REG - Unite Group PLC - Interim Results <Origin Href="QuoteRef">UTG.L</Origin> - Part 3
26/07/2016 07:06
- Part 3: For the preceding part double click ID:nRSZ1864Fb
as follows:
Note Unaudited Unaudited Year to
6 months to 6 months to 31 December
30 June 2016 30 June 2015£m 2015£m
£m
Earnings
Basic 106.7 208.3 351.9
Diluted 108.3 208.3 351.9
EPRA 2.2a 36.1 29.6 61.3
EPRA pre yield related USAF performance fee 2.2a 36.1 29.6 49.5
Weighted average number of shares (thousands)
Basic 220,941 208,070 214,304
Dilutive potential ordinary shares (share options and convertible bond) 18,849 19,126 19,877
Diluted 239,790 227,196 234,181
Earnings per share (pence)
Basic 48.3p 100.1p 164.2p
Diluted 45.2p 91.7p 150.3p
EPRA EPS 16.3p 14.2p 28.6p
EPRA EPS pre yield related USAF performance fee 16.3p 14.2p 23.1p
2.3 Net Assets
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. The way in which the Property
segment adds value to the business is set out in the Property review on pages
38 - 41 of the 2015 Annual Report. EPRA NAV, reported on the basis recommended
for real estate companies by EPRA is the key indicator used by the board to
manage the Property business.
a) EPRA net assets
Unaudited 30 June 2016
Wholly owned Share of JV's Total
£m £m £m
Investment properties 1,062.3 869.1 1,931.4
Investment properties under development 221.6 109.6 331.2
Total property portfolio 1,283.9 978.7 2,262.6
Debt on properties (545.3) (341.2) (886.5)
Cash 31.0 28.6 59.6
Net debt (514.3) (312.6) (826.9)
Other liabilities (15.7) (12.7) (28.4)
EPRA net assets (pre convertible) 753.9 653.4 1,407.3
Convertible bond * 84.2 - 84.2
EPRA net assets 838.1 653.4 1,491.5
Loan to value 40% 32% 37%
* 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.
Unaudited 30 June 2015
Wholly owned Share of JV's Total
£m £m £m
Investment properties 926.9 728.7 1,655.6
Investment properties under development 83.9 101.8 185.7
Total property portfolio 1,010.8 830.5 1,841.3
Debt on properties (478.3) (296.2) (774.5)
Cash 105.6 22.8 128.4
Net debt (372.7) (273.4) (646.1)
Other liabilities (16.8) (14.2) (31.0)
EPRA net assets 621.3 542.9 1,164.2
Loan to value 37% 33% 35%
31 December 2015
Wholly owned Share of JV's Total
£m £m £m
Investment properties 1,024.4 810.8 1,835.2
Investment properties under development 149.8 80.2 230.0
Total property portfolio 1,174.2 891.0 2,065.2
Debt on properties (475.1) (304.6) (779.7)
Cash 27.0 22.0 49.0
Net debt (448.1) (282.6) (730.7)
Other liabilities (4.9) (18.3) (23.2)
EPRA net assets (pre convertible) 721.2 590.1 1,311.3
Convertible bond 83.1 - 83.1
EPRA net assets 804.3 590.1 1,394.4
Loan to value 38% 32% 35%
b) Movement in EPRA NAV during the period
Contributions to EPRA NAV by each segment during the period is as follows:
Unaudited 30 June 2016
UNITE Share of joint ventures Group on see through basis
Total USAF LSAV Total Total
£m £m £m £m £m
Operations
Operations segment result 21.7 10.6 6.6 17.2 38.9
Property
Rental growth 22.3 3.8 5.7 9.5 31.8
Yield movement 15.2 11.6 3.7 15.3 30.5
Disposals and acquisition costs (0.3) - - - (0.3)
Investment property gains 37.2 15.4 9.4 24.8 62.0
Development property gains 11.2 (0.7) 10.8 10.1 21.3
Pre-contract and other development costs (0.6) - - - (0.6)
Total property 47.8 14.7 20.2 34.9 82.7
Unallocated
Shares issued 0.2 - - - 0.2
Investment in joint ventures (11.2) 16.5 (5.3) 11.2 -
Convertible bond 1.1 - - - 1.1
Dividends paid (21.0) - - - (21.0)
Other (4.8) - - - (4.8)
Total unallocated (35.7) 16.5 (5.3) 11.2 (24.5)
Total EPRA NAV movement in the period 33.8 41.8 21.5 63.3 97.1
Total EPRA NAV brought forward 804.3 305.3 284.8 590.1 1,394.4
Total EPRA NAV carried forward 838.1 347.1 306.3 653.4 1,491.5
The £4.8 million charge that comprises the other balance within the
unallocated segment includes a tax charge of £1.7 million, a contribution of
£0.7 million to the UNITE Foundation, fair value of share options charge of
£0.2 million and own shares acquired of 2.2 million.
