REG - Great Portland Ests. - Great Portland Estates Full Year Results 2016 <Origin Href="QuoteRef">GPOR.L</Origin> - Part 2
25/05/2016 07:07
- Part 2: For the preceding part double click ID:nRSY1972Za
none). Tenant delinquencies in the year were low at 0.3% of total
rent roll (2015: 0.7%) and rent deposits have predominantly mitigated their
financial impact. We are vigilant and continue to monitor the financial
position of our tenants on a regular basis.
Taxation
The current tax credit in the income statement for the year is £0.6 million
(2015: £nil) as a result of the tax-free nature of much of the Group's income
and other allowances being available to set against non-REIT profits. The
deferred tax credit in the income statement for the year is £0.5 million
(2015: £0.8 million) and relates to non-REIT Group activities. The underlying
effective tax rate was 0% (2015: 0%). The Group complied with all relevant
REIT tests for the year to 31 March 2016.
All entities within the Group are UK tax resident; as our business is located
wholly in the UK, we consider this to be appropriate. The Group maintains an
open working relationship with HMRC and seeks pre-clearance in respect of
complex transactions as part of its low-risk tax strategy.
As a REIT, we are exempt from UK corporation tax in respect of our property
rental business, provided we meet a number of conditions including
distributing at least 90% of the rental income profits of this business (known
as Property Income Distributions (PIDs)) on an annual basis. These PIDs are
then typically treated as taxable income in the hands of shareholders. The
Group's REIT exemption does not extend to either profits arising from the sale
of investment properties which have undergone a major redevelopment within the
preceding three years or profits arising from trading properties (including
the sale of the residential units at Rathbone Square, W1).
During the year, GWP sold 95 Wigmore Street, W1. As the disposal occurred
within three years of the completion of the development of the property, the
Group's share of the gain arising is taxable. The Group anticipates that the
gain will be sheltered by losses and therefore has not accrued a tax charge in
respect of this disposal. The REIT legislation enables the Group to reclaim
the REIT conversion charge it paid in 2007 in respect of the property, giving
rise to a prior year tax credit of £0.6 million.
Despite being a REIT, we are subject to a number of other taxes and certain
sector specific charges in the same way as non-REIT companies. During the
year, we incurred £11.9 million in respect of stamp duty, empty rates in
respect of vacant space, s106 contributions and community infrastructure
levies.
Dividend
The Board has declared a final dividend of 5.6 pence per share (2015: 5.5
pence) which will be paid in July 2016. All of this final dividend will be a
REIT PID in respect of the Group's tax exempt property rental business.
Together with the interim dividend of 3.6 pence, the total dividend for the
year is 9.2 pence per share (2015: 9.0 pence).
Group income statement
For the year ended 31 March 2016
Notes 2016 2015
£m £m
Total revenue 2 128.8 88.8
Net rental income 3 75.5 66.0
Joint venture fee income 12 4.1 4.2
Rental and joint venture fee income 79.6 70.2
Property expenses 4 (8.2) (7.7)
Net rental and related income 71.4 62.5
Administration expenses 5 (24.4) (20.1)
Development management revenue 37.6 10.6
Development management costs (33.6) (8.9)
4.0 1.7
Trading property - cost of sales (0.6) (4.8)
Operating profit before surplus on property and results of joint ventures 50.4 39.3
Surplus from investment property 10 422.2 380.6
Share of results of joint ventures 12 66.8 84.7
Operating profit 539.4 504.6
Finance income 6 7.8 11.8
Finance costs 7 (14.8) (17.7)
Fair value movement on convertible bond 13.5 (21.7)
Fair value movement on derivatives 9.2 30.4
Profit before tax 555.1 507.4
Tax 8 1.1 0.8
Profit for the year 556.2 508.2
Basic earnings per share 9 162.6p 148.3p
Diluted earnings per share 9 161.9p 147.4p
Diluted EPRA earnings per share 9 13.5p 12.7p
All results are derived from continuing operations in the United Kingdom.
