REG - Hansteen Hldgs plc - Half Yearly Report <Origin Href="QuoteRef">EVRE.L</Origin> <Origin Href="QuoteRef">HSTN.L</Origin> - Part 1

EvrazAnnouncement

29/10/2014 15:28

RNS Number : 0640Q
Hansteen Holdings plc
27 August 2014
27 August 2014
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 2014.
Financial Highlights
 Normalised Income Profit increased by 32.8% to 25.1 million (H1 2013: 18.9 million)
 Normalised Total Profit increased by 59.1% to 35.0 million (H1 2013: 22.0 million)
 IFRS pre-tax profit of 66.7 million (H1 2013: 14.9 million)
 Normalised Income Profit per share increased by 31.0% to 3.8p (H1 2013: 2.9p)
 Diluted EPRA EPS of 3.2p (H1 2013: 2.2p)
 EPRA NAV per share 96p (31 December 2013: 91p)
 November interim dividend increased by 5.3% to 2.0p per share (November 2013: 1.9p per share)
 Net debt to property value ratio 45.9% (31 December 2013: 49.3%)
Operational Highlights
 30 sales from the total portfolio with a total value of 90.4 million and a combined profit of 8.3 million
 142.7 million of properties acquired in the year to date at an average yield of 11.3% and a vacancy of 18.7%
 Acquisition of a further 9.2% stake in the Ashtenne Industrial Fund ('AIF') for 26.0 million increasing ownership to 36.7%
 Placing of 44,834,877 shares to raise 46.3 million
 Completion of the German debt refinancing with banks new to Hansteen at an all in average cost of 3.8% per annum
 Total value of portfolio owned or co-owned increased by 7.2% to 1.6 billion (31 December 2013: 1.5 billion)
 Like-for-like property valuation increase across the total portfolio of 4.6% or 73.5 million 
 Annualised rent roll from total portfolio up by 7.0% to 144.3 million (31 December 2013: 134.9 million)
 Like-for-like occupancy improvement of 17,000 sq m or 2.5% of vacancy at the start of the year
* Total portfolio relates to property, owned and managed, of Hansteen and its associated funds.
James Hambro, Chairman, commented:
"Our strategy of substantially growing the portfolio from the low point in the cycle is beginning to realise its promise. Investment market conditions have undoubtedly become more competitive as investors begin to recognise that regional industrial property is likely to produce superior returns in the medium term. Despite the increased competition, our creative approach to acquiring property is still presenting openings to purchase well priced assets that will provide potential for income and growth. Occupational markets are continuing to improve and have led to further increases in our rent roll and improved occupation. 
"In every region we are seeing improving occupational and investment markets albeit to differing extents and from different starting points. Recently, some commentators have questioned the sustainability of current investment yields in various property sectors. Whilst it may be true that in some areas of property, until rental growth is established, scope for further yield compression may be limited, the Board does not believe this to be the case in relation to Hansteen's portfolio of regional light industrial properties."
For more information:
Morgan Jones/Ian Watson
Hansteen Holdings PLC 
Tel: 0207408 7000
Jeremy Carey/Faye Walters
Tavistock Communications 
Tel: 020 7920 3150
Email: jcarey@tavistock.co.uk


CHAIRMAN'S INTERIM STATEMENT 
We present our interim results for the six months to 30 June 2014. The results show a record level of profits and value growth and despite growing competition for investments, we have been able to make some significant acquisitions with excellent value potential. In our most recent annual report, we highlighted that our business model is based on two key strengths: an entrepreneurial and opportunistic approach to buying and selling property, funding and deal structuring; and a focused, disciplined and skilled asset management and marketing platform. Both elements of this model have performed strongly in the first half of 2014, with a significant amount of property acquired and sold, new equity raised and the refinancing of a considerable proportion of our debt. The asset management and marketing platform has continued to deliver excellent results with increases in like-for-like rental income and occupancy as well as high levels of new leases and lease renewals.
I am pleased to report that our financial results are again very strong even though property sales in the fourth quarter of 2013 reduced our initial rent roll in 2014 by 4.8 million per annum and the Euro weakened against the Sterling in the first half of 2014 by 4.0%. 
We had highlighted previously a dramatic improvement in institutional investor sentiment toward light industrial property, particularly in the UK, and the first half of 2014 has shown how Hansteen has been well placed to benefit from this significant upturn. 90.4 million of sales were completed at 8.3 million above book value and at an average yield of 6.5%. Despite the increased competition for well priced industrial assets, we have also managed to acquire 142.7 million of property so far in 2014, all with opportunities to add value. Valuations have risen by 4.6% from December 2013, with the increase across all three of our core regions.
In March 2014, 46.3 million (net of expenses) was raised from the placing of 44.8 million shares at a 2.8% discount to the closing share price on 27 March 2014. 
Hansteen now holds a 36.7% stake in AIF following the original acquisition of 27.5% announced in August 2013 and the additional 9.2% stake purchased for 26.0 million in March 2014. The increased investment was purchased from three vendors at a price of 46.5 pence per unit and, since acquisition, the value of the AIF properties has increased by 4.4%.
Hansteen has completed the refinancing of both its HBOS and UniCredit facilities which were due to expire in October 2014 and February 2015 respectively. A five-year, 235 million facility has been provided by a consortium of lenders led by Landesbank Hessen-Thringen Girozentrale (Helaba). 80% of the interest on the loan has been hedged, resulting in an interest cost of 3.5% per annum at the time of refinancing, excluding fees. HSBC provided a five-year, 108 million facility which, with a 55 million interest rate hedge, gave an interest cost of 2.9% per annum at the time of refinancing, excluding fees. The combined terms equated to an all in average rate of 3.8% per annum, including fees.
As announced in December 2013, Hansteen acquired 50% of a loan secured against a portfolio of mainly multi-let industrial property in the Netherlands. Following a series of complex transactions, in exchange for settlement of the loan obligations and the payment of a cash sum, Hansteen has now taken full ownership of the portfolio. Hansteen has made a net investment of 40 million of equity in the transaction which has contributed over 17 million to the IFRS pre-tax profit. 4.0 million of finance income relates to the unwinding of the discount on the loan that was secured on the portfolio and 3.4 million of operating income arose when the loan was satisfied in exchange for the properties on which it was secured. Subsequent to the acquisition of the entire portfolio the period end revaluation increase was 9.8 million.
Results
Normalised Income Profit (recurring income less costs excluding profit from sales of properties, valuation movements and one-off items) increased by 32.8% to 25.1million (H1 2013: 18.9 million). The improvement of 6.2 million is due to an increase in the share of associates' profit and increased management fees from our investment in AIF and HPUT II. There is an associated increase in overheads due to the expansion of the UK office structure and UK team. In addition, there is 4.0 million of finance income that relates to the unwinding of a discount on the loan that was secured on the portfolio in the Netherlands. Normalised Income Profit per share (pre-tax) increased by 31.0% to 3.8p (H1 2013: 2.9p).
Normalised Total Profit (Normalised Income Profit plus profits or losses from property sales and realised profits from one-off items) increased by 59.1% to 35.0 million (H1 2013: 22.0 million). The improvement reflects the 6.2 million Normalised Income Profit increase plus a 3.4 million gain when the Netherlands loan was satisfied in exchange for the properties on which it was secured. 3.5 million is due to an insurance receipt in Germany. Normalised Total Profit per share (pre-tax) increased by 51.4% to 5.3p (H1 2013: 3.5p).
The table below shows how these profit measures were calculated:

H1 2014
H1 2013

m
m
Investment property rental income
37.3 
39.8
Direct operating expenses
(6.7)
(7.0)
Property management fees
3.0 
0.8
Share of associates
4.6 
1.2
Administrative expenses
(10.0)
(8.1)
Net interest payable
(3.1)
(7.8)
Normalised Income Profit
25.1 
18.9
Profit on sale of investment and trading properties
3.0
3.1
Other operating income
6.9
-
Normalised Total Profit
35.0
22.0
Under IFRS, Hansteen reported a 66.7 million pre-tax profit for the period (H1 2013: 14.9 million). In addition to Normalised Profits the IFRS pre-tax profit includes movements in fair value of investment properties and financial derivatives. The property valuation improvement was 28.1 million for the wholly owned portfolio and 15.0 million for the share of associates. Also included in the IFRS pre-tax profit is a charge of 8.4 million related to a potential LTIP award and associated National Insurance Contributions. The charge for the potential LTIP award does not impact net assets as it is credited back through equity. 
Diluted EPRA earnings per share were 3.2p (H1 2013: 2.2p). The improvement in net assets of 81.0 million from 31 December 2013 can be summarised as follows:

H1 2014
H1 2013

m
m
Normalised Total Profit
35.0
22.0
Tax
(6.0)
(3.2)

29.0
18.8
Equity raised
46.3
-
Property revaluation
43.1
(3.3)
Exchange and other fair value movements
(17.5)
15.4
Dividends paid
(19.9)
(17.2)
NAV movement
81.0
13.7
The Group's EPRA net asset value (NAV) was 96p per share (31 December 2013: 91p). 
Dividend 
The Board has increased the interim dividend to be paid on 20 November 2014 by 5.3% to 2.0p per share (November 2013: 1.9p per share) reflecting the intention of the Board to maintain its prudently progressive dividend policy. 1.0p of the dividend payment will be a PID. The associated record date is 24 October 2014 and the ex-dividend date is 23 October 2014. 
Property Portfolio
The portfolio that is owned or co-owned was valued as at 30 June 2014 at 1.65 billion, with a rent roll of 144.3 million per annum, and a vacancy of 16.7%. It comprised 4.4 million sq m with a yield of 8.8% and a reversionary yield of 10.8% generated from 624estates with 6,200 tenants in five different countries.
The value of the total portfolio increased by 73.5 million or 4.6% on a like-for-like basis from 31 December 2013, after allowing for purchases, sales and currency movements. 43.1 million of this gain attributable to Hansteen is derived from our wholly owned properties and our share in the UK associates. All three of the core regions in which Hansteen operates showed property valuation increases. The UK portfolio increased by 48.0 million or 6.1% and the German portfolio increased by 19.0 million or 2.7%. The Benelux portfolio value increased by 12.1 million or 4.1%, with all of the increase coming on the newly acquired Netherlands portfolio. 
From December 2013, HPUT property values increased by 9.6 million or 7.4%, HPUT II by 6.1 million or 4.9% and AIF by 29.5 million or 7.0%. Hansteen's share of the increases in the three UK funds from December 2013 totalled 15.0 million. The wholly owned UK portfolio increased by 2.8 million or 2.5%.
It should also be noted that property valuations do not take account of portfolio premiums and as they are evidence based tend to be behind the market. Given that a lot of liquidity is currently provided by larger portfolio buyers the current premium for size will not be reflected in our annual valuations.
Since the beginning of the year, 30 sales totalling 140,000 sq m of space have completed, for a combined consideration of 90.4 million generating profits of 8.3 million. Of the 90.4 million of sales, 12.7 million were from the wholly owned portfolio at 0.5 million above book value and 77.7 million were from the co-owned portfolio at 7.8 million above book value. Hansteen's share of the profits from these co-owned portfolio sales, was 2.5 million. The sales were completed at an average yield of 6.5%.
142.7 million of acquisitions in five separate transactions have completed, the largest of which was at the end of June when we completed the purchase of 41 assets in the core Ranstad area of the Netherlands. A new 60 million five year loan has been provided by ING. The property portfolio extends to more than 370,000 sq m across 41 estates with a gross annual rental income of approximately 15.4 million per annum, and contracted rental income of more than 16.0 million per annum. The current vacancy rate is in the region of 20%, which provides a significant opportunity to add value. The portfolio was independently valued at 30 June 2014 at 126.5 million.
HPUT II has acquired 51.0 million of property in four separate transactions, including the 'Spice' portfolio which was purchased in February 2014 for 41.2 million. In total, 19 properties have been acquired by HPUT II so far this year, adding 4.0 million of rent per annum at an average yield of 7.9%. HPUT II has now invested 70.1 million of equity since its formation in May 2013 and several other opportunities are currently being pursued in order to invest the remaining 36.8 million. 
On a like-for-like basis, after allowing for sales, purchases and currency movements, annual rental income for the Group has increased by 1.6 million per annum from the December 2013 rent roll of 134.9 million. Both Germany and Benelux showed like-for-like rental increases with the UK showing a slight decrease due to some significant lease renewals with rent incentives. Our like-for-like rent figures are calculated on passing rents and not contracted rents and all three regions showed like-for-like gains on contracted rents. Like-for-like occupancy (measured by taking the vacant area at the year-end plus purchased vacancy during the period and comparing it with vacancies at the end of the period) has increased by 17,000 sq m from December 2013 with the UK and Germany showing gains and Benelux remaining flat.
Activity levels remained very high in the first half of the year with 819 new leases and lease renewals completed, securing 19.4 million per annum of rental income at an average of 24,000 per letting.
Hansteen Property Portfolio: Summary at 30 June 2014