Unaudited 30 June 2015
UNITE Share of joint ventures Group on see through basis
Total USAF LSAV Total Total
£m £m £m £m £m
Operations
Operations segment result 16.9 8.3 4.6 12.9 29.8
Property
Rental growth 20.8 1.8 20.2 22.0 42.8
Yield movement 52.2 25.1 30.0 55.1 107.3
Disposals and acquisition costs (17.3) 0.1 - 0.1 (17.2)
Investment property gains 55.7 27.0 50.2 77.2 132.9
Development property gains 9.9 - 19.9 19.9 29.8
Pre-contract and other development costs (0.6) - - - (0.6)
Total property 65.0 27.0 70.1 97.1 162.1
Unallocated
Shares issued 112.6 - - - 112.6
Investment in joint ventures (66.4) 50.2 16.2 66.4 -
Dividends paid (19.8) - - - (19.8)
Swap losses and debt exit costs (0.3) - - - (0.3)
Other (1.3) - - - (1.3)
Total unallocated 24.8 50.2 16.2 66.4 91.2
Total EPRA NAV movement in the period 106.7 85.5 90.9 176.4 283.1
Total EPRA NAV brought forward 514.6 206.9 159.6 366.5 881.1
Total EPRA NAV carried forward 621.3 292.4 250.5 542.9 1,164.2
The £1.3 million charge that comprises the other balance within the
unallocated segment includes a tax charge of £0.9 million and a contribution
of £0.3 million to the UNITE Foundation.
31 December 2015
UNITE Share of joint ventures Group on see through 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 and 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 period 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, a contribution of
£1.0 million to the UNITE Foundation and a fair value of share options charge
of £2.9 million.
c) EPRA NAV IFRS reconciliation
EPRA NAV excludes the mark to market valuation of swaps, deferred tax
liabilities and recognises all properties at market value. These are the main
differences between EPRA NAV and Net assets reported under IFRS.
The Group also manages NAV using EPRA NNNAV, which adjusts EPRA NAV to include
the fair value of swaps and debt. This is considered to give stakeholders the
most relevant information on the current fair value of all the assets and
liabilities within in the Group.
Note Unaudited Unaudited Year to
6 months to 6 months to 31 December
30 June 2016 30 June 2015 2015
£m £m £m
Net asset value reported under IFRS 1,344.2 1,143.7 1,275.1
Mark to market interest rate swaps 21.7 1.9 4.3
Deferred tax * 41.4 18.6 31.9
EPRA NAV (pre convertible) 1,407.3 1,164.2 1,311.3
Convertible bond 84.2 - 83.1
EPRA NAV 2.3a 1,491.5 1,164.2 1,394.4
Mark to market of fixed rate debt (9.7) (28.9) (28.0)
Mark to market interest rate swaps (21.7) (1.9) (4.3)
Deferred tax (41.4) (18.6) (31.9)
EPRA NNNAV 1,418.7 1,114.8 1,330.2
* As a REIT, the Group will not be subject to tax on the sale of investment
property and as such will not be required to provide deferred tax in relation
to its properties. Had the Group been a REIT on 30 June 2016, both the net
deferred tax liability and deferred tax asset on the balance sheet would have
been reduced to nil, generating a credit to the income statement of £45.2
million and a charge of £4.7 million taken directly to equity. There would
have been no effect to the EPRA NAV or EPRA NNNAV position.