Group statement of comprehensive income
For the year ended 31 March 2016
Notes 2016 2015
£m £m
Profit for the year 556.2 508.2
Items that will not be reclassified subsequently to profit and loss
Actuarial gain/(deficit) on defined benefit scheme 25 0.1 (3.1)
Total comprehensive income and expense for the year 556.3 505.1
Group balance sheet
At 31 March 2016
Notes 2016 2015
£m £m
Non-current assets
Investment property 10 2,932.1 2,348.2
Investment in joint ventures 12 543.4 636.7
Plant and equipment 13 1.1 0.2
3,476.6 2,985.1
Current assets
Trading property 11 172.4 115.9
Trade and other receivables 14 37.0 28.1
Corporation tax 8 0.6 -
Deferred tax 8 1.3 0.8
Cash and cash equivalents 12.7 4.3
224.0 149.1
Total assets 3,700.6 3,134.2
Current liabilities
Trade and other payables 15 (135.0) (73.1)
(135.0) (73.1)
Non-current liabilities
Interest-bearing loans and borrowings 16 (600.2) (638.5)
Obligations under finance leases 18 (50.5) (28.5)
Pension liability 25 (2.7) (3.2)
(653.4) (670.2)
Total liabilities (788.4) (743.3)
Net assets 2,912.2 2,390.9
Equity
Share capital 19 43.0 43.0
Share premium account 352.0 352.0
Capital redemption reserve 16.4 16.4
Retained earnings 2,509.9 1,991.2
Investment in own shares 20 (9.1) (11.7)
Total equity 2,912.2 2,390.9
Net assets per share 9 847p 695p
EPRA net assets per share 9 847p 709p
Approved by the Board on 25 May 2016 and signed on its behalf by
Toby Courtauld Nick Sanderson
Chief Executive Finance Director
Group statement of cash flows
For the year ended 31 March 2016
Notes 2016 2015
£m £m
Operating activities
Operating profit 539.4 504.6
Adjustments for non-cash items 21 (491.8) (471.2)
Deposits received on forward sale of residential units 34.9 22.3
Development of trading property (45.2) (18.1)
Decrease/(increase) in receivables 6.8 (2.9)
(Decrease)/increase in payables (1.5) 1.8
Cash generated from operations 42.6 36.5
Interest paid (27.4) (28.4)
Cash flows from operating activities 15.2 8.1
Investing activities
Distributions from joint ventures 110.3 8.2
Purchase and development of property (365.8) (93.9)
Purchase of fixed assets (1.1) (0.2)
Sale of properties 321.0 102.7
Investment in joint ventures (4.4) (1.0)
Exercise of put option on 100 Bishopsgate Partnership - 15.8
Sale of joint ventures - 15.8
Cash flows from investing activities 60.0 47.4
Financing activities
Borrowings (repaid)/drawn (28.0) 15.0
Purchase of derivatives - (2.2)
Funds to joint ventures (0.1) (22.6)
Purchase of own shares (8.1) (19.1)
Equity dividends paid (30.6) (30.1)
Cash flows from financing activities (66.8) (59.0)
Net increase/(decrease) in cash and cash equivalents 8.4 (3.5)
Cash and cash equivalents at 1 April 4.3 7.8
Cash and cash equivalents at balance sheet date 12.7 4.3
Group statement of changes in equity
For the year ended 31 March 2016
Notes Share Share Capital Retained Investment Total
capital premium redemption earnings in own equity
£m £m reserve £m shares £m
£m £m
Total equity at 1 April 2015 43.0 352.0 16.4 1,991.2 (11.7) 2,390.9
Profit for the year - - - 556.2 - 556.2
Actuarial gain on defined benefit scheme 25 - - - 0.1 - 0.1
Employee Long-Term Incentive Plan and Share Matching Plan charge 20 - - - - 4.2 4.2
Purchase of own shares 20 - - - - (8.1) (8.1)
Dividends to shareholders 22 - - - (31.1) - (31.1)
Transfer to retained earnings - - - (6.5) 6.5 -
Total equity at 31 March 2016 43.0 352.0 16.4 2,509.9 (9.1) 2,912.2
Group statement of changes in equity
For the year ended 31 March 2015
Notes Share Share Capital Retained Investment Total
capital premium redemption earnings in own equity
£m £m reserve £m shares £m
£m £m
Total equity at 1 April 2014 43.0 352.0 16.4 1,519.5 1.0 1,931.9
Profit for the year - - - 508.2 - 508.2
Actuarial deficit on defined benefit scheme 25 - - - (3.1) - (3.1)
Employee Long-Term Incentive Plan and Share Matching Plan charge 20 - - - - 3.5 3.5
Purchase of own shares 20 - - - - (19.1) (19.1)
Dividends to shareholders 22 - - - (30.5) - (30.5)
Transfer to retained earnings - - - (2.9) 2.9 -
Total equity at 31 March 2015 43.0 352.0 16.4 1,991.2 (11.7) 2,390.9
Notes forming part of the Group financial statements
1 Accounting policies
Basis of preparation
The financial information contained in this announcement has been prepared on
the basis of the accounting policies set out in the statutory accounts for the
year ended 31 March 2016. Whilst the financial information included in this
announcement has been computed in accordance with International Financial
Reporting Standard (IFRS), as adopted by the European Union, this announcement
does not itself contain sufficient information to comply with IFRS. The
financial information set out above does not constitute the Company' statutory
accounts for the years ended 31 March 2016 or 2015 but is derived from those
accounts. Those accounts give a true and fair value of the assets,
liabilities, financial position and profit and loss of the company and the
undertakings included in the consolidation taken as a whole. Statutory
accounts for 2015 have been delivered to the Registrar of Companies and those
for 2016 will be delivered following the Company's annual meeting. The
auditor's reports on both the 2016 and 2015 accounts were unqualified; did
not, did not draw attention to any matters by way of emphasis without
qualifying their report and did not contain statements under s498(2) or (3) of
the Companies Act 2006 or preceding legislation.