No. properties
Built area
Vacant area
Passing rent
Value
Yield


sq m
%
Euros m
Sterling m
Euros m
Sterling m
%
UK
77
253,136
20.73%
 11.72 
 9.39 
 145.75 
 116.72 
8.04%
Germany 
88
1,503,525
11.80%
 64.07 
 51.30 
 711.69 
 569.90 
9.00%
Netherlands, Belgium & France
84
795,154
23.94%
 29.39 
 23.53 
 305.41 
 244.56 
9.62%
Total wholly owned
249
 2,551,815
16.47%
 105.18 
 84.22 
1,162.85 
 931.18
9.04%
HPUT*
42
278,925
12.26%
 12.69 
 10.16 
 174.76 
 139.95 
7.26%
HPUT II*
64
298,827
17.27%
 13.47 
 10.78 
 162.02 
 129.74 
8.31%
AIF*
269
1,265,507
18.14%
 48.92 
 39.17 
 559.08 
 447.69 
8.75%
Total attributable to Hansteen
383
 3,208,840 
16.62%
 131.85 
 105.58 
1,480.29 
1,185.38 
8.91%
Total under management
624
4,395,074
16.74%
 180.26
 144.33
2,058.71 
1,648.56 
8.75%
* Figures include 100% of HPUT, HPUT II and AIF's portfolio. Hansteen has an investment of 33.3% in HPUT and 33.3% in HPUT II and 36.7% in AIF.
Finance and Hedging
Finance
At 30 June 2014, net debt was 427.8 million compared to 419.0 million at 31 December 2013. Net debt to property value was 45.9% (31 December 2013: 49.3%) and net debt to shareholders' equity was 67.3% (31 December 2013: 75.5%). Borrowings increased to 527.0 million at 30 June 2014 from 489.9 million at 31 December 2013. 
239.0 million of borrowings were swapped at an average rate of 0.9%, with a further 90.8 million capped at an average rate of 2.1% and the 100 million convertible loan stock is fixed at 4%.
All of the loans continue to have significant headroom on their loan-to-value and interest cover covenants. Following the refinancing of the UniCredit and HBOS facilities in February 2014, the maturity profile of the Group's existing borrowings has improved significantly, with the weighted average time to maturity of borrowings increased from 1.8 years to 4.2 years. The earliest maturity of a small element (23.3M) of the current facilities is not due until December 2015. The Group's all-in cost of borrowing at 30 June 2014 was 3.9% (31 December 2013: 3.6%).
As at 30 June 2014, Hansteen had 85.3 million of cash. Taking account of impending financial commitments, when this cash is geared up it provides current fire power of over 100 million. In addition, HPUT II has remaining fire power of approximately 65 million.
Convertible Loan Stock
In July 2013 Hansteen issued a 100 million convertible bond. The money raised was instrumental in enabling our purchase of Ashtenne and the debt refinancing in Germany. In normal circumstances the bonds are unable to convert prior to July 2016 and therefore no accrual has been made to the NAV per share figures. As the conversion price (97.2p) is currently above the NAV (96p) conversion would in any event be accretive. However, on current trends the NAV may soon exceed the convert price and if converted would become dilutive. At present we do not foresee accruing for dilution in EPRA NAV prior to July 2016.
Long Term Incentive Plan (LTIP)
Our policy of buying value during the downturn and working the assets has generated capital and income returns well in excess of 10% per annum since the current LTIP measurement period began in January 2013. If continued, this performance will potentially trigger the Founder LTIP arrangements. 
The potential LTIP award can only be estimated at this stage as the out-turn depends entirely on the performance of the business over the three year period ending 31 December 2015. To the extent that growth in EPRA NAV plus dividends exceeds 10% per annum compound over three years, the Joint Chief Executives will each receive shares equating to 12.5% of the out-performance. 
In the first 18 months of the LTIP measurement period, EPRA NAV growth plus dividends amounted to a gain of 22.3p per share. This represents at 27% total return. In our EPRA NAV per share figure we have included a number of shares to reflect a possible LTIP award on the basis of what the award would be if the measurement period were taken for only the 18 months to 30 June 2014. The impact of these shares is to reduce EPRA NAV per share from 98p to 96p. As noted above, included in the IFRS pre-tax profit is a charge of 8.4 million related to a potential LTIP award and associated National Insurance Contributions.
Currency
The Group's net assets at 30 June 2014 were 635.6 million, of which 49.5% (314.9 million) were located in the UK and denominated in Sterling. The remaining 50.5% (320.7 million/400.5 million) were located in Germany, the Netherlands, Belgium and France.
The Board reviews its currency hedging policy on a regular basis. The current policy can be summarised as:
 Hedging instruments are used to cover a substantial proportion of Group Euro net assets and estimated net Euro income for the short-term.
 Hedges are implemented at levels which the Board believe are cost effective.
 Hedging is employed as an insurance policy against the impact of a significant fall in the value of the Euro against Sterling rather than a means to speculate for profit.
The Group's investments in Europe are partly matched with Euro borrowings and to that extent there is a natural currency hedge. 
During the period, the Group terminated its two 100.0 million currency options for proceeds of 0.7 million, replacing these with two new 100.0 million currency options at an average rate of 1.3 for a cost of 2.9 million. These hedges are held to mitigate the risk of a significant fall in the Sterling value of the European portfolio and the resulting fall in the NAV caused by a weakening Euro. 
The Group also has four options hedging 71.0 million net Euro income. These options expire at six-monthly intervals between 31 December 2014 and 30 June 2016. The option expiring on 30 June 2016 was entered into during the year at a cost of 0.2 million. The option is to put 20.0 million and call for GBP at an exchange rate of 1.35/1. The original three options are to put 51.0 million and call for GBP at an exchange rate of 1.3/1. 
Outlook
In every region we are seeing improving occupational and investment markets albeit to differing extents and from different starting points. Recently, some commentators have questioned the sustainability of current investment yields in various property sectors. Whilst it may be true that in some areas of property, until rental growth is established, scope for further yield compression may be limited, the Board does not believe this to be the case in relation to Hansteen's portfolio of regional light industrial properties for three principal reasons:-
1. The fundamental dynamics of the regional light industrial sector are that rents and values are still below those necessary for replacement of the stock. This should ensure a favourable supply/demand equation until values and rents rise. 
2. Following the half year valuation the simple yield (passing rent  value) on Hansteen's attributable share of the entire portfolio under management is 8.91% with a simple reversionary yield (estimated rental value for the whole portfolio  value) of 10.8%. Even against the interest rate backdrop of the last cycle this would be regarded as very high yielding. 
3. The current interest rate environment is extraordinary. Sterling Libor can currently be fixed for ten years at less than 2.5% per annum. The ten year rate for Euribor is less than 1.2% per annum. Furthermore, whilst over the last few years super low interest rates were, to some extent, an irrelevance since there was little availability of debt and where it was available margins were high now both debt and equity is available for sound propositions and margins for bank lending appear to have normalised. Such a backdrop to the operation of a high yielding property business is outside the experience of most people working today but the likelihood must be that it will provide scope for continued value growth. 
The last 12 months have been the most active in the history of Hansteen with acquisitions, sales and increases in properties under management totalling approximately 800 million. Our strategy of substantially growing the portfolio from the low point in the cycle is beginning to realise its promise. Investment market conditions have undoubtedly become more competitive as investors begin to recognise that regional industrial property is likely to produce superior returns in the medium term. Despite the increased competition, our creative approach to acquiring property is still presenting openings to purchase well priced assets that will provide potential for income and growth. Occupational markets are continuing to improve and have led to further increases in our rent roll and improved occupation. 
We have a large and diverse high yielding portfolio located in three distinct regions; the UK, Germany and the Benelux. Much of the portfolio was purchased with low rents and high vacancies and despite considerable asset management success over the last couple of years there is still real reversionary potential inherent in the portfolio, which we expect to continue to drive both income and value. The key to maximising returns from these kinds of properties is detailed, entrepreneurial hands on management and our extensive network of local teams spread throughout our regions have proven expertise in this regard and a consistent track record of successfully adding value. 
Hansteen Holdings Board
During the period we welcomed Mel Egglenton and Rebecca Worthington onto the Board. We are fortunate to recruit two very experienced Directors whose contribution will be extremely valuable to the Group.
James Hambro
Chairman
26 August 2014
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
26 August 2014
Copies of this announcement are available on the Company's website at www.hansteen.co.ukand can be requested from the Company's registered office at 6th Floor Clarendon House, 12 Clifford Street, London, W1S 2LL.
Consolidated income statement 
for the six months ended 30 June 2014

