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RNS
Hansteen Holdings plc  -  HSTN   

Half-year Report

Released 07:00 23-Aug-2017

RNS Number : 7209O
Hansteen Holdings plc
23 August 2017
 



23 August 2017

Hansteen Holdings PLC

("Hansteen" or the "Group" or the "Company")

 

HALF YEAR RESULTS

Hansteen (LSE: HSTN), the investor in UK and continental European industrial property, announces its half year results for the six months ended 30 June 2017.

 

Financial Highlights

·      IFRS pre-tax profit increased by 185.6% to £156.5 million (H1 2016: £54.8 million)

·      Normalised Income Profit (NIP) increased by 25.9% to £38.9 million (H1 2016: £30.9 million)1

·      Normalised Total Profit (NTP) increased by 172.0% to £88.4 million (H1 2016: £32.5 million)

·      EPRA NAV per share increased by 2.8% to 132.5p (31 December 2016: 128.9p)

·      IFRS NAV per share increased by 6.9% to 132.5p (31 December 2016: 124.0p)

·      November interim dividend increased by 4.5% to 2.3p per share (November 2016: 2.2p per share)

 

Operational Highlights

·      German and Dutch portfolio sold for €1.28 billion representing a premium of approximately €76 million or 6% to 31 December 2016 valuation and generating a pre-tax profit of £47.9 million

·      Transaction realises the value in the German and Dutch portfolio when occupancy and rent were at a high point for Hansteen ownership and also when Euro/Sterling exchange rate was historically favourable

·      Proposed Return to Shareholders of up to £580 million by end of 2017

·      Settlement of the €100 million convertible bonds with a combination of cash and equity

·      Acquisition of Industrial Multi Property Trust PLC

·      Property valuation increase of 2.3% or £17.4 million on the remaining Total portfolio *

 

Melvyn Egglenton, Chairman, commented: "After an extremely busy and successful period, with completion of the sale of the German and Dutch portfolio for €1.28bn, the acquisition of Industrial Multi Property Trust and the settlement of €100 million of convertible bonds, it is very pleasing to report record profits and Net Asset Value. Looking forward, following the proposed Return to Shareholders, our projections indicate that there is scope to increase dividends, on a fully covered basis, compared to the historic levels."

 

Ian Watson and Morgan Jones, joint Chief Executives, added: "For the first time in many years, strong occupier demand has resulted in increasing rents per let sq ft and it looks as though this trend will continue. We believe there are constraints to new supply because, to feasibly build equivalent properties to those in our portfolio, a developer would need to achieve a rent of between £6 and £7 per sq ft. Furthermore, the appreciation by investors of our type of properties continues to grow and recent transactions would indicate that we could well benefit from further yield compression." 

 

For more information:

Ian Watson/Morgan Jones

Hansteen Holdings PLC

Tel: 0207 408 7000

Jeremy Carey/Kirsty Allan

Tavistock

Tel: 0207 920 3150

Email: jeremy.carey@tavistock.co.uk

 

 

* Total portfolio includes 100% of IMPT's portfolio of which Hansteen had an investment of 93.4% at 30 June 2017. After the balance sheet date, Hansteen has purchased the remaining 6.6% of the shares and now owns 100% of IMPT

 

 

1 Important Explanatory Notes about Alternative Performance Measures used in this Report:
EPRA and Adjusted metrics: The condensed financial statements are prepared under IFRS. The Board monitors a number of alternative performance measures when assessing the underlying performance of the business. These include Normalised Income Profit (NIP), Normalised Total Profit (NTP) and those defined by EPRA. NIP and NTP are defined in the Chairman’s interim statement and note • of the condensed financial statements contains the reconciliation of these to IFRS profit before tax. Note • of the condensed financial statements has more information about the EPRA adjustments and the reconciliation of these to the IFRS equivalents. A calculation of net debt and the net debt to value ratio is shown in the Financial Review.

 

 

Presentation for Analysts

A presentation to analysts (with dial in facilities and webex) will take place today at 09:30 at Tavistock, 1 Cornhill, London, EC3V 3ND.

Dial in details are as follows:

Direct DDI (s) for Participant Connection: UK Toll Number: +44 3333000804  UK/Toll-Free Number: 08003589473

Participant Pin Code: 06727718#

 

Webex details are as follows:

Audience URL: https://arkadin-event.webex.com/arkadin-event/onstage/g.php?MTID=eaf6d0d067e833fd54b8446096b84354e 

Audience Password: 301200470

 

If you need any further details, please email Jeremy Carey at jeremy.carey@tavistock.co.uk or Kirsty Allan at kirsty.allan@tavistock.co.uk 

 

 

Chairman's interim statement

 

The first half of 2017 has been an extremely busy and successful period for Hansteen and I can once again report record profits and Net Asset Value. The Group has completed the sale of the German and Dutch portfolio for €1.28 billion and we intend to return up to £580 million to Shareholders. In addition, we have acquired the entire issued share capital of Industrial Multi Property Trust and settled the €100 million of convertible bonds. More details on these transactions can be found below.

 

The sale of the German and Dutch portfolio realised the value that had been created over a sustained period, from good buying, active asset management using Hansteen's platform as well as capitalising on the strengthening Euro. The sale is in line with the Company's long term business and portfolio strategy of buying at a low point in the cycle, with low occupancy and rents, adding value through improved asset management and subsequently realising the investment at a higher point in the cycle. The Board would like to acknowledge and thank the Hansteen European team for the hard work, skill and commitment which they have contributed to the business over the last 12 years.

 

We previously reported that the fundamentals of occupational supply and demand in the light industrial sector were positive and the first half of 2017 has seen this momentum continue. With limited new developments due to low rents and capital values, demand has continued to outstrip supply across all of our regions, partly due to the growth of e-commerce. This has translated into further rental growth across the UK with ERVs increasing by 2.1% on average across the portfolio in the six months from 31 December 2016. We have completed a total of 432 new lettings and lease renewals and the passing rent per let sq ft on the UK portfolio has increased by 7.2% between December 2016 and June 2017. Some regions are experiencing greater growth than others principally where we have estates with little or no vacant space and there is no available competing stock. Our average rent in the UK is £3.66 per sq ft (31 December 2016: £3.41 per sq ft) and the rent needed to justify development is substantially higher. Given the growing demand profile, we believe that regional urban industrial and logistics properties will experience a period of significant rental growth.

 

Results

We believe that the best measures of performance are Normalised Profits (our measure of underlying realised profits) and EPRA NAV per share. Normalised Income Profit (NIP), recurring earnings excluding profits or losses from the sale of properties, increased by 25.9% to £38.9 million (H1 2016: £30.9 million). Normalised Total Profit (NTP), comprising NIP plus profits or losses from the sale of properties and realised profits from one off items, increased by 172.0% to £88.4 million (H1 2016: £32.5 million).

 

EPRA NAV per share has increased by 2.8% to 132.5p (31 December 2016: 128.9p). This growth is in addition to the payment of a 3.7p dividend per share in the period. These are all record results for the business and show another strong performance in the first six months of the year.

