REG - Unite Group PLC - Final Results <Origin Href="QuoteRef">UTG.L</Origin> - Part 2
22/02/2017 07:06
- Part 2: For the preceding part double click ID:nRSV4866Xa
lower than in 2015 due to the high level of yield
compression in 2015. After payment of the fee, our stake in USAF will remain
at 23%.
Responsibility statement of the directors in respect of the annual financial
report
We confirm that to the best of our knowledge:
· The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole
· The strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face
· We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's position and performance, business model and strategy.
Richard Smith Joe Lister
Chief Executive Officer Chief Financial Officer
22 February 2017
Introduction and table of contents
These financial statements are prepared in accordance with IFRS. The Board of Directors also present the Group's performance
on the basis recommended for real estate companies by the European Public Real Estate Association (EPRA). The reconciliation
between IFRS performance measures and EPRA performance measures can be found in Section 2.2 b) for EPRA earnings and 2.3 c) for
EPRA net asset value (NAV). The adjustments to the IFRS results are intended to help users in the comparability of these
results across other listed real estate companies in Europe and reflect how the directors monitor the business. We have grouped
the notes to the financial statements under six main headings:> Results for the year, including segmental
information, EPRA earnings and EPRA NAV> Asset management> Funding> Working capital>
Key management and employee benefits> Company subsidiaries and joint venturesEach section sets out the relevant
accounting policies applied in these financial statements together with the key judgements and estimates used.
Primary statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Company balance sheet
Consolidated statement of changes in shareholders' equity
Company statement of changes in shareholders' equity
Statements of cash flows
Section 1: Basis of preparation
Section 2: Results for the year
2.1 Segmental information
2.2 Earnings
2.3 Net assets
2.4 Revenue and costs
2.5 Tax
Section 3: Asset management
3.1 Wholly owned property assets
3.2 Inventories
3.3 Investments in joint ventures
Section 4: Funding
4.1 Borrowings
4.2 Interest rate swaps
4.3 Net financing costs
4.4 Gearing
4.5 Covenant compliance
4.6 Equity 4.7 Dividends
Section 5: Working capital
5.1 Cash and cash equivalents
5.2 Credit risk
Consolidated income statement
For the year ended 31 December 2016
Note 2016£m 2015£m
Rental income 2.4 97.1 93.0
Property sales and other income 2.4 23.6 115.8
Total revenue 120.7 208.8
Cost of sales 2.4 (44.9) (114.9)
Operating expenses (25.0) (28.5)
Results from operating activities 50.8 65.4
Profit / (Loss) on disposal of property 0.4 (0.6)
Net valuation gains on property 3.1 77.2 164.8
Profit before net financing costs 128.4 229.6
Loan interest and similar charges 4.3 (20.9) (22.6)
Mark to market changes in interest rate swaps 4.3 - (0.6)
Swap cancellation costs 4.3 (1.0) -
Finance costs 4.3 (21.9) (23.2)
Finance income 4.3 0.1 0.2
Net financing costs 4.3 (21.8) (23.0)
Share of joint venture profit 3.3b 94.8 181.8
Profit before tax 201.4 388.4
Current tax 2.5 (2.3) (1.6)
Deferred tax 2.5 27.3 (31.1)
Profit for the year 226.4 355.7
Profit for the year attributable to
Owners of the parent company 2.2c 224.0 351.9
Minority interest 2.4 3.8
226.4 355.7
Earnings per share
Basic 2.2c 101.3p 164.2p
Diluted 2.2c 94.7p 150.3p
All results are derived from continuing activities.
Consolidated statement of comprehensive income
For the year ended 31 December 2016
Note 2016 2015
£m £m
Profit for the year 226.4 355.7
Movements in effective hedges 4.2 (9.2) (1.9)
- Deferred tax in relation to movements in effective hedges 2.5d (1.1) 1.0
Gains on hedging instruments transferred to income statement within mark to market changes in interest rate swaps - 0.3
- Deferred tax in relation to hedging instruments transferred to income statement - (0.1)
Share of joint venture movements in effective hedges 3.3b (1.4) 0.6
- Deferred tax in relation to share of joint venture movements in effective hedges 2.5d (0.5) (0.1)
Other comprehensive income for the year (12.2) (0.2)
Total comprehensive income for the year 214.2 355.5
Attributable to
Owners of the parent company 211.8 351.6
Minority interest 2.4 3.9
214.2 355.5
All other comprehensive income may be classified as profit and loss in the
future.