Note
Six months ended
30 June
2014
m
Unaudited
Six months ended
30 June
2013
m
Unaudited
Continuing operations



Revenue
6
43.7
41.9
Cost of sales

(10.2)
(8.4)
Gross profit

33.5
33.5
Other operating income
7
6.9
-
Administrative expenses

(18.5)
(8.1)
Share of results of associates

23.7
1.2
Gains/(losses) on investment properties

28.8
(1.4)
Gain on sale of subsidiary

-
1.3
Operating profit

74.4
26.5
Finance income

8.9
3.7
Finance costs

(16.6)
(15.3)
Profit before tax

66.7
14.9
Tax charge
9
(6.0)
(3.2)
Profit for the period

60.7
11.7




Attributable to:



Equity holders of the parent

60.7
11.7
Non-controlling interest

-
-
Profit for the period

60.7
11.7




Earnings per share



Basic
12
9.2p
1.8p
Diluted
12
8.9p
1.8p
 
Consolidated statement of comprehensive income
for the six months ended 30 June 2014

Six months ended
30 June
2014
m
Unaudited
Six months ended
30 June
2013
m
Unaudited



Profit for the period 
60.7
11.7



Other comprehensive (expense)/income:


Exchange (losses)/gains arising on translation of foreign operations
(13.0)
18.9
Total other comprehensive (expense)/income for the period 
(13.0)
18.9
Total comprehensive income for the period
47.7
30.6



Total comprehensive income attributable to:


Equity holders of the parent
47.6
30.6
Non-controlling interest
0.1
-

47.7
30.6
All components of other comprehensive income and expense will be recycled through the income statement. 
Consolidated balance sheet 
as at 30 June 2013

Note
30 June
2014
m
Unaudited
31 December
2013
m
Audited
Non-current assets



Goodwill

2.2
2.3
Property, plant and equipment

0.2
0.3
Investment property
13
918.7
834.9
Investment in associates
14
173.7
124.7
Deferred tax asset

3.0
1.7
Derivative financial instruments

3.2
0.3


1,101.0
964.2
Current assets



Investment property held for sale

5.9
4.6
Trading properties

6.6
10.1
Trade and other receivables

27.6
63.3
Cash and cash equivalents

85.3
57.8
Derivative financial instruments

0.2
1.6


125.6
137.4
Total assets

1,226.6
1,101.6
Current liabilities



Trade and other payables

(33.0)
(31.3)
Current tax liabilities

(2.4)
(2.1)
Borrowings
15
(6.8)
(125.5)
Obligations under finance leases

(0.2)
(0.2)
Derivative financial instruments

(0.1)
(0.4)