 

Hansteen's IFRS pre-tax profit was £156.5 million (H1 2016: £54.8 million) with the 185.6% increase largely due to the profit on the sale of the German and Dutch Portfolio which is detailed below. Diluted EPRA earnings per share were 2.4p (H1 2016: 3.4p). The table below shows how the NIP and NTP profit measures were calculated:

 


Continuing Operations H1 2017

Discontinued Operations

H1 2017

Total

 

H1 2017

Continuing Operations H1 2016

Discontinued Operations

H1 2016

Total

 

H1 2016


£m

£m

£m

£m

£m

£m

Property rental income

28.8

36.2

65.0

9.0

35.7

44.7

Direct operating expenses

(1.5)

(3.0)

(4.5)

(0.8)

(5.0)

(5.8)

Property management fees

-

-

-

1.7

-

1.7

Share of associates

-

-

-

8.2

-

8.2

Administrative expenses

(6.9)

(3.1)

(10.0)

(6.5)

(3.2)

(9.7)

Net interest payable

(4.9)

(6.7)

(11.6)

(0.5)

(7.7)

(8.2)

Normalised Income Profit

15.5

23.4

38.9

11.1

19.8

30.9

Profit on sale of properties

0.8

48.0

48.8

0.9

0.7

1.6

Other operating income

0.5

0.2

0.7



-

Normalised Total Profit

16.8

71.6

88.4

12.0

20.5

32.5

 

A reconciliation of NIP and NTP to the IFRS profit before tax is contained in Note 9 of the Condensed Financial Statements.

 

The improvement in the EPRA NAV from 31 December 2016 can be summarised as follows:

 

http://www.rns-pdf.londonstockexchange.com/rns/7209O_-2017-8-22.pdf

 

 

Basic NAV per share is reconciled to EPRA NAV per share in Note 10 of the Condensed Financial Statements.

 

Dividend

The Board has increased the interim dividend by 4.5% to 2.3p per share (November 2016: 2.2p per share) reflecting the strong income performance of the portfolio prior to the sale of the German and Dutch assets in June 2017. The dividend payment of 2.3p per share will include a 2.1p Property Income Distribution (PID) and will be paid on 27 October 2017. The associated record date is 29 September 2017 and the ex-dividend date is 28 September 2017.

 

Looking forward and without the majority earnings from the Continental European portfolio, Hansteen's dividend will be more closely prescribed by the REIT rules whereby broadly speaking, 90% of our Normalised Income Profit (NIP) will be distributed to shareholders. This will result in a higher dividend on the reduced capital base and the increased dividend will remain well covered. Further details can be found in the Outlook.

 

Sale of German and Dutch Portfolio

The German and Dutch Portfolio was sold on a debt free basis for cash to the Blackstone Purchasers, entities owned by funds advised by affiliates of the Blackstone Group L.P. and M7 Real Estate. The value given to the properties was €1.28 billion which represents a premium of approximately €76 million (6%) to the 31 December 2016 valuation.

 

The net cash received by Hansteen in connection with the sale was approximately €1.276 billion after the deduction of €25 million which was retained by Blackstone to satisfy 50% of the latent capital gains tax liabilities relating to the German properties. Immediately upon completion, €471 million was used to repay debt secured against the German and Dutch Portfolio and approximately €36 million was used or has been retained to meet costs and other tax liabilities associated with the sale. Following these deductions and repayments, the net cash increase was approximately €769 million.

 

The sale has contributed a pre-tax profit of £47.9 million and a post-tax profit of £41.6 million at 30 June 2017. Also included in the profits is £71.6 million of realised exchange gains of which £57.1 million was previously credited to reserves in the balance sheet and £14.5 million arose during the six months to 30 June 2017.

 

Return to Shareholders

The Board proposes to return up to £580 million in aggregate to Shareholders which is the equivalent of 70p per share. The Board currently anticipates that this return will be implemented by the end of 2017, and a circular will be posted to shareholders in due course. The Board's intention is to ensure that the £580 million is treated as a capital return and not an income return.

 

 

Convertible Bond

Following the sale of the German and Dutch portfolio and the net cash increase of approximately €769 million, Hansteen offered to buy and/or convert the €100 million of convertible bonds due in 2018. All of the bondholders chose to settle their bonds with 15.9% opting to receive cash and 84.1% opting to receive shares. The cash settlement was paid on 5 July 2017 and although the shares were not issued until 10 July 2017, Hansteen was contractually obliged to issue these shares when the bonds converted on 29 June 2017. Therefore, the equity is included in the 30 June 2017 balance sheet and the number of shares has been included in the per share measures. The calculation of the earnings per share and Net Asset Value per share measures are shown in note 10 of the Condensed Financial Statements and further details on the convertible bonds are shown in note 14 of the Condensed Financial Statements.

 

Industrial Multi Property Trust PLC (IMPT)

On 17 February 2017, Hansteen and the Independent Directors of IMPT reached agreement on the terms of a recommended all cash offer for the entire issued ordinary share capital of IMPT. Hansteen acquired 57.2% of the issued share capital of IMPT either through stock market purchases or through valid acceptances of the original offer of 300p per share. The offer was subsequently increased to 330p per share and as at 30 June 2017, Hansteen owned 93.4% of IMPT. The remaining 6.6% of shares were acquired by 23 July 2017.

 

The properties within the IMPT portfolio are similar in nature to the existing Hansteen portfolio and following a detailed assessment of the assets, our UK asset management team believe there is scope to increase the ERVs in a similar way as we have done with the existing UK portfolio over the last 12 months. With a yield on the passing rent of 9.4% and a vacancy rate of 8.2% at 31 December 2016, the acquisition represented a good opportunity to acquire a significant amount of light industrial property at an attractive price. At 30 June 2017 the portfolio is valued at £90.5 million compared with £85.3 million at 31 December 2016 and the ERV of the portfolio has increased from £9.0 million to £9.5 million per annum.

 

The portfolio consists of 51 multi‐let properties offering 500 leasable units with a total floor area of approximately 1.7 million sq ft all of which are located in the UK. Approximately 86% is invested in light industrial property and 14% in offices with a passing rent roll of £8.0 million per annum at 30 June 2017. The portfolio is well distributed across the UK, with the majority of sites located close to major towns and to major motorways and trunk roads.

 

Property Portfolio

The total portfolio owned or co-owned at 30 June 2017 was valued at £805.2 million, with a rent roll of £60.2 million per annum, with a vacancy of 7.9%. It comprised 18.0 million sq ft of built stock with a yield on the passing rent of 8.0% generated from 337 estates with 3,259 tenants. Included within the portfolio, there are 447 acres of development land valued at £49.9 million.

 

The value of the total portfolio increased by £17.4 million, or 2.3% on a like-for-like basis, from 31 December 2016, after allowing for purchases and sales.

 

In addition to the sale of the German and Dutch assets discussed above, 18 other sales have completed for a combined consideration of £21.1 million, generating profits of £0.9 million over the 31 December 2016 valuation.

 

On a like-for-like basis, both passing rent and occupancy on the UK portfolio improved marginally from 31 December 2016. The statistics follow a similar pattern to previous years where leases ending at 31 December create a marginally negative effect during the early months of the year which we expect to reverse during the latter part of the year.

