Mucklow (A & J) Group plc

5 September 2017

Embargoed: 7.00am

 

 

Financial Summary

for the year ended 30 June 2017

 

 

Statement of comprehensive income	Year ended	Year ended
	30 June 2017	30 June 2016
Underlying pre-tax profit (1)	£15.9m	£15.0m
Statutory pre-tax profit	£29.6m	£25.2m
EPRA EPS (1)	25.05p	23.88p
Basic EPS	46.63p	39.86p
Ordinary dividend per share	22.12p	21.47p

 

Balance sheet	30 June 2017	30 June 2016
Net asset value	£296.7m	£280.6m
EPRA NAV per share (1)	471p	446p
Basic NAV per share	469p	443p
Net debt	£78.5m	£71.2m
Net debt to equity gearing	26%	25%

 

Property portfolio	30 June 2017	30 June 2016
Vacancy rate	4.2%	3.2%
Portfolio value (2)	£386.9m	£364.2m
Valuation gain	£13.0m	£10.2m
Initial yield on investment properties	6.2%	6.4%
Equivalent yield	7.0%	7.2%

 

The ordinary dividend of 22.12p per share (2016: 21.47p) consists of the first and second quarterly dividends totalling 9.88p, a third quarterly dividend of 5.15p and a final dividend of 7.09p.

 

1	An alternative performance measure. The Group uses a number of financial measures to assess and explain its performance, some of which are considered to be alternative performance measures as they are not defined under IFRS. The directors consider that this further analysis of our performance gives shareholders a useful comparison of the underlying performance for the periods shown, consistent with other companies in the sector. For further details, see the table in the Finance Review on page 9 and note 8.
2	See note 9.
For further information please contact:
Rupert Mucklow, Chairman		Tel:	0121 550 1841
David Wooldridge, Finance Director
A & J Mucklow Group plc
Fiona Tooley		Tel:	0121 309 0099
TooleyStreet Communications		Mobile:	07785 703523

 

 

Legal Entity Identifier (LEI): 21300M1Q89HWSY7ES84

 

 

Chairman's Statement

Rupert Mucklow, Chairman

 

I am pleased to report another steady performance by the Group for the year ended 30 June 2017.

 

Our property portfolio continued to perform well, in favourable market conditions. We maintained a high occupancy level throughout the year and delivered further rental growth, which in turn has contributed towards a £0.9m rise in underlying pre-tax profit (6.0%) and 25p increase in EPRA net asset value per share (5.6%).

 

Conditions were also ideal during the year for us to plan our future funding requirements. We refinanced the majority of our banking facilities, extending the terms of our loans and reduced the average cost of borrowing.

 

In recognition of further improvement in underlying profit, the Board are proposing to increase the ordinary dividend by 3% again this year, maintaining an unbroken dividend record spanning over five decades.

 

This is our 55th year as a quoted company and 10th anniversary as a Real Estate Investment Trust (REIT). We are a small team of 11 employees and 3 independent non-executive directors, proud of our corporate heritage, with a strategy focused on providing long-term stability and growth for our shareholders.

 

Results

Statutory pre-tax profit was £29.6m, which included a revaluation surplus of £13.0m (2016: £25.2m, including a revaluation surplus of £10.2m).

 

The underlying pre-tax profit, which excludes revaluation movements, profit on the sale of investment and trading properties and early repayment costs, increased by 6.0% during the year to £15.9m (2016: £15.0m). EPRA adjusted earnings per ordinary share was 4.9% higher at 25.05p (2016: 23.88p).

 

EPRA net asset value per ordinary share increased by 5.6% during the year from 446p to 471p. Basic net asset value per share increased by 26p to 469p.

 

Shareholders' funds rose to £296.7m (2016: £280.6m), while total net borrowings amounted to £78.5m (2016: £71.2m). Net debt to equity gearing was 26% and loan to value ("LTV") 20%.

 

Dividend

The Board is recommending the payment of dividends amounting to 12.24p per ordinary share, an increase of 3% over last year (2016: 11.88p), making a total for the year of 22.12p (2016: 21.47p).

 

A quarterly dividend of 5.15p per ordinary share is to be paid on 16 October 2017 to Shareholders on the register at the close of business on 15 September 2017 and a final dividend of 7.09p per ordinary share, if approved by shareholders at the AGM, will be paid on 15 January 2018 to Shareholders on the register at the close of business on 15 December 2017.

 

Both dividends will be paid as Property Income Distributions (PIDs).

 

Property Review

The occupational market in the Midlands remained active throughout the year, with demand outstripping supply. As a consequence, we have been able to continue to achieve average rental growth of around 10% on new lettings, lease renewals and rent reviews.

 

Our vacancy rate at 30 June 2017 was 4.2% (31 December 2016: 4.1%). This included 1.2% of vacant space returned to us on the expiry of five leases, just prior to our year end in June 2017. Our vacant space also included one empty office building (0.6% of vacant space) which is currently being refurbished and not available for rental until December 2017. In addition, approximately 1.0% of our vacant space was reserved at the year end.

 

The vacant office building, comprising 24,125 sq ft, is in a prime location, close to Birmingham International Railway Station and Airport and is currently undergoing a substantial refurbishment at a cost of around £2.7m. When completed later this year, it will have a rental value of around £0.54m per annum.

 

We acquired a prominent 70,182 sq ft industrial/warehouse building during the year at Barton-Under-Needwood for £5.6m. The property is located at the front of Barton Business Park, on the A38 between the A50 and A5 trunk roads. Built in 2005, the unit is currently let at a rent of £0.4m per annum.

 

We also completed the acquisition of a pre-let office development at Grove Park, Leicester for £4.7m. The property comprises 20,829 sq ft of high quality offices let at an initial rent of £0.35m per annum.

 

Construction on our first pre-let development at i54 Wolverhampton started in the second half-year, with completion anticipated for early 2018. The property will comprise a 44,250 sq ft industrial unit and the initial rent will be £0.28m per annum.

 

A vacant 12,000 sq ft office building in Henley on Thames was sold during the year to a residential developer for £4.1m, to show a profit of £1.9m over the last valuation.

 

The regional property investment market was also very competitive during the year, particularly for high quality properties with rental growth potential. There were only a limited number of industrial investment opportunities and transactions recorded, but yields contracted a little further, due to the heavy demand and tight supply of stock.