The financial statements have been prepared on the historical cost basis,
except for the revaluation of properties, other investment, financial
instruments and pension liability.
Key accounting judgements
In the process of applying the Group's accounting policies, the directors are
required to make judgements, estimates and assumptions that may affect the
financial statements. The directors believe that the judgements made in the
preparation of the financial statements are reasonable. However, actual
outcomes may differ from those anticipated. Critical accounting judgements
include the adoption of the external portfolio valuation without adjustment,
the recognition of purchases and disposal of assets and the adoption of a
single reporting segment. The accounting policies for these areas of judgement
are set out in the accounting policies below.
New accounting standards
During the year ended 31 March 2016, the following accounting standards and
guidance were adopted by the Group:
· Amendments to IAS19 Employee Benefits - Contributions from employees or
third parties that are linked to service
· Amendments to IFRS (Annual Improvements cycle 2010-2012)
· Amendments to IFRS (Annual Improvements cycle 2011-2013)
The adoption of the Standards and Interpretations has not significantly
impacted these financial statements.
At the date of approval of these financial statements, the following Standards
and Interpretations which have not been applied in these financial statements
were in issue but not yet effective (and in some cases had not yet been
adopted by the EU):
· Amendments to IFRS (Annual Improvements cycle 2012-2014)
· Amendments to IFRS 10 Consolidated Financial Statements
· Amendments to IFRS 11 Joint Arrangements
· Amendments to IAS 1 and IAS 7 Disclosure Initiatives
· Amendments to IAS 27 Separate Financial Statements
· Amendments to IAS 28 Investments in Associates and Joint Ventures
· Amendments to IAS 12 Income Taxes
· IFRS 9 Financial Instruments
· IFRS 15 Revenue from Contracts with Customers
· IFRS 16 Leases
The directors do not expect that the adoption of the Standards and
Interpretations listed above will have a material impact on the financial
statements of the Group.
Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and all its subsidiary undertakings for the year ended 31 March 2016.
Subsidiary undertakings are those entities controlled by the Group. Control is
assumed when the Group directs the financial and operating policies of an
entity to benefit from its activities.
Rental income
This comprises rental income and premiums on lease surrenders on investment
properties for the year, exclusive of service charges receivable.
Tenant leases
The directors have considered the potential transfer of risks and rewards of
ownership in accordance with IAS 17 - Leases for all properties leased to
tenants and in their judgement have determined that all such leases are
operating leases.
Lease incentives
Lease incentives, including rent-free periods and payments to tenants, are
allocated to the income statement on a straight-line basis over the lease term
or on another systematic basis, if applicable. The value of resulting accrued
rental income is included within the respective property.
Other property expenses
Irrecoverable running costs directly attributable to specific properties within
the Group's portfolio are charged to the income statement as other property
expenses. Costs incurred in the improvement of the portfolio which, in the
opinion of the directors, are not of a capital nature are written-off to the
income statement as incurred.
Administration expenses
Costs not directly attributable to individual properties are treated as
administration expenses.
Share-based payment
The cost of granting share-based payments to employees and directors is
recognised within administration expenses in the income statement. The Group
has used the Stochastic model to value the grants, which is dependent upon
factors including the share price, expected volatility and vesting period, and
the resulting fair value is amortised through the income statement over the
vesting period. The charge is reversed if it is likely that any
non-market-based criteria will not be met.
Investment property
Investment properties and investment properties under development are
professionally valued on a fair value basis by qualified external valuers and
the directors must ensure that they are satisfied that the valuation of the
Group's properties is appropriate for inclusion in the accounts without
adjustment.
The valuations of investment properties and investment properties under
development have been prepared in accordance with the Global RICS Valuation -
Professional Standards (January 2014).
For investment property, this approach involves applying market-derived
capitalisation yields to current and market-derived future income streams with
appropriate adjustments for income voids arising from vacancies or rent-free
periods. These capitalisation yields and future income streams are derived
from comparable property and leasing transactions and are considered to be the
key inputs in the valuation. Other factors that are taken into account in the
valuations include the tenure of the property, tenancy details, planning,
building and environmental factors that might affect the property.
