related construction and sales delays, the Group has sought and received credit approval to extend facility durations and milestones in respect of two loans funding our Manchester New Square joint venture development. The 10 month extension (to October 2021) of the GBP51.0 million senior facility and 17 month extension (to May 2022) of the GBP24.6 million mezzanine facility will provide additional time in which to complete the construction and sale of the residential apartments; 44 per cent of which have already been reserved or exchanged).

In addition to these measures the Group has also applied for a number of facility expansions with existing lenders and these are being reviewed by respective credit departments at this time. None of these extensions are being relied upon to form our view on going concern, which has no material uncertainties attaching to it and which has been described in more detail in note 1.

The Group has not taken advantage of the Coronavirus Large Business Interruption Loan scheme. HSBC (the Group's corporate lender) has indicated that the Group would qualify, subject to usual approvals and processes.

The Group's net debt position at 31 March 2020 totalled GBP122.1 million (30 September 2019: GBP104.9 million), producing a net gearing ratio of 30.6 per cent (30 September 2019: 26.0 per cent) on an IFRS NAV basis and 25.0 per cent (30 September 2019: 19.9 per cent) on an EPRA NAV basis. Look-through gearing levels are higher as shown below due to the shorter-term borrowings used to fund development expenditure in respect of the Manchester New Square and Homes England borrowings within the Rugby and Wintringham joint ventures.

Homes England now account for 75.1 per cent of all Group borrowings with Local Authorities and other government bodies accounting for a further 1.4 per cent (as shown in the table below).

 
 
                                                                 At 31 March 2020 
                                     --------------------------------------------------------------------- 
                                                Proportion                                      Proportion 
                                                        of                                              of 
                                       Group         Group   Joint ventures   Look-through    look-through 
                                        GBPm    borrowings             GBPm           GBPm      borrowings 
-----------------------------------  -------  ------------  ---------------  -------------  -------------- 
Homes England                          102.7         75.1%             26.8          129.5           66.1% 
Corporate RCF                           20.9         15.3%                -           20.9           10.7% 
Manchester New square                      -          0.0%             32.2           32.2           16.4% 
Deansgate Hotel                         11.2          8.2%                -           11.2            5.8% 
Huntington District Council              2.0          1.4%                -            2.0            1.0% 
-----------------------------------  -------  ------------  ---------------  -------------  -------------- 
Borrowings before loan arrangement 
 costs                                 136.8        100.0%             59.0          195.8          100.0% 
Loan arrangement costs                 (2.0)                          (0.3)          (2.3) 
-----------------------------------  -------  ------------  ---------------  -------------  -------------- 
Borrowings after loan arrangement 
 costs                                 134.8                           58.7          193.5 
Cash                                  (12.7)                          (6.2)         (18.9) 
-----------------------------------  -------  ------------  ---------------  -------------  -------------- 
Net debt                               122.1                           52.5          174.6 
-----------------------------------  -------  ------------  ---------------  -------------  -------------- 
EPRA NAV                               487.8                                         487.8 
EPRA NAV gearing                       25.0%                                         35.8% 
-----------------------------------  -------  ------------  ---------------  -------------  -------------- 
 

The Group's only gearing covenant, which attaches to the GBP40 million Revolving Credit Facility with HSBC, has a limit of 40 per cent and is based on borrowings (on a non-look-through basis) and EPRA NAV.

Other principal loan covenants (which are predominantly associated with Homes England loans) are based on loan to value ratios attaching to specific property assets. These ratios typically range between 40 per cent and 75 per cent.

The Group was covenant compliant in the six months to 31 March and is forecast to remain compliant throughout the going concern review period, as described in note 1. Compliance has been stress tested as part of that exercise and the Group has identified further mitigations that could be used to cure any potential covenant breaches, including pledging more asset value as security. On large sites we typically seek to give lenders charges over smaller areas of land, rather than a charge over the whole site, which provides additional charging capacity if required. By way of example, out of a total value of GBP272.4 million for Alconbury at 31 March, GBP133.6 million is subject to a fixed charge, leaving GBP138.8 million of additional charging capacity.

The Group's weighted average loan maturity at 31 March 2020 was 6.3 years (30 September 2019: 6.7 years) and weighted average cost of borrowing on drawn debt was 3.7 per cent (30 September 2019: 3.8 per cent).

The Group has no loans maturing over the next three years, except for the Newark Homes England facility (GBP6.1 million currently drawn), the GBP11.2 million Deansgate Hotel facility (which is currently being marketed as a development site with planning) and the joint venture development loans at Manchester New Square. The Newark facility will be repaid out of residential plot sales and the Manchester New Square and Deansgate borrowings will also be repaid from sale proceeds.

The Group continues to assess its long-term viability using the procedures set out on page 33 of the 2019 Annual Report and Accounts, however in this period of uncertainty, particular attention has been paid to the Group's assumptions around non-contractual receipts and non-committed expenditure as well as the additional mitigations that might be used to counter adverse events (as described in note 1).

Having completed this review, the Directors can confirm that they have a reasonable expectation that the Group has adequate resources to continue in operation and meet its liabilities as they fall due over the 18 months to 30 September 2021.

Post balance sheet matters

Subsequent to 31 March 2020, the Waterbeach joint arrangement sold the converted medical accommodation (let to Papworth Hospital Trust) for GBP18.6 million. The Development Management Agreement arrangements were such that Urban&Civic received GBP18.2 million of these proceeds to clear all amounts previously advanced.

Principal risks and uncertainties

The principal risks of the business are set out on pages 38 to 43 of the 2019 Annual Report and Accounts, which include a commentary on their potential impacts, links to the Group's strategic priorities and identification of relevant mitigation factors.

Since the publication of the 2019 Annual Report and Accounts, the Board, with the support of the Executive Management Committee, has undertaken further reviews and believes that although there have been no material changes to the composition of the Group's principal risks, the risk scores and ratings across a number of these risks have increased as a result of Coronavirus. The movements in risk ratings and a description of the movement are set out below.

 
                                                                                                             Change 
                                                                            Risk                             in risk 
                                                                           rating                            rating 
                                                                           (after        Risk rating         (after 
                                                                         mitigation)        (after         mitigation) 
                                                                            at 31         mitigation)         since 
                                                                            March       at 30 September     September 
Risk description     Movement description                                   2020             2019             2019 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
Market               Covid-19 and the associated lockdown                   Red              Red               ^ 
 risk(1)              has had, and is likely to continue to 
                      have, an impact on the Group's customers, 
                      suppliers and contractors, thereby increasing 
                      the risk of operating in the residential 
                      market. 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
Strategic            Covid-19 has caused market disruption                 Green            Green              ^ 
 risk(1)              that will mean the Group's contractual 
                      minimums are likely be tested for the 
                      first time in a market downturn. First 
                      charges over land that secure unpaid 
                      sums, lack of force majeure clauses 
                      in our contracts and underlying financial 
                      stability of our housebuilder customers 
                      (78 per cent have been assessed as five 
                      star or four star builders by the HBF) 
                      provides the Group with good mitigation 
                      prospects. 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
People               The longer term effects of a significant              Green            Green              ^ 
 risk(1)              lockdown period on U&C's workforce is 
                      not fully understood, however active 
                      work programmes, training and increased 
                      levels of communication throughout lockdownhave 
                      helped to mitigate unfavourable effects. 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
Cyber risk(1)        Home working and remote operations caused             Green            Green              ^ 
                      by the lockdown has increased the risk 
                      of cyber-attack. Additional IT security 
                      (such as multi-factor authentification) 
                      and a continuing focus on maintaining 
                      existing protocols have helped to counter 
                      this increased threat. 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
Planning             Achieving a planning consent (or successful           Amber            Green              ^ 
 risk                 appeal) in a period where physical meetings 
                      are not being scheduled could cause 
                      delays. Although virtual planning committee 
                      meetings are now starting to be scheduled, 
                      there remains an increased risk of delay. 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
Health               Social distancing and restrictions on                 Amber            Green              ^ 
 and safety           physical movements increase health and 
 risk                 safety risks when operating development 
                      sites and head office operations (post 
                      lockdown). Although the Group has implemented 
                      enhanced working practices, there remains 
                      an increased risk. 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
Delivery             Coronavirus disruption has affected                   Amber            Green              ^ 
 risk                 the Group's ability to maintain delivery 
                      of its projects in an efficient manner 
                      and increased the financial vulnerability 
                      of its contractors. Additional credit 
                      checks, bonds where appropriate and 
                      requests for additional management information 
                      from our suppliers, contractors and 
                      customers are being sought or undertaken, 
                      however there remains an increased risk 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
Finance              Reduced values and income generation                  Amber            Amber              ^ 
 risk(1)              have increased the Group's finance risk. 
                      Additional funding capacity, revised 
                      milestones and covenants together with 
                      undertaking covenant sensitivity analysis 
                      provides the Group with confidence that 
                      current mitigations are effective. 
----------------    -------------------------------------------------  -------------  -----------------  ------------- 
 

