TIDMHSTN
RNS Number : 7209O
Hansteen Holdings plc
23 August 2017
23 August 2017
Hansteen Holdings PLC
("Hansteen" or the "Group" or the "Company")
HALF YEAR RESULTS
Hansteen (LSE: HSTN), the investor in UK and continental
European industrial property, announces its half year results for
the six months ended 30 June 2017.
Financial Highlights
-- IFRS pre-tax profit increased by 185.6% to GBP156.5 million (H1 2016: GBP54.8 million)
-- Normalised Income Profit (NIP) increased by 25.9% to GBP38.9
million (H1 2016: GBP30.9 million)1
-- Normalised Total Profit (NTP) increased by 172.0% to GBP88.4
million (H1 2016: GBP32.5 million)
-- EPRA NAV per share increased by 2.8% to 132.5p (31 December 2016: 128.9p)
-- IFRS NAV per share increased by 6.9% to 132.5p (31 December 2016: 124.0p)
-- November interim dividend increased by 4.5% to 2.3p per share
(November 2016: 2.2p per share)
Operational Highlights
-- German and Dutch portfolio sold for EUR1.28 billion
representing a premium of approximately EUR76 million or 6% to 31
December 2016 valuation and generating a pre-tax profit of GBP47.9
million
-- Transaction realises the value in the German and Dutch
portfolio when occupancy and rent were at a high point for Hansteen
ownership and also when Euro/Sterling exchange rate was
historically favourable
-- Proposed Return to Shareholders of up to GBP580 million by end of 2017
-- Settlement of the EUR100 million convertible bonds with a combination of cash and equity
-- Acquisition of Industrial Multi Property Trust PLC
-- Property valuation increase of 2.3% or GBP17.4 million on the remaining Total portfolio *
Melvyn Egglenton, Chairman, commented: "After an extremely busy
and successful period, with completion of the sale of the German
and Dutch portfolio for EUR1.28bn, the acquisition of Industrial
Multi Property Trust and the settlement of EUR100 million of
convertible bonds, it is very pleasing to report record profits and
Net Asset Value. Looking forward, following the proposed Return to
Shareholders, our projections indicate that there is scope to
increase dividends, on a fully covered basis, compared to the
historic levels."
Ian Watson and Morgan Jones, joint Chief Executives, added: "For
the first time in many years, strong occupier demand has resulted
in increasing rents per let sq ft and it looks as though this trend
will continue. We believe there are constraints to new supply
because, to feasibly build equivalent properties to those in our
portfolio, a developer would need to achieve a rent of between GBP6
and GBP7 per sq ft. Furthermore, the appreciation by investors of
our type of properties continues to grow and recent transactions
would indicate that we could well benefit from further yield
compression."
For more information:
Ian Watson/Morgan Jones Jeremy Carey/Kirsty Allan
Hansteen Holdings PLC Tavistock
Tel: 0207 408 7000 Tel: 0207 920 3150
Email: jeremy.carey@tavistock.co.uk
* Total portfolio includes 100% of IMPT's portfolio of which
Hansteen had an investment of 93.4% at 30 June 2017. After the
balance sheet date, Hansteen has purchased the remaining 6.6% of
the shares and now owns 100% of IMPT
(1) Important Explanatory Notes about Alternative Performance Measures used in this Report:
EPRA and Adjusted metrics: The condensed financial statements
are prepared under IFRS. The Board monitors a number of alternative
performance measures when assessing the underlying performance of
the business. These include Normalised Income Profit (NIP),
Normalised Total Profit (NTP) and those defined by EPRA. NIP and
NTP are defined in the Chairman's interim statement and note -- of
the condensed financial statements contains the reconciliation of
these to IFRS profit before tax. Note -- of the condensed financial
statements has more information about the EPRA adjustments and the
reconciliation of these to the IFRS equivalents. A calculation of
net debt and the net debt to value ratio is shown in the Financial
Review.
Presentation for Analysts
A presentation to analysts (with dial in facilities and webex)
will take place today at 09:30 at Tavistock, 1 Cornhill, London,
EC3V 3ND.
Dial in details are as follows:
Direct DDI (s) for Participant Connection: UK Toll Number: +44
3333000804 UK/Toll-Free Number: 08003589473
Participant Pin Code: 06727718#
Webex details are as follows:
Audience URL:
https://arkadin-event.webex.com/arkadin-event/onstage/g.php?MTID=eaf6d0d067e833fd54b8446096b84354e
Audience Password: 301200470
If you need any further details, please email Jeremy Carey at
jeremy.carey@tavistock.co.uk or Kirsty Allan at
kirsty.allan@tavistock.co.uk
Chairman's interim statement
The first half of 2017 has been an extremely busy and successful
period for Hansteen and I can once again report record profits and
Net Asset Value. The Group has completed the sale of the German and
Dutch portfolio for EUR1.28 billion and we intend to return up to
GBP580 million to Shareholders. In addition, we have acquired the
entire issued share capital of Industrial Multi Property Trust and
settled the EUR100 million of convertible bonds. More details on
these transactions can be found below.
The sale of the German and Dutch portfolio realised the value
that had been created over a sustained period, from good buying,
active asset management using Hansteen's platform as well as
capitalising on the strengthening Euro. The sale is in line with
the Company's long term business and portfolio strategy of buying
at a low point in the cycle, with low occupancy and rents, adding
value through improved asset management and subsequently realising
the investment at a higher point in the cycle. The Board would like
to acknowledge and thank the Hansteen European team for the hard
work, skill and commitment which they have contributed to the
business over the last 12 years.
We previously reported that the fundamentals of occupational
supply and demand in the light industrial sector were positive and
the first half of 2017 has seen this momentum continue. With
limited new developments due to low rents and capital values,
demand has continued to outstrip supply across all of our regions,
partly due to the growth of e-commerce. This has translated into
further rental growth across the UK with ERVs increasing by 2.1% on
average across the portfolio in the six months from 31 December
2016. We have completed a total of 432 new lettings and lease
renewals and the passing rent per let sq ft on the UK portfolio has
increased by 7.2% between December 2016 and June 2017. Some regions
are experiencing greater growth than others principally where we
have estates with little or no vacant space and there is no
available competing stock. Our average rent in the UK is GBP3.66
per sq ft (31 December 2016: GBP3.41 per sq ft) and the rent needed
to justify development is substantially higher. Given the growing
demand profile, we believe that regional urban industrial and
logistics properties will experience a period of significant rental
growth.
Results
We believe that the best measures of performance are Normalised
Profits (our measure of underlying realised profits) and EPRA NAV
per share. Normalised Income Profit (NIP), recurring earnings
excluding profits or losses from the sale of properties, increased
by 25.9% to GBP38.9 million (H1 2016: GBP30.9 million). Normalised
Total Profit (NTP), comprising NIP plus profits or losses from the
sale of properties and realised profits from one off items,
increased by 172.0% to GBP88.4 million (H1 2016: GBP32.5
million).
EPRA NAV per share has increased by 2.8% to 132.5p (31 December
2016: 128.9p). This growth is in addition to the payment of a 3.7p
dividend per share in the period. These are all record results for
the business and show another strong performance in the first six
months of the year.
Hansteen's IFRS pre-tax profit was GBP156.5 million (H1 2016:
GBP54.8 million) with the 185.6% increase largely due to the profit
on the sale of the German and Dutch Portfolio which is detailed
below. Diluted EPRA earnings per share were 2.4p (H1 2016: 3.4p).
The table below shows how the NIP and NTP profit measures were
calculated:
Continuing Discontinued Total Continuing Discontinued Total
Operations Operations Operations Operations
H1 2017 H1 2017 H1 2017 H1 2016 H1 2016 H1 2016
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ------------- --------- ------------ ------------- ---------
Property rental income 28.8 36.2 65.0 9.0 35.7 44.7
Direct operating
expenses (1.5) (3.0) (4.5) (0.8) (5.0) (5.8)
Property management
fees - - - 1.7 - 1.7
Share of associates - - - 8.2 - 8.2
Administrative expenses (6.9) (3.1) (10.0) (6.5) (3.2) (9.7)
Net interest payable (4.9) (6.7) (11.6) (0.5) (7.7) (8.2)
------------------------- ------------ ------------- --------- ------------ ------------- ---------
Normalised Income
Profit 15.5 23.4 38.9 11.1 19.8 30.9
Profit on sale of
properties 0.8 48.0 48.8 0.9 0.7 1.6
Other operating income 0.5 0.2 0.7 -
------------------------- ------------ ------------- --------- ------------ ------------- ---------
Normalised Total
Profit 16.8 71.6 88.4 12.0 20.5 32.5
------------------------- ------------ ------------- --------- ------------ ------------- ---------
A reconciliation of NIP and NTP to the IFRS profit before tax is
contained in Note 9 of the Condensed Financial Statements.