In the case of investment property under development, the approach applied is
the 'residual method' of valuation, which is the investment method of
valuation as described above with a deduction for the costs necessary to
complete the development, together with an allowance for the remaining risk.
Sales and purchases of investment properties are recognised when the risks and
rewards of ownership transfer.
Trading property
Trading property is being developed for sale or being held for sale after
development is complete, and is carried at the lower of cost and net
realisable value. Cost includes direct expenditure and capitalised interest.
Cost of sales, including costs associated with off-plan residential sales, are
expensed to the income statement as incurred.
Depreciation
No depreciation is provided in respect of freehold investment properties and
leasehold investment properties. Depreciation is provided on plant and
equipment, at rates calculated to write off the cost, less estimated residual
value, based on prices prevailing at the balance sheet date of each asset
evenly over its expected useful life, as follows:
Fixtures and fittings - over three to five years.
Leasehold improvements - over the term of the lease.
Joint ventures
Joint ventures are accounted for under the equity method where, in the
directors' judgement, the Group has joint control of the entity. The Group's
level of control in its joint ventures is driven both by the individual
agreements which set out how control is shared by the partners and how that
control is exercised in practice. The Group balance sheet contains the Group's
share of the net assets of its joint ventures. Balances with partners owed to
or from the Group by joint ventures are included within investments. The
Group's share of joint venture profits and losses are included in the Group
income statement in a single line. All of the Group's joint ventures adopt the
accounting policies of the Group for inclusion in the Group financial
statements.
Income tax
Current tax is the amount payable on the taxable income for the year and any
adjustment in respect of previous years. Deferred tax is provided in full on
temporary differences between the tax base of an asset or liability and its
carrying amount in the balance sheet. Deferred tax is determined using tax
rates that have been enacted or substantively enacted by the balance sheet
date and are expected to apply when the asset is realised or the liability is
settled. Deferred tax assets are recognised when it is probable that taxable
profits will be available against which the deferred tax assets can be
utilised. No provision is made for temporary differences arising on the
initial recognition of assets or liabilities that affect neither accounting
nor taxable profit. Tax is included in the income statement except when it
relates to items recognised directly in other comprehensive income or equity,
in which case the related tax is also recognised directly in other
comprehensive income or equity.
Pension benefits
The Group contributes to a defined benefit pension plan which is funded with
assets held separately from those of the Group. The full value of the net
assets or liabilities of the pension fund is brought on to the balance sheet
at each balance sheet date. Actuarial gains and losses are taken to reserves;
all other movements are taken to the income statement.
Capitalisation of interest
Interest associated with direct expenditure on investment and trading
properties under development is capitalised. Direct expenditure includes the
purchase cost of a site if it has been purchased with the specific intention
to redevelop, but does not include the original book cost of a site where no
intention existed. Interest is capitalised from the start of the development
work until the date of practical completion. The rate used is the Group's
weighted average cost of borrowings or, if appropriate, the rate on specific
associated borrowings.
Financial instruments
i Derivatives The Group uses derivative financial instruments to hedge its
exposure to foreign currency fluctuations and interest rate risks. The Group's
derivatives are measured at fair value in the balance sheet. To the extent
that a derivative is a designated hedge and provides an effective cash flow
hedge against the Group's underlying exposure, the movements in the fair value
of the hedge are taken to equity. To the extent that the derivative is not a
designated hedge or does not effectively hedge the underlying exposure, the
movement in the fair value of the hedge is taken to the income statement.
ii Borrowings The Group's borrowings in the form of its debentures, private
placement notes and bank loans are recognised initially at fair value, after
taking account of any discount or premium on issue and attributable
transaction costs. Subsequently, borrowings are held at amortised cost, with
any discounts, premiums and attributable costs charged to the income statement
using the effective interest rate method.
iii Convertible bond The Group's convertible bond can be settled in shares,
cash or a combination of both at the Group's discretion. The bonds have been
designated at fair value through profit and loss upon initial recognition,
with any gains or losses arising subsequently due to re-measurement being
recognised in the income statement.
iv Cash and cash equivalents Cash and cash equivalents comprise cash in hand,
demand deposits and other short-term highly liquid investments that are
readily convertible into a known amount of cash and are subject to
insignificant risk of changes in value.
v Trade receivables and payables Trade receivables and payables are initially
measured at fair value, and are subsequently measured at amortised cost using
the effective interest rate method.
Head leases
The present value of future ground rents is added to the carrying value of a
leasehold investment property and to long-term liabilities. On payment of a
ground rent, virtually all of the cost is charged to the income statement,
principally as interest payable, and the balance reduces the liability; an
equal reduction to the asset's valuation is charged to the income statement.