1. Although the risk rating has not changed classification in the period, the risk score has increased.

The Board believes the previously reported mitigation actions, together with the increased controls noted above, appropriately manage these increased 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 10 June 2020

David Wood

Group Finance Director

Consolidated statement of comprehensive income

For the six month period-ended 31 March 2020

 
                                             Six months to   Six months     Year ended 
                                                                     to 
                                                  31 March     31 March   30 September 
                                                      2020         2019           2019 
                                                 Unaudited    Unaudited        Audited 
                                          Notes    GBP'000      GBP'000        GBP'000 
-----------------------------------------------  ---------  -----------  ------------- 
 Revenue                                      2     33,044       30,894        102,114 
 Direct costs                                 2   (23,707)     (23,587)       (80,890) 
------------------------------------------  ---  ---------  -----------  ------------- 
 Gross profit                                 2      9,337        7,307         21,224 
 Administrative expenses                           (7,607)      (8,779)       (19,875) 
 (Deficit)/surplus on revaluation 
  of investment properties                    9    (4,845)        1,046          5,791 
 Surplus on revaluation of receivables       14         98          528            850 
 Impairment of loans to joint ventures       11      (718)            -              - 
 Share of post-tax profit from joint 
  ventures                                   11      2,488        5,240          8,039 
 Profit on disposal of investment properties             6            -              - 
 Operating (loss)/profit                      3    (1,241)        5,342         16,029 
 Finance income                               5      2,350          531          1,777 
 Finance costs                                5      (927)        (774)        (1,470) 
------------------------------------------  ---  ---------  -----------  ------------- 
 Profit before taxation                                182        5,099         16,336 
 Taxation expense                             6    (1,129)      (1,250)        (3,707) 
------------------------------------------  ---  ---------  -----------  ------------- 
 Total comprehensive (loss)/income                   (947)        3,849         12,629 
-----------------------------------------------  ---------  -----------  ------------- 
 Basic (loss)/earnings per share              7     (0.7)p         2.7p           8.8p 
------------------------------------------  ---  ---------  -----------  ------------- 
 Diluted (loss)/earnings per share            7     (0.7)p         2.6p           8.6p 
------------------------------------------  ---  ---------  -----------  ------------- 
 
 

The Group had no amounts of other comprehensive income for the current or prior periods and the (loss)/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 2020

 
                                                                                                                                        31 March        31 March           30 
                                                                                                                                                                    September 
                                                                                                                                            2020            2019         2019 
                                                                                                                                       Unaudited       Unaudited      Audited 
                                                                                           Notes                                         GBP'000         GBP'000      GBP'000 
------------------------------------------------------------------------------------------------  ----------------------------------------------  --------------  ----------- 
 Non-current assets 
 Investment properties                                                                         9                                          48,371          46,553       52,937 
 Property, plant and equipment                                                                10                                           8,024           4,223        3,958 
 Investments in joint ventures                                                                11                                         123,631         113,624      121,262 
 Deferred tax assets                                                                          12                                           3,137           3,808        2,565 
 Trade and other receivables                                                                  14                                          37,088          19,953       45,898 
-------------------------------------------------------------------  ---------------------------  ----------------------------------------------  --------------  ----------- 
                                                                                                                                         220,251         188,161      226,620 
------------------------------------------------------------------------------------------------------------------------------------------------  --------------  ----------- 
 Current assets 
 Trading properties                                                                           13                                         309,342         320,750      306,998 
 Trade and other receivables                                                                  14                                          31,321          22,875       18,463 
 Cash and cash equivalents                                                                                                                12,673          28,165       24,441 
------------------------------------------------------------------------------------------------  ----------------------------------------------  --------------  ----------- 
                                                                                                                                         353,336         371,790      349,902 
------------------------------------------------------------------------------------------------------------------------------------------------  --------------  ----------- 
 Total assets                                                                                                                            573,587         559,951      576,522 
------------------------------------------------------------------------------------------------  ----------------------------------------------  --------------  ----------- 
 Non-current liabilities 
 Borrowings                                                                                   16                                       (128,651)       (117,560)    (128,265) 
 Deferred tax liabilities                                                                     12                                         (9,308)         (8,713)      (8,509) 
-------------------------------------------------------------------  ---------------------------  ----------------------------------------------  --------------  ----------- 
(137,959)                                                                                                                                              (126,273)    (136,774) 
------------------------------------------------------------------------------------------------------------------------------------------------  --------------  ----------- 
 Current liabilities 
 Borrowings                                                                                   16                                         (6,134)         (1,000)      (1,000) 
 Trade and other payables                                                                     15                                        (30,850)        (37,555)     (35,715) 
                                                                                                                                        (36,984)        (38,555)     (36,715) 
 Total liabilities                                                                                                                     (174,943)       (164,828)    (173,489) 
------------------------------------------------------------------------------------------------  ----------------------------------------------  --------------  ----------- 
 Net assets                                                                                                                              398,644         395,123      403,033 
------------------------------------------------------------------------------------------------  ----------------------------------------------  --------------  ----------- 
 Equity 
 Share capital                                                                                17                                          29,036          29,023       29,030 
 Share premium account                                                                                                                   169,268         169,065      169,163 
 Capital redemption reserve                                                                                                                  849             849          849 
 Own shares                                                                                                                              (3,590)         (4,261)      (4,086) 
 Other reserve                                                                                                                           113,785         113,785      113,785 
 Retained earnings                                                                                                                        89,296          86,662       94,292 
------------------------------------------------------------------------------------------------  ----------------------------------------------  --------------  ----------- 
 Total equity                                                                                                                            398,644         395,123      403,033 
------------------------------------------------------------------------------------------------  ----------------------------------------------  --------------  ----------- 
 NAV per share                                                                                18                                          273.9p          270.6p       275.3p 
-------------------------------------------------------------------  ---------------------------  ----------------------------------------------  --------------  ----------- 
 EPRA NAV per share                                                                           18                                          335.1p          340.6p       360.3p 
-------------------------------------------------------------------  ---------------------------  ----------------------------------------------  --------------  ----------- 
 EPRA NNNAV per share                                                                         18                                          318.3p          322.4p       339.5p 
-------------------------------------------------------------------  ---------------------------  ----------------------------------------------  --------------  ----------- 
 