 

Property Valuation

Cushman & Wakefield revalued our property portfolio at 30 June 2017. The investment properties and development land were valued at £386.9m, recognising a revaluation surplus of £13.0m (3.5%).

 

The initial yield on the investment properties was 6.2% (30 June 2016: 6.4%). The equivalent yield was 7.0% (30 June 2016: 7.2%).

 

Cushman & Wakefield also revalued our trading properties at 30 June 2017. The total value was £1.9m (2016: £1.9m), which showed an unrecognised surplus of £1.4m against book value (2016: £1.4m).

 

Finance

We renewed our £64m banking facilities with HSBC during the first half-year for a further 5 years to 2021 on a 30% lower margin.

 

We also repaid a £20m, 5.23% fixed rate loan we had with Lloyds Bank, which was due to expire in 2022, incurring an early debt repayment cost of £1.2m and took out a new £40m term loan facility with Scottish Widows for a period of 15 years, fixed at 3.5%.

 

As such, our weighted average cost of debt has reduced to 3.1% (30 June 2016: 4.1%) or 3.6% on drawn amounts (2016: 4.4%) and our weighted average term remaining on debt has increased to 7.7 years (30 June 2016: 5.5 years).

The total net borrowings at 30 June 2017 was £78.5m (30 June 2016: £71.2m), while undrawn banking facilities were £40.5m (30 June 2016: £27.0m).

 

Net debt to equity gearing at 30 June 2017 was 26% (30 June 2016: 25%) and LTV was 20% (30 June 2016: 20%).

 

Long Term Performance

Shareholders may be interested to know that £1,000 invested in A&J Mucklow Group at flotation in 1962 would have been worth £3.3m* at 30 June 2017, assuming all the dividends had been reinvested, which would show a Total Shareholder Return (TSR) of around 15.8% per annum for the last 55 years.

A&J Mucklow Group also has the distinguished record of having never cut its dividend in 55 years as a listed company. The dividend has increased 50 times and been maintained on only 5 occasions.

 

Since conversion to a REIT on 1 July 2007, A&J Mucklow Group has paid out £120m in ordinary dividends to Shareholders and has been one of the best performing REITs over 10 years, with a TSR of +99.5%, against the FTSE EPRA/NAREIT UK Index of -2.3% for the same period*.

 

Outlook

Since our year end, the number of tenant enquiries for our vacant properties has continued in a similar manner as before and we are not expecting conditions to change much over the next 6 months.

 

Should it be necessary, we are extremely well positioned to adapt our short-term strategy in order to capitalise on any uncertainty and opportunities that may occur and remain confident of our ability to continue to deliver long term performance for our shareholders.

 

 

 

Rupert Mucklow

Chairman

4 September 2017

 

*Source: Bloomberg

 

 

 

Property Review

Justin Parker, Managing Director

 

Overview

The Group has enjoyed another positive and robust performance during the year ended 30 June 2017. Gross rental income has risen by 3.5% to £23.7m, underlying pre-tax profit by 6.0% (£0.9m) to £15.9m and ordinary dividends by 3.0%. Net assets have advanced in value to over £296m and net debt to equity gearing has remained low at 26% (2016: 25%).

 

Strong occupational demand and the continued lack of available stock in our core market of Midlands industrial, together with our asset management initiatives, have allowed us to maintain a high occupancy rate of 95.8%. In addition to this we have continued to sustain average real rental growth of around 10% on new lettings, lease renewals and rent reviews.

 

Investor demand for industrial property has remained high driven by the reality of strong rental growth. This has helped increase the value of our industrial and commercial property portfolio by 3.5% (£13.0m) over the twelve month period.

 

Key performance indicators

The Group's main objective is the long-term enhancement of shareholder value through dividend and capital appreciation, whilst adopting a conservative financial structure. As a result, the key performance indicators we use to reflect the achievement of that objective on an annual basis are: underlying pre-tax profit; vacant space; dividend growth; and net debt to equity gearing.

 

Key Performance Indicators
	2017	2016
Underlying pre-tax profit+ (£m)	15.9	15.0
Vacant space (%)	4.2	3.2
Dividend growth (%)	3.0	3.0
Net debt to equity gearing (%)	26	25

+ See the table on page 9 for the calculations.

 

Acquisition and disposal of investment properties

The industrial investment market was very competitive during our financial year, particularly in the second half, with low yields being paid for quality industrial properties.

 

In October 2016 we completed the purchase of a 70,182 sq ft industrial/warehouse building at a cost of £5.6m (initial yield: 6.9%). The building is located on Barton Business Park in Barton-under-Needwood. The unit is let at an annual rent of £0.41m (£5.85 psf).

 

In January 2016 terms were agreed to forward fund a 20,829 sq ft pre-let office building at Grove Park, Leicester, for £4.7m (initial yield: 7.0%). Completion of the high quality office scheme with 112 car parking spaces took place in December 2016. The annual rent of £0.35m (£16.78 psf) commenced on completion of the acquisition.

 

In August 2016 the tenant of the Reading Road offices in Henley-on-Thames vacated. Considerable interest in the building was received from local residential developers. The office was sold in November 2016 for £4.1m, at an 86% premium to the 30 June 2016 valuation of £2.2m.

 

We continue to look for attractively priced investment properties, focusing on the Midlands industrial property

market.

 

Developing new properties for long-term investment

Mucklow Park i54, Wolverhampton

We entered into an option agreement for a prime 15 acre industrial site with Wolverhampton City Council and Staffordshire County Council in November 2015. The site is adjacent to the new Jaguar Land Rover engine manufacturing facility at i54 in Wolverhampton. The land can accommodate up to 275,000 sq ft of advanced manufacturing space.

 

Construction is currently taking place on site of a 44,250 sq ft industrial unit following a pre-letting to Tentec Limited, a subsidiary of Atlas Copco. The unit is due to complete in February 2018 and will produce a rent of £0.28m.

 

We are marketing the remainder of the site for further pre-lets.

 

Mucklow Park, Tyseley

Birmingham City Council are currently out to tender with a shortlist of civil contractors for the construction of a new link road running alongside our 20 acre site in Tyseley, Birmingham. Construction of the road is expected to commence in early 2018. Whilst awaiting the construction of this new road we continue to actively seek pre-lets for our proposed scheme.

 

If the occupational market for industrial property continues to be supportive, our 35 acres of development land at i54, Wolverhampton and Tyseley, Birmingham provides the potential for up to 625,000 sq ft of pre-let industrial/warehouse space.