 

 

Hansteen Property Portfolio Summary at 30 June 2017:

 


No. properties

Acres of land

Built area  sq ft

Vacant area

Passing rent

Contracted rent

Value

Yield on passing rent

UK*

328

18

17,029,541

7.9%

57.4

62.1

721.3

7.9%

Belgium & France

9


927,041

8.6%

2.8

2.9

34.0

8.4%

Total built portfolio

337

18

17,956,582

7.9%

60.2

65.0

755.3

8.0%

UK Land**


429

-

-

-

-

49.9

-

All Euro figures translated at the period end exchange rate of £1 = €1.1391

* Figures include 100% of IMPT's portfolio of which Hansteen had an investment of 93.4% at 30 June 2017. After the balance sheet date, Hansteen has purchased the remaining 6.6% of the shares and now owns 100% of IMPT.

** Figures include £10.0 million of trading property.

 

Finance and hedging

 

Finance

As at 30 June 2017, the Group had total bank facilities of £385.8 million (31 December 2016: £771.1 million), of which £373.8 million were drawn (31 December 2016: £712.5 million). £175.1 million was swapped at an average rate of 0.7%, with a further £50.0 million capped at an average rate of 0.8%. Including obligations under finance leases, the Group had borrowings of £388.3 million at 30 June 2017 (31 December 2016: £816.6 million including the mark-to-market value of the convertible bonds).

 

In August 2017, the £20.0 million RBS loan secured on Saltley Business Park was repaid leaving the property uncharged and the £31.4 million RBS loan secured on the IMPT properties was also repaid. In due course the IMPT properties will be secured as part of the RBS Revolving Credit Facility.

 

All of the loans continue to have significant headroom on their loan-to-value and interest cover covenants. The weighted average time to maturity of borrowings following the £51.4 million repaid to RBS in August 2017 is 4.0 years and the Group's all-in cost of borrowing is 2.4% (31 December 2016: 3.2%).

 

Analysis of the Group's bank loan facilities following the repayment of the two RBS loans is set out below:

 

Lender

Facility

 

millions

Amount undrawn

millions

Unexpired term

Years

All-in-interest rate

Loan to value covenant

Loan to value

June 2017

Interest cover covenant

Interest cover

June 2017

BNP Paribas Fortis

€5.0

-

6.0

1.5%

-

28.6%

-

-

Total euro facilities in GBP

 

£4.4

 

-
















Royal Bank of Scotland

£330.0

£12.0

3.9

2.4%

55%

48%

2:1

6:1

Total facilities

£334.4

£12.0

4.0

2.4%





 

Following the sale of the German and Dutch assets, cash resources at 30 June 2017 were £726.9 million (31 December 2016: £82.5 million). With the settlement of part of the convertible bond in cash (€27.8 million or £24.4 million), the Return to Shareholders (up to £580.0 million) and the repayment of the two debt facilities all discussed above, the cash balance will be reduced to approximately £70 million. Net debt will therefore be approximately £250 million and net debt to value using the portfolio value of £805.2 million will be around 31.0%.

 

 

Founder Long Term Incentive Plan (LTIP)

30 June 2017 marks the halfway point in the current and last LTIP performance period and from 31 December 2015, the EPRA NAV after adding back dividends paid has increased by 30.35p per share. This represents a return of 17.5% per annum.

 

In accordance with accounting standard IAS33, no accrual for the potential LTIP shares is included in the EPRA NAV per share calculation because the target return for the whole performance period has not yet been reached. The accounting standards do however require a charge to the income statement for the LTIP of £7.9 million although this charge is reversed in the balance sheet.

 

To help shareholders estimate the potential dilution to the EPRA NAV the Board believes the following illustrative methodologies could be helpful.

 

The first method is to assume the performance period ended on 30 June 2017. Based on this assumption the LTIP award would have been £27.7 million or 22.2 million ordinary shares. This would have diluted the June EPRA NAV by 3.5p per share. However the Directors believe this would probably overstate the dilution because of the exceptional return from the sale of the German and Dutch portfolio which will not be repeated in the second half of the performance period and the impact of holding the sale proceeds since completion in June 2017.

 

An alternative method is to take the actual results for the 18 months to 30 June 2017 and add only a continuing NIP at a rate of £31 million per annum. On this basis the LTIP award would be £15 million and dilute the EPRA NAV by 1.8p. This figure may understate the outcome because returns and the LTIP will grow if there are increases in property valuations.

 

Outlook

Taking the H1 2017 NIP of the continuing business (£15.5 million) and for illustrative purposes assuming this result continues, the annualised NIP would be £31.0 million or 8.0 pence per share assuming the number of shares decreases pro-rata with the capital returned. On this basis, there is scope to increase dividends (on a fully covered basis) from the historic levels of 5.25 pence a share in 2015 and 5.9 pence a share in 2016.

 

In the UK we have 3,231 tenants representing a very broad cross section of commercial activities woven into the regional economies with a continuing boost to our market from the internet retailer revolution. This diverse rent roll is both resilient and dynamic with the current positive demand and supply situation underpinning that beneficial business backdrop. In the first half of the year, the UK business showed value growth as a result largely of rental growth and successful asset management initiatives with the valuation yield remaining virtually unchanged. The 8.0% yield on the built portfolio (passing rent divided by the value of the properties) is compared to the current all-in borrowing costs for the business of 2.4%.

 

For the first time in many years strong occupier demand has resulted in increasing rents per let square foot and it looks as though this trend will continue. We believe there are constraints to new supply because to feasibly build equivalent properties to those in our portfolio a developer would need to achieve a rent of between £6 and £7 per sq ft.

 

We are currently enjoying a period of strong investment and occupier demand. The appreciation by investors of our type of properties continues to grow and recent transactions would indicate that we could well benefit from further yield compression.

 

 

Melvyn Egglenton

Chairman

22 August 2017

 

Principal risks and uncertainties

 

Risk management is an important part of the Group's system of internal controls. Senior management and the Board regularly consider the significant risks which it believes are facing the Group, identify and monitor appropriate controls and, if necessary, instigate action to improve those controls. There will always be some risk when undertaking property investments but the control process is aimed at mitigating and minimising these risks where possible.

 

Following the sale of the German and Dutch businesses in the first half of the year the Board has re-assessed the principal risks facing the Group, the Board considers them to be consistent with the prior year with the exception of the risks related to foreign currency, the probability of which the Board considers to have reduced.

 

The key risks identified by the Board for the remaining six months of the year, the steps taken to mitigate them and additional commentary is as follows:

 

Principal Risk

Cause

Impact

Probability

Risk Management






Over reliance on key executives

High dependence on Joint Chief Executives

High

Medium

The Board believes such risk is to some extent mitigated through the appointment and support of high calibre employees and professional advisors. All such appointments are approved by a member of the Board and performance is monitored regularly.






Tenant failure

 

Recession and reduced profitability

 

Over reliance on income from one particular type of tenant exposing the Group to industry specific periods of recession

 

High

Medium

Whilst there is always a risk that recession or new legislation may affect specific industry types, the Board is satisfied that Hansteen's exposure is mitigated by operating with an extremely diverse tenant base without reliance on any particular tenants or industries. Vacancy rates, arrears and bad debts are monitored on a regional basis with trends investigated to determine any systematic problems with a portfolio or type of tenant.

