REG - Safestore Hldgs plc - Interim results <Origin Href="QuoteRef">SAFE.L</Origin> - Part 2
15/06/2017 07:06
- Part 2: For the preceding part double click ID:nRSO1236Ia
Underlying (cash tax adjusted) EPS (p) 10.4 9.0 15.6%
Note: As the Group no longer incurs deferred tax on underlying trading, EPRA earnings and EPRA EPS are now identical to
cash tax earnings and cash tax adjusted EPS respectively.
Management considers the above presentation of earnings to be representative of the underlying performance of the
business.
Underlying EBITDA increased by 16.7% to £34.2m (H1 2016: £29.3m) reflecting a 15.7% increase in revenue less a 14.5%
increase in the underlying cost base (see below). The leasehold rent charge has increased by 28.2% from £3.9m in H1 2016
to £5.0m, principally reflecting the addition of six new leases through the acquisition of the Space Maker business.
Finance charges increased by 6.0% from £5.0m in H1 2016 to £5.3m in H1 2017, reflecting the increase in borrowings required
to finance the Space Maker acquisition in the second half of last year and our new store developments.
Given the Group's REIT status in the UK, tax is normally only payable in France. The current tax charge for the period
increased to £2.0m (H1 2016: £1.6m).
Management considers that the most representative earnings per share ("EPS") measure is cash tax adjusted EPS, which
increased by 15.6% to 10.4p (H1 2016: 9.0p). At constant exchange rates, cash tax adjusted EPS would have been 10.0p, an
increase of 11.1% since H1 2016.
Reconciliation of Underlying EBITDA
The table below reconciles the operating profit included in the consolidated income statement to underlying EBITDA.
H1 2017 H1 2016
£'m £'m
Operating profit 64.6 56.9
Adjusted for
- gain on investment properties (30.8) (28.2)
- depreciation 0.2 0.2
- contingent rent 0.2 0.1
- costs incurred relating to corporate transactions - 0.3
Underlying EBITDA 34.2 29.3
The main reconciling item between operating profit and underlying EBITDA is the gain on investment properties, which has
increased from £28.2m in H1 2016 to £30.8m in H1 2017, which continues to reflect the benefit of our trading performance
improvements and cost controls. The Group's approach to the valuation of its investment property portfolio at 30 April 2017
is discussed below.
During H1 2016, the Group incurred £0.3m of costs relating to corporate transactions, which are unrelated to the Group's
trading performance, so have been excluded from underlying EBITDA.
Underlying Profit by geographical region
The Group is organised and managed in two operating segments based on geographical region. The table below details the
underlying profitability of each region.
H1 2017 H1 2016
UK Paris Total (CER) UK Paris Total (CER)
£'m E'm £'m £'m E'm £'m
Revenue 47.3 17.9 60.8 41.1 17.3 54.1
Underlying cost of sales (17.9) (5.0) (21.7) (15.4) (4.8) (19.0)
Store EBITDA 29.4 12.9 39.1 25.7 12.5 35.1
Store EBITDA margin 62.2% 72.1% 64.3% 62.5% 72.3% 64.9%
Underlying administrative expenses (5.1) (1.4) (6.2) (4.9) (1.2) (5.8)
Underlying EBITDA 24.3 11.5 32.9 20.8 11.3 29.3
EBITDA margin 51.4% 64.2% 54.1% 50.6% 65.3% 54.2%
Leasehold rent (3.1) (2.2) (4.8) (2.1) (2.5) (3.9)
Underlying EBITDA after leasehold rent 21.2 9.3 28.1 18.7 8.8 25.4
EBITDA after leasehold rent margin 44.8% 52.0% 46.2% 45.5% 50.9% 47.0%
UK Paris Total UK Paris Total
£'m £'m £'m £'m £'m £'m
Underlying EBITDA after leasehold rent (CER) 21.2 6.9 28.1 18.7 6.7 25.4
Adjustment to actual exchange rate - 1.1 1.1 - - -
Reported underlying EBITDA after leasehold rent 21.2 8.0 29.2 18.7 6.7 25.4
Note: CER is Constant Exchange Rates (Euro denominated results for the current period have been retranslated at the
exchange rate effective for the comparative period in order to present the reported results on a more comparable basis).
