TIDMMKLW
RNS Number : 7903P
Mucklow(A.& J.)Group PLC
05 September 2017
Mucklow (A & J) Group plc
5 September 2017
Embargoed: 7.00am
Financial Summary
for the year ended 30 June 2017
Statement of comprehensive income Year ended Year ended
30 June 30 June
2017 2016
----------------------------------- ----------- -----------
Underlying pre-tax profit (1) GBP15.9m GBP15.0m
Statutory pre-tax profit GBP29.6m GBP25.2m
EPRA EPS (1) 25.05p 23.88p
Basic EPS 46.63p 39.86p
Ordinary dividend per share 22.12p 21.47p
----------------------------------- ----------- -----------
Balance sheet 30 June 30 June
2017 2016
---------------------------- ---------- ----------
Net asset value GBP296.7m GBP280.6m
EPRA NAV per share (1) 471p 446p
Basic NAV per share 469p 443p
Net debt GBP78.5m GBP71.2m
Net debt to equity gearing 26% 25%
---------------------------- ---------- ----------
Property portfolio 30 June 30 June
2017 2016
----------------------------- ---------- ----------
Vacancy rate 4.2% 3.2%
Portfolio value (2) GBP386.9m GBP364.2m
Valuation gain GBP13.0m GBP10.2m
Initial yield on investment
properties 6.2% 6.4%
Equivalent yield 7.0% 7.2%
----------------------------- ---------- ----------
The ordinary dividend of 22.12p per share (2016: 21.47p)
consists of the first and second quarterly dividends totalling
9.88p, a third quarterly dividend of 5.15p and a final dividend of
7.09p.
1 An alternative performance measure. The Group
uses a number of financial measures to assess
and explain its performance, some of which
are considered to be alternative performance
measures as they are not defined under IFRS.
The directors consider that this further analysis
of our performance gives shareholders a useful
comparison of the underlying performance for
the periods shown, consistent with other companies
in the sector. For further details, see the
table in the Finance Review on page 9 and note
8.
2 See note 9.
For further information
please contact:
Rupert Mucklow, Chairman Tel: 0121 550 1841
David Wooldridge, Finance
Director
A & J Mucklow Group
plc
Fiona Tooley Tel: 0121 309 0099
TooleyStreet Communications Mobile: 07785 703523
Legal Entity Identifier (LEI): 21300M1Q89HWSY7ES84
Chairman's Statement
Rupert Mucklow, Chairman
I am pleased to report another steady performance by the Group
for the year ended 30 June 2017.
Our property portfolio continued to perform well, in favourable
market conditions. We maintained a high occupancy level throughout
the year and delivered further rental growth, which in turn has
contributed towards a GBP0.9m rise in underlying pre-tax profit
(6.0%) and 25p increase in EPRA net asset value per share
(5.6%).
Conditions were also ideal during the year for us to plan our
future funding requirements. We refinanced the majority of our
banking facilities, extending the terms of our loans and reduced
the average cost of borrowing.
In recognition of further improvement in underlying profit, the
Board are proposing to increase the ordinary dividend by 3% again
this year, maintaining an unbroken dividend record spanning over
five decades.
This is our 55th year as a quoted company and 10th anniversary
as a Real Estate Investment Trust (REIT). We are a small team of 11
employees and 3 independent non-executive directors, proud of our
corporate heritage, with a strategy focused on providing long-term
stability and growth for our shareholders.
Results
Statutory pre-tax profit was GBP29.6m, which included a
revaluation surplus of GBP13.0m (2016: GBP25.2m, including a
revaluation surplus of GBP10.2m).
The underlying pre-tax profit, which excludes revaluation
movements, profit on the sale of investment and trading properties
and early repayment costs, increased by 6.0% during the year to
GBP15.9m (2016: GBP15.0m). EPRA adjusted earnings per ordinary
share was 4.9% higher at 25.05p (2016: 23.88p).
EPRA net asset value per ordinary share increased by 5.6% during
the year from 446p to 471p. Basic net asset value per share
increased by 26p to 469p.
Shareholders' funds rose to GBP296.7m (2016: GBP280.6m), while
total net borrowings amounted to GBP78.5m (2016: GBP71.2m). Net
debt to equity gearing was 26% and loan to value ("LTV") 20%.
Dividend
The Board is recommending the payment of dividends amounting to
12.24p per ordinary share, an increase of 3% over last year (2016:
11.88p), making a total for the year of 22.12p (2016: 21.47p).
A quarterly dividend of 5.15p per ordinary share is to be paid
on 16 October 2017 to Shareholders on the register at the close of
business on 15 September 2017 and a final dividend of 7.09p per
ordinary share, if approved by shareholders at the AGM, will be
paid on 15 January 2018 to Shareholders on the register at the
close of business on 15 December 2017.
Both dividends will be paid as Property Income Distributions
(PIDs).
Property Review
The occupational market in the Midlands remained active
throughout the year, with demand outstripping supply. As a
consequence, we have been able to continue to achieve average
rental growth of around 10% on new lettings, lease renewals and
rent reviews.
Our vacancy rate at 30 June 2017 was 4.2% (31 December 2016:
4.1%). This included 1.2% of vacant space returned to us on the
expiry of five leases, just prior to our year end in June 2017. Our
vacant space also included one empty office building (0.6% of
vacant space) which is currently being refurbished and not
available for rental until December 2017. In addition,
approximately 1.0% of our vacant space was reserved at the year
end.
The vacant office building, comprising 24,125 sq ft, is in a
prime location, close to Birmingham International Railway Station
and Airport and is currently undergoing a substantial refurbishment
at a cost of around GBP2.7m. When completed later this year, it
will have a rental value of around GBP0.54m per annum.
We acquired a prominent 70,182 sq ft industrial/warehouse
building during the year at Barton-Under-Needwood for GBP5.6m. The
property is located at the front of Barton Business Park, on the
A38 between the A50 and A5 trunk roads. Built in 2005, the unit is
currently let at a rent of GBP0.4m per annum.
We also completed the acquisition of a pre-let office
development at Grove Park, Leicester for GBP4.7m. The property
comprises 20,829 sq ft of high quality offices let at an initial
rent of GBP0.35m per annum.
Construction on our first pre-let development at i54
Wolverhampton started in the second half-year, with completion
anticipated for early 2018. The property will comprise a 44,250 sq
ft industrial unit and the initial rent will be GBP0.28m per
annum.
A vacant 12,000 sq ft office building in Henley on Thames was
sold during the year to a residential developer for GBP4.1m, to
show a profit of GBP1.9m over the last valuation.
The regional property investment market was also very
competitive during the year, particularly for high quality
properties with rental growth potential. There were only a limited
number of industrial investment opportunities and transactions
recorded, but yields contracted a little further, due to the heavy
demand and tight supply of stock.
Property Valuation
Cushman & Wakefield revalued our property portfolio at 30
June 2017. The investment properties and development land were
valued at GBP386.9m, recognising a revaluation surplus of GBP13.0m
(3.5%).
The initial yield on the investment properties was 6.2% (30 June
2016: 6.4%). The equivalent yield was 7.0% (30 June 2016:
7.2%).
Cushman & Wakefield also revalued our trading properties at
30 June 2017. The total value was GBP1.9m (2016: GBP1.9m), which
showed an unrecognised surplus of GBP1.4m against book value (2016:
GBP1.4m).
Finance
We renewed our GBP64m banking facilities with HSBC during the
first half-year for a further 5 years to 2021 on a 30% lower
margin.