 






Lack of availability of capital

Banks under internal pressure to improve liquidity

Banks considering unutilised loans too expensive

 

High

Medium

The Board acknowledge that there may be occasions when banks are under internal pressures which may conflict with existing financing arrangements and it may prove more difficult to secure the more challenging properties. Detailed due diligence is carried out prior to the purchase of each property. Regular meetings are held with a portfolio of banks to keep them fully appraised of commercial opportunities and alert to any potential issues early on. Hansteen also considers alternative sources of finance to develop its strategy and reduce exposure.






Information and cyber security breaches resulting in data leakage, financial loss, reputational damage or business disruption

Failure to protect information and information systems from unauthorised access, misuse, disruption, modification or destruction

High

Medium

The Board believes this risk to be mitigated to some extent by the Group outsourcing much of its day-to-day processing to reputable third party organisations.  Due diligence designed to assess the integrity of third party processes and systems is undertaken by management as part of the tendering and appointment process and is maintained on an on-going basis. Internally, the Group has developed policies and procedures designed to mitigate information and cyber security risk as far as possible, these including: the secure encryption of all payroll and personal data, rigorous use of passwords and firewall defences, externally facilitated staff training programmes, bulletins to raise risk awareness and encourage good practice, development of secure mobile working policies, incident response and disaster recovery procedures and the establishment of anti-malware defences.






Poor return on investment and deterioration in operating results

Over paying for an acquisition

Prices driven up by increased competition

Reduced number of investment opportunities

High

Low

Supply and demand is reviewed continuously through direct information from Hansteen's network of managing agents and managers. Experienced members of management review each acquisition and due diligence is carried out by external parties. The Board is required to approve all acquisitions and disposals over a prescribed amount.






Banking counterparty disruption

Lack of liquidity

 

Financial difficulties at institutions holding significant deposits

Medium

Medium

The Board believes such risks are reduced by adherence to a Cash and Liquidity Management Policy that sets out how funds can be invested. Cash balances and borrowings are maintained with a portfolio of considered counterparties. The Group Treasurer reviews the cash balances on a daily basis, and where possible, surplus cash is put on interest bearing deposit.

Responsibility statement

 

We confirm to the best of our knowledge:

 

(a)   The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

 

(b)   The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

 

(c)   The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

 

On behalf of the Board

 

 

 

 

 

 

 

 

 

Ian Watson                                                                            Morgan Jones                                                                      

Joint Chief Executive                                                           Joint Chief Executive

 

22 August 2017

 

Copies of this announcement are available on the Company's website at www.hansteen.co.uk and can be requested from the Company's registered office at 1st Floor Pegasus House, 37-43 Sackville Street, London, W1S 3D

 

Consolidated income statement

for the six months ended 30 June 2017

 


 

 

 

 

Note

Six months ended

30 June

2017

£m

Unaudited

Six months ended

30 June

20161

£m

Unaudited

Continuing operations




Revenue

5

28.8

12.0

Cost of sales


(1.6)

(2.0)

Gross profit


27.2

10.0

Other operating income


0.5

-

Administrative expenses


(14.8)

(6.5)

Share of results of associates and gain on associate


-

12.0

Negative goodwill and other gains


-

0.4

Gains on investment properties


14.5

2.4

Operating profit


27.4

18.3

Finance income

6

4.8

18.9

Finance costs

6

(19.6)

(12.4)

Profit before tax


12.6

24.8

Tax

7

0.7

(0.4)

Profit for the period from continuing operations

Profit for the period from discontinued operations net of tax

 

11

13.3

135.1

24.4

26.0

Profit for the period


148.4

50.4





Attributable to:




Equity holders of the parent


148.1

50.3

Non-controlling interest


0.3

0.1

Profit for the period


148.4

50.4





Earnings per share




Basic




Continuing operations

10

1.7p

3.4p

Discontinued operations

10

18.1p

3.5p



19.8p

6.9p

Diluted




Continuing operations

10

1.7p

3.3p

Discontinued operations

10

18.0p

3.5p



19.7p

6.8p

 

 

1 Re-presented to classify the German and Dutch portfolio as discontinued operations

 

                                                                                                                                           

Consolidated statement of comprehensive income

for the six months ended 30 June 2017

 


Six months ended

30 June

2017

£m

Unaudited

Six months ended

30 June

2016

£m

Unaudited




Profit for the period

148.4

50.4




Other comprehensive expense:



Exchange gains arising on translation of foreign operations

14.5

54.5

Exchange differences recycled to the income statement on disposal of discontinued operations

(71.6)

-

Total other comprehensive (expense)/ income for the period

(57.1)

54.5

Total comprehensive income for the period

91.3

104.9




Total comprehensive income attributable to:



Equity holders of the parent

91.0

104.7

Non-controlling interest

0.3

0.2


91.3

104.9

All components of other comprehensive income and expense will be recycled through the income statement.

 

Consolidated balance sheet

As at 30 June 2017

 


 

 

 

Note

30 June

2017

£m

Unaudited

31 December

2016

£m

Audited

Non-current assets




Property, plant and equipment


0.3

0.4

Investment property

13

795.2

1,717.5

Deferred tax asset


-

0.6

Derivative financial instruments


2.3

2.1



797.8

1,720.6

Current assets




Investment property held for sale


-

10.4

Trading properties


10.0

10.0

Trade and other receivables


21.4

31.1

Cash and cash equivalents


726.9

82.5



758.3

134.0


1,556.1

1,854.6

Current liabilities




Trade and other payables


(61.8)

(54.0)

Current tax liabilities


(21.0)

(6.6)

Borrowings

14

(50.9)

(20.5)

Obligations under finance leases


(0.2)

(0.2)

Provisions


-

(0.1)

Derivative financial instruments


(0.6)

-



(134.5)

(81.4)

Non-current liabilities




Borrowings

14

(318.9)

(793.5)

Obligations under finance leases


(2.3)

(2.4)

Provisions


(0.8)

(0.7)

Derivative financial instruments


-

(4.3)

Deferred tax liabilities


(4.6)

(48.1)



(326.6)

(849.0)

Total liabilities


(461.1)

(930.4)

Net assets


1,095.0

924.2





Equity




Share capital

15

74.6

74.6

Share premium account


114.5

114.5

Shares to be issued


99.5

-

Other reserves


(3.0)

(1.9)

Translation reserves


4.7

61.8

Retained earnings


802.4

674.6

Equity shareholders' funds


1,092.7

923.6

Non-controlling interest


2.3

0.6

Total equity


1,095.0

924.2

 

Net asset value per share




Diluted net asset value per share

10

133p

123p

EPRA net asset value per share

10

133p

129p

 

 

Consolidated statement of changes in equity

for the six months ended 30 June 2017

 

Unaudited

Share

capital

£m

Share

premium

£m

Translation

reserve

£m

 

Other reserves

£m

 

Shares to be issued

£m

Retained

earnings

£m

Total

£m

Non-controlling interest

£m

 

Total

£m

Balance at 1 January 2016

72.2

114.5

(8.7)

(1.4)

-

629.6

806.2

0.5

806.7

Shares issued

2.4

-

-

-

-

-

2.4

-

2.4

Dividends

-

-

-

-

-

(23.4)

(23.4)

-

(23.4)