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 2020

 
                                     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 
  2019                    29,030   169,163          849   (4,086)   113,785     94,292   403,033 
 Shares issued under 
 scrip dividend 
  scheme                       6       105            -         -         -          -       111 
 Deferred bonus 
  award and share 
 option exercise 
  satisfied out 
 of own shares                 -         -            -     2,220         -    (2,210)        10 
 Purchase of own 
 shares                        -         -            -   (1,724)         -          -   (1,724) 
 Share-based 
 payment expense               -         -            -         -         -      1,752     1,752 
 Total comprehensive 
 loss for the period           -         -            -         -         -      (947)     (947) 
 Dividends paid                -         -            -         -         -    (3,591)   (3,591) 
 Balance at 31 
 March 2020 
 (unaudited)              29,036   169,268          849   (3,590)   113,785     89,296   398,644 
-----------------------  -------  --------  -----------  --------  --------  ---------  -------- 
 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 restated           29,009   168,881          849   (4,748)   113,785     84,450   392,226 
 Shares issued under 
 scrip dividend 
  scheme                      14       184            -         -         -          -       198 
 Deferred bonus award and share 
 option exercise 
  satisfied out 
 of own shares                 -         -            -       762         -      (504)       258 
 Purchase of own 
 shares                        -         -            -     (275)         -          -     (275) 
 Share-based 
 payment expense               -         -            -         -         -      2,023     2,023 
 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 2018 restated    29,009   168,881          849   (4,748)   113,785     84,450   392,226 
 Shares issued under 
 scrip dividend 
  scheme                      21       282            -         -         -          -       303 
 Deferred bonus 
  award and 
 share option exercise 
 satisfied out 
 of own shares                 -         -            -     1,417         -    (1,577)     (160) 
 Purchase of own 
 shares                        -         -            -     (755)         -          -     (755) 
 Share-based 
 payment expense               -         -            -         -         -      3,955     3,955 
 Total comprehensive 
 income for the 
  year                         -         -            -         -         -     12,629    12,629 
 Dividends paid                -         -            -         -         -    (5,165)   (5,165) 
-----------------------  -------  --------  -----------  --------  --------  ---------  -------- 
 Balance at 30 
 September 2019 
 (audited)                29,030   169,163          849   (4,086)   113,785     94,292   403,033 
-----------------------  -------  --------  -----------  --------  --------  ---------  -------- 
 
 

Consolidated cash flow statement

For the six month period-ended 31 March 2020

 
                                              Six months to   Six months     Year ended 
                                                                      to 
                                                   31 March     31 March   30 September 
                                                       2020         2019           2019 
                                                  Unaudited    Unaudited        Audited 
                                                    GBP'000      GBP'000        GBP'000 
-----------------------------------------------------------  -----------  ------------- 
 Cash flows from operating activities 
 Profit before taxation                                 182        5,099         16,336 
 Adjustments for: 
 Deficit/(surplus) on revaluation of investment 
  properties                                          4,845      (1,046)        (5,791) 
 Surplus on revaluation of receivables                 (98)        (528)          (850) 
 Impairment of loans to joint ventures                  718            -              - 
 Share of post-tax profit from joint venture        (2,488)      (5,240)        (8,039) 
 Finance income                                     (2,350)        (531)        (1,777) 
 Finance costs                                          927          774          1,470 
 Depreciation charge                                    422          502            918 
 Write down of trading properties                     1,285            -            730 
 Profit on disposal of investment properties            (6)            -              - 
 Loss on disposal of property, plant and 
  equipment                                               1            9             13 
 Share-based payment expense                          1,752        2,023          3,955 
------------------------------------------------  ---------  -----------  ------------- 
 Cash flows from operating activities before change 
 in working capital                                   5,190        1,062          6,965 
 (Increase)/decrease in trading properties          (1,449)      (3,770)         11,034 
 (Increase)/decrease in trade and other 
  receivables                                       (1,910)       10,761        (9,243) 
 Decrease in trade and other payables               (8,970)      (9,703)       (12,368) 
------------------------------------------------  ---------  -----------  ------------- 
 Cash absorbed by operations                        (7,139)      (1,650)        (3,612) 
 Finance costs paid                                   (633)        (549)        (1,126) 
 Finance income received                                 41           36             72 
 Tax paid                                           (2,545)        (806)        (1,498) 
------------------------------------------------  ---------  -----------  ------------- 
 Net cash flows from operating activities          (10,276)      (2,969)        (6,164) 
------------------------------------------------  ---------  -----------  ------------- 
 Investing activities 
 Additions to investment properties                 (1,621)        (503)        (2,144) 
 Additions to property, plant and equipment           (162)        (225)          (381) 
 Loans advanced to joint ventures                     (599)      (4,185)        (9,203) 
 Loans repaid by joint ventures and associates            -            -            179 
 Proceeds from disposal of investment                 1,496            -              - 
  properties 
 Net cash flows from investing activities             (886)      (4,913)       (11,549) 
------------------------------------------------  ---------  -----------  ------------- 
 Financing activities 
 New loans                                            7,893       24,340         37,335 
 Issue costs of new loans                              (61)         (43)          (580) 
 Repayment of loans                                 (3,234)      (1,656)        (5,622) 
 Purchase of own shares                             (1,724)        (275)          (755) 
 Dividends paid                                     (3,480)      (2,957)        (4,862) 
------------------------------------------------  ---------  -----------  ------------- 
 Net cash flows from financing activities             (606)       19,409         25,516 
------------------------------------------------  ---------  -----------  ------------- 
 Net (decrease)/increase in cash and cash 
  equivalents                                      (11,768)       11,527          7,803 
 Cash and cash equivalents at start of 
  period                                             24,441       16,638         16,638 
------------------------------------------------  ---------  -----------  ------------- 
 Cash and cash equivalents at end of period          12,673       28,165         24,441 
------------------------------------------------  ---------  -----------  ------------- 
 

Notes to the condensed consolidated interim financial statements

For the six month period-ended 31 March 2020

1. Accounting policies

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 2019 Annual Report and Accounts. The financial information for the six months ended 31 March 2020 and 31 March 2019 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 2019 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 2019 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.

Going concern

These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Group will continue to meet its liabilities as they fall due.

The Directors continue to assess going concern through reviewing five year business plans, which are presented periodically at Board meetings, however in this period of uncertainty a more detailed review, focussing on monthly cash positions over the next 18 months to 30 September 2021, has been undertaken.

The assumptions attaching to these forecasts provide for maintained construction programmes (as these are largely fully funded through existing development facilities) and reduced residential sales (which assumed that sales rates do not recover markedly until April 2021) .

Forecast house price, land price and cost price inflation assumptions are in line with those used by CBRE in arriving at their strategic site valuations at 31 March and broadly reflect no house price or land price inflation until Q2 2021 (2.5 per cent to 4 per cent thereafter) and cost price inflation at 2 per cent throughout the forecast period.

Any forecast disposals in the base case prior to Spring 2021 relate to transactions that are in documentation at the time of the review (such as the Papworth sale which is noted in the financial review as completing subsequent to 31 March and realised GBP18.2 million of cash for the Group ).

In addition, the base case model includes further downside sensitivities:

-- Removal of non-contracted residential sales income (leaving GBP34.1 million of contractual minimums due over the period to 30 September 2021; equivalent to 2.1 times the annual cash overhead sum of GBP16 million; which comprises GBP25 million of gross overheads less depreciation, non-cash share based payment charges and discretionary bonuses).

-- A further six -month deferral (to Autumn 2021) of 50 per cent of non-contracted land promotion receipts, together with an assumption that 10 per cent of forecast base case promotion receipts are fully abortive.

These downside sensitivities combine to form an extreme downside scenario which reduces the forecast cash flows by a maximum of GBP84 .5 million over the 18-month period to 30 September 2021.