 

Actively managing our assets to enhance value

The positive trends in the occupational market have continued in the year. Active management and a shortage of industrial properties available to let has supported rental growth. Our vacancy rate increased slightly to 4.2% at our year end (30/06/16: 3.2%), although 1.2% of space was returned to us, as a result of lease expiries, in June 2017.

 

This growth in income and low level of voids helped to increase net rental income as well as the capital value of the portfolio, with a revaluation surplus of £13.0m over the year.

 

Rent reviews completed in the year, on properties with a previous annual rent totalling £1.5m, were agreed at an average uplift of 10.3%.

 

Lease renewals have been agreed over 237,860 sq ft of space at a new rent of £2.1m, an increase of 10.7%.

 

New leases were agreed in the year totalling 222,812 sq ft, producing an annual rent of £1.2m, an increase of 8.7% over our ERV.

 

In December 2016 we agreed an early lease surrender on a 64,000 sq ft industrial unit at Kings Hill, Wednesbury. The unit was previously let at £0.28m until March 2017. Following refurbishment, a new 20 year lease with a break at the 10^th anniversary was agreed in June 2017 at an annual rent of £0.32m.

 

We also agreed an early lease surrender in July 2016 of a 24,125 sq ft office building at Trinity Central, Solihull. Strip out works have been completed and a major refurbishment of the building is currently taking place at a cost of around £2.7m. This work is due to be completed in December 2017. 

 

Occupancy

Our year-end vacancy rate was 4.2% (166,989 sq ft), of which 1.2% (46,892 sq ft) had been returned to us in June 2017.

 

Valuation

The external valuation of the Group's investment and development portfolio at 30 June 2017 totalled £386.9m (2016: £364.2m) leading to a valuation surplus of £13.0m being recognised in the Group's statement of comprehensive income.

 

The initial yield on the portfolio decreased by 0.2% to 6.2% (2016: 6.4%) and the equivalent yield also decreased by the same amount to 7.0% (2016: 7.2%).

 

	Initial yield 2017	Initial yield 2016	Equivalent yield 2017	Equivalent yield 2016
Industrial	6.4%	6.5%	7.0%	7.2%
Office	6.3%	7.2%	7.6%	8.0%
Retail	5.6%	5.7%	6.3%	6.4%
Total	6.2%	6.4%	7.0%	7.2%

 

Outlook

Despite the uncertainty that enveloped the UK after the vote to leave the EU, our portfolio has remained resilient. This is especially true of the industrial properties, where both occupational and investor demand currently remains high.

 

With negotiations now underway between the UK and the EU, inflation increasing and the residual political and economic effects of the recent snap General Election, a hint of caution has become evident in both the property market and wider economy.

 

Our existing portfolio continues to offer rental growth potential and our low net debt to equity gearing at 26% and £40.5m of undrawn facilities provides us with the means to take advantage of any buying opportunities that may arise should market conditions deteriorate over the next 12 months.

 

 

 

Justin Parker

Managing Director

4 September 2017

 

 

 

Finance Review 

David Wooldridge, Finance Director

 

The Group's underlying business performed well over the year, with rental income increased through lease renewals, rent reviews, new lettings and property acquisitions.

 

Our underlying cost base was largely unchanged, leading to a £0.9m increase in underlying pre-tax profit, which has supported the 3% increase in ordinary dividends.

 

As announced in the last annual report, in August 2016 we refinanced the £64.0m of facilities we had with HSBC Bank plc. The facilities were due to expire in March 2018, but we have now renewed for a five year term expiring in August 2021, and have reduced the margin payable on the facilities by around 30%. 

 

We also took advantage of the low interest rate environment to raise a further £20m of long-term debt finance by repaying the £20m Lloyds Bank 2012 term loan, which had just over 5 years remaining, out of the proceeds of a £40m 15 year term loan with Scottish Widows. Completion of the transaction, which saw the interest rate on the new facility of 3.5% being set at a significantly lower level than the 5.2% previously paid on the 2012 term loan, took place in December 2016. A £1.2m early repayment charge was incurred on the refinancing, which impacts on statutory profit, but the amount is not included in the underlying profit measure or in EPRA earnings per share.

 

We remain conservatively financed, with the refinancings in the year extending both the total amount of our facilities and moving beyond normal bank facilities, as well as providing us with a diversified maturity profile. No facilities are due to expire before 2021, our balance sheet remains strong and our loan to value is only 20%.

 

Income

Gross rental income increased from £22.9m to £23.7m and property costs, net of service charge income, increased from £0.9m to £1.0m, leading to an increase in net rental income of £0.7m to £22.7m.

 

Administration expenses increased slightly to £3.4m (2016: £3.3m).

 

Excluding the early repayment costs of £1.2m, finance costs decreased by £0.3m, as we benefited from the reduction in margin on the HSBC facilities and the lower interest rate on the Scottish Widows loan.

 

Underlying pre-tax profit increased from £15.0m to £15.9m.

 

Statutory pre-tax profit increased from £25.2m to £29.6m, mainly as a result of the above, as well as the revaluation surplus of £13.0m (2016: £10.2m) and profit on disposal of investment property of £1.9m (2016: £nil).

 

Basic and diluted earnings per share increased from 39.86p to 46.63p and EPRA earnings per share, which excludes the valuation surplus, profit on sale of investment property and early repayment costs, increased by 4.9% to 25.05p (2016: 23.88p). 

 

Taxation

No current tax charge has been recognised in the year, as the majority of the Group's income is exempt from corporation tax due to our REIT status.

 

We continue to comfortably meet all of the REIT requirements and maintain our REIT status.