Share-based payments

-

-

-

-

-

(25.5)

(25.5)

-

(25.5)

Share options exercised

-

-

-

0.1

-

-

0.1

-

0.1

Own shares acquired

-

-

-

(0.6)

-

-

(0.6)

-

(0.6)

Profit for the period

-

-

-

-

-

50.3

50.3

0.1

50.4

Other comprehensive expense for the period

-

-

54.4

-

-

-

54.4

0.1

54.5

Balance at 30 June 2016

74.6

114.5

45.7

(1.9)

-

631.0

863.9

0.7

864.6

Dividends

-

-

-

-

-

(16.4)

(16.4)

-

(16.4)

Share-based payments

-

-

-

-

-

0.8

0.8

-

0.8

Profit for the period

-

-

-

-

-

59.2

59.2

(0.1)

59.1

Other comprehensive income for the period

-

-

16.1

-

-

-

16.1

-

16.1

Balance at 31 December 2016

74.6

114.5

61.8

(1.9)

-

674.6

923.6

0.6

924.2

Shares issued

-

-

-

(0.3)

-

-

(0.3)

-

(0.3)

Shares to be issued

-

-

-

-

99.5

(0.1)

99.4

-

99.4

Dividends

-

-

-

-

-

(27.5)

(27.5)

(0.4)

(27.9)

Share-based payments

-

-

-

-

-

7.3

7.3

-

7.3

Own shares acquired

-

-

-

(0.8)

-

-

(0.8)

-

(0.8)

Non-controlling interests acquired

-

-

-

-

-

-

-

1.8

1.8

Profit for the period

-

-

-

-

-

148.1

148.1

0.3

148.4

Other comprehensive income for the period

-

-

(57.1)

-

-

-

(57.1)

-

(57.1)

Balance at 30 June 2017

74.6

114.5

4.7

(3.0)

99.5

802.4

1,092.7

2.3

1,095.0

 

Consolidated cash flow statement

for the six months ended 30 June 2017

 


 

 

 

 

Note

Six months ended

30 June

2017

£m

Unaudited

Six months ended

30 June

2016

£m

Unaudited

Net cash inflow from operating activities

16

11.7

9.4

Investing activities




Interest received


0.1

0.1

Additions to investment properties


(30.2)

(5.5)

Additions to property, plant and equipment


-

(0.1)

Proceeds from sale of investment properties


20.7

8.2

Investment in subsidiary


(27.3)

(8.4)

Proceeds from sale of subsidiaries


662.4

-

Investment in associates


-

(10.2)

Distributions received from associates


-

17.2

Net cash generated by investing activities


625.7

1.3

Financing activities




Dividends paid


(27.9)

(23.4)

Settlement of liabilities in respect of share options


-

(23.5)

Repayments of obligations under finance leases


(0.1)

(0.1)

New bank loans raised (net of expenses)


36.4

124.2

Bank loans repaid (net of expenses)


(3.8)

(111.0)

Own shares acquired


(0.8)

(0.6)

Additions to derivative financial instruments


0.2

-

Settlement of derivative financial instruments


(3.5)

0.5

Net cash generated/(used in) by financing activities


0.5

(33.9)

Net increase/(decrease) in cash and cash equivalents


637.9

(23.2)

Cash and cash equivalents at beginning of period


82.5

63.4

Effect of foreign exchange rate changes


6.5

4.0

Cash and cash equivalents at end of period


726.9

44.2

 

 

Notes to the condensed set of financial statements for the six months ended 30 June 2017

1.     General information

Hansteen Holdings PLC is a company which is incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 1st Floor, Pegasus House, 37-43 Sackville Street, London, W1S 3DL.

 

The Group's principal activities are those of a property group investing mainly in industrial properties in Continental Europe and the United Kingdom.

 

The financial information contained in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the year ended 31 December 2016 was derived from the statutory accounts for the year ended 31 December 2016, a copy of which has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published annual financial statements for the period ended 31 December 2016. There are no new standards or amendments to standards effective for the periods presented that have a material impact on the Group.

 

The Group's performance is not subject to seasonal fluctuations.

2.     Basis of preparation

The annual financial statements of Hansteen Holdings PLC are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

 

The interim report was approved by the Board on 22 August 2017.

 

The principal exchange rates used to translate foreign currency denominated amounts are:

Balance sheet: £1 = €1.1391 (31 December 2016: £1 = €1.1651)

Income statement: £1 = €1.1626 (30 June 2016: £1 = €1.2845)

3.     Going concern

The Group's principal risks and uncertainties are detailed above. The Directors believe that the Group is well placed to manage its business risks successfully despite the potential impact of the current uncertain economic outlook on the Group's operating cash flows and the possibility of tenancy failures and increased vacancies. After consideration of the Group's forecast cash flows and covenant compliance, including evaluation of the impact of potential reductions in property valuations, rental income and increases in interest rates, the Directors have a reasonable expectation that the Group will continue to have adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing these condensed financial statements.

 

Information on the Group's performance and its risk management is included in the Interim Statement, including sections on the finance, hedging and outlook of the Group. The Group's debt maturity profile and principal covenants are disclosed in note 14 to these condensed financial statements.

4.     Related party transactions

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed. There have been no other material transactions with related parties in the first six months of 2017 and there have been no material changes in the related party transactions described in the Annual Report and Accounts for the year ended 31 December 2016.

 

5.     Operating segments

The following is an analysis of the Group's revenue and results by reportable segment:


Six months ended

30 June 2017

Six months ended

30 June 20161

Continuing Operations

Revenue

£m

Result

£m

Revenue

£m

Result

£m

Belgium

0.5

0.5

0.5

0.4

France

0.9

0.8

0.7

0.7

UK

27.4

25.9

10.8

8.9


28.8

27.2

12.0

10.0

Other operating income


0.5


-

Administrative expenses


(14.8)


(6.5)

Share of results of associates and gain on sale of associate


-


12.0

Negative goodwill and other gains


-


0.4

Changes in fair values of investment properties by segment:





Belgium

(1.0)


(0.2)


France

(0.5)


0.3


UK

15.1


2.3


Total changes in fair values of investment properties

13.6


2.4


Profit on disposal of investment properties

0.9


-


Total gains on investment properties


14.5


2.4

Operating profit


27.4


18.3

Net finance costs


(14.8)


6.5

Profit before tax


12.6


24.8

 

 

Administrative expenses and net finance costs are managed as central costs and are not allocated to segments.