Underlying EBITDA in the UK increased by £3.5m, or 16.8%, to £24.3m (H1 2016: £20.8m), reflecting a 15.1% increase in
revenue offset partially by 13.3% increase the underlying cost base, although on a like-for-like basis underlying costs
grew by only 2.0%. Underlying UK EBITDA after leasehold rent increased by 13.4% to £21.2m (H1 2016: £18.7m), but the margin
decreased from 45.5% in H1 2016 to 44.8% in the current year due to the impact of the Space Maker acquisition and new store
openings in the second half of last year.
In Paris, underlying EBITDA increased by E0.2m, or 1.8%, to E11.5m (H1 2016: E11.3m), reflecting a E0.6m increase in
revenue, arising from a 2.2% increase in the average storage rate and a 1.3% increase in average occupancy. Underlying
EBITDA after leasehold rent in Paris increased by 5.7% to E9.3m (H1 2016: E8.8m), and the margin improved from 50.9% in H1
2016 to 52.0% in the current year as a result of a E0.3m decrease in rent arising due to the favourable settlement of
outstanding rent reviews.
The combined results of the UK and Paris delivered a 10.6% increase in Group underlying EBITDA after leasehold rent at
constant exchange rates at Group level. Adjusting for a favourable exchange impact of £1.1m in the current year, Group
reported underlying EBITDA after leasehold rent has increased by 15.0% or £3.8m to £29.2m (H1 2016: £25.4m).
Revenue
Revenue for the Group is primarily derived from the rental of self-storage space and the sale of ancillary products such as
insurance and merchandise (e.g. packing materials and padlocks) in both the UK and Paris.
The split of the Group's revenues by geographical segment is set out below for H1 2017 and H1 2016.
H1 2017 % of total H1 2016 % of total % change
UK £'m 47.3 76% 41.1 76% 15.1%
Paris
Local currency E'm 17.9 17.3 3.5%
Average exchange rate E:£ 1.168 1.325
Paris in sterling £'m 15.3 24% 13.0 24% 17.7%
Total revenue 62.6 100% 54.1 100% 15.7%
The Group's reported revenue increased by 15.7% or £8.5m during the period. The Group's occupied space was 450,000 sq ft
higher at 30 April 2017 (3.94 million sq ft) than at 30 April 2016 (3.49 million sq ft), with average occupancy during the
period 12.4% higher at 3.90 million sq ft (H1 2016: 3.47 million sq ft), and the reported average rental rate for the Group
for the period was 3.2% higher at £26.85 than in H1 2016 (£26.02).
On a like-for-like basis, adjusting for the impact of new and closed stores and the acquisition of Space Maker, the Group's
revenue has increased by 7.1% since the comparative period. Adjusting for a favourable exchange impact in the current year,
revenue increased by 3.7% on a constant currency basis.
In the UK reported revenue increased by £6.2m or 15.1%, occupancy increased by 15.6% to 3.11 million sq ft at 30 April 2017
(H1 2016: 2.69 million sq ft) and the average rental rate decreased 0.3% to £24.75 (H1 2016: £24.82). The average space
occupied during the period was up 15.7% compared with H1 2016 at 3.09 million sq ft (H1 2016: 2.67 million sq ft).
On a like-for-like basis, adjusting for the acquisition of Space Maker and new and closed stores, UK revenue increased by
£1.6m or 3.9% arising from a 1.7% increase in the average store rate and 1.9% increase in average occupancy.
In Paris, revenue increased by E0.6m or 3.5%. The average Euro exchange rate for H1 2017 was E1.168:£1 compared with
E1.325:£1 in H1 2016 resulting in a £1.8m benefit at the revenue level when comparing to a constant currency basis. Further
adjusting for the impact of the Emerainville store opening in the second half of last year, like-for-like revenue in
constant currency increased by £0.4m or 3.1% to £13.4m (H1 2016: £13.0m)
Paris closing occupancy at 30 April 2017 has increased by 3.8% since 30 April 2016 to 0.83 million sq ft and average
occupancy for the period of 0.81 million sq ft is a 1.3% increase compared to H1 2016. The average rental rate in France
was E40.57 for the period, an increase of 2.2% on H1 2016 (E39.71).