Consolidated balance sheet
At 31 December 2016
Note 2016 2015
£m £m
Assets
Investment property 3.1 1,061.6 1,024.4
Investment property under development 3.1 184.6 149.8
Investment in joint ventures 3.3b 692.9 610.6
Other non-current assets 29.8 24.5
Deferred tax asset 2.5d - 1.0
Total non-current assets 1,968.9 1,810.3
Inventories 3.2 2.9 3.6
Trade and other receivables 77.9 83.0
Cash and cash equivalents 5.1 42.7 27.0
Total current assets 123.5 113.6
Total assets 2,092.4 1,923.9
Liabilities
Borrowings 4.1 (1.3) (31.3)
Trade and other payables (123.7) (115.5)
Current tax liability (2.4) (2.3)
Total current liabilities (127.4) (149.1)
Borrowings 4.1 (473.5) (443.8)
Interest rate swaps 4.2 (11.6) (2.3)
Deferred tax liability 2.5d (4.4) (31.0)
Total non-current liabilities (489.5) (477.1)
Total liabilities (616.9) (626.2)
Net assets 1,475.5 1,297.7
Equity
Issued share capital 4.6 55.5 55.5
Share premium 4.6 493.6 493.3
Merger reserve 40.2 40.2
Retained earnings 867.9 679.5
Hedging reserve (15.0) (2.8)
Equity portion of convertible instrument 4.1 9.4 9.4
Equity attributable to the owners of the parent company 1,451.6 1,275.1
Minority interest 23.9 22.6
Total equity 1,475.5 1,297.7
These financial statements of The Unite Group plc, registered number 3199160
were approved by the Board of Directors on 22 February 2017 and were signed on
its behalf by:
R S Smith J J Lister
Director Director
Consolidated statement of changes in shareholders' equity
For the year ended 31 December 2016
Issued Share Merger Retained earnings Hedging Equity portion of convertible instrument Attributable Minority Total
share capital premium reserve £m reserve £m to owners interest £m
£m £m £m £m of the parent £m
£m
At 1 January 2016 55.5 493.3 40.2 679.5 (2.8) 9.4 1,275.1 22.6 1,297.7
Profit for the year - - - 224.0 - - 224.0 2.4 226.4
Movements in effective hedges (net of associated deferred tax) - - - - (12.2) - (12.2) - (12.2)
Total comprehensive income for the year - - - 224.0 (12.2) - 211.8 2.4 214.2
Shares issued - 0.3 - - - 0.3 - 0.3
Deferred tax on share based payments - - - (0.1) - - (0.1) - (0.1)
Fair value of share based payments - - - 1.2 - - 1.2 - 1.2
Own shares acquired - - - (2.5) - - (2.5) - (2.5)
Dividends paid to owners of the parent company - - - (34.2) - - (34.2) - (34.2)
Dividends to minority interest - - - - - - - (1.1) (1.1)
At 31 December 2016 55.5 493.6 40.2 867.9 (15.0) 9.4 1,451.6 23.9 1,475.5
Issued Share Merger Retained earnings Hedging Equity portion of convertible instrument Attributable Minority Total
share capital premium reserve £m reserve £m to owners interest £m
£m £m £m £m of the parent £m
£m
At 1 January 2015 50.4 385.8 40.2 359.2 (2.5) 9.4 842.5 19.8 862.3
Profit for the year - - - 351.9 - - 351.9 3.8 355.7
Other comprehensive income for the year - - - - (0.3) - (0.3) 0.1 (0.2)
Total comprehensive income for the year - - - 351.9 (0.3) - 351.6 3.9 355.5
Shares issued 5.1 107.5 - - - - 112.6 - 112.6
Deferred tax on share based payments - - - 0.8 - - 0.8 - 0.8
Fair value of share based payments - - - 2.9 - - 2.9 - 2.9
Own shares acquired - - - (3.4) - - (3.4) - (3.4)
Dividends paid to owners of the parent company - - - (31.9) - - (31.9) - (31.9)
Dividends to minority interest - - - - - - - (1.1) (1.1)
At 31 December 2015 55.5 493.3 40.2 679.5 (2.8) 9.4 1,275.1 22.6 1,297.7
Statements of cash flows
For the year ended 31 December 2016
Group
Note 2016 2015
£m £m
Cash flows from operating activities 5.1 70.3 120.8
Cash flows from taxation (2.2) (0.3)
Investing activities
Proceeds from sale of investment property 126.1 (0.6)
Payments to/on behalf of subsidiaries - -
Payments from subsidiaries - -
Repayment received of joint venture investment loan - -
Loan to joint ventures - (30.5)
