REG - Workspace Grp PLC - Final Results <Origin Href="QuoteRef">WKP.L</Origin> - Part 2
08/06/2016 07:05
- Part 2: For the preceding part double click ID:nRSH5143Aa
2016£m 2015 £m
Total administrative expenses are analysed below:
Staff costs 7.5 6.8
Cash settled share based costs 0.9 1.3
Equity settled share based costs 1.9 2.0
Other 4.3 3.7
14.6 13.8
3(a). Profit on disposal of investment properties
2016£m 2015£m
Proceeds from sale of investment properties (net of sale costs) 122.7 99.0
Book value at time of sale (including assets held for sale) (115.0) (98.7)
Profit on disposal 7.7 0.3
Realisation of profits on sale of properties out of joint ventures (note 12(a)) 0.4 ---
8.1 0.3
£0.4m (2015: £nil) above relates to previously unrealised profits from the
sale of property by the Group to joint ventures.
£1.5m (2015: £1.5m) of the proceeds for the year were in the form of deferred
consideration, of which the full amount is outstanding at 31 March 2016 (31
March 2015: £1.5m) and is included in the Consolidated Balance Sheet under
non-current and current trade and other receivables.
3(b). Loss on disposal of joint ventures
2016£000 2015£000
Proceeds from disposal of joint ventures 3.1 _
Carrying value at time of disposal (note 12(a)) (3.2) --
Loss on disposal (0.1) --
3(c). Other income
2016£m 2015£m
Joint venture performance fee 24.1 --
Change in fair value of deferred consideration 9.5 10.1
Lease surrender premium 5.4 -
39.0 10.1
The Group as property manager to the BlackRock Workspace Property Trust joint
venture is due a performance fee based on the returns achieved over the five
year term of the fund. The five year term came to an end in February 2016 and
the Group has agreed with its partner to sell the remaining properties to
bring the joint venture to a conclusion. Based on the returns achieved over
the life of the fund and the valuation at 31 March 2016 of the remaining
properties a fee was estimated at £24.1m. In accordance with IAS18 recognition
rules this has been recognised as income for the year.
The value of deferred consideration (cash and overage) from the sale of
investment properties has been re-valued by CBRE Limited at 31 March 2016 and
31 March 2015. The amounts receivable are included in the Consolidated balance
sheet under non-current and current trade and other receivables (note 13).
The lease surrender premium is in respect of an amount received from a tenant
in order to break their lease.
4. Finance income and costs
2016£m 2015£m
Interest income on bank deposits 0.1 0.1
Finance income 0.1 0.1
Interest payable on bank loans and overdrafts (2.7) (3.6)
Interest payable on other borrowings (13.9) (14.7)
Amortisation of issue costs of borrowings (0.8) (0.8)
Interest payable on finance leases (0.5) (0.3)
Interest capitalised on property refurbishments (note 10) 0.9 0.8
Foreign exchange (losses)/gains on financing activities (2.2) (7.2)
Cash flow hedge - transfer from equity 2.2 7.2
Finance costs (17.0) (18.6)
5. Employees and directors
Staff costs for the Group during the year were: 2016£m 2015£m
Wages and salaries 12.8 11.2
Social security costs 1.4 1.3
Other pension costs 0.8 0.7
Cash settled share based costs 0.9 1.3
Equity settled share based costs 1.9 2.0
17.8 16.5
Less costs capitalised (1.6) (1.2)
16.2 15.3
The monthly average number of people employed during the year was: 2016Number 2015Number
Head office staff (including Directors) 92 85
Estates and property management staff 119 114
211 199
6. Taxation
2016£m 2015£m
Current tax:
UK corporation tax 1.3 -
Adjustments to tax in respect of previous periods - 0.1
1.3 0.1
Deferred tax:
On origination and reversal of temporary differences 1.1 -
1.1 -
Total taxation charge 2.4 0.1
The tax on the Group's profit for the year differs from the standard
applicable corporation tax rate in the UK of 20% (2015: 21%). The differences
are explained below:
2016£m 2015£m
Profit on ordinary activities before taxation 391.3 360.0
Adjust gains from share in joint ventures (4.2) (8.4)
387.1 351.6
Tax at standard rate of corporation tax in the UK of 20% (2015: 21%) 77.4 73.8
Effects of:
REIT exempt income (10.3) (5.8)
Changes in fair value not subject to tax as a REIT (59.3) (66.3)
Change in fair value of derivatives not subject to tax (0.5) -
Share based payment adjustments (3.0) (0.7)
Other income 0.2 0.2
Adjustments to tax in respect of previous periods - 0.1
Losses carried forward previously unrecognised 0.3 (1.2)
Losses brought forward (2.4) -
Total taxation charge 2.4 0.1
The Group is a Real Estate Investment Trust (REIT). The Group's UK property
rental business (both income and capital gains) is exempt from tax. The
Group's other income is subject to corporation tax. A substantial amount of
other income has been recorded this year (note 3(c)). £30.7m (2015: £6.7m) of
this income is subject to tax and so the Group has a higher tax charge than in
previous years. The Group estimates that as the majority of its future profits
will be exempt from tax, it will have a very low tax charge.
