REG - Unite Group PLC - Interim Results <Origin Href="QuoteRef">UTG.L</Origin> - Part 2
26/07/2017 07:06
- Part 2: For the preceding part double click ID:nRSZ0829Ma
£m £m
Profit for the period 83.3 108.3 226.4
Movements in effective hedges 1.4 (14.5) (9.2)
- Deferred tax in relation to movements in effective hedges - 2.6 (1.1)
Share of joint venture movements in effective hedges 0.9 (2.9) (1.4)
- Deferred tax in relation to share of joint venture movements in effective hedges - 0.5 (0.5)
Other comprehensive income / (expense) for the period 2.3 (14.3) (12.2)
Total comprehensive income for the period 85.6 94.0 214.2
Attributable to
Owners of the parent company 84.5 92.4 211.8
Minority interest 1.1 1.6 2.4
85.6 94.0 214.2
All other comprehensive income may be classified as profit and loss in the
future.
Consolidated balance sheet
At 30 June 2017
Note Unaudited Unaudited 31 December
30 June 2017 30 June 2016 2016
£m £m £m
Assets
Investment property 3.1a 1,051.1 1,062.3 1,061.6
Investment property under development 3.1a 263.4 221.6 184.6
Investment in joint ventures 3.3a 765.2 672.2 692.9
Other non-current assets 30.8 28.8 29.8
Deferred tax asset - 0.6 -
Total non-current assets 2,110.5 1,985.5 1,968.9
Inventories 3.2 3.7 6.6 2.9
Trade and other receivables 54.8 47.4 77.9
Cash and cash equivalents 35.3 31.0 42.7
Total current assets 93.8 85.0 123.5
Total assets 2,204.3 2,070.5 2,092.4
Liabilities
Borrowings 4.1 (1.3) (1.4) (1.3)
Trade and other payables (104.3) (97.3) (123.7)
Current tax creditor (2.2) (2.2) (2.4)
Total current liabilities (107.8) (100.9) (127.4)
Borrowings 4.1 (459.1) (543.9) (473.5)
Interest rate swaps 4.2 (10.2) (16.8) (11.6)
Deferred tax liability (4.5) (41.1) (4.4)
Total non-current liabilities (473.8) (601.8) (489.5)
Total liabilities (581.6) (702.7) (616.9)
Net assets 1,622.7 1,367.8 1,475.5
Equity
Issued share capital 60.2 55.5 55.5
Share premium 579.2 493.5 493.6
Merger reserve 40.2 40.2 40.2
Retained earnings 931.6 762.7 867.9
Hedging reserve (12.7) (17.1) (15.0)
Equity portion of convertible instrument - 9.4 9.4
Equity attributable to the owners of the parent company 1,598.5 1,344.2 1,451.6
Minority interest 24.2 23.6 23.9
Total equity 1,622.7 1,367.8 1,475.5
Consolidated statement of changes in shareholders' equity
For the 6 months to 30 June 2017
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 2017 55.5 493.6 40.2 867.9 (15.0) 9.4 1,451.6 23.9 1,475.5
(Unaudited)
Profit for the period - - - 82.4 - - 82.4 0.9 83.3
Other comprehensive income - - - - 2.3 - 2.3 - 2.3
for the period
Total comprehensive income - - - 82.4 2.3 - 84.7 0.9 85.6
for the period
Shares issued 4.7 82.7 - - - - 87.4 87.4
Deferred tax on share based payments - - - - - - - - -
Fair value of share based payments - - - 0.6 - - 0.6 - 0.6
Own shares acquired - - - (1.9) - - (1.9) - (1.9)
Redemption of convertible bond - 2.9 - 5.8 - (9.4) (0.7) - (0.7)
Dividends paid to owners - - - (23.2) - - (23.2) - (23.2)
of the parent company
Dividends to minority interest - - - - - - - (0.6) (0.6)
At 30 June 2017 60.2 579.2 40.2 931.6 (12.7) - 1,598.5 24.2 1,622.7
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 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 expense - - - - (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
Deferred tax on share based payments - - - - - - - - -
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 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
Profit for the period - - - 224.0 - - 224.0 2.4 226.4
Other comprehensive expense - - - - (12.2) - (12.2) - (12.2)
for the period
Total comprehensive income - - - 224.0 (12.2) - 211.8 2.4 214.2
for the period
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 - - - (34.2) - - (34.2) - (34.2)
of the parent company
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
Consolidated statement of cash flows
For the 6 months to 30 June 2017
Unaudited Unaudited Year to
6 months to 6 months to 31 December
30 June 2017 30 June 2016 2016
£m £m £m
Cash flows from operating activities 9.2 26.8 70.3
Cash flows from taxation (0.7) (1.6) (2.2)
Investing activities
Proceeds from sale of investment property 29.3 (0.3) 126.1
Loans to joint ventures - - -
Dividends received 17.5 15.1 29.2
Interest received - - 0.1
Investment in joint ventures (48.6) - -
Acquisition of intangible assets (3.2) (4.5) (8.2)
Acquisition of property (42.8) (63.5) (131.0)
Acquisition of plant and equipment (1.0) (1.4) (3.1)
Cash flows from investing activities (48.8) (54.6) 13.1
Financing activities
Interest paid in respect of financing activities (12.0) (11.3) (23.7)
Ineffective swap payments - - -
Swap cancellation costs - - (1.0)
Proceeds from the issue of share capital 0.3 0.2 0.3
Payments to acquire own shares (1.9) (2.2) (2.5)
Proceeds from non-current borrowings 71.0 99.0 99.0
Repayment of borrowings (0.7) (30.7) (102.3)
Dividends paid to the owners of the parent company (23.2) (21.0) (34.2)
Dividends paid to minority interest (0.6) (0.6) (1.1)
Cash flows from financing activities 32.9 33.4 (65.5)
Net increase/(decrease) in cash and cash equivalents (7.4) 4.0 15.7
Cash and cash equivalents at start of period 42.7 27.0 27.0
Cash and cash equivalents at end of period 35.3 31.0 42.7
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 2016.