The improvement in the EPRA NAV from 31 December 2016 can be
summarised as follows:
http://www.rns-pdf.londonstockexchange.com/rns/7209O_-2017-8-22.pdf
Basic NAV per share is reconciled to EPRA NAV per share in Note
10 of the Condensed Financial Statements.
Dividend
The Board has increased the interim dividend by 4.5% to 2.3p per
share (November 2016: 2.2p per share) reflecting the strong income
performance of the portfolio prior to the sale of the German and
Dutch assets in June 2017. The dividend payment of 2.3p per share
will include a 2.1p Property Income Distribution (PID) and will be
paid on 27 October 2017. The associated record date is 29 September
2017 and the ex-dividend date is 28 September 2017.
Looking forward and without the majority earnings from the
Continental European portfolio, Hansteen's dividend will be more
closely prescribed by the REIT rules whereby broadly speaking, 90%
of our Normalised Income Profit (NIP) will be distributed to
shareholders. This will result in a higher dividend on the reduced
capital base and the increased dividend will remain well covered.
Further details can be found in the Outlook.
Sale of German and Dutch Portfolio
The German and Dutch Portfolio was sold on a debt free basis for
cash to the Blackstone Purchasers, entities owned by funds advised
by affiliates of the Blackstone Group L.P. and M7 Real Estate. The
value given to the properties was EUR1.28 billion which represents
a premium of approximately EUR76 million (6%) to the 31 December
2016 valuation.
The net cash received by Hansteen in connection with the sale
was approximately EUR1.276 billion after the deduction of EUR25
million which was retained by Blackstone to satisfy 50% of the
latent capital gains tax liabilities relating to the German
properties. Immediately upon completion, EUR471 million was used to
repay debt secured against the German and Dutch Portfolio and
approximately EUR36 million was used or has been retained to meet
costs and other tax liabilities associated with the sale. Following
these deductions and repayments, the net cash increase was
approximately EUR769 million.
The sale has contributed a pre-tax profit of GBP47.9 million and
a post-tax profit of GBP41.6 million at 30 June 2017. Also included
in the profits is GBP71.6 million of realised exchange gains of
which GBP57.1 million was previously credited to reserves in the
balance sheet and GBP14.5 million arose during the six months to 30
June 2017.
Return to Shareholders
The Board proposes to return up to GBP580 million in aggregate
to Shareholders which is the equivalent of 70p per share. The Board
currently anticipates that this return will be implemented by the
end of 2017, and a circular will be posted to shareholders in due
course. The Board's intention is to ensure that the GBP580 million
is treated as a capital return and not an income return.
Convertible Bond
Following the sale of the German and Dutch portfolio and the net
cash increase of approximately EUR769 million, Hansteen offered to
buy and/or convert the EUR100 million of convertible bonds due in
2018. All of the bondholders chose to settle their bonds with 15.9%
opting to receive cash and 84.1% opting to receive shares. The cash
settlement was paid on 5 July 2017 and although the shares were not
issued until 10 July 2017, Hansteen was contractually obliged to
issue these shares when the bonds converted on 29 June 2017.
Therefore, the equity is included in the 30 June 2017 balance sheet
and the number of shares has been included in the per share
measures. The calculation of the earnings per share and Net Asset
Value per share measures are shown in note 10 of the Condensed
Financial Statements and further details on the convertible bonds
are shown in note 14 of the Condensed Financial Statements.
Industrial Multi Property Trust PLC (IMPT)
On 17 February 2017, Hansteen and the Independent Directors of
IMPT reached agreement on the terms of a recommended all cash offer
for the entire issued ordinary share capital of IMPT. Hansteen
acquired 57.2% of the issued share capital of IMPT either through
stock market purchases or through valid acceptances of the original
offer of 300p per share. The offer was subsequently increased to
330p per share and as at 30 June 2017, Hansteen owned 93.4% of
IMPT. The remaining 6.6% of shares were acquired by 23 July
2017.
The properties within the IMPT portfolio are similar in nature
to the existing Hansteen portfolio and following a detailed
assessment of the assets, our UK asset management team believe
there is scope to increase the ERVs in a similar way as we have
done with the existing UK portfolio over the last 12 months. With a
yield on the passing rent of 9.4% and a vacancy rate of 8.2% at 31
December 2016, the acquisition represented a good opportunity to
acquire a significant amount of light industrial property at an
attractive price. At 30 June 2017 the portfolio is valued at
GBP90.5 million compared with GBP85.3 million at 31 December 2016
and the ERV of the portfolio has increased from GBP9.0 million to
GBP9.5 million per annum.
The portfolio consists of 51 multi--let properties offering 500
leasable units with a total floor area of approximately 1.7 million
sq ft all of which are located in the UK. Approximately 86% is
invested in light industrial property and 14% in offices with a
passing rent roll of GBP8.0 million per annum at 30 June 2017. The
portfolio is well distributed across the UK, with the majority of
sites located close to major towns and to major motorways and trunk
roads.
Property Portfolio
The total portfolio owned or co-owned at 30 June 2017 was valued
at GBP805.2 million, with a rent roll of GBP60.2 million per annum,
with a vacancy of 7.9%. It comprised 18.0 million sq ft of built
stock with a yield on the passing rent of 8.0% generated from 337
estates with 3,259 tenants. Included within the portfolio, there
are 447 acres of development land valued at GBP49.9 million.
The value of the total portfolio increased by GBP17.4 million,
or 2.3% on a like-for-like basis, from 31 December 2016, after
allowing for purchases and sales.
In addition to the sale of the German and Dutch assets discussed
above, 18 other sales have completed for a combined consideration
of GBP21.1 million, generating profits of GBP0.9 million over the
31 December 2016 valuation.
On a like-for-like basis, both passing rent and occupancy on the
UK portfolio improved marginally from 31 December 2016. The
statistics follow a similar pattern to previous years where leases
ending at 31 December create a marginally negative effect during
the early months of the year which we expect to reverse during the
latter part of the year.
Hansteen Property Portfolio Summary at 30 June 2017:
No. properties Acres Built Vacant Passing Contracted Value Yield
of land area area rent rent on passing
sq ft rent
UK* 328 18 17,029,541 7.9% 57.4 62.1 721.3 7.9%
------------- --------------- --------- ----------- ------- -------- ----------- ------ ------------
Belgium
& France 9 927,041 8.6% 2.8 2.9 34.0 8.4%
------------- --------------- --------- ----------- ------- -------- ----------- ------ ------------
Total built
portfolio 337 18 17,956,582 7.9% 60.2 65.0 755.3 8.0%
============= =============== ========= =========== ======= ======== =========== ====== ============
UK Land** 429 - - - - 49.9 -
------------- --------------- --------- ----------- ------- -------- ----------- ------ ------------
All Euro figures translated at the period end exchange rate of
GBP1 = EUR1.1391
* Figures include 100% of IMPT's portfolio of which Hansteen had
an investment of 93.4% at 30 June 2017. After the balance sheet
date, Hansteen has purchased the remaining 6.6% of the shares and
now owns 100% of IMPT.
** Figures include GBP10.0 million of trading property.
Finance and hedging
Finance
As at 30 June 2017, the Group had total bank facilities of
GBP385.8 million (31 December 2016: GBP771.1 million), of which
GBP373.8 million were drawn (31 December 2016: GBP712.5 million).
GBP175.1 million was swapped at an average rate of 0.7%, with a
further GBP50.0 million capped at an average rate of 0.8%.
Including obligations under finance leases, the Group had
borrowings of GBP388.3 million at 30 June 2017 (31 December 2016:
GBP816.6 million including the mark-to-market value of the
convertible bonds).