We also repaid a GBP20m, 5.23% fixed rate loan we had with
Lloyds Bank, which was due to expire in 2022, incurring an early
debt repayment cost of GBP1.2m and took out a new GBP40m term loan
facility with Scottish Widows for a period of 15 years, fixed at
3.5%.
As such, our weighted average cost of debt has reduced to 3.1%
(30 June 2016: 4.1%) or 3.6% on drawn amounts (2016: 4.4%) and our
weighted average term remaining on debt has increased to 7.7 years
(30 June 2016: 5.5 years).
The total net borrowings at 30 June 2017 was GBP78.5m (30 June
2016: GBP71.2m), while undrawn banking facilities were GBP40.5m (30
June 2016: GBP27.0m).
Net debt to equity gearing at 30 June 2017 was 26% (30 June
2016: 25%) and LTV was 20% (30 June 2016: 20%).
Long Term Performance
Shareholders may be interested to know that GBP1,000 invested in
A&J Mucklow Group at flotation in 1962 would have been worth
GBP3.3m* at 30 June 2017, assuming all the dividends had been
reinvested, which would show a Total Shareholder Return (TSR) of
around 15.8% per annum for the last 55 years.
A&J Mucklow Group also has the distinguished record of
having never cut its dividend in 55 years as a listed company. The
dividend has increased 50 times and been maintained on only 5
occasions.
Since conversion to a REIT on 1 July 2007, A&J Mucklow Group
has paid out GBP120m in ordinary dividends to Shareholders and has
been one of the best performing REITs over 10 years, with a TSR of
+99.5%, against the FTSE EPRA/NAREIT UK Index of -2.3% for the same
period*.
Outlook
Since our year end, the number of tenant enquiries for our
vacant properties has continued in a similar manner as before and
we are not expecting conditions to change much over the next 6
months.
Should it be necessary, we are extremely well positioned to
adapt our short-term strategy in order to capitalise on any
uncertainty and opportunities that may occur and remain confident
of our ability to continue to deliver long term performance for our
shareholders.
Rupert Mucklow
Chairman
4 September 2017
*Source: Bloomberg
Property Review
Justin Parker, Managing Director
Overview
The Group has enjoyed another positive and robust performance
during the year ended 30 June 2017. Gross rental income has risen
by 3.5% to GBP23.7m, underlying pre-tax profit by 6.0% (GBP0.9m) to
GBP15.9m and ordinary dividends by 3.0%. Net assets have advanced
in value to over GBP296m and net debt to equity gearing has
remained low at 26% (2016: 25%).
Strong occupational demand and the continued lack of available
stock in our core market of Midlands industrial, together with our
asset management initiatives, have allowed us to maintain a high
occupancy rate of 95.8%. In addition to this we have continued to
sustain average real rental growth of around 10% on new lettings,
lease renewals and rent reviews.
Investor demand for industrial property has remained high driven
by the reality of strong rental growth. This has helped increase
the value of our industrial and commercial property portfolio by
3.5% (GBP13.0m) over the twelve month period.
Key performance indicators
The Group's main objective is the long-term enhancement of
shareholder value through dividend and capital appreciation, whilst
adopting a conservative financial structure. As a result, the key
performance indicators we use to reflect the achievement of that
objective on an annual basis are: underlying pre-tax profit; vacant
space; dividend growth; and net debt to equity gearing.
Key Performance Indicators
2017 2016
----------------------------------- ----- -----
Underlying pre-tax profit+ (GBPm) 15.9 15.0
Vacant space (%) 4.2 3.2
Dividend growth (%) 3.0 3.0
Net debt to equity gearing (%) 26 25
----------------------------------- ----- -----
+ See the table on page 9 for the calculations.
Acquisition and disposal of investment properties
The industrial investment market was very competitive during our
financial year, particularly in the second half, with low yields
being paid for quality industrial properties.
In October 2016 we completed the purchase of a 70,182 sq ft
industrial/warehouse building at a cost of GBP5.6m (initial yield:
6.9%). The building is located on Barton Business Park in
Barton-under-Needwood. The unit is let at an annual rent of
GBP0.41m (GBP5.85 psf).
In January 2016 terms were agreed to forward fund a 20,829 sq ft
pre-let office building at Grove Park, Leicester, for GBP4.7m
(initial yield: 7.0%). Completion of the high quality office scheme
with 112 car parking spaces took place in December 2016. The annual
rent of GBP0.35m (GBP16.78 psf) commenced on completion of the
acquisition.
In August 2016 the tenant of the Reading Road offices in
Henley-on-Thames vacated. Considerable interest in the building was
received from local residential developers. The office was sold in
November 2016 for GBP4.1m, at an 86% premium to the 30 June 2016
valuation of GBP2.2m.
We continue to look for attractively priced investment
properties, focusing on the Midlands industrial property
market.
Developing new properties for long-term investment
Mucklow Park i54, Wolverhampton
We entered into an option agreement for a prime 15 acre
industrial site with Wolverhampton City Council and Staffordshire
County Council in November 2015. The site is adjacent to the new
Jaguar Land Rover engine manufacturing facility at i54 in
Wolverhampton. The land can accommodate up to 275,000 sq ft of
advanced manufacturing space.
Construction is currently taking place on site of a 44,250 sq ft
industrial unit following a pre-letting to Tentec Limited, a
subsidiary of Atlas Copco. The unit is due to complete in February
2018 and will produce a rent of GBP0.28m.
We are marketing the remainder of the site for further
pre-lets.
Mucklow Park, Tyseley
Birmingham City Council are currently out to tender with a
shortlist of civil contractors for the construction of a new link
road running alongside our 20 acre site in Tyseley, Birmingham.
Construction of the road is expected to commence in early 2018.
Whilst awaiting the construction of this new road we continue to
actively seek pre-lets for our proposed scheme.
If the occupational market for industrial property continues to
be supportive, our 35 acres of development land at i54,
Wolverhampton and Tyseley, Birmingham provides the potential for up
to 625,000 sq ft of pre-let industrial/warehouse space.
Actively managing our assets to enhance value
The positive trends in the occupational market have continued in
the year. Active management and a shortage of industrial properties
available to let has supported rental growth. Our vacancy rate
increased slightly to 4.2% at our year end (30/06/16: 3.2%),
although 1.2% of space was returned to us, as a result of lease
expiries, in June 2017.
This growth in income and low level of voids helped to increase
net rental income as well as the capital value of the portfolio,
with a revaluation surplus of GBP13.0m over the year.
Rent reviews completed in the year, on properties with a
previous annual rent totalling GBP1.5m, were agreed at an average
uplift of 10.3%.
Lease renewals have been agreed over 237,860 sq ft of space at a
new rent of GBP2.1m, an increase of 10.7%.
New leases were agreed in the year totalling 222,812 sq ft,
producing an annual rent of GBP1.2m, an increase of 8.7% over our
ERV.
In December 2016 we agreed an early lease surrender on a 64,000
sq ft industrial unit at Kings Hill, Wednesbury. The unit was
previously let at GBP0.28m until March 2017. Following
refurbishment, a new 20 year lease with a break at the 10(th)
anniversary was agreed in June 2017 at an annual rent of
GBP0.32m.
We also agreed an early lease surrender in July 2016 of a 24,125
sq ft office building at Trinity Central, Solihull. Strip out works
have been completed and a major refurbishment of the building is
currently taking place at a cost of around GBP2.7m. This work is
due to be completed in December 2017.