The comparative figures for the financial year ended 31 December 2016 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 has 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 2016 (pages 26 to 29). These are summarised as
follows:
i. Reduction in demand as a result of a change in government policy 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 out in the Business Review.
The Group has prepared cash flow forecasts to the end of 2019. The Group has
sufficient levels of cash headroom to meet all of its commitments. 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 mitigates 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 and provides
a reconciliation between the primary statements and EPRA performance measures.
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.
The Group uses EPRA earnings and NAV movement as key comparable indicators
across other real estate companies in Europe.
Performance measures
Note Unaudited Unaudited 31 December
30 June 2017 30 June 2016 2016
£ £ £
Earnings basic 2.2c 82.4m 106.7m 224.0m
Earnings diluted 2.2c 83.9m 108.3m 227.7m
Basic earnings per share (pence) 2.2c 36.7p 48.3p 101.3p
Diluted earnings per share (pence) 2.2c 36.5p 45.2p 94.7p
Net assets basic 2.3c 1,598.5 1,344.2 1,451.6m
Basic NAV per share (pence) 2.3d 663p 605p 653p
EPRA performance measures
Note Unaudited Unaudited 31 December
30 June 2017 30 June 2016 2016
£ £ £
EPRA earnings 2.2a 40.4m 36.1m 62.7m
EPRA earnings per share (pence) 2.2c 18.0p 16.3p 28.4p
Adjusted EPRA earnings 2.2a 40.4m 36.1m 61.3m
Adjusted EPRA earnings per share (pence) 2.2c 18.0p 16.3p 27.7p
EPRA NAV 2.3a 1,616.3m 1,491.5m 1,557.3m
EPRA NAV per share (pence) 2.3d 669p 620p 646p
EPRA NNNAV 2.3c 1,615.4m 1,418.7m 1,517.3m
EPRA NNNAV per share (pence) 2.3d 668p 589p 630p
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 2017 and 30 June 2016 and for the year ended 31 December 2016 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
IFRS profits include unrealised investment property gains and losses. The
Group's performance is also presented on the basis recommended for real estate
companies by the European Public Real Estate Association (EPRA). EPRA earnings
excludes these unrealised 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 way in which the Operations
segment adds value to the business is set out in the Operations review on
pages 30 - 33 of the 2016 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.
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 2017
UNITE Share of joint ventures Group on see through basis
Total USAF LSAV Total Total
£m £m £m £m £m
Rental income 53.5 20.7 18.2 38.9 92.4
Property operating expenses (14.1) (5.1) (2.5) (7.6) (21.7)
Net operating income 39.4 15.6 15.7 31.3 70.7
Management fees 11.3 (1.5) (2.3) (3.8) 7.5
Operating expenses (11.8) (0.2) (0.2) (0.4) (12.2)
38.9 13.9 13.2 27.1 66.0
Operating lease rentals* (6.4) - - - (6.4)
Net financing costs (9.3) (2.8) (5.1) (7.9) (17.2)
Operations segment result 23.2 11.1 8.1 19.2 42.4
Property segment result (0.5) - - - (0.5)
Unallocated to segments (1.2) (0.1) (0.2) (0.3) (1.5)
EPRA earnings 21.5 11.0 7.9 18.9 40.4
Included in the above is rental income of £11.9 million and property operating expenses of £3.8million relating to sale and leaseback properties. The unallocated to segments balance includes the fair value of share based payments of (£0.7million), UNITE Foundation of (£0.6 million), JV acquisition fees of £0.8 million, current tax charges of (£0.7 million) and deferred tax charges of (£0.2 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 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.
31 December 2016
UNITE Share of joint ventures Group on see through 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
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
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