In August 2017, the GBP20.0 million RBS loan secured on Saltley
Business Park was repaid leaving the property uncharged and the
GBP31.4 million RBS loan secured on the IMPT properties was also
repaid. In due course the IMPT properties will be secured as part
of the RBS Revolving Credit Facility.
All of the loans continue to have significant headroom on their
loan-to-value and interest cover covenants. The weighted average
time to maturity of borrowings following the GBP51.4 million repaid
to RBS in August 2017 is 4.0 years and the Group's all-in cost of
borrowing is 2.4% (31 December 2016: 3.2%).
Analysis of the Group's bank loan facilities following the
repayment of the two RBS loans is set out below:
Lender Facility Amount Unexpired All-in-interest Loan Loan Interest Interest
undrawn term rate to value to value cover cover
millions millions Years covenant June covenant June
2017 2017
----------------- ---------- ---------- ---------- ---------------- ---------- ---------- ---------- ---------
BNP Paribas
Fortis EUR5.0 - 6.0 1.5% - 28.6% - -
Total euro
facilities GBP4.4 -
in GBP
Royal Bank
of Scotland GBP330.0 GBP12.0 3.9 2.4% 55% 48% 2:1 6:1
Total facilities GBP334.4 GBP12.0 4.0 2.4%
----------------- ---------- ---------- ---------- ---------------- ---------- ---------- ---------- ---------
Following the sale of the German and Dutch assets, cash
resources at 30 June 2017 were GBP726.9 million (31 December 2016:
GBP82.5 million). With the settlement of part of the convertible
bond in cash (EUR27.8 million or GBP24.4 million), the Return to
Shareholders (up to GBP580.0 million) and the repayment of the two
debt facilities all discussed above, the cash balance will be
reduced to approximately GBP70 million. Net debt will therefore be
approximately GBP250 million and net debt to value using the
portfolio value of GBP805.2 million will be around 31.0%.
Founder Long Term Incentive Plan (LTIP)
30 June 2017 marks the halfway point in the current and last
LTIP performance period and from 31 December 2015, the EPRA NAV
after adding back dividends paid has increased by 30.35p per share.
This represents a return of 17.5% per annum.
In accordance with accounting standard IAS33, no accrual for the
potential LTIP shares is included in the EPRA NAV per share
calculation because the target return for the whole performance
period has not yet been reached. The accounting standards do
however require a charge to the income statement for the LTIP of
GBP7.9 million although this charge is reversed in the balance
sheet.
To help shareholders estimate the potential dilution to the EPRA
NAV the Board believes the following illustrative methodologies
could be helpful.
The first method is to assume the performance period ended on 30
June 2017. Based on this assumption the LTIP award would have been
GBP27.7 million or 22.2 million ordinary shares. This would have
diluted the June EPRA NAV by 3.5p per share. However the Directors
believe this would probably overstate the dilution because of the
exceptional return from the sale of the German and Dutch portfolio
which will not be repeated in the second half of the performance
period and the impact of holding the sale proceeds since completion
in June 2017.
An alternative method is to take the actual results for the 18
months to 30 June 2017 and add only a continuing NIP at a rate of
GBP31 million per annum. On this basis the LTIP award would be
GBP15 million and dilute the EPRA NAV by 1.8p. This figure may
understate the outcome because returns and the LTIP will grow if
there are increases in property valuations.
Outlook
Taking the H1 2017 NIP of the continuing business (GBP15.5
million) and for illustrative purposes assuming this result
continues, the annualised NIP would be GBP31.0 million or 8.0 pence
per share assuming the number of shares decreases pro-rata with the
capital returned. On this basis, there is scope to increase
dividends (on a fully covered basis) from the historic levels of
5.25 pence a share in 2015 and 5.9 pence a share in 2016.
In the UK we have 3,231 tenants representing a very broad cross
section of commercial activities woven into the regional economies
with a continuing boost to our market from the internet retailer
revolution. This diverse rent roll is both resilient and dynamic
with the current positive demand and supply situation underpinning
that beneficial business backdrop. In the first half of the year,
the UK business showed value growth as a result largely of rental
growth and successful asset management initiatives with the
valuation yield remaining virtually unchanged. The 8.0% yield on
the built portfolio (passing rent divided by the value of the
properties) is compared to the current all-in borrowing costs for
the business of 2.4%.
For the first time in many years strong occupier demand has
resulted in increasing rents per let square foot and it looks as
though this trend will continue. We believe there are constraints
to new supply because to feasibly build equivalent properties to
those in our portfolio a developer would need to achieve a rent of
between GBP6 and GBP7 per sq ft.
We are currently enjoying a period of strong investment and
occupier demand. The appreciation by investors of our type of
properties continues to grow and recent transactions would indicate
that we could well benefit from further yield compression.
Melvyn Egglenton
Chairman
22 August 2017
Principal risks and uncertainties
Risk management is an important part of the Group's system of
internal controls. Senior management and the Board regularly
consider the significant risks which it believes are facing the
Group, identify and monitor appropriate controls and, if necessary,
instigate action to improve those controls. There will always be
some risk when undertaking property investments but the control
process is aimed at mitigating and minimising these risks where
possible.
Following the sale of the German and Dutch businesses in the
first half of the year the Board has re-assessed the principal
risks facing the Group, the Board considers them to be consistent
with the prior year with the exception of the risks related to
foreign currency, the probability of which the Board considers to
have reduced.
The key risks identified by the Board for the remaining six
months of the year, the steps taken to mitigate them and additional
commentary is as follows:
Principal Cause Impact Probability Risk Management
Risk
--------------------- --------------------- ------- ------------ -----------------------------------------
Over reliance High dependence High Medium The Board believes such risk
on key executives on Joint is to some extent mitigated
Chief Executives through the appointment and
support of high calibre employees
and professional advisors.
All such appointments are approved
by a member of the Board and
performance is monitored regularly.
Tenant failure Over reliance High Medium Whilst there is always a risk
on income that recession or new legislation
Recession from one may affect specific industry
and reduced particular types, the Board is satisfied
profitability type of tenant that Hansteen's exposure is
exposing mitigated by operating with
the Group an extremely diverse tenant
to industry base without reliance on any
specific particular tenants or industries.
periods of Vacancy rates, arrears and
recession bad debts are monitored on
a regional basis with trends
investigated to determine any
systematic problems with a
portfolio or type of tenant.
Lack of availability Banks under High Medium The Board acknowledge that
of capital internal there may be occasions when
pressure banks are under internal pressures
to improve which may conflict with existing
liquidity financing arrangements and
Banks considering it may prove more difficult
unutilised to secure the more challenging
loans too properties. Detailed due diligence
expensive is carried out prior to the
purchase of each property.
Regular meetings are held with
a portfolio of banks to keep
them fully appraised of commercial
opportunities and alert to
any potential issues early
on. Hansteen also considers
alternative sources of finance
to develop its strategy and
reduce exposure.
Information Failure to High Medium The Board believes this risk
and cyber protect information to be mitigated to some extent
security breaches and information by the Group outsourcing much
resulting systems from of its day-to-day processing
in data leakage, unauthorised to reputable third party organisations.
financial access, misuse, Due diligence designed to assess
loss, reputational disruption, the integrity of third party
damage or modification processes and systems is undertaken
business disruption or destruction by management as part of the
tendering and appointment process
and is maintained on an on-going
basis. Internally, the Group
has developed policies and
procedures designed to mitigate
information and cyber security
risk as far as possible, these
including: the secure encryption
of all payroll and personal
data, rigorous use of passwords
and firewall defences, externally
facilitated staff training
programmes, bulletins to raise
risk awareness and encourage
good practice, development
of secure mobile working policies,
incident response and disaster
recovery procedures and the
establishment of anti-malware
defences.
Poor return Over paying High Low Supply and demand is reviewed
on investment for an acquisition continuously through direct
and deterioration Prices driven information from Hansteen's
in operating up by increased network of managing agents
results competition and managers. Experienced members
Reduced number of management review each acquisition
of investment and due diligence is carried
opportunities out by external parties. The
Board is required to approve
all acquisitions and disposals
over a prescribed amount.