Occupancy
Our year-end vacancy rate was 4.2% (166,989 sq ft), of which
1.2% (46,892 sq ft) had been returned to us in June 2017.
Valuation
The external valuation of the Group's investment and development
portfolio at 30 June 2017 totalled GBP386.9m (2016: GBP364.2m)
leading to a valuation surplus of GBP13.0m being recognised in the
Group's statement of comprehensive income.
The initial yield on the portfolio decreased by 0.2% to 6.2%
(2016: 6.4%) and the equivalent yield also decreased by the same
amount to 7.0% (2016: 7.2%).
Initial yield Initial Equivalent Equivalent
2017 yield yield yield
2016 2017 2016
------------ -------------- -------- ----------- -----------
Industrial 6.4% 6.5% 7.0% 7.2%
------------ -------------- -------- ----------- -----------
Office 6.3% 7.2% 7.6% 8.0%
------------ -------------- -------- ----------- -----------
Retail 5.6% 5.7% 6.3% 6.4%
------------ -------------- -------- ----------- -----------
Total 6.2% 6.4% 7.0% 7.2%
------------ -------------- -------- ----------- -----------
Outlook
Despite the uncertainty that enveloped the UK after the vote to
leave the EU, our portfolio has remained resilient. This is
especially true of the industrial properties, where both
occupational and investor demand currently remains high.
With negotiations now underway between the UK and the EU,
inflation increasing and the residual political and economic
effects of the recent snap General Election, a hint of caution has
become evident in both the property market and wider economy.
Our existing portfolio continues to offer rental growth
potential and our low net debt to equity gearing at 26% and
GBP40.5m of undrawn facilities provides us with the means to take
advantage of any buying opportunities that may arise should market
conditions deteriorate over the next 12 months.
Justin Parker
Managing Director
4 September 2017
Finance Review
David Wooldridge, Finance Director
The Group's underlying business performed well over the year,
with rental income increased through lease renewals, rent reviews,
new lettings and property acquisitions.
Our underlying cost base was largely unchanged, leading to a
GBP0.9m increase in underlying pre-tax profit, which has supported
the 3% increase in ordinary dividends.
As announced in the last annual report, in August 2016 we
refinanced the GBP64.0m of facilities we had with HSBC Bank plc.
The facilities were due to expire in March 2018, but we have now
renewed for a five year term expiring in August 2021, and have
reduced the margin payable on the facilities by around 30%.
We also took advantage of the low interest rate environment to
raise a further GBP20m of long-term debt finance by repaying the
GBP20m Lloyds Bank 2012 term loan, which had just over 5 years
remaining, out of the proceeds of a GBP40m 15 year term loan with
Scottish Widows. Completion of the transaction, which saw the
interest rate on the new facility of 3.5% being set at a
significantly lower level than the 5.2% previously paid on the 2012
term loan, took place in December 2016. A GBP1.2m early repayment
charge was incurred on the refinancing, which impacts on statutory
profit, but the amount is not included in the underlying profit
measure or in EPRA earnings per share.
We remain conservatively financed, with the refinancings in the
year extending both the total amount of our facilities and moving
beyond normal bank facilities, as well as providing us with a
diversified maturity profile. No facilities are due to expire
before 2021, our balance sheet remains strong and our loan to value
is only 20%.
Income
Gross rental income increased from GBP22.9m to GBP23.7m and
property costs, net of service charge income, increased from
GBP0.9m to GBP1.0m, leading to an increase in net rental income of
GBP0.7m to GBP22.7m.
Administration expenses increased slightly to GBP3.4m (2016:
GBP3.3m).
Excluding the early repayment costs of GBP1.2m, finance costs
decreased by GBP0.3m, as we benefited from the reduction in margin
on the HSBC facilities and the lower interest rate on the Scottish
Widows loan.
Underlying pre-tax profit increased from GBP15.0m to
GBP15.9m.
Statutory pre-tax profit increased from GBP25.2m to GBP29.6m,
mainly as a result of the above, as well as the revaluation surplus
of GBP13.0m (2016: GBP10.2m) and profit on disposal of investment
property of GBP1.9m (2016: GBPnil).
Basic and diluted earnings per share increased from 39.86p to
46.63p and EPRA earnings per share, which excludes the valuation
surplus, profit on sale of investment property and early repayment
costs, increased by 4.9% to 25.05p (2016: 23.88p).
Taxation
No current tax charge has been recognised in the year, as the
majority of the Group's income is exempt from corporation tax due
to our REIT status.
We continue to comfortably meet all of the REIT requirements and
maintain our REIT status.
Underlying financial performance
Investment/ Trading Other
Total development* properties items
2017 GBPm GBPm GBPm GBPm
------------------------------------ ------ ------------- ----------- ------
Gross rental income 23.7 23.7 - -
Service charge income 1.0 1.0 - -
------------------------------------ ------ ------------- ----------- ------
Total revenue 24.7 24.7 - -
Property costs (2.0) (2.0) - -
------------------------------------ ------ ------------- ----------- ------
Net property income 22.7 22.7 - -
------------------------------------ ------ ------------- ----------- ------
Sale of trading properties - - - -
Property outgoings on trading - - - -
properties
------------------------------------ ------ ------------- ----------- ------
Net income from trading properties - - - -
------------------------------------ ------ ------------- ----------- ------
Administration expenses (3.4) (3.4) - -
------------------------------------ ------ ------------- ----------- ------
Operating profit before net
gains on investment 19.3 19.3 - -
Profit on disposal of investment
and development properties 1.9 - - 1.9
Net gains on revaluation 13.0 - - 13.0
Operating profit 34.2 19.3 - 14.9
------------------------------------ ------ ------------- ----------- ------
Finance costs (3.4) (3.4) - -
Early repayment costs (1.2) - - (1.2)
Total finance costs (4.6) (3.4) - (1.2)
Profit before tax 29.6 15.9 - 13.7
------------------------------------ ------ ------------- ----------- ------
Investment/ Trading Other
Total development properties items
2016 GBPm GBPm GBPm GBPm
------------------------------------ ------ ------------ ----------- ------
Gross rental income 22.9 22.9 - -
Service charge income 0.9 0.9 - -
------------------------------------ ------ ------------ ----------- ------
Total revenue 23.8 23.8 - -
Property costs (1.8) (1.8) - -
------------------------------------ ------ ------------ ----------- ------
Net property income 22.0 22.0 - -
------------------------------------ ------ ------------ ----------- ------
Sale of trading properties - - - -
Property outgoings on trading - - - -
properties
------------------------------------ ------ ------------ ----------- ------
Net income from trading properties - - - -
------------------------------------ ------ ------------ ----------- ------
Administration expenses (3.3) (3.3) - -
------------------------------------ ------ ------------ ----------- ------
Operating profit before net
gains on investment 18.7 18.7 - -
Net gains on revaluation 10.2 - - 10.2
Operating profit 28.9 18.7 - 10.2
------------------------------------ ------ ------------ ----------- ------
Gross finance costs (3.7) (3.7) - -
Total finance costs (3.7) (3.7) - -
Profit before tax 25.2 15.0 - 10.2
------------------------------------ ------ ------------ ----------- ------
*Presented above is an analysis of the underlying rental
performance before tax, as shown in the investment/development
column, which excludes the impact of EPRA adjustments and
capitalised interest. The directors consider that this further
analysis of our profit before tax gives shareholders a useful
comparison of our underlying performance for the periods shown in
the financial statements.