 

Underlying financial performance

		Investment/	Trading	Other
	Total	development*	properties	items
2017	£m	£m	£m	£m
Gross rental income	23.7	23.7	-	-
Service charge income	1.0	1.0	-	-
Total revenue	24.7	24.7	-	-
Property costs	(2.0)	(2.0)	-	-
Net property income	22.7	22.7	-	-
Sale of trading properties	-	-	-	-
Property outgoings on trading properties	-	-	-	-
Net income from trading properties	-	-	-	-
Administration expenses	(3.4)	(3.4)	-	-
Operating profit before net gains on investment	19.3	19.3	-	-
Profit on disposal of investment and development properties	1.9	-	-	1.9
Net gains on revaluation	13.0	-	-	13.0
Operating profit	34.2	19.3	-	14.9
Finance costs	(3.4)	(3.4)	-	-
Early repayment costs	(1.2)	-	-	(1.2)
Total finance costs	(4.6)	(3.4)	-	(1.2)
Profit before tax	29.6	15.9	-	13.7

 

		Investment/	Trading	Other
	Total	development	properties	items
2016	£m	£m	£m	£m
Gross rental income	22.9	22.9	-	-
Service charge income	0.9	0.9	-	-
Total revenue	23.8	23.8	-	-
Property costs	(1.8)	(1.8)	-	-
Net property income	22.0	22.0	-	-
Sale of trading properties	-	-	-	-
Property outgoings on trading properties	-	-	-	-
Net income from trading properties	-	-	-	-
Administration expenses	(3.3)	(3.3)	-	-
Operating profit before net gains on investment	18.7	18.7	-	-
Net gains on revaluation	10.2	-	-	10.2
Operating profit	28.9	18.7	-	10.2
Gross finance costs	(3.7)	(3.7)	-	-
Total finance costs	(3.7)	(3.7)	-	-
Profit before tax	25.2	15.0	-	10.2

 

*Presented above is an analysis of the underlying rental performance before tax, as shown in the investment/development column, which excludes the impact of EPRA adjustments and capitalised interest. The directors consider that this further analysis of our profit before tax gives shareholders a useful comparison of our underlying performance for the periods shown in the financial statements.

 

Dividend

The Group moved to quarterly dividends with effect from October 2016.

 

An interim dividend of 9.88p per share (2016: 9.59p) was declared in February 2017, with 4.94p per share paid in April 2017 and 4.94p per share paid in July 2017.

 

Dividends totalling 12.24p per share (2016: 11.88p) are being declared in respect of the 30 June 2017 financial year, making the total in respect of the year ended 30 June 2017 22.12p per share (2016: 21.47p), an increase of 3% over the prior year. The dividends consist of a quarterly dividend of 5.15p and a final dividend of 7.09p. The quarterly dividend and final dividend will both be paid as Property Income Distributions (PIDs).

 

The quarterly dividend of 5.15p will be paid on 16 October 2017 to Shareholders on the register at the close of business on 15 September 2017.

 

The final dividend of 7.09p will, if approved by Shareholders at the AGM, be paid on 15 January 2018 to Shareholders on the register at the close of business on 15 December 2017.

 

The allocation of future dividends between PID and non-PID may vary.

 

The Board's continued intention is to grow the rent roll to enable a sustainable, covered, increase in dividends over the long-term, with a view to distributing around 90% of our recurring profit.

 

The interim, quarterly and final dividends paid and proposed in respect of the financial year of 22.12p amount to 88% of the EPRA earnings per share figure of 25.05p, and are covered 1.13 times by that earnings measure.

 

Net assets

Net assets increased by £16.1m in the year, from £280.6m to £296.7m, due to £15.9m of underlying pre-tax profit, a revaluation surplus of £13.0m, profit on disposal of investment property of £1.9m and share-based payment charges of £0.2m, offset by ordinary dividends of £13.7m and an early repayment interest cost of £1.2m on the refinancing of the Lloyds term loan.

 

Net asset value per share increased by 26p, from 443p to 469p, and EPRA net asset value per share increased by 25p, to 471p.

 

Financing and cash flow

Operating cash flow was £1.8m higher at £17.1m. Cash outflows in respect of property acquisitions and capital expenditure amounted to £11.4m and borrowings increased by £5.7m.

 

Equity dividends paid in the year totalled £16.7m, compared to £13.2m in the prior year, with the increase due to the introduction of quarterly dividend payments with effect from October 2016.

 

	2017	2016
	£m	£m
Net cash generated from operations	21.3	18.6
From investment and development properties	21.3	18.6
From trading properties	-	-
Net interest paid	(4.2)	(3.3)
Taxation	-	-
Operating cash flow	17.1	15.3
Property acquisitions and development	(11.4)	(4.1)
Property disposals	4.0	-
Net expenditure on property, plant and equipment	-	(0.1)
Movement in borrowings	5.7	2.3
Equity dividends	(16.7)	(13.2)
Net movement in cash	(1.3)	0.2

 

As previously disclosed, the majority of the Group's debt facilities were refinanced in the year. On 31 August 2016 the Group refinanced the HSBC term loan and revolving credit facilities, which now expire in 2021, a new £40m 15 year loan was taken out with Scottish Widows in December 2016 and the 2012 Lloyds term loan (£20m) was repaid in the same month. The Group's £1.0m overdraft was renewed for the year to November 2017 and we expect to renew the overdraft for a further twelve months.

 

The table below shows the position as at 30 June 2017.

 

	Expiry	Available	Drawn	Undrawn
Borrowing	year	£m	£m	£m
HSBC overdraft	2017	1.0	-	1.0
HSBC Revolving Credit Facility	2021	44.0	4.5	39.5
HSBC term loan	2021	20.0	20.0	-
Lloyds 10 yr term loan	2023	20.0	20.0	-
Scottish Widows 15 yr term loan	2031	40.0	40.0	-
Preference shares	-	0.7	0.7	-
		125.7	85.2	40.5

 

Of the £85.2m of drawn debt shown in the table above, 100% is at fixed rates or covered by interest rate caps.

 

Our average cost of total debt facilities at 30 June 2017 was 3.1% (2016: 4.1%) or 3.6% on drawn amounts (2016: 4.4%). The weighted average term remaining on total debt facilities is 7.7 years (2016: 5.5 years, taking into account the HSBC refinance in August 2016).