Changes to the UK corporation tax rates were substantively enacted as part of
Finance Bill 2015 on 26 October 2015. These include reductions to the main
rate to reduce the rate to 19% from 1 April 2017 and to 18% from 1 April 2020.
Deferred taxes at the balance sheet date have been measured using these
enacted tax rates and reflected in these financial statements.
The Group currently has unrecognised tax losses carried forward of £1.4m
(2015: £3.6m) calculated at a corporation tax rate of 19% (2015: 20%).
The analysis of deferred tax assets and liabilities is as follows:
2016£m 2015£m
Deferred tax assets:
- Deferred tax to be recovered within 12 months 3.1 2.3
Deferred tax liabilities:
- Deferred tax liabilities to be recovered within 12 months (4.2) (2.3)
Deferred tax liabilities (net) (1.1) -
The movement in deferred tax assets and liabilities during the year, without
taking into consideration the offsetting of balances within the same tax
jurisdiction, is as follows:
Deferred tax liabilities Other income (overage receipts)£m Total£m
At 1 April 2014 - -
Charged to income statement 2.3 2.3
At 1 March 2015 2.3 2.3
Charged to income statement 1.9 1.9
At 31 March 2016 4.2 4.2
Deferred tax assets Expenses (share-based payment) £m Tax losses£m Total£m
At 1 April 2014 - - -
Credited to income statement - (2.3) (2.3)
At 1 March 2015 - (2.3) (2.3)
(Credited)/charged to income statement (1.1) 0.3 (0.8)
At 31 March 2016 (1.1) (2.0) (3.1)
7. Dividends
Ordinary dividends paid Payment date Per share 2016£m 2015£m
For the year ended 31 March 2014:
Final dividend August 2014 7.09p - 10.3
For the year ended 31 March 2015:
Interim dividend February 2015 3.89p - 6.3
Final dividend August 2015 8.15p 13.2 -
For the year ended 31 March 2016:
Interim dividend February 2016 4.86p 7.9 -
Dividends for the year 21.1 16.6
Timing difference on payment of withholding tax (0.2) (0.1)
Dividends cash paid 20.9 16.5
In addition the Directors are proposing a final dividend in respect of the
financial year ended 31 March 2016 of 10.19 pence per ordinary share which
will absorb an estimated £16.5m of revenue reserves and cash. If approved by
the shareholders at the AGM, it will be paid on 5 August 2016 to shareholders
who are on the register of members on 8 July 2016. The dividend will be paid
as a REIT Property Income Distribution (PID) net of withholding tax where
appropriate.
8. Earnings per share
Earnings used for calculating earnings per share: 2016£m 2015£m
Basic and diluted earnings (attributable to owners of the parent) 388.9 350.9
Change in fair value of investment properties (296.6) (318.0)
Adjustments for non-controlling interests share of change in fair value of investment property - 3.7
Profit on disposal of investment properties (8.1) (0.3)
Loss on disposal of joint ventures 0.1 -
Movement in fair value of derivative financial instruments (0.9) 2.2
Group's share of EPRA adjustments of joint ventures (5.6) (9.3)
EPRA adjusted earnings 77.8 29.2
Adjustment for non-trading items:
Group's share of joint ventures other expenses 2.7 2.1
Other income (note 3(c)) (39.0) (10.1)
Non-controlling interest (less adjustment above) - 5.3
Taxation 2.4 0.1
Adjusted underlying earnings 43.9 26.6
Earnings have been adjusted and calculated on a diluted basis to derive an
earnings per share measure as defined by the European Public Real Estate
Association (EPRA) and an underlying earnings measure. Adjusted underlying
earnings represents trading profits after interest, including trading profits
of joint ventures.