Dividend
The Group moved to quarterly dividends with effect from October
2016.
An interim dividend of 9.88p per share (2016: 9.59p) was
declared in February 2017, with 4.94p per share paid in April 2017
and 4.94p per share paid in July 2017.
Dividends totalling 12.24p per share (2016: 11.88p) are being
declared in respect of the 30 June 2017 financial year, making the
total in respect of the year ended 30 June 2017 22.12p per share
(2016: 21.47p), an increase of 3% over the prior year. The
dividends consist of a quarterly dividend of 5.15p and a final
dividend of 7.09p. The quarterly dividend and final dividend will
both be paid as Property Income Distributions (PIDs).
The quarterly dividend of 5.15p will be paid on 16 October 2017
to Shareholders on the register at the close of business on 15
September 2017.
The final dividend of 7.09p will, if approved by Shareholders at
the AGM, be paid on 15 January 2018 to Shareholders on the register
at the close of business on 15 December 2017.
The allocation of future dividends between PID and non-PID may
vary.
The Board's continued intention is to grow the rent roll to
enable a sustainable, covered, increase in dividends over the
long-term, with a view to distributing around 90% of our recurring
profit.
The interim, quarterly and final dividends paid and proposed in
respect of the financial year of 22.12p amount to 88% of the EPRA
earnings per share figure of 25.05p, and are covered 1.13 times by
that earnings measure.
Net assets
Net assets increased by GBP16.1m in the year, from GBP280.6m to
GBP296.7m, due to GBP15.9m of underlying pre-tax profit, a
revaluation surplus of GBP13.0m, profit on disposal of investment
property of GBP1.9m and share-based payment charges of GBP0.2m,
offset by ordinary dividends of GBP13.7m and an early repayment
interest cost of GBP1.2m on the refinancing of the Lloyds term
loan.
Net asset value per share increased by 26p, from 443p to 469p,
and EPRA net asset value per share increased by 25p, to 471p.
Financing and cash flow
Operating cash flow was GBP1.8m higher at GBP17.1m. Cash
outflows in respect of property acquisitions and capital
expenditure amounted to GBP11.4m and borrowings increased by
GBP5.7m.
Equity dividends paid in the year totalled GBP16.7m, compared to
GBP13.2m in the prior year, with the increase due to the
introduction of quarterly dividend payments with effect from
October 2016.
2017 2016
GBPm GBPm
-------------------------------------------- ------- -------
Net cash generated from operations 21.3 18.6
-------------------------------------------- ------- -------
From investment and development properties 21.3 18.6
From trading properties - -
-------------------------------------------- ------- -------
Net interest paid (4.2) (3.3)
Taxation - -
-------------------------------------------- ------- -------
Operating cash flow 17.1 15.3
Property acquisitions and development (11.4) (4.1)
Property disposals 4.0 -
Net expenditure on property, plant
and equipment - (0.1)
Movement in borrowings 5.7 2.3
Equity dividends (16.7) (13.2)
-------------------------------------------- ------- -------
Net movement in cash (1.3) 0.2
-------------------------------------------- ------- -------
As previously disclosed, the majority of the Group's debt
facilities were refinanced in the year. On 31 August 2016 the Group
refinanced the HSBC term loan and revolving credit facilities,
which now expire in 2021, a new GBP40m 15 year loan was taken out
with Scottish Widows in December 2016 and the 2012 Lloyds term loan
(GBP20m) was repaid in the same month. The Group's GBP1.0m
overdraft was renewed for the year to November 2017 and we expect
to renew the overdraft for a further twelve months.
The table below shows the position as at 30 June 2017.
Expiry Available Drawn Undrawn
Borrowing year GBPm GBPm GBPm
-------------------------------- -------- ---------- ------ --------
HSBC overdraft 2017 1.0 - 1.0
HSBC Revolving Credit Facility 2021 44.0 4.5 39.5
HSBC term loan 2021 20.0 20.0 -
Lloyds 10 yr term loan 2023 20.0 20.0 -
Scottish Widows 15 yr term
loan 2031 40.0 40.0 -
Preference shares - 0.7 0.7 -
-------------------------------- -------- ---------- ------ --------
125.7 85.2 40.5
----------------------------------------- ---------- ------ --------
Of the GBP85.2m of drawn debt shown in the table above, 100% is
at fixed rates or covered by interest rate caps.
Our average cost of total debt facilities at 30 June 2017 was
3.1% (2016: 4.1%) or 3.6% on drawn amounts (2016: 4.4%). The
weighted average term remaining on total debt facilities is 7.7
years (2016: 5.5 years, taking into account the HSBC refinance in
August 2016).
Analysis of borrowings at 30 June 2017
2017 2016
GBPm GBPm
------------------------------------------- ------ ------
Borrowings from revolving credit facility
2021 4.5 18.0
HSBC term loan 2021 19.8 19.9
Lloyds term loan 2022 - 19.7
Lloyds term loan 2023 20.0 20.0
Scottish Widows term loan 2031 39.3 -
Preference share capital 0.7 0.7
------------------------------------------- ------ ------
Debt and preference share capital 84.3 78.3
Cash and short-term deposits (5.8) (7.1)
------------------------------------------- ------ ------
Net debt 78.5 71.2
------------------------------------------- ------ ------
Net assets 296.7 280.6
------------------------------------------- ------ ------
Net debt to equity gearing 26% 25%
------------------------------------------- ------ ------
David Wooldridge
Finance Director
4 September 2017
Group Statement of Comprehensive Income
for the year ended 30 June 2017
2017 2016
Notes GBPm GBPm
------------------------------------------- ------ ------- -------
Gross rental income 2 23.7 22.9
Service charge income 2 1.0 0.9
------------------------------------------- ------ ------- -------
Total revenue 2 24.7 23.8
Property costs 3 (2.0) (1.8)
------------------------------------------- ------ ------- -------
Net property income 22.7 22.0
------------------------------------------- ------ ------- -------
Proceeds on sale of trading properties - -
Carrying value of trading properties - -
sold
Property outgoings relating to trading - -
properties
------------------------------------------- ------ ------- -------
Net income from trading properties - -
------------------------------------------- ------ ------- -------
Administration expenses (3.4) (3.3)
------------------------------------------- ------ ------- -------
Operating profit before net gains
on investment and development properties 19.3 18.7
Profit on disposal of investment 1.9 -
and development properties
Revaluation of investment and development
properties 9 13.0 10.2
------------------------------------------- ------ ------- -------
Operating profit 34.2 28.9
------------------------------------------- ------ ------- -------
Total finance income 5 - -
------------------------------------------- ------ ------- -------
Finance costs (3.4) (3.7)
Early repayment costs (1.2) -
------------------------------------------- ------ ------- -------
Total finance costs 5 (4.6) (3.7)
------------------------------------------- ------ ------- -------
Net finance costs 5 (4.6) (3.7)
------------------------------------------- ------ ------- -------
Profit before tax 29.6 25.2
Taxation 6 - -
------------------------------------------- ------ ------- -------
Profit for the financial year 29.6 25.2
------------------------------------------- ------ ------- -------
Other comprehensive income:
Items that will not be reclassified
subsequently to profit and loss:
Revaluation of owner-occupied property - -
Total comprehensive income for the
year attributable to the owners of
the parent 29.6 25.2
------------------------------------------- ------ ------- -------
All operations are continuing.