(42.5)
(159.5)
Non-current liabilities



Borrowings
15
(520.2)
(364.4)
Obligations under finance leases

(2.7)
(2.9)
Derivative financial instruments

(4.4)
(4.5)
Deferred tax liabilities

(20.8)
(15.3)


(548.1)
(387.1)
Total liabilities

(590.6)
(546.6)
Net assets

636.0
555.0




Equity



Share capital
16
68.6
64.1
Share premium account

114.4
114.1
Other reserves

(0.5)
0.3
Translation reserves

19.0
32.1
Retained earnings

434.1
344.1
Equity shareholders' funds

635.6
554.7
Non-controlling interest

0.4
0.3
Total equity

636.0
555.0
Basic diluted net asset value per share
12
90p
86p
EPRA net asset value per share
12
96p
91p
Consolidated statement of changes in equity 
for the six months ended 30 June 2014
Unaudited 
Share
capital
m
Share
premium
m
Translation
reserve
m
Other reserves
m
Merger
reserve
m
Retained
earnings
m
Total
m
Non-controlling interest
m
Total
m
Balance at 1 January 2013
63.9
112.7
23.9
-
-
314.9
515.4
1.0
516.4
Dividends 
-
-
-
-
-
(17.2)
(17.2)
-
(17.2)
Share-based payments
-
-
-
-
-
0.3
0.3
-
0.3
Profit for the period
-
-
-
-
-
11.7
11.7
-
11.7
Other comprehensive income for the period
-
-
18.9
-
-
-
18.9
-
18.9
Balance at 30 June 2013
63.9
112.7
42.8
-
-
309.7
529.1
1.0
530.1
Dividends
-
-
-
-
-
(12.1)
(12.1)
-
(12.1)
Share-based payments
-
-
-
-
-
0.5
0.5
-
0.5
Share options exercised
0.2
1.1
-
-
-
(0.3)
1.0
-
1.0
Shares issued as consideration
-
0.3
-
0.3
-
-
0.6
(0.7)
(0.1)
Profit for the period
-
-
-
-
-
46.3
46.3
-
46.3
Other comprehensive expense for the period 
-
-
(10.7)
-
-
-
(10.7)
-
(10.7)
Balance at 31 December 2013
64.1
114.1
32.1
0.3
-
344.1
554.7
0.3
555.0
Dividends
-
-
-
-
-
(19.9)
(19.9)
-
(19.9)
Share-based payments
-
-
-
-
-
7.5
7.5
-
7.5
Share options exercised
-
0.3
-
-
-
(0.1)
0.2
-
0.2
Shares issued
4.5
-
-
-
42.6
-
47.1
-
47.1
Cost of share issue
-
-
-
-
(0.8)
-
(0.8)
-
(0.8)
Transferred to retained earnings
-
-
-
-
(41.8)
41.8
-
-
-
Own shares acquired
-
-
-
(0.8)
-
-
(0.8)
-
(0.8)
Profit for the period
-
-
-
-
-
60.7
60.7
-
60.7
Other comprehensive (expense)/income for the period
-
-
(13.1)
-
-
-
(13.1)
0.1
(13.0)
Balance at 30 June 2014
68.6
114.4
19.0
(0.5)
-
434.1
635.6
0.4
636.0
The merger reserve comprises the share premium generated under the cash-box arrangement for the Placing and Open Offer in April 2014. No share premium is recorded in the Company's financial statements through the operation of the Merger Relief provisions of the Companies Act 2006. 41.8 million has been transferred to retained earnings, net of costs of 0.8 million in relation to this share issue.
Consolidated cash flow statement
for the six months ended 30 June 2014

Note
Six months ended
30 June
2014
m
Unaudited
Six months ended
30 June
2013
m
Unaudited
Net cash inflow from operating activities
17
17.1
19.6
Interest received

0.8
0.3
Proceeds from sale of subsidiary

-
13.3
Additions to property, plant and equipment

-
(0.1)
Additions to investment properties

(52.8)
(89.7)
Proceeds from sale of investment properties

16.3
28.7
Distributions received from associates

8.4
3.1
Net cash used in investing activities

(27.3)
(44.4)
Investments in associates

(34.8)
-
Dividends paid

(19.7)
(16.8)
Proceeds from issue of shares at a premium (net of expenses)

46.5
-
Repayments of obligations under finance leases

(0.1)
(0.1)
Bank loans raised (net of expenses)