Dividends received 29.2 22.9
Interest received 0.1 0.2
Investment in joint ventures - (52.4)
Acquisition of intangible assets (8.2) (7.7)
Acquisition of property (131.0) (96.3)
Acquisition of plant and equipment (3.1) (4.1)
Cash flows from investing activities 13.1 (168.5)
Financing activities
Interest paid in respect of financing activities (23.7) (21.8)
Ineffective swap payments - (2.3)
Swap cancellation costs (1.0) -
Proceeds from the issue of share capital 0.3 112.6
Payments to acquire own shares (2.5) (3.4)
Proceeds from non-current borrowings 99.0 17.6
Repayment of borrowings (102.3) (36.1)
Dividends paid to the owners of the parent company (34.2) (31.9)
Dividends paid to minority interest (1.1) (1.1)
Cash flows from financing activities (65.5) 33.6
Net (decrease)/increase in cash and cash equivalents 15.7 (14.4)
Cash and cash equivalents at start of year 27.0 41.4
Cash and cash equivalents at end of year 5.1 42.7 27.0
Notes to the FINANCIAL STATEMENTS
Section 1: Basis of preparation
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2016 or 2015 but is derived
from those accounts. Statutory accounts for 2015 have been delivered to the
Registrar of Companies, and those for 2016 will be delivered in due course.
The auditors have reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006 in respect of the accounts for 2015 or 2016.
Going concern
The Group's business activities, together with the factors likely to affect
its future development and position are set out in the Strategic Report. In
addition, section 4 of these Notes to the financial statements includes the
Group's objectives, policies and processes for managing its capital; details
of its borrowings and interest rate swaps; and in note 5.2 its exposure to
credit risk.
The Group has prepared cash flow projections three years forward to December
2019 and the Group has sufficient headroom to meet all its commitments. The
Group added £100m to an existing facility during 2016 and this together with
existing facilities will be sufficient to fund the Group's commitments over
the next three years. The Group maintains positive relationships with its
lending banks and has historically secured new facilities before maturity
dates and remained within its covenant levels. The Group is in full compliance
with its covenants at 31 December 2016. Our debt facilities include
loan-to-value, interest cover and minimum net worth covenants, all of which
have a high level of headroom. In order to manage future financial
commitments, the Group operate a formal approval process, through its Major
Investment Approvals committee, to ensure appropriate review is undertaken
before any transactions are agreed.
The Directors consider that the Group has adequate resources to continue in
operational existence for the foreseeable future.
Section 2: Results for the year
Performance measures
Note 2016 2015
Earnings basicEarnings dilutedBasic earnings per share (pence)Diluted earnings per share (pence) 2.2c2.2c2.2c2.2c £224.0m£227.7m101.3p94.7p £351.9m£351.9m164.2p150.3p
Net assets BasicBasic NAV per share (pence) 2.3c2.3d £1,451.6m653p £1,275.1m574p
EPRA performance measures
Note 2016 2015
EPRA earningsEPRA earnings per share (pence) 2.2a2.2c £62.7m28.4p £61.3m28.6p
Adjusted EPRA earningsAdjusted EPRA earnings per share (pence) 2.2a2.2c £61.3m27.7p £49.5m23.1p
EPRA NAVEPRA NAV per share (pence) 2.3a2.3d £1,557.3m646p £1,394.4m579p
EPRA NNNAV 2.3c £1,517.3m £1,330.2m
EPRA NNNAV per share (pence) 2.3d 630p 552p
2.1 Segmental information
The Board of Directors monitor the business along two activity lines,
Operations and Property. The reportable segments for the years ended 31
December 2016 and 31 December 2015 are Operations and Property.