Number of shares used for calculating earnings per share: 2016Number 2015Number
Weighted average number of shares (excluding own shares held in trust) 161,843,774 151,635,965
Dilution due to share option schemes 2,018,833 2,649,360
Weighted average number of shares for diluted earnings per share 163,862,607 154,285,325
In pence: 2016 2015
Basic earnings per share 240.3p 231.4p
Diluted earnings per share 237.3p 227.4p
EPRA earnings per share1 47.5p 18.9p
Adjusted underlying earnings per share1 26.8p 17.2p
1. EPRA earnings per share and adjusted underlying earnings per share are
calculated on a diluted basis.
9. Net assets per share
Net assets used for calculating net assets per share: 2016£m 2015£m
Net assets at end of year (basic) 1,517.6 1,146.3
Derivative financial instruments at fair value (3.9) 2.3
EPRA net assets 1,513.7 1,148.6
Number of shares used for calculating net assets per share: 2016Number 2015Number
Shares in issue at year-end 162,404,600 161,107,649
Less own shares held in trust at year-end (122,362) (114,354)
Number of shares for calculating basic net assets per share 162,282,238 160,993,295
Dilution due to share option schemes 1,673,407 2,462,487
Number of shares for calculating diluted adjusted net assets per share 163,955,645 163,455,782
2016 2015
EPRA net assets per share £9.23 £7.03
Net assets have been adjusted and calculated on a diluted basis to derive a
net asset per share measure as defined by the European Public Real Estate
Association (EPRA).
10. Investment properties
2016£m 2015£m
Balance at 1 April 1,408.9 1,068.3
Purchase of investment properties 107.4 80.0
Acquisition of finance leases - 3.6
Capital expenditure 54.3 37.2
Capitalised interest on refurbishments (note 4) 0.9 0.8
Disposals during the year (114.7) (98.7)
Change in fair value of investment properties 296.6 318.0
Balance at 31 March 1,753.4 1,409.2
Less: classified as assets held for sale - (0.3)
Less: classified as trade and other receivables (4.0) -
Total investment properties 1,749.4 1,408.9
Investment properties represent a single class of property being business
accommodation for rent in London.
Capitalised interest is included at a rate of capitalisation of 4.8% (2015:
5.2%). The total amount of capitalised interest included in investment
properties is £6.7m (2015: £5.8m).
The change in fair value of investment properties is recognised in the
Consolidated income statement.
Valuation
The Group's investment properties are held at fair value and were revalued at
31 March 2016 by the external valuer, CBRE Limited, a firm of independent
qualified valuers in accordance with the Royal Institution of Chartered
Surveyors Valuation - Professional Standards 2014. All the properties are
revalued at period end regardless of the date of acquisition. This includes a
physical inspection of all properties, at least once a year. In line with IFRS
13, all investment properties are valued on the basis of their highest and
best use. For like-for-like properties their current use equates to the
highest and best use. For properties undergoing refurbishment or
redevelopment, most of these are currently being used for business
accommodation in their current state. However, the valuation is based on the
current valuation at the balance sheet date including the impact of the
potential refurbishment and redevelopment as this represents the highest and
best use.
The Executive Committee and the Board both conduct a detailed review of each
property valuation to ensure appropriate assumptions have been applied.
Meetings are held with the valuers to review and challenge the valuations,
ensuring they have considered all relevant information, and rigorous reviews
are performed to ensure valuations are sensible.
The valuation of like-for-like properties (which are not subject to
refurbishment or redevelopment) is based on the income capitalisation method
which applies market-based yields to the Estimated Rental Values (ERVs) of
each of the properties. Yields are based on current market expectations
depending on the location and use of the property. ERVs are based on estimated
rental potential considering current rental streams, market comparatives,
occupancy and timing of rent reviews. Whilst there is market evidence for
these inputs and recent transaction prices for similar properties, there is
still a significant element of estimation and judgement. As a result of
adjustments made to market observable data, the significant inputs are deemed
unobservable under IFRS 13.