Basic and diluted earnings per share 8 46.63p 39.86p
------------------------------------------- ------ ------- -------
Statement of Changes in Equity
for the year ended 30 June 2017
Ordinary Share Capital Revaluation Share-based Retained Total
share premium redemption reserve payments earnings equity
capital reserve reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Balance at 30
June 2015 15.8 13.0 11.2 0.3 0.3 228.0 268.6
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Retained profit - - - - - 25.2 25.2
Other comprehensive -
income - - - - - -
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Total comprehensive
income - - - - - 25.2 25.2
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Share-based
payment - - - - 0.2 - 0.2
Expiry of share
options - - - - (0.2) 0.2 -
Dividends paid - - - - - (13.4) (13.4)
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Balance at 30
June 2016 15.8 13.0 11.2 0.3 0.3 240.0 280.6
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Retained profit - - - - - 29.6 29.6
Other comprehensive -
income - - - - - -
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Total comprehensive
income - - - - - 29.6 29.6
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Share-based
payment - - - - 0.2 - 0.2
Expiry of share
options - - - - (0.2) 0.2 -
Dividends paid - - - - - (13.7) (13.7)
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Balance at 30
June 2017 15.8 13.0 11.2 0.3 0.3 256.1 296.7
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Group Balance Sheet
at 30 June 2017
2017 2016
Notes GBPm GBPm
--------------------------------------- ------ ------- -------
Non-current assets
Investment and development properties 9 386.8 363.1
Property, plant and equipment 1.3 1.3
Derivative financial instruments - -
Trade and other receivables 0.6 0.5
--------------------------------------- ------ ------- -------
388.7 364.9
--------------------------------------- ------ ------- -------
Current assets
Trading properties 0.5 0.5
Trade and other receivables 1.6 2.4
Cash and cash equivalents 5.8 7.1
--------------------------------------- ------ ------- -------
7.9 10.0
--------------------------------------- ------ ------- -------
Total assets 396.6 374.9
--------------------------------------- ------ ------- -------
Current liabilities
Trade and other payables (15.2) (16.0)
Current tax liabilities (0.4) -
(15.6) (16.0)
--------------------------------------- ------ ------- -------
Non-current liabilities
Borrowings (84.3) (78.3)
--------------------------------------- ------ ------- -------
Total liabilities (99.9) (94.3)
--------------------------------------- ------ ------- -------
Net assets 296.7 280.6
--------------------------------------- ------ ------- -------
Equity
Called up ordinary share capital 15.8 15.8
Share premium 13.0 13.0
Revaluation reserve 0.3 0.3
Share-based payment reserve 0.3 0.3
Redemption reserve 11.2 11.2
Retained earnings 256.1 240.0
--------------------------------------- ------ ------- -------
Total equity 296.7 280.6
--------------------------------------- ------ ------- -------
Net asset value per share
- Basic and diluted 8 469p 443p
- EPRA 8 471p 446p
--------------------------------------- ------ ------- -------
Rupert Mucklow
David Wooldridge
Group Cash Flow Statement
for the year ended 30 June 2017
2017 2016
GBPm GBPm
-------------------------------------------------- ------- -------
Cash flows from operating activities
Operating profit 34.2 28.9
Adjustments for non-cash items
Unrealised net revaluation gains on
- investment and development properties (13.0) (10.2)
- Profit on disposal of investment properties (1.9) -
- Depreciation 0.1 0.1
- Share based payments 0.2 0.2
- Profit on sale of property, plant and - -
equipment
- Amortisation of lease incentives (0.4) (0.3)
Other movements arising from operations
- Increase in trading properties - -
- Decrease/(increase) in receivables 0.3 (1.6)
- Increase in payables 1.8 1.5
--- --------------------------------------------- ------- -------
Net cash generated from operations 21.3 18.6
Interest received - -
Interest paid (4.2) (3.3)
Preference dividends paid - -
Net cash inflow from operating activities 17.1 15.3
Cash flows from investing activities
Acquisition of and additions to investment
and development properties (11.4) (4.1)
Proceeds on disposal of investment and 4.0 -
development properties
Net expenditure on property, plant and
equipment - (0.1)
-------------------------------------------------- ------- -------
Net cash outflow from investing activities (7.4) (4.2)
Cash flows from financing activities
Repayment of existing borrowings (20.0) -
New borrowings (net of costs) 39.4 -
Net (decrease)/increase in borrowings (13.7) 2.3
Equity dividends paid (16.7) (13.2)
-------------------------------------------------- ------- -------
Net cash outflow from financing activities (11.0) (10.9)
Net (decrease)/increase in cash and cash
equivalents (1.3) 0.2
-------------------------------------------------- ------- -------
Cash and cash equivalents at beginning
of year 7.1 6.9
-------------------------------------------------- ------- -------
Cash and cash equivalents at end of year 5.8 7.1
-------------------------------------------------- ------- -------
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
Basis of preparation of financial information
The Group financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) adopted
for use in the European Union and therefore comply with Article 4
of the EU IAS regulation. Whilst the financial information included
in this preliminary announcement has been computed in accordance
with IFRSs, this announcement itself does not contain sufficient
information to comply with IFRSs. The Company expects to publish
full financial statements that comply with IFRSs on 1 October
2017.
The preliminary announcement was approved by the board of
directors on 4 September 2017. The financial information set out in
this announcement does not constitute the Company's statutory
accounts for the years ended 30 June 2017 or 2016 as defined under
Section 435 of the Companies Act 2006. The financial information
previously set out does not constitute the Company's statutory
accounts for the years ended 30 June 2017 or 30 June 2016 but is
derived from those accounts. Statutory accounts for 2016 have been
delivered to the Registrar of Companies, and those for 2017 will be
delivered in due course.
The auditors, KPMG LLP, have reported on these respective
statutory accounts; their reports were:
i. unqualified;
ii. did not include references to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report; and
iii. did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.
The financial statements are prepared under the historical cost
convention, except for the revaluation of investment and
development properties and owner-occupied properties and deferred
tax thereon and certain financial assets, with consistent
accounting policies to the prior year.
Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and all its subsidiaries. Control is
assumed where the Parent Company has the power to govern the
financial and operational policies of the subsidiary.
Unrealised gains and losses on intra-Group transactions and
intra-Group balances are eliminated from the consolidated
results.
Going concern
As at 30 June 2017 the Group had GBP40.5m of undrawn banking
facilities and had drawn down GBP4.5m from its HSBC GBP44m 2021
Revolving Credit Facility. The Group's GBP1.0m overdraft, which is
due for renewal within 12 months of the date of this document, was
undrawn. Given these facilities, the Group's low net debt to equity
gearing level of 26% and GBP101.7m of unencumbered properties,
significant capacity exists to raise additional finance or to
provide additional security for existing facilities, should
property values fall. Accordingly, the directors continue to adopt
the going concern basis in preparing the annual report and
financial statements.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements requires the use of
estimates and assumptions that affect reported amounts of assets
and liabilities during the reporting period. These estimates and
assumptions are based on management's best knowledge of the amount,
event or actions. Actual results may differ from those amounts.
In making their judgement over the valuation of properties,
which has a significant effect on the amounts recognised in the
financial statements, management has used the valuation performed
by its independent valuers as the fair value of its investment,
development, owner-occupied and trading properties. The valuation
is based upon assumptions including future rental income and an
appropriate yield. The valuers also use market evidence of
transaction prices for similar properties.
Standards in issue but not yet effective
The following Adopted IFRSs have been issued but have not been
applied by the Group in these financial statements. Their adoption
is not expected to have a material effect on the financial
statements unless otherwise indicated:
-- IFRS 9 Financial Instruments (effective date 1 January 2018).