The Group undertakes its Operations and Property activities directly and
through joint ventures with third parties. The joint ventures
are an integral part of each segment and are included in the information used
by the Board to monitor the business.
The Group's properties are located exclusively in the United Kingdom. The
Group therefore has one geographical segment.
2.2 Earnings
EPRA earnings amends IFRS measures by removing principally the unrealised
investment property valuation gains and losses such that users of the
financials are able to see the extent to which dividend payments (dividend per
share) are underpinned by earnings arising from purely operational activity.
The reconciliation between Profit attributable to owners of the parent company
and EPRA earnings is available in note 2.2 (b).
The Operations segment manages rental properties, owned directly by the Group
or by joint ventures. Its revenues are derived from rental income and asset
management fees earned from joint ventures.. The Operations segment is the
main contributor to EPRA earnings and EPRA EPS and these are therefore the key
indicators which are used by the Board to monitor the Operations business.
The Board does not manage or monitor the Operations segment through the
balance sheet and therefore no segmental information for assets and
liabilities is provided for the Operations segment.
a) EPRA earnings
2016
UNITE Share of joint ventures Group on
EPRA
basis
Total USAF LSAV Total Total
£m £m £m £m £m
Rental income 97.1 36.9 25.1 62.0 159.1
Property operating expenses (29.3) (10.7) (2.8) (13.5) (42.8)
Net operating income 67.8 26.2 22.3 48.5 116.3
Management fees 20.8 (2.8) (4.0) (6.8) 14.0
Operating expenses (22.4) (0.4) (0.3) (0.7) (23.1)
Operating lease rentals* (13.5) - - - (13.5)
Net financing costs (20.8) (5.7) (5.9) (11.6) (32.4)
Operations segment result 31.9 17.3 12.1 29.4 61.3
Property segment result (1.0) - - - (1.0)
Unallocated to segments 2.4 - - - 2.4
EPRA earnings 33.3 17.3 12.1 29.4 62.7
Yield related USAF performance fees (1.4) - - - (1.4)
Adjusted EPRA earnings 31.9 17.3 12.1 29.4 61.3
* Operating lease rentals arise from properties which the
Group has sold and is now leasing back. These properties were sold to generate
financing and they now contribute to the Group's rental income and incur
property operating expenses. Therefore the Group consider these lease costs to
be a form of financing.
Included in the above is rental income of £18.5 million and property operating
expenses of £5.9 million relating to sale and leaseback properties.
The unallocated to segments balance includes the fair value of share based
payments of (£1.2 million), UNITE Foundation of (£1.0 million), fees received
from USAF relating to acquisitions £0.4 million, net USAF performance fee of
£6.5 million, deferred tax of (£0.3 million) and current tax charges of (£2.0
million).
2015
UNITE Share of joint ventures Group on
EPRA
basis
Total USAF LSAV Total Total
£m £m £m £m £m
Rental income 93.0 31.6 19.7 51.3 144.3
Property operating expenses (28.2) (9.3) (2.3) (11.6) (39.8)
Net operating income 64.8 22.3 17.4 39.7 104.5
Management fees 17.5 (2.2) (3.3) (5.5) 12.0
Operating expenses (21.3) (0.3) (0.3) (0.6) (21.9)
61.0 19.8 13.8 33.6 94.6
Operating lease rentals* (14.5) - - - (14.5)
Net financing costs (23.6) (5.6) (4.4) (10.0) (33.6)
Operations segment result 22.9 14.2 9.4 23.6 46.5
Property segment result (1.8) - - - (1.8)
Unallocated to segments 16.6 - - - 16.6
EPRA earnings 37.7 14.2 9.4 23.6 61.3
Yield related USAF performance fees (11.8) - - - (11.8)
Adjusted EPRA earnings 25.9 14.2 9.4 23.6 49.5
* Operating lease rentals arise from properties which the
Group has sold and is now leasing back. These properties were sold to generate
financing and they now contribute to the Group's rental income and incur
property operating expenses. Therefore the Group consider these lease costs to
be a form of financing.
Included in the above is rental income of £20.3 million and property operating
expenses of £6.6 million relating to sale and leaseback properties.