 

Analysis of borrowings at 30 June 2017

 

	2017	2016
	£m	£m
Borrowings from revolving credit facility 2021	4.5	18.0
HSBC term loan 2021	19.8	19.9
Lloyds term loan 2022	-	19.7
Lloyds term loan 2023	20.0	20.0
Scottish Widows term loan 2031	39.3	-
Preference share capital	0.7	0.7
Debt and preference share capital	84.3	78.3
Cash and short-term deposits	(5.8)	(7.1)
Net debt	78.5	71.2
Net assets	296.7	280.6
Net debt to equity gearing	26%	25%

 

 

 

David Wooldridge

Finance Director

4 September 2017

 

 

 

Group Statement of Comprehensive Income

for the year ended 30 June 2017

 

 

 

 

		2017	2016
	Notes	£m	£m
Gross rental income	2	23.7	22.9
Service charge income	2	1.0	0.9
Total revenue	2	24.7	23.8
Property costs	3	(2.0)	(1.8)
Net property income		22.7	22.0
Proceeds on sale of trading properties		-	-
Carrying value of trading properties sold		-	-
Property outgoings relating to trading properties		-	-
Net income from trading properties		-	-
Administration expenses		(3.4)	(3.3)
Operating profit before net gains on investment and development properties		19.3	18.7
Profit on disposal of investment and development properties		1.9	-
Revaluation of investment and development properties	9	13.0	10.2
Operating profit		34.2	28.9
Total finance income	5	-	-
Finance costs		(3.4)	(3.7)
Early repayment costs		(1.2)	-
Total finance costs	5	(4.6)	(3.7)
Net finance costs	5	(4.6)	(3.7)
Profit before tax		29.6	25.2
Taxation	6	-	-
Profit for the financial year		29.6	25.2
Other comprehensive income:
Items that will not be reclassified subsequently to profit and loss:
Revaluation of owner-occupied property		-	-
Total comprehensive income for the year attributable to the owners of the parent		29.6	25.2
All operations are continuing.
Basic and diluted earnings per share	8	46.63p	39.86p

 

 

Statement of Changes in Equity

for the year ended 30 June 2017

 

 

	Ordinary	Share	Capital	Revaluation	Share-based	Retained	Total
	share	premium	redemption	reserve	payments	earnings	equity
	capital		reserve		reserve
	£m	£m	£m	£m	£m	£m	£m
Balance at 30 June 2015	15.8	13.0	11.2	0.3	0.3	228.0	268.6
Retained profit	-	-	-	-	-	25.2	25.2
Other comprehensive income	-	-	-	-	-	-	-
Total comprehensive income	-	-	-	-	-	25.2	25.2
Share-based payment	-	-	-	-	0.2	-	0.2
Expiry of share options	-	-	-	-	(0.2)	0.2	-
Dividends paid	-	-	-	-	-	(13.4)	(13.4)
Balance at 30 June 2016	15.8	13.0	11.2	0.3	0.3	240.0	280.6
Retained profit	-	-	-	-	-	29.6	29.6
Other comprehensive income	-	-	-	-	-	-	-
Total comprehensive income	-	-	-	-	-	29.6	29.6
Share-based payment	-	-	-	-	0.2	-	0.2
Expiry of share options	-	-	-	-	(0.2)	0.2	-
Dividends paid	-	-	-	-	-	(13.7)	(13.7)
Balance at 30 June 2017	15.8	13.0	11.2	0.3	0.3	256.1	296.7

 

 

 

Group Balance Sheet

at 30 June 2017

 

		2017	2016
	Notes	£m	£m
Non-current assets
Investment and development properties	9	386.8	363.1
Property, plant and equipment		1.3	1.3
Derivative financial instruments		-	-
Trade and other receivables		0.6	0.5
		388.7	364.9
Current assets
Trading properties		0.5	0.5
Trade and other receivables		1.6	2.4
Cash and cash equivalents		5.8	7.1
		7.9	10.0
Total assets		396.6	374.9
Current liabilities
Trade and other payables		(15.2)	(16.0)
Current tax liabilities		(0.4)	-
		(15.6)	(16.0)
Non-current liabilities
Borrowings		(84.3)	(78.3)
Total liabilities		(99.9)	(94.3)
Net assets		296.7	280.6
Equity
Called up ordinary share capital		15.8	15.8
Share premium		13.0	13.0
Revaluation reserve		0.3	0.3
Share-based payment reserve		0.3	0.3
Redemption reserve		11.2	11.2
Retained earnings		256.1	240.0
Total equity		296.7	280.6
Net asset value per share
- Basic and diluted	8	469p	443p
- EPRA	8	471p	446p

 

 

Rupert Mucklow

David Wooldridge

 

 

 

Group Cash Flow Statement

for the year ended 30 June 2017

 

 

		2017	2016
		£m	£m
Cash flows from operating activities
Operating profit		34.2	28.9
Adjustments for non-cash items
-	Unrealised net revaluation gains on investment and development properties	(13.0)	(10.2)
-	Profit on disposal of investment properties	(1.9)	-
-	Depreciation	0.1	0.1
-	Share based payments	0.2	0.2
-	Profit on sale of property, plant and equipment	-	-
-	Amortisation of lease incentives	(0.4)	(0.3)
Other movements arising from operations
-	Increase in trading properties	-	-
-	Decrease/(increase) in receivables	0.3	(1.6)
-	Increase in payables	1.8	1.5
Net cash generated from operations		21.3	18.6
Interest received		-	-
Interest paid		(4.2)	(3.3)
Preference dividends paid		-	-
Net cash inflow from operating activities		17.1	15.3
Cash flows from investing activities
Acquisition of and additions to investment and development properties		(11.4)	(4.1)
Proceeds on disposal of investment and development properties		4.0	-
Net expenditure on property, plant and equipment		-	(0.1)
Net cash outflow from investing activities		(7.4)	(4.2)
Cash flows from financing activities
Repayment of existing borrowings		(20.0)	-
New borrowings (net of costs)		39.4	-
Net (decrease)/increase in borrowings		(13.7)	2.3
Equity dividends paid		(16.7)	(13.2)
Net cash outflow from financing activities		(11.0)	(10.9)
Net (decrease)/increase in cash and cash equivalents		(1.3)	0.2
Cash and cash equivalents at beginning of year		7.1	6.9
Cash and cash equivalents at end of year		5.8	7.1

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.  Accounting policies

Basis of preparation of financial information

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the European Union and therefore comply with Article 4 of the EU IAS regulation. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRSs, this announcement itself does not contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs on 1 October 2017.

 

The preliminary announcement was approved by the board of directors on 4 September 2017. The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 30 June 2017 or 2016 as defined under Section 435 of the Companies Act 2006. The financial information previously set out does not constitute the Company's statutory accounts for the years ended 30 June 2017 or 30 June 2016 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies, and those for 2017 will be delivered in due course.

 

The auditors, KPMG LLP, have reported on these respective statutory accounts; their reports were:

i.      unqualified;

ii.    did not include references to any matters 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 financial statements are prepared under the historical cost convention, except for the revaluation of investment and development properties and owner-occupied properties and deferred tax thereon and certain financial assets, with consistent accounting policies to the prior year.

