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RNS
Hansteen Holdings plc  -  HSTN   

Half-year Report

Released 07:00 22-Aug-2018

RNS Number : 4904Y
Hansteen Holdings plc
22 August 2018
 
22 August 2018

Hansteen Holdings PLC

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

 

HALF YEAR RESULTS

Hansteen (LSE: HSTN), the investor in urban multi-let industrial property, announces its half year results for the six months ended 30 June 2018.

 

Financial highlights from continuing operations

·      IFRS profit increased to £29.2 million (H1 2017: £13.3 million)

·      Normalised Income Profit (NIP) of £13.6 million (H1 2017: £15.5 million[1])

·      Normalised Total Profit (NTP) of £20.2 million (H1 2017: £16.8 million1)

·      EPRA NAV per share of 100p after returning 35p of capital (31 December 2017: 131p1)

·      IFRS NAV per share of 106p after returning 35p of capital (31 December 2017: 135p)

·      October interim dividend increased by 4.3% to 2.4p per share (November 2017: 2.3p per share)

 

Operational highlights

·      Property valuation increase of 3.7% or £24.1 million

·      362 new UK leases / renewals at 4.6% ahead of ERV at 31 December 2017

·      IMPT portfolio sold for £116 million generating a profit of £6.1 million over 31 December 2017 valuation

·      Saltley Business Park compulsorily purchased (CPO)

·      £9.9 million of other sales generating profits of £0.3 million over 31 December 2017 valuation

·      £144.5 million (35p per share) of capital returned to shareholders in May 2018

 

Post balance sheet events

·      Contracts exchanged to acquire 34 assets for £57.3 million (including costs) reflecting a net initial yield of 9.15%.

 

Melvyn Egglenton, Chairman, commented: "This has been a busy and successful period for Hansteen. We have sold the IMPT portfolio, received a down payment for the CPO of Saltley Business Park and returned £144.5 million of capital to shareholders. Meanwhile, the portfolio continued to perform strongly enjoying substantial valuation growth over the six-month period.

 

This pace has continued into July and August with the exchange of contracts to acquire 34 assets for £57.3 million (including costs) with a rent roll of £5.25 million per annum, reflecting a net initial yield of 9.15%"

 

Ian Watson and Morgan Jones, Joint Chief Executives, added: "The backdrop to our business remains positive. Occupational demand is solid with very limited supply in all our regions. Rents and capital values are growing but at a time when there is no new meaningful supply on the horizon.

 

The investment case for urban multi-let industrials is stronger than ever and increasingly well understood. As a result, we continue to see new capital looking to invest. A stabilised and diversified portfolio like ours with a robust and growing rent roll provides ongoing solid and attractive returns. However, we remain committed to our buy, work and sell business model and expect to continue to realise investments over the next couple of years. As we have shown with the recent acquisition, if we identify opportunities that fit our model we will keenly pursue them but our expectation is that we will be net sellers for the foreseeable future."

 

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

 

 

 

 

Chairman's interim statement

 

The first six months of 2018 continued to be a busy and successful period for Hansteen. We have sold the IMPT portfolio, received a down payment for the compulsory purchase order (CPO) of Saltley Business Park and returned £144.5 million of capital to our shareholders. Meanwhile, the portfolio continued to perform strongly enjoying substantial valuation growth over the six-month period.

 

This pace has continued into July and August with the exchange of contracts to acquire 34 assets for £57.3 million (including costs) with a rent roll of £5.25 million per annum, reflecting a net initial yield of 9.15%. The acquisition was made by the vehicle that owned Saltley and therefore we expect to recover the acquisition costs in due course under the re-investment provisions of the CPO.

 

Results

Hansteen's IFRS profit for the six months to 30 June 2018 increased to £29.2 million (H1 2017: £13.3 million) and includes a like-for-like property revaluation uplift of £24.1 million or 3.7%. This revaluation was generated from a smaller portfolio following the 21 asset sales in the second half of 2017, the sale of IMPT and the Saltley CPO in 2018. Despite the reduced rent roll following these disposals, the business produced Normalised Income Profit (NIP) of £13.6 million (H1 2017: £15.5 million) and Normalised Total Profit of £20.2 million (H1 2017: £16.8 million). NIP excludes profits or losses from the sale of properties and valuation movements and therefore reflects the net rental income received from the portfolio after the deduction of costs and debt interest. NTP comprises NIP plus profits or losses from the sale of properties and realised profits from one-off items.

 

These normalised profit measures (NIP and NTP) reflect the underlying realised profits from the business before considering property and other revaluation movements. The table below sets out the calculation and results for NIP and NTP with a breakdown between 'Continuing Operations', being predominantly the UK portfolio and 'Discontinued Operations', being the German and Dutch portfolio, which was sold in June 2017.

 

Continuing Operations

H1 2018

Discontinued Operations

H1 2018

Total

 

H1 2018

Continuing Operations H1 2017

Discontinued Operations

H1 2017

Total

 

H1 2017

 

£m

£m

£m

£m

£m

£m

Property rental income

26.2

-

26.2

28.8

36.2

65.0

Direct operating expenses

(1.9)

0.1

(1.8)

(1.5)

(3.0)

(4.5)

Administrative expenses

(6.8)

(0.2)

(7.0)

(6.9)

(3.1)

(10.0)

Net interest payable

(3.9)

-

(3.8)

(4.9)

(6.7)

(11.6)

Normalised Income Profit (NIP)

13.6

(0.1)

13.5

15.5

23.4

38.9

Profit on sale of properties

6.4

-

6.4

0.8

48.0

48.8

Other operating income

0.2

-

0.2

0.5

0.2

0.7

Normalised Total Profit (NTP)

20.2

(0.1)

20.1

16.8

71.6

88.4

 

Basic IFRS EPS was 7.1p (H1 2017: 1.7p) and adjusted EPS was 3.2p (H1 2017: 2.0p). Adjusted EPS is based on EPRA EPS adjusted for the fair value of the Founder LTIP charge. EPRA EPS and adjusted EPS are reconciled to basic IFRS EPS in note 11 to the condensed financial statements.

 

The Board regards EPRA NAV per share plus dividends and other returns to shareholders as the best measure of value growth. The Group's EPRA NAV per share at 30 June 2018 was 100p after paying a dividend of 3.8p and returning 35p per share to shareholders. The EPRA NAV per share at 31 December 2017, before the 35p capital return was 131p. The calculation of the EPRA NAV per share at 30 June 2018 takes account of the Founder LTIP, details of which are set out later in the Statement.