323.8
38.8
Bank loans repaid 

(270.0)
(21.9)
Own shares acquired

(0.9)
-
Additions to derivative financial instruments

(7.4)
(0.2)
Settlement of derivative financial instruments

1.1
-
Net cash from/(used in) financing activities

38.5
(0.2)
Net increase/(decrease) in cash and cash equivalents

28.3
(25.0)
Cash and cash equivalents at beginning of period

57.8
118.9
Effect of foreign exchange rate changes

(0.8)
0.8
Cash and cash equivalents at end of period

85.3
94.7
Notes to the condensed set of financial statements for the six months ended 30 June 2014
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 6th Floor, Clarendon House, 12 Clifford Street, London, W1S 2LL. 
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 2013 was derived from the statutory accounts for the year ended 31 December 2013, 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 auditors 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.
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 26 August 2014.
The principal exchange rates used to translate foreign currency denominated amounts are:
Balance sheet: 1 = 1.2488 (31 December 2013: 1 = 1.2004)
Income statement: 1 = 1.2179 (30 June 2013: 1 = 1.1759)
3. Principal risks and uncertainties
Risk management is an important part of the Group's system of internal controls. Senior management staff and the Board regularly consider the significant risks, which it believes are facing the Group, identify 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. The key risks identified by the Board, the steps taken to mitigate them and additional commentary is as follows:
 Changes in the general economic environment exposes the Group to a number of risks including falls in the value of its property investments, loss of rental income and increased vacant property costs due to the failure of tenants to renew or extend leases as well as the increased potential for tenants to become bankrupt. The Board believes these risks are reduced due to its policy of assembling a portfolio with a wide spread of different tenancies in terms of actual tenants, industry type and geographical location as well as undertaking thorough due diligence on acquisitions. The level of exposure to individual tenants is regularly monitored to ensure they are within manageable limits. Rent deposits or bank guarantees are requested where appropriate to mitigate against the effect of tenant defaults. Where possible, purchases are achieved at low capital values and with due investigation of tenant finances.
 Over-borrowing by the Group, insufficient credit facilities, significant interest rate increases or facility covenant breaches could represent a significant risk to the Group. In response to these risks Hansteen maintains a prudent approach to its borrowing levels by seeking to maintain sufficient headroom within its debt facilities. The Board actively monitors current debt and equity levels as well as considering the future levels of debt and equity required to sustain the business. Loan covenants are monitored and compliance certificates are prepared on a regular basis. For all money borrowed consideration is given to procuring the appropriate hedging instruments to protect against increases in interest rates.
 By investing in property in mainland Europe the Group is exposed to a foreign currency exchange rate risk. In response to this risk the Group's borrowings are in Euro denominated loan facilities and therefore, to the extent that investments are financed by debt, a self hedging mechanism is in place. In relation to the equity element of the Group's Euro investments the Board monitors the level of exposure on a regular basis and considers the level and timing of when to take out the appropriate hedging instruments to cover this exposure. There is a risk that one or more of the countries that the Group operates in leaves the Euro which may affect the nature of the Group's loans and derivatives or introduce new volatility and currency exposures for the Group to manage.
 In addition to the need to act as a responsible landlord there may, in some circumstances, be occasions when pollution on a site owned by a property investment company becomes its responsibility. Each acquisition undertaken by the Group includes an environmental report from a specialist consultancy. These reports may highlight the need for further investigation and in some cases remediation. The Group's policy is then to either undertake such investigations or remediation or potentially reject the purchase as no longer viable.
 Loss of REIT status and payment of additional corporation tax as a risk to the Group. Loss of REIT status and payment of additional corporation tax would arise from a breach of REIT compliance requirements. Breach of certain limits imposed by REIT legislation may be mitigated through regular review of the Group's actual and forecast performance against REIT regime requirements. Management have sufficient discretion to manage and meet the REIT requirements and apply mitigating actions where required. 
4. 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 15 to these condensed financial statements.
5. 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 2014 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 2013.
6. Operating segments
The following is an analysis of the Group's revenue and results by reportable segment:

Six months ended
30 June 2014
Six months ended
30 June 2013

Revenue
m
Result
m
Revenue
m
Result
m
Belgium
0.8
0.5
1.0
0.7
France
0.7
0.6
0.8
0.8
Germany
26.4
21.9
25.8
21.4
Netherlands
4.4
3.8
4.8
4.1
UK
11.4
6.7
9.5
6.5

43.7
33.5
41.9
33.5
Other operating income

6.9

-
Administrative expenses

(18.5)

(8.1)
Share of results of associates

23.7

1.2
Changes in fair values of investment properties by segment:




Belgium
-

(1.7)

France
-

-

Germany
15.5

1.4

Netherlands
9.8

(2.3)

UK
2.8

(0.7)

Total changes in fair values of investment properties
28.1

(3.3)

Profit on disposal of investment properties
0.7

1.9

Total gains/(losses) on investment properties

28.8

(1.4)
Gain on sale of subsidiary

-

1.3
Operating profit

74.4

26.5
Net finance costs

(7.7)

(11.6)
Profit before tax

66.7

14.9
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:
30 June 2014
Investment properties*
m
Trading properties
m
Total
properties
m
Other
assets
m
Total
assets
m
Additions to investment properties
m
Non-current assets
m
Belgium
24.7
-
24.7
2.9
27.6
0.2
101.3
France
12.0
-
12.0
1.6
13.6
-
26.3
Germany
569.9
-
569.9
31.4
601.3
1.6
495.1
Netherlands
207.9
-
207.9
5.3
213.2
93.8
106.6
UK
110.1
6.6
116.7
63.8
180.5
0.1
191.3

924.6
6.6
931.2
105.0
1,036.2
95.7
920.6
Unallocated assets




190.4

180.4





1,226.6

1,101.0
31 December 2013
Investment properties*
m
Trading properties
m
Total
properties
m
Other
assets
m
Total
assets
m
Additions to investment properties
m
Non-current assets
m
Belgium
25.5
-
25.5
2.8
28.3
0.3
27.2
France
12.5
-
12.5
2.9
15.4
-
12.5
Germany
575.6
-
575.6
26.4
602.0
19.0
574.9
Netherlands
110.9
-
110.9
3.5
114.4
0.2
111.0
UK
115.0
10.1
125.1
139.8
264.9
60.8
236.1

839.5
10.1
849.6
175.4
1,025.0
80.3
961.7
Unallocated assets




76.6

2.5





1,101.6

964.2
*Investment properties includes those classified as held for sale on the balance sheet. 
7. Other operating income
Other operating income includes 3.5 million (2013: nil) comprising an insurance receipt relating to an investment property damaged by fire in a previous period and 3.4 million (2013: nil) relating to the gain arising on the waiver of a loan receivable in exchange for a property portfolio in the Netherlands that the loan was secured upon. 
8. Net finance costs
Six months ended
30 June
2014
m
Six months ended
30 June
2013
m
Interest receivable on bank deposits
0.1
0.1
Other interest receivable
6.2
0.2
Interest income
6.3
0.3
Interest payable on borrowings
(9.4)
(8.0)
Net interest expense
(3.1)
(7.7)
Change in fair value of currency options
(1.2)
(3.5)
Change in fair value of interest rate swaps and caps
(3.6)
3.4
Change in fair value of convertible bond
2.6
-
Foreign exchange losses
(2.4)
(3.8)
Net finance costs
(7.7)
(11.6)
Finance income
8.9
3.7
Finance costs
(16.6)
(15.3)
9. Tax on profit on ordinary activities
Six months ended
30 June
2014
m
Six months ended
30 June
2013
m
UK current tax
-
-
Foreign current tax
(1.4)
(1.5)
Total current tax
(1.4)
(1.5)
Deferred tax
(4.6)
(1.7)
Tax charge
(6.0)
(3.2)
10. Dividends
Six months ended
30 June
2014
m
Six months ended
30 June
2013
m
Amounts recognised as distributions to equity holders in the period:


Second interim dividend 2.9p (2013: 2.7p) per share
19.9
17.2
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%). 2,743,000 of the cash dividend paid in the period ended 30 June 2014 is attributable to PIDs (2013: 1,877,000).
11. 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
30 June 2014
Six months ended
30 June 2013

Group
m
Share of associates
m
Total
m
Group
m
Share of associate
m
Total
m
Investment property rental income
37.3
10.3
47.6
39.8
2.4
42.2
Direct operating expenses 
(6.7)
(1.8)
(8.5)
(7.0)
(0.4)
(7.4)
Property management fees
3.0
-
3.0
0.8
-
0.8
Administrative expenses
(10.0)
(1.2)
(11.2)
(8.1)
(0.4)
(8.5)
Net interest payable
(3.1)
(2.7)
(5.8)
(7.8)
(0.4)
(8.2)
Normalised Income Profit
20.5
4.6
25.1
17.7
1.2
18.9
Profit on sale of investment properties 
0.7
2.5
3.2
1.8
-
1.8
Loss on sale of trading properties
(0.2)
-
(0.2)
-
-
-
Total profit on sale of investment 
and trading properties
0.5
2.5
3.0
1.8
-
1.8
Other operating income 
6.9
-
6.9
-
-
-
Gain on sale of subsidiary
-
-
-
1.3
-
1.3
Normalised Total Profit
27.9
7.1
35.0
20.8
1.2
22.0
Negative goodwill recognised on acquisition
-
0.3
0.3
-
-
-
Gain on winding up associate's partnership
-
1.3
1.3
-
-
-
LTIP charge*
(8.4)
-
(8.4)
-
-
-
Fair value gains/(losses) on investment properties
28.1
15.0
43.1
(3.2)
(0.1)
(3.3)
Change in fair value of foreign currency derivatives
(1.2)
-
(1.2)
(0.1)
0.1
-
Change in fair value of interest rate derivatives
(3.6)
-
(3.6)
-
-
-
Change in fair value of convertible bond
2.6
-
2.6
-
-
-
Foreign exchange losses
(2.4)
-
(2.4)
(3.8)
-
(3.8)
Profit before tax
43.0
23.7
66.7
13.7
1.2
14.9
*The LTIP charge of 8.4 million relates to a potential LTIP award and associated National Insurance Contributions. The charge for the potential LTIP award does not impact NAV
12. 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 per share information. Diluted EPRA EPS and Diluted EPRA NAV are included in the following tables.

30 June 2014
30 June 2013

Earnings
m
Weighted average number of
shares
m
Earnings
per share
pence
Earnings
m
Weighted average number of
shares
m
Earnings
per share
pence
Normalised Income Profit
25.1
663.4
3.8
18.9
638.8
2.9
Normalised Total Profit
35.0
663.4
5.3
22.0
638.8
3.5







Basic EPS
60.7
663.4
9.2
11.7
638.8
1.8
Dilutive share options
-
16.9
-
-
0.1
-
Diluted EPS
60.7
680.3
8.9
11.7
638.9
1.8
Adjustments:






Revaluation (gains)/losses on investment properties
(28.1)


3.3


Profit on the sale of investment properties
(0.7)


(1.9)


Loss on disposal of trading properties
0.2


-


Profit on disposal of loan
(3.4)


-


Negative goodwill on investment in associate
(0.3)


-


Gain on sale of subsidiary
-


(1.3)


Change in fair value of financial instruments
4.8


0.1


Change in fair value of Convertible Bond (excluding foreign exchange)
1.3


-


Adjustment in respect of associates
(17.6)


-


Deferred tax on the above items
4.8


1.9


Diluted EPRA EPS
21.7
680.3
3.2
13.8
638.9
2.2

30 June 2014
31 Dec 2013

Equity
share-holders'
funds 
m
Number
of
shares
m
Net asset
value
per share
pence
Equity
share-
holders'
funds 
m
Number
of
shares
m
Net asset
value
per share
pence
Basic NAV
635.6
685.6
93
554.7
641.5
86
Unexercised share options
-
16.9

0.2
4.4

Diluted NAV
635.6
702.5
90
554.9
645.9
86
Adjustments:






Goodwill
(2.2)


(2.3)


Fair value of interest rate derivatives
4.3


4.8


Adjustments in respect of associates
(0.6)


0.5


Mark-to-market of convertible bond
16.8


16.2


Deferred tax on adjustments
17.7


13.5


EPRA NAV
671.6
702.5
96
587.6
645.9
91
13. Investment property

30 June 2014
31 Dec 2013

m
m
Investment property at start of period
834.9
821.4
Additions - property purchases
93.8
62.7
 - capital expenditure
1.9
17.5
Lease incentives 
0.8
1.7
Letting costs
-
0.7
Revaluations included in income statement
28.1
12.6
Disposals
(4.0)
(91.7)
Transfer to investment property held for sale
(5.9)
(4.6)
Exchange adjustment
(30.9)
14.6

918.7
834.9
Investment property held for sale
30 June 2014
31 Dec 2013

m
m
Investment property held for sale at start of period
4.6
10.9
Additions - capital expenditure
-
-
Disposals
(4.6)
(11.4)
Transfer from investment property
5.9
4.6
Exchange adjustment
-
0.5