Segmental analysis
All of the Group's revenue is generated from investment properties located in
central London. The properties are managed as a single portfolio by an asset
management team whose responsibilities are not segregated by location or type,
but are managed on an asset-by-asset basis. The majority of the Group's assets
are mixed-use, therefore the office, retail and any residential space is
managed together. Within the property portfolio, the Group has a number of
properties under development. The directors view the Group's development
activities as an integral part of the life cycle of each of its assets rather
than a separate business or division. The nature of developing property means
that whilst a property is under development it generates no revenue and has no
operating results. Once a development has completed, it returns to the
investment property portfolio, or if it is a trading property, it is sold. The
directors have considered the nature of the business, how the business is
managed and how they review performance and, in their judgement, the Group has
only one reportable segment. The components of the valuation, as provided by
CBRE, are set out in note 10.
Development management agreements
The Group sold a development property prior to its completion and has a
development management agreement with the buyer to construct the remainder of
the building on their behalf. Where the outcome of this development management
agreement can be estimated reliably, revenue and costs are recognised by
reference to the stage of completion of the contract at the balance sheet
date. This is normally measured as the proportion that contract costs incurred
for work performed bear to the estimated total contract costs. Variations in
work, claims and incentive payments are included to the extent that they have
been agreed with the counterparty.
Where the outcome of the development management agreement cannot be estimated
reliably, contract revenue is recognised to the extent of costs incurred where
it is probable they will be recoverable. Costs are recognised as expenses in
the period in which they are incurred. When it is probable that total costs
will exceed total revenue, the expected loss is recognised as an expense
immediately.
2 Total revenue
2016 2015
£m £m
Gross rental income 72.8 58.6
Spreading of tenant lease incentives 3.0 7.6
Service charge income 11.3 7.8
Joint venture fee income 4.1 4.2
Development management revenue 37.6 10.6
128.8 88.8
3 Net rental income
2016 2015
£m £m
Gross rental income 72.8 58.6
Spreading of tenant lease incentives 3.0 7.6
Ground rents (0.3) (0.2)
75.5 66.0
4 Property expenses
2016 2015
£m £m
Service charge income (11.3) (7.8)
Service charge expenses 12.3 9.7
Other property expenses 7.2 5.8
8.2 7.7
5 Administration expenses
2016 2015
£m £m
Employee costs 20.1 16.5
Other head office costs 4.3 3.6
24.4 20.1
Included within employee costs is an accounting charge for the LTIP and SMP
schemes of £4.2 million (2015: £3.5 million).
Employee costs, including those of directors, comprise the following:
2016 2015
£m £m
Wages and salaries 19.2 15.1
Social security costs 2.5 2.9
Other pension costs 1.5 1.4
23.2 19.4
Less: recovered through service charges (1.0) (1.0)
Less: capitalised into development projects (2.1) (1.9)
20.1 16.5
The Executive Directors are considered to be key management for the purposes
of IAS 24 'Related Party Transactions'. The Group's key management, its
pension plan and joint ventures are the Group's only related parties.
Employee information
The average number of employees of the Group, including directors, was:
2016 2015
Number Number
Head office and property management 96 96
Auditor's remuneration
2016 2015
£000's £000's
Audit of the Company's annual accounts 114 99
Audit of subsidiaries 96 83
210 182
Audit-related assurance services, including the interim review 61 61
Total audit and audit-related services 271 243
Services related to taxation (advisory) 11 9
Other non-audit services - 118
282 370
6 Finance income
2016 2015
£m £m
Interest on balances with joint venture partners 7.8 11.8
7 Finance costs
2016 2015
£m £m
Interest on revolving credit facilities 3.4 4.3
Interest on private placement notes 12.9 12.5
Interest on debenture stock 8.0 8.0
Interest on convertible bond 1.5 1.5
Interest on obligations under finance leases 2.3 1.4
Break costs on refinanced revolving credit facilities - 1.4
Gross finance costs 28.1 29.1
Less: capitalised interest at an average rate of 3.9% (2015: 4.1%) (13.3) (11.4)
14.8 17.7
8 Tax
2016 2015
£m £m
Current tax
UK corporation tax - -
Tax over provided in previous years (0.6) -
Total current tax (0.6) -
Deferred tax (0.5) (0.8)
Tax credit for the year (1.1) (0.8)
The difference between the standard rate of tax and the effective rate of tax
arises from the items set out below:
2016 2015
£m £m
Profit before tax 555.1 507.4
Tax charge on profit at standard rate of 20% (2015: 21%) 111.0 106.6
REIT tax-exempt rental profits and gains (18.4) (13.1)
Non-taxable revaluation surplus (89.3) (93.7)
Prior periods' corporation tax (0.6) -
Other (3.8) (0.6)
Tax credit for the year (1.1) (0.8)
During the year, £nil (2015: £nil) of deferred tax was credited directly to
equity. The Group's net deferred tax at 31 March 2016 was £1.3 million (2015:
£0.8 million), based on a 20% tax rate. This consists of a deferred tax
liability of £nil (2015: £8.5 million) and a deferred tax asset of £1.3
million (2015: £9.3 million).