The Group has incurred a current tax charge of £1.5 million in the 6 months to
30 June 2016 (2015: £0.9 million). Following conversion to REIT status the
Group's income from its property business will not be subject to income or
corporation tax. However, the non-property business of the Group will remain
subject to corporation tax. The Group's remaining non-property activities are
expected to generate an annual corporation tax charge of £3 - £4 million from
2017 onwards.
d) NAV per share
NAV is based on the net assets attributable to the equity shareholders of
Unite Group plc and the number of shares in issue at the end of the period.
The Board uses EPRA NAV and EPRA NNNAV to monitor the performance of the
Property segment on a day to day basis.
Note Unaudited Unaudited 31 December
30 June 2016 30 June 2015£m 2015£m
£m
Net assets
Basic 2.3c 1,344.2 1,143.7 1,275.1
EPRA 2.3a 1,491.5 1,164.2 1,394.4
EPRA diluted 1,493.7 1,165.5 1,396.7
EPRA NNNAV (diluted) 1,420.9 1,116.1 1,332.5
Number of shares (thousands)
Basic 222,327 223,247 222,051
Convertible bond 18,124 - 18,124
Outstanding share options 654 313 1,027
Diluted 241,105 223,560 241,202
Net asset value per share (pence)
Basic 605p 512p 574p
EPRA 620p 522p 581p
EPRA (fully diluted) 620p 521p 579p
EPRA NNNAV (fully diluted) 589p 499p 552p
2.4. Revenue and costs
Revenue included in the consolidated income statement is allocated to the
Group's segments 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
Rental income Operations segment 2.2a 54.5 51.6 93.0
Management fees Operations segment 8.2 7.9 15.2
Development fees Property segment 0.7 0.7 1.9
Property sales Unallocated - 77.1 77.0
USAF performance fee Unallocated - 4.9 22.4
63.4 142.2 209.5
Impact of minority interest on management fees (0.1) (0.4) (0.7)
Total revenue 63.3 141.8 208.8
The cost of sales included in the consolidated income statement includes
property operating expenses of £14.8 million (30 June 2015: £13.7 million),
operating lease rentals of £7.0 million (30 June 2015: £7.6 million), costs
associated with development fees of £0.8 million (30 June 2015: £0.8 million)
and the carrying value of property sales of £nil million (30 June 2015: £70.1
million).
Section 3: Asset management
The Group holds its property portfolio directly and through its joint
ventures. The performance of the property portfolio whether wholly owned or in
joint ventures is the key factor that drives EPRA net asset value (NAV), one
of the Group's key performance indicators.
The following pages provide disclosures about the Group's investments in
property assets and joint ventures and their performance over the period.
3.1 Wholly owned property assets
The Group's wholly owned property portfolio is held in two groups on the
balance sheet at the carrying values detailed below. In the Group's EPRA NAV,
all these groups are shown at market value.
i) Investment property (fixed assets)
These are assets that the Group intends to hold for a long period to earn
rental income or capital appreciation. The assets are held at fair value in
the balance sheet with changes in fair value taken to the income statement.
ii) Investment property under development (fixed assets)
These are assets which are currently in the course of construction and which
will be transferred to 'Investment property' on completion.
