TIDMMKLW
RNS Number : 0145J
Mucklow(A.& J.)Group PLC
06 September 2016
Mucklow (A & J) Group plc
6 September 2016
Embargoed: 7.00am
Financial Summary
for the year ended 30 June 2016
Statement of comprehensive income Year ended Year ended
30 June 30 June
2016 2015
----------------------------------- ----------- -----------
Underlying pre-tax profit (1) GBP15.0m GBP13.9m
Statutory pre-tax profit GBP25.2m GBP56.2m
EPRA EPS (2) 23.88p 22.21p
Basic EPS 39.86p 89.02p
Ordinary dividend per share 21.47p 20.84p
----------------------------------- ----------- -----------
Balance sheet 30 June 30 June
2016 2015
------------------------ ---------- ----------
Net asset value GBP280.6m GBP268.6m
EPRA NAV per share (3) 446p 427p
Basic NAV per share 443p 424p
Net debt GBP71.2m GBP69.0m
Gearing 25% 26%
------------------------ ---------- ----------
Property portfolio 30 June 30 June
2016 2015
----------------------------- ---------- ----------
Vacancy rate 3.2% 5.4%
Portfolio value (4) GBP364.2m GBP349.7m
Valuation gain GBP10.2m GBP42.4m
Initial yield on investment
properties 6.4% 6.3%
Equivalent yield 7.2% 7.2%
----------------------------- ---------- ----------
The Ordinary dividend of 21.47p per share (2015: 20.84p)
consists of the interim dividend of 9.59p, a quarterly dividend of
5.00p and a final dividend of 6.88p.
1 Underlying profit is defined as investment/development
operations of the Group. See the investment/development
column in the tables in the property and finance
review for the calculations.
2 Excludes the profit on disposal of investment,
development and trading properties and the revaluation
of investment and development properties and
derivative financial instruments and tax adjustments.
See note 8.
3 Excludes the fair value of derivative financial
instruments and includes the fair value surplus
on trading properties. See note 8.
4 See note 9.
For further information
please contact:
Rupert Mucklow, Chairman
David Wooldridge, Finance
Director
A & J Mucklow Group
plc
Tel: 0121 550 1841
Fiona Tooley
TooleyStreet Communications
Tel: 0121 309 0099
Mobile: 07785 703523
The information contained within the announcement was deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
Chairman's Statement
I am pleased to report another solid performance by the Group
for the year ended 30 June 2016, which has resulted in further
increases in underlying profit, net asset value and Ordinary
dividend per share.
Our vacancy rate at 30 June 2016 had reduced to an historic low
of 3.2%. Midlands industrial property continued to benefit from
strong rental growth, as a consequence of steady occupational
demand throughout the year and a diminishing supply of modern
space.
Since our year end and post the EU referendum, the regional
property market has remained buoyant and, so far, does not appear
to have been affected by the decision. Our vacancy rate has
subsequently fallen to below 3.0%.
Results
The underlying pre-tax profit, which excludes revaluation
movements and profit on the sale of investment and trading
properties, increased by 7.9% during the year to GBP15.0m (2015:
GBP13.9m). EPRA adjusted earnings per Ordinary share was 23.88p
(2015: 22.21p).
Statutory pre-tax profit was GBP25.2m, which included a
revaluation surplus of GBP10.2m (2015: GBP56.2m, including a
revaluation surplus of GBP42.3m).
EPRA net asset value per Ordinary share increased by 4.4% during
the year from 427p to 446p.
Shareholders' funds rose to GBP280.6m (2015: GBP268.6m), while
borrowings, net of cash, amounted to GBP71.2m (2015: GBP69.0m).
Debt to equity gearing reduced to 25% (2015: 26%) and LTV remained
at 20%.
Dividend
The Board has decided to increase the frequency of dividend
payments and move to quarterly dividends with effect from October
2016. Part of the final dividend that would have been paid in
January 2017 is being brought forward to October 2016.
Dividends of 11.88p per Ordinary share (2015: 11.53p) are being
declared in respect of the 30 June 2016 financial year, making a
total for the year of 21.47p (2015: 20.84p), an increase of 3% over
the prior year.
The dividends consist of a quarterly dividend of 5.00p per
Ordinary share to be paid on 17 October 2016 to Shareholders on the
register at the close of business on 16 September 2016 and a final
dividend of 6.88p per Ordinary share, if approved by shareholders
at the AGM, to be paid on 16 January 2017 to Shareholders on the
register at the close of business on 16 December 2016.
Both dividends will be paid as Property Income Distributions
(PIDs).
The interim dividend will also be split and paid quarterly in
the middle of April and July 2017.
Property Review
The number of active requirements for Midlands industrial
property has been maintained at a similar level to the previous 12
months and has continued post the EU referendum result. A declining
supply of quality industrial space has enabled us to continue to
grow rental levels on new lettings and lease renewals, which in
turn has also provided higher reversionary rental evidence for
future lease events and property valuations.
Our vacancy rate at 30 June 2016 fell to 3.2% (30 June 2015:
5.4%). We completed 32 new lettings and 26 lease renewals during
the year, representing 8.9% of our property portfolio by area.
Rental growth from new lettings and lease renewals averaged around
10.0%, approximately 5.0% higher than our estimated rental values
set in the previous year.
Two investment properties were bought during the financial year
at a total cost of GBP4.0m. We acquired a 19,200 sq ft retail
warehouse in Leicester City centre and a 17,000 sq ft industrial
unit in Halesowen, West Midlands. The combined rental income for
the two properties was GBP0.27m.