Analysis of Cost Base
Cost of sales
The table below details the key movements in cost of sales between H1 2016 and H1 2017.
Cost of sales H1 2017 H1 2016
£'m £'m
Reported cost of sales (22.5) (19.3)
Adjusted for:
Depreciation 0.2 0.2
Contingent rent 0.2 0.1
Underlying cost of sales (22.1) (19.0)
Underlying cost of sales for H1 2016 (19.0)
Closed store cost of sales 0.1
Underlying cost of sales for H1 2016 (LFL) (18.9)
Store maintenance and business rates (0.2)
Employee remuneration and volume related cost of sales (0.1)
Underlying cost of sales for H1 2017 (LFL CER) (19.2)
Space Maker and new store cost of sales (2.5)
Underlying cost of sales for H1 2017 (CER) (21.7)
Foreign exchange (0.4)
Underlying cost of sales for H1 2017 (reported) (22.1)
In order to arrive at underlying cost of sales adjustments are made to remove the impact of depreciation and contingent
rent.
Adjusting for the impact of new and closed stores and the acquisition of Space Maker, underlying cost of sales increased by
£0.3m, to £19.2m (H1 2016: £18.9m) on a constant currency basis. The cost of sales attributable to new and acquired stores,
including Space Maker, is £2.5m. Reflecting the impact of exchange rate movements, reported underlying cost of sales
increased by £3.1m or 16.3% to £22.1m in H1 2017.
Administrative Expenses
The table below reconciles reported administrative expenses to underlying administrative expenses and details the key
movements in underlying administrative expenses between H1 2016 and H1 2017.
Administrative expenses H1 2017 H1 2016
£'m £'m
Reported administrative expenses (6.3) (6.1)
Adjusted for:
Exceptionals and non-underlying items - 0.3
Underlying administrative expenses (6.3) (5.8)
Underlying administrative expenses for H1 2016 (5.8)
Employee remuneration (0.3)
Other administrative costs (0.1)
Underlying administrative expenses for H1 2017 (CER) (6.2)
Foreign exchange (0.1)
Underlying administrative expenses for H1 2017 (reported) (6.3)
In order to arrive at underlying administrative expenses adjustments are made to remove the impact of exceptional items,
corporate transaction costs and changes in the fair value of derivatives.
Underlying administrative expenses increased by £0.5m to £6.3m (H1 2016: £5.8m). The increase arose primarily due to
increased employee remuneration (£0.3m) as a result of increased headcount and lower vacancy rates, with other
administrative costs including professional fees and IT costs arising from the new and acquired stores contributing a
further £0.1m.
Investment Properties
A full external valuation of the store portfolio is undertaken by the Group on an annual, rather than a bi-annual, basis.
At 30 April 2017, a sample of the Group's largest properties, representing approximately 42% of the value of the Group's
investment property portfolio at 31 October 2016, has been valued by the Group's external valuers, Cushman & Wakefield LLP
("C&W"). In addition, at the same date, the directors have prepared estimates of fair values for the remaining 58% of the
Group's investment property portfolio, updating 31 October 2016 valuations to incorporate latest assumptions for estimated
absorption, revenue growth and capitalisation rates to reflect current market conditions and trading.
As a result of this exercise, the net gain or loss on investment properties during the period was as follows.
H1 2017 H1 2016
£'m £'m
Revaluation of investment properties 33.4 30.5
Revaluation of investment properties under construction - (0.2)
Depreciation on leasehold properties (2.6) (2.1)
Gain on investment properties 30.8 28.2
The movement on investment properties reflects the increased value of the Group's store portfolio as a result of the
continuing trading performance improvement. The UK business contributed £24.7m of the £33.4m net revaluation gain, with
£8.7m arising in France.
Operating profit
Reported operating profit increased by £7.7m from £56.9m in H1 2016 to £64.6m in H1 2017, primarily reflecting the £4.9m
improvement in underlying EBITDA plus the £2.6m higher investment property gain.
Net finance costs
Net finance costs consist of interest payable, interest on obligations under finance leases, fair value movements on
derivatives and exchange gains or losses.