The Group also acquires land which it intends to develop. Land is held within
inventories until planning permission is obtained, at which point it is
transferred to properties under development.
a) Valuation process
The valuation of the properties are performed twice a year on the basis of
valuation reports prepared by external, independent valuers, having an
appropriate recognised professional qualification. The fair values are based
on market values as defined in the RICS Appraisal and Valuation Manual, issued
by the Royal Institution of Chartered Surveyors. CB Richard Ellis Ltd, Jones
Lang LaSalle Ltd and Messrs Knight Frank, Chartered Surveyors were the
valuers in the 6 months ending 30 June 2016 and 2015.
The reports are based on both:
§ Information provided by the Group such as current rents, occupancy,
operating costs, terms and conditions of leases and nomination agreements,
capital expenditure, etc. This information is derived from the Group's
financial systems and is subject to the Group's overall control environment.
§ Assumptions and valuation models used by the valuers - the assumptions are
typically market related, such as yield and discount rates. These are based on
their professional judgement and market observation.
The information provided to the valuers - and the assumptions and the
valuation models used by the valuers - are reviewed by the property board and
the CFO. This includes a review of the fair value movements over the period.
Following the Referendum decision for the UK to exit its membership of the
European Union, we are now in a period of uncertainty in relation to many
factors that impact the property investment and letting markets.
Since the Referendum date it has not been possible to gauge the effect of this
decision by reference to transactions in the market place.
The movements in the carrying value of the Group's wholly owned property
portfolio during the period ended 30 June 2016 are shown in the table below.
Whilst completed property is held at cost on the balance sheet, the Group
manages all properties based on their market value (fair value). These
properties are included in EPRA NAV at their fair value, valued on the same
basis as for investment property and investment property under development, by
external valuers. The fair value of the Group's wholly owned properties at the
period ended 30 June 2016 are also shown below.
Unaudited 30 June 2016
Investment property Investment property under development Completed property Total
£m £m £m £m
At 1 January 2016 1,024.4 149.8 - 1,174.2
Cost capitalised 0.4 57.4 - 57.8
Interest capitalised - 3.2 - 3.2
Valuation gains 41.9 17.1 - 59.0
Valuation losses (4.4) (5.9) - (10.3)
Net valuation gains 37.5 11.2 - 48.7
Carrying value at 30 June 2016 1,062.3 221.6 - 1,283.9
Valuation gains not recognised under IFRS but included in EPRA NAV
Brought forward - - - -
- - - -
Market value at 30 June 2016 1,062.3 221.6 - 1,283.9
The movements in the carrying value of the Group's wholly owned property
portfolio during the period ended 30 June 2015 and the fair value of the
Group's wholly owned property portfolio at the year ended 30 June 2015 is as
follows:
Unaudited 30 June 2015
Investment property Investment property under development Completed property Total
£m £m £m £m
At 1 January 2015 850.5 49.2 70.1 969.8
Cost capitalised 3.4 23.7 - 27.1
Interest capitalised - 1.1 - 1.1
Disposals - - (70.1) (70.1)
Valuation gains 74.6 9.9 - 84.5
Valuation losses (1.6) - - (1.6)
Net valuation gains 73.0 9.9 - 82.9
Carrying value at 30 June 2015 926.9 83.9 - 1,010.8
Valuation gains not recognised under IFRS but included in EPRA NAV
Brought forward - - 31.2 31.2
Disposals - - (31.2) (31.2)
- - - -
Market value at 30 June 2015 926.9 83.9 - 1,010.8
The movements in the carrying value of the Group's wholly owned property
portfolio during the period ended 31 December 2015 and the fair value of the
Group's wholly owned property portfolio at the year ended 31 December 2015 is
as follows:
31 December 2015
Investment property Investment property under development Completed property Total
£m £m £m £m
At 1 January 2015 850.5 49.2 70.1 969.8
Cost capitalised 8.6 97.4 - 106.0
Interest capitalised - 2.7 - 2.7
Transfer from investment property under development 41.2 (41.2) - -
Transfer from work in progress - 1.0 - 1.0
Disposals - - (70.1) (70.1)
Valuation gains 126.4 41.0 - 167.4
Valuation losses (2.3) (0.3) - (2.6)
Net valuation gains 124.1 40.7 - 164.8
Carrying value at 31 December 2015 1,024.4 149.8 - 1,174.2
Valuation gains not recognised under IFRS but included in EPRA NAV
Brought forward - - 31.2 31.2
Disposals - - (31.2) (31.2)
- - - -
Market value at 31 December 2015 1,024.4 149.8 - 1,174.2
b) Fair value measurement
All investment and development properties are classified as Level 3 in the
fair value hierarchy. Whilst completed property are held at cost in the
balance sheet, the Group discloses the fair value of these assets and includes
them at fair value in EPRA NAV. Completed property fair value measurements are
categorised as Level 3 in the fair value hierarchy and their fair value is
measured using the same techniques as for investment properties and investment
properties under development.
