REG - Unite Group PLC - Interim Results <Origin Href="QuoteRef">UTG.L</Origin> - Part 2
26/07/2016 07:06
- Part 2: For the preceding part double click ID:nRSZ1864Fa
receivables 47.4 43.9 83.0
Cash and cash equivalents 31.0 105.6 27.0
Total current assets 85.0 154.9 113.6
Total assets 2,070.5 1,748.0 1,923.9
Liabilities
Borrowings 4.1 (1.4) (9.2) (31.3)
Interest rate swaps 4.2 - (0.1) -
Trade and other payables (97.3) (85.2) (115.5)
Current tax creditor (2.2) (1.9) (2.3)
Total current liabilities (100.9) (96.4) (149.1)
Borrowings 4.1 (543.9) (469.1) (443.8)
Interest rate swaps 4.2 (16.8) - (2.3)
Deferred tax liability (41.1) (17.2) (31.0)
Total non-current liabilities (601.8) (486.3) (477.1)
Total liabilities (702.7) (582.7) (626.2)
Net assets 1,367.8 1,165.3 1,297.7
Equity
Issued share capital 55.5 55.5 55.5
Share premium 493.5 493.3 493.3
Merger reserve 40.2 40.2 40.2
Retained earnings 762.7 546.0 679.5
Hedging reserve (17.1) (0.7) (2.8)
Equity portion of convertible instrument 9.4 9.4 9.4
Equity attributable to the owners of the parent company 1,344.2 1,143.7 1,275.1
Minority interest 23.6 21.6 22.6
Total equity 1,367.8 1,165.3 1,297.7
Consolidated statement of changes in shareholders' equity
For the 6 months to 30 June 2016
Issued Share Merger Retained earnings Hedging Equity portion of convertible instrument£m Attributable Minority Total
share capital premium reserve £m reserve 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
(Unaudited)
Profit for the period - - - 106.7 - - 106.7 1.6 108.3
Other comprehensive income - - - - (14.3) - (14.3) - (14.3)
for the period
Total comprehensive income - - - 106.7 (14.3) - 92.4 1.6 94.0
for the period
Shares issued - 0.2 - - - - 0.2 - 0.2
Fair value of share based payments - - - (0.3) - - (0.3) - (0.3)
Own shares acquired - - - (2.2) - - (2.2) - (2.2)
Dividends paid to owners - - - (21.0) - - (21.0) - (21.0)
of the parent company
Dividends to minority interest - - - - - - - (0.6) (0.6)
At 30 June 2016 55.5 493.5 40.2 762.7 (17.1) 9.4 1,344.2 23.6 1,367.8
Issued Share Merger Retained Hedging Equity portion of convertible instrument£m Attributable Minority Total
share capital premium reserve earnings reserve to owners interest £m
£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
(Unaudited)
Profit for the period - - - 208.3 - - 208.3 2.4 210.7
Other comprehensive income - - - - 1.8 - 1.8 - 1.8
for the period
Total comprehensive income - - - 208.3 1.8 - 210.1 2.4 212.5
for the period
Shares issued 5.1 107.5 - - - - 112.6 - 112.6
Fair value of share based payments - - - 1.2 - - 1.2 - 1.2
Own shares acquired - - - (2.9) - - (2.9) - (2.9)
Dividends paid to owners - - - (19.8) - - (19.8) - (19.8)
of the parent company
Dividends to minority interest - - - - - - - (0.6) (0.6)
At 30 June 2015 55.5 493.3 40.2 546.0 (0.7) 9.4 1,143.7 21.6 1,165.3
Issued Share Merger Retained earnings Hedging Equity portion of convertible instrument£m Attributable Minority Total
share capital premium reserve £m reserve 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 period - - - 351.9 - - 351.9 3.8 355.7
Other comprehensive income - - - - (0.3) - (0.3) 0.1 (0.2)
for the period
Total comprehensive income - - - 351.9 (0.3) - 351.6 3.9 355.5
for the period
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 - - - (31.9) - - (31.9) - (31.9)
of the parent company
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
Consolidated statement of cash flows
For the 6 months to 30 June 2016
Unaudited Unaudited Year to
6 months to 6 months to 31 December
30 June 2016 30 June 2015 2015
£m £m £m
Cash flows from operating activities 26.8 100.9 120.8
Cash flows from taxation (1.6) - (0.3)
Investing activities
Proceeds from sale of investment property (0.3) (0.2) (0.6)
Loans to joint ventures - (30.5) (30.5)
Dividends received 15.1 11.0 22.9
Interest received - 0.1 0.2
Investment in joint ventures - (48.2) (52.4)
Acquisition of intangible assets (4.5) (4.3) (7.7)
Acquisition of property (63.5) (26.8) (96.3)
Acquisition of plant and equipment (1.4) (1.1) (4.1)
Cash flows from investing activities (54.6) (100.0) (168.5)
Financing activities
Interest paid in respect of financing activities (11.3) (11.4) (21.8)
Ineffective swap payments - (1.0) (2.3)
Proceeds from the issue of share capital 0.2 112.6 112.6
Payments to acquire own shares (2.2) (2.9) (3.4)
Proceeds from non-current borrowings 99.0 37.9 17.6
Repayment of borrowings (30.7) (51.5) (36.1)
Dividends paid to the owners of the parent company (21.0) (19.8) (31.9)
Dividends paid to minority interest (0.6) (0.6) (1.1)
Cash flows from financing activities 33.4 63.3 33.6
Net increase/(decrease) in cash and cash equivalents 4.0 64.2 (14.4)
Cash and cash equivalents at start of period 27.0 41.4 41.4
Cash and cash equivalents at end of period 31.0 105.6 27.0
Notes to the interim financial statements
Section 1: Basis of preparation
This section details the Group's accounting policies that relate to the
interim financial statements.