5.9
4.6
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). All of the Group's investment property as at 30 June 2014 is categorised as Level 3. Details of inputs used in the fair value measurement can be found in the Chairman's Interim Statement. An increase in passing rent and a decrease in discount rate would increase the valuation. 
14. Investment in associates
During the period the Group redeemed 14 million of units in Hansteen UK Industrial Property Unit Trust. The Group's share of the investment remains at 33.3%. The Group invested a further 8.0m in Hansteen UK Industrial Property Unit Trust II. The Group's share of the investment remains at 33.3%. The Group made an additional 26.0 million investment in Ashtenne Industrial Fund Unit Trust, bringing the Group's holding to 36.7% (2013: 27.5%). 
15. Borrowings

30 June 2014
31 Dec 2013

m
m



Amortised cost


Bank loans
437.0
391.2 
Convertible Bond
96.9
99.5
Unamortised borrowing costs
(6.9)
(0.8)

527.0
489.9 
Maturity


The bank loans are repayable as follows:


Within one year or on demand
8.0
125.6
Between one and two years
31.4
175.2
Between three and five years
489.3
184.4
Over five years
5.2
5.5

533.9
490.7



Covenants
Facility
Drawn
Expiry
Loan to value
Interest cover
23,338,000
23,338,000
December 2015
68%**
160%
6,463,000
6,463,000
August 2016
45%
300%
108,000,000
108,000,000
April 2017
76%**
155%
2,672,000
2,672,000
June 2017
70%
125%
4,000,000
4,000,000
January 2018
60%
200%
100,000,000
100,000,000
July 2018*
-
-
108,000,000
108,000,000
December 2018
60%
175%
233,531,000
233,531,000
February 2019
55%
144%
60,000,000
60,000,000
June 2019
75%
125%
12,694,000
12,694,000
August 2018 to December 2026
-
-
* The July 2018 facility is a convertible bond. The bonds may be converted into ordinary shares if the share price of an ordinary share exceeds 130% of the conversion price for a specified period, or at any time after July 2016.
Security for secured borrowings at 30 June 2014 is provided by charges on property with an aggregate carrying value of 895.1 million (31 December 2013: 744 million).
** On the 23.3 million facility expiring in December 2015 the loan to value covenant reduces to 55% at the end of 2014. On the 108.0 million facility expiring in April 2017 the loan to value covenant reduces by 2% per annum from July 2014.
%
30 June
2014
m
%
31 Dec
2013
m
Interest rate and currency profile




Euros
3.2
500.1
2.3 
448.0 
Sterling
3.7
33.8
 3.6 
42.7 

3.3
533.9
2.5
490.7
Reconciliation of movement in net debt in the period


30 June
2014
31 Dec
2013


m
m
Net debt at beginning of period

419.0
325.0
Cash flow



Net decrease in cash and cash equivalents

(28.3)
60.5
New bank loans raised (net of expenses)

323.8
189.5
Bank loans repaid (net of expenses)

(270.0)
(144.4)
Repayments of obligations under finance leases

(0.1)
(0.2)
Other



Disposal of subsidiary

-
(20.4)
Foreign exchange movements recognised in equity

(15.6)
8.2
Foreign exchange movements recognised in the income statement

(1.7)
(0.2)
Amortisation of bank loan fees

0.7
1.0
Net debt at end of period

427.8
419.0
Net debt ratios

30 June
2014
31 Dec
2013


m
m
Obligations under finance leases

2.9
3.1
Borrowings

430.1
390.4
Convertible Bond

96.9
99.5
Less mark-to-market on Convertible Bond 

(16.8)
(16.2)
Cash and cash equivalents

(85.3)
(57.8)
Net debt

427.8
419.0
Equity attributable to equity holders of the parent

635.6
554.7
Net debt to equity ratio

67.3%
75.5%
Carrying value of investment and trading properties

931.2
849.6
Net debt to value ratio

45.9%
49.3%
16. Share capital
Number (m)
30 June
2014
m
Number (m)
31 Dec
2013
m
Issued and fully paid ordinary shares of 10p each




At start of the period
640.5
64.1
638.8
63.9
Equity raise April 2014
44.8
4.5
-
-
Share options exercised
0.3
-
1.3
0.2
Acquisition of minority interest
-
-
0.4
-
At end of period
685.6
68.6
640.5
64.1
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.
On 2 April 2014 pursuant to a placing and open offer, the Company raised gross proceeds of 47.1 million (46.3 million net of expenses) through the issue of 44,834,877 shares at a price of 105 pence per ordinary share. On 17 April 2014 300,000 share options were exercised. 
17. Notes to the cash flow statement

Six months ended
30 June
2014
m
Six months ended
30 June
2013
m
Profit for the period
60.7
11.7
Adjustments for:


Share-based employee remuneration
7.5
0.3
Depreciation of property, plant and equipment
0.1
0.1
Share of profits of associate
(23.7)
(1.2)
(Gains)/losses on investment properties
(28.8)
1.4
Gain on sale of subsidiary
-
(1.3)
Gain on disposal of loan
(3.4)
-
Net finance costs
7.7
11.6
Tax charge
6.0
3.2
Operating cash inflows before movements in working capital
26.1
25.8
Decrease in trading properties
3.4
0.8
Increase in receivables
(3.5)
(4.3)
Increase in payables
0.9
5.9
Cash generated by operations
26.9
28.2
Income taxes paid
(1.5)
(0.4)
Interest paid
(8.3)
(8.2)
Net cash inflow from operating activities
17.1
19.6
During the period the Group acquired a portfolio of investment properties for consideration of 106 million which was settled in part by a cash payment of 53 million and the balance by settlement of a loan due to the Group.
18. Financial instruments fair value disclosures
The table below sets out the categorisation of the financial instruments held by the Group at 30 June 2014. 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. 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 
2014

level
m
Financial assets


Designated as held for trading


Currency option
2
3.2
Interest rate caps
2
0.2



Financial liabilities 


Designated as held for trading


Interest rate swaps
2
(4.5)
Fair value through profit and loss


Convertible Bond
1
(96.9)
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. 
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 2014 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 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 2, 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 Ireland) 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 2014 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
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
26 August 2014

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The company news service from the London Stock Exchange
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