Mitigating actions that could be taken to address this extreme downside scenario include :

-- Cessation of uncommitted strategic land development works, which are not associated with contracted residential sales income.

-- Cessation of non-committed capital investment in respect of a number of identified early stage projects.

   --      Further drawdown under the Group's Revolving Credit Facility. 
   --      Cessation of dividends beyond this interim period. 

These combined mitigations would increase the Group's cash flows by a maximum of GBP91.2 million over the 18 month period to 30 September 2021.

A further GBP66.5 million of other potential mitigations (including the facility expansions referred to in the financial review, the expected disposal of Deansgate development site and drawings under the Coronavirus Large Business Interruption Loan scheme) would provide additional headroom.

The Board is satisfied that these mitigating actions would protect the Group from the extreme downside scenario set out above and would mean that the Group would still have sufficient cash resources to meet its obligations.

No key loan covenants are projected to be breached during the period under review , having analysed prior period recessionary falls in land values (in the Group's geographic locations), calculated consequential covenant headroom and identified additional uncharged land which could be used to enhance loan security for lenders (as noted in the financial review). Strategic site land values would need to fall between 17 per cent and 72 per cent before any covenants were breached. In such an event the Group has the option of pledging further land as additional security.

Three loan facilities currently expire in the 18 months to 30 September 2021. The first is the Newark Homes England facility (GBP6.1 million currently drawn), the second is the GBP11.2 million Deansgate Hotel facility (which is currently being marketed as a development site with planning) and the last is the joint venture development loans at Manchester New Square.

Post 31 March 2020 credit approvals were received for extensions to expiry dates for the Manchester New Square loans and the Deansgate loan. These extensions push terms beyond 30 September 2021 and provide additional time for development completion (in the case of Manchester New Square) and sale; thereby triggering loan repayments.

The Newark facility is capable of being repaid out of existing contracted residential receipts and plot reservations.

The Directors have concluded that it is appropriate to prepare the consolidated interim financial statements on a going concern basis.

Significant accounting policies

In the current period, the Group has adopted IFRS 16 'Leases' which has resulted in the Group recognising a right-of-use asset and liability on the balance sheet initially at the present value of all future lease payments for any leases for which it is the lessee. The treatment of leases where the Group is acting as a lessor is substantially unchanged from that currently applied under IAS 17. The Group has elected to adopt IFRS 16 using the Cumulative Effect Method meaning that full retrospective adjustment of comparative periods is not required. The impact on the Group's balance sheet at 1 October 2019 was to increase both property, plant and equipment and other payables by GBP4,327,000.

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 2020.

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 one 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.

Fair value measurement of properties

The Group's investment properties, as presented within the results, and the majority of the Group's trading properties for the purpose of EPRA valuations, are valued on a semi-annual basis by CBRE Limited (CBRE), an independent firm of chartered surveyors, and to a lesser extent by the Directors, on the basis of fair value. Where property assets are bifurcated between investment and trading properties, the Directors have allocated CBRE's valuation with reference to the nature of the properties in each classification. 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. EPRA valuations are discussed in further detail within note 18.

Due to the outbreak of Covid-19, the following wording was included in CBRE's valuation report at 31 March 2020 in relation to the assets subjected to their valuation:

"The outbreak of the Novel Coronavirus (Covid-19), declared by the World Health Organisation as a 'Global Pandemic' on 11 March 2020, has impacted global financial markets. Travel restrictions have been implemented by many countries.

Market activity is being impacted in many sectors, as at the Valuation Date, we consider that we can attach less weight to previous market evidence for comparison purposes, to inform opinions of value. Indeed, the current response to Covid-19 means that we are faced with an unprecedented set of circumstances on which to base a judgement.

Our valuations are therefore reported as being subject to 'material valuation uncertainty' as set out in VPS 3 and VPGA 10 of the RICS Valuation - Global Standards. Consequently, less certainty - and a higher degree of caution - should be attached to our Valuation than would normally be the case. Given the unknown future impact that Covid-19 might have on the real estate market, we recommend that you keep the Valuation of these Properties under frequent review.

For the avoidance of doubt, the inclusion of the 'material valuation uncertainty' declaration above does not mean that the Valuation cannot be relied upon. Rather, the declaration has been included to ensure transparency of the fact that - in the current extraordinary circumstances - less certainty can be attached to the Valuation than would otherwise be the case. The material uncertainty clause is to serve as a precaution and does not invalidate the Valuation".

Director valuations are deemed to have the same level of uncertainty at 31 March 2020.

Property value assumptions

The key inputs to the strategic property valuations, for both investment properties and trading properties valued for EPRA purposes including properties wholly owned, within joint ventures vehicles, or subject to joint arrangements included:

 
                                                31 March      31 March   30 September 
                                                    2020          2019           2019 
                                                 GBP'000       GBP'000        GBP'000 
--------------------------------------------------------  ------------  ------------- 
 House price - private (GBPpsf)                220 - 300     215 - 300      215 - 300 
 House price - affordable (GBPpsf)             125 - 200     125 - 200      125 - 200 
 House price inflation (per cent)                    2.5           3.0            2.5 
 Cost price inflation (per cent)                     2.0           2.0            2.0 
 Residential land prices (GBP'000 per 
  NDA)                                       700 - 1,600   694 - 1,450    694 - 1,622 
 Commercial land value (GBP'000 per acre)      150 - 400     150 - 400      150 - 400 
 Risk-adjusted discount rate (per cent)      6.25 - 10.0   6.0 - 10.25     6.0 - 10.0 
------------------------------------------  ------------  ------------  ------------- 
 

The inter-relationship between the unobservable inputs set out above and the fair value measurement is unchanged from that reported in the 2019 Annual Report and Accounts. Please refer to note 1 for the impact of the Coronavirus on the property valuations at 31 March 2020.

Other than as described above, there have been no new or material revisions to the nature and amount of estimates reported in the 2019 accounts.

2. Revenue and gross profit

 
                                        Six months to   Six months     Year ended 
                                                                to 
                                             31 March     31 March   30 September 
                                                 2020         2019           2019 
                                              GBP'000      GBP'000        GBP'000 
-----------------------------------------------------  -----------  ------------- 
 Trading property sales                         7,989        8,863         30,279 
 Residential property sales                    14,460       10,964         49,307 
 Revenue on construction contracts              4,315        3,243          7,972 
 Rental and other property income               1,439        1,357          2,884 
 Recoverable property expenses                    396          735          1,116 
 Hotel income                                   3,300        3,761          7,621 
 Project management fees and other income       1,145        1,971          2,935 
------------------------------------------  ---------  -----------  ------------- 
 Revenue                                       33,044       30,894        102,114 
------------------------------------------  ---------  -----------  ------------- 
 Cost of trading property sales               (2,529)      (6,402)       (17,665) 
 Cost of residential property sales          (12,278)      (9,498)       (46,529) 
 Costs of construction contracts              (3,181)      (2,917)        (6,641) 
 Direct property expenses                     (1,190)      (1,114)        (2,251) 
 Recoverable property expenses                  (396)        (735)        (1,116) 
 Cost of hotel trading                        (2,848)      (2,921)        (5,957) 
 Write down of trading properties             (1,285)            -          (731) 
------------------------------------------  ---------  -----------  ------------- 
 Direct costs                                (23,707)     (23,587)       (80,890) 
------------------------------------------  ---------  -----------  ------------- 
 Gross profit                                   9,337        7,307         21,224 
------------------------------------------  ---------  -----------  ------------- 
 

3. Operating (loss)/profit

Operating (loss)/profit is arrived at after allocating GBP2,482,000 of directly attributable administrative expenses to the cost of investment and trading properties (six months to 31 March 2019: GBP2,142,000; year ended 30 September 2019: GBP5,461,000).