-- IFRS 15 Revenue from Contract with Customers (effective date 1 January 2018).
-- IFRS 16 Leases (effective date to be confirmed).
-- Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses (effective date to be confirmed).
-- Amendments to IAS 7: Disclosure Initiative (effective date to be confirmed).
-- Amendments to IFRS 2: Classification and Measurement of
Share-based Payment Transactions (effective date to be
confirmed).
-- Amendments to IFRS 4: Applying IFRS 9 Financial Instruments
with IFRS 4 Insurance Contracts (effective date to be
confirmed).
Significant accounting policies
Revenue recognition
Rental income
Gross rental income represents rents receivable for the year.
Rent increases arising from rent reviews due during the year are
taken into account only to the extent that such reviews have been
agreed with tenants at the accounting date.
Rental income from operating leases is recognised on a
straight-line basis over the term of the lease.
Lease incentives are amortised on a straight-line basis over the
lease term.
Property operating expenses are expensed as incurred.
Revenue and profits on sale of investment, development and
trading properties
Revenue and profits on sale of investment, development and
trading properties are recognised on the completion of
contracts.
The amount of profit recognised is the difference between sale
proceeds and the carrying amount.
Dividends and interest income
Dividend income from investments in subsidiaries is recognised
when shareholders' rights to receive payment have been
established.
Interest income is recognised on an accruals basis when it falls
due.
Costs associated with properties
Costs associated with properties under the course of development
include total development outgoings, including interest,
attributable to properties held for development is added to the
cost of such properties. A property is regarded as being in the
course of development until practical completion.
Interest associated with direct expenditure on investment
properties which are undergoing development or major refurbishment
and development properties is capitalised. Direct expenditure
includes the purchase cost of a site or property for development
properties, but the original book cost of investment property under
development or refurbishment is not included in the calculation of
interest. Interest is capitalised gross from the start of the
development work until the date of practical completion, but is
suspended if there are prolonged periods when development activity
is interrupted. The rate used is the rate on specific associated
borrowings or, for that part of the development costs financed out
of general funds, the average rate.
Valuation of properties
Investment properties are valued at the balance sheet date at
fair value. Where investment properties are being redeveloped the
property continues to be treated as an investment property.
Surpluses and deficits attributable to the Group arising from
revaluation are recognised in the statement of comprehensive
income. Valuation surpluses reflected in retained earnings are not
distributable until realised on sale.
Properties under construction, where the land option is owned
but not the land, are valued at fair value, or under the cost model
if the fair value cannot be reliably measured as the land option
has not yet been exercised. Once the option is exercised the
property under construction will be valued at fair value until
practical completion, when they are transferred from development
properties to investment properties.
Properties under development are valued at fair value until
practical completion, when they are transferred to investment
properties. Valuation surpluses and deficits attributable to
properties under development are recognised in the statement of
comprehensive income.
Owner-occupied properties are valued at the balance sheet date
at fair value. Valuation changes in owner-occupied property are
taken to revaluation reserve through other comprehensive income.
Where the valuation is below historic cost, the deficit is
recognised in the statement of comprehensive income.
Trading properties held for resale are stated at the lower of
cost and net realisable value.
Property, plant and equipment
Land and buildings held for use in the production or supply of
goods or services, or for administrative purposes, are stated in
the balance sheet at their revalued amounts, being the fair value
at the date of revaluation, less any subsequent accumulated
depreciation and subsequent accumulated impairment losses.
Revaluations are performed with sufficient regularity such that the
carrying amount does not differ materially from that which would be
determined using fair values at the balance sheet date.
Any revaluation increase arising on the revaluation of such land
and buildings is credited to the properties revaluation reserve
through other comprehensive income, except to the extent that it
reverses a revaluation decrease for the same asset previously
recognised as an expense, in which case the increase is credited to
the statement of comprehensive income to the extent of the decrease
previously charged. A decrease in carrying amount arising on the
revaluation of such land and buildings is charged as an expense to
the extent that it exceeds the balance, if any, held in the
properties revaluation reserve relating to a previous revaluation
of that asset.
Depreciation on revalued buildings is charged to income. On the
subsequent sale or retirement of a revalued property, the
attributable revaluation surplus remaining in the properties
revaluation reserve is transferred directly to retained
earnings.
Plant and equipment is stated at cost less accumulated
depreciation, less any recognised impairment.
Depreciation
Depreciation is provided on buildings, motor vehicles and
fixtures and fittings on a straight-line basis over the estimated
useful lives of between two and twenty-five years. Investment
properties are not depreciated.
Capital grants
Capital grants received relating to the cost of building or
refurbishing investment properties are deducted from the cost of
the relevant property. Revenue grants are deducted from the related
expenditure.
Share-based payments
The cost of granting equity-settled share options and other
share-based remuneration is recognised in the statement of
comprehensive income at their fair value at grant date. They are
expensed straight-line over the vesting period, based on estimates
of the shares or options that eventually vest. Options are valued
using the Monte Carlo simulation model.
Taxation
The Group is a Real Estate Investment Trust (REIT). As a result,
the Group does not pay UK corporation tax on its profits and gains
from the qualifying rental business. Non-qualifying profits and
gains continue to be subject to corporation tax.
The tax expense represents the sum of the tax currently payable
and deferred tax. The tax currently payable is based on taxable
profit for the year. Taxable profit differs from net profit as
reported in the statement of comprehensive income because it
excludes items of income and expense that are taxable or deductible
in other years and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the balance sheet date.
Tax is recognised in the statement of comprehensive income
except for items that are reflected directly in equity, where the
tax is also recognised in equity.
Deferred taxation
Deferred taxation is provided in full on temporary differences
that result in an obligation to pay more tax, or a right to pay
less tax, at a future date, at rates expected to apply when they
crystallise based on current tax rates and law. Temporary
differences arise from the inclusion of items in taxation
computations in periods different from when they are included in
the financial statements. Deferred tax is provided on temporary
differences arising from the revaluation of fixed assets. Deferred
tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered.
Pension costs
The cost to the Group of contributions made to defined
contribution plans is expensed when the contributions fall due.
Acquisitions
On the acquisition of a business, including an interest in an
associated undertaking, fair values are attributed to the Group's
share of separable net assets. Where the fair value of the cost of
acquisition exceeds the fair value attributable to such assets, the
difference is treated as purchased goodwill and capitalised in the
balance sheet in the year of acquisition.
Under the Group's previous policy, GBP0.13m of goodwill has been
written off directly to reserves as a matter of accounting policy.
This would be credited to the statement of comprehensive income on
disposal of the business to which it related.
Group undertakings
Investments are included in the balance sheet at cost less any
provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument. The Group derecognises a
financial asset only when the contractual rights to the cash flows
from the asset expire; or it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset
to another entity. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Group recognises its retained
interest in the asset and an associated liability for any amounts
it may have to pay. If the Group retains substantially all the
risks and rewards of ownership of a transferred financial asset,
the Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
The Group derecognises financial liabilities when, and only when,
the Group's obligations are discharged, cancelled, or they
expire.
Trade receivables
Trade receivables are measured at initial recognition at fair
value, and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for
estimated irrecoverable amounts are recognised in the statement of
comprehensive income when there is objective evidence that the
asset is impaired. The allowance recognised is measured as the
difference between the asset's carrying amount and the present
value of future cash flows discounted at the effective rate
computed at initial recognition.