Banking counterparty Financial Medium Medium The Board believes such risks
disruption difficulties are reduced by adherence to
Lack of liquidity at institutions a Cash and Liquidity Management
holding significant Policy that sets out how funds
deposits can be invested. Cash balances
and borrowings are maintained
with a portfolio of considered
counterparties. The Group Treasurer
reviews the cash balances on
a daily basis, and where possible,
surplus cash is put on interest
bearing deposit.
Responsibility statement
We confirm 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 description of 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 parties'
transactions and changes therein).
On behalf of the Board
Ian Watson Morgan Jones
Joint Chief Executive Joint Chief Executive
22 August 2017
Copies of this announcement are available on the Company's
website at www.hansteen.co.uk and can be requested from the
Company's registered office at 1st Floor Pegasus House, 37-43
Sackville Street, London, W1S 3D
Consolidated income statement
for the six months ended 30 June 2017
Six months Six months
ended ended
30 June 30 June
2017 2016(1)
GBPm GBPm
Note Unaudited Unaudited
---------------------------------------------------- ------ ---------- ----------
Continuing operations
Revenue 5 28.8 12.0
Cost of sales (1.6) (2.0)
---------------------------------------------------- ------ ---------- ----------
Gross profit 27.2 10.0
Other operating income 0.5 -
Administrative expenses (14.8) (6.5)
Share of results of associates and gain on
associate - 12.0
Negative goodwill and other gains - 0.4
Gains on investment properties 14.5 2.4
Operating profit 27.4 18.3
Finance income 6 4.8 18.9
Finance costs 6 (19.6) (12.4)
Profit before tax 12.6 24.8
Tax 7 0.7 (0.4)
---------------------------------------------------- ------ ---------- ----------
Profit for the period from continuing operations 13.3 24.4
Profit for the period from discontinued operations 11 135.1 26.0
net of tax
---------------------------------------------------- ------ ---------- ----------
Profit for the period 148.4 50.4
---------------------------------------------------- ------ ---------- ----------
Attributable to:
Equity holders of the parent 148.1 50.3
Non-controlling interest 0.3 0.1
---------------------------------------------------- ------ ---------- ----------
Profit for the period 148.4 50.4
---------------------------------------------------- ------ ---------- ----------
Earnings per share
Basic
Continuing operations 10 1.7p 3.4p
Discontinued operations 10 18.1p 3.5p
---------------------------------------------------- ------ ---------- ----------
19.8p 6.9p
Diluted
Continuing operations 10 1.7p 3.3p
Discontinued operations 10 18.0p 3.5p
---------------------------------------------------- ------ ---------- ----------
19.7p 6.8p
---------------------------------------------------- ------ ---------- ----------
(1) Re-presented to classify the German and Dutch portfolio as discontinued operations
Consolidated statement of comprehensive income
for the six months ended 30 June 2017
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Unaudited Unaudited
---------------------------------------------------------- ---------- ----------
Profit for the period 148.4 50.4
Other comprehensive expense:
Exchange gains arising on translation of foreign
operations 14.5 54.5
Exchange differences recycled to the income statement
on disposal of discontinued operations (71.6) -
Total other comprehensive (expense)/ income for
the period (57.1) 54.5
---------------------------------------------------------- ---------- ----------
Total comprehensive income for the period 91.3 104.9
---------------------------------------------------------- ---------- ----------
Total comprehensive income attributable to:
Equity holders of the parent 91.0 104.7
Non-controlling interest 0.3 0.2
---------------------------------------------------------- ---------- ----------
91.3 104.9
---------------------------------------------------------- ---------- ----------
All components of other comprehensive income and expense will be
recycled through the income statement.
Consolidated balance sheet
As at 30 June 2017
30 June 31 December
2017 2016
GBPm GBPm
Note Unaudited Audited
---------------------------------- ------ ---------- -----------
Non-current assets
Property, plant and equipment 0.3 0.4
Investment property 13 795.2 1,717.5
Deferred tax asset - 0.6
Derivative financial instruments 2.3 2.1
---------------------------------- ------ ---------- -----------
797.8 1,720.6
Current assets
Investment property held for sale - 10.4
Trading properties 10.0 10.0
Trade and other receivables 21.4 31.1
Cash and cash equivalents 726.9 82.5
758.3 134.0
---------------------------------- ------ ---------- -----------
Total assets 1,556.1 1,854.6
---------------------------------- ------ ---------- -----------
Current liabilities
Trade and other payables (61.8) (54.0)
Current tax liabilities (21.0) (6.6)
Borrowings 14 (50.9) (20.5)
Obligations under finance leases (0.2) (0.2)
Provisions - (0.1)
Derivative financial instruments (0.6) -
---------------------------------- ------ ---------- -----------
(134.5) (81.4)
Non-current liabilities
Borrowings 14 (318.9) (793.5)
Obligations under finance leases (2.3) (2.4)
Provisions (0.8) (0.7)
Derivative financial instruments - (4.3)
Deferred tax liabilities (4.6) (48.1)
---------------------------------- ------ ---------- -----------
(326.6) (849.0)
---------------------------------- ------ ---------- -----------
Total liabilities (461.1) (930.4)
---------------------------------- ------ ---------- -----------
Net assets 1,095.0 924.2
---------------------------------- ------ ---------- -----------
Equity
Share capital 15 74.6 74.6
Share premium account 114.5 114.5
Shares to be issued 99.5 -
Other reserves (3.0) (1.9)
Translation reserves 4.7 61.8
Retained earnings 802.4 674.6
---------------------------------- ------ ---------- -----------
Equity shareholders' funds 1,092.7 923.6
Non-controlling interest 2.3 0.6
---------------------------------- ------ ---------- -----------
Total equity 1,095.0 924.2
---------------------------------- ------ ---------- -----------
Net asset value per share
Diluted net asset value per share 10 133p 123p
EPRA net asset value per share 10 133p 129p
---------------------------------- ---- ----
Consolidated statement of changes in equity
for the six months ended 30 June 2017
Unaudited
Other Shares
Share Share Translation reserves to be Retained Non-controlling
capital premium reserve GBPm issued earnings Total interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- -------- ----------- ---------- -------- --------- ------- --------------- -------
Balance at 1
January
2016 72.2 114.5 (8.7) (1.4) - 629.6 806.2 0.5 806.7
Shares issued 2.4 - - - - - 2.4 - 2.4
Dividends - - - - - (23.4) (23.4) - (23.4)
Share-based
payments - - - - - (25.5) (25.5) - (25.5)
Share options
exercised - - - 0.1 - - 0.1 - 0.1
Own shares
acquired - - - (0.6) - - (0.6) - (0.6)
Profit for the
period - - - - - 50.3 50.3 0.1 50.4
Other
comprehensive
expense for the
period - - 54.4 - - - 54.4 0.1 54.5
Balance at 30
June
2016 74.6 114.5 45.7 (1.9) - 631.0 863.9 0.7 864.6
Dividends - - - - - (16.4) (16.4) - (16.4)
Share-based
payments - - - - - 0.8 0.8 - 0.8
Profit for the
period - - - - - 59.2 59.2 (0.1) 59.1
Other
comprehensive
income for the
period - - 16.1 - - - 16.1 - 16.1
Balance at 31
December
2016 74.6 114.5 61.8 (1.9) - 674.6 923.6 0.6 924.2
Shares issued - - - (0.3) - - (0.3) - (0.3)
Shares to be
issued - - - - 99.5 (0.1) 99.4 - 99.4
Dividends - - - - - (27.5) (27.5) (0.4) (27.9)
Share-based
payments - - - - - 7.3 7.3 - 7.3
Own shares
acquired - - - (0.8) - - (0.8) - (0.8)
Non-controlling
interests
acquired - - - - - - - 1.8 1.8
Profit for the
period - - - - - 148.1 148.1 0.3 148.4
Other
comprehensive
income for the
period - - (57.1) - - - (57.1) - (57.1)
Balance at 30
June
2017 74.6 114.5 4.7 (3.0) 99.5 802.4 1,092.7 2.3 1,095.0
----------------- -------- -------- ----------- ---------- -------- --------- ------- --------------- -------
Consolidated cash flow statement
for the six months ended 30 June 2017
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Note Unaudited Unaudited
----------------------------------------------------- ------ ---------- ----------
Net cash inflow from operating activities 16 11.7 9.4
Investing activities
Interest received 0.1 0.1
Additions to investment properties (30.2) (5.5)
Additions to property, plant and equipment - (0.1)
Proceeds from sale of investment properties 20.7 8.2
Investment in subsidiary (27.3) (8.4)
Proceeds from sale of subsidiaries 662.4 -
Investment in associates - (10.2)
Distributions received from associates - 17.2
----------------------------------------------------- ------ ---------- ----------
Net cash generated by investing activities 625.7 1.3
----------------------------------------------------- ------ ---------- ----------
Financing activities
Dividends paid (27.9) (23.4)
Settlement of liabilities in respect of share
options - (23.5)
Repayments of obligations under finance leases (0.1) (0.1)
New bank loans raised (net of expenses) 36.4 124.2
Bank loans repaid (net of expenses) (3.8) (111.0)
Own shares acquired (0.8) (0.6)
Additions to derivative financial instruments 0.2 -
Settlement of derivative financial instruments (3.5) 0.5
----------------------------------------------------- ------ ---------- ----------
Net cash generated/(used in) by financing activities 0.5 (33.9)
----------------------------------------------------- ------ ---------- ----------
Net increase/(decrease) in cash and cash equivalents 637.9 (23.2)
Cash and cash equivalents at beginning of period 82.5 63.4
Effect of foreign exchange rate changes 6.5 4.0
----------------------------------------------------- ------ ---------- ----------
Cash and cash equivalents at end of period 726.9 44.2
----------------------------------------------------- ------ ---------- ----------
Notes to the condensed set of financial statements for the six
months ended 30 June 2017
1. General information
Hansteen Holdings PLC is a company which is incorporated in the
United Kingdom under the Companies Act 2006. The address of the
registered office is 1st Floor, Pegasus House, 37-43 Sackville
Street, London, W1S 3DL.