When valuing properties being refurbished by Workspace, the residual value
method is used. The completed value of the refurbishment is determined as for
like-for-like properties above. Capital expenditure required to complete the
building is then deducted and a discount factor is applied to reflect the time
period to complete construction and allowance made for construction and market
risk to arrive at the residual value of the property.
The discount factor used is the property yield that is also applied to the
estimated rental value to determine the value of the completed building. Other
risks such as unexpected time delays relating to planned capital expenditure
are assessed on a project-by-project basis, looking at market comparable data
where possible and the complexity of the proposed scheme.
Redevelopment properties are also valued using the residual value method. The
completed proposed redevelopment which would be undertaken by a residential
developer is valued based on the market value for similar sites and then
adjusted for costs to complete, developer's profit margin and a time discount
factor. Allowance is also made for planning and construction risk depending on
the stage of the redevelopment. If a contract is agreed for the
sale/redevelopment of the site, the property is valued based on agreed
consideration.
For all methods the valuers are provided with information on tenure, letting,
town planning and the repair of the buildings and sites.
An increase/decrease to ERVs will increase/decrease valuations respectively,
while an increase/decrease to yields will decrease/increase valuations
respectively. There are interrelationships between these inputs as they are
partially determined by market conditions.
An increase/decrease in costs to complete and the discount factor will
decrease/increase valuations respectively.
The reconciliation of the valuation report total to the amount shown in the
Consolidated balance sheet as non-current assets, investment properties, is as
follows:
2016£m 2015£m
Total per CBRE valuation report 1,778.6 1,423.4
Deferred consideration on sale of property (36.3) (21.3)
Assets held for sale - (0.3)
Head leases treated as finance leases under IAS 17 7.1 7.1
Total investment properties per balance sheet 1,749.4 1,408.9
The Group's Investment properties are carried at fair value and under IFRS 13
are required to be analysed by level depending on the valuation method
adopted. The different valuation methods are as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets
or liabilities that the entity can access at the measurement date.
Level 2 - Use of a model with inputs (other than quoted prices included in
Level 1) that are directly or indirectly observable market data.
Level 3 - Use of a model with inputs that are not based on observable
market data.
As noted in the Significant judgements, key assumptions and estimates section,
property valuations are complex and involve data which is not publicly
available and involves a degree of judgement. All the investment properties
are classified as Level 3, due to the fact that one or more significant inputs
to the valuation are not based on observable market data. If the degree of
subjectivity or nature of the measurement inputs changes then there could be a
transfer between Levels 2 and 3 of classification. No changes requiring a
transfer have occurred during the current or previous year.
The following table summarises the valuation techniques and inputs used in the
determination of the property valuation.
Key unobservable inputs:
ERVs - per sq. ft. Equivalent yields
Property category Valuation £m Valuation technique Range Weighted average Range Weighted average
Like-for-like 864 1 £7 - £83 £26 4.5% - 8.2% 6.4%
Completed projects 316 1 £28 - £65 £49 5.2% - 6.4% 6.1%
Refurbishments 192 2 £20 - £63 £44 5.3% - 7.0% 5.6%
Redevelopments 176 2 £15 - £35 £26 5.0% - 7.0% 6.4%
Other 194 1 £16 - £56 £38 2.5% - 7.0% 5.2%
Head leases 7 n/a
Total 1,749
1 = Income capitalisation method.
2 = Residual value method.
Sensitivity analysis:
A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would
result in the following increase/decrease in the valuation.