 

Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and all its subsidiaries. Control is assumed where the Parent Company has the power to govern the financial and operational policies of the subsidiary.

 

Unrealised gains and losses on intra-Group transactions and intra-Group balances are eliminated from the consolidated results.

 

Going concern

As at 30 June 2017 the Group had £40.5m of undrawn banking facilities and had drawn down £4.5m from its HSBC £44m 2021 Revolving Credit Facility. The Group's £1.0m overdraft, which is due for renewal within 12 months of the date of this document, was undrawn. Given these facilities, the Group's low net debt to equity gearing level of 26% and £101.7m of unencumbered properties, significant capacity exists to raise additional finance or to provide additional security for existing facilities, should property values fall. Accordingly, the directors continue to adopt the going concern basis in preparing the annual report and financial statements.

 

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements requires the use of estimates and assumptions that affect reported amounts of assets and liabilities during the reporting period. These estimates and assumptions are based on management's best knowledge of the amount, event or actions. Actual results may differ from those amounts.

 

In making their judgement over the valuation of properties, which has a significant effect on the amounts recognised in the financial statements, management has used the valuation performed by its independent valuers as the fair value of its investment, development, owner-occupied and trading properties. The valuation is based upon assumptions including future rental income and an appropriate yield. The valuers also use market evidence of transaction prices for similar properties.

 

Standards in issue but not yet effective

The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

 

·     IFRS 9 Financial Instruments (effective date 1 January 2018).

·     IFRS 15 Revenue from Contract with Customers (effective date 1 January 2018).

·     IFRS 16 Leases (effective date to be confirmed).

·     Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective date to be confirmed).

·     Amendments to IAS 7: Disclosure Initiative (effective date to be confirmed).

·     Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (effective date to be confirmed).

·     Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (effective date to be confirmed).

Significant accounting policies

 

Revenue recognition

Rental income

Gross rental income represents rents receivable for the year. Rent increases arising from rent reviews due during the year are taken into account only to the extent that such reviews have been agreed with tenants at the accounting date.

 

Rental income from operating leases is recognised on a straight-line basis over the term of the lease.

 

Lease incentives are amortised on a straight-line basis over the lease term.

 

Property operating expenses are expensed as incurred.

 

Revenue and profits on sale of investment, development and trading properties

Revenue and profits on sale of investment, development and trading properties are recognised on the completion of contracts.

 

The amount of profit recognised is the difference between sale proceeds and the carrying amount.

 

Dividends and interest income

Dividend income from investments in subsidiaries is recognised when shareholders' rights to receive payment have been established.

 

Interest income is recognised on an accruals basis when it falls due.

 

Costs associated with properties

Costs associated with properties under the course of development include total development outgoings, including interest, attributable to properties held for development is added to the cost of such properties. A property is regarded as being in the course of development until practical completion.

 

Interest associated with direct expenditure on investment properties which are undergoing development or major refurbishment and development properties is capitalised. Direct expenditure includes the purchase cost of a site or property for development properties, but the original book cost of investment property under development or refurbishment is not included in the calculation of interest. Interest is capitalised gross from the start of the development work until the date of practical completion, but is suspended if there are prolonged periods when development activity is interrupted. The rate used is the rate on specific associated borrowings or, for that part of the development costs financed out of general funds, the average rate.

 

Valuation of properties

Investment properties are valued at the balance sheet date at fair value. Where investment properties are being redeveloped the property continues to be treated as an investment property. Surpluses and deficits attributable to the Group arising from revaluation are recognised in the statement of comprehensive income. Valuation surpluses reflected in retained earnings are not distributable until realised on sale.

 

Properties under construction, where the land option is owned but not the land, are valued at fair value, or under the cost model if the fair value cannot be reliably measured as the land option has not yet been exercised. Once the option is exercised the property under construction will be valued at fair value until practical completion, when they are transferred from development properties to investment properties.

 

Properties under development are valued at fair value until practical completion, when they are transferred to investment properties.  Valuation surpluses and deficits attributable to properties under development are recognised in the statement of comprehensive income.

 

Owner-occupied properties are valued at the balance sheet date at fair value. Valuation changes in owner-occupied property are taken to revaluation reserve through other comprehensive income. Where the valuation is below historic cost, the deficit is recognised in the statement of comprehensive income.

 

Trading properties held for resale are stated at the lower of cost and net realisable value.

 

Property, plant and equipment

Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

 

Any revaluation increase arising on the revaluation of such land and buildings is credited to the properties revaluation reserve through other comprehensive income, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the statement of comprehensive income to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.

 

Depreciation on revalued buildings is charged to income. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings.

 

Plant and equipment is stated at cost less accumulated depreciation, less any recognised impairment.

 

Depreciation

Depreciation is provided on buildings, motor vehicles and fixtures and fittings on a straight-line basis over the estimated useful lives of between two and twenty-five years. Investment properties are not depreciated.

 

Capital grants

Capital grants received relating to the cost of building or refurbishing investment properties are deducted from the cost of the relevant property. Revenue grants are deducted from the related expenditure.

 

Share-based payments

The cost of granting equity-settled share options and other share-based remuneration is recognised in the statement of comprehensive income at their fair value at grant date. They are expensed straight-line over the vesting period, based on estimates of the shares or options that eventually vest. Options are valued using the Monte Carlo simulation model.

 

Taxation

The Group is a Real Estate Investment Trust (REIT). As a result, the Group does not pay UK corporation tax on its profits and gains from the qualifying rental business. Non-qualifying profits and gains continue to be subject to corporation tax.

 

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Tax is recognised in the statement of comprehensive income except for items that are reflected directly in equity, where the tax is also recognised in equity.

 

Deferred taxation

Deferred taxation is provided in full on temporary differences that result in an obligation to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Temporary differences arise from the inclusion of items in taxation computations in periods different from when they are included in the financial statements. Deferred tax is provided on temporary differences arising from the revaluation of fixed assets. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.

 

Pension costs

The cost to the Group of contributions made to defined contribution plans is expensed when the contributions fall due.

 

Acquisitions

On the acquisition of a business, including an interest in an associated undertaking, fair values are attributed to the Group's share of separable net assets. Where the fair value of the cost of acquisition exceeds the fair value attributable to such assets, the difference is treated as purchased goodwill and capitalised in the balance sheet in the year of acquisition.