We also agreed terms to acquire a pre-let development at Grove
Park, Leicester for GBP4.7m, on a forward commitment basis. The
property will comprise 20,620 sq ft of high quality offices with
112 car parking spaces. The development is progressing well and is
due to be completed in December 2016. The initial rent will be
GBP0.35m pa.
The regional investment market remained stable throughout the
year, with only a limited number of suitable buying opportunities
available and very little change in property yields. Uncertainty
caused by the EU referendum result may provide us with some
additional Institutional stock, but early signs are that quality
investment properties are still in high demand and will continue to
be well supported by investors.
A shortage of vacant industrial property in the Midlands is
creating some opportunities for pre-let development. We entered
into an option agreement during the year with Wolverhampton City
Council and Staffordshire County Council to promote and develop a
prime 15 acre industrial site 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. We
are currently in detailed discussions on the first proposed pre-let
building of 43,000 sq ft.
Marketing of our 20 acre industrial site at Tyseley, Birmingham
is still on hold, while we wait for Birmingham City Council to
resolve a few technical issues on the procurement of a new link
road. There remains a real shortage of land around Birmingham which
can accommodate buildings over 50,000 sq ft.
Property Valuation
Cushman & Wakefield revalued our property portfolio at 30
June 2016. The investment properties and development land were
valued at GBP364.2m, which showed a revaluation surplus of GBP10.2m
(2.9%).
The initial yield on the investment properties was 6.4% (30 June
2015: 6.3%), rising to 6.7% on the expiry of rent free periods. The
equivalent yield was unchanged at 7.2% (30 June 2015: 7.2%).
Cushman & Wakefield also revalued our trading properties at
30 June 2016. The total value was GBP1.9m (2015: GBP1.9m), which
showed an unrecognised surplus of GBP1.4m against book value (2015:
GBP1.4m).
Finance
Total net borrowings at 30 June 2016 were GBP71.2m (2015:
GBP69.0m). Undrawn banking facilities totalled GBP27.0m, while net
debt to equity gearing had reduced to 25% (2015: 26%) and loan to
value remained unchanged at 20% (2015: 20%).
Since our year end, we have renewed our GBP64m banking
facilities with HSBC for a further 5 years through to 2021 at a
reduced margin.
Board Changes
The following planned changes to Non-Executive Directorships
have been made over the last 6 months, with a view to providing
succession and continuity in the composition of our Board.
Paul Ludlow retired as Senior Independent Non-Executive Director
on 30 June 2016, having completed 9 years' dedicated service to the
Company. Paul has been replaced by Ian Cornock, a Chartered
Surveyor, who is currently Lead Director for the Midlands Region of
Jones Lang LaSalle, with over 30 years' experience in commercial
property.
Jock Lennox has advised us that he will be stepping down from
the Board at our Annual General Meeting on 15 November 2016 after 6
productive years as Chairman of our Audit Committee.
Since the year end Peter Hartill has been appointed to the Board
as an Independent Non-Executive Director and will take over the
role of Chairman of the Audit Committee on Jock's retirement. Peter
is a retired chartered accountant and is currently Chairman of the
Audit Committee at Midlands based The Paragon Group of Companies
Plc.
Paul and Jock have made extensive contributions to our Board
meetings over the years and I would like to thank them for their
commitment. Ian and Peter have settled in well and I am confident
that our business will continue to benefit from the wealth of
experience and specialist knowledge that all of our Independent
Non-Executive Directors offer.
Outlook
High occupancy levels and steady letting enquires for quality
industrial property are expected to continue for some time, given
the lack of supply in the local Midlands market, despite the
anticipated uncertainty caused by the referendum decision.
Over the next 12 months, we intend to continue our strategy of
actively managing our investment portfolio to realise the excellent
reversionary potential it offers and when opportunities arise,
selectively to acquire and develop low risk, income producing
properties, in order to grow rental income and expand our property
portfolio.
It is too early for us to understand what longer term impact
leaving the EU will have on the UK economy and our business,
however, we are extremely well placed to respond to any market
changes.
Rupert Mucklow
Chairman
5 September 2016
Property and Finance Review
Overview
The Group has continued to perform positively during the year
ended 30 June 2016. Gross rental income increased by 6.0% to
GBP22.9m, underlying profit increased by 7.9% to GBP15.0m, ordinary
dividends have been increased by 3.0%, net assets have increased to
over GBP280m and gearing has reduced to 25% (2015: 26%).
Investor demand for commercial property remained relatively
strong, albeit with lower transaction volumes in the second half of
the financial year. Investment and development properties increased
in value by GBP10.2m (2.9%) over the 12 month period. The EU
referendum result was announced a week before our year-end, so
there was no transactional evidence between the referendum result
and our valuation date for our valuers to reflect in the 30 June
2016 investment and development property valuation.
It is too early to assess any potential impact of the referendum
result on our property values and occupational demand, although we
have not yet experienced any material change in occupational
interest.
Industrial property, our sector focus, is well placed to deal
with current market conditions, given continuing robust
occupational interest, particularly from e-commerce and retailers.
We will continue to closely monitor economic and political
developments and react accordingly to any changes in market
conditions.
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 gearing.
Key Performance Indicators
2016 2015
----------------------------------- ----- -----
Underlying pre-tax profit+ (GBPm) 15.0 13.9
Vacant space (%) 3.2 5.4
Dividend growth (%) 3.0 3.0
Gearing (net of cash) (%) 25 26
+See the table on page 9 for the calculations.
Group structure
A & J Mucklow Group plc has four main subsidiaries for
property development and investment. All of the Group's properties
are wholly owned.
Properties let to a single tenant are tenant managed, and
portfolio managers at A & J Mucklow Group plc monitor the
management of these sites regularly.