The following is an analysis of the Group's assets by reportable segment:

 

 

30 June 2017

 

Investment properties

£m

 

Trading properties

£m

 

Total

properties

£m

 

Other

assets

£m

 

Total

assets

£m

Additions to investment properties

£m

Non-current assets

£m

Belgium

16.3

-

16.3

2.5

18.8

-

16.3

France

17.6

-

17.6

0.8

18.4

0.1

17.6

UK

761.3

10.0

771.3

45.7

817.0

90.4

761.5


795.2

10.0

805.2

49.0

854.2

90.5

795.4

Unallocated assets





701.92


2.4






1,556.1


797.8

 

 

 

31 December 2016

 

Investment properties3

£m

 

Trading properties

£m

 

Total

properties

£m

 

Other

assets

£m

 

Total

assets

£m

Additions to investment properties

£m

Non-current assets

£m

Belgium

17.0

-

17.0

2.3

19.3

0.3

17.0

France

17.7

-

17.7

0.6

18.3

0.7

17.7

Germany

761.7

-

761.7

29.4

791.1

11.7

754.8

Netherlands

264.7

-

264.7

7.4

272.1

3.1

265.0

UK

666.8

10.0

676.8

40.4

717.2

480.0

664.0


1,727.9

10.0

1,737.9

80.1

1,818.0

495.8

1,718.5

Unallocated assets





36.6


2.1






1,854.6


1,720.6

 

1 Re-presented to classify the German and Dutch portfolio as discontinued operations

 

2 Included in unallocated assets is £577.4 million corporate cash on hand which arose mainly from the disposal of the German and Dutch portfolio.

 

3 Investment properties includes those classified as held for sale on the balance sheet.

             

6.     Net finance costs

 

 

 

 

Continuing Operations

Six months ended

30 June

2017

£m

Six months ended

30 June

20161

£m

Interest receivable on bank deposits

-

0.1

Other interest receivable

0.5

0.8

Interest income

0.5

0.9

Interest payable on borrowings

(5.4)

(1.4)

Net interest expense

(4.9)

(0.5)

Change in fair value of currency options

-

(9.3)

Change in fair value of interest rate swaps and caps

0.5

-

Change in fair value of convertible bond

(12.1)

7.7

Fees incurred on conversion of convertible bonds

(0.4)

-

Interest incurred on the convertible bond

(1.7)

(1.7)

Foreign exchange gains

3.8

10.3

Net finance costs

(14.8)

6.5

Finance income

4.8

18.9

Finance costs

(19.6)

(12.4)

Net finance costs

(14.8)

6.5

  

7.     Tax

 

 

 

 

Continuing Operations

Six months ended

30 June

2017

£m

Six months ended

30 June

20161

£m

UK current tax

0.7

(0.1)

Foreign current tax

(0.1)

-

Total current tax

0.6

(0.1)

Deferred tax

0.1

(0.3)

Tax

0.7

(0.4)

 

 

8.     Dividends

 

 

Six months ended

30 June

2017

£m

Six months ended

30 June

2016

£m

Amounts recognised as distributions to equity holders in the period:



Second interim dividend 3.7p (2016: 3.15p) per share

27.5

23.4


27.5

23.4

 

1 Re-presented to classify the German and Dutch portfolio as discontinued operations

 

As a REIT, the Company is required to pay Property Income Distributions ('PIDs') equal to at least 90% of the Group's exempted net income after deduction of withholding tax at the basic rate (currently 20%). £15.6 million of the cash dividend paid in the period ended 30 June 2017 is attributable to PIDs (2016: £10.0 million).

9.     Normalised income profit and normalised total profit

Normalised Income Profit and Normalised Total Profit are adjusted measures intended to show the underlying earnings of the Group before fair value movements and other non-recurring or otherwise non-cash one-off items. A reconciliation of the Normalised Income Profit and Normalised Total Profit reconciled to profit before tax prepared in accordance with IFRS is set out below.


Six months ended

30 June 2017

Six months ended

30 June 20161


Continuing operations

£m

Discontinued operations

£m

 

Total

£m

Continuing operations

£m

Discontinued operations

£m

Share of associates

£m

Total

£m

Investment property rental income

28.8

36.2

65.0

9.0

35.7

15.1

59.8

Direct operating expenses

(1.5)

(3.0)

(4.5)

(0.8)

(5.0)

(2.1)

(7.9)

Property management fees

-

-

-

1.7

-

-

1.7

Administrative expenses

(6.9)

(3.1)

(10.0)

(6.5)

(3.2)

(2.0)

(11.7)

Net interest payable

(4.9)

(6.7)

(11.6)

(0.5)

(7.7)

(2.8)

(11.0)

Normalised Income Profit

15.5

23.4

38.9

2.9

19.8

8.2

30.9

Profit on sale of investment properties

0.9

0.1

1.0

-

0.7

0.8

1.5

Loss/(profit) on sale of trading properties

(0.1)

-

(0.1)

0.1

-

-

0.1

Total profit on sale of properties

0.8

0.1

0.9

0.1

0.7

0.8

1.6

Profit on disposal of discontinued operations

-

47.9

47.9

-

-

-

-

Net other operating income

0.5

0.2

0.7

-

-

-

-

Normalised Total Profit

16.8

71.6

88.4

3.0

20.5

9.0

32.5

Negative goodwill and other gains

-

-

-

0.4

-

1.0

1.4

LTIP charge

(7.9)

-

(7.9)

-

-

-

-

Fair value gains on investment properties

13.6

-

13.6

2.4

10.7

2.4

15.5

Change in fair value of foreign currency derivatives2

-

-

-

(9.3)

-

-

(9.3)

Change in fair value of interest rate derivatives

0.5

0.7

1.2

-

(1.2)

(0.4)

(1.6)

Change in fair value of convertible bond

(12.1)

-

(12.1)

7.7

-

-

7.7

Fees incurred on conversion of convertible bonds

(0.4)

-

(0.4)

-

-

-

-

Interest incurred on the convertible bond3

(1.7)

-

(1.7)

(1.7)

-

-

(1.7)

Foreign exchange gains

3.8

-

3.8

10.3

-

-

10.3

Exchange differences recycled on disposal of discontinued operations

-

71.6

71.6

-

-

-

-

Profit before tax

12.6

143.9

156.5

12.8

30.0

12.0

54.8

Tax

0.7

(8.8)

(8.1)

(0.4)

(4.0)

-

(4.4)

Profit for the period

13.3

135.1

148.4

12.4

26.0

12.0

50.4

1 Re-presented to classify the German and Dutch portfolio as discontinued operations
2 The £9.3 million change in fair value of foreign currency derivatives in 2016 relates to options to hedge European net assets. The hedges expired in June 2016 and were not replaced.
3 Net interest payable in NIP excludes the interest on the convertible bond as this expense is not recurring.

10.  Earnings per share and net asset value per share

The European Public Real Estate Association ("EPRA") has issued recommended bases for the calculation of certain earnings per share ("EPS") information. Diluted EPRA EPS is reconciled to the IFRS measure in the following table.


