REG - Hansteen Hldgs plc - Half Yearly Report <Origin Href="QuoteRef">EVRE.L</Origin> <Origin Href="QuoteRef">HSTN.L</Origin> - Part 2
29/10/2014 15:28
- Part 2: For the preceding part double click ID:nRSa0640Qa
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 ended30 June2014£m Six months ended30 June2013£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 ended30 June2014£m Six months ended30 June2013£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 ended30 June2014£m Six months ended30 June2013£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 ended30 June 2014 Six months ended30 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.
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
1.9
Diluted EPRA EPS
21.7
680.3
3.2
13.8
638.9
2.2
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
13.5
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%
E108,000,000 E108,000,000 April 2017 76%** 155%
E2,672,000 E2,672,000 June 2017 70% 125%
£4,000,000 £4,000,000 January 2018 60% 200%
E100,000,000 E100,000,000 July 2018* - -
E108,000,000 E108,000,000 December 2018 60% 175%
E233,531,000 E233,531,000 February 2019 55% 144%
E60,000,000 E60,000,000 June 2019 75% 125%
E12,694,000 E12,694,000 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 E108.0 million facility
expiring in April 2017 the loan to value covenant reduces by 2% per annum from
July 2014.
% 30 June2014£m % 31 Dec2013£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 June2014 31 Dec2013
£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 June2014 31 Dec2013
£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 June2014£m Number (m) 31 Dec2013£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 ended30 June2014£m Six months ended30 June2013£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 E106 million which was settled in part by a cash payment of
E53 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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