Basis of preparation
This condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU.
As required by the Disclosure and Transparency Rules of the Financial Conduct
Authority, the condensed set of financial statements has been prepared
applying the accounting policies and presentation that were applied in the
preparation of the company's published consolidated financial statements for
the year ended 31 December 2015.
The comparative figures for the financial year ended 31 December 2015 are not
the company's statutory financial statements for that financial year. Those
financial statements have been reported on by the company's auditor and
delivered to the registrar of companies. The report of the auditor was (i)
unqualified, (ii) did not include a reference to any matter to which the
auditor 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.
The board have continued to consider the principal risks and the
appropriateness of risk management systems and consider that the principal
risks remain largely consistent with those noted in the Annual Report for the
year ended 31 December 2015 (pages 31 to 34) with additional consideration
given to the EU Referendum result at 30 June 2016. These are summarised as
follows:
i. Reduction in demand as a result of a change in government policy, the EU Referendum or changes in behaviour of students
ii. Increased competition leading to higher levels of new supply
iii. Reputational damage
iv. Property cycle risk
v. Development risks
vi. Availability of finance, change in interest rate and risks associated with fund management.
Going concern
The Group's business activities, together with the factors likely to affect
its future development and position are set on in the Business Review.
The Group has prepared cash flow forecasts to the end of 2018. Following the
recent financing activity the Group has sufficient levels of cash headroom to
meet all of its commitments. The Group has agreed heads of terms on an
extension to an existing revolving facility to support the development
pipeline capital expenditure; the extension is with two existing relationship
banks. The Group continues to maintain positive relationships with its lending
banks and has historically been able to secure facilities before maturity
dates. The Group is in full compliance with its borrowing covenants and is
forecast to continue to do so.
The Directors consider that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group financial
statements have therefore been prepared on a going concern basis.
Seasonality of operations
The results of the Group's operation segment, a separate business segment (see
Section 2), are closely linked to the level of occupancy achieved in its
portfolio of property. Occupancy typically falls over the summer months
(particularly July and August) as students leave for the summer holidays. The
Group attempts to minimise the seasonal impact by the use of short-term summer
tenancies. However, the second half-year typically has lower revenues from the
existing portfolio.
Conversely, the Group's build cycle for new properties is to plan to complete
construction shortly before the start of the academic year in September each
year. The addition of these completed properties in the second half increases
the Operations segment's revenues in that period.
Section 2: Results for the period
This section focuses on the results and performance of the Group. On the
following pages you will find disclosures explaining the Group's results for
the period, segmental information, earnings and net asset value (NAV) per
share.
EPRA earnings and NAV movement are the Group's main key performance
indicators. This reflects the way the business is managed and how the
directors assess the performance of the Group.
EPRA performance measures
Note Unaudited Unaudited 31 December
30 June 2016 30 June 2015 2015
£ £ £
EPRA earnings 2.2a 36.1m 29.6m 61.3m
EPRA earnings per share (pence) 2.2c 16.3p 14.2p 28.6p
Adjusted EPRA earnings 2.2a 36.1m 29.6m 49.5m
Adjusted EPRA earnings per share (pence) 2.2c 16.3p 14.2p 23.1p
EPRA NAV 2.3a 1,491.5m 1,164.2m 1,394.4m
EPRA NAV per share (pence) 2.3d 620p 521p 579p
EPRA NNNAV 2.3c 1,418.7m 1,114.8m 1,330.2m
EPRA NNNAV per share (pence) 2.3d 589p 499p 552p
2.1 Segmental information
The Board of Directors monitor the business along two activity lines,
Operations and Property. The reportable segments for the 6 months ended 30
June 2016 and 30 June 2015 and for the year ended 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
Board therefore does not consider that the Group has meaningful geographical
segments.