 

The Group uses a number of alternative performance measures which are not defined within IFRS. The Board use these measures in order to assess the underlying realised profits from the business and as such these measures should be considered alongside the IFRS measures. A reconciliation of NIP and NTP to the IFRS profit before tax is contained in note 9 to the condensed financial statements. Basic NAV per share is reconciled to EPRA NAV per share in note 10 to the condensed financial statements.

 

Dividend

The Board has increased the interim dividend by 4.3% to 2.4p per share (November 2017: 2.3p per share) reflecting the strong realised profit performance. The dividend payment of 2.4p per share will include a 2.4p Property Income Distribution (PID) and will be paid on 26 October 2018. The associated record date is 28 September 2018 and the ex-dividend date is 27 September 2018.

 

 

Industrial Multi Property Trust PLC (IMPT)

On 27 March 2018, Hansteen completed the sale of the IMPT portfolio for £116 million. After acquiring the portfolio in the first half of 2017, our UK asset management team was able to increase the occupancy, rent roll and ERV and, as a result, the portfolio was valued at £109.7 million at 31 December 2017. The sale has generated a profit over the 31 December 2017 valuation of £6.1 million after fees and expenses.

 

Saltley Compulsory Purchase Order (CPO)

On 13 March 2018, the Secretary of State for Transport acquired Saltley Business Park, Birmingham by way of a CPO under the High Speed Rail (London - West Midlands) Act 2017, to enable construction of the first phase of the HS2 route. As part of the CPO process, High Speed Two (HS2) Limited, acting on behalf of the Secretary of State, made a down payment of £36.96 million and a mutual valuation process is under way which is designed to establish the property's market value.

 

Return of capital

The sale of the IMPT portfolio and the Saltley Business Park CPO generated net cash proceeds in excess of £150 million. Owing to the high level of demand for industrial property investments, opportunities to reinvest these substantial cash deposits in properties that fitted the Hansteen business model were limited. As the cash deposits would have earned virtually no interest and, therefore, materially dilute the returns from the business, the Board considered that returning the capital to the shareholders by means of a reduction and return of capital was in the best interest of all shareholders. The Company's share premium and capital redemption reserve were reduced by £144.5 million and each shareholder received 35p per share in cash on or around the 11 May 2018.

 

Since the Company's IPO, Hansteen has raised £717.9 million, including convertible bonds, and has made distributions of income and capital which along with the net asset value of the remaining business amounts to c£1.5 billion. (£717.9 million raised, £339.2 million of dividends paid, c£722.4 million of capital returns, and a retained NAV of £439 million.)

 

Property portfolio

The built portfolio has a yield of 7.4% on the passing rent and 7.9% on the contracted rent. Including the 469 acres of undeveloped land, the total portfolio has a yield on the passing rent of 6.8% and a yield on the contracted rent of 7.3%. The summary analysis of the total portfolio, at 30 June 2018, is set out below:

 

 

Number of properties

Acres of land

Built area

(m sq ft)

Vacant area

Passing

rent (£m)

Contracted rent (£m)

Value (£m)

Yield on passing

rent

Yield on contracted rent

UK

257

-

13.2

9.0%

43.3

46.5

589.9

7.3%

7.9%

Belgium & France

8

-

0.7

11.9%

2.3

2.3

28.4

8.1%

8.1%

Total built portfolio

265

-

13.9

9.2%

45.6

48.8

618.3

7.4%

7.9%

UK Land

-

469

-

-

-

-

51.9

-

-

 

 

Occupational demand has continued to outstrip supply in 2018. This, combined with very limited new development is driving rental growth across the UK. In the first six months of the year our team has secured 362 new lettings or renewals at rent levels which are 4.6% higher than the ERV at 31 December 2017. Like-for-like net occupancy (measured by taking the vacant area at the start of the period, adding vacancy on purchases and then comparing that with the vacancy at the end of the period) has improved marginally. This statistic follows 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.

 

Property valuation, disposals and acquisitions

The like-for-like value of the total portfolio (after disposals) has increased by £24.1 million or 3.7% since 31 December 2017. The UK portfolio increased by £24.4 million or 4.0% and the value of the Belgium and France portfolio decreased by £0.3 million of 1%. Despite the overall valuation increase, the built portfolio retains a high yield of 7.4% (passing rent divided by value).

 

In addition to the disposal of the IMPT portfolio and the Saltley CPO, a further seven properties were sold for £9.9 million generating profits of £0.3 million above the 31 December 2017 valuation.

 

On 6 August 2018, we announced that contracts had been exchanged for the acquisition of a portfolio of 34 assets located throughout the UK with a focus on the North West for £57.3 million (including costs), adding 1.4 million sq ft of space to the portfolio. The passing rent is £5.25 million per annum generated from more than 200 tenants providing a diverse and secure income stream. We believe that the portfolio contains a number of asset management opportunities which will create value in both the short and longer term. The purchase of 31 of these assets completed on 16 August 2018 for £50.4 million and the purchase of the remaining three assets for £6.9 million is expected in September 2018.

 

As a result of press speculation regarding a potential sale of a portfolio of industrial assets by Hansteen to Warehouse REIT plc, both companies have issued statements which have confirmed that we are in discussions regarding a property sale but that there is no certainty that a transaction will be concluded and a further announcement will be made as and when appropriate.

 

Gearing

At 30 June 2018, net debt was £225.2 million (31 December 2017: £225.4 million) and net debt to value was 33.6% (31 December 2017: 27.6%). The table below sets out the calculation of net debt and the net debt to value ratio:

 

 

30 June

2018

31 Dec

 2017

 

£m

£m

Obligations under finance leases

2.3

2.5

Borrowings

263.8

297.1

Capitalised bank loan fees

(2.4)

(3.0)

Cash and cash equivalents

(38.5)

(71.2)

Net debt

225.2

225.4

Carrying value of investment and trading properties

670.2

818.1

Net debt to value ratio

33.6%

27.6%

 

As at 30 June 2018, the Group had total bank facilities of £333.8 million (31 December 2017: £334.1 million), of which £263.8 million were drawn (31 December 2017: £297.1 million). Borrowings are in the same currency as the assets against which they are secured. Cash resources were £38.5 million (31 December 2017: £71.2 million). The weighted average debt maturity, at 30 June 2018, was 3.1 years and the weighted average maturity of hedging was 3.1 years.

 

Analysis of the Group's bank loan facilities at 30 June 2018 is set out below:

 

Lender

Facility

 

millions

Amount undrawn

millions

Unexpired term

years

All-in-interest rate

Loan to value covenant

Interest cover covenant

BNP Paribas Fortis

£3.8

-

5.1

1.5%

-

-

Royal Bank of Scotland

£330.0

£70.0

3.1

2.9%

55%

200%

Total facilities

£333.8

£70.0

3.1

2.9%

 

 

 

In addition to the bank loan facilities, the Group has a £2.3 million finance lease in place to fund a property in Belgium. As at 30 June 2018, the lease had an unexpired term of 4.5 years and an interest rate implicit in the lease of 2.8%.