H1 2017 H1 2016
£'m £'m
Net bank interest payable (5.3) (5.0)
Interest on obligations under finance leases (2.2) (1.7)
Fair value movement on derivatives (7.6) 2.8
Net exchange gains/(losses) 5.4 (4.0)
Unwinding of discount on Capital Goods Scheme receivable 0.1 0.1
Net finance costs (9.6) (7.8)
Underlying finance charge
The underlying finance charge (net bank interest payable) increased to £5.3m, from £5.0m in H1 2016. The increase reflects
a higher level of borrowings in the current year, primarily arising on the acquisition of Space Maker in the second half of
last year, which was partly mitigated by a 0.25% reduction in UK interest rates in August 2016.
The Group announced a refinancing after the period end, on 19 May 2017, which is discussed below. However, based on the
drawn debt position as at 30 April 2017, the effective interest rate is analysed as follows:
Facility Drawn Hedged Hedged Bank Hedged Floating Total
£/E/$'m £'m £'m % Margin Rate Rate Rate
UK Term Loan £126.0 £126.0 £100.0 79% 1.50% 1.34% 0.26% 2.62%
UK Revolver £125.0 £61.0 - - 1.50% - 0.26% 1.76%
UK Revolver- non-utilisation £64.0 - - - 0.60% - - 0.60%
Euro Revolver E70.0 £38.7 £25.2 65% 1.50% 0.31% (0.33%) 1.58%
Euro Revolver- non-utilisation E24.0 - - - 0.60% - - 0.60%
US Private Placement 2019 $65.6 £50.7 £50.7 100% 5.52% - - 5.83%
US Private Placement 2024 $47.3 £36.5 £36.5 100% 6.29% - - 6.74%
Unamortised finance costs - (£1.5) - - - - - -
Total £397.1 £311.4 £212.4 68% 3.52%
The UK term loan of £126m was fully drawn as at 30 April 2017 and attracted a bank margin of 1.50%. The Group has interest
rate hedge agreements in place to June 2020 swapping LIBOR on £100.0m at a weighted average effective rate of 1.34%.
The Group's committed UK revolver facility was £125m, of which £61m was drawn as at 30 April 2017. Drawn amounts also
attracted a bank margin of 1.50%, and the Group paid a non-utilisation fee of 0.6% on undrawn balances.
The Euro revolver of E70m had E46m (£38.7m) drawn as at 30 April 2017, following the drawdown of E4m during the period to
finance expansionary capital expenditure. It attracted a bank margin of 1.50%. The Group has interest rate hedges in place
to June 2020 swapping EURIBOR on E30m at an effective rate of 0.309%. In addition, the Group paid a non-utilisation fee of
0.6% on undrawn balances.
The US Private Placement Notes were fully hedged at 5.83% for the 2019 notes and 6.74% for the 2024 notes.
The hedge arrangements provided cover for 68% of the Group's drawn debt. Overall, the Group had an effective interest rate
on its outstanding borrowings of 3.52% at 30 April 2017 (H1 2016: 4.08%).
Non-underlying finance charge
Interest on finance leases was £2.2m (H1 2016: £1.7m) and reflects part of the leasehold rental payment. The balance of the
leasehold payment is charged through the gain or loss on investment properties line and contingent rent in the income
statement. Overall, the leasehold rent charge increased from £3.9m in H1 2016 to £5.0m in H1 2017, principally reflecting
the six additional leases acquired with the Space Maker business in the second half of last year.
Net finance costs reflects £5.4m of net exchange gains (H1 2016: net exchange losses of £4.0m) arising primarily on
retranslation of the Group's US dollar denominated borrowings. This partly offsets the net fair value loss on derivatives
of £7.6m (H1 2016: net gain of £2.8m), which includes a £7.9m loss (H1 2016: £4.4m gain) in respect of cross currency swaps
taken out by the Group to hedge against movements in the US dollar denominated borrowings.
Refinancing in May 2017
On 19 May 2017, after the period end, the Group announced the refinancing of its US Private Placement Notes ("USPP") and an
amendment and extension of its existing bank facilities to extend the average maturity and lower the cost of the Group's
debt financing. The key terms of the new and amended arrangements, which came into effect on 31 May 2017, are as follows:
US Private Placement Notes
· The previous $65.6m 5.83% 2019 USPP and $47.3m 6.74% 2024 USPP were repaid in full;
· New Euro and Sterling denominated USPP notes were issued with the following tenor and coupons:
o E50.9m 7 year notes at a coupon of 1.59%;
o E74.1m 10 year notes at a coupon of 2.00%; and
o £50.5m 12 year notes at a coupon of 2.92%.