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 way in which the Operations
segment adds value to the business is set out in the Operations review on
pages 35 - 37 of the 2015 Annual Report. 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. EPRA
earnings and EPRA EPS are reported on the basis recommended for real estate
companies by EPRA, the European Real Estate Association.
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
Unaudited 30 June 2016
UNITE Share of joint ventures Group on see through basis
Total USAF LSAV Total Total
£m £m £m £m £m
Rental income 54.5 20.0 12.4 32.4 86.9
Property operating expenses (14.3) (5.1) (1.2) (6.3) (20.6)
Net operating income 40.2 14.9 11.2 26.1 66.3
Management fees 10.2 (1.3) (1.9) (3.2) 7.0
Operating expenses (11.8) (0.2) (0.2) (0.4) (12.2)
38.6 13.4 9.1 22.5 61.1
Operating lease rentals* (7.0) - - - (7.0)
Net financing costs (9.9) (2.8) (2.5) (5.3) (15.2)
Operations segment result 21.7 10.6 6.6 17.2 38.9
Property segment result (0.6) - - - (0.6)
Unallocated to segments (2.2) - - - (2.2)
EPRA earnings 18.9 10.6 6.6 17.2 36.1
Included in the above is rental income of £12.2 million and property operating expenses of £3.3million relating to sale and leaseback properties. The unallocated to segments balance includes the fair value of share based payments of (£0.2million), UNITE Foundation of (£0.7million), USAF acquisition fee of £0.5 million and current tax charges of (£1.8 million).
* 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.
Unaudited 30 June 2015
UNITE Share of joint ventures Group on see through basis
Total USAF LSAV Total Total
£m £m £m £m £m
Rental income 51.6 16.4 9.0 25.4 77.0
Property operating expenses (13.7) (4.1) (0.7) (4.8) (18.5)
Net operating income 37.9 12.3 8.3 20.6 58.5
Management fees 8.0 (1.0) (1.6) (2.6) 5.4
Operating expenses (8.8) (0.1) (0.2) (0.3) (9.1)
37.1 11.2 6.5 17.7 54.8
Operating lease rentals* (7.6) - - - (7.6)
Net financing costs (12.6) (2.9) (1.9) (4.8) (17.4)
Operations segment result 16.9 8.3 4.6 12.9 29.8
Property segment result (0.6) - - - (0.6)
Unallocated to segments 0.4 - - - 0.4
EPRA earnings 16.7 8.3 4.6 12.9 29.6
Included in the above is rental income of £11.2 million and property operating expenses of £3.6 million relating to sale and leaseback properties. The unallocated to segments includes the fair value of share based payments of (£1.7 million), UNITE Foundation of (£0.3 million), USAF acquisition fee of £1.8 million, net USAF performance fee of £1.6 million and current tax charges of (£0.9 million).
Unaudited 31 December 2015
UNITE Share of joint ventures Group on see through 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
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 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 of £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).
* 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
b) EPRA earnings IFRS reconciliation
The EPRA profit 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 Unaudited Unaudited Year to
6 months to 6 months to 31 December
30 June 2016 30 June 2015 2015
£m £m £m
EPRA earnings 2.2a 36.1 29.6 61.3
Net valuation gains on investment property 48.7 82.9 164.8
Property disposals and write downs (0.3) 6.8 6.8
Share of joint venture gains on investment property 3.3a 35.8 106.1 152.7
Share of joint venture property disposals and write downs - 0.1 0.3
Mark to market changes in interest rate swaps* - (0.3) (0.6)
Interest rate swap payments on ineffective hedges* - 0.7 1.2
Share of joint venture swap cancellation costs - - (0.3)
Deferred tax relating to interest rate swap movement - (0.5) (0.2)
Deferred tax relating to properties (12.6) (15.1) (30.9)
Minority interest share of reconciling items** (1.0) (2.0) (3.2)
Profit attributable to owners of the parent company 106.7 208.3 351.9
* Within IFRS reported profit, there is a £nil million loss (30 June
2015: £0.3 million loss) relating to movements in the mark to market of
ineffective interest rate swaps. Part of this movement, £nil million (30 June
2015: £0.7 million) relates to actual interest payments made on these swaps
and is considered to be a true operating cost of the Operations Segment. It is
therefore already included within Net Financing Costs in Operations Segment
result in note 2.2a.
** The minority interest share, or non-controlling interest, arises as a
result of the Group 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 EPS calculation is based on the earnings attributable to the equity
shareholders of UNITE Group plc and the weighted average number of shares
which have been in issue during the period. Basic EPS is adjusted in line with
EPRA guidelines in order to more accurately show the business performance of
the Group in a consistent manner and to reflect how the business is managed
and measured on a day to day basis. EPRA EPS is calculated using EPRA
earnings.
The calculations of basic, diluted and EPRA EPS for the 6 months ended 30 June
2016 is
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