On multi-let properties the day-to-day management is outsourced
to managing agents, who report to portfolio managers at A & J
Mucklow Group plc.
Acquisition and disposal of investment properties
The industrial investment market remained competitive during our
financial year, with a slowing down in the number of suitable
properties in the second half. We have entered into three
off-market transactions in the year, acquiring two investment
properties and agreeing to buy one property on a forward commitment
basis.
In August 2015 we completed the purchase of a 19,203 sq ft
retail warehouse with 80 car parking spaces at a cost of GBP2.8m
(net initial yield: 6.45%). The building is located in Leicester
City Centre, close to Highcross shopping centre. The property is
let on a 25 year lease, expiring in 2023, at a current rent of
GBP0.18m.
Just before our financial year end we acquired an
industrial/warehouse unit close to our offices in Halesowen. Unit
D5 at Coombswood Business Park is a 16,974 sq ft building
constructed in 2003, let until 2023 at a rent of GBP4.99 psf,
offering reversionary potential. The purchase price of GBP1.2m
reflects an initial yield of 7.0%.
In January 2016 terms were agreed to forward fund a 20,620 sq ft
pre-let office building at Grove Park, Leicester, for GBP4.7m (net
initial yield: 7.0%). Completion of the high quality office scheme
with 112 car parking spaces is due in December 2016. Letting terms
have been agreed at an initial rent of GBP0.35m (GBP16.95 psf).
No properties have been disposed of in the period under
review.
We continue to look for attractively priced investment
properties, focusing on the Midlands property market.
Developing new properties for long-term investment
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.
We are marketing the site for pre-lets and are in detailed
discussions with a potential occupier for a 43,000 sq ft unit.
Birmingham City Council are currently expected to commence
construction of a new link road running alongside our 20 acre site
in Tyseley, Birmingham, in 2017. Marketing of our development land
is still on hold.
If the occupational market for industrial property continues to
be supportive, our 35 acres of development land at i54 and Tyseley
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 and our vacancy rate
decreased to 3.2% (2015: 5.4%) over the period. This growth in
income and reduction in voids helped to increase net rental income
as well as the capital value of the portfolio, with a revaluation
surplus of GBP10.2m over the year.
Further rental growth has been achieved on our industrial unit
lease renewals. For instance, renewals at Roman Park, Coleshill, on
three units totalling 38,945 sq ft, have been agreed with the
annual passing rent increasing by 15.2%, from GBP0.22m to GBP0.26m.
At Crompton Fields, Crawley, we have achieved a rent increase of
16.7% on a renewal of a 16,967 sq ft unit, to GBP0.15m pa.
Our only retail unit lease renewal in the period, for a 10 year
term without break, was agreed at the current passing rent
(GBP0.19m pa).
Over 165,948 sq ft of new leases were completed during the year
at a total annual rent of GBP1.0m. In February 2016 we let our
39,400 sq ft unit at Golden Cross, Aston, on a 10 year lease
without break at a rent of GBP6.25 psf (GBP0.25m pa). In April we
agreed a lease on a 21,313 sq ft industrial unit at our Wednesbury
One scheme at a rent of GBP5.58 psf (GBP0.12m). The unit was
previously let at GBP5.04 psf.
Occupancy
Our year-end vacancy rate was 123,976 sq ft (3.2%), compared to
204,334 sq ft (5.4%) at 30 June 2015.
In July 2016 we agreed a surrender of a 24,125 sq ft office
building close to Birmingham International railway station just
over two months before the lease end date.
A 11,828 sq ft office building in Henley-on-Thames was returned
to us on 21 August 2016 following the exercise of a break
option.
Although we had limited vacant space when the EU Referendum
result was announced, days before our financial year-end, we have
not noticed a material decline in occupational trends across our
portfolio. In August 2016 we agreed a lease on a 50,238 sq ft unit
at Wednesbury One let at the quoting terms of GBP5.50 psf
(GBP0.28m).
Valuation
The external valuation of the Group's investment and development
portfolio at 30 June 2016 totalled GBP364.2m (2015: GBP349.7m)
leading to a valuation surplus of GBP10.2m being recognised in the
statement of comprehensive income.
The initial yield on the portfolio was virtually unchanged at
6.4% (2015: 6.3%) and the equivalent yield remained at 7.2%.
The revaluation increase of GBP6.9m recorded in the first
half-year represented a surplus of 2.0%. The second half of the
financial year saw a further increase of GBP3.3m (0.9%), after
taking into account the impact of the Stamp Duty changes in April
2016, which in isolation reduced our valuation by around
GBP3.5m.
Our independent valuers, Cushman & Wakefield, have
highlighted a shortage in transactional evidence in the days
between the EU referendum result and the valuation date of 30 June
2016. Further details are provided in note 9.
Yield breakdown - investment properties
Initial Initial yield Equivalent Equivalent
yield 30/06/15 yield yield
30/06/16 30/06/16 30/06/15
------------ ---------- -------------- ----------- -----------
Industrial 6.5% 6.2% 7.2% 7.3%
------------ ---------- -------------- ----------- -----------
Office 7.2% 7.2% 8.0% 7.6%
------------ ---------- -------------- ----------- -----------
Retail 5.7% 5.9% 6.4% 6.4%
------------ ---------- -------------- ----------- -----------
Total 6.4% 6.3% 7.2% 7.2%
------------ ---------- -------------- ----------- -----------
Finance Review
The Group's underlying business performed well over the year,
with rental income increased through a reduction in void levels,
rental growth, acquisitions and recognising a full year of income
from the development completed half way through the previous
financial year.