 

Under the Group's previous policy, £0.13m of goodwill has been written off directly to reserves as a matter of accounting policy. This would be credited to the statement of comprehensive income on disposal of the business to which it related.

 

Group undertakings

Investments are included in the balance sheet at cost less any provision for impairment.

 

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for any amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled, or they expire.

 

Trade receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of future cash flows discounted at the effective rate computed at initial recognition.

 

Available-for-sale assets

Mortgage receivables held by the Group are classified as being available-for-sale and are stated at fair value. Fair value is determined in the manner described in note 13 of the annual report. Gains and losses arising from changes in fair value are recognised directly in equity in the investments revaluation reserve with the exception of impairment losses, which are recognised directly in the statement of comprehensive income.

 

Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss recognised in the investments revaluation reserve is included in profit or loss for the period.

 

Financial assets at FVTPL

Financial assets are classified as at 'fair value through profit or loss' where it is a derivative that is not designated and effective as a hedging instrument. The interest rate caps are classified as FVTPL.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

 

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

 

Bank borrowings

Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlements or redemption and direct issue costs, are accounted for on an accrual basis in the statement of comprehensive income using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

 

Trade payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

 

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

 

2.  Revenue

	2017	2016
	£m	£m
Gross rental income from investment and development properties	23.7	22.9
Service charge income	1.0	0.9
Income received from trading properties	-	-
Total revenue	24.7	23.8

 

3.  Property costs

	2017	2016
	£m	£m
Service charge expenses	1.0	1.0
Other property expenses	1.0	0.8
	2.0	1.8

 

4.  Segmental analysis

The Group has two reportable segments: investment and development property, and trading property. 

 

These two segments are considered appropriate for reporting under IFRS 8 "Operating Segments" as these are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. The Group has a large and diverse customer base and there is no significant reliance on any single customer.

 

The measure of profit or loss that is reported to the Board of Directors for the segments is profit before tax. A segmental analysis of income from the two segments is presented below, which includes a reconciliation to the results reported in the Group statement of comprehensive income.

 

		2017	2016
		£m	£m
Investment and development properties
-	Net property income	22.7	22.0
-	Profit on disposal	1.9	-
-	Gain on revaluation of investment properties	13.0	8.2
-	Gain on revaluation of development properties	-	2.0
		37.6	32.2
Trading properties
-	Income received from trading properties	-	-
-	Carrying value on sale	-	-
-	Property outgoings	-	-
		-	-
Net income from the property portfolio before administration expenses		37.6	32.2
Administration expenses		(3.4)	(3.3)
Operating profit		34.2	28.9
Net financing costs		(4.6)	(3.7)
Profit before tax		29.6	25.2
The property revaluation gain has been recognised as follows:
Within operating profit
-	Investment properties	13.0	8.2
-	Development properties	-	2.0
		13.0	10.2
Within other comprehensive income
-	Owner-occupied properties	-	-
Total revaluation gain for the period		13.0	10.2

 

Segmental information on assets and liabilities, including a reconciliation to the results reported in the Group balance sheet, are as follows:

		2017		2016
		£m		£m
Balance sheet
Investment and development properties
-	Segment assets	388.3		365.5
-	Segment liabilities	(6.9)		(6.8)
-	Net borrowings	(78.5)		(71.2)
		302.9		287.5
Trading properties
-	Segment assets	0.5		0.5
-	Segment liabilities	-		-
		0.5		0.5
Other activities
-	Unallocated assets	2.0		1.8
-	Unallocated liabilities	(8.7)		(9.2)
		(6.7)		(7.4)
Net assets		296.7		280.6
Capital expenditure
Investment and development properties		12.6		4.0
Other activities		0.1		0.1
		12.7		4.1
Depreciation
Other activities			0.1		0.1
			0.1		0.1

 

All operations and income are derived from the United Kingdom and therefore no geographical segmental information is provided.

 

5.  Net finance costs

 

	2017	2016
	£m	£m
Finance costs on:
Preference share dividend	-	-
Early repayment costs	1.2	-
Bank overdraft and loan interest payable	3.4	3.7
Total finance costs	4.6	3.7
Finance income on:
Short-term deposits	-	-
Fair value movement of derivative financial instruments	-	-
Bank and other interest receivable	-	-
Total finance income	-	-
Net finance costs	4.6	3.7

 

 

6.  Taxation

 

	2017	2016
	£m	£m
Current tax
- Corporation tax	-	-
	-	-
Deferred tax	-	-
Total tax in the statement of comprehensive income	-	-

 

The tax for the year can be reconciled to the profit per the statement of comprehensive income as follows:

 

	2017	2016
	£m	£m
Profit before tax	29.6	25.2
Profit before tax multiplied by the standard rate of
UK corporation tax of 19.75% (2016: 20.0%)	5.9	5.0
Effect of:
REIT exempt income and gains	(6.1)	(5.2)
Losses not recognised	0.1	0.1
Share based payments	0.1	0.1
	-	-

 

Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013.  Further reductions to 19% (effective from 1 April 2017) and to 17% (effective 1 April 2020) were substantively enacted on 26 October 2015 and 6 September 2016 respectively.  Any deferred tax balance would be calculated based on these rates as at 30 June 2017. 

 

The Group became a Real Estate Investment Trust (REIT) on 1 July 2007. Under the tax rules which apply to REITs properties which are developed and sold within three years of completion do not benefit from the normal REIT tax exemption on disposal gains. The Group currently owns £13.5m (2016: £14.1m) of properties which have completed development during the previous three years.  If these properties had been disposed of at their 30 June 2017 valuation, then tax of £nil (2016: £0.5m) would have become payable. No deferred tax has been provided in respect of this potential tax liability as the Group had no plans to dispose of these properties at the balance sheet date.

 

7.  Dividends

	2017	2016
	£m	£m
Amounts recognised as distributions to equity holders in the year:
Quarterly dividend for the year ended 30 June 2016 of 5.00p (2015: nil) per share	3.1	-
Final dividend for the year ended 30 June 2016 of 6.88p (2015: 11.53p) per share	4.4	7.3
Interim dividend for the year ended 30 June 2016 of 9.59p per share	-	6.1
First quarterly dividend for the year ended 30 June 2017 of 4.94p (2016: nil) per share	3.1	-
Second quarterly dividend for the year ended 30 June 2017 of 4.94p (2016: nil) per share	3.1	-
	13.7	13.4

 

The third quarterly dividend payment of 5.15p (2016: 5.00p) will be paid on 16 October 2017 to shareholders on the register at the close of business on 15 September 2017, totalling £3.3m.  As this dividend was not declared at 30 June 2017, it has not been included as a liability in these financial statements.