The Group's principal activities are those of a property group
investing mainly in industrial properties in Continental Europe and
the United Kingdom.
The financial information contained in this interim report does
not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The financial information for the year ended 31
December 2016 was derived from the statutory accounts for the year
ended 31 December 2016, a copy of which has been delivered to the
Registrar of Companies. The auditor's report on those accounts was
unqualified, did not include a reference to any matters to which
the auditor drew attention by way of emphasis of matter and did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed financial statements
have been prepared applying the accounting policies and
presentation that were applied in the preparation of the Group's
published annual financial statements for the period ended 31
December 2016. There are no new standards or amendments to
standards effective for the periods presented that have a material
impact on the Group.
The Group's performance is not subject to seasonal
fluctuations.
2. Basis of preparation
The annual financial statements of Hansteen Holdings PLC are
prepared in accordance with IFRSs as adopted by the European Union.
The condensed set of financial statements included in this interim
report has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting', as adopted by
the European Union. The same accounting policies, presentation and
methods of computation are followed in the condensed set of
financial statements as applied in the Group's latest annual
audited financial statements.
The interim report was approved by the Board on 22 August
2017.
The principal exchange rates used to translate foreign currency
denominated amounts are:
Balance sheet: GBP1 = EUR1.1391 (31 December 2016: GBP1 =
EUR1.1651)
Income statement: GBP1 = EUR1.1626 (30 June 2016: GBP1 =
EUR1.2845)
3. Going concern
The Group's principal risks and uncertainties are detailed
above. The Directors believe that the Group is well placed to
manage its business risks successfully despite the potential impact
of the current uncertain economic outlook on the Group's operating
cash flows and the possibility of tenancy failures and increased
vacancies. After consideration of the Group's forecast cash flows
and covenant compliance, including evaluation of the impact of
potential reductions in property valuations, rental income and
increases in interest rates, the Directors have a reasonable
expectation that the Group will continue to have adequate resources
to continue in operational existence for the foreseeable future and
therefore continue to adopt the going concern basis in preparing
these condensed financial statements.
Information on the Group's performance and its risk management
is included in the Interim Statement, including sections on the
finance, hedging and outlook of the Group. The Group's debt
maturity profile and principal covenants are disclosed in note 14
to these condensed financial statements.
4. Related party transactions
Transactions between the company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed. There have been no other material transactions with
related parties in the first six months of 2017 and there have been
no material changes in the related party transactions described in
the Annual Report and Accounts for the year ended 31 December
2016.
5. Operating segments
The following is an analysis of the Group's revenue and results
by reportable segment:
Six months ended Six months ended
30 June 2017 30 June 20161
Revenue Result Revenue Result
Continuing Operations GBPm GBPm GBPm GBPm
-------------------------------------------- --------- ------- --------- -------
Belgium 0.5 0.5 0.5 0.4
France 0.9 0.8 0.7 0.7
UK 27.4 25.9 10.8 8.9
-------------------------------------------- --------- ------- --------- -------
28.8 27.2 12.0 10.0
Other operating income 0.5 -
Administrative expenses (14.8) (6.5)
Share of results of associates and
gain on sale of associate - 12.0
Negative goodwill and other gains - 0.4
Changes in fair values of investment
properties by segment:
Belgium (1.0) (0.2)
France (0.5) 0.3
UK 15.1 2.3
-------------------------------------------- --------- ------- --------- -------
Total changes in fair values of investment
properties 13.6 2.4
Profit on disposal of investment properties 0.9 -
-------------------------------------------- --------- ------- --------- -------
Total gains on investment properties 14.5 2.4
Operating profit 27.4 18.3
Net finance costs (14.8) 6.5
-------------------------------------------- --------- ------- --------- -------
Profit before tax 12.6 24.8
-------------------------------------------- --------- ------- --------- -------
Administrative expenses and net finance costs are managed as
central costs and are not allocated to segments.
The following is an analysis of the Group's assets by reportable
segment:
Additions
Investment Trading Total Other Total to investment Non-current
properties properties properties assets assets properties assets
30 June 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------ ------------ ------------ -------- -------- -------------- -----------
Belgium 16.3 - 16.3 2.5 18.8 - 16.3
France 17.6 - 17.6 0.8 18.4 0.1 17.6
UK 761.3 10.0 771.3 45.7 817.0 90.4 761.5
--------------- ------------ ------------ ------------ -------- -------- -------------- -----------
795.2 10.0 805.2 49.0 854.2 90.5 795.4
Unallocated
assets 701.92 2.4
--------------- ------------ ------------ ------------ -------- -------- -------------- -----------
1,556.1 797.8
--------------- ------------ ------------ ------------ -------- -------- -------------- -----------
Additions
Investment Trading Total Other Total to investment Non-current
31 December properties3 properties properties assets assets properties assets
2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------------- ------------ ------------ -------- -------- -------------- -----------
Belgium 17.0 - 17.0 2.3 19.3 0.3 17.0
France 17.7 - 17.7 0.6 18.3 0.7 17.7
Germany 761.7 - 761.7 29.4 791.1 11.7 754.8
Netherlands 264.7 - 264.7 7.4 272.1 3.1 265.0
UK 666.8 10.0 676.8 40.4 717.2 480.0 664.0
-------------- ------------- ------------ ------------ -------- -------- -------------- -----------
1,727.9 10.0 1,737.9 80.1 1,818.0 495.8 1,718.5
Unallocated
assets 36.6 2.1
-------------- ------------- ------------ ------------ -------- -------- -------------- -----------
1,854.6 1,720.6
-------------- ------------- ------------ ------------ -------- -------- -------------- -----------
(1) Re-presented to classify the German and Dutch portfolio as discontinued operations (2) Included in unallocated assets is GBP577.4 million corporate cash on hand which arose mainly from the disposal of the German and Dutch portfolio.
(3) Investment properties includes those classified as held for sale on the balance sheet.