Amendment and Extension of Bank Facilities
· The previous UK and Euro revolving credit facilities were extended by two years from June 2020 to June 2022 with an
option (on an uncommitted basis) to extend for a further year with the previous £126m term loan cancelled.
· The amended facilities comprise:
o a £190m revolving credit facility of which £117m is drawn; and
o a E70m revolving facility of which E46m is drawn.
· The margin on the amended facilities was reduced by 25 bps from 150 bps to 125 bps.
· Similarly, the non-utilisation fee on the undrawn facilities reduced from 0.6% to 0.5%.
· The Group also has the option (on an uncommitted basis) to increase the quantum of the sterling revolving credit
facility by £60m.
The Group has paid a 'make-whole' payment to existing USPP noteholders of £12.4m and broke the Sterling/Dollar
cross-currency swap relating to the existing USPP notes, leading to the Group receiving £13.9m, being the mark to market
value of the swap which was in the Group's favour and which was carried at that value at the date of breakage. Exceptional
finance charges to be reported by the Group in respect of the refinancing in the second half of the year are estimated to
be c.£16m, comprising the £12.4m 'make-whole' payment, with the balance relating to fees and the write off of previous
unamortised issue costs. The refinancing was broadly cash flow neutral.
Had the refinanced arrangements been in place at 30 April 2017, on a pro forma basis the Group's effective interest rate
would have been as follows:
Facility Drawn Hedged Hedged Bank Hedged Floating Total
£/E/$'m £'m £'m % Margin Rate Rate Rate
UK Revolver £190.0 £117.0 £100.0 85% 1.25% 1.34% 0.25% 2.43%
UK Revolver- non-utilisation £73.0 - - - 0.50% - - 0.50%
Euro Revolver E70.0 £38.7 £25.2 65% 1.25% 0.31% (0.33%) 1.34%
Euro Revolver- non-utilisation E24.0 - - - 0.50% - - 0.50%
US Private Placement 2024 E50.9 £42.8 £42.8 100% 1.59% - - 1.59%
US Private Placement 2027 E74.1 £62.3 £62.3 100% 2.00% - - 2.00%
US Private Placement 2029 £50.5 £50.5 £50.5 100% 2.92% - - 2.92%
Total £404.5 £311.3 £280.8 90% 2.32%
Note: the above table has been prepared on a pro forma basis, using exchange rates at 30 April 2017 for comparison.
The Group's pro forma annual underlying finance charge will, over a full year, reduce by c.£3m per annum and the Group's
overall ongoing average cost of debt will reduce by c.120 bps to 2.32% per annum.
Tax
The tax credit/(charge) for the period is analysed below:
Tax credit/(charge) H1 2017 H1 2016
£'m £'m
Underlying current tax (2.0) (1.6)
Current tax (2.0) (1.6)
Tax on investment properties movement (2.9) (1.9)
Tax on revaluation of interest rate swaps (0.1) 0.1
Impact of tax rate change in France 8.7 -
Other 0.1 -
Deferred tax 5.8 (1.8)
Tax credit/(charge) 3.8 (3.4)
The income tax credit in the period was £3.8 (H1 2016: £3.4m charge).
In the UK the Group is a REIT, so the tax charge relates to the Paris business. The current tax charge for the period
amounted to £2.0m (H1 2016: £1.6m).
In France, the 2017 Finance Bill, which was adopted in December 2016, introduced a reduction in the income tax rate from
33.33% to 28.0%, applicable progressively from 2017 to 2020 according to size of company. As a result, the deferred tax
credit/(charge) includes a non-recurring deferred tax credit of £8.7m (H1 2016: £nil) relating to this change.
Profit after tax
The profit after tax for the period was £58.8m, compared with £45.7m in H1 2016. Basic EPS was 28.1 pence (H1 2016: 22.0
pence) and diluted EPS was 28.0 pence (H1 2016: 21.8 pence). Management considers cash tax adjusted EPS to be more
representative of the underlying EPS performance of the business and this is discussed above.
