REG - Unite Group PLC - Full Year Results <Origin Href="QuoteRef">UTG.L</Origin> - Part 2
23/02/2016 07:21
- Part 2: For the preceding part double click ID:nRSW8154Pa
invested £60
million (from the proceeds of its own capital raise early in the year) to maintain its stake at 21%. The proceeds of the
fund raise were immediately deployed into the £271 million AUB acquisition outlined above.
Based on its leverage targets, USAF currently has investment capacity of approximately £125 million and, for 2016, is
considering a small number of open market individual asset purchases, including on a forward commitment basis.
Fees
During the year the Group recognised net fees of £35.9 million from its fund and asset management activities as follows:
2015 £'m 2014 £'m
USAF
Asset Management fee 8.7 7.1
Net acquisition fee 1.8 1.6
Net performance fee* 20.2 -
LSAV
Asset and Property Management fee 3.3 2.6
Development Management fee 1.9 2.8
OCB
Asset management fee - 0.3
Total fees 35.9 14.4
* A full breakdown of the net performance fee is in note 3.4(c) of the notes to the financial statements.
The asset management fees from both USAF and LSAV have increased as a result of the growth in the portfolios under
management during the year as a result of acquisitions and valuation growth. A net acquisition fee of £1.8 million was
earned as part of USAF's acquisition of the AUB portfolio and a performance fee was earned due to the strong performance of
USAF during the year.
A total performance fee of £25.6 million was earned and will be paid in units during the first quarter of 2016. The net fee
recognised of £20.2 million is after deducting £3.2 million, which represents the Group's share of the performance fee paid
by USAF and after a one-off bonus payment of £2.2 million was made to Unite staff, excluding directors, in recognition of
USAF's sustained outstanding performance. After payment of the fee, our stake in USAF will increase to 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.
Mark Allan Joe Lister
Chief Executive Officer Chief Financial Officer
23 February 2016
Introduction and table of contents
Whilst these financial statements are prepared in accordance with IFRS, the Board of Directors manage the business based on EPRA earnings and EPRA net asset value (NAV) which can be found in section 2. The adjusted results are aligned with the European Public Real Estate Association (EPRA) best practice recommendations.We have grouped the notes to the financial statements under four main headings:
· Results for the year, including segmental information, EPRA earnings and EPRA NAV
· Asset management
· Funding
· Working capital
Each 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
Consolidated statement of changes in shareholders' equity
Consolidated statement 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
5.2 Credit risk
Financial statements
Consolidated income statement
For the year ended 31 December 2015
Note 2015 £m 2014£m
Rental income 2.4 93.0 89.4
Property sales and other income 2.4 115.8 19.1
Total revenue 208.8 108.5
Cost of sales 2.4 (114.9) (50.0)
Operating expenses (28.5) (25.9)
Results from operating activities 65.4 32.6
Loss on disposal of property (0.6) (1.0)
Net valuation gains on property 3.1 164.8 43.3
Profit before net financing costs 229.6 74.9
Loan interest and similar charges 4.3 (22.6) (22.2)
Mark to market changes in interest rate swaps 4.3 (0.6) (1.3)
Finance costs 4.3 (23.2) (23.5)
Finance income 4.3 0.2 0.5
Net financing costs 4.3 (23.0) (23.0)
Share of joint venture profit 3.3b 181.8 56.5
Profit before tax 388.4 108.4
Current tax 2.5 (1.6) (1.2)
Deferred tax 2.5 (31.1) (2.4)
Profit for the year 355.7 104.8
Profit for the year attributable to
Owners of the parent company 2.2c 351.9 102.6
Minority interest 3.8 2.2
355.7 104.8
Earnings per share
Basic 2.2c 164.2p 53.1p
Diluted 2.2c 150.3p 52.3p
All results are derived from continuing activities.
Consolidated statement of comprehensive income
For the year ended 31 December 2015
2015 2014
£m £m
Profit for the year 355.7 104.8
Movements in effective hedges (1.0) (0.1)
Gains on hedging instruments transferred to income statement 0.2 1.2
Share of joint venture movements in effective hedges 0.5 (1.8)
Share of joint venture movement on hedging instruments transferred to income statement - -
Other comprehensive income for the year (0.3) (0.7)
Total comprehensive income for the year 355.4 104.1
Attributable to
Owners of the parent company 351.6 101.9
Minority interest 3.8 2.2
355.4 104.1
All movements above are shown net of deferred tax. All other comprehensive income may be classified as profit and loss in
the future.