The unallocated to segments balance includes the fair value of share based
payments of (£2.9 million), UNITE Foundation of (£1.0 million), fees received
from USAF relating to acquisitions £1.8 million, net USAF performance fee of
£20.2 million, deferred tax of (£0.1 million) and current tax charges of (£1.4
million).
b) IFRS reconciliation to EPRA earnings
EPRA earnings excludes movements relating to changes in values of investment
properties and interest rate swaps, profits from the disposal of properties
and property impairments, which are included in the profit reported under
IFRS. EPRA earnings reconcile to the profit attributable to owners of the
parent company as follows:
Note 2016 2015
£m £m
EPRA earnings 2.2a 62.7 61.3
Net valuation gains on investment property 3.1 77.2 164.8
Property disposals and write downs 0.3 6.8
Share of joint venture gains on investment property 3.3b 58.8 152.7
Share of joint venture property disposals and write downs - 0.3
Mark to market changes in interest rate swaps* 4.3 - (0.6)
Interest rate swap payments on ineffective hedges* - 1.2
Swap cancellation costs (1.0) -
Share of joint venture swap cancellation costs 3.3b - (0.3)
Deferred tax relating to interest rate swap movement - (0.2)
Deferred tax relating to properties 27.6 (30.9)
Minority interest share of reconciling items** (1.6) (3.2)
Profit attributable to owners of the parent company 224.0 351.9
* Swaps are designated as hedging instruments within
hedge relationships concluded to be effective for the year ended 31 December
2016 and so are reported within Other comprehensive income for the year. In
the prior year certain hedging relationships were concluded to be ineffective
and hence fair value movement of the swaps designated as hedging instruments
in those relationships were recorded within the Income statement rather than
Other comprehensive income.
** The minority interest share, or non-controlling
interest, arises as a result of the Company not owning 100% of the share
capital of one of its subsidiaries, USAF (Feeder) Guernsey Ltd. More detail is
provided in note 3.3.
c) Earnings per share
The Basic EPS calculation is based on the earnings attributable to the equity
shareholders of The Unite Group plc and the weighted average number of shares
which have been in issue during the year. Basic EPS is adjusted in line with
EPRA guidelines in order to allow users to compare the business performance of
the Group with other listed real estate companies in a consistent manner and
to reflect how the business is managed and measured on a day to day basis.
EPRA EPS and EPRA EPS pre yield related USAF performance fee are calculated
using EPRA earnings.
The calculations of basic and EPRA EPS for the year ended 31 December 2016 is
as follows:
Note 2016 2015
£m £m
Earnings
Basic 224.0 351.9
Diluted 227.7 351.9
EPRA 2.2a 62.7 61.3
Adjusted EPRA (excluding yield related USAF performance fee) 2.2a 61.3 49.5
Weighted average number of shares (thousands)
Basic 221,013 214,304
Dilutive potential ordinary shares (convertible bond and share options) 19,315 19,877
Diluted 240,328 234,181
Earnings per share (pence)
Basic 101.3p 164.2p
Diluted 94.7p 150.3p
EPRA EPS 28.4p 28.6p
Adjusted EPRA EPS (excluding yield related USAF performance fee) 27.7p 23.1p
Movements in the weighted average number of shares have resulted from the
issue of shares arising from the employee share based payment schemes.
Excluded from the potential dilutive shares (share options), in 2016, are
16,838 (2015: 191,000) options which do not affect the diluted weighted
average number of shares.
2.3 Net assets
EPRA Net Asset Value per share makes adjustments to IFRS measures by
principally removing some items that are not expected to materialise in normal
circumstances like items of deferred tax and the fair value of financial
derivatives. The reconciliation between IFRS NAV and EPRA NAV is available in
note 2.3 (c).