 

30 June 2017

 

30 June 20161


£m

Shares

m

Per share

pence

£m

 Shares

m

Per share

pence

Normalised Income Profit

15.5

746.2

2.1

11.1

734.8

1.5

Normalised Total Profit

16.8

746.2

2.2

12.0

734.8

1.6

Continuing Operations

Basic EPS

13.0

746.2

1.7

24.3

734.8

3.4

Adjustments:







Dilutive shares relating to the profit share scheme


3.0



2.3


Dilutive shares relating to the Founder LTIP


-



1.5


Diluted EPS

 

13.0

749.2

1.7

24.3

738.6

3.3

Basic EPS

Adjustments:

13.0

746.2

1.7

24.3

734.8

3.4

Revaluation gains on investment properties

(13.6)



(2.4)



Profit on the sale of investment properties

(0.9)



-



Loss/(profit) on sale of trading properties

0.1



(0.1)



Change in fair value of derivatives

(0.5)



9.3



Change in fair value of convertible bond

9.2



(20.0)



Fees incurred on conversion of convertible bonds

0.4



-



Adjustment in respect of associates

-



(3.8)



Negative goodwill and other gains

-



(0.4)



Deferred tax on the above items

(0.3)



-



EPRA EPS

7.4

746.2

1.0

6.9

734.8

0.9

Adjustments:







Dilutive shares relating to the profit share scheme


3.0



2.3


Dilutive shares relating to the Founder LTIP


-



1.5


Diluted EPRA EPS

7.4

749.2

1.0

6.9

738.6

0.9

 

1 Re-presented to classify the German and Dutch portfolio as discontinued operations

 

 


 

30 June 2017

 

30 June 20161


£m

Shares

m

Per share

pence

£m

 Shares

m

Per share

pence

Discontinued Operations

Basic EPS

135.1

746.2

18.1

26.0

734.8

3.5

Adjustments:







Dilutive shares relating to the profit share scheme


3.0



2.3


Dilutive shares relating to the Founder LTIP


-



1.5


Diluted EPS

 

135.1

749.2

18.0

26.0

738.6

3.5

Basic EPS

Adjustments:

135.1

746.2

18.1

26.0

734.8

3.5

Revaluation gains on investment properties

-



(10.7)



Profit on the sale of investment properties

(0.1)



(0.7)



Profit after tax on disposal of discontinued operations

(113.2)



-



Change in fair value of derivatives

(0.7)



1.2



Deferred tax on the above items

(10.4)



2.9



EPRA EPS

10.7

746.2

1.4

18.7

734.8

2.5

Adjustments:







Dilutive shares relating to the profit share scheme


3.0



2.3


Dilutive shares relating to the Founder LTIP


-



1.5


Diluted EPRA EPS

10.7

749.2

1.4

18.7

738.6

2.4

 

1 Re-presented to classify the German and Dutch portfolio as discontinued operations

 

 

The calculations for net asset value ("NAV") per share are shown in the table below:


30 June 2017

31 December 2016


£m

Shares

m

Per share

pence

£m

Shares

m

Per share

pence

Basic NAV

1,092.7

824.6

133

923.6

745.1

124

Unexercised share options

-

2.1


-

2.1


Mark-to-market of convertible bonds

-

-


109.8

92.8


Diluted NAV

1,092.7

826.7

132

1,033.4

840.0

123

Revaluation of trading properties

-



-



Goodwill

-



-



Fair value of interest rate derivatives

(1.6)



2.2



Adjustments in respect of associates

-



-



Convertible bond

-



-



Deferred tax

4.6



47.3



EPRA NAV

1,095.7

826.7

133

1,082.9

840.0

129

11.  Discontinued operations

On 20 March 2017, the Group entered into a sale agreement to dispose of the German and Dutch portfolios. The disposal was completed on 16 June 2017 on which date control of the disposal group was passed to the acquirer. In accordance with the sales and purchase agreement there will be a true-up of the purchase price. This process is expected to be completed by the end of October 2017 and may affect the numbers disclosed relating to the discontinued operations reported in the interim financial statements as at 30 June 2017.

 

The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:

 

 

 

Six months ended 

30 June

 2017

Six months ended

30 June

2016


£m

Unaudited

£m

Unaudited

Revenue

36.2

35.7

Cost of sales

(3.0)

(5.0)

Gross profit

33.2

30.7

Other operating income

0.2

-

Administrative expenses

(3.1)

(3.2)

Gains on investment properties

0.1

11.4

Operating profit

30.4

38.9

Finance income

0.8

-

Finance costs

(6.8)

(8.9)

Profit before tax

24.4

30.0

Tax

(2.5)

(4.0)

Profit after tax

21.9

26.0

Profit on disposal of discontinued operations

119.5

-

Tax attributable to profit on disposal

(6.3)

-

Profit after tax on disposal of discontinued operations

113.2

-

Profit for the period from discontinued operations

135.1

26.0

 

12.  Disposal of investment in subsidiary

As referred to in note 11, on 16 June 2017 the group disposed of its interests in the German and Dutch portfolio. The net assets of the disposal group at the date of disposal were as follows:



£m


1,067.8


17.8


8.2


(23.8)


(3.0)


(411.7)

Deferred tax liability


(32.6)



622.7

Profit on disposal of discontinued operations


119.5

Total consideration


742.2

Satisfied by:




670.6

Release of translation reserve


71.6



742.2

Net cash inflow arising on disposal:




670.6

Less: cash and cash equivalents disposed of


(8.2)



662.4

There were no disposals of subsidiaries completed in 2016. The consideration for the sale of the entities in 2017 was settled in cash. The impact of discontinued operations on the Group's results in the current and prior periods and the profit on disposal of discontinued operations are disclosed in note 11.

13.  Investment property

30 June

 2017

31 December 2016


£m

£m

1,717.5

1,059.1

88.8

478.2

13.0

1.1

1.7

2.8

15.5

13.7

0.8

1.4

(0.1)

1.2

0.1

0.1

0.2

(0.1)

13.6

15.3

-

28.1

(9.1)

(10.0)

(1,067.8)

(12.1)

-

(10.4)

Exchange adjustment - continuing operations

0.8

5.0

Exchange adjustment - discontinued operations

20.2

144.1


795.2

1,717.5

*Property purchase additions of £88.8 million relates to the acquisition of Industrial Multi Property Trust plc.

 

30 June

2017

31 December 2016


£m

£m

10.4

1.6

(10.4)

(1.8)

-

10.4

-

0.2


-

10.4

 

In accordance with IFRS 13, the Group's investment property has been assigned a valuation level in the fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). In general, the Group's investment property as at 30 June 2017 is categorised as Level 3. 

 

Investment properties are valued using a capitalisation methodology applying a yield to current and estimated rental income.  Yields and rental values are considered to be unobservable inputs and details of the ranges used in each region are as follows:

 

Information about fair value measurements using unobservable inputs (Level 3)



Fair value at

Rent per sq m

                    Yield



30 June 2017

Min

Max

Min

Max



£m

£

£

%

%

Belgium


16.3

28.4

106.7

5.6

9.6

France


17.6

29.2

32.4

8.3

15.4

UK - Industrial properties


740.3

10.8

175.4

2.8

14.4

UK - Offices


21.0

23.1

625.7

3.0

18.5

Total


795.2





 

 



Fair value at

Rent per sq m

                    Yield



31 December 2016

Min

Max

Min

Max



£m

£

£

%

%

Belgium


17.0

27.2

90.5

6.5

9.4

France


17.7

28.6

31.7

8.6

12.7

Germany


761.7

15.2

109.4

1.3

17.5

Netherlands


264.7

11.6

79.0

3.7

22.0

UK - Industrial properties


646.4

6.1

158.4

1.8

14.4

UK - Offices


20.4

23.1

625.7

3.1

19.1

Total


1,727.9





 

All other factors being equal there is a positive relationship between estimated rental values and property values such that an increase in estimated rental values would increase the valuation of a property. The relationship between Reversionary yields and property values is negative such that an increase in Reversionary yields would decrease a property valuation. There are interrelationships between these inputs as they are determined by market conditions such that the valuation movement in any one period depends on the balance between them.  