Class of asset 6 months to 6 months to 31 December
30 June 2016 30 June 2015 2015
£m £m £m
London - rental properties 420.0 379.7 409.4
Major provincial - rental properties 450.1 370.6 431.1
Other provincial - rental properties 192.2 176.6 183.9
Major provincial - development properties 132.7 61.6 94.2
Other provincial - development properties 88.9 22.3 55.6
Market value 1,283.9 1,010.8 1,174.2
The valuation technique for investment properties is a discounted cash flow
using the following inputs: net rental income, estimated future costs,
occupancy and property management costs.
Where the asset is leased to a University, the valuation also reflects the
length of the lease, the allocation of maintenance and insurance
responsibilities between the Group and the lessee, and the market's general
perception of the lessee's credit worthiness.
The resulting valuations are cross-checked against the initial yields and the
capital value per bed derived from actual market transactions.
For development properties, the fair value is usually calculated by estimating
the fair value of the completed property (using the discounted cash flow
method) less estimated costs to completion.
c) Fair value using unobservable inputs (Level 3)
6 months to 6 months to 31 December
30 June 2016 30 June 2015 2015
£m £m £m
Opening fair value 1,174.2 1,001.0 1,001.0
Gains and losses recognised in income statement 48.7 82.9 164.8
Acquisitions - - -
Capital expenditure 61.0 28.2 109.7
Disposals - (101.3) (101.3)
Closing fair value 1,283.9 1,010.8 1,174.2
d) Quantitative information about fair value measurements using unobservable
inputs (Level 3)
Fair value £m Valuation technique Unobservable inputs Range Weighted average
London Discounted Net rental income (£ per week) £179 - £327 £242
- rental properties 420.0 cash flows Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 4.5% - 5.2% 4.7%
Major provincial Discounted Net rental income (£ per week) £102 - £149 £125
- rental properties 450.1 cash flows Estimated future rent (%) 1% - 6% 4%
Discount rate (yield) (%) 5.2% - 7.0% 5.8%
Other provincial Discounted Net rental income (£ per week) £77 - £148 £122
- rental properties 192.2 cash flows Estimated future rent (%) 2% - 6% 4%
Discount rate (yield) (%) 5.7% - 9.9% 6.2%
Major provincial Discounted Estimated cost to complete (£m) £1.9m - £59.4m £30.7m
- development properties 132.7 cash flows Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 5.1% - 6.3% 5.8%
Other provincial Discounted Estimated cost to complete (£m) £2.3m - 20.2m £8.3m
- development properties 88.9 cash flows Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 5.8% - 5.9% 5.9%
Fair value at 30 June 2016 1,283.9
Fair value £m Valuation technique Unobservable inputs Range Weighted average
London Discounted Net rental income (£ per week) £199 - £311 £231
- rental properties 379.7 cash flows Estimated future rent (%) 2% - 3% 3%
Discount rate (yield) (%) 5.0% - 5.5% 5.1%
Major provincial Discounted Net rental income (£ per week) £100 - £148 £118
- rental properties 370.6 cash flows Estimated future rent (%) 3% - 4% 4%
Discount rate (yield) (%) 5.6% - 7.0% 6.1%
Other provincial Discounted Net rental income (£ per week) £84 - £141 £115
- rental properties 176.6 cash flows Estimated future rent (%) 2% - 3% 3%
Discount rate (yield) (%) 6.0% - 8.6% 6.6%
Major provincial Discounted Estimated cost to complete (£m) £1.6m - £36.7m £26.6m