Consolidated balance sheet
Note 2015 2014
£m £m
Assets
Investment property 3.1 1,024.4 850.5
Investment property under development 3.1 149.8 49.2
Investment in joint ventures 3.3b 610.6 383.8
Other non-current assets 24.5 15.3
Deferred tax asset 2.5c 1.0 2.2
Total non-current assets 1,810.3 1,301.0
Completed property 3.1 - 70.1
Inventories 3.2 3.6 3.9
Trade and other receivables 83.0 43.4
Cash and cash equivalents 5.1 27.0 41.4
Total current assets 113.6 158.8
Total assets 1,923.9 1,459.8
Liabilities
Borrowings 4.1 (31.3) (12.5)
Interest rate swaps 4.2 - (0.4)
Trade and other payables (115.5) (101.6)
Current tax liability (2.3) (1.0)
Total current liabilities (149.1) (115.5)
Borrowings 4.1 (443.8) (477.3)
Interest rate swaps 4.2 (2.3) (1.9)
Deferred tax liability 2.5c (31.0) (2.8)
Total non-current liabilities (477.1) (482.0)
Total liabilities (626.2) (597.5)
Net assets 1,297.7 862.3
Equity
Issued share capital 55.5 50.4
Share premium 493.3 385.8
Merger reserve 40.2 40.2
Retained earnings 679.5 359.2
Hedging reserve (2.8) (2.5)
Equity portion of convertible instrument 4.1 9.4 9.4
Equity attributable to the owners of the parent company 1,275.1 842.5
Minority interest 22.6 19.8
Total equity 1,297.7 862.3
These financial statements of The Unite Group plc, registered number 3199160 were approved by the Board of Directors on 23
February 2016 and were signed on its behalf by:
M C Allan J J Lister
Director Director
Director
Consolidated statement of changes
in shareholders' equity
For the year ended 31 December 2015
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 period - - - - (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
Fair value of share based payments - - - 3.7 - - 3.7 - 3.7
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
Issued Share Merger Retained Hedging Equity portion of convertible instrument Attributable Minority Total
share capital premium reserve earnings reserve £m to owners interest £m
£m £m £m £m £m of the parent £m
£m
At 1 January 2014 44.2 295.3 40.2 266.0 (1.8) 9.4 653.3 18.7 672.0
Profit for the year - - - 102.6 - - 102.6 2.2 104.8
Other comprehensive income for the period - - - - (0.7) - (0.7) - (0.7)
Total comprehensive income for the year - - - 102.6 (0.7) - 101.9 2.2 104.1
Shares issued 6.2 90.5 - - - - 96.7 - 96.7
Fair value of share based payments - - - 3.1 - - 3.1 - 3.1
Own shares acquired - - - (1.8) - - (1.8) - (1.8)
Dividends paid to owners of the parent company - - - (10.7) - - (10.7) - (10.7)
Dividends to minority interest - - - - - - - (1.1) (1.1)
At 31 December 2014 50.4 385.8 40.2 359.2 (2.5) 9.4 842.5 19.8 862.3
CONSOLIDATED Statement of cash flows
For the year ended 31 December 2015
Group
Note 2015 2014
£m £m
Cash flows from operating activities 5.1 120.8 44.7
Cash flows from taxation (0.3) (0.5)
Investing activities
Proceeds from sale of investment property (0.6) 62.9
Repayment received of joint venture investment loan - 10.7
Loan to joint ventures (30.5) (12.8)
Dividends received 22.9 22.2
Interest received 0.2 0.1
Investment in joint ventures (52.4) (103.3)
Acquisition of intangible assets (7.7) (5.7)
Acquisition of property (96.3) (45.9)
Acquisition of plant and equipment (4.1) (4.8)
Cash flows from investing activities (168.5) (76.6)
Financing activities
Total interest paid (21.8) (24.8)
Interest capitalised into property under development included in cash flows from operating activities - 4.0
Interest paid in respect of financing activities (21.8) (20.8)
Ineffective swap payments (2.3) (4.0)
Proceeds from the issue of share capital 112.6 96.7
Payments to acquire own shares (3.4) (1.8)
Proceeds from non-current borrowings 17.6 124.8
Repayment of borrowings (36.1) (152.5)
Dividends paid to the owners of the parent company (31.9) (10.7)
Dividends paid to minority interest (1.1) (1.1)
Cash flows from financing activities 33.6 30.6
Net decrease in cash and cash equivalents (14.4) (1.8)
Cash and cash equivalents at start of year 41.4 43.2
Cash and cash equivalents at end of year 5.1 27.0 41.4
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 2015 or 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar
of Companies, and those for 2015 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 2014 or 2015.