14.  Borrowings


30 June

 2017

31 December 2016


£m

£m




Amortised cost



Bank loans

373.8

712.5

Convertible Bond

-

109.8

Unamortised borrowing costs

(4.0)

(8.3)


369.8

814.0

Maturity



The bank loans and convertible bond are repayable as follows:



Within one year or on demand

52.0

23.2

Between one and two years

0.6

201.1

Between three and five years

320.1

596.6

Over five years

1.1

1.4


373.8

822.3

 




Covenants

Facility

Drawn

Expiry

Loan to value

Interest cover

£20.0 million

£20.0 million

October 2017

60%

200%

£330.0 million

£318.0 million

July 2021

55%

200%

£31.4 million

£31.4 million

December 2018

60%

225%

€5.0 million

€5.0 million

March 2025

-

-

 

In July 2013, Hansteen (Jersey) Securities Limited issued €100 million of convertible bonds with a coupon of 4.0% expiring in July 2018.

 

On 26 June 2017 the Company decided to exercise its right and invited the bondholders, on or before 29 June 2017, to either offer to sell their bonds to the Company for a cash settlement and/or to exercise their rights to convert their bonds to ordinary shares in in the Company in accordance with the terms and conditions of the Bonds on 29 June 2017.

 

All bondholders accepted the invitation to sell or convert their bonds. 159 bonds of €100,000 each elected to settle in cash and 841 bonds of €100,000 each elected to convert to shares in the Company. The cash was settled on 5 July 2017 and is represented by a liability of £23.9 million at 30 June 2017. The shares to be issued of £99.5 million has been separately disclosed in the Company's reserves at 30 June 2017. 

 

In addition, Bondholders, whether electing to sell or convert, would be paid an amount in cash of €1,889.50 per €100,000 Bond by the Company equating to the accrued or notional interest accrued on the bonds for the 171 days up to but excluding the settlement date of 5 July 2017.

 

Security for secured borrowings at 30 June 2017 is provided by charges on property with an aggregate carrying value of £804.2 million (31 December 2016: £1,081.6million).

 

 

 

%

30 June

2017

£m

%

31 December

2016

£m

Interest rate and currency profile





Euro

1.5

4.4

2.5

522.3

Sterling

2.2

369.4

2.2

300.0


2.2

373.8

2.4

822.3

 

Reconciliation of movement in net debt in the period



30 June

2017

31 December

2016



£m

£m

Net debt at beginning of period


710.1

441.2

Cash flow




Net decrease in cash and cash equivalents


(637.9)

(14.3)

New bank loans raised and acquired (net of expenses)


67.8

567.3

Bank loans repaid (net of expenses)


(493.0)

(354.7)

Repayments of obligations under finance leases


(0.1)

(0.2)

Other




Foreign exchange movements recognised in equity


(2.8)

54.5

Foreign exchange movements recognised in the income statement


(3.7)

12.3

Amortisation of bank loan fees


5.0

4.0

 Net debt at end of period


(354.6)

710.1

 

Net debt to equity ratio


30 June

2017

31 December

2016



£m

£m

Obligations under finance leases


2.5

2.6

Borrowings


369.8

704.2

Convertible bond


-

109.8

Less mark-to-market on convertible bond


-

(24.0)

Cash and cash equivalents


(726.9)

(82.5)

Net debt


(354.6)

710.1

Equity attributable to equity holders of the parent


1,092.7

923.6

Net debt to equity ratio


-32.5%

76.9%

Carrying value of investment and trading properties


805.2

1,737.9

Net debt to value ratio


-44.0%

40.9%

15.  Share capital

 

 

Number (m)

30 June

2017

£m

Number (m)

31 December

2016

£m

Issued and fully paid ordinary shares of 10p each





At start of the period

745.8

74.6

721.5

72.2

Equity raised

-

-

24.3

2.4

At end of period

745.8

74.6

745.8

74.6

 

The share capital comprises one class of ordinary shares carrying no right to fixed income. There are no restrictions on the size of a shareholding or the transfer of shares, except for UK REIT restrictions.

 

The equity raised in 2016 relates to equity issued in respect of the Founder Long Term Incentive Plan for the performance period ended 31 December 2015.

 

During the period, the Company acquired some of its own shares in order to settle obligations under the Performance Share Plan arrangement. A summary is presented below:


 

Number (m)

 

£m

At 1 January 2017

2.0

2.2

Acquired

0.6

0.8

At 30 June 2017

2.6

3.0

16.  Net cash inflow from operating activities


Six months ended

30 June

2017

£m

Six months ended

30 June

2016

£m

Profit for the period

148.4

50.4

Adjustments for:



Share-based payments

7.3

0.5

Depreciation of property, plant and equipment

0.1

0.1

Share of results of associates and gain on sale of associate

-

(12.0)

Gain on business combination

-

(0.4)

Profit on disposal of discontinued operations

(119.5)

-

Gains on investment properties - continuing operations

(14.5)

(2.4)

Gains on investment properties - discontinued operations

(0.1)

(11.4)

Net finance costs - continuing operations

14.8

(6.5)

Net finance costs - discontinued operations

6.0

8.9

Tax - continuing operations

(0.7)

0.4

Tax - discontinued operations

8.8

4.0

Operating cash inflows before movements in working capital

50.6

31.6

Decrease in trading properties

-

0.9

Increase in receivables

2.7

2.4

Increase in payables

(28.3)

(14.8)

Cash generated by operations

25.0

20.1

Income taxes paid

(3.4)

(1.8)

Interest paid

(9.9)

(8.9)

Net cash inflow from operating activities

11.7

9.4

 

17.  Financial instruments fair value disclosures

The table below sets out the categorisation of the financial instruments held by the Group at 30 June 2017. Where the financial instruments are held at fair value the valuation level indicates the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Valuations categorised as level 2 are obtained from third parties. The fair value of the derivative interests rate swap contracts are estimated by discounting expected future cash flows using market interest rates and yield curves over the remaining term of the instruments. If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.

 


Valuation

30 June

2017

31 December

2016


level

£m

£m

Financial assets




Designated as held for trading




Interest rate caps

2

0.7

1.0

Interest rate swaps

2

1.0

-





Financial liabilities




Designated as held for trading




Interest rate swaps

2

-

(3.2)

Fair value through profit and loss




Convertible Bond

1

-

(109.8)

 

The Directors consider that the carrying value amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values.

 

18.  Events after the balance sheet date

The convertible bond was converted on 29 June 2017 as detailed in note 14. The shares to be issued of £99.5 million as reported at 30 June 2017 were issued to the bondholders on 10 July 2017 and the cash liability of £24.0 million was settled on 5 July 2017.

 

The RBS facility in Industrial Multi Property Trust plc of £31.4 million was settled on 18 August 2017 and the RBS facility in Hansteen Saltley Unit Trust of £20.0 million was settled on 21 August 2017.

 

On 23 July 2017 the group acquired the remaining 6.6% of the shares in Industrial Multi Property Trust plc thereby obtaining 100% ownership.

 

 

 

INDEPENDENT REVIEW REPORT TO HANSTEEN HOLDINGS PLC

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

Deloitte LLP

Statutory Auditor

London, United Kingdom

22 August 2017


 


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