Like-for-like +86/-86 -32/+35
Completed projects (refurbishments) +32/-32 -12/+14
Refurbishments +24/-24 -11/+15
Redevelopments +12/-12 -5/+5
Other +19/-19 -9/+10
Other
+19/-19
-9/+10
11. Property, plant and equipment
Cost or valuation Equipment and fixtures £m Total £m
Balance at 31 March 2014 7.2 7.2
Additions during the year 0.7 0.7
Balance at 31 March 2015 7.9 7.9
Additions during the year 0.8 0.8
Disposals during the year (3.6) (3.6)
Balance at 31 March 2016 5.1 5.1
Accumulated depreciation
Balance at 31 March 2014 5.2 5.2
Charge for the year 0.7 0.7
Balance at 31 March 2015 5.9 5.9
Charge for the year 0.8 0.8
Disposals during the year (3.6) (3.6)
Balance at 31 March 2016 3.1 3.1
Net book amount at 31 March 2016 2.0 2.0
Net book amount at 31 March 2015 2.0 2.0
12(a). Investment in joint ventures
The Group's investment in joint ventures represents:
2016 £m 2015 £m
Balance at 1 April 28.6 23.1
Capital distributions received† (6.3) (2.0)
(Repayment)/payment of loans to joint ventures (0.2) 0.2
Share of gains 4.2 8.4
Income distributions received† (1.2) (1.1)
Disposal of joint ventures (note 3(b)) (3.2) -
Realisation of profits on sale of properties out of joint ventures (note 3(a)) 0.4 -
Balance at 31 March 22.3 28.6
† Capital distributions are from proceeds on disposal of investment
properties. Income distributions are from trading profits.
The Group had the following joint ventures during the year:
Partner Established Ownership MeasurementMethod
BlackRock Workspace Property Trust BlackRock UK Property Fund February 2011 20.1% Equity
Enterprise House Investments LLP* Polar Properties Limited April 2012 50% Equity
Generate Studio Limited Whitebox Creative Limited February 2014 50% Equity
*The Company sold its share in this joint venture in July 2015.
BlackRock Workspace Property Trust is a Jersey property unit trust established
in February 2011 whose aim was to build a fund of up to £100m of office and
industrial property in and around London. The Group holds a 20.1% interest
however strategic decisions are taken with the agreement of both parties and
no one party has control on their own. The Group is also property manager with
significant delegated powers including responsibility for asset management and
recommending acquisitions and disposals. As a result there is shared control
and so the joint venture has been equity accounted in the Consolidated
financial statements.
Enterprise House Investments LLP was established to obtain mixed use planning
consent and redevelop Enterprise House, Hayes, UB3 for new residential and
commercial space. The Group sold its share in this joint venture in July
2015.
Generate Studio Limited is engaged in the design and project management of
office fit outs and workplace consultancy both for Group properties and third
parties.
The Group has no funding commitments relating to its joint ventures.
The summarised balance sheets and income statements of the joint ventures are
shown below:
Investment properties 130.6 139.7
Cash and cash equivalents 6.3 8.0
Other current assets 1.8 1.5
Current liabilities (27.8) (14.5)
Net assets 110.9 134.7
Net assets
110.9
134.7
The net assets of BlackRock Workspace Property Trust included above are
£110.5m (2015: £127.9m).
Income statements of joint ventures 2016 £m 2015 £m
Revenue 9.5 9.8
Direct costs (2.9) (3.0)
Net rental income 6.6 6.8
Administrative expenses (1.8) (1.9)
Other expenses (13.9) (10.2)
Profit on disposal of investment properties 0.8 5.7
Change in fair value of investment properties 27.5 36.6
Profit before tax 19.2 37.0
Taxation (0.1) -
Profit after tax 19.1 37.0
The profit after tax of BlackRock Workspace Property Trust included above is
£18.9m (2015: £34.4m).
There are no differences in accounting policies between the Group and the
joint ventures.