The Group's Property business undertakes the acquisition and development of
properties. The Property segment's revenue comprises revenue from development
management fees earned from joint ventures.
a) EPRA net assets
2016 2015
Wholly owned Share of JVs Total Wholly owned Share of JVs Total
£m £m £m £m £m £m
Investment properties 1,061.6 1,023.2 2,084.8 1,024.4 810.8 1,835.2
Investment properties under development 184.6 7.2 191.8 149.8 80.2 230.0
Total property portfolio 1,246.2 1,030.4 2,276.6 1,174.2 891.0 2,065.2
Debt on properties (474.8) (366.8) (841.6) (475.1) (304.6) (779.7)
Cash 42.7 23.1 65.8 27.0 22.0 49.0
Net debt (432.1) (343.7) (775.8) (448.1) (282.6) (730.7)
Other assets/(liabilities) (14.6) (14.3) (28.9) (4.9) (18.3) (23.2)
EPRA net assets (pre convertible) 799.5 672.4 1,471.9 721.2 590.1 1,311.3
Convertible bond* 85.4 - 85.4 83.1 - 83.1
EPRA net assets 884.9 672.4 1,557.3 804.3 590.1 1,394.4
Loan to value 35% 33% 34% 38% 32% 35%
* Under the terms of the Convertible Bond, early
conversion of the debt into equity can be triggered if the share price trades
over 1.3 times the conversion price for a period of time.
b) Movement in EPRA NAV during the year
Contributions to EPRA NAV by each segment during the year is as follows:
2016 UNITE Share of joint ventures Group on
EPRA
basis
Total USAF LSAV Total Total
£m £m £m £m £m
Operations
Operations segment result 31.9 17.3 12.1 29.4 61.3
Property
Rental growth 35.8 14.8 12.0 26.8 62.6
Yield movement 4.9 7.2 7.5 14.7 19.6
Disposals and acquisition gains 1.0 - - - 1.0
Investment property gains 41.7 22.0 19.5 41.5 83.2
Development property gains 36.5 0.4 14.5 14.9 51.4
Pre-contract/other development costs (1.0) - - - (1.0)
Total property 77.2 22.4 34.0 56.4 133.6
Unallocated
Shares issued 0.3 0.3
Investment in joint ventures 3.3 7.3 (10.6) (3.3) -
Convertible bond 2.3 - - - 2.3
Dividends paid (34.2) - - - (34.2)
USAF performance fee 6.5 - - - 6.5
USAF property acquisition fee 0.4 - - - 0.4
Swap cancellation costs (1.0) - - - (1.0)
Other (6.3) - - - (6.3)
Total unallocated (28.7) 7.3 (10.6) (3.3) (32.0)
Total EPRA NAV movement in the year 80.6 46.8 35.5 82.3 162.9
Total EPRA NAV brought forward 804.3 305.3 284.8 590.1 1,394.4
Total EPRA NAV carried forward 884.9 352.1 320.3 672.4 1,557.3
The £6.3 million charge that comprises the other balance within the
unallocated segment includes a tax charge of £2.3 million, fair value of share
options charge of £3.0 million and £1.0 million for the UNITE Foundation.
2015 UNITE Share of joint ventures Group on
EPRA
basis
Total USAF LSAV Total Total
£m £m £m £m £m
Operations
Operations segment result 22.9 14.2 9.4 23.6 46.5
Property
Rental growth 21.6 5.8 22.2 28.0 49.6
Yield movement 97.6 37.0 41.1 78.1 175.7
Disposals and acquisition costs (17.3) 0.1 0.2 0.3 (17.0)
Investment property gains 101.9 42.9 63.5 106.4 208.3
Development property gains 45.7 - 36.1 36.1 81.8
Pre-contract/other development costs (1.8) - - - (1.8)
Total property 145.8 42.9 99.6 142.5 288.3
Unallocated
Shares issued 112.6 - - - 112.6
Investment in joint ventures (57.8) 41.6 16.2 57.8 -
Convertible bond 83.1 - - - 83.1
Dividends paid (31.9) - - - (31.9)
USAF performance fee 19.8 - - - 19.8
USAF property acquisition fee 1.7 - - - 1.7
Swap losses and debt exit costs (1.1) (0.3) - (0.3) (1.4)
Other (5.4) - - - (5.4)
Total unallocated 121.0 41.3 16.2 57.5 178.5
Total EPRA NAV movement in the year 289.7 98.4 125.2 223.6 513.3
Total EPRA NAV brought forward 514.6 206.9 159.6 366.5 881.1
Total EPRA NAV carried forward 804.3 305.3 284.8 590.1 1,394.4
The £5.4 million charge that comprises the other balance within the
unallocated segment includes a tax charge of £1.5 million, fair value of share
options charge of £2.9 million and £1.0 million for the UNITE Foundation.
c) Reconciliation to IFRS
To determine EPRA NAV net assets reported under IFRS are amended to exclude
the mark to market valuation of swaps, deferred tax liabilities and to
recognise all properties at market value.