Our cost base was virtually unchanged, leading to a GBP1.1m
increase in underlying profit, which has supported the 3% increase
in ordinary dividends.
We remain conservatively financed, with a strong balance sheet
and a loan to value of only 20%.
In August 2016 we refinanced the GBP64.0m of facilities we have
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%.
Income
Gross rental income increased from GBP21.6m to GBP22.9m and
property costs, net of service charge income, decreased from
GBP1.0m to GBP0.9m, leading to an increase in net rental income of
GBP1.4m to GBP22.0m.
Administration expenses increased slightly, by GBP0.1m to
GBP3.3m.
Finance costs increased by GBP0.1m, with bank debt and loan
interest up by GBP0.2m, a decrease in the fair value movement in
the interest rate caps of GBP0.2m and GBP0.1m of capitalised
interest in the prior year.
Underlying profit before tax increased from GBP13.9m to
GBP15.0m.
Statutory pre-tax profit reduced from GBP56.2m to GBP25.2m,
mainly as a result of the revaluation surplus of GBP10.2m being
GBP32.1m lower than the prior year's GBP42.3m.
Basic and diluted earnings per share reduced from 89.02p to
39.86p due to the decrease in the non-cash valuation surplus. EPRA
earnings per share, which mainly excludes the valuation surplus,
increased by 7.5% to 23.88p (2015: 22.21p).
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.
Dividend
The Board has considered the Group's dividend policy in the
light of market practice in the REIT sector and following
discussions with its advisors, it has been decided to increase the
frequency of dividend payments by moving to quarterly dividends
with effect from October 2016. Part of the final dividend that
would have been paid in January 2017 is being brought forward to
October 2016.
An interim dividend of 9.59p per share (2015: 9.31p) was paid on
1 July 2016.
Dividends totalling 11.88p per share (2015: 11.53p) are being
declared in respect of the 30 June 2016 financial year, making the
total in respect of the year ended 30 June 2016 21.47p per share
(2015: 20.84p), an increase of 3% over the prior year. The
dividends consist of a quarterly dividend of 5.00p and a final
dividend of 6.88p. The quarterly dividend and final dividend will
both be paid as Property Income Distributions (PIDs).
The quarterly dividend of 5.00p will be paid on 17 October 2016
to Shareholders on the register at the close of business on 16
September 2016.
The final dividend of 6.88p will, if approved by Shareholders at
the AGM, be paid on 16 January 2017 to Shareholders on the register
at the close of business on 16 December 2016.
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 21.47p amount to 90% of the EPRA
earnings per share figure of 23.88p, and are covered 1.11 times by
that earnings measure.
Underlying financial performance
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) - -
Fair value movement on derivative - - - -
financial instruments
------------------------------------ ------ ------------ ----------- ------
Total finance costs (3.7) (3.7) - -
Total finance income - - - -
------------------------------------ ------ ------------ ----------- ------
Profit before tax 25.2 15.0 - 10.2
------------------------------------ ------ ------------ ----------- ------
Investment/ Trading Other
Total development properties items
2015 GBPm GBPm GBPm GBPm
------------------------------------ ------ ------------ ----------- ------
Gross rental income 21.6 21.6 - -
Service charge income 1.0 1.0 - -
------------------------------------ ------ ------------ ----------- ------
Total revenue 22.6 22.6 - -
Property outgoings (2.0) (2.0) - -
------------------------------------ ------ ------------ ----------- ------
Net property income 20.6 20.6 - -
------------------------------------ ------ ------------ ----------- ------
Sale of trading properties - - - -
Property outgoings on trading - - - -
properties
------------------------------------ ------ ------------ ----------- ------
Net income from trading properties - - - -
------------------------------------ ------ ------------ ----------- ------
Administration expenses (3.2) (3.2) - -
------------------------------------ ------ ------------ ----------- ------
Operating profit before net
gains on investment 17.4 17.4 - -
Net gains on revaluation 42.3 - - 42.3
Profit on disposal of investment
and development properties 0.1 - - 0.1
------------------------------------ ------ ------------ ----------- ------
Operating profit 59.8 17.4 - 42.4
------------------------------------ ------ ------------ ----------- ------
Gross finance costs (3.5) (3.5) - -
Capitalised interest 0.1 - - 0.1
Fair value movement on derivative
financial instruments (0.2) - - (0.2)
------------------------------------ ------ ------------ ----------- ------
Total finance costs (3.6) (3.5) - (0.1)
Total finance income - - - -
------------------------------------ ------ ------------ ----------- ------
Profit before tax 56.2 13.9 - 42.3
------------------------------------ ------ ------------ ----------- ------
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.
Net assets
Net assets increased by GBP12.0m in the year, from GBP268.6m to
GBP280.6m, due to GBP15.0m of underlying pre-tax profit, a
revaluation surplus of GBP10.2m and share-based payment charges of
GBP0.2m, offset by ordinary dividends of GBP13.4m.
Net asset value per share increased by 19p, from 424p to 443p,
and EPRA net asset value per share also increased by 19p, to
446p.
Financing and cash flow
Net cash generated from operations was GBP2.6m higher at
GBP15.3m. Cash outflows in respect of property acquisitions and
capital expenditure amounted to GBP4.1m and borrowings increased by
GBP2.3m.
Equity dividends paid in the year totalled GBP13.2m, compared to
GBP7.1m in the prior year, with the comparative figure being lower
due to the interim dividend for the 2015 financial year being paid
on 1 July 2015 and therefore included in the 2016 cash flow
figures.