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 2019 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 2020

 
                         Strategic sites & Catesby   Commercial   Unallocated      Total 
                                           GBP'000      GBP'000       GBP'000    GBP'000 
--------------------------------------------------  -----------  ------------  --------- 
 Revenue                                    29,292        3,752             -     33,044 
 Direct costs                             (19,615)      (4,092)             -   (23,707) 
---------------------------------------  ---------  -----------  ------------  --------- 
 Gross profit                                9,677        (340)             -      9,337 
---------------------------------------  ---------  -----------  ------------  --------- 
 Share-based payment expense                     -            -       (1,752)    (1,752) 
 Other administrative expenses                   -            -       (5,855)    (5,855) 
---------------------------------------  ---------  -----------  ------------  --------- 
 Administrative expenses                         -            -       (7,607)    (7,607) 
 Deficit on revaluation of investment 
  properties                               (4,845)            -             -    (4,845) 
 Surplus on revaluation of receivables          98            -             -         98 
 Impairment of loans to joint ventures           -        (718)             -      (718) 
 Share of post-tax profit from joint 
  ventures                                   2,488            -             -      2,488 
 Profit on disposal of investment 
  properties                                     6            -             -          6 
 Operating profit/(loss)                     7,424      (1,058)       (7,607)    (1,241) 
 Net finance income/(cost)                   1,889        (466)             -      1,423 
---------------------------------------  ---------  -----------  ------------  --------- 
 Profit/(loss) before tax                    9,313      (1,524)       (7,607)        182 
---------------------------------------  ---------  -----------  ------------  --------- 
 
 

Consolidated balance sheet

As at 31 March 2020

 
                  Strategic sites & Catesby   Commercial   Unallocated       Total 
                                    GBP'000      GBP'000       GBP'000     GBP'000 
-------------------------------------------  -----------  ------------  ---------- 
 Investment properties               48,371            -             -      48,371 
 Property, plant and equipment        3,292          288         4,444       8,024 
 Investments in joint 
  ventures                          106,648       16,983             -     123,631 
 Deferred tax assets                      -            -         3,137       3,137 
 Trade and other receivables         37,088            -             -      37,088 
-------------------------------  ----------  -----------  ------------  ---------- 
 Non-current assets                 195,399       17,271         7,581     220,251 
-------------------------------  ----------  -----------  ------------  ---------- 
 Trading properties                 281,539       27,803             -     309,342 
 Trade and other receivables         27,195        4,126             -      31,321 
 Cash and cash equivalents                -            -        12,673      12,673 
-------------------------------  ----------  -----------  ------------  ---------- 
 Current assets                     308,734       31,929        12,673     353,336 
-------------------------------  ----------  -----------  ------------  ---------- 
 Borrowings                       (103,311)     (11,093)      (20,381)   (134,785) 
 Trade and other payables          (15,948)     (14,902)             -    (30,850) 
 Deferred tax liabilities           (8,545)            -         (763)     (9,308) 
-------------------------------  ----------  -----------  ------------  ---------- 
 Total liabilities                (127,804)     (25,995)      (21,144)   (174,943) 
-------------------------------  ----------  -----------  ------------  ---------- 
 Net assets                         376,329       23,205         (890)     398,644 
-------------------------------  ----------  -----------  ------------  ---------- 
 

Consolidated statement of comprehensive income

For the six month period-ended 31 March 2019

 
                         Strategic sites & Catesby   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                                   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 sites & Catesby   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       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 year ended 30 September 2019

 
                         Strategic sites & Catesby   Commercial   Unallocated      Total 
                                           GBP'000      GBP'000       GBP'000    GBP'000 
--------------------------------------------------  -----------  ------------  --------- 
 Revenue                                    87,322       14,792             -    102,114 
---------------------------------------  ---------  -----------  ------------  --------- 
 Other direct costs                       (71,689)      (8,471)             -   (80,160) 
 Write down of trading properties            (730)            -             -      (730) 
---------------------------------------  ---------  -----------  ------------  --------- 
 Total direct costs                       (72,419)      (8,471)             -   (80,890) 
---------------------------------------  ---------  -----------  ------------  --------- 
 Gross profit                               14,903        6,321             -     21,224 
---------------------------------------  ---------  -----------  ------------  --------- 
 Share-based payment expense                     -            -       (3,955)    (3,955) 
 Other administrative expenses                   -            -      (15,920)   (15,920) 
---------------------------------------  ---------  -----------  ------------  --------- 
 Total administrative expenses                   -            -      (19,875)   (19,875) 
 Surplus on revaluation of investment 
  properties                                 5,791            -             -      5,791 
 Surplus on revaluation of receivables         850            -             -        850 
---------------------------------------  ---------  -----------  ------------  --------- 
 Share of post-tax profit from 
  joint ventures                             8,027           12             -      8,039 
---------------------------------------  ---------  -----------  ------------  --------- 
 Operating profit/(loss)                    29,571        6,333      (19,875)     16,029 
---------------------------------------  ---------  -----------  ------------  --------- 
 Net finance income/(cost)                   1,478      (1,171)             -        307 
---------------------------------------  ---------  -----------  ------------  --------- 
 Profit/(loss) before tax                   31,049        5,162      (19,875)     16,336 
---------------------------------------  ---------  -----------  ------------  --------- 
 

Consolidated balance sheet

as at 30 September 2019

 
                  Strategic sites & Catesby   Commercial   Unallocated       Total 
                                    GBP'000      GBP'000       GBP'000     GBP'000 
-------------------------------------------  -----------  ------------  ---------- 
 Investment properties               52,937            -             -      52,937 
 Property, plant and equipment        3,348          299           311       3,958 
 Investments in joint ventures      103,563       17,699             -     121,262 
 Deferred tax assets                      -            -         2,565       2,565 
 Trade and other receivables         45,898            -             -      45,898 
-------------------------------  ----------  -----------  ------------  ---------- 
 Non-current assets                 205,746       17,998         2,876     226,620 
-------------------------------  ----------  -----------  ------------  ---------- 
 Trading properties                 279,307       27,691             -     306,998 
 Trade and other receivables         13,782        4,681             -      18,463 
 Cash and cash equivalents                -            -        24,441      24,441 
-------------------------------  ----------  -----------  ------------  ---------- 
 Current assets                     293,089       32,372        24,441     349,902 
-------------------------------  ----------  -----------  ------------  ---------- 
 Borrowings                       (101,899)     (11,045)      (16,321)   (129,265) 
 Trade and other payables          (24,351)     (11,364)             -    (35,715) 
 Deferred tax liabilities           (7,806)            -         (703)     (8,509) 
-------------------------------  ----------  -----------  ------------  ---------- 
 Total liabilities                (134,056)     (22,409)      (17,024)   (173,489) 
-------------------------------  ----------  -----------  ------------  ---------- 
 Net assets                         364,779       27,961        10,293     403,033 
-------------------------------  ----------  -----------  ------------  ---------- 
 

5. Finance income and finance costs

 
                                          Six months to   Six months     Year ended 
                                                                  to 
                                               31 March     31 March   30 September 
                                                   2020         2019           2019 
                                                GBP'000      GBP'000        GBP'000 
-------------------------------------------------------  -----------  ------------- 
 Interest receivable from cash deposits              41           33             81 
 Unwinding of discounts applied to long-term 
  receivables                                     2,008          497          1,663 
 Other interest receivable                          301            1             33 
---------------------------------------------  --------  -----------  ------------- 
 Finance income                                   2,350          531          1,777 
---------------------------------------------  --------  -----------  ------------- 
 Interest payable on borrowings                 (2,496)      (1,813)        (4,044) 
 Amortisation of loan arrangement costs           (338)        (258)          (503) 
---------------------------------------------  --------  -----------  ------------- 
 Finance costs pre-capitalisation               (2,834)      (2,071)        (4,547) 
 Finance costs capitalised to trading 
  properties                                      1,907        1,297          3,077 
 Finance costs                                    (927)        (774)        (1,470) 
---------------------------------------------  --------  -----------  ------------- 
 Net finance income/(costs)                       1,423        (243)            307 
---------------------------------------------  --------  -----------  ------------- 
 