Dividends
The Board has announced an interim dividend of 4.2 pence per share, an increase of 16.7% on the interim dividend paid last
year of 3.6 pence. This will amount to a dividend payment of £8.8m (H1 2016: £7.5m). The dividend will be paid on 18 August
2017 to shareholders who are on the Company's register at the close of business on 14 July 2017. The ex-dividend date will
be 13 July 2017. 50% (H1 2016: 50%) of the dividend will be paid as a property income dividend ("PID").
Property Valuation
As discussed above, a sample of the Group's largest properties, representing approximately 42% of the value of the Group's
investment property, has been valued by the Group's external valuers and the directors have prepared estimates of fair
values for the remaining 58% of the Group's investment property portfolio.
UK Paris Total Paris
£'m £'m £'m E'm
Value as at 1 November 2016 699.7 243.6 943.3 270.9
Currency translation movement - (15.9) (15.9) -
Additions 1.9 1.8 3.7 2.0
Disposals (3.4) - (3.4) -
Reclassifications 10.9 - 10.9 -
Revaluation 24.7 8.7 33.4 10.3
Value at 30 April 2017 733.8 238.2 972.0 283.2
The table above summarises the movement in the valuations.
The exchange rate at 30 April 2017 was E1.19:£1 compared to E1.11:£1 at 31 October 2016. This movement in the foreign
exchange rate has resulted in a £15.9m adverse currency translation movement in the period, reversing some of the
favourable translation movements experienced in the prior year. This impacts net asset value ("NAV") but has no impact on
the loan to value ("LTV") covenant as the assets in Paris are tested in Euro.
Despite the £15.9m exchange loss described above, the Group's property portfolio valuation has increased by £28.7m from the
valuation of £943.3m at 31 October 2016. This reflects the gain on valuation of £33.4m plus additions of £14.6m (including
the reclassification of Chiswick from investment properties under construction), less the £3.4m disposal of our old site in
Birmingham.
The value of the Company's pipeline of expansion stores of £8.3m as at 30 April 2017, reflects the development sites at
Mitcham in London and Combs-la-Ville in Paris, both of which were acquired during the period.
The adjusted EPRA NAV per share is 314 pence, an increase of 4.7% since 31 October 2016, reflecting the revaluation gain
and additions described above, less the impact of exchange losses reported for the period.
Gearing and Capital Structure
As at 30 April 2017, the Group's borrowings comprised bank borrowing facilities, made up of a UK term loan and revolving
facilities in the UK and France, as well as a US Private Placement. As noted above, the Group has refinanced its facilities
since the period end.
Net debt (including finance leases and cash) stood at £360.7m at 30 April 2017, a decrease of £8.5m during the period from
£369.2m at 31 October 2016. Total capital (net debt plus equity) increased from £956.6m at 31 October 2016 to £980.9m at 30
April 2017. The net impact is that the gearing ratio has reduced from 39% to 37% in the period.
Management also measures gearing with reference to its loan to value ("LTV") ratio defined as gross debt (excluding finance
leases, but adjusted for the fair value of the US dollar cross currency swaps) as a proportion of the valuation of
investment properties and investment properties under construction (excluding finance leases). At 30 April 2017 the Group
LTV ratio was 30% compared with 31% at 31 October 2016.
Prior to the refinancing in May 2017, the Group's £126m UK term loan facility and £125m UK revolver both ran to June 2020
and attracted a margin of 1.50%. The amount drawn under the UK revolver was £61m at both 30 April 2017 and 31 October
2016, although amounts totalling £14m were both drawn and repaid during the period.
The Group's Euro revolver remains E70m, of which E46m had been drawn as at 30 April 2017, following the drawdown of E4m
during the period. Prior to the refinancing, it also ran to June 2020 and attracted a margin of 1.50%.
Of the US private placement debt issued in 2012 which totalled $113 million, $66 million was issued at 5.52% (swapped to
5.83%) with 2019 maturity and $47 million was issued at 6.29% (swapped to 6.74%) with 2024 maturity.