2016 2015
GBPm GBPm
--------------------------------------- ------- ------
Net cash generated from operations 18.6 16.0
--------------------------------------- ------- ------
From investment and development
properties 18.6 16.0
From trading properties - -
--------------------------------------- ------- ------
Net interest paid (3.3) (3.3)
Taxation - -
--------------------------------------- ------- ------
Operating cash flow 15.3 12.7
Property acquisitions and development (4.1) (8.1)
Property disposals - 0.4
Net expenditure on property, plant
and equipment (0.1) (0.1)
Movement in borrowings 2.3 2.1
Equity dividends (13.2) (7.1)
--------------------------------------- ------- ------
Net movement in cash 0.2 (0.1)
--------------------------------------- ------- ------
The Group's debt facilities were unchanged in the year. On 31
August 2016 the Group refinanced the HSBC term loan and revolving
credit facilities, which now expire in 2021. The table below shows
the position as at 30 June 2016.
Borrowing Expiry Available Drawn Undrawn
year
GBPm GBPm GBPm
----------------------- -------- ---------- ------ --------
HSBC overdraft 2016 1.0 - 1.0
HSBC Revolving Credit
Facility 2018 44.0 18.0 26.0
HSBC term loan 2018 20.0 20.0 -
Lloyds 15 year term
loan 2023 20.0 20.0 -
Lloyds 10 year term
loan 2022 20.0 20.0 -
Preference shares - 0.7 0.7 -
----------------------- -------- ---------- ------ --------
105.7 78.7 27.0
-------------------------------- ---------- ------ --------
Of the GBP78.7m of drawn debt shown in the table above, 96% is
at fixed rates or covered by interest rate caps.
Our average cost of total debt facilities at 30 June 2016 was
4.1% (2015: 4.1%) or 4.4% on drawn amounts (2015: 4.4%). Following
the HSBC refinance in August 2016, the weighted average term
remaining on total debt facilities is 5.5 years (2015: 4.6
years).
Analysis of borrowings at 30 June 2016
2016 2015
GBPm GBPm
--------------------------------------- ------ ------
Preference Share Capital 0.7 0.7
Lloyds Term Loan 2023 20.0 20.0
Lloyds Term Loan 2022 19.7 19.7
HSBC term loan 2018 19.9 19.8
Borrowings from revolving credit 18.0 15.7
facility
--------------------------------------- ------ ------
Debt and Preference Share Capital 78.3 75.9
Cash and short-term deposits (7.1) (6.9)
--------------------------------------- ------ ------
Net debt and Preference Share Capital 71.2 69.0
--------------------------------------- ------ ------
Net Assets 280.6 268.6
--------------------------------------- ------ ------
Gearing (net of cash) 25% 26%
--------------------------------------- ------ ------
The gearing ratio is determined by the proportion of debt (net
of cash) to equity.
Outlook
The outcome of the UK's EU Referendum vote has created
uncertainty in the property market, but, so far, there has been
limited direct impact on the Group. Although it is too early to
predict the medium to long-term effects on the Midlands property
market, the combination of our focus on industrial property, a
conservative financial position and a low level of voids provides
us with a strong foundation as we enter the 2017 financial
year.
We are encouraged by the lettings completed in the year, the
deals that have been signed between the referendum result and the
release of these results and the interest in our development land
at i54.
We are optimistic about prospects for continuing to grow the
Group's rental income over the medium and long-term, to support a
progressive dividend policy.
Justin Parker David Wooldridge
Managing Director Finance Director
5 September 2016 5 September 2016
Group Statement of Comprehensive Income
for the year ended 30 June 2016
2016 2015
Notes GBPm GBPm
---------------------------------------- ------ ------- ---------
Gross rental income 2 22.9 21.6
Service charge income 2 0.9 1.0
---------------------------------------- ------ ------- ---------
Total revenue 2 23.8 22.6
Property costs 3 (1.8) (2.0)
---------------------------------------- ------ ------- ---------
Net property income 22.0 20.6
---------------------------------------- ------ ------- ---------
Proceeds on sale of trading 2 - -
properties
Carrying value of trading - -
properties sold
Property outgoings relating - -
to trading properties
---------------------------------------- ------ ------- ---------
Net income from trading properties - -
---------------------------------------- ------ ------- ---------
Administration expenses (3.3) (3.2)
---------------------------------------- ------ ------- ---------
Operating profit before net
gains on investment and development
properties 18.7 17.4
Profit on disposal of investment
and development properties - 0.1
Revaluation of investment
and development properties 9 10.2 42.3
---------------------------------------- ------ ------- ---------
Operating profit 28.9 59.8
---------------------------------------- ------ ------- ---------
Total finance income 5 - -
Total finance costs 5 (3.7) (3.6)
---------------------------------------- ------ ------- ---------
Net finance costs 5 (3.7) (3.6)
---------------------------------------- ------ ------- ---------
Profit before tax 25.2 56.2
Tax credit 6 - 0.1
---------------------------------------- ------ ------- ---------
Profit for the financial year 25.2 56.3
---------------------------------------- ------ ------- ---------
Other comprehensive income:
Items that will not be
reclassified subsequently
to profit and loss:
Revaluation of owner-occupied
property - 0.1
Total comprehensive income
for the year attributable
to the owners of the parent 25.2 56.4
---------------------------------------- ------ ------- -------
All operations are continuing.