 

In total at 30 June 2018, the Group had borrowings including obligations under finance leases, of £266.1 million (31 December 2017: £299.6 million) of which £150.0 million was swapped at an average rate of 0.53% and £50.0 million was capped at an average rate of 0.75%. The average all-in borrowing rate for the Group, at 30 June 2018, was 2.9% (31 December 2017: 2.7%).

 

Founder Long Term Incentive Plan ("Founder LTIP")

The Founder LTIP was established at the time of the Company's IPO in November 2005. Under the scheme, if the growth in the Group's EPRA NAV per share plus dividends (and other returns to shareholders) exceeds compound growth of more than 10% per annum over a fixed three-year period, the joint Chief Executives will each receive an award of shares with a value of 12.5% of the outperformance multiplied by the number of shares in issue at the end of the performance period. The current performance period runs from 1 January 2016 to 31 December 2018 and as previously reported, after consultation with shareholders and the directors, this will be the final performance period for which Founder LTIP shares can be awarded.

 

The returns so far are ahead of the target levels. There is a further six months remaining and therefore the potential awards can only be estimated at this stage and are dependent on the performance in the final six months.

 

The calculation of performance in the current period has been adjusted to take account of the tender offer of November 2017 and as explained in the return of capital circular and in the Remuneration Committee report contained in the 2017 Annual Report and Accounts, the Founder LTIP calculation will be measured over two periods, being pre and post the return of capital date of 14 November 2017.

 

EPRA NAV per share includes the impact of dilutive shares and dilution is required only to the extent that the results to date have exceeded the full target to 31 December 2018. Under this methodology the accrual to 30 June 2018 is 13.1 million shares to each of the Joint Chief Executives. As the full three-year hurdle has been met by 30 June 2018, the value of the awards will increase by 25% of all additional returns made in the second half of 2018.

 

The administrative expenses of £22.1 million (H1 2017: £14.8 million) includes a charge of £15.3 million (H1 2017: £7.9 million) related to the potential Founder LTIP awards and associated National Insurance contributions. Only the effect of the associated National Insurance contributions on the Founder LTIP awards affects the NAV because, in accordance with IFRS, the charge for the potential Founder LTIP awards excluding the associated National Insurance contribution is credited back through equity. This £15.3 million charge related to the potential Founder LTIP awards and associated National Insurance contributions is not reversed when calculating EPRA EPS which has led to a loss of 0.5p per share at 30 June 2018. However, the charge is reversed when calculating Adjusted EPS of 3.2p per share at 30 June 2018.

 

Outlook

We continue to enjoy a beneficial backdrop to our business. Occupational demand is solid with very limited supply in all our regions. Rents and capital values are growing but not yet at a stage where any new meaningful supply is even on the horizon.

 

The investment case for urban multi-let industrials is stronger than ever and increasingly well understood. As a result, we continue to see new capital looking to invest. A stabilised and diversified portfolio like ours with a robust and growing rent roll provides solid and attractive returns. However, we remain committed to our buy, work and sell business model and expect to continue to realise investments over the next couple of years. As we have shown with the recent acquisition, if we identify opportunities that fit our model we will keenly pursue them, but our expectation is that we will be net sellers for the foreseeable future.

 

 

 

Melvyn Egglenton

Chairman

21 August 2018

 

 

 

 

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.

 

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.

 

 

 

 

 

Significant tenant failure.

 

 

Recession and reduced profitability.

 

High

Low

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 include: 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

 

21 August 2018

 

 

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 3DL

 

 

Consolidated income statement

for the six months ended 30 June 2018

 

 

 

 

 

Note

Six months ended

30 June

2018

£m

Unaudited

Six months ended

30 June

2017

£m

Unaudited

Continuing operations

 

 

 

 

 

 

 

Gross revenue1

5

28.5

31.0

 

 

 

 

Revenue

5

26.2

28.8

Cost of sales

 

(1.9)

(1.6)

Gross profit

 

24.3

27.2

Other operating income

 

0.2

0.5

Administrative expenses

 

(22.1)

(14.8)

Gains on investment properties

 

30.5

14.5

Operating profit

 

32.9

27.4

Finance income

7

0.8

4.8

Finance costs

7

(4.4)

(19.6)

Profit before tax

 

29.3

12.6

Tax (charge)/credit

8

(0.1)

0.7

Profit for the period from continuing operations

 

29.2

13.3

(Loss)/profit for the period from discontinued operations net of tax

12

(0.1)

135.1

Profit for the period

 

29.1

148.4

 

 

 

 

Attributable to:

 

 

 

Equity holders of the parent

 

29.1

148.1

Non-controlling interest

 

-

0.3

Profit for the period

 

29.1

148.4

 

 

 

 

Earnings per share

 

 

 

Basic

 

 

 

Continuing operations

11

7.1p

1.7p

Discontinued operations

11

0.0p

18.1p

 

 

7.1p

19.8p

Diluted

 

 

 

Continuing operations

11

6.7p

1.7p

Discontinued operations

11

0.0p

18.0p

 

 

6.7p

19.7p

 

 

 

                                                                                                                                           

Consolidated statement of comprehensive income

for the six months ended 30 June 2018

 

 

Six months ended

30 June

2018

£m

Unaudited

Six months ended

30 June

2017

£m

Unaudited

 

 

 

Profit for the period

29.1

148.4

 

 

 

Other comprehensive expense:

 

 

Exchange gains arising on translation of foreign operations

-

14.5

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

-

(71.6)

Total other comprehensive expense for the period

-

(57.1)

Total comprehensive income for the period

29.1

91.3

 

 

 

Total comprehensive income attributable to:

 

 

Equity holders of the parent

29.1

91.0

Non-controlling interest

-

0.3

 

29.1

91.3

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

 

Consolidated balance sheet

As at 30 June 2018

 

 

 

 

 

Note

30 June

2018

£m

Unaudited

31 December

2017

£m

Audited

Non-current assets

 

 

 

Property, plant and equipment

 

0.1

0.2

Investment property

14

644.4

694.2

Derivative financial instruments

 

2.9

2.2

 

 

647.4

696.6

Current assets

 

 

 

Investment property held for sale

14

15.8

113.9

Trading properties

 

10.0

10.0

Trade and other receivables

 

35.2

18.3

Cash and cash equivalents

 

38.5

71.2

 

 

99.5

213.4

Total assets

 

746.9

910.0

Current liabilities

 