Movement in deferred tax
At 1 April Recognised in the income statement At 31 March 2016
2015 £m £m
£m
Revaluation surpluses (8.5) 8.5 -
Revenue losses recognised in respect of revaluation surpluses 8.5 (8.5) -
Revenue losses recognised in respect of trading property - cost of sales 0.8 0.5 1.3
Net deferred tax asset 0.8 0.5 1.3
In accordance with IAS 12 - Income Taxes, deferred tax liabilities have been
recognised in respect of revaluation surpluses relating to properties which do
not benefit from the Group's REIT status.
A deferred tax asset of £3.8 million (2015: £5.5 million), mainly relating to
contingent share awards, the pension liability and the convertible bond was
not recognised because it is uncertain whether future taxable profits will
arise against which this asset can be utilised.
As a REIT, the Group is largely exempt from corporation tax in respect of its
rental profits and chargeable gains relating to its property rental business.
The Group is otherwise subject to corporation tax. In particular, the Group's
REIT exemption does not extend to either profits arising from the sale of
investment properties which have undergone a major redevelopment within the
preceding three years or profits arising from trading properties (including
the sale of the residential units at Rathbone Square, W1).
In order to ensure that the Group is able to both retain its status as a REIT
and to avoid financial charges being imposed, a number of tests (including a
minimum distribution test) must be met by both Great Portland Estates plc and
by the Group as a whole on an ongoing basis. These conditions are detailed in
the Corporation Tax Act 2010.
9 Performance measures and EPRA metrics
Adjusted earnings and net assets per share are calculated in accordance with
the Best Practice Recommendations issued by the European Public Real Estate
Association (EPRA).
Weighted average number of ordinary shares
2016 2015
Number of Number of
shares shares
Issued ordinary share capital at 1 April 343,926,149 343,926,149
Investment in own shares (1,811,076) (1,178,160)
Weighted average number of ordinary shares - Basic 342,115,073 342,747,989
Basic and diluted earnings per share
Profit Number Earnings Profit Number Earnings
after tax of shares per share after tax of shares per share
2016 2016 2016 2015 2015 2015
£m million pence £m million pence
Basic 556.2 342.1 162.6 508.2 342.7 148.3
Dilutive effect of LTIP shares - 1.4 (0.7) - 2.0 (0.9)
Diluted 556.2 343.5 161.9 508.2 344.7 147.4
Basic and diluted EPRA earnings per share
Profit Number Earnings Profit Number Earnings
after tax of shares per share after tax of shares per share
2016 2016 2016 2015 2015 2015
£m million pence £m million pence
Basic 556.2 342.1 162.6 508.2 342.7 148.3
Surplus from investment property (note 10) (422.2) - (123.4) (380.6) - (111.0)
Surplus from joint venture investment property (note 12) (64.6) - (18.9) (80.1) - (23.4)
Movement in fair value of derivatives (9.2) - (2.7) (30.4) - (8.9)
Movement in fair value of convertible bond (13.5) - (4.0) 21.7 - 6.3
Movement in fair value of derivatives in joint ventures 1.0 - 0.3 0.9 - 0.3
(note 12)
Trading property - cost of sales 0.6 - 0.2 4.8 - 1.4
Break costs on refinanced revolving credit facilities (note 7) - - - 1.4 - 0.4
Deferred tax (note 8) (0.5) - (0.1) (0.8) - (0.2)
Basic EPRA earnings 47.8 342.1 14.0 45.1 342.7 13.2
Dilutive effect of LTIP shares - 1.4 (0.1) - 2.0 (0.1)
Dilutive effect of convertible bond 1.5 21.0 (0.4) 1.5 21.0 (0.4)
Diluted EPRA earnings 49.3 364.5 13.5 46.6 365.7 12.7
EPRA net assets per share
Net assets Number Net assets Net assets Number Net assets
2016 of shares per share 2016 2015 of shares per share
£m 2016 pence £m 2015 2015
million million pence
Basic net assets 2,912.2 343.9 847 2,390.9 343.9 695
Investment in own shares - (2.6) 6 - (2.9) 6
Dilutive effect of convertible bond 150.0 21.0 (8) - - -
Dilutive effect of LTIP shares - 1.4 (3) - 2.0 (4)
Diluted net assets 3,062.2 363.7 842 2,390.9 343.0 697