Available-for-sale assets
Mortgage receivables held by the Group are classified as being
available-for-sale and are stated at fair value. Fair value is
determined in the manner described in note 13 of the annual report.
Gains and losses arising from changes in fair value are recognised
directly in equity in the investments revaluation reserve with the
exception of impairment losses, which are recognised directly in
the statement of comprehensive income.
Where the investment is disposed of or is determined to be
impaired, the cumulative gain or loss recognised in the investments
revaluation reserve is included in profit or loss for the
period.
Financial assets at FVTPL
Financial assets are classified as at 'fair value through profit
or loss' where it is a derivative that is not designated and
effective as a hedging instrument. The interest rate caps are
classified as FVTPL.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the
proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlements or redemption and direct
issue costs, are accounted for on an accrual basis in the statement
of comprehensive income using the effective interest rate method
and are added to the carrying amount of the instrument to the
extent that they are not settled in the period in which they
arise.
Trade payables
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
2. Revenue
2017 2016
GBPm GBPm
----------------------------------------- ----- -----
Gross rental income from investment
and development properties 23.7 22.9
Service charge income 1.0 0.9
Income received from trading properties - -
----------------------------------------- ----- -----
Total revenue 24.7 23.8
----------------------------------------- ----- -----
3. Property costs
2017 2016
GBPm GBPm
------------------------- ----- -----
Service charge expenses 1.0 1.0
Other property expenses 1.0 0.8
------------------------- ----- -----
2.0 1.8
------------------------- ----- -----
4. Segmental analysis
The Group has two reportable segments: investment and
development property, and trading property.
These two segments are considered appropriate for reporting
under IFRS 8 "Operating Segments" as these are regularly reviewed
by the chief operating decision maker to allocate resources to the
segments and to assess their performance. The Group has a large and
diverse customer base and there is no significant reliance on any
single customer.
The measure of profit or loss that is reported to the Board of
Directors for the segments is profit before tax. A segmental
analysis of income from the two segments is presented below, which
includes a reconciliation to the results reported in the Group
statement of comprehensive income.
2017 2016
GBPm GBPm
---------------------------------------------- ------ ------
Investment and development properties
- Net property income 22.7 22.0
- Profit on disposal 1.9 -
Gain on revaluation of investment
- properties 13.0 8.2
Gain on revaluation of development
- properties - 2.0
--- ----------------------------------------- ------ ------
37.6 32.2
---------------------------------------------- ------ ------
Trading properties
- Income received from trading properties - -
- Carrying value on sale - -
- Property outgoings - -
--- ----------------------------------------- ------ ------
- -
---------------------------------------------- ------ ------
Net income from the property portfolio
before administration expenses 37.6 32.2
Administration expenses (3.4) (3.3)
---------------------------------------------- ------ ------
Operating profit 34.2 28.9
Net financing costs (4.6) (3.7)
---------------------------------------------- ------ ------
Profit before tax 29.6 25.2
---------------------------------------------- ------ ------
The property revaluation gain has been
recognised as follows:
Within operating profit
- Investment properties 13.0 8.2
- Development properties - 2.0
--- ----------------------------------------- ------ ------
13.0 10.2
Within other comprehensive income
- Owner-occupied properties - -
--- ----------------------------------------- ------ ------
Total revaluation gain for the period 13.0 10.2
---------------------------------------------- ------ ------
Segmental information on assets and liabilities, including a
reconciliation to the results reported in the Group balance sheet,
are as follows:
2017 2016
GBPm GBPm
------------------------------------------ ------- -------
Balance sheet
Investment and development properties
- Segment assets 388.3 365.5
- Segment liabilities (6.9) (6.8)
- Net borrowings (78.5) (71.2)
---- ------------------------------------ ------- -------
302.9 287.5
------------------------------------------ ------- -------
Trading properties
- Segment assets 0.5 0.5
- Segment liabilities - -
---- ------------------------------------ ------- -------
0.5 0.5
------------------------------------------ ------- -------
Other activities
- Unallocated assets 2.0 1.8
- Unallocated liabilities (8.7) (9.2)
(6.7) (7.4)
------------------------------------------ ------- -------
Net assets 296.7 280.6
------------------------------------------ ------- -------
Capital expenditure
Investment and development properties 12.6 4.0
Other activities 0.1 0.1
------------------------------------------ ------- -------
12.7 4.1
------------------------------------------ ------- -------
Depreciation
Other activities 0.1 0.1
------------------------------------------ ------- -------
0.1 0.1
------------------------------------------ ------- -------
All operations and income are derived from the United Kingdom
and therefore no geographical segmental information is
provided.
5. Net finance costs
2017 2016
GBPm GBPm
--------------------------------------------- ----- -----
Finance costs on:
Preference share dividend - -
Early repayment costs 1.2 -
Bank overdraft and loan interest payable 3.4 3.7
--------------------------------------------- ----- -----
Total finance costs 4.6 3.7
--------------------------------------------- ----- -----
Finance income on:
Short-term deposits - -
Fair value movement of derivative financial - -
instruments
Bank and other interest receivable - -
--------------------------------------------- ----- -----
Total finance income - -
--------------------------------------------- ----- -----
Net finance costs 4.6 3.7
--------------------------------------------- ----- -----
6. Taxation
2017 2016
GBPm GBPm
-------------------------------------------- ----- -----
Current tax
- Corporation tax - -
- -
-------------------------------------------- ----- -----
Deferred tax - -
-------------------------------------------- ----- -----
Total tax in the statement of comprehensive - -
income
-------------------------------------------- ----- -----
The tax for the year can be reconciled to the profit per the
statement of comprehensive income as follows:
2017 2016
GBPm GBPm
------------------------------------- ------ ------
Profit before tax 29.6 25.2
------------------------------------- ------ ------
Profit before tax multiplied by the
standard rate of
UK corporation tax of 19.75% (2016:
20.0%) 5.9 5.0
Effect of:
REIT exempt income and gains (6.1) (5.2)
Losses not recognised 0.1 0.1
Share based payments 0.1 0.1
- -
------------------------------------- ------ ------
Reductions in the UK corporation tax rate from 23% to 21%
(effective from 1 April 2014) and 20% (effective from 1 April 2015)
were substantively enacted on 2 July 2013. Further reductions to
19% (effective from 1 April 2017) and to 17% (effective 1 April
2020) were substantively enacted on 26 October 2015 and 6 September
2016 respectively. Any deferred tax balance would be calculated
based on these rates as at 30 June 2017.
The Group became a Real Estate Investment Trust (REIT) on 1 July
2007. Under the tax rules which apply to REITs properties which are
developed and sold within three years of completion do not benefit
from the normal REIT tax exemption on disposal gains. The Group
currently owns GBP13.5m (2016: GBP14.1m) of properties which have
completed development during the previous three years. If these
properties had been disposed of at their 30 June 2017 valuation,
then tax of GBPnil (2016: GBP0.5m) would have become payable. No
deferred tax has been provided in respect of this potential tax
liability as the Group had no plans to dispose of these properties
at the balance sheet date.