 

 

Trade and other payables

 

(31.0)

(30.4)

Current tax liabilities

 

(8.0)

(20.5)

Borrowings

15

(0.3)

(0.3)

Obligations under finance leases

 

(0.2)

(0.2)

 

 

(39.5)

(51.4)

Non-current liabilities

 

 

 

Borrowings

15

(261.1)

(293.8)

Obligations under finance leases

 

(2.1)

(2.3)

Provisions

 

(0.8)

(0.8)

Deferred tax liabilities

 

(4.0)

(4.2)

 

 

(268.0)

(301.1)

Total liabilities

 

(307.5)

(352.5)

Net assets

 

439.4

557.5

 

 

 

 

Equity

 

 

 

Share capital

16

41.3

41.3

Share premium account

 

11.0

114.5

Other reserves

 

(0.1)

(0.1)

Capital redemption reserve

 

-

41.3

Translation reserve

 

4.8

4.8

Retained earnings

 

382.4

355.7

Equity shareholders' funds

 

439.4

557.5

Non-controlling interest

 

-

-

Total equity

 

439.4

557.5

 

Net asset value per share

 

 

 

IFRS net asset value per share

11

106p

135p

Diluted net asset value per share

11

99p

130p

EPRA net asset value per share

11

100p

131p

 

 

Consolidated statement of changes in equity

for the six months ended 30 June 2018

 

Unaudited

Share

capital

£m

Share

premium

£m

Translation

reserve

£m

 

Other reserves

£m

Capital redemption reserve

£m

Shares to be issued

£m

Retained

earnings

£m

Total

£m

Non-controlling interest

£m

 

Total

£m

Balance at 1 January 2017

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 expense 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

Shares issued/settlement of convertible bond

 

8.0

 

-

 

-

 

-

 

 

(99.5)

 

91.5

 

-

 

-

 

-

Cancellation of shares under tender offer

(41.3)

-

-

-

 

41.3

-

(583.1)

(583.1)

-

(583.1)

Non-controlling interests disposed

-

-

-

-

 

-

-

-

-

(1.9)

(1.9)

Capital repaid

-

-

-

-

-

-

-

-

(0.2)

(0.2)

Dividends

-

-

-

-

-

-

(19.0)

(19.0)

(0.1)

(19.1)

Share-based payments

-

-

-

-

-

-

10.7

10.7

-

10.7

Share options exercised

-

-

-

2.8

-

-

(2.8)

-

-

-

Own shares acquired

-

-

-

0.1

-

-

-

0.1

-

0.1

Profit for the period

-

-

-

-

-

-

56.0

56.0

(0.1)

55.9

Other comprehensive income for the period

-

-

0.1

-

-

-

-

0.1

-

0.1

Balance at 31 December 2017

41.3

114.5

4.8

(0.1)

41.3

-

355.7

557.5

-

557.5

Return of capital

-

(103.5)

-

-

(41.3)

-

0.1

(144.7)

-

(144.7)

Dividends

-

-

-

-

-

-

(15.7)

(15.7)

-

(15.7)

Share-based payments

-

-

-

-

-

-

14.1

14.1

-

14.1

Share options exercised

-

-

-

0.9

-

-

(0.9)

-

-

-

Own shares acquired

-

-

-

(0.9)

-

-

-

(0.9)

-

(0.9)

Profit for the period

-

-

-

-

-

-

29.1

29.1

-

29.1

Balance at 30 June 2018

41.3

11.0

4.8

(0.1)

-

-

382.4

439.4

-

439.4

 



Consolidated cash flow statement

for the six months ended 30 June 2018

 

 

 

 

 

 

Note

Six months ended

30 June

2018

£m

Unaudited

Six months ended

30 June

2017

£m

Unaudited

Net cash inflow from operating activities

17

2.3

11.7

Investing activities

 

 

 

Interest received

 

0.1

0.1

Additions to investment properties

 

(2.0)

(30.2)

Proceeds from sale of investment properties

 

162.3

20.7

Investment in subsidiary

 

-

(27.3)

Proceeds from sale of subsidiaries

 

-

662.4

Net cash generated by investing activities

 

160.4

625.7

Financing activities

 

 

 

Dividends paid

 

(15.7)

(27.9)

Repayments of obligations under finance leases

 

(0.1)

(0.1)

New bank loans raised (net of expenses)

 

74.0

36.4

Bank loans repaid (net of expenses)

 

(107.3)

(3.8)

Own shares acquired

 

(0.9)

(0.8)

Return of capital

 

(144.7)

-

Additions to derivative financial instruments

 

-

0.2

Settlement of derivative financial instruments

 

-

(3.5)

Net cash (used in)/generated by financing activities

 

(194.7)

0.5

Net (decrease)/increase in cash and cash equivalents

 

(32.0)

637.9

Cash and cash equivalents at beginning of period

 

71.2

82.5

Effect of foreign exchange rate changes

 

(0.7)

6.5

Cash and cash equivalents at end of period

 

38.5

726.9

 



Notes to the condensed set of financial statements for the six months ended 30 June 2018

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 2017 was derived from the statutory accounts for the year ended 31 December 2017, 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 2017 apart from a number of new standards and amendments to IFRSs that became effective for the financial year beginning on 1 January 2018. These new standards and amendments are listed below:

 

IFRS 9

Financial Instruments

IFRS 15

Revenue from Contracts with Customers

IFRS 2 (amendments)

Classification and Measurement of Share-based Payment Transactions

IAS 40 (amendments)

Transfers of Investment Property

Annual improvement s to IFRS 2014-2016 Cycle

Amendments to IFRS 1 First-time Adoption of IFRS and IFRS 28 Investments in Associates and Joint Ventures

IFRS 10 and IAS 28 (amendments)

Sale or Contribution of Assets between and Investor and its Associate or Joint Venture

IFRIC 22

Foreign Currency Transactions and Advance Consideration

IFRIC 23

Uncertainty over Income Tax Treatments

 

 

The adoption of these new standards and amendments to IFRSs did not materially impact the condensed set of financial statements for the six months ended 30 June 2018 and no retrospective adjustments were made to the prior year figures. However, with the introduction of IFRS 15, Revenue from Contracts with Customers, additional prior year disclosures have now been included. Further details on this standard are detailed below.

 

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 following significant accounting policy has been applied from 1 January 2018 to reflect the new standards and amendments. There have been no other changes to the significant accounting policies set out in the latest financial statements of the Group in preparing the condensed set of financial statements.