Borrowings under both the previous and refinanced loan facilities are subject to certain financial covenants. The UK bank
facilities and the US private placement share interest cover and LTV covenants. The interest cover requirement is set at a
ratio of EBITDA:interest of 2.4:1, and the actual interest cover for the period to 30 April 2017 was 5.5:1.
The LTV covenant for the UK bank facilities and private placement is set at 60% and is calculated by reference to the value
of designated properties in the UK. The LTV covenant is also 60% for the Euro revolver in France, calculated by reference
to the value of designated French freehold properties. As at 30 April 2017, there is significant headroom in both the UK
LTV and the French LTV covenant calculations.
The Group is in compliance with its covenants at 30 April 2017 and, based on forecast projections, is expected to be in
compliance for a period in excess of twelve months from the date of this report.
Cash flow
The table below sets out the cash flow of the business in H1 2017 and H1 2016.
H1 2017 H1 2016
£'m £'m
Underlying EBITDA 34.2 29.3
Working capital/exceptionals/other 1.4 (0.1)
Operating cash inflow 35.6 29.2
Interest payments (5.8) (4.7)
Leasehold rent payments (5.0) (3.9)
Tax payments (1.6) (0.9)
Free cash flow (before investing and financing activities) 23.2 19.7
Capital expenditure - investment properties (13.8) (9.2)
Capital expenditure - property, plant and equipment (0.3) (0.4)
Proceeds from disposal - investment properties 3.4 -
Net cash flow after investing activities 12.5 10.1
Dividends paid (14.7) (12.1)
Net drawdown/(repayment) of borrowings 3.4 (0.8)
Debt issuance costs - (0.4)
Net decrease in cash 1.2 (3.2)
Operating cash flow increased by £6.4m in the period, principally reflecting the £4.9m increase in underlying EBITDA.
Free cash flow (before investing and financing activities) grew by 17.8% to £23.2m (H1 2016: £19.7m) reflecting the
stronger trading performance. Interest payments were £1.1m higher than the prior year due to the increased interest charge,
but also due to timing differences arising from the scheduling of payments in anticipation of our refinancing.
Investing activities has increased by £1.1m to £10.7m (H1 2016: £9.6m). In the current year, net capital expenditure
principally relates to acquisition of new sites at Mitcham in London and Combs-la-Ville in Paris, less the £3.4m disposal
of our old site in Birmingham.
Dividends paid to shareholders increased from £12.1m in H1 2016 to £14.7m in H1 2017, and the Group drew a net £3.4m of
borrowings, primarily to finance capital expenditure.
Consolidated income statement
for the six months ended 30 April 2017
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Note £m £m £m
Revenue 4 62.6 54.1 115.4
Cost of sales (22.5) (19.3) (40.9)
Gross profit 40.1 34.8 74.5
Administrative expenses (6.3) (6.1) (12.5)
Negative goodwill on acquisition of subsidiary - - 5.6
Underlying EBITDA 4 34.2 29.3 64.2
Exceptional items - - 4.3
Costs incurred relating to corporate transactions - (0.3) -
Depreciation and contingent rent (0.4) (0.3) (0.9)
Operating profit before gain on investment properties 33.8 28.7 67.6
Gain on investment properties 10 30.8 28.2 41.7
Operating profit 64.6 56.9 109.3
Finance income 5 5.7 4.5 21.0
Finance expense 5 (15.3) (12.3) (35.4)
Profit before income tax 4 55.0 49.1 94.9
Income tax credit/(charge)* 6 3.8 (3.4) (7.5)
Profit for the period 58.8 45.7 87.4
Earnings per share for profit attributable to the equity holders
- basic (pence) 9 28.1 22.0 42.0
- diluted (pence) 9 28.0 21.8 41.7
All items in the income statement relate to continuing operations.
* Includes a deferred tax credit of £8.7m reflecting changes in the tax rate applicable in France (30 April 2016 and 31
October 2016: £nil).
Underlying EBITDA is defined as operating profit before exceptional items, corporate transaction costs, change in fair
value of derivatives, gain/loss on investment properties, contingent rent and depreciation.
An interim dividend of 4.2 pence per ordinary share has been declared for the period ended 30 April 2017 (30 April 2016:
3.6 pence).