- development properties 61.6 cash flows Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 5.7% - 6.0% 5.9%
Other provincial Discounted Estimated cost to complete (£m) £13.9m - £29.1m £25.2m
- development properties 22.3 cash flows Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 6.0% 6.0%
Fair value at 30 June 2015 1,010.8
Fair value £m Valuation technique Unobservable inputs Range Weighted average
London Discounted Net rental income (£ per week) £190 - £326 £244
- rental properties 409.4 cash flows Estimated future rent (%) 2% - 4% 3%
Discount rate (yield) (%) 4.6% - 5.2% 4.8%
Major provincial Discounted Net rental income (£ per week) £95 - £146 £120
- rental properties 431.1 cash flows Estimated future rent (%) 1% - 6% 4%
Discount rate (yield) (%) 5.2% - 7.0% 5.8%
Other provincial Discounted Net rental income (£ per week) £77 - £135 £117
- rental properties 183.9 cash flows Estimated future rent (%) 2% - 6% 4%
Discount rate (yield) (%) 5.8% - 9.4% 6.3%
Major provincial Discounted Estimated cost to complete (£m) £9.4m - £47.6m £31.6m
- development properties 94.2 cash flows Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 5.2% - 5.8% 5.6%
Other provincial Discounted Estimated cost to complete (£m) £8.9m - £10.5m £10.1m
- development properties 55.6 cash flows Estimated future rent (%) 3% 3%
Discount rate (yield) (%) 5.8% - 5.9% 5.9%
Fair value at 31 December 2015 1,174.2
A decrease in net rental income, estimated future rents or occupancy will
result in a decrease in the fair value, whereas a decrease in the discount
rate (yield) or the estimated costs to complete will result in an increase in
fair value. There are interrelationships between these rates as they are
partially determined by market rate conditions.
3.2 Inventories
Unaudited Unaudited Year to
6 months to 6 months to 31 December
30 June 2016 30 June 2015 2015
£m £m £m
Interests in land 2.7 1.8 0.9
Other stocks 3.9 3.6 2.7
Inventories 6.6 5.4 3.6
3.3 Investments in joint ventures
The Group has two joint ventures:
Joint venture Group's share of Objective Partner Legal entity in which
assets/results 2016 (2015) Group has interest
The UNITE UK Student Accommodation Fund (USAF) 24.6%* (23.0%) Invest and operate Consortium of investors UNITE Student Accommodation Fund,
student accommodation throughout the UK a Jersey Unit Trust
London Student Accommodation Venture (LSAV) 50% (50%) Develop and operate student accommodation in London and Edinburgh GIC Real Estate Pte, LtdReal estate LSAV Unit Trust, a Jersey Unit Trust and LSAV (Holdings) Ltd, incorporated in Jersey
investment vehicle
of the Government
of Singapore
* Part of the Group's interest is held through a subsidiary, USAF (Feeder)
Guernsey Ltd, in which there is an external investor. A minority interest
therefore occurs on consolidation of the Group's results representing the
external investor's share of profits and assets relating to its investment in
USAF. The ordinary shareholders of The UNITE Group plc are beneficially
interested in 23.0% (30 June 2015: 21.4%) of USAF.
a) Movement in carrying value of the Group's investments in joint ventures
The carrying value of the Group's investment in joint ventures has increased
by £61.6 million during the 6 months ended 30 June 2016 (30 June 2015: £179.0
million), resulting in an overall carrying value of £672.2 million (30 June
2015: £562.8 million). The following table shows how the increase has been
achieved.