 

Gross revenue

IFRS 15, Revenue from Contracts with Customers, is based on the principle that revenue is recognised when control passes to a customer. The majority of the Group's income is from tenant leases and is outside the scope of the new standard. However, certain non-rental income streams, such as service charge income, trading property sales, and external management fees, are within the scope of the standard. In total the Group's 'Gross revenue' includes rental income and non-rental income streams. 'Gross Revenue' includes service charge income which is excluded from Revenue in the consolidated income statement. There has been no financial impact of the new standard to the Group; however, the 'Gross revenue' line has been included within the consolidated income statement. Comparative figures have been included accordingly.

 

For management purposes, Revenue remains the primary income measure as shown in notes 6 and 10. Revenue from services is recognised at the fair value of the consideration received or receivable and represents amounts receivable for services rendered in the accounting period.

 

The interim report was approved by the Board on 21 August 2018.

 

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

Balance sheet: £1 = €1.1308 (31 December 2017: £1 = €1.1270)

Income statement: £1 = €1.1369 (30 June 2017: £1 = €1.1626)

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 15 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 2018 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 2017.

5.     Revenue

 

 

 

 

Continuing Operations

Six months ended

30 June

2018

£m

Six months ended

30 June

2017

£m

 

 

 

Investment property rental income

26.2

28.8

Revenue

26.2

28.8

Service charge income

2.3

2.2

Gross revenue1

28.5

31.0

 

 

6.     Operating segments

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

 

 

 

 

 

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Continuing Operations

 

Revenue

£m

 

Result

£m

Gross revenue1

£m

 

Revenue

£m

 

Result

£m

Belgium

0.5

0.5

0.4

0.5

0.5

0.5

France

0.6

0.6

0.6

0.9

0.9

0.8

UK

27.4

25.1

23.3

29.6

27.4

25.9

 

28.5

26.2

24.3

31.0

28.8

27.2

Other operating income

 

 

0.2

 

 

0.5

Administrative expenses

 

 

(22.1)

 

 

(14.8)

Changes in fair values of investment properties by segment:

 

 

 

 

 

 

Belgium

 

(0.1)

 

 

(1.0)

 

France

 

(0.2)

 

 

(0.5)

 

UK

 

24.4

 

 

15.1

 

Total changes in fair values of investment properties

 

24.1

 

 

13.6

 

Profit on disposal of investment properties

 

6.4

 

 

0.9

 

Total gains on investment properties

 

 

30.5

 

 

14.5

Operating profit

 

 

32.9

 

 

27.4

Net finance costs

 

 

(3.6)

 

 

(14.8)

Profit before tax

 

 

29.3

 

 

12.6

                   

 

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 2018

 

Investment properties2

£m

 

Trading properties

£m

 

Total

properties

£m

 

Other

assets

£m

 

Total

assets

£m

Additions to investment properties

£m

Non-current assets

£m

Belgium

14.3

-

14.3

1.0

15.3

-

14.3

France

14.1

-

14.1

3.8

17.9

0.2

14.1

UK

631.8

10.0

641.8

48.4

690.2

1.8

616.0

 

660.2

10.0

670.2

53.2

723.4

2.0

644.4

Unallocated assets

 

 

 

 

23.5

 

3.0

 

 

 

 

 

746.9

 

647.4

 

 

 

31 December 2017

 

Investment properties2

£m

 

Trading properties

£m

 

Total

properties

£m

 

Other

assets

£m

 

Total

assets

£m

Additions to investment properties

£m

Non-current assets

£m

Belgium

14.5

-

14.5

1.8

16.3

-

14.5

France

17.2

-

17.2

0.6

17.8

0.1

17.2

UK

776.4

10.0

786.4

33.7

820.1

95.8

662.6

 

808.1

10.0

818.1

36.1

854.2

95.9

694.3

Unallocated assets

 

 

 

 

55.8

 

2.3

 

 

 

 

 

910.0

 

696.6

 

 

7.     Net finance costs

 

 

 

 

Continuing Operations

Six months ended

30 June

2018

£m

Six months ended

30 June

2017

£m

Interest receivable on bank deposits

-

-

Other interest receivable

0.1

0.5

Interest income

0.1

0.5

Interest payable on borrowings

(4.0)

(5.4)

Net interest expense

(3.9)

(4.9)

Change in fair value of interest rate swaps and caps

0.7

0.5

Change in fair value of convertible bond

-

(12.1)

Fees incurred on conversion of convertible bonds

-

(0.4)

Interest incurred on the convertible bond

-

(1.7)

Foreign exchange gains

(0.4)

3.8

Net finance costs

(3.6)

(14.8)

Finance income

0.8

4.8

Finance costs

(4.4)

(19.6)

Net finance costs

(3.6)

(14.8)

 

8.     Tax

 

 

 

 

Continuing Operations

Six months ended

30 June

2018

£m

Six months ended

30 June

2017

£m

UK current tax credit

-

(0.7)

Foreign current tax charge

0.3

0.1

Total current tax charge/(credit)

0.3

(0.6)

Deferred tax credit

(0.2)

(0.1)

Tax charge/(credit)

0.1

(0.7)

 

The Group elected to be a UK REIT in 2009 following admission to the Official List. The UK REIT rules exempt the profits of the Group's property rental business from UK corporation tax. Gains on UK properties are also exempt from tax provided they are not held for trading. The Group's UK activities are otherwise subject to UK corporation tax. To remain a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activity and its balance of business which are set out in the UK REIT legislation in the Corporation Tax Act 2010.

9.     Dividends

 

 

Six months ended

30 June

2018

£m

Six months ended

30 June

2017

£m

Amounts recognised as distributions to equity holders in the period:

 

 

Second interim dividend 3.8p (2017: 3.7p) per share

15.7

27.5

 

15.7

27.5

 

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%). £15.2 million of the cash dividend paid in the period ended 30 June 2018 is attributable to PIDs (2017: £15.6 million).

10.  Normalised income profit and normalised total profit

The Group uses a number of Alternative Performance Measures ("APMs") which are not defined or specified within IFRS.  The Directors use these measures in order to assess the underlying operational performance of the Group and allow greater comparability between periods but do not consider them to be a substitute for, or superior to, IFRS measures.  Key APMs used are Normalised Income Profit ("NIP"), Normalised Total Profit ("NTP"), measures defined by EPRA and adjusted EPS[2].

 

NIP and NTP are adjusted measures intended to show the underlying earnings of the Group before fair value movements and other non-recurring or otherwise non-cash items. Fair value movements include those in relation to investment property, financial assets and financial liabilities. Non-recurring or otherwise non-cash items include foreign exchange gains or losses and the Founder LTIP charge. A reconciliation of NIP and NTP to the Profit for the year prepared in accordance with IFRS is set out below.  A reconciliation of EPRA measures and adjusted EPS is included within note 11.