 

The directors propose a final dividend for the year ended 30 June 2017 of 7.09p (2016: 6.88p) per ordinary share, totalling £4.5m.  Both dividends will be paid as PIDs.

 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has therefore not been included as a liability in these financial statements.

 

The final dividend, if approved, will be paid on 15 January 2018 to shareholders on the register at the close of business on 15 December 2017.

 

8.  Earnings per share and net asset value per share

 

Earnings per share

The basic and diluted earnings per share of 46.63p (2016: 39.86p) has been calculated on the basis of the weighted average of 63,294,833 ordinary shares (2016: 63,294,833 ordinary shares) and profit of £29.6m (2016: £25.2m).

 

The European Public Real Estate Association (EPRA) has issued recommended bases for the calculation of earnings and net asset value per share information and these are included in the following tables.

 

The EPRA earnings per share has been amended from the basic and diluted earnings per share by the following:

 

	2017	2016
	£m	£m
Earnings	29.6	25.2
Profit on disposal of investment and development properties	(1.9)	-
Net gains on revaluation of investment and development properties	(13.0)	(10.2)
Early repayment costs	1.2	-
EPRA earnings	15.9	15.0
EPRA earnings per share	25.05p	23.88p

 

The Group presents an EPRA earnings per share figure as the directors consider that this is a better indicator of the performance of the Group.

 

There are no dilutive shares. Options over 103,257 ordinary shares were granted in the year (2016: 94,445 ordinary shares) under the 2015 Performance Share Plan. The vesting conditions for these shares have not been met, so they have not been treated as dilutive in these calculations. The sixth three year award under the 2007 Performance Share Plan vested in the period, with no ordinary shares being issued and with 87,606 shares lapsed.

 

Net asset value per share

The net asset value per share of 469p (2016: 443p) has been calculated on the basis of the number of equity shares in issue of 63,294,833 (2016: 63,294,833) and net assets of £296.7m (2016: £280.6m). The EPRA net asset value per share has been calculated as follows:

 

	2017	2016
	£m	£m
Equity shareholders' funds	296.7	280.6
Valuation of land held as trading properties	1.9	1.9
Book value of land held as trading properties	(0.5)	(0.5)
EPRA net asset value	298.1	282.0
EPRA net asset value per share	471p	446p

 

9.  Investment and development properties

 

	Investment	Development	Total
	£m	£m	£m
At 1 July 2015	342.5	6.1	348.6
Additions	4.0	-	4.0
Lease incentives	0.3	-	0.3
Revaluation gain	8.2	2.0	10.2
At 1 July 2016	355.0	8.1	363.1
Additions	11.6	1.0	12.6
Lease incentives	0.4	-	0.4
Impairment	-	(0.1)	(0.1)
Disposals	(2.2)	-	(2.2)
Revaluation gain	13.0	-	13.0
At 30 June 2017	377.8	9.0	386.8

 

The closing book value shown above comprises £364.1m (2016: £340.7m) of freehold and £22.7m (2016: £22.4m) of leasehold properties.

 

	Freehold	Leasehold	Total
	£m	£m	£m
Properties held at valuation on 30 June 2017:
Cost	219.6	23.4	243.0
Valuation surplus/(deficit)	144.5	(0.7)	143.8
Valuation	364.1	22.7	386.8
	Freehold	Leasehold	Total
	£m	£m	£m
Properties held at valuation on 30 June 2016:
Cost	208.6	22.9	231.5
Valuation surplus/(deficit)	132.1	(0.5)	131.6
Valuation	340.7	22.4	363.1

 

The properties are stated at their 30 June 2017 fair value and are valued by Cushman & Wakefield, professionally qualified external valuers, in accordance with the RICS Valuation Professional Standards published by the Royal Institution of Chartered Surveyors. Cushman & Wakefield have recent experience in the relevant location and category of the properties being valued. Cushman & Wakefield is the trading name of Cushman & Wakefield Debenham Tie Leung Limited.

 

	2017	2016
	£m	£m
Cushman & Wakefield valuation	386.9	364.2
Owner-occupied property included in property, plant and equipment	(1.1)	(1.1)
Other adjustments	1.0	-
Investment and development properties as at 30 June	386.8	363.1

 

Additions to freehold and leasehold properties include capitalised interest of £nil (2016: £nil). The total amount of interest capitalised included in freehold and leasehold properties is £5.4m (2016: £5.4m). Properties valued at £285.2m (2016: £225.8m) were subject to a security interest.

 

10.	Directors and Company Secretary
Rupert Mucklow BSc		-	Chairman
Justin Parker BSc FRICS		-	Managing Director
David Wooldridge FCCA ACIS		-	Finance Director and Company Secretary
Ian Cornock MRICS*		-	Senior Independent Non-Executive
Stephen Gilmore LLB*		-	Independent Non-Executive
Peter Hartill FCA*		-	Independent Non-Executive
	*Member of Remuneration Committee and Audit Committee.

 

 

Responsibility statement of the directors

 

We confirm that to the best of our knowledge:

·     the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

·     the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's position and performance, business model and strategy.

This responsibility statement was approved by the board of directors on 4 September 2017 and is signed on its behalf by:

 

Rupert Mucklow	David Wooldridge
Chairman	Finance Director and Company Secretary

 

 

 

DATES:

 

Annual General Meeting

The Group's Annual General Meeting will be held on Tuesday 14 November 2017 at 11.30a.m. at the Birmingham Botanical Gardens, Westbourne Road, Edgbaston, Birmingham, B15 3TR.

 

Dividend

Dividends of 12.24p per ordinary share are being declared in respect of the 30 June 2017 financial year, making a total for the year of 22.12p.

 

The dividends consist of the third quarterly dividend of 5.15p per ordinary share to be paid on 16 October 2017 to Shareholders on the register at the close of business on 15 September 2017 and a final dividend of 7.09p per ordinary share, if approved by shareholders at the AGM, to be paid on 15 January 2018 to Shareholders on the register at the close of business on 15 December 2017.

 

Report and Accounts

The full report and accounts for the year ended 30 June 2017 will be available on 1 October 2017.

 

A copy of this document is available on the Company's website, www.mucklow.com