The reconciliation of the summarised financial information presented above to
the carrying amount of the Group's interest in the joint ventures is shown
below:
Summarised financial information 2016 £m 2015 £m
Opening net assets 1 April 134.7 111.6
Profit for the period 19.1 37.0
Capital distributions (31.5) (10.0)
Income distributions (4.7) (4.3)
Loans to joint ventures (0.4) 0.4
Disposal of joint ventures (6.3) -
Closing net assets 31 March 110.9 134.7
Group's interest 22.4 29.1
Unrealised surplus on sale of properties to joint ventures (0.1) (0.5)
Carrying amount 22.3 28.6
12(b). Other investments
The Group holds the following investments:
9% of share capital of Mailstorage Ltd 1.2 1.0
10% of share capital of The Excell Group plc 3.0 -
4.2 1.0
4.2
1.0
13. Trade and other receivables
Non-current trade and other receivables 2016 £m 2015 £m
Prepayments and accrued income 7.2 -
Deferred consideration on sale of investment properties (see below) 7.0 8.7
14.2 8.7
Deferred consideration on sale of investment properties: 2016 £m 2015 £m
Balance at 1 April 8.7 11.2
Additions (cash receivable) 1.6 1.5
Less: classified as current (12.8) (14.1)
Change in fair value (note 3(c)) 9.5 10.1
Balance at 31 March 7.0 8.7
The deferred consideration arising on the sale of investment properties
relates to cash and overage. The conditional value of the portion of the
receivable that relates to overage is held at fair value through profit and
loss - £4.0m (2015: £7.2m). It has been fair valued by CBRE Limited on the
basis of residual value, using appropriate discount rates, and will be
revalued on a regular basis. This is a Level 3 valuation of a financial asset,
as defined by IFRS 13. The methodology and significant assumptions used in the
valuation are consistent with those disclosed in note 10. The change in fair
value recorded in the Consolidated income statement was a gain of £9.5m (31
March 2015: £10.1m) (note 3(c)).
Trade receivables 3.4 2.8
Less provision for impairment of receivables (0.4) (0.4)
Trade receivables - net 3.0 2.4
Prepayments and accrued income 19.7 2.4
Deferred consideration on sale of investment properties 29.3 14.1
52.0 18.9
14.1
52.0
18.9
Accrued income (non-current and current) includes £24.1m (2015: £nil) in
respect of a performance fee for the BlackRock Workspace Property Trust joint
venture (note 3(c)).
Receivables at fair value:
Included within deferred consideration on sale of investment properties is
£29.3m (2015: £13.1m) of overage which is held at fair value through profit
and loss. The amount is receivable within the following 12 months and has
therefore been classified from non-current to current receivables.
Receivables at amortised cost:
The remaining receivables are held at amortised cost. There is no material
difference between the above amounts and their fair values due to the
short-term nature of the receivables. Trade receivables are impaired when
there is evidence that the amounts may not be collectable under the original
terms of the receivable. All the Group's trade and other receivables are
denominated in Sterling.
14. Cash and cash equivalents
Cash at bank and in hand 24.5 40.3
Restricted cash - tenants' deposit deeds 3.3 2.3
27.8 42.6
27.8
42.6
Tenants' deposit deeds represent returnable cash security deposits received
from tenants and are ring-fenced under the terms of the individual lease
contracts.
15. Trade and other payables
2016£m 2015£m
Trade payables 3.7 3.9
Other tax and social security payable 0.5 3.9
Corporation tax payable 1.3 -
Tenants' deposit deeds (note 14) 3.3 2.3
Tenants' deposits 16.0 13.3
Accrued expenses 20.3 18.8
Amounts due to related parties 0.4 0.4
Deferred income - rent and service charges 2.9 2.8
48.4 45.4
There is no material difference between the above amounts and their fair
values due to the short-term nature of the payables.
16. Borrowings
(a) Balances
2016£m 2015£m
Non-current
Bank loans (unsecured) 38.3 48.8
6% Retail Bond (unsecured) 56.9 56.8
5.6% Senior US Dollar Notes 2023 (unsecured) 69.7 67.6
5.53% Senior Notes 2023 (unsecured) 83.8 83.7
Senior Floating Rate Notes 2020 (unsecured) 9.0 9.0
Other term loan (unsecured) 44.5 44.4
Finance lease obligations 7.1 7.1
309.3 317.4
(b) Net Debt
2016£m 2015£m
Borrowings per (a) above 309.3 317.4
Adjust for:
Finance leases (7.1) (7.1)
Cost of raising finance 3.2 3.0
Foreign exchange differences (5.4) (3.3)
300.0 310.0
Cash at bank and in hand (note 14) (24.5) (40.3)
Net Debt 275.5 269.7
At 31 March 2016 the Group had £110m (2015: £100m) of undrawn bank facilities
and £24.5m of unrestricted cash (2015: £40.3m). £10m of bank borrowings were
repaid during the year.