 

 

Six months ended

30 June 2018

Six months ended

30 June 2017

 

Continuing operations

£m

Discontinued operations

£m

Total

£m

 

Continuing operations

£m

Discontinued operations

£m

Total

£m

Investment property rental income

26.2

-

26.2

 

28.8

36.2

65.0

Direct operating expenses

(1.9)

0.1

(1.8)

 

(1.5)

(3.0)

(4.5)

Administrative expenses excluding LTIP charge[3]

(6.8)

(0.2)

(7.0)

 

(6.9)

(3.1)

(10.0)

Net interest expense3

(3.9)

-

(3.9)

 

(4.9)

(6.7)

(11.6)

Normalised Income Profit

13.6

(0.1)

13.5

 

15.5

23.4

38.9

Profit on sale of investment properties

6.4

-

6.4

 

0.9

0.1

1.0

Loss on sale of trading properties

-

-

-

 

(0.1)

-

(0.1)

Total profit on sale of properties

6.4

-

6.4

 

0.8

0.1

0.9

Profit on disposal of discontinued operations

-

-

-

 

-

47.9

47.9

Net other operating income

0.2

-

0.2

 

0.5

0.2

0.7

Normalised Total Profit

20.2

(0.1)

20.1

 

16.8

71.6

88.4

LTIP charge2

(15.3)

-

(15.3)

 

(7.9)

-

(7.9)

Fair value gains on investment properties

24.1

-

24.1

 

13.6

-

13.6

Change in fair value of interest rate derivatives

0.7

-

0.7

 

0.5

0.7

1.2

Change in fair value of convertible bond

-

-

-

 

(12.1)

-

(12.1)

Fees incurred on conversion of convertible bonds

-

-

-

 

(0.4)

-

(0.4)

Interest incurred on the convertible bond[4]

-

-

-

 

(1.7)

-

(1.7)

Foreign exchange (losses)/gains

(0.4)

-

(0.4)

 

3.8

-

3.8

Exchange differences recycled on disposal of discontinued operations

-

-

-

 

-

71.6

71.6

Profit before tax

29.3

(0.1)

29.2

 

12.6

143.9

156.5

Tax

(0.1)

-

(0.1)

 

0.7

(8.8)

(8.1)

Profit for the period

29.2

(0.1)

29.1

 

13.3

135.1

148.4

11.  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.

 

As noted in note 10 the Group uses a number of APMs which are not defined within IFRS. Normalised Income Profit and Normalised Total Profit have been defined in note 10 and adjusted EPS is defined below.

 

 

30 June 2018

 

30 June 2017

Continuing Operations

£m

Shares

m

Per share

pence

£m

 Shares

m

Per share

pence

Normalised Income Profit (see note 10)

13.6

412.9

3.3

15.5

746.2

2.1

Normalised Total Profit (see note 10)

20.2

412.9

4.9

16.8

746.2

2.2

 

 

 

 

 

 

 

Basic EPS

29.2

412.9

7.1

13.0

746.2

1.7

Adjustments:

 

 

 

 

 

 

Dilutive shares relating to the profit share scheme

 

3.4

 

 

3.0

 

Dilutive shares relating to the Founder LTIP

 

20.5

 

 

-

 

Diluted EPS

 

29.2

436.8

6.7

13.0

749.2

1.7

 

 

 

 

 

 

 

Basic EPS

Adjustments:

29.2

412.9

7.1

13.0

746.2

1.7

Revaluation gains on investment properties

(24.1)

 

 

(13.6)

 

 

Profit on the sale of investment properties

(6.4)

 

 

(0.9)

 

 

Loss/(profit) on sale of trading properties

-

 

 

0.1

 

 

Change in fair value of derivatives

(0.7)

 

 

(0.5)

 

 

Change in fair value of convertible bond

-

 

 

9.2

 

 

Fees incurred on conversion of convertible bonds

-

 

 

0.4

 

 

Deferred tax on the above items

-

 

 

(0.3)

 

 

EPRA EPS

(2.0)

412.9

(0.5)

7.4

746.2

1.0

Adjustments:

 

 

 

 

 

 

Dilutive shares relating to the profit share scheme

 

3.4

 

 

3.0

 

Dilutive shares relating to the Founder LTIP

 

20.5

 

 

-

 

Diluted EPRA EPS[5]

(2.0)

436.8

(0.5)

7.4

749.2

1.0

Founder LTIP Charge

15.3

(20.5)

 

7.9

-

 

Adjusted EPS

13.3

416.3

3.2

15.3

749.2

2.0

 

 

 

 

30 June 2018

 

30 June 2017

Discontinued Operations

£m

Shares

m

Per share

pence

£m

 Shares

m

Per share

pence

Normalised Income Profit (see note 10)

(0.1)

412.9

0.0

23.4

746.2

3.1

Normalised Total Profit (see note 10)

(0.1)

412.9

0.0

71.6

746.2

9.6

 

 

 

 

 

 

 

Basic EPS

(0.1)

412.9

0.0

135.1

746.2

18.1

Adjustments:

 

 

 

 

 

 

Dilutive shares relating to the profit share scheme

 

3.4

 

 

3.0

 

Dilutive shares relating to the Founder LTIP

 

20.5

 

 

-

 

Diluted EPS

 

(0.1)

436.8

0.0

135.1

749.2

18.0

 

 

 

 

 

 

 

Basic EPS

Adjustments:

(0.1)

412.9

0.0

135.1

746.2

18.1

Revaluation gains on investment properties

-

 

 

-

 

 

Profit on the sale of investment properties

-

 

 

(0.1)

 

 

Profit after tax on disposal of discontinued operations

-

 

 

(113.2)

 

 

Change in fair value of derivatives

-

 

 

(0.7)

 

 

Deferred tax on the above items

-

 

 

(10.4)

 

 

EPRA EPS

(0.1)

412.9

0.0

10.7

746.2

1.4

Adjustments:

 

 

 

 

 

 

Dilutive shares relating to the profit share scheme

 

3.4

 

 

3.0

 

Dilutive shares relating to the Founder LTIP

 

20.5

 

 

-

 

Diluted EPRA EPS[6]

(0.1)

436.8

0.0

10.7

749.2

1.4

Founder LTIP Charge

 

(20.5)

 

-

-

 

Adjusted EPS

(0.1)

416.3

0.0

10.7

749.2

1.4

               

 

 

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

 

 

30 June 2018

31 December 2017

 

 

 

 

£m

Shares

m

Per share

Pence

£m

Shares

m

Per share

pence

Basic NAV

439.4

412.8

106

557.5

412.8

135

Unexercised share options[7]

 

29.6

 

-

15.5

 

Diluted NAV

439.4

442.4

99

557.5

428.3

130

Fair value of interest rate derivatives

(2.9)

 

 

(2.2)

 

 

Deferred tax

3.8

 

 

4.1

 

 

EPRA NAV

440.3

442.4

100

559.4

428.3

131

12.  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 was a true-up of the purchase price. This process was completed by the end of October 2017 and has affected the numbers disclosed relating to the discontinued operations reported in the interim financial statements as at 30 June 2017 and 2018.