6. Net finance costs
Six months Six months
ended ended
30 June 30 June
2017 20161
Continuing Operations GBPm GBPm
------------------------------------------------- ---------- ----------
Interest receivable on bank deposits - 0.1
Other interest receivable 0.5 0.8
------------------------------------------------- ---------- ----------
Interest income 0.5 0.9
Interest payable on borrowings (5.4) (1.4)
------------------------------------------------- ---------- ----------
Net interest expense (4.9) (0.5)
Change in fair value of currency options - (9.3)
Change in fair value of interest rate swaps and
caps 0.5 -
Change in fair value of convertible bond (12.1) 7.7
Fees incurred on conversion of convertible bonds (0.4) -
Interest incurred on the convertible bond (1.7) (1.7)
Foreign exchange gains 3.8 10.3
------------------------------------------------- ---------- ----------
Net finance costs (14.8) 6.5
------------------------------------------------- ---------- ----------
Finance income 4.8 18.9
Finance costs (19.6) (12.4)
------------------------------------------------- ---------- ----------
Net finance costs (14.8) 6.5
------------------------------------------------- ---------- ----------
7. Tax
Six months Six months
ended ended
30 June 30 June
2017 2016(1)
Continuing Operations GBPm GBPm
------------------------ ---------- ----------
UK current tax 0.7 (0.1)
Foreign current tax (0.1) -
------------------------ ---------- ----------
Total current tax 0.6 (0.1)
Deferred tax 0.1 (0.3)
------------------------ ---------- ----------
Tax 0.7 (0.4)
------------------------ ---------- ----------
8. Dividends
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
------------------------------------------------------ ---------- ----------
Amounts recognised as distributions to equity holders
in the period:
Second interim dividend 3.7p (2016: 3.15p) per
share 27.5 23.4
27.5 23.4
------------------------------------------------------ ---------- ----------
(1) Re-presented to classify the German and Dutch portfolio as discontinued operations
As a REIT, the Company is required to pay Property Income
Distributions ('PIDs') equal to at least 90% of the Group's
exempted net income after deduction of withholding tax at the basic
rate (currently 20%). GBP15.6 million of the cash dividend paid in
the period ended 30 June 2017 is attributable to PIDs (2016:
GBP10.0 million).
9. Normalised income profit and normalised total profit
Normalised Income Profit and Normalised Total Profit are
adjusted measures intended to show the underlying earnings of the
Group before fair value movements and other non-recurring or
otherwise non-cash one-off items. A reconciliation of the
Normalised Income Profit and Normalised Total Profit reconciled to
profit before tax prepared in accordance with IFRS is set out
below.
Six months ended Six months ended
30 June 2017 30 June 20161
------------------------------- ---------------------------------- -------------------------------------------------
Continuing Discontinued Continuing Discontinued Share
operations operations Total operations operations of associates Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ----------- ------------ ------- ----------- ------------ -------------- ------
Investment property rental
income 28.8 36.2 65.0 9.0 35.7 15.1 59.8
Direct operating expenses (1.5) (3.0) (4.5) (0.8) (5.0) (2.1) (7.9)
Property management fees - - - 1.7 - - 1.7
Administrative expenses (6.9) (3.1) (10.0) (6.5) (3.2) (2.0) (11.7)
Net interest payable (4.9) (6.7) (11.6) (0.5) (7.7) (2.8) (11.0)
------------------------------- ----------- ------------ ------- ----------- ------------ -------------- ------
Normalised Income Profit 15.5 23.4 38.9 2.9 19.8 8.2 30.9
Profit on sale of
investment
properties 0.9 0.1 1.0 - 0.7 0.8 1.5
Loss/(profit) on sale of
trading properties (0.1) - (0.1) 0.1 - - 0.1
Total profit on sale of
properties 0.8 0.1 0.9 0.1 0.7 0.8 1.6
Profit on disposal of
discontinued
operations - 47.9 47.9 - - - -
Net other operating income 0.5 0.2 0.7 - - - -
------------------------------- ----------- ------------ ------- ----------- ------------ -------------- ------
Normalised Total Profit 16.8 71.6 88.4 3.0 20.5 9.0 32.5
Negative goodwill and other
gains - - - 0.4 - 1.0 1.4
LTIP charge (7.9) - (7.9) - - - -
Fair value gains on investment
properties 13.6 - 13.6 2.4 10.7 2.4 15.5
Change in fair value of
foreign currency derivatives2 - - - (9.3) - - (9.3)
Change in fair value of
interest rate derivatives 0.5 0.7 1.2 - (1.2) (0.4) (1.6)
Change in fair value of
convertible bond (12.1) - (12.1) 7.7 - - 7.7
Fees incurred on conversion
of convertible bonds (0.4) - (0.4) - - - -
Interest incurred on the
convertible bond3 (1.7) - (1.7) (1.7) - - (1.7)
Foreign exchange gains 3.8 - 3.8 10.3 - - 10.3
Exchange differences recycled
on disposal of discontinued
operations - 71.6 71.6 - - - -
Profit before tax 12.6 143.9 156.5 12.8 30.0 12.0 54.8
Tax 0.7 (8.8) (8.1) (0.4) (4.0) - (4.4)
------------------------------- ----------- ------------ ------- ----------- ------------ -------------- ------
Profit for the period 13.3 135.1 148.4 12.4 26.0 12.0 50.4
------------------------------- ----------- ------------ ------- ----------- ------------ -------------- ------
(1) Re-presented to classify the German and Dutch portfolio as discontinued operations (2) The GBP9.3 million change in fair value of foreign currency derivatives in 2016 relates to options to hedge European net assets. The hedges expired in June 2016 and were not replaced. (3) Net interest payable in NIP excludes the interest on the convertible bond as this expense is not recurring.
10. Earnings per share and net asset value per share
The European Public Real Estate Association ("EPRA") has issued
recommended bases for the calculation of certain earnings per share
("EPS") information. Diluted EPRA EPS is reconciled to the IFRS
measure in the following table.
30 June 2017 30 June 20161
Shares Per share Shares Per share
GBPm m pence GBPm m pence
------------------------------------ ------ ------ --------- ------ ------- ---------
Normalised Income Profit 15.5 746.2 2.1 11.1 734.8 1.5
Normalised Total Profit 16.8 746.2 2.2 12.0 734.8 1.6
Continuing Operations
Basic EPS 13.0 746.2 1.7 24.3 734.8 3.4
Adjustments:
Dilutive shares relating to
the profit share scheme 3.0 2.3
Dilutive shares relating to
the Founder LTIP - 1.5
------------------------------------ ------ ------ --------- ------ ------- ---------
Diluted EPS 13.0 749.2 1.7 24.3 738.6 3.3
Basic EPS
Adjustments: 13.0 746.2 1.7 24.3 734.8 3.4
Revaluation gains on investment
properties (13.6) (2.4)
Profit on the sale of investment
properties (0.9) -
Loss/(profit) on sale of trading
properties 0.1 (0.1)
Change in fair value of derivatives (0.5) 9.3
Change in fair value of convertible
bond 9.2 (20.0)
Fees incurred on conversion
of convertible bonds 0.4 -
Adjustment in respect of associates - (3.8)
Negative goodwill and other
gains - (0.4)
Deferred tax on the above items (0.3) -
EPRA EPS 7.4 746.2 1.0 6.9 734.8 0.9
Adjustments:
Dilutive shares relating to
the profit share scheme 3.0 2.3
Dilutive shares relating to
the Founder LTIP - 1.5
Diluted EPRA EPS 7.4 749.2 1.0 6.9 738.6 0.9
------------------------------------ ------ ------ --------- ------ ------- ---------
(1) Re-presented to classify the German and Dutch portfolio as discontinued operations
30 June 2017 30 June 20161
Shares Per share Shares Per share
GBPm m pence GBPm m pence
------------------------------------ ------- ------ --------- ------ ------- ---------
Discontinued Operations
Basic EPS 135.1 746.2 18.1 26.0 734.8 3.5
Adjustments:
Dilutive shares relating to
the profit share scheme 3.0 2.3
Dilutive shares relating to
the Founder LTIP - 1.5
------------------------------------ ------- ------ --------- ------ ------- ---------
Diluted EPS 135.1 749.2 18.0 26.0 738.6 3.5
Basic EPS
Adjustments: 135.1 746.2 18.1 26.0 734.8 3.5
Revaluation gains on investment
properties - (10.7)
Profit on the sale of investment
properties (0.1) (0.7)
Profit after tax on disposal
of discontinued operations (113.2) -
Change in fair value of derivatives (0.7) 1.2
Deferred tax on the above items (10.4) 2.9
EPRA EPS 10.7 746.2 1.4 18.7 734.8 2.5
Adjustments:
Dilutive shares relating to
the profit share scheme 3.0 2.3
Dilutive shares relating to
the Founder LTIP - 1.5
Diluted EPRA EPS 10.7 749.2 1.4 18.7 738.6 2.4
------------------------------------ ------- ------ --------- ------ ------- ---------
(1) Re-presented to classify the German and Dutch portfolio as discontinued operations
The calculations for net asset value ("NAV") per share are shown
in the table below:
30 June 2017 31 December 2016
Shares Per share Shares Per share
GBPm m pence GBPm m pence
---------------------------------- ------- ------ --------- ------- ------ ---------
Basic NAV 1,092.7 824.6 133 923.6 745.1 124
Unexercised share options - 2.1 - 2.1
Mark-to-market of convertible
bonds - - 109.8 92.8
---------------------------------- ------- ------ --------- ------- ------ ---------
Diluted NAV 1,092.7 826.7 132 1,033.4 840.0 123
Revaluation of trading properties - -
Goodwill - -
Fair value of interest rate
derivatives (1.6) 2.2
Adjustments in respect of -
associates -
Convertible bond - -
Deferred tax 4.6 47.3
---------------------------------- ------- ------ --------- ------- ------ ---------
EPRA NAV 1,095.7 826.7 133 1,082.9 840.0 129
---------------------------------- ------- ------ --------- ------- ------ ---------
11. Discontinued operations
On 20 March 2017, the Group entered into a sale agreement to
dispose of the German and Dutch portfolios. The disposal was
completed on 16 June 2017 on which date control of the disposal
group was passed to the acquirer. In accordance with the sales and
purchase agreement there will be a true-up of the purchase price.