Basic and diluted earnings
per share 8 39.86p 89.02p
---------------------------------------- ------ ------- -------
Statements of Changes in Equity
for the year ended 30 June 2016
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 2014 15.8 13.0 11.2 0.2 0.3 184.5 225.0
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Retained profit - - - - - 56.3 56.3
Other comprehensive
income - - - 0.1 - - 0.1
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Total comprehensive
income - - - 0.1 - 56.3 56.4
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Share-based
payment - - - - 0.2 - 0.2
Exercise of
share options - - - - (0.2) 0.2 -
Dividends paid - - - - - (13.0) (13.0)
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
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
--------------------- --------- -------- ----------- ------------ ------------ --------- -------
Group Balance Sheet
at 30 June 2016
2016 2015
Notes GBPm GBPm
--------------------------------------- ------ ------- -------
Non-current assets
Investment and development properties 9 363.1 348.6
Property, plant and equipment 1.3 1.3
Derivative financial instruments - 0.1
Trade and other receivables 0.5 0.5
--------------------------------------- ------ ------- -------
364.9 350.5
--------------------------------------- ------ ------- -------
Current assets
Trading properties 0.5 0.5
Trade and other receivables 2.4 0.8
Cash and cash equivalents 7.1 6.9
--------------------------------------- ------ ------- -------
10.0 8.2
--------------------------------------- ------ ------- -------
Total assets 374.9 358.7
--------------------------------------- ------ ------- -------
Current liabilities
Trade and other payables (16.0) (14.2)
(16.0) (14.2)
--------------------------------------- ------ ------- -------
Non-current liabilities
Borrowings (78.3) (75.9)
--------------------------------------- ------ ------- -------
Total liabilities (94.3) (90.1)
--------------------------------------- ------ ------- -------
Net assets 280.6 268.6
--------------------------------------- ------ ------- -------
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 240.0 228.0
--------------------------------------- ------ ------- -------
Total equity 280.6 268.6
--------------------------------------- ------ ------- -------
Net asset value per share
- Basic and diluted 8 443p 424p
- EPRA 8 446p 427p
--------------------------------------- ------ ------- -------
Rupert Mucklow
David Wooldridge
Group Cash Flow Statement
for the year ended 30 June 2016
2016 2015
GBPm GBPm
----------------------------------------- --------- ---------
Cash flows from operating activities
Operating profit 28.9 59.8
Adjustments for non-cash items
Unrealised net revaluation gains
on investment and development
- properties (10.2) (42.3)
Profit on disposal of investment
- properties - (0.1)
- Depreciation 0.1 0.1
- Share based payments 0.2 0.2
- Profit on sale of property, - -
plant and equipment
- Amortisation of lease incentives (0.3) (0.7)
Other movements arising from
operations
- Increase in trading properties - -
- (Increase)/decrease in receivables (1.6) 0.5
- Increase/(decrease) in payables 1.5 (1.5)
--- ------------------------------------- --------- ---------
Net cash generated from operations 18.6 16.0
Interest received - -
Interest paid (3.3) (3.3)
Preference dividends paid - -
Corporation tax refunded - -
----------------------------------------- --------- ---------
Net cash inflow from operating
activities 15.3 12.7
Cash flows from investing activities
Acquisition of and additions
to investment and development
properties (4.1) (8.1)
Proceeds on disposal of investment
and development properties - 0.4
Net expenditure on property,
plant and equipment (0.1) (0.1)
----------------------------------------- --------- ---------
Net cash outflow from investing
activities (4.2) (7.8)
Cash flows from financing activities
Net increase in borrowings 2.3 6.3
Repayment of debenture stock - (4.2)
Equity dividends paid (13.2) (7.1)
----------------------------------------- --------- ---------
Net cash outflow from financing
activities (10.9) (5.0)
Net increase/(decrease) in cash
and cash equivalents 0.2 (0.1)
----------------------------------------- --------- ---------
Cash and cash equivalents at
beginning of year 6.9 7.0
----------------------------------------- --------- ---------
Cash and cash equivalents at
end of year 7.1 6.9
----------------------------------------- --------- ---------
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 30 September
2016.
The preliminary announcement was approved by the board of
directors on 5 September 2016. The financial information set out in
this announcement does not constitute the Company's statutory
accounts for the years ended 30 June 2016 or 2015 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 2016 or 30 June 2015 but is
derived from those accounts. Statutory accounts for 2015 have been
delivered to the Registrar of Companies, and those for 2016 will be
delivered in due course.
The auditors, KPMG LLP for year ended 30 June 2016 and Deloitte
LLP for the year ended 30 June 2015, 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 2016 the Group had GBP27.0m of undrawn banking
facilities and had drawn down GBP18.0m from its HSBC GBP44m 2018
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, which have been subsequently
refinanced for a further five year term, the Group's low gearing
level of 25% and GBP138.4m 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 discount rate. The valuers also use market evidence of
transaction prices for similar properties.
Standards in issue but not yet effective
At the date of authorisation of these financial statements, the
following Standards and interpretations which have not yet been
applied in these financial statements, were in issue, but not yet
effective:
-- IFRS 9 - Financial Instruments
-- Annual Improvements to IFRSs 2012-2014 cycle
-- IFRS 15 - Revenue from Contracts with Customers
-- IFRS 16 - Leases
-- Amendments to IAS 1 - Disclosure Initiative
-- Amendments to IAS 7 - Disclosure Initiatives (effective date 1 January 2017)
-- Amendments to IFRS 10 and IAS 28 - Sale of Contribution of
Assets between Investor and its Associate of Joint Venture
-- Amendments to IFRS 11 - Accounting for Acquisitions of
Interests in Joint Operations (effective date 1 January 2016)
-- Amendments to IAS 12 - Recognition of Deferred Tax Assets for
Unrealised Losses (effective date 1 January 2017)
-- Amendments to IAS 16 and IAS 38 - Clarification of Acceptable
Methods of Depreciations and Amortisation
-- Amendments to IAS 27- Equity Method in Separate Financial Statements
The Directors anticipate that adoption of these standards and
interpretations in future periods will have no material impact on
the financial statements of the Group.