Surplus on revaluation of trading property (note 11) 22.2 - 6 21.5 - 6
Fair value of convertible bond (note 17) 19.5 - 6 33.0 - 10
Fair value of derivatives (note 17) (24.3) - (7) (15.1) - (4)
Fair value of derivatives in joint ventures (note 12) 1.2 - - 1.5 - -
Deferred tax (note 8) (1.3) - - (0.8) - -
EPRA net assets (NAV) 3,079.5 363.7 847 2,431.0 343.0 709
Fair value of financial liabilities (note 17) (75.5) - (21) (62.0) - (18)
Fair value of financial liabilities in joint ventures (note 12) (1.6) - - (0.5) - -
Fair value of convertible bond (note 17) - - - (33.0) - (10)
Fair value of derivatives (note 17) 24.3 - 6 15.1 - 4
Fair value of derivatives in joint ventures (note 12) (1.2) - - (1.5) - -
Tax arising on sale of trading properties (4.2) - (1) (4.1) - (1)
Deferred tax (note 8) 1.3 - - 0.8 - -
EPRA triple net assets (NNNAV) 3,022.6 363.7 831 2,345.8 343.0 684
The Group has £150.0 million of convertible bonds in issue with an initial
conversion price of £7.15 per share. The dilutive effect of the contingently
issuable shares within the convertible bond is required to be recognised in
accordance with IAS 33 - Earnings per Share. For the current and prior year
the convertible bond had no dilutive impact. In accordance with the EPRA Best
Practice Recommendations, we have presented EPRA earnings per share on a basic
and diluted basis.
EPRA cost ratio (including share of joint ventures)
2016 2015£m
£m
Administration expenses 24.4 20.1
Property expenses 8.2 7.7
Joint venture management fees (4.1) (4.2)
Joint venture property and administration costs 2.2 2.5
EPRA costs (including direct vacancy costs) (A) 30.7 26.1
Direct vacancy costs (2.3) (3.2)
Joint venture direct vacancy costs (1.1) (0.8)
EPRA costs (excluding direct vacancy costs) (B) 27.3 22.1
Net rental income 75.5 66.0
Joint venture net rental income 17.0 24.8
Gross rental income (C) 92.5 90.8
Portfolio at fair value including joint ventures (D) 3,703.9 3,206.2
Cost ratio (including direct vacancy costs) (A/C) 33.2% 28.7%
Cost ratio (excluding direct vacancy costs) (B/C) 29.5% 24.3%
Cost ratio (by portfolio value) (A/D) 0.8% 0.8%
10 Investment property
Investment property
Freehold Leasehold Total
£m £m £m
Book value at 1 April 2014 950.1 767.4 1,717.5
Acquisitions - 25.4 25.4
Costs capitalised 5.7 8.3 14.0
Disposals (8.0) - (8.0)
Transfer to investment property under development (74.9) (84.4) (159.3)
Transfer from investment property under development - 92.4 92.4
Net valuation surplus on investment property 154.4 99.6 254.0
Book value at 31 March 2015 1,027.3 908.7 1,936.0
Acquisitions 124.9 213.7 338.6
Costs capitalised 4.0 22.4 26.4
Disposals (102.8) (192.1) (294.9)
Transfer to investment property under development (30.4) - (30.4)
Transfer from investment property under development 7.5 - 7.5
Net valuation surplus on investment property 103.0 94.2 197.2
Book value at 31 March 2016 1,133.5 1,046.9 2,180.4
Investment property under development
Freehold Leasehold Total
£m £m £m
Book value at 1 April 2014 114.2 141.0 255.2
Costs capitalised 28.4 22.7 51.1
Interest capitalised 5.4 2.3 7.7
Disposals - (80.6) (80.6)
Transfer from investment property 74.9 84.4 159.3
Transfer to investment property - (92.4) (92.4)
Net revaluation surplus on investment property under development 53.6 58.3 111.9
Book value at 31 March 2015 276.5 135.7 412.2
Costs capitalised 96.2 12.9 109.1
Interest capitalised 7.9 0.8 8.7
Transfer from investment property 30.4 - 30.4
Transfer to investment property (7.5) - (7.5)
Net revaluation surplus on investment property under development 133.1 65.7 198.8
Book value at 31 March 2016 536.6 215.1 751.7
Total investment property 1,670.1 1,262.0 2,932.1
The book value of investment property includes £50.5 million (2015: £28.5
million) in respect of the present value of future ground rents, the market
value of the portfolio (excluding these amounts) is £2,881.6 million. The
market value of the Group's total property portfolio, including trading
properties, was £3,076.2 million (2015: £2,457.1 million).
