REG - Unite Group PLC - Full Year Results <Origin Href="QuoteRef">UTG.L</Origin> - Part 4
23/02/2016 07:22
- Part 4: For the preceding part double click ID:nRSW8154Pc
joint ventures outperform certain
benchmarks. The Group receives an enhanced equity interest in the JV's as consideration for the performance fee. The Group
has recognised the following fees in its results for the year.
2015 2014
£m £m
USAF 8.5 6.9
LSAV 4.7 3.4
OCB - 0.3
Asset and property management fees 13.2 10.6
LSAV 1.4 2.7
Development management fees 1.4 2.7
USAF performance fee 25.6 -
USAF acquisition fee 2.1 1.4
Investment management fees* 27.7 1.4
Total fees 42.3 14.7
* Included in the movement in EPRA NAV in a USAF performance fee of £20.2 million (2014: £nil). This is the gross fee of
£25.6 million (2014: £nil) paid by USAF net of associated costs of £2.2 million (2014: £nil) and a £3.2 million (2014:
£nil) adjustment related to trading with joint ventures. The USAF performance fee will be settled in units in The Unite UK
Student Accommodation Fund rather than cash.
Included in share of joint venture profit in the income statement is a share of joint venture property management fee costs
of £1.4 million (2014: £0.8 million). On a see-through basis these costs are deducted from the property management fees
shown above, plus an adjustment for the minority interest of £0.2 million (2014: £0.2 million). This results in the net
fees included in the Operating Segment result (note 2.2a) of £12.0 million (2014: £10.0 million). Development management
fees are included in the Property Segment result (note 2.2a). Investment management fees are included within the
unallocated to segments (note 2.2a).
Included in the movement in EPRA NAV in a USAF property acquisition fee of £1.7 million (2014: £1.2 million). This is the
gross fee of £2.1 million (2014: £1.4 million) paid by USAF net of a £0.4 million (2014: £0.2 million) adjustment related
to trading with joint ventures.
During the year the Group has paid operating lease rentals to USAF relating to two properties under a sale and leaseback
agreement amounting to £2.7 million (2014: £1.3 million).
During the year the Group sold one property to LSAV for £84.3 million. The property was held on the balance sheet as
property within current assets, the proceeds and carrying value of the property are therefore recognised in revenue and
cost of sales and the cash flows in operating activities. One property was sold to USAF in 2014. The profits relating to
sales and associated disposal costs and related cash flows are set out below:
Profit and loss 2015 Profit and loss2014
LSAV LSAV
£m £m
Included in property sales and other income (net of joint venture trading adjustment) 77.2 -
Included in cost of sales (70.1) -
Profit on disposal of property 7.1 -
Profit and loss 2015 Profit and loss2014
USAF USAF
£m £m
Included in loss on disposal of property (net of joint venture trading adjustment) - 0.4
Profit on disposal of property - 0.4
Cash flow 2015 Cash flow 2014
LSAV LSAV
£m £m
Proceeds 84.3 -
Net cash flows included in cash flows from operating activities 84.3 -
Cash flow 2015 Cash flow 2014
USAF USAF
£m £m
Gross proceeds - 20.1
Part settled by:
Investment in joint venture - (10.0)
Net cash flows included in cash flows from investing activities - 10.1
Section 4: Funding
4.1 Borrowings
The table below analyses the Group's borrowings which comprise bank and other loans by when they fall due for payment:
Group
2015 2014
£m £m
Current
In one year or less, or on demand 31.3 12.5
Non-current
In more than one year but not more than two years 1.5 40.5
In more than two years but not more than five years 202.2 106.7
In more than five years 240.1 330.1
443.8 477.3
Total borrowings 475.1 489.8
In addition to the borrowings currently drawn as shown above, the Group has available undrawn facilities of £174.0 million
(2014: £76.5 million). A further overdraft facility of £10.0 million (2014: £10.0 million) is also available.