Consolidated statement of comprehensive income
for the six months ended 30 April 2017
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
£m £m £m
Profit for the period 58.8 45.7 87.4
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss
Currency translation differences (9.8) 10.8 29.4
Total other comprehensive income, net of tax (9.8) 10.8 29.4
Total comprehensive income for the period 49.0 56.5 116.8
Consolidated balance sheet
as at 30 April 2017
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
Note £m £m £m
Non-current assets
Investment properties 10 972.0 826.6 943.3
Interests in leasehold properties 10 55.6 49.1 58.9
Investment properties under construction 10 8.3 12.0 10.9
Property, plant and equipment 2.0 1.8 2.0
Derivative financial instruments 14 13.0 4.3 20.9
Deferred tax assets 7 0.1 0.2 0.2
Other receivables 2.1 3.5 2.1
1,053.1 897.5 1,038.3
Current assets
Inventories 0.2 0.2 0.2
Trade and other receivables 26.4 22.4 23.0
Cash and cash equivalents 6.3 11.2 5.4
32.9 33.8 28.6
Total assets 1,086.0 931.3 1,066.9
Current liabilities
Trade and other payables (44.7) (40.8) (41.2)
Current income tax liabilities (3.4) (1.5) (3.2)
Obligations under finance leases (8.9) (7.8) (9.4)
(57.0) (50.1) (53.8)
Non-current liabilities
Bank borrowings 13 (311.4) (255.7) (315.7)
Derivative financial instruments 14 (3.1) (2.4) (3.4)
Deferred tax liabilities 7 (47.6) (47.9) (57.1)
Obligations under finance leases (46.7) (41.3) (49.5)
(408.8) (347.3) (425.7)
Total liabilities (465.8) (397.4) (479.5)
Net assets 620.2 533.9 587.4
Shareholders' equity
Ordinary shares 15 2.1 2.1 2.1
Share premium 60.1 60.0 60.1
Translation reserve 6.8 (2.0) 16.6
Retained earnings 551.2 473.8 508.6
Total equity 620.2 533.9 587.4
The notes set out below form an integral part of this condensed consolidated interim financial information.
Condensed consolidated statement of changes in equity
for the six months ended 30 April 2017
Sharecapital Sharepremium Translationreserve Retainedearnings Totalequity
£m £m £m £m £m
At 1 November 2016 2.1 60.1 16.6 508.6 587.4
Total comprehensive income for the period - - (9.8) 58.8 49.0
Transactions with owners in their capacity as owner:
Dividends (note 8) - - - (16.8) (16.8)
Employee share options - - - 0.6 0.6
At 30 April 2017 2.1 60.1 6.8 551.2 620.2
Condensed consolidated statement of changes in equity
for the six months ended 30 April 2016
Sharecapital Sharepremium Translationreserve Retainedearnings TotalEquity
£m £m £m £m £m
At 1 November 2015 2.1 60.0 (12.8) 441.3 490.6
Total comprehensive income for the period - - 10.8 45.7 56.5
Transactions with owners in their capacity as owner:
Dividends (note 8) - - - (13.8) (13.8)
Employee share options - - - 0.6 0.6
At 30 April 2016 2.1 60.0 (2.0) 473.8 533.9
Condensed consolidated statement of changes in equity
for the year ended 31 October 2016
Sharecapital Sharepremium Translationreserve Retainedearnings TotalEquity
£m £m £m £m £m
At 1 November 2015 2.1 60.0 (12.8) 441.3 490.6
Total comprehensive income for the year - - 29.4 87.4 116.8
Transactions with owners in their capacity as owner:
Dividends (note 8) - - - (21.3) (21.3)
Increase in share capital - 0.1 - - 0.1
Employee share options - - - 1.2 1.2
At 31 October 2016 2.1 60.1 16.6 508.6 587.4
Consolidated cash flow statement
for the six months ended 30 April 2017
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
£m £m £m
Profit before income tax 55.0 49.1 94.9
Gain on the revaluation of investment properties (30.8) (28.2) (41.7)
Negative goodwill on acquisition of subsidiary - - (5.6)
Depreciation 0.2 0.2 0.4
Net finance expense 9.6 7.8 14.4
Employee share options 0.6 0.6 1.2
Increase in trade and other receivables (3.8) (2.4) (0.3)
Increase/(decrease) in trade and other payables 4.6 2.0
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