Finance costs are 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 
                                                    2020         2019           2019 
                                                 GBP'000      GBP'000        GBP'000 
--------------------------------------------------------  -----------  ------------- 
 Current tax: 
 UK corporation tax on profits for the 
  year                                               902        1,070          2,482 
 Adjustments in respect of previous periods            -          (6)              - 
 Total current tax charge                            902        1,064          2,482 
------------------------------------------------  ------  -----------  ------------- 
 Deferred tax: 
 Origination and reversal of timing differences      227          186          1,225 
 Total deferred tax charge                           227          186          1,225 
------------------------------------------------  ------  -----------  ------------- 
 Total tax charge                                  1,129        1,250          3,707 
------------------------------------------------  ------  -----------  ------------- 
 

(b) Factors affecting the tax charge for the period

 
                                    Six months to   Six months     Year ended 
                                                            to 
                                         31 March     31 March   30 September 
                                             2020         2019           2019 
                                          GBP'000      GBP'000        GBP'000 
-------------------------------------------------  -----------  ------------- 
 Profit attributable to the Group before 
  tax                                         182        5,099         16,336 
-----------------------------------------  ------  -----------  ------------- 
 Profit multiplied by the average rate of UK corporation tax of 19 
 per cent (31 March 2019 and 30 September 
  2019: 19 per cent)                           35          969          3,104 
 Expenses not deductible for tax purposes     386          379            937 
 Differences arising from taxation of chargeable gains and property 
 revaluations                                 868        1,037            190 
 Changes in tax rates                         561            -              - 
 Tax losses and other items                 (721)      (1,135)          (524) 
                                            1,129        1,250          3,707 
 Adjustments to tax charge in respect           -            -              - 
  of previous periods 
-----------------------------------------  ------  -----------  ------------- 
 Total tax charge                           1,129        1,250          3,707 
-----------------------------------------  ------  -----------  ------------- 
 

7. (Loss)/earnings per share

Basic (loss)/earnings per share

The calculation of basic (loss)/earnings per share is based on a loss of GBP947,000 (six months to 31 March 2019: profit of GBP3,849,000; year ended 30 September 2019: profit of GBP12,629,000) and on 143,782,177 (six months to 31 March 2019: 143,397,834; year ended 30 September 2019: 143,442,735) shares, being the weighted average number of shares in issue during the period less own shares held.

Diluted (loss)/earnings per share

The calculation of diluted (loss)/earnings per share is based on a loss of GBP947,000 (six months to 31 March 2019: profit of GBP3,849,000; year ended 30 September 2019: profit of GBP12,629,000) and on 145,328,565 (six months to 31 March 2019: 145,875,912; year ended 30 September 2019: 146,176,846) 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 
                                               2020          2019           2019 
 Weighted average number of shares           Number        Number         Number 
-------------------------------------  ------------  ------------  ------------- 
 In issue at start of period            145,148,088   145,044,582    145,044,582 
 Effect of shares issued under scrip 
  dividend scheme                             6,712        12,664         49,325 
 Effect of own shares purchased and 
  transferred                           (1,372,623)   (1,659,412)    (1,651,172) 
-------------------------------------  ------------  ------------  ------------- 
 Weighted average number of shares 
  during the period - basic             143,782,177   143,397,834    143,442,735 
 Dilutive effect of share options         1,546,388     2,478,078      2,734,111 
-------------------------------------  ------------  ------------  ------------- 
 Weighted average number of shares 
  during the period - diluted           145,328,565   145,875,912    146,176,846 
-------------------------------------  ------------  ------------  ------------- 
 

8. Dividends

 
                                      Six months to   Six months     Year ended 
                                                              to 
                                           31 March     31 March   30 September 
                                               2020         2019           2019 
                                            GBP'000      GBP'000        GBP'000 
---------------------------------------------------  -----------  ------------- 
 Final dividend of 2.5p per share proposed    3,480            -              - 
  and paid February 2020 
 Final dividend of 2.5p per share granted       111            -              - 
  via scrip dividend 
 Interim dividend of 1.4p per share paid 
  July 2019                                       -            -          1,907 
 Interim dividend of 1.4p per share granted 
  via scrip dividend                              -            -            102 
 Final dividend of 2.2p per share proposed 
  and paid February 2019                          -        2,957          2,957 
 Final dividend of 2.2p per share granted 
  via scrip dividend                              -          199            199 
                                              3,591        3,156          5,165 
---------------------------------------------------  -----------  ------------- 
 

9. Investment properties

 
                                    GBP'000 
------------------------------------------- 
 Valuation 
 At 1 October 2018                   86,918 
 Additions at cost                      504 
 Transfer to trading properties    (41,915) 
 Surplus on revaluation               1,046 
--------------------------------  --------- 
 At 31 March 2019                    46,553 
 Additions at cost                    1,639 
 Surplus on revaluation               4,745 
--------------------------------  --------- 
 At 30 September 2019                52,937 
 Additions at cost                    1,769 
 Disposals                          (1,490) 
 Deficit on revaluation             (4,845) 
--------------------------------  --------- 
 At 31 March 2020                    48,371 
--------------------------------  --------- 
 

The Group's investment properties are all carried at fair value and 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 process of fair valuing the Group's investment properties, including the significant unobservable inputs applied in the valuations, is explained in note 1. The following summarises the valuation technique used in measuring the fair value of the Group's investment properties.

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.

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. No further transfers have taken place.

10. Property, plant and equipment

 
                                             Furniture     Right 
                      Freehold   Leasehold         and    of use 
                      property    property   equipment     asset     Total 
                       GBP'000     GBP'000     GBP'000   GBP'000   GBP'000 
------------------------------  ----------  ----------  --------  -------- 
 Cost 
 At 1 October 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 
 Additions                   -           -         155         -       155 
 Disposals                   -           -         (6)         -       (6) 
----------------------  ------  ----------  ----------  --------  -------- 
 At 30 September 
  2019                   5,425         757       1,757         -     7,939 
 Effect of adoption 
  of IFRS 16                 -           -           -     4,327     4,327 
----------------------  ------  ----------  ----------  --------  -------- 
 As at 30 September 
  2019 as restated       5,425         757       1,757     4,327    12,266 
 Additions                   -           -         162         -       162 
 Disposals                   -           -        (19)         -      (19) 
----------------------  ------  ----------  ----------  --------  -------- 
 At 31 March 2020        5,425         757       1,900     4,327    12,409 
----------------------  ------  ----------  ----------  --------  -------- 
 Depreciation 
 At 1 October 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 
 Charge for the 
  period                   212          67         137         -       416 
 Release on disposals        -           -         (2)         -       (2) 
----------------------  ------  ----------  ----------  --------  -------- 
 At 30 September 
  2019                   2,197         569       1,215         -     3,981 
 Charge for the 
  period                    94          68          85       175       422 
 Release on disposals        -           -        (18)         -      (18) 
----------------------  ------  ----------  ----------  --------  -------- 
 At 31 March 2020        2,291         637       1,282       175     4,385 
----------------------  ------  ----------  ----------  --------  -------- 
 Net book value 
 31 March 2020           3,134         120         618     4,152     8,024 
----------------------  ------  ----------  ----------  --------  -------- 
 31 March 2019           3,440         255         528         -     4,223 
 30 September 2019       3,228         188         542         -     3,958 
----------------------  ------  ----------  ----------  --------  -------- 
 