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 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.
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.
Taxation
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.
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
2016 2015
GBPm GBPm
----------------------------------------- ----- -----
Gross rental income from investment and
development properties 22.9 21.6
Service charge income 0.9 1.0
Income received from trading properties - -
----------------------------------------- ----- -----
Total revenue 23.8 22.6
----------------------------------------- ----- -----
3 Property costs
2016 2015
GBPm GBPm
------------------------- ----- -----
Service charge expenses 1.0 1.0
Other property expenses 0.8 1.0
------------------------- ----- -----
1.8 2.0
------------------------- ----- -----
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.
2016 2015
GBPm GBPm
---------------------------------------------- ------ ------
Investment and development properties
- Net property income 22.0 20.6
- Profit on disposal - 0.1
Gain on revaluation of investment
- properties 8.2 37.3
Gain on revaluation of development
- properties 2.0 5.0
--- ----------------------------------------- ------ ------
32.2 63.0
---------------------------------------------- ------ ------
Trading properties
- Income received from trading properties - -
- Carrying value on sale - -
- Property outgoings - -
--- ----------------------------------------- ------ ------
- -
---------------------------------------------- ------ ------
Net income from the property portfolio
before administration expenses 32.2 63.0
Administration expenses (3.3) (3.2)
---------------------------------------------- ------ ------
Operating profit 28.9 59.8
Net financing costs (3.7) (3.6)
---------------------------------------------- ------ ------
Profit before tax 25.2 56.2
---------------------------------------------- ------ ------
The property revaluation gain has been
recognised as follows:
Within operating profit
- Investment properties 8.2 37.3
- Development properties 2.0 5.0
--- ----------------------------------------- ------ ------
10.2 42.3
Within other comprehensive income
- Owner-occupied properties - 0.1
--- ----------------------------------------- ------ ------
Total revaluation gain for the period 10.2 42.4
---------------------------------------------- ------ ------
Segmental information on assets and liabilities, including a
reconciliation to the results reported in the Group balance sheet,
are as follows:
2016 2015
GBPm GBPm
------------------------------------------ ------- -------
Balance sheet
Investment and development properties
- Segment assets 365.5 349.2
- Segment liabilities (6.8) (5.1)
- Net borrowings (71.2) (69.0)
---- ------------------------------------ ------- -------
287.5 275.1
------------------------------------------ ------- -------
Trading properties
- Segment assets 0.5 0.5
- Segment liabilities - -
---- ------------------------------------ ------- -------
0.5 0.5
------------------------------------------ ------- -------
Other activities
- Unallocated assets 1.8 2.1
- Unallocated liabilities (9.2) (9.1)
(7.4) (7.0)
------------------------------------------ ------- -------
Net assets 280.6 268.6
------------------------------------------ ------- -------
Capital expenditure
Investment and development properties 4.0 7.9
Other activities 0.1 0.1
------------------------------------------ ------- -------
4.1 8.0
------------------------------------------ ------- -------
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
2016 2015
GBPm GBPm
--------------------------------------------- ----- ------
Finance costs on:
Preference share dividend 0.1 0.1
Fair value movement of derivative financial
instruments - 0.2
Capitalised interest - (0.1)
Bank overdraft and loan interest payable 3.6 3.4
--------------------------------------------- ----- ------
Total finance costs 3.7 3.6
--------------------------------------------- ----- ------
Finance income on:
Short-term deposits - -
Fair value movement of derivative financial - -
instruments
Bank and other interest receivable - -
--------------------------------------------- ----- ------
Total finance income - -
--------------------------------------------- ----- ------
Net finance costs 3.7 3.6
--------------------------------------------- ----- ------
6 Taxation
2016 2015
GBPm GBPm
---------------------------------------------------- ------ -----
Current tax
- Corporation tax - -
- Adjustment in respect of previous years - 0.1
---------------------------------------------------- ------ -----
- 0.1
----------------------------------------------------------- -----
Deferred tax - -
---------------------------------------------------- ------ -----
Total tax credit in the statement of comprehensive
income - 0.1
---------------------------------------------------- ------ -----
The tax credit in the previous financial year reflects the
removal of provisions in respect of prior year liabilities.
The tax credit for the year can be reconciled to the profit per
the statement of comprehensive income as follows:
2016 2015
GBPm GBPm
---------------------------------------------- ------ -------
Profit before tax 25.2 56.2
---------------------------------------------- ------ -------
Profit before tax multiplied by the standard
rate of
UK corporation tax of 20.0% (2015: 20.75%) 5.0 11.7
Effect of:
REIT exempt income and gains (5.2) (11.9)
Losses not recognised 0.1 0.1
Share based payments 0.1 0.1
Adjustments in respect of prior years - 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 18% (effective 1 April
2020) were substantively enacted on 26 October 2015. Deferred tax
has been calculated based on these rates as at 30 June 2016.
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 GBP14.1m (2015: GBP13.6m) of properties which have
completed development during the previous three years. If these
properties had been disposed of at their 30 June 2016 valuation,
then tax of GBP0.5m (2015: GBP0.4m) 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
2016 2015
GBPm GBPm
--------------------------------------------- ------ ------
Amounts recognised as distributions to
equity holders in the year:
Final dividend for the year ended 30 June
2015 of 11.53p (2014: 11.19p) per share 7.3 7.1
Interim dividend for the year ended 30
June 2016 of 9.59p (2015: 9.31p) per share 6.1 5.9
13.4 13.0
--------------------------------------------- ------ ------
The Board has decided to move to quarterly dividend payments
with effect from October 2016. The quarterly dividend payment of
5.00p (2015: nil) will be paid on 17 October 2016 to shareholders
on the register at the close of business on 16 September 2016,
totalling GBP3.2m.