At 31 March 2016, property with a carrying value of £403.4 million (2015:
£356.6 million) was secured under the first mortgage debenture stock (see note
16) and £25.8 million of property was held for sale.
The cumulative interest capitalised in investment property was £26.1 million
(2015: £17.4 million).
Surplus from investment property
2016 2015
£m £m
Net valuation surplus on investment property 396.0 365.9
Profit on sale of investment properties 26.2 14.7
422.2 380.6
The Group's investment properties, including those held in joint venture (note
12), were valued on the basis of Fair Value by CBRE Limited (CBRE), external
valuers, as at 31 March 2016 in accordance with the Global RICS Valuation -
Professional Standards January 2014 and the RICS UK valuation standards and
guidance notes December 2014 (the Red Book) and have been primarily derived
using comparable recent market transactions on arm's length terms.
The total fees, including the fee for this assignment, earned by CBRE (or
other companies forming part of the same group of companies within the UK)
from the Group are less than 5.0% of total UK revenues.
The principal signatories of the CBRE valuation reports have continuously been
the signatories of valuations for the same addressee and valuation purpose as
this report since 2012. CBRE has continuously been carrying out valuation
instructions for the Group for in excess of 20 years. CBRE has carried out
valuation, agency and professional services on behalf of the Group for in
excess of 20 years.
Real estate valuations are complex and derived using comparable market
transactions which are not publicly available and involve an element of
judgement. Therefore, in line with EPRA guidance, we have classified the
valuation of the property portfolio as Level 3 as defined by IFRS 13. There
were no transfers between levels during the year. Inputs to the valuation,
including capitalisation yields (typically the true equivalent yield) and
rental values, are defined as 'unobservable' as defined by IFRS 13.
Key inputs to the valuation
ERV True equivalent yield
Average Range Average Range
£ per sq ft £ per sq ft % %
North of Oxford Street Office 71 44 - 82 4.3 3.9 - 5.9
Retail 64 34 - 181 3.8 3.6 - 5.5
Rest of West End Office 83 64 - 96 4.5 3.6 - 5.6
Retail 114 15 - 257 4.2 3.4 - 4.3
City, Midtown & Southwark Office 55 42 - 62 5.0 4.7 - 5.6
Retail 71 32 - 116 5.1 4.7 - 5.1
Capital value
Average Range
£ per sq ft £ per sq ft
Residential 1,886 684 - 2,914 n/a n/a
Everything else being equal, there is a positive relationship between rental
values and the property valuation, such that an increase in rental values will
increase the valuation of a property and vice versa. However, the relationship
between capitalisation yields and the property valuation is negative;
therefore an increase in capitalisation yields will reduce the valuation of a
property and vice versa. There are interrelationships between these inputs as
they are determined by market conditions, and the valuation movement in any
one period depends on the balance between them. If these inputs move in
opposite directions (i.e. rental values increase and yields decrease)
valuation movements can be amplified, whereas if they move in the same
direction they may offset, reducing the overall net valuation movement.
At 31 March 2016, the Group had capital commitments of £241.5 million (2015:
£324.6 million).
EPRA capital expenditure
2016 2015
£m £m
Group
Acquisitions 338.6 25.4
Developments (including trading properties) 161.0 70.0
Investment property 26.4 14.0
Interest capitalised (including trading properties) 13.3 11.4
Joint ventures (at share)
Acquisitions (excluding those from the GPE Group) - 13.9
Developments 5.0 -
Investment property 13.3 10.0
Interest capitalised 0.7 -
558.3 144.7
11 Trading property
Total
£m
At 1 April 2015 115.9
Costs capitalised 51.9
Interest capitalised 4.6
At 31 March 2016 172.4
The Group is developing a large mixed-use scheme at Rathbone Square, W1. Part
of the approved scheme consists of residential units which the Group holds for
sale. As a result, the residential element of the scheme is classified as
trading property. The fair value of the trading property was £194.6 million
(2015: £137.4 million), representing a cumulative valuation uplift of £22.2
million (2015: £21.5 million).
12 Investment in joint ventures
The Group has the following investments in joint ventures:
Equity Balances 2016 2015
£m with Total Total
partners £m £m
£m
At 1 April 428.3 208.4 636.7 524.8
Movement on joint venture balances - 44.6 44.6 34.4
Additions 4.4 - 4.4 1.0
Share of profit of joint ventures 2.8 - 2.8 4.6
Share of revaluation surplus of joint ventures 50.0 - 50.0 80.2
Share of profit on disposal of joint venture properties 14.0 - 14.0 (0.1)
Share of results of joint ventures 66.8 - 66.8 84.7
Transfer to subsidiaries - Great Star Partnership (33.4) (65.4)
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