The carrying value of borrowings is considered to be approximate to fair value, except for the Group's fixed rate loans
carried at £331.4 million (2014: £332.5 million) and the convertible bond carried at £84.3 million (2014: £82.5). The
convertible bond and £90.0 million (2014: £90.0 million) of the fixed rate loans are classified as level 1 in the IFRS 13
fair value hierarchy and have a fair value of £218.4 million (2014: £194.5 million). The IFRS 13 level categorisation
relates to the extent the fair value can be determined by reference to comparable market values. The classifications range
from level 1 where instruments are quoted on an active market through to level 3 where the assumptions used to arrive at
fair value do not have comparable market data.
The remaining £241.4 million (2014: £242.5 million) of the fixed rate loans are classified as level 2 in the IFRS 13 fair
value hierarchy. The fair value of these fixed rate loans has been calculated by a third party expert discounting estimated
future cash flows on the basis of market expectations of future interest rates. The fair value of these loans is £226.4
million (2014: £224.0 million).
Properties with a carrying value of £993.6 million (2014: £651.9 million) have been pledged as security against the Group's
drawn down borrowings.
4.2 Interest rate swaps
The Group uses interest rate swaps to manage the Group's exposure to interest rate fluctuations. In accordance with the
Group's treasury policy, the Group does not hold or issue interest rate swaps for trading purposes and only holds swaps
which are considered to be commercially effective.
The following table shows the fair value of interest rate swaps:
2015 2014
£m £m
Current - 0.4
Non-current 2.3 1.9
Fair value of interest rate swaps 2.3 2.3
The fair values of interest rate swaps have been calculated by a third party expert, discounting estimated future cash
flows on the basis of market expectations of future interest rates, representing level 2 in the IFRS 13 fair value
hierarchy.
4.3 Net financing costs
Recognised in the income statement: 2015 2014
£m £m
Finance income
- Interest income on deposit (0.2) (0.1)
- Impact of discounting on interest free joint venture investment loans (note 3.3b) - (0.4)
Finance income (0.2) (0.5)
Gross interest expense on loans 25.3 28.6
Loan break costs - 1.6
Interest capitalised (2.7) (8.0)
Loan interest and similar charges 22.6 22.2
Changes in mark to market of interest rate swaps not accounted for as hedges 0.6 1.3
Finance costs 23.2 23.5
Net financing costs 23.0 23.0
The average cost of the Group's wholly owned investment debt at 31 December 2015 is 4.7% (2014: 5.1%). The overall average
cost of investment debt on a see-through basis is 4.5% (2014: 4.7%).
4.4 Gearing
The Group's adjusted gearing ratio is a key indicator that the Group uses to manage its indebtedness. EPRA net asset value
(NAV) and adjusted net debt are used to calculate adjusted gearing. Adjusted net debt excludes mark to market of interest
rate swaps as shown below.
The Group's gearing ratios are calculated as follows:
Note 2015 2014
£m £m
Cash and cash equivalents 5.1 27.0 41.4
Current borrowings 4.1 (31.3) (12.5)
Non-current borrowings 4.1 (443.8) (477.3)
Interest rate swaps liabilities 4.2 (2.3) (2.3)
Net debt per balance sheet (450.4) (450.7)
Mark to market of interest rate swaps 2.3 2.3
Adjusted net debt (448.1) (448.4)
Reported net asset value (attributable to owners of the parent company) 2.3c 1,275.1 842.5
EPRA net asset value 2.3c 1,394.4 881.1
Gearing
Basic (Net debt/Reported net asset value) 35% 53%
Adjusted gearing (Adjusted net debt/EPRA net asset value) 32% 51%
See-through adjusted gearing (including share of JV properties and net debt) 52% 79%
See-through adjusted LTV 35% 43%
4.5 Covenant compliance
Many of the Group's funding facilities carry covenants. The Group monitors its covenant position and the headroom available
on an ongoing basis. At 31 December 2015, the Group was in full compliance with all of its borrowing covenants. The Group
is able to use available cash to reduce debt to increase headroom on its loan to value (LTV) covenants. The covenant
headroom position is outlined below and assumes that the Group is able to use a mixture of available cash and add
additional property to banks' security pools.