The Group also manages NAV using EPRA NNNAV, which adjusts EPRA NAV to include
the fair value of swaps and debt. Under EPRA best practice guidelines this is
considered to give stakeholders the most relevant comparable information on
the current fair value of all the assets and liabilities in the Group.
The Net Assets reported under IFRS reconcile to EPRA NAV and EPRA NNNAV as
follows:
Note 2016 2015
£m £m
Net asset value reported under IFRS 1,451.6 1,275.1
Mark to market interest rate swaps 14.9 4.3
Deferred tax 5.4 31.9
EPRA NAV (pre convertible) 2.3a 1,471.9 1,311.3
Convertible bond 85.4 83.1
EPRA NAV 1,557.3 1,394.4
Mark to market of fixed rate debt (19.7) (28.0)
Mark to market interest rate swaps (14.9) (4.3)
Deferred tax (5.4) (31.9)
EPRA NNNAV 1,517.3 1,330.2
d) NAV per share
Basic NAV is based on the net assets attributable to the equity shareholders
of The Unite Group plc and the number of shares in issue at the end of the
year. The Board uses EPRA NAV and EPRA NNNAV to monitor the performance of the
Property segment on a day to day basis.
Note 2016 2015£m
£m
Net assets
Basic 2.3c 1,451.6 1,275.1
EPRA 2.3a 1,557.3 1,394.4
EPRA diluted 1,559.9 1,396.7
EPRA NNNAV (diluted) 1,520.0 1,332.5
Number of shares (thousands)
Basic 222,268 222,051
Convertible bond shares 18,426 18,124
Outstanding share options 762 1,027
Diluted 241,456 241,202
Net asset value per share (pence)
Basic 653p 574p
EPRA 647p 581p
EPRA (fully diluted) 646p 579p
EPRA NNNAV (fully diluted) 630p 552p
2.4. Revenue and costs
The Group earns revenue from the following activities:
Note 2016 2015
£m £m
Rental income Operations segment 2.2a 97.1 93.0
Management fees Operations segment 16.0 15.2
Development fees Property segment 1.0 1.9
Property sales Unallocated - 77.0
USAF performance fee Unallocated 7.0 22.4
121.1 209.5
Impact of minority interest on management fees (0.4) (0.7)
Total revenue 120.7 208.8
The cost of sales included in the consolidated income statement includes
property operating expenses of £30.3 million (2015: £28.9 million), operating
lease rentals of £13.5 million (2015: £14.5 million), costs associated with
development fees of £1.1 million (2015: £1.9 million) and the carrying value
of property sales of £nil (2015: £69.6 million).
There were no disposals of properties held as trading properties during 2016
and therefore no revenue was recognised. During 2015, Stratford One, a
trading asset, was sold to LSAV resulting in £77.0m of revenue.
2.5 Tax
The Group has not paid any corporation tax in the recent past due to the
availability of capital allowances, indexation and brought forward losses.
However, it does pay UK income tax on rental income that arises from
investments held by offshore subsidiaries.
a) Tax - income statement
The total taxation charge/(credit) in the income statement is analysed as
follows:
2016 2015
£m £m
Income tax on UK rental income arising in non-UK companies 2.3 1.6
Current tax charge 2.3 1.6
Reversal of deferred tax provision in respect of REIT property business assets (39.8) -
Origination and reversal of temporary differences 13.7 27.2
Effect of change in tax rate (1.2) (4.1)
Recognition of previously unrecognised asset - 8.0
Deferred tax charge/(credit) (27.3) 31.1
Total tax (credit)/charge in income statement (25.0) 32.7
During the year, the Group elected to be taxed as a REIT with effect from 1
January 2017. As a result of this, the Group's investment properties are
exempt from tax and no deferred tax is required on the balance sheet.
Accordingly the Group's deferred tax now only relates to non-property
investments (being primarily its interests in joint ventures) and historic tax
losses. The removal of the deferred tax provision in
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