This process is expected to be completed by the end of October 2017
and may affect the numbers disclosed relating to the discontinued
operations reported in the interim financial statements as at 30
June 2017.
The results of the discontinued operations, which have been
included in the consolidated income statement, were as follows:
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Unaudited Unaudited
---------------------------------------------------- ----------- -----------
Revenue 36.2 35.7
Cost of sales (3.0) (5.0)
---------------------------------------------------- ----------- -----------
Gross profit 33.2 30.7
Other operating income 0.2 -
Administrative expenses (3.1) (3.2)
Gains on investment properties 0.1 11.4
---------------------------------------------------- ----------- -----------
Operating profit 30.4 38.9
Finance income 0.8 -
Finance costs (6.8) (8.9)
---------------------------------------------------- ----------- -----------
Profit before tax 24.4 30.0
Tax (2.5) (4.0)
---------------------------------------------------- ----------- -----------
Profit after tax 21.9 26.0
---------------------------------------------------- ----------- -----------
Profit on disposal of discontinued operations 119.5 -
Tax attributable to profit on disposal (6.3) -
---------------------------------------------------- ----------- -----------
Profit after tax on disposal of discontinued -
operations 113.2
---------------------------------------------------- ----------- -----------
Profit for the period from discontinued operations 135.1 26.0
---------------------------------------------------- ----------- -----------
12. Disposal of investment in subsidiary
As referred to in note 11, on 16 June 2017 the group disposed of
its interests in the German and Dutch portfolio. The net assets of
the disposal group at the date of disposal were as follows:
GBPm
----------------------------------------------------- --------
Investment property 1,067.8
Trade and other receivables 17.8
Cash and cash equivalents 8.2
Trade and other payables (23.8)
Current tax liabilities (3.0)
Borrowings (411.7)
Deferred tax liability (32.6)
------------------------------------------------------ --------
622.7
Profit on disposal of discontinued operations 119.5
------------------------------------------------------ --------
Total consideration 742.2
------------------------------------------------------ --------
Satisfied by:
Cash proceeds net of transaction costs 670.6
Release of translation reserve 71.6
------------------------------------------------------ --------
742.2
----------------------------------------------------- --------
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents 670.6
Less: cash and cash equivalents disposed of (8.2)
------------------------------------------------------ --------
662.4
----------------------------------------------------- --------
There were no disposals of subsidiaries completed in 2016. The
consideration for the sale of the entities in 2017 was settled in
cash. The impact of discontinued operations on the Group's results
in the current and prior periods and the profit on disposal of
discontinued operations are disclosed in note 11.
13. Investment property
30 June 31 December
2017 2016
GBPm GBPm
------------------------------------------------------------------ ---------- ------------
Investment property at start of period 1,717.5 1,059.1
Additions - property purchases - continuing operations* 88.8 478.2
- property purchases - discontinued operations 13.0 1.1
- capital expenditure - continuing operations 1.7 2.8
- capital expenditure - discontinued operations 15.5 13.7
Lease incentives - continuing operations 0.8 1.4
Lease incentives - discontinued operations (0.1) 1.2
Letting costs - continuing operations 0.1 0.1
Letting costs - discontinued operations 0.2 (0.1)
Revaluations - continuing operations 13.6 15.3
Revaluations - discontinued operations - 28.1
Disposals - continuing operations (9.1) (10.0)
Disposals - discontinued operations (1,067.8) (12.1)
Transfer to investment property held for sale - (10.4)
Exchange adjustment - continuing operations 0.8 5.0
Exchange adjustment - discontinued operations 20.2 144.1
------------------------------------------------------------------ ---------- ------------
795.2 1,717.5
------------------------------------------------------------------ ---------- ------------
*Property purchase additions of GBP88.8 million relates to the
acquisition of Industrial Multi Property Trust plc.
30 June 31 December
Investment property held for sale 2017 2016
GBPm GBPm
----------------------------------------------- -------- ------------
Investment property held for sale at start of
period 10.4 1.6
Disposals (10.4) (1.8)
Transfer from investment property - 10.4
Exchange adjustment - 0.2
- 10.4
----------------------------------------------- -------- ------------
In accordance with IFRS 13, the Group's investment property has
been assigned a valuation level in the fair value hierarchy. The
fair value hierarchy gives the highest priority to quoted prices in
active markets for identical assets (Level 1) and the lowest
priority to unobservable inputs (Level 3). In general, the Group's
investment property as at 30 June 2017 is categorised as Level
3.
Investment properties are valued using a capitalisation
methodology applying a yield to current and estimated rental
income. Yields and rental values are considered to be unobservable
inputs and details of the ranges used in each region are as
follows:
Information about fair value measurements using unobservable
inputs (Level 3)
Fair value at Rent per sq m Yield
30 June 2017 Min Max Min Max
GBPm GBP GBP % %
--------------------------- ------------- ------ ------- ----------- -------------
Belgium 16.3 28.4 106.7 5.6 9.6
France 17.6 29.2 32.4 8.3 15.4
UK - Industrial properties 740.3 10.8 175.4 2.8 14.4
UK - Offices 21.0 23.1 625.7 3.0 18.5
---------------------------- ------------- ------ ------- ----------- -------------
Total 795.2
---------------------------- ------------- ------ ------- ----------- -------------
Fair value at Rent per sq m Yield
31 December 2016 Min Max Min Max
GBPm GBP GBP % %
--------------------------- ---------------- ------ ------- ----------- -------------
Belgium 17.0 27.2 90.5 6.5 9.4
France 17.7 28.6 31.7 8.6 12.7
Germany 761.7 15.2 109.4 1.3 17.5
Netherlands 264.7 11.6 79.0 3.7 22.0
UK - Industrial properties 646.4 6.1 158.4 1.8 14.4
UK - Offices 20.4 23.1 625.7 3.1 19.1
---------------------------- ---------------- ------ ------- ----------- -------------
Total 1,727.9
---------------------------- ---------------- ------ ------- ----------- -------------
All other factors being equal there is a positive relationship
between estimated rental values and property values such that an
increase in estimated rental values would increase the valuation of
a property. The relationship between Reversionary yields and
property values is negative such that an increase in Reversionary
yields would decrease a property valuation. There are
interrelationships between these inputs as they are determined by
market conditions such that the valuation movement in any one
period depends on the balance between them.