31 December 2015 31 December 2014
Weighted covenant Weighted Weighted covenant Weighted
actual actual
Loan to value 74% 29%* 73% 22%*
Interest cover 1.47 4.47 1.45 2.61
Minimum net worth £250m £1,394 £250m £881m
* Calculated on the basis that available cash is used to reduce debt and available property can be used as additional
security.
4.6 Equity
The Company's issued share capital has increased during the year as follows:
Number of ordinary shares
2015 2014
Issued at start of year - fully paid 201,541,803 176,657,924
Share placing 20,137,326 24,500,000
Share options exercised 251,782 383,879
Issued at end of year - fully paid 221,930,911 201,541,803
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.
On 20 April 2015 the Group completed a share placing and open offer of 21,137,326 shares, which gave rise to proceeds of
£114.8 million, £112.3 million net of issue costs.
4.7 Dividends
During the year, the Company declared and paid an interim dividend of £12.1 million (2014: £4.4 million) and paid a £19.8
million final dividend relating to the year ended 31 December 2014 (2013: £6.3 million).
After the year end, the Directors proposed a final dividend per share of 9.5p (2014: 9.0p), bringing the total dividend per
share for the year to 15.0p (2014: 11.2p). No provision has been made in relation to this dividend.
Section 5: Working capital
5.1 Cash
The Group's cash position at 31 December 2015 was £27.0 million (2014: £41.4 million).
The Group's cash balances include £8.5 million (2014: £12.8 million) whose use at the balance sheet date is restricted by
funding agreements to pay operating costs and loan interest relating to specific properties.
The Group generates cash from its operating activities as follows:
Group
Note 2015 2014
£m £m
Profit/(loss) for the year 355.7 104.8
Adjustments for:
Depreciation and amortisation 2.6 2.5
Fair value of share based payments 2.9 2.1
Change in value of investment property 3.1 (164.8) (43.3)
Net finance costs 4.3 23.0 23.0
Loss on disposal of investment property 0.6 1.0
Share of joint venture profit 3.3b (181.8) (56.5)
Trading with joint venture adjustment 15.5 1.4
Tax charge/(credit) 2.5a 32.7 3.6
Cash flows from operating activities before 86.4 38.6
changes in working capital
(Increase)/decrease in trade and other receivables (39.6) 6.6
Decrease/(increase) in completed property and property under development 70.1 (8.6)
Decrease/(increase) in inventories 0.3 (0.7)
Increase/(decrease) in trade and other payables 3.6 8.8
Cash flows from operating activities 120.8 44.7
Cash flows consist of the following segmental cash inflows/(outflows): Operations £40.8 million (2014: £35.0 million),
property
(£48.3 million) (2014: (£16.0 million)) and unallocated (£6.9 million) (2014: £20.8 million). The unallocated amount
includes Group dividends (£31.9 million) (2014: (£10.7 million)), tax payable of (£0.3 million) (2014: (£0.5 million)),
investment in JVs (£52.4 million) (2014: (£105.4 million)), contributions to UNITE foundation (£1.0 million) (2014: (£0.9
million)) and amounts received from shares issued £112.6 million (2014: £96.7 million).
5.2 Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations. It arises principally from the Group's cash balances, the Group's receivables from
customers and joint ventures and loans provided to the Group's joint ventures.
At the year end, the Group's exposure to credit risk was as follows:
Note 2015 2014
£m £m
Cash 5.1 27.0 41.4
Trade receivables 5.2 2.3 1.9
Amounts due from joint ventures (excluding loans that are capital in nature) 5.2 41.7 28.1
71.0 71.4
a) Cash
The Group operates investment guidelines with respect to surplus cash. Counterparty limits for cash deposits are largely
based upon long-term ratings published by credit rating agencies and credit default swap rates.
b) Trade receivables
The Group's customers can be split into two groups - (i) students (individuals) and (ii) commercial organisations including
Universities. The Group's exposure to credit risk is influenced by the characteristics of each customer. The Group holds
tenant deposits of £7.8 million (2014: £8.3 million) as collateral against individual customers.
c) Joint ventures
Amounts receivable from joint ventures fall into two categories - working capital balances and investment loans.
This information is provided by RNS
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