Unaudited Unaudited Year to
6 months to 6 months to 31 December
30 June 2016 30 June 2015 2015
£m £m £m
Recognised in the income statement:
Operations segment result 17.2 12.9 23.6
Minority interest share of Operations segment result 0.7 0.8 1.2
Management fee adjustment relating to trading with joint venture 2.5 1.8 4.1
Net revaluation gains 35.8 106.1 152.7
Loss on cancellation of interest rate swaps - - (0.3)
Profit on disposal of investment property - - 0.3
Other 0.2 0.2 0.2
56.4 121.8 181.8
Recognised in equity:
Movement in effective hedges (2.9) 0.7 0.6
Other adjustments to the carrying value:
Profit adjustment related to trading (2.4) (11.2) (11.9)
with joint venture
Increase in loan to USAF - 30.5 30.5
Additional capital invested in USAF 25.6 29.1 29.1
USAF performance fee - - (3.7)
Additional capital invested in LSAV - 19.1 23.3
Distributions received (15.1) (11.0) (22.9)
Increase in carrying value 61.6 179.0 226.8
Carrying value brought forward 610.6 383.8 383.8
Carrying value carried forward 672.2 562.8 610.6
b) Transactions with joint ventures
The Group acts as asset and property manager for the joint ventures and
receives management fees in relation to these services.
In addition, the Group is entitled to investment management fees from USAF and
LSAV, which collectively include performance fees if the joint ventures
outperform certain benchmarks, and property acquisition fees. The Group
receives an enhanced equity interest in the JV's as consideration for the
performance fee. The Group has recognised the following management fees in its
results for the year.
Unaudited Unaudited Year to
6 months to 6 months to 31 December
30 June 2016 30 June 2015 2015
£m £m £m
USAF 4.9 3.8 8.5
LSAV 2.7 2.3 4.7
Property management fees 7.6 6.1 13.2
LSAV 0.7 0.7 1.4
Development management fees 0.7 0.7 1.4
USAF performance fee - 4.2 25.6
USAF acquisition fee 0.5 2.1 2.1
Investment management fees 0.5 6.3 27.7
Total fees 8.8 13.1 42.3
Section 4: Funding
The Group finances its development and investment activities through a mixture
of retained earnings, borrowings and equity. The Group continuously monitors
its financing arrangements to manage its gearing.
Interest rate swaps are used to manage the Group's risk to fluctuations in
interest rate movements.
The following pages provide disclosures about the Group's funding position,
including borrowings and hedging instruments.
4.1 Borrowings
The table below analyses the Group's borrowings which comprise bank and other
loans by when they fall due for payment:
Unaudited 6 months to Unaudited 6 months to Year to 31 December 2015
30 June 2016 30 June 2015
Carrying value£m Fair value£m Carrying value£m Fair value£m Carrying value£m Fair value£m
Current
In one year or less, or on demand 1.4 1.3 9.2 9.2 31.3 31.2
Non-current
In more than one year but not more than two years 1.5 1.4 31.4 31.4 1.5 1.4
In more than two years but not more than five years 302.6 334.5 196.9 231.7 202.2 240.4
In more than five years 239.8 208.6 240.8 228.1 240.1 225.5
543.9 544.5 469.1 491.2 443.8 467.3
Total borrowings 545.3 545.8 478.3 500.4 475.1 498.5
The carrying value of borrowings is considered to be approximate to fair
value, except for the Group's fixed rate loans carried at £330.9 million (30
June 2015: £332.5 million) and the convertible bond carried at £84.3 million
(30 June 2015: £82.5 million). The convertible bond and £90.0 million of fixed
rate loans are classified as level 1 in the IFRS 13 fair value hierarchy and
have a fair value of £212.2 million (30 June 2015: £214.8 million).
The remaining £240.9 million (30 June 2015: £242.5 million) of fixed rate
loans are classified as level 2 in the IFRS
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