11. Investments

Investments in joint ventures

 
                                            Total 
                                          GBP'000 
------------------------------------------------- 
 Cost or valuation 
 At 1 October 2018                        103,418 
 Effect of adoption of IFRS 15                781 
---------------------------------------  -------- 
 As at 1 October 2018 as restated         104,199 
 Loans advanced                             4,185 
 Share of post-tax profit                   5,240 
---------------------------------------  -------- 
 At 31 March 2019                         113,624 
---------------------------------------  -------- 
 Loans advanced                             5,017 
 Share of post-tax profit                   2,799 
 Profits distributed                        (178) 
 At 30 September 2019                     121,262 
---------------------------------------  -------- 
 Loans advanced                               599 
 Impairment of loans to joint ventures      (718) 
 Share of post-tax profit                   2,488 
 At 31 March 2020                         123,631 
---------------------------------------  -------- 
 

At 31 March 2020 the Group's interests in its joint arrangements were as follows:

 
 Joint ventures 
 SUE Developments LP     50%   Property development 
 Wintringham Partners    33%   Property development 
  LLP 
 Manchester New Square   50%   Property development 
  LP 
 Achadonn Limited        50%   Property development 
 Altira Park JV LLP      50%   Property development 
----------------------  ---- 
 
 
Joint operations 
 Waterbeach         Property development 
---------------- 
 

Waterbeach is a joint arrangement with a landowner that is structured through a contractual arrangement, rather than a separate entity. Decisions about relevant activities in relation to the Waterbeach development require unanimous consent by the Group and the landowner. When the development assets are sold to a third party, the Group will have a right to a proportion of the sales proceeds under a waterfall agreement which will include recovery of costs incurred and a 9 per cent share of residual proceeds. At 31 March 2020, the Group had incurred GBP23,522,000 (31 March 2019: GBP20,064,000; 30 September 2019: GBP21,404,000) of costs in relation to the project, which have been capitalised into investment and trading properties.

 
                          SUE   Wintringham   Manchester   Achadonn   Altira 
                                                                        Park 
              Developments LP      Partners   New Square    Limited   JV LLP    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            34,874         1,710            -          -      426   37,010 
Loans                  53,788        16,276       15,165      1,392        -   86,621 
Total investment in 
 joint ventures        88,662        17,986       15,165      1,392      426  123,631 
                      -------  ------------  ----------- 
 
 

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 
                                      2020         2019           2019 
                                   GBP'000      GBP'000        GBP'000 
------------------------------------------  -----------  ------------- 
At start of period                 (5,944)      (4,063)        (4,063) 
Effect of adoption of IFRS 15            -        (656)          (656) 
At start of period as restated     (5,944)      (4,719)        (4,719) 
Movement in the period (see note 
 6)                                  (227)        (186)        (1,225) 
At end of period                   (6,171)      (4,905)        (5,944) 
 

The deferred tax balances are made up as follows:

 
                                     At         At             At 
                               31 March   31 March   30 September 
                                   2020       2019           2019 
                                GBP'000    GBP'000        GBP'000 
---------------------------------------  ---------  ------------- 
 Deferred tax assets 
Tax losses                        3,137      3,808          2,565 
                                         ---------  ------------- 
                                  3,137      3,808          2,565 
                                         ---------  ------------- 
 Deferred tax liabilities 
Revaluation surpluses             8,839      8,125          8,035 
Revenue recognised under IFRS 15    469        588            474 
                                  9,308      8,713          8,509 
 

At 31 March 2020, the Group had unused tax losses of GBP20,239,000 (31 March 2019: GBP22,477,000; 30 September 2019: GBP 20,513,000 ), of which GBP16,510,000 (31 March 2019: GBP21,956,000; 30 September 2019: GBP 15,089,000 ) has been recognised as a deferred tax asset. A further GBP3,410,000 (31 March 2019: GBP96,000; 30 September 2019: GBP 5,104,000 ) 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 GBP320,000 (31 March 2019: GBP424,000; 30 September 2019: GBP320,000) 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 19 per cent (2019: 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.

13. Trading properties

 
                                  Six months to   Six months     Year ended 
                                                          to 
                                       31 March     31 March   30 September 
                                           2020         2019           2019 
                                        GBP'000      GBP'000        GBP'000 
                                                 ----------- 
At start of period                      306,998      273,770        273,770 
Additions at cost                        18,616       20,166         46,583 
Costs written down                      (1,285)            -          (730) 
Disposals                              (14,987)     (15,101)       (54,540) 
Transfer from investment properties           -       41,915         41,915 
At end of period                        309,342      320,750        306,998 
                                                 -----------  ------------- 
 

Capitalised interest of GBP7,715,000 is included within the carrying value of trading properties as at 31 March 2020 (31 March 2019: GBP4,706,000; 30 September 2019: GBP5,933,000).

14. Trade and other receivables

 
                                            At         At             At 
                                      31 March   31 March   30 September 
                                          2020       2019           2019 
Non-current                            GBP'000    GBP'000        GBP'000 
                                                ---------  ------------- 
Trade receivables                       36,478     17,802         44,365 
Other receivables                          610      2,151          1,533 
                                        37,088     19,953         45,898 
----------------------------------------------  ---------  ------------- 
 
                                            At         At             At 
                                      31 March   31 March   30 September 
                                          2020       2019           2019 
Current                                GBP'000    GBP'000        GBP'000 
                                                ---------  ------------- 
Trade receivables                       22,494     15,382         11,588 
Less: provision for impairment of 
 trade receivables                        (91)       (80)           (83) 
Trade receivables (net)                 22,403     15,302         11,505 
Other receivables                        1,639      3,526          1,563 
Contract assets - amounts recoverable 
 under contracts                           119      1,346          3,203 
Prepayments and accrued income           7,160      2,701          2,192 
                                                ---------  ------------- 
                                        31,321     22,875         18,463 
                                                ---------  ------------- 
 

Trade receivables include minimum and overage amounts due from housebuilders on strategic land parcel sales which are payable on the completion of the onward sale of completed units by the respective housebuilders, subject to certain minimum amounts that are payable annually over a three to five-year period post sale.

Other receivables include an amount of GBP1,240,000 (31 March 2019: GBP3,609,000; 30 September 2019: GBP2,163,000) relating to overage entitlements that were acquired with the Priors Hall asset in a prior period 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 are current expectations over future house price values, the timing of housebuilder delivery and a discount rate of 8.0 per cent (31 March 2019: 8.8 per cent; 30 September 2019: 8.0 per cent). The fair value movement in the period is GBP98,000 (31 March 2019: GBP528,000; 30 September 2019: GBP850,000) which has been credited to the income statement for the period.

Amounts totalling GBP9,377,000 have been collected by 31 March 2020 (31 March 2019: GBP7,375,000; 30 September 2019: GBP8,357,000).

15. Trade and other payables

 
                                      At         At             At 
                                31 March   31 March   30 September 
                                    2020       2019           2019 
                                 GBP'000    GBP'000        GBP'000 
----------------------------------------  ---------  ------------- 
Trade payables                     9,523      7,771         10,751 
Taxes and social security costs    1,179      1,467          4,896 
Other payables                    12,026      8,379          7,104 
Accruals                           6,586     18,118         11,350 
Deferred income                    1,536      1,820          1,614 
                                          ---------  ------------- 
                                  30,850     37,555         35,715 
                                          ---------  ------------- 
 

Other payables include a GBP1,000,000 grant that is conditional on certain milestones of construction being achieved before 2020. The grant is only repayable if these are not reached.