7. Dividends
2017 2016
GBPm GBPm
---------------------------------------------- ----- -----
Amounts recognised as distributions to
equity holders in the year:
Quarterly dividend for the year ended 30 3.1 -
June 2016 of 5.00p (2015: nil) per share
Final dividend for the year ended 30 June
2016 of 6.88p (2015: 11.53p) per share 4.4 7.3
Interim dividend for the year ended 30
June 2016 of 9.59p per share - 6.1
First quarterly dividend for the year ended 3.1 -
30 June 2017 of 4.94p (2016: nil) per share
Second quarterly dividend for the year 3.1 -
ended 30 June 2017 of 4.94p (2016: nil)
per share
13.7 13.4
---------------------------------------------- ----- -----
The third quarterly dividend payment of 5.15p (2016: 5.00p) will
be paid on 16 October 2017 to shareholders on the register at the
close of business on 15 September 2017, totalling GBP3.3m. As this
dividend was not declared at 30 June 2017, it has not been included
as a liability in these financial statements.
The directors propose a final dividend for the year ended 30
June 2017 of 7.09p (2016: 6.88p) per ordinary share, totalling
GBP4.5m. Both dividends will be paid as PIDs.
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has therefore not
been included as a liability in these financial statements.
The final dividend, if approved, will be paid on 15 January 2018
to shareholders on the register at the close of business on 15
December 2017.
8. Earnings per share and net asset value per share
Earnings per share
The basic and diluted earnings per share of 46.63p (2016:
39.86p) has been calculated on the basis of the weighted average of
63,294,833 ordinary shares (2016: 63,294,833 ordinary shares) and
profit of GBP29.6m (2016: GBP25.2m).
The European Public Real Estate Association (EPRA) has issued
recommended bases for the calculation of earnings and net asset
value per share information and these are included in the following
tables.
The EPRA earnings per share has been amended from the basic and
diluted earnings per share by the following:
2017 2016
GBPm GBPm
---------------------------------------- ------- -------
Earnings 29.6 25.2
Profit on disposal of investment and (1.9) -
development properties
Net gains on revaluation of investment
and development properties (13.0) (10.2)
Early repayment costs 1.2 -
EPRA earnings 15.9 15.0
---------------------------------------- ------- -------
EPRA earnings per share 25.05p 23.88p
---------------------------------------- ------- -------
The Group presents an EPRA earnings per share figure as the
directors consider that this is a better indicator of the
performance of the Group.
There are no dilutive shares. Options over 103,257 ordinary
shares were granted in the year (2016: 94,445 ordinary shares)
under the 2015 Performance Share Plan. The vesting conditions for
these shares have not been met, so they have not been treated as
dilutive in these calculations. The sixth three year award under
the 2007 Performance Share Plan vested in the period, with no
ordinary shares being issued and with 87,606 shares lapsed.
Net asset value per share
The net asset value per share of 469p (2016: 443p) has been
calculated on the basis of the number of equity shares in issue of
63,294,833 (2016: 63,294,833) and net assets of GBP296.7m (2016:
GBP280.6m). The EPRA net asset value per share has been calculated
as follows:
2017 2016
GBPm GBPm
---------------------------------------------- ------ ------
Equity shareholders' funds 296.7 280.6
Valuation of land held as trading properties 1.9 1.9
Book value of land held as trading
properties (0.5) (0.5)
EPRA net asset value 298.1 282.0
---------------------------------------------- ------ ------
EPRA net asset value per share 471p 446p
---------------------------------------------- ------ ------
9. Investment and development properties
Investment Development Total
GBPm GBPm GBPm
------------------ ----------- ------------ ------
At 1 July 2015 342.5 6.1 348.6
Additions 4.0 - 4.0
Lease incentives 0.3 - 0.3
Revaluation gain 8.2 2.0 10.2
At 1 July 2016 355.0 8.1 363.1
Additions 11.6 1.0 12.6
Lease incentives 0.4 - 0.4
Impairment - (0.1) (0.1)
Disposals (2.2) - (2.2)
Revaluation gain 13.0 - 13.0
At 30 June 2017 377.8 9.0 386.8
------------------ ----------- ------------ ------
The closing book value shown above comprises GBP364.1m (2016:
GBP340.7m) of freehold and GBP22.7m (2016: GBP22.4m) of leasehold
properties.
Freehold Leasehold Total
GBPm GBPm GBPm
------------------------------ --------- ---------- ------
Properties held at valuation
on 30 June 2017:
Cost 219.6 23.4 243.0
Valuation surplus/(deficit) 144.5 (0.7) 143.8
------------------------------ --------- ---------- ------
Valuation 364.1 22.7 386.8
------------------------------ --------- ---------- ------
Freehold Leasehold Total
GBPm GBPm GBPm
------------------------------ --------- ---------- ------
Properties held at valuation
on 30 June 2016:
Cost 208.6 22.9 231.5
Valuation surplus/(deficit) 132.1 (0.5) 131.6
------------------------------ --------- ---------- ------
Valuation 340.7 22.4 363.1
------------------------------ --------- ---------- ------
The properties are stated at their 30 June 2017 fair value and
are valued by Cushman & Wakefield, professionally qualified
external valuers, in accordance with the RICS Valuation
Professional Standards published by the Royal Institution of
Chartered Surveyors. Cushman & Wakefield have recent experience
in the relevant location and category of the properties being
valued. Cushman & Wakefield is the trading name of Cushman
& Wakefield Debenham Tie Leung Limited.
2017 2016
GBPm GBPm
--------------------------------------- ------ ------
Cushman & Wakefield valuation 386.9 364.2
Owner-occupied property included
in property, plant and equipment (1.1) (1.1)
Other adjustments 1.0 -
--------------------------------------- ------ ------
Investment and development properties
as at 30 June 386.8 363.1
--------------------------------------- ------ ------
Additions to freehold and leasehold properties include
capitalised interest of GBPnil (2016: GBPnil). The total amount of
interest capitalised included in freehold and leasehold properties
is GBP5.4m (2016: GBP5.4m). Properties valued at GBP285.2m (2016:
GBP225.8m) were subject to a security interest.
10. Directors and Company Secretary
Rupert Mucklow BSc - Chairman
Justin Parker BSc - Managing Director
FRICS
David Wooldridge - Finance Director and Company
FCCA ACIS Secretary
Ian Cornock MRICS* - Senior Independent Non-Executive
Stephen Gilmore - Independent Non-Executive
LLB*
Peter Hartill FCA* - Independent Non-Executive
*Member of Remuneration Committee and Audit
Committee.
Responsibility statement of the directors
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the consolidation
taken as a whole; and
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the group's position and
performance, business model and strategy.
This responsibility statement was approved by the board of
directors on 4 September 2017 and is signed on its behalf by:
Rupert Mucklow David Wooldridge
Chairman Finance Director and Company
Secretary
DATES:
Annual General Meeting
The Group's Annual General Meeting will be held on Tuesday 14
November 2017 at 11.30a.m. at the Birmingham Botanical Gardens,
Westbourne Road, Edgbaston, Birmingham, B15 3TR.
Dividend
Dividends of 12.24p per ordinary share are being declared in
respect of the 30 June 2017 financial year, making a total for the
year of 22.12p.
The dividends consist of the third quarterly dividend of 5.15p
per ordinary share to be paid on 16 October 2017 to Shareholders on
the register at the close of business on 15 September 2017 and a
final dividend of 7.09p per ordinary share, if approved by
shareholders at the AGM, to be paid on 15 January 2018 to
Shareholders on the register at the close of business on 15
December 2017.
Report and Accounts
The full report and accounts for the year ended 30 June 2017
will be available on 1 October 2017.
A copy of this document is available on the Company's website,
www.mucklow.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSFFWLFWSELU
(END) Dow Jones Newswires
September 05, 2017 02:00 ET (06:00 GMT)
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