 

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

 

 

 

Six months ended 

30 June

 2018

Six months ended 

30 June

2017

 

£m

Unaudited

£m

Unaudited

Revenue

-

36.2

Cost of sales

0.1

(3.0)

Gross profit

0.1

33.2

Other operating income

-

0.2

Administrative expenses

(0.2)

(3.1)

Gains on investment properties

-

0.1

Operating (loss)/profit

(0.1)

30.4

Finance income

-

0.8

Finance costs

-

(6.8)

(Loss)/profit before tax

(0.1)

24.4

Tax

-

(2.5)

(Loss)/profit after tax

(0.1)

21.9

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

(Loss)/profit for the period from discontinued operations

(0.1)

135.1

13.  Disposal of investment in subsidiary

As referred to in note 12, 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:

 

 

 

2017

£m

Investment property

 

1,067.7

Trade and other receivables

 

17.3

Cash and cash equivalents

 

8.2

Trade and other payables

 

(20.7)

Current tax liabilities

 

(3.0)

Borrowings

 

(414.4)

Deferred tax liability

 

(33.2)

 

 

621.9

Profit on disposal of discontinued operations

 

121.4

Net assets disposed

 

621.9

Cash proceeds net of transaction costs

 

671.1

 

 

49.2

Release of translation reserve

 

72.2

Profit on disposal of discontinued operations

 

121.4

Net cash inflow arising on disposal:

 

Consideration received in cash and cash equivalents

 

671.1

Less: cash and cash equivalents disposed of

 

(8.2)

 

 

662.9

There were no disposals of subsidiaries completed in the six months ended 30 June 2018. 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 12.

 

 

 

14.  Investment property

 

30 June 2018

31 December 2017

 

Continuing operations

Continuing operations

Discontinued operations

 

£m

£m

£m

Investment property at start of period

694.2

698.5

1,019.0

Additions - property purchases

-

91.2

13.0

                  - capital expenditure

2.0

4.7

15.4

Lease incentives

0.2

1.4

(0.1)

Letting costs

0.1

0.1

0.2

Revaluations

24.1

62.0

-

Disposals

(60.3)

(50.9)

(1,067.7)

Transfer to investment property held for sale

(15.8)

(113.9)

-

Exchange adjustment

(0.1)

1.1

20.2

 

644.4

694.2

-

 

Investment property held for sale

30 June 2018

31 December 2017

 

Continuing operations

Continuing operations

Discontinued operations

 

£m

£m

£m

Investment property at start of period

113.9

3.0

7.4

Disposals

(113.9)

(3.0)

(7.4)

Transfer from investment property

15.8

113.9

-

 

15.8

113.9

-

 

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 2018 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 2018

Min

Max

Min

Max

 

 

£m

£

£

%

%

Belgium

 

14.3

29.2

109.2

4.5

9.8

France

 

14.1

30.6

30.6

8.4

8.3

UK - Industrial properties

 

616.7

7.0

150.2

0.9

15.6

UK - Offices

 

15.1

34.6

625.7

4.5

17.6

Total

 

660.2

 

 

 

 

 

  

 

 

 

 

Fair value at

Rent per sq m

                    Yield

 

 

31 December 2017

Min

Max

Min

Max

 

 

£m

£

£

%

%

Belgium

 

14.5

25.7

108.2

3.0

9.7

France

 

17.2

29.5

29.5

8.3

8.3

UK - Industrial properties

 

760.0

10.8

178

2.5

15.6

UK - Offices

 

16.4

23.1

625.7

3.0

17.6

Total

 

808.1

 

 

 

 

 

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.  

 

15.  Borrowings

 

30 June

 2018

31 December 2017

 

£m

£m

 

 

 

Amortised cost

 

 

Bank loans

263.8

297.1

Unamortised borrowing costs

(2.4)

(3.0)

 

261.4

294.1

Maturity

 

 

The bank loans are repayable as follows:

 

 

Within one year or on demand

0.6

0.6

Between one and two years

0.7

0.7

Between three and five years

261.4

294.9

Over five years

1.1

0.9

 

263.8

297.1

 

 

 

 

Covenants

Facility

Drawn

Expiry

Loan to value

Interest cover

£330.0 million

£260.0 million

July 2021

55%

200%

€4.3 million

€4.3 million

March 2025

-

-

 

Interest charged on the £330 million facility is based on a floating interest rate. At 30 June 2018 the £330 million facility is secured through charges against the issued share capital of the relevant entities which own properties totalling £655.6 million (31 December 2017: £638.7 million). At 30 June 2018 the Euro facilities detailed above are secured by charges on property with an aggregate carrying value of £13.4 million (31 December 2017: £13.6 million).

 

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 was represented by a liability of £23.9 million at 30 June 2017. The shares to be issued of £99.5 million was separately disclosed in the Company's reserves at 30 June 2017.

 

In addition, Bondholders, whether electing to sell or convert, were 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.

 

 

30 June 2018

31 December 2017

 

%

£m

%

£m

Interest rate and currency profile

 

 

 

 

Euro

1.4

3.8

1.5

4.1

Sterling

2.4

260.0

2.1

293.0

 

2.2

263.8

2.1

297.1

 

The above table details the interest rates charged on the outstanding loans as at 30 June 2018.

 

Reconciliation of movement in net debt in the period

 

 

30 June

2018

31 December

2017

 

 

£m

£m

Net debt at 1 January

 

225.4

710.1

Cash flow

 

 

 

Net decrease in cash and cash equivalents

 

32.0

15.2

New bank loans raised and acquired (net of expenses)

 

74.0

181.2

Bank loans repaid (net of expenses)

 

(107.3)

(692.2)

Repayments of obligations under finance leases

 

(0.1)

(0.2)

Other

 

 

 

Foreign exchange movements recognised in equity

 

-

5.8

Foreign exchange movements recognised in the income statement

 

0.7

(0.4)

Amortisation of bank loan fees

 

0.5

5.9

 Net debt at end of period

 

225.2

225.4

 

 

Net debt to equity ratio

 

30 June

2018

31 December

2017

 

 

£m

£m

Obligations under finance leases

 

2.3

2.5

Borrowings

 

261.4

294.1

Cash and cash equivalents

 

(38.5)

(71.2)

Net debt

 

225.2

225.4

Equity attributable to equity holders of the parent

 

439.4

557.5

Net debt to equity ratio

 

51.3%

40.4%

Carrying value of investment and trading properties

 

670.2

818.1

Net debt to value ratio

 

33.6%

27.6%

 

16.  Share capital

 

30 June 2018

31 December 2017

 

Number (m)

£m

Number (m)

£m

Issued and fully paid ordinary shares of 10p each

 

 

 

 

At start of the period

413.1

41.3

745.8

74.6

Issue of equity shares

-

-

80.2

8.0

Cancellation of shares under tender offer

-

-

(412.9)

(41.3)

At end of period

413.1

41.3

413.1

41.3

 

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

 

The 35p per share return of capital in May 2018 was settled by utilising £41.3 million held in the capital redemption reserve and by reducing the share premium by £103.5 million.