14. Borrowings
30 June 31 December
2017 2016
GBPm GBPm
--------------------------------------------------- -------- ------------
Amortised cost
Bank loans 373.8 712.5
Convertible Bond - 109.8
Unamortised borrowing costs (4.0) (8.3)
--------------------------------------------------- -------- ------------
369.8 814.0
Maturity
The bank loans and convertible bond are repayable
as follows:
Within one year or on demand 52.0 23.2
Between one and two years 0.6 201.1
Between three and five years 320.1 596.6
Over five years 1.1 1.4
--------------------------------------------------- -------- ------------
373.8 822.3
--------------------------------------------------- -------- ------------
Covenants
Facility Drawn Expiry Loan to value Interest
cover
------------------ ---------------- ------------- ------------- --------
GBP20.0 million GBP20.0 million October 2017 60% 200%
GBP330.0 million GBP318.0 million July 2021 55% 200%
GBP31.4 million GBP31.4 million December 2018 60% 225%
EUR5.0 million EUR5.0 million March 2025 - -
------------------ ---------------- ------------- ------------- --------
In July 2013, Hansteen (Jersey) Securities Limited issued EUR100
million of convertible bonds with a coupon of 4.0% expiring in July
2018.
On 26 June 2017 the Company decided to exercise its right and
invited the bondholders, on or before 29 June 2017, to either offer
to sell their bonds to the Company for a cash settlement and/or to
exercise their rights to convert their bonds to ordinary shares in
in the Company in accordance with the terms and conditions of the
Bonds on 29 June 2017.
All bondholders accepted the invitation to sell or convert their
bonds. 159 bonds of EUR100,000 each elected to settle in cash and
841 bonds of EUR100,000 each elected to convert to shares in the
Company. The cash was settled on 5 July 2017 and is represented by
a liability of GBP23.9 million at 30 June 2017. The shares to be
issued of GBP99.5 million has been separately disclosed in the
Company's reserves at 30 June 2017.
In addition, Bondholders, whether electing to sell or convert,
would be paid an amount in cash of EUR1,889.50 per EUR100,000 Bond
by the Company equating to the accrued or notional interest accrued
on the bonds for the 171 days up to but excluding the settlement
date of 5 July 2017.
Security for secured borrowings at 30 June 2017 is provided by
charges on property with an aggregate carrying value of GBP804.2
million (31 December 2016: GBP1,081.6million).
30 June 31 December
2017 2016
% GBPm % GBPm
----------------------------------- --- ------- --- -----------
Interest rate and currency profile
Euro 1.5 4.4 2.5 522.3
Sterling 2.2 369.4 2.2 300.0
----------------------------------- --- ------- --- -----------
2.2 373.8 2.4 822.3
----------------------------------- --- ------- --- -----------
Reconciliation of movement in net debt in the period
30 June 31 December
2017 2016
GBPm GBPm
------------------------------------------------ ------- -----------
Net debt at beginning of period 710.1 441.2
Cash flow
Net decrease in cash and cash equivalents (637.9) (14.3)
New bank loans raised and acquired (net of
expenses) 67.8 567.3
Bank loans repaid (net of expenses) (493.0) (354.7)
Repayments of obligations under finance leases (0.1) (0.2)
Other
Foreign exchange movements recognised in equity (2.8) 54.5
Foreign exchange movements recognised in the
income statement (3.7) 12.3
Amortisation of bank loan fees 5.0 4.0
------------------------------------------------- ------- -----------
Net debt at end of period (354.6) 710.1
------------------------------------------------- ------- -----------
Net debt to equity ratio 30 June 31 December
2017 2016
GBPm GBPm
---------------------------------------------------- ------- -----------
Obligations under finance leases 2.5 2.6
Borrowings 369.8 704.2
Convertible bond - 109.8
Less mark-to-market on convertible bond - (24.0)
Cash and cash equivalents (726.9) (82.5)
----------------------------------------------------- ------- -----------
Net debt (354.6) 710.1
Equity attributable to equity holders of the
parent 1,092.7 923.6
----------------------------------------------------- ------- -----------
Net debt to equity ratio -32.5% 76.9%
Carrying value of investment and trading properties 805.2 1,737.9
Net debt to value ratio -44.0% 40.9%
----------------------------------------------------- ------- -----------
15. Share capital
30 June 31 December
2017 2016
Number (m) GBPm Number (m) GBPm
------------------------------- ---------- ------- ---------- -----------
Issued and fully paid ordinary
shares of 10p each
At start of the period 745.8 74.6 721.5 72.2
Equity raised - - 24.3 2.4
At end of period 745.8 74.6 745.8 74.6
------------------------------- ---------- ------- ---------- -----------
The share capital comprises one class of ordinary shares
carrying no right to fixed income. There are no restrictions on the
size of a shareholding or the transfer of shares, except for UK
REIT restrictions.
The equity raised in 2016 relates to equity issued in respect of
the Founder Long Term Incentive Plan for the performance period
ended 31 December 2015.
During the period, the Company acquired some of its own shares
in order to settle obligations under the Performance Share Plan
arrangement. A summary is presented below:
Number (m) GBPm
------------------ ------------ ------
At 1 January 2017 2.0 2.2
Acquired 0.6 0.8
At 30 June 2017 2.6 3.0
------------------ ------------ ------
16. Net cash inflow from operating activities
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
------------------------------------------------------------- ---------- ----------
Profit for the period 148.4 50.4
Adjustments for:
Share-based payments 7.3 0.5
Depreciation of property, plant and equipment 0.1 0.1
Share of results of associates and gain on sale
of associate - (12.0)
Gain on business combination - (0.4)
Profit on disposal of discontinued operations (119.5) -
Gains on investment properties - continuing operations (14.5) (2.4)
Gains on investment properties - discontinued operations (0.1) (11.4)
Net finance costs - continuing operations 14.8 (6.5)
Net finance costs - discontinued operations 6.0 8.9
Tax - continuing operations (0.7) 0.4
Tax - discontinued operations 8.8 4.0
Operating cash inflows before movements in working
capital 50.6 31.6
Decrease in trading properties - 0.9
Increase in receivables 2.7 2.4
Increase in payables (28.3) (14.8)
------------------------------------------------------------- ---------- ----------
Cash generated by operations 25.0 20.1
Income taxes paid (3.4) (1.8)
Interest paid (9.9) (8.9)
------------------------------------------------------------- ---------- ----------
Net cash inflow from operating activities 11.7 9.4
------------------------------------------------------------- ---------- ----------
17. Financial instruments fair value disclosures
The table below sets out the categorisation of the financial
instruments held by the Group at 30 June 2017. Where the financial
instruments are held at fair value the valuation level indicates
the priority of the inputs to the valuation technique. The fair
value hierarchy gives the highest priority to quoted prices in
active markets for identical assets or liabilities (Level 1) and
the lowest priority to unobservable inputs (Level 3). Valuations
categorised as level 2 are obtained from third parties. The fair
value of the derivative interests rate swap contracts are estimated
by discounting expected future cash flows using market interest
rates and yield curves over the remaining term of the instruments.
If the inputs used to measure fair value fall within different
levels of the hierarchy, the category level is based on the lowest
priority level input that is significant to the fair value
measurement of the instrument in its entirety.
Valuation 30 June 31 December
2017 2016
level GBPm GBPm
----------------------------------- --------- ------- -----------
Financial assets
Designated as held for trading
Interest rate caps 2 0.7 1.0
Interest rate swaps 2 1.0 -
Financial liabilities
Designated as held for trading
Interest rate swaps 2 - (3.2)
Fair value through profit and loss
Convertible Bond 1 - (109.8)
----------------------------------- --------- ------- -----------
The Directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their
fair values.
18. Events after the balance sheet date
The convertible bond was converted on 29 June 2017 as detailed
in note 14. The shares to be issued of GBP99.5 million as reported
at 30 June 2017 were issued to the bondholders on 10 July 2017 and
the cash liability of GBP24.0 million was settled on 5 July
2017.
The RBS facility in Industrial Multi Property Trust plc of
GBP31.4 million was settled on 18 August 2017 and the RBS facility
in Hansteen Saltley Unit Trust of GBP20.0 million was settled on 21
August 2017.
On 23 July 2017 the group acquired the remaining 6.6% of the
shares in Industrial Multi Property Trust plc thereby obtaining
100% ownership.
INDEPENDENT REVIEW REPORT TO HANSTEEN HOLDINGS PLC
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 30 June 2017 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and the
related notes 1 to 18. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, 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 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
22 August 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFFVVTTIFFID
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