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 5.3 its
exposure to credit risk.
The Group has prepared cash flow projections three years forward to December 2018 and the Group has sufficient headroom to
meet all its commitments. The Group finalised a new facility in November 2015 which will be sufficient to fund the Group's
commitments over the next three years. This facility will be of sufficient size to replace the debt facility maturing in
the Group in 2016. The Group has historically maintained positive relationships with its lending banks and has always
secured new facilities before maturity dates and within its covenant levels. The Group is in full compliance with its
covenants at 31 December 2015. 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
EPRA performance measures
Note 2015 £m. 2014£m
EPRA earningsEPRA earnings per share (pence) 2.2a2.2c 61.3m28.6p 33.3m17.2p
Adjusted EPRA earningsAdjusted EPRA earnings per share (pence) 2.2a2.2c 49.5m23.1p 33.3m17.2p
EPRA NAVEPRA NAV per share (pence) 2.3a2.3d 1,394.4m579p 881.1m434p
EPRA NNNAV EPRA NNNAV per share (pence) 2.3c2.3d 1,330.2m552p 870.7m429p
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 2015 and 31 December 2014 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 meaningful geographical
segment.
2.2 Earnings
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 manage
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
2015 UNITE Share of joint ventures Group on see-through basis
Total USAF LSAV OCB Total Total
£m £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
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 £16.6 million credit that is unallocated to segments includes the fair value of share based payments of (£2.9 million), UNITE Foundation of (£1.0 million), net USAF performance fee of £20.2 million, fees received from USAF relating to acquisitions of £1.8 million, deferred tax of (£0.1
million) and current tax charges of (£1.4 million).
* Operating lease rentals arise from properties which the Group has sold and is now leasing back. These properties
contribute to the Group's rental income.
2014 UNITE Share of joint ventures Group on see-through basis
Total USAF LSAV OCB Total Total
£m £m £m £m £m £m
Rental income 89.4 25.9 13.5 1.2 40.6 130.0
Property operating expenses (25.9) (7.5) (2.0) (0.3) (9.8) (35.7)
Net operating income 63.5 18.4 11.5 0.9 30.8 94.3
Management fees 13.8 (1.7) (2.0) (0.1) (3.8) 10.0
Operating expenses (19.4) (0.2) (0.3) - (0.5) (19.9)
57.9 16.5 9.2 0.8 26.5 84.4
Operating lease rentals* (14.4) - - - - (14.4)
Net financing costs (21.7) (5.2) (3.8) (0.5) (9.5) (31.2)
Operations segment result 21.8 11.3 5.4 0.3 17.0 38.8
Property segment result (3.6) - - - - (3.6)
Unallocated to segments (2.3) 0.4 - - 0.4 (1.9)
EPRA earnings 15.9 11.7 5.4 0.3 17.4 33.3
Included in the above is rental income of £20.3 million and property operating expenses of £6.2 million relating to sale
and leaseback properties.
The £1.9 million charge that is unallocated to segments includes the fair value of share based payments of (£2.1 million),
UNITE Foundation of (£0.9 million), share of monies received from Landsbanki of £0.4 million, fees received from USAF
relating to acquisitions of £1.2 million, deferred tax of £0.5 million and current tax charges of (£1.0 million).
* Operating lease rentals arise from properties which the Group has sold and is now leasing back. These properties
contribute to the Group's rental income.
b) EPRA earnings IFRS reconciliation
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. The EPRA
earnings reconcile to the profit reported under IFRS as follows:
Note 2015 2014
£m £m
EPRA earnings 2.2a 61.3 33.3
Net valuation gains on investment property 3.1 164.8 43.3
Property disposals and write downs 6.8 (3.3)
Share of joint venture gains on investment property 3.3b 152.7 35.7
Share of joint venture property disposals and write downs 0.3 (0.6)
Mark to market changes in interest rate swaps* 4.3 (0.6) (1.3)
Interest rate swap payments on ineffective hedges* 1.2 1.2
Debt exit costs - (1.6)
Share of joint
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