 

The issue of 80.2 million equity shares in 2017 relates to the conversion of the convertible bonds on 10 July 2017. The cancellation of 412.9 million shares under tender offer was completed on 8 November 2017 following the publication of a circular and a successful tender offer. The shares were purchased at the tender offer price of 140 pence per ordinary share, representing a par value of £41.3 million and a total gross cost of £583.1 million (£578.1 million return to shareholders and £5.0 million associated costs). The £41.3 million has been transferred to the capital redemption reserve as required by the Companies Act.

 

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 2018

0.1

0.1

Acquired

 

 

4 April 2018

0.7

0.9

Issued to employees

 

 

13 April 2018

(0.4)

(0.5)

16 April 2018

(0.3)

(0.4)

At 30 June 2018

0.1

0.1

 

17.  Net cash inflow from operating activities

 

Six months ended

30 June

2018

£m

Six months ended

30 June

2017

£m

Profit for the period

29.1

148.4

Adjustments for:

 

 

Share-based payments

14.1

7.3

Depreciation of property, plant and equipment

-

0.1

Profit on disposal of discontinued operations

-

(119.5)

Gains on investment properties - continuing operations

(30.5)

(14.5)

Gains on investment properties - discontinued operations

-

(0.1)

Net finance costs - continuing operations

3.6

14.8

Net finance costs - discontinued operations

-

6.0

Tax - continuing operations

0.1

(0.7)

Tax - discontinued operations

-

8.8

Operating cash inflows before movements in working capital

16.4

50.6

(Decrease)/increase in receivables

(0.2)

2.7

Increase/(decrease) in payables

1.0

(28.3)

Cash generated by operations

17.2

25.0

Income taxes paid

(12.8)

(3.4)

Interest paid

(2.1)

(9.9)

Net cash inflow from operating activities

2.3

11.7

 

18.  Financial instruments fair value disclosures

The table below sets out the categorisation of the financial instruments held by the Group at 30 June 2018. 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

level

30 June

2018

31 December

2017

 

£m

£m

Financial assets

 

 

 

Designated as held for trading

 

 

 

Interest rate caps

2

0.5

0.5

Interest rate swaps

2

2.4

1.7

 

 

 

 

Financial liabilities

 

 

 

Designated as held for trading

 

 

 

Interest rate caps

2

-

-

Interest rate swaps

2

-

-

 

 

 

 

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.

19.  Events after the balance sheet date

On 6 August 2018 the Group exchanged contracts for the acquisition of a portfolio of 34 assets for £57.3 million (including costs). The purchase of 31 of these assets completed on 16 August 2018 for £50.4 million and the purchase of the remaining three assets for £6.9 million is expected in September 2018.

 

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 2018 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 19. 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 Financial Reporting Council. 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 Guidance 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 Financial Reporting Council 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 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

Deloitte LLP

Statutory Auditor

London, United Kingdom

21 August 2018

 

 

[1] Important Explanatory Notes about Alternative Performance Measures used in this Report:

The Group uses a number of Alternative Performance Measures ("APMs") which are not defined or specified within IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and allow greater comparability between periods but do not consider them to be a substitute for or superior to IFRS measures. Key APMs used are Normalised Income Profit ("NIP"), Normalised Total Profit ("NTP"), measures defined by EPRA and adjusted EPS.

 

NIP and NTP are adjusted measures intended to show the underlying earnings of the Group before fair value movements and other non-recurring or otherwise non-cash items. Fair value movements include those in relation to investment property, financial assets and financial liabilities. Non-recurring or otherwise non-cash items include foreign exchange gains or losses and the Founder LTIP charge. A reconciliation of NIP and NTP to the Profit for the period prepared in accordance with IFRS is set out in note 10. A reconciliation of EPRA measures and adjusted EPS is included within note 11. A calculation of net debt and the net debt to value ratio is shown in the Chairman's interim statement.

 

 

1 The new financial statement line "Gross revenue" has been included as a result of implementing the new accounting standard IFRS 15, Revenue from Contracts with Customers. This does not form part of the casting of the consolidated income statement. Comparative figures have been included accordingly.

1 The new note to the financial statements has been included as a result of implementing the new accounting standard IFRS 15, Revenue from Contracts with Customers. This note reconciles Gross revenue to Revenue as disclosed on the consolidated income statement. Comparative figures have been included accordingly.

1 This note to the financial statements has been updated as a result of implementing the new accounting standard IFRS 15, Revenue from Contracts with Customers. The note now also details Gross revenue by segment. Comparative figures have been included accordingly.

2 Includes investment properties held for sale.

[2] Diluted EPRA EPS has been adjusted to exclude the impact of the Founder LTIP charge on the earnings per share in the current year. The prior year measures have also been restated to make the comparatives useful.

[3] Continuing administrative expenses of £6.8 million (30 June 2017: £6.9 million) plus the LTIP charge of £15.3 million (30 June 2017: £7.9 million) reconcile to the administrative expenses of £22.1 million (30 June 2017: £14.8 million) reported in the consolidated income statement. 

[4] Net interest expense in NIP, as set out in note 7, excludes the interest on the convertible bond as this expense is not recurring.

[5] Diluted EPRA EPS has been adjusted to exclude the impact of the Founder LTIP charge on the earnings per share in the current year. The prior year measures have also been restated to make the comparatives useful.

 

[6] Diluted EPRA EPS has been adjusted to exclude the impact of the Founder LTIP charge on the earnings per share in the current year. The prior year measures have also been restated to make the comparatives useful.

[7] The 29.6 million shares (2017: 15.5 million shares) contains 26.1 million shares (2017: 13.0 million shares) in relation to the Founder LTIP awards and 3.5 million shares (2017: 2.5 million) in relation to the Performance Share Plan awards.


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Half-year Report - RNS