(c) Maturity
2016£m 2015£m
Repayable between three years and four years 57.5 50.0
Repayable between four years and five years 49.0 57.5
Repayable in five years or more 193.5 202.5
300.0 310.0
Cost of raising finance (3.2) (3.0)
Foreign exchange differences 5.4 3.3
302.2 310.3
Finance leases
Repayable in five years or more 7.1 7.1
309.3 317.4
(d) Interest rate and repayment profile
Principal atperiod end £m Interest rate Interest payable Repayable
Current
Bank overdraft due within one year or on demand - Base +2.25% Variable On demand
Non-current
Private Placement Notes:
5.6% Senior US Dollar Notes 64.5 5.6% Half Yearly June 2023
5.53% Senior Notes 84.0 5.53% Half Yearly June 2023
Senior Floating Rate Notes 9.0 LIBOR +3.5% Half Yearly June 2020
Other term loan 22.5 LIBOR +3.5% Quarterly May 2022
22.5 LIBOR +3.5% Quarterly May 2023
Revolver loan 40.0 LIBOR +1.65% Monthly June 2020
6% Retail Bond 57.5 6.0% Half Yearly October 2019
300.0
In June 2015 the existing £50m term loan and £100m revolver facilities were
replaced by a new £150m revolver facility with the maturity extended from June
2018 to June 2020 and with reduced rates. The revised terms also provided for
the potential extension of the revolver facility for a further two one year
terms to June 2022 and a potential increase in the quantum of the facility
from £150m to £250m.
(e) Derivative financial instruments
The following derivative financial instruments are held:
Cash flow hedge - cross currency swap $100m/£64.5m 5.66% June 2023
Cash flow hedge - cross currency swap
$100m/£64.5m
5.66%
June 2023
The £95m (1.87%) interest rate swap to June 2018 was broken in June 2015 with
a cash payment of £1.7m. This was valued as a £2.6m liability at 31 March
2015.
The Group has entered into a cross currency swap to ensure the US Dollar
liability streams generated from the US Dollar Notes are fully hedged into
Sterling for the life of the transaction. Through entering into the cross
currency swap the Group has created a synthetic Sterling fixed rate liability
totalling £64.5m. This swap has been designated as a cash flow hedge with
changes in fair value dealt with in other comprehensive income.
(f) Financial instruments and fair values
2016Book Value£m 2016Fair Value£m 2015Book Value£m 2015Fair Value£m
Financial liabilities held at amortised cost
Bank loans 38.3 38.3 48.8 48.8
6% Retail Bond 56.9 59.7 56.8 62.1
Private Placement Notes 162.5 162.5 160.3 160.3
Other term loan 44.5 44.5 44.4 44.4
Finance lease obligations 7.1 7.1 7.1 7.1
309.3 312.1 317.4 322.7
Financial liabilities at fair value through profit or loss
Derivative financial instruments:
Interest rate swaps - - 2.6 2.6
Financial (assets)/liabilities at fair value through other comprehensive income
Derivative financial instruments:
Cash flow hedge - derivatives used for hedging (3.9) (3.9) (0.3) (0.3)
(3.9) (3.9) 2.3 2.3
Financial assets at fair value through profit or loss
Deferred consideration 33.3 33.3 20.3 20.3
The fair value of the Retail Bond has been established from the quoted market
price at 31 March 2016 and is thus a Level 1 valuation as defined by IFRS 13.
In accordance with IFRS 13 disclosure is required for financial instruments
that are carried in the financial statements at fair value. The fair values of
all the Group's financial derivatives have been determined by reference to
market prices and discounted expected cash flows at prevailing interest rates
and are Level 2 valuations. There have been no transfers between levels in the
year.
The different levels of valuation hierarchy as defined by IFRS 13 are set out
in note 10.
The total change in fair value of derivative financial instruments recorded in
the income statement was a £0.9m profit (2015: loss of £2.2m). This is net of
£1.7m (2015: £nil) cash paid to break the interest rate swap.
The total change in fair value of derivative financial instruments recorded in
other comprehensive income was a £1.4m profit (2015: loss of £0.3m).