16. Borrowings

 
                                At         At             At 
                          31 March   31 March   30 September 
                              2020       2019           2019 
                           GBP'000    GBP'000        GBP'000 
----------------------------------  ---------  ------------- 
Bank loans and overdrafts   31,474     27,285         27,366 
Other loans                103,311     91,275        101,899 
                                    ---------  ------------- 
                           134,785    118,560        129,265 
                                    ---------  ------------- 
 
 
                                 At         At             At 
                           31 March   31 March   30 September 
                               2020       2019           2019 
Maturity profile            GBP'000    GBP'000        GBP'000 
                                     ---------  ------------- 
Less than one year            6,134      1,000          1,000 
Between one and five years   39,546     37,228         45,218 
More than five years         89,105     80,332         83,047 
                                     ---------  ------------- 
                            134,785    118,560        129,265 
                                     ---------  ------------- 
 

Other loans comprise borrowings from Homes England and Huntington District Council. Interest on borrowings from Homes England is charged between 2.2 and 4.0 per cent above the EC Reference Rate and the facilities are secured against specific land holdings.

There are two bank loans (the Revolving Credit Facility and Deansgate Investment Facility), which are secured against specific property holdings.

17. Share capital

 
                          At         At             At 
                    31 March   31 March   30 September 
                        2020       2019           2019 
Urban&Civic plc      GBP'000    GBP'000        GBP'000 
                              ---------  ------------- 
 Issued and fully paid 
Shares of 20p each    29,036     29,023         29,030 
                              ---------  ------------- 
 

Movements in share capital in issue

 
                       Issued and fully paid 
Ordinary shares                      GBP'000        Number 
                                              ------------ 
At 1 October 2018                     29,009   145,044,582 
Shares issued under scrip dividend 
 scheme                                   14        72,024 
                                              ------------ 
At 31 March 2019                      29,023   145,116,606 
Shares issued under scrip dividend 
 scheme                                    7        31,482 
                                              ------------ 
At 30 September 2019                  29,030   145,148,088 
Shares issued under scrip dividend 
 scheme                                    6        31,494 
                                              ------------ 
At 31 March 2020                      29,036   145,179,582 
                                              ------------ 
 

Transactions in own shares

At the end of the period the Employee Benefit Trust held 1,182,033 20p shares in Urban&Civic plc (31 March 2019: 1,589,015; 30 September 2019: 1,491,248). The market value of those shares at 31 March 2020 was GBP2,458,629 (31 March 2019: GBP4,449,000; 30 September 2019: GBP4,832,000). The movement is as follows:

 
                                                                 Cost 
Employee Benefit Trust                     Number of shares   GBP'000 
                                                             -------- 
 At 1 October 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 purchase                                     148,889       480 
 Transferred to employees on share 
  option exercise                                 (246,656)     (655) 
At 30 September 2019                              1,491,248     4,086 
 Share purchase                                     500,844     1,724 
 Transferred to employees under deferred 
  bonus scheme arrangements and on share 
  option exercise                                 (810,059)   (2,220) 
At 31 March 2020                                  1,182,033     3,590 
                                                             -------- 
 

Share options

During the six month period to 31 March 2020 the Company granted 1,723,250 share options (including 109,499 in place of a dividend) to employees (six months to 31 March 2019: 1,981,452; year ended 30 September 2019: 1,981,452), 732,756 share options were exercised (six months to 31 March 2019: 163,084; year ended 30 September 2019: 466,510) and 242,365 options lapsed (six months to 31 March 2019: 450,284; year ended 30 September 2019: 528,644). The number of share options outstanding at 31 March 2020 was 6,430,119 (31 March 2019: 6,544,122; 30 September 2019:, 6,162,336).

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.

EPRA NAV metrics are one of the Group's principal performance measures, particularly when assessing value growth. EPRA balance sheet measures record the net asset value attributable to equity shareholders, adjusted for the revaluation of trading properties without tax (EPRA net asset value) or with tax (EPRA triple net asset value).

 
                                             At           At            At 
                                       31 March     31 March  30 September 
                                           2020         2019          2019 
                                      Unaudited    Unaudited       Audited 
Number of shares in issue           145,179,582  145,116,606   145,148,088 
Own shares held                     (1,182,033)  (1,589,015)   (1,491,248) 
Dilutive effect of share options      1,546,388    2,478,078     2,734,111 
                                    145,543,937  146,005,669   146,390,951 
NAV per share                            273.9p       270.6p        275.3p 
Net asset value (GBP'000)               398,644      395,123       403,033 
Revaluation of trading property held as current assets (GBP'000) 
-    Alconbury Weald                     33,246       42,107        42,302 
-    Rugby                                3,221        8,240         8,763 
-    Priors Hall                         10,202       12,466        13,952 
-    Waterbeach                          17,868            -        19,492 
-    Newark                             (3,750)      (1,560)           154 
-    Wintringham St Neots                10,551       10,052        12,297 
-    Manchester sites                     (125)        5,224         5,600 
-    Land promotion sites                 8,775       15,461        12,963 
 -   Other                                (190)        1,425           424 
--- 
                                         79,798       93,415       115,947 
Deferred tax liability (GBP'000)          9,308        8,713         8,509 
EPRA NAV (GBP'000)                      487,750      497,251       527,489 
EPRA NAV per share                       335.1p       340.6p        360.3p 
Deferred tax (GBP'000)                 (24,470)     (26,461)      (30,539) 
EPRA NNNAV (GBP'000)                    463,280      470,790       496,950 
EPRA NNNAV per share                     318.3p       322.4p        339.5p 
 

Of the GBP79,798,000 EPRA valuation uplift, GBP71,023,000 has been valued by CBRE and GBP8,775,000 has been valued by Directors based on the stage in the planning process at which each individual site is and the expected profit that the site will realise.

The process of fair valuing the Group's trading properties for the purpose of EPRA valuations is explained in note 1.

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 
                                2020       2019          2019 
                             GBP'000    GBP'000       GBP'000 
                                      --------- 
Contracted but not provided 
 for                          39,155     51,359        50,059 
                                      --------- 
 
 

Total commitments include the construction of a secondary school at Houlton, Rugby through a joint venture and earthworks at Priors Hall. Of the total, GBP34,984,000 is due to be paid for by existing funding arrangements.

20. Related party transactions

There have been no material changes to the nature of the related party transactions described in the 2019 Annual Report and Accounts.

Details of transactions with and amounts owed from joint ventures 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 2020 which comprises the Consolidated Group Statement of Comprehensive Income, the Consolidated Group Statement of Financial Position, the Consolidated Group Cash Flow Statement, the Consolidated Group Statement of Changes in Equity and 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 2020 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.

Emphasis of Matter: Property valuations

We draw attention to note 1, which explains that as a result of the impact of the outbreak of the Novel Coronavirus (COVID-19) on the market, the Company's property valuer has advised that less certainty, and a higher degree of caution, should be attached to their valuation than would normally be the case. Our opinion is not modified in respect of this matter.

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

10 June 2020

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 during the period 
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 
                                measurable date (i.e. an exit price) 
Gearing                        Group bank borrowings as a proportion of net 
                                asset value 
Group                          Urban&Civic plc and subsidiaries, joint ventures 
                                and associates 
HBF                            Home Builders Federation 
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 
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 NAV return               The growth in EPRA NAV per share plus dividends 
                                paid, expressed as a percentage of EPRA NAV per 
                                share at the beginning of the period. 
Total return                   Movement in the value of net assets, adjusted 
                                for dividends paid, as a proportion of opening 
                                net asset value 
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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