The directors propose a final dividend for the year ended 30
June 2016 of 6.88p (2015: 11.53p) per Ordinary share, totalling
GBP4.4m. 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 16 January 2017
to shareholders on the register at the close of business on 16
December 2016.
8 Earnings per share and net asset value per share
Earnings per share
The basic and diluted earnings per share of 39.86p (2015:
89.02p) has been calculated on the basis of the weighted average of
63,294,833 Ordinary shares (2015: 63,273,435 Ordinary shares) and
profit of GBP25.2m (2015: GBP56.3m).
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:
2016 2015
GBPm GBPm
-------------------------------------------------- ------- -------
Earnings 25.2 56.3
Profit on disposal of investment and development
properties - (0.1)
Net gains on revaluation of investment
and development properties (10.2) (42.3)
Fair value movement on derivative financial
instruments - 0.2
EPRA earnings 15.0 14.1
-------------------------------------------------- ------- -------
EPRA earnings per share 23.88p 22.21p
-------------------------------------------------- ------- -------
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 94,445 Ordinary
shares were granted in the year (2015: 105,418 Ordinary shares)
under the 2015 Performance Share Plan (2015: 2007 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 fifth three year award under the 2007 Performance Share Plan
vested in the period, with no Ordinary shares being issued and with
112,583 shares lapsed.
Net asset value per share
The net asset value per share of 443p (2015: 424p) has been
calculated on the basis of the number of equity shares in issue of
63,294,833 (2015: 63,294,833) and net assets of GBP280.6m (2015:
GBP268.6m). The EPRA net asset value per share has been calculated
as follows:
2016 2015
GBPm GBPm
------------------------------------------------ ------ ------
Equity shareholders' funds 280.6 268.6
Valuation of land held as trading properties 1.9 1.9
Book value of land held as trading properties (0.5) (0.5)
Fair value of derivative financial instruments - (0.1)
------------------------------------------------ ------ ------
EPRA net asset value 282.0 269.9
------------------------------------------------ ------ ------
EPRA net asset value per share 446p 427p
------------------------------------------------ ------ ------
9 Investment and development properties
Investment Development Total
Group GBPm GBPm GBPm
---------------------- ----------- ------------ ------
At 30 June 2014 288.2 9.7 297.9
Additions 4.4 3.5 7.9
Lease incentives 0.6 0.1 0.7
Capitalised interest - 0.1 0.1
Transfer 12.3 (12.3) -
Disposals (0.3) - (0.3)
Revaluation gain 37.3 5.0 42.3
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 30 June 2016 355.0 8.1 363.1
---------------------- ----------- ------------ ------
The closing book value shown above comprises GBP340.7m (2015:
GBP327.2m) of freehold and GBP22.4m (2015: GBP21.4m) of leasehold
properties.
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
------------------------------ --------- ---------- ------
Freehold Leasehold Total
GBPm GBPm GBPm
------------------------------ --------- ---------- ------
Properties held at valuation
on 30 June 2015:
Cost 205.6 21.6 227.2
Valuation surplus/(deficit) 121.6 (0.2) 121.4
------------------------------ --------- ---------- ------
Valuation 327.2 21.4 348.6
------------------------------ --------- ---------- ------
The properties are stated at their 30 June 2016 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 DTZ Debenham
Tie Leung Limited.
Following the Referendum held on 23 June 2016 concerning the
UK's membership of the EU, a decision was taken to exit the EU.
Since that date Cushman & Wakefield have monitored market
transactions and market sentiment in arriving at their opinion of
Market Value/Fair Value.
There is still a shortage of comparable evidence of arm's length
transactions since the Referendum in many sectors of the market.
Cushman & Wakefield had, therefore, to exercise a greater
degree of judgement than would be applied under more liquid market
conditions.
2016 2015
GBPm GBPm
--------------------------------------- ------ ------
Cushman & Wakefield valuation 364.2 349.7
Owner-occupied property included in
property, plant and equipment (1.1) (1.1)
Other adjustments - -
--------------------------------------- ------ ------
Investment and development properties
as at 30 June 363.1 348.6
--------------------------------------- ------ ------
Additions to freehold and leasehold properties include
capitalised interest of GBPnil (2015: GBP0.1m). The total amount of
interest capitalised included in freehold and leasehold properties
is GBP5.4m (2015: GBP5.4m). Properties valued at GBP225.8m (2015:
GBP221.5m) 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*
Jock Lennox LLB - Independent Non-Executive
CA*
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 5 September 2016 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 15
November 2016 at 11.30 a.m. at the Birmingham Botanical Gardens,
Westbourne Road, Edgbaston, Birmingham, B15 3TR.
Dividend
Dividends of 11.88p per Ordinary share are being declared in
respect of the 30 June 2016 financial year, making a total for the
year of 21.47p.
The dividends consist of a quarterly dividend of 5.00p per
Ordinary share to be paid on 17 October 2016 to Shareholders on the
register at the close of business on 16 September 2016 and a final
dividend of 6.88p per Ordinary share, if approved by shareholders
at the AGM, to be paid on 16 January 2017 to Shareholders on the
register at the close of business on 16 December 2016.
Report and Accounts
The full report and accounts for the year ended 30 June 2016
will be available on 30 September 2016.
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 FMGGLGKLGVZZ
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September 06, 2016 02:01 ET (06:01 GMT)
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