17. Notes to cash flow statement
Reconciliation of profit for the year to cash generated from operations:
2016£m 2015£m
Profit before tax 391.3 360.0
Depreciation 0.8 0.7
Amortisation of intangibles 0.3 0.2
Profit on disposal of investment properties (8.1) (0.3)
Loss on disposal of joint ventures 0.1 -
Other income (33.6) (10.1)
Net gain from change in fair value of investment property (296.6) (318.0)
Equity settled share based payments 1.9 2.0
Change in fair value of financial instruments (0.9) 2.2
Finance income (0.1) (0.1)
Finance expense 17.0 18.6
Gains from share in joint ventures (4.2) (8.4)
Changes in working capital:
Increase in trade and other receivables (0.5) (0.1)
Increase in trade and other payables 0.2 7.6
Cash generated from operations 67.6 54.3
For the purposes of the cash flow statement, cash and cash equivalents
comprise the following:
2016£m 2015£m
Cash at bank and in hand 24.5 40.3
Restricted cash - tenants' deposit deeds 3.3 2.3
27.8 42.6
18. Non-controlling interests
In December 2009 Workspace acquired full control of its former Workspace Glebe
joint venture. The purchase was satisfied by a cash payment of £15m and a debt
facility of £68m provided by the former lenders to the joint venture, with
further amounts potentially payable under the Glebe Proceeds Share Agreement
(GPSA).
The GPSA provided for the former lenders to Workspace Glebe to share in net
cash proceeds from disposals from the Glebe property portfolio once Workspace
received its priority return. The priority return was £92m. For proceeds up to
£170m the lenders' share (after deducting Workspace's priority return) was
50%, from £170m up to £200m it was 30% and nil thereafter. The maximum payable
under the GPSA was capped at £48m. All disposals were at the option of
Workspace and there were no time limits.
In measuring the amount attributable to NCI, the Group took into account the
likelihood that a property would be sold and that a payment may be made. On
this basis, the Group attributed amounts to NCI when it considered it probable
that it would sell the relevant properties. No amounts were attributed to NCI
in relation to properties that the Group had no intention of selling.
In December 2014 an agreement was reached with the former lenders to terminate
the GPSA for a cash settlement of £30m. On settlement, the Group derecognised
non-controlling interests of £20m and recorded a decrease in equity
attributable to owners of the parent of £10m.
Profit and comprehensive income attributable to NCI was £nil (2015: £9.0m).
19. Share capital and share premium
2016Number 2015Number
Issued: Fully paid ordinary shares of £1 each 162,404,600 161,107,649
2016£m 2015£m
Issued: Fully paid ordinary shares of £1 each 162.4 161.1
Movements in share capital were as follows: 2016Number 2015Number
Number of shares at 1 April 161,107,649 145,616,695
Issue of shares 1,296,951 15,490,954
Number of shares at 31 March 162,404,600 161,107,649
On 12 November 2014 the Group undertook a placement of 14,627,492 shares at
660p per share raising £94.0m net of expenses.
The Group issued 1,296,951 (2015: 863,462 shares) shares during the year to
satisfy the exercise of share options.
Share Capital Share Premium
2016£m 2015£m 2016£m 2015£m
Balance at 1 April 161.1 145.6 136.8 58.2
Issue of shares 1.3 15.5 (0.9) 78.6
Balance at 31 March 162.4 161.1 135.9 136.8
20. Capital commitments
At the year end the estimated amounts of contractual commitments for future
capital expenditure not provided for were:
2016£m 2015£m
Construction or redevelopment of investment property 18.8 42.3
21. Post balance sheet events
In June 2016 the Group exercised the option for the first extension of the
maturity term of the £150m revolver facility for a year to June 2021.
Responsibility Statement
The 2016 Annual Report, which will be issued mid-June 2016, contains a
responsibility statement which states that on 7 June 2016, the date of
approval of the Annual Report, the Directors confirm that, to the best of
their knowledge:
· The Group financial statements, which have been prepared in accordance
with IFRS as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position, and profit of the Group; and
· The Business Review contained within the Annual Report, includes a fair
review of the developments and performance of the business, and the position
of the Group, with a description of the principle risks and uncertainties that
the Group faces included in a separate section.
· The Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's performance, business model and
strategy.
Approved by the Board on 7 June 2016 and signed on its behalf by
J Hopkins
G Clemett
Directors
This information is provided by RNS
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