TIDMCLI
RNS Number : 4646G
CLS Holdings PLC
04 March 2015
Release date: 4 March
2015
Embargoed
until: 07:00
CLS HOLDINGS PLC
("CLS", THE "COMPANY" OR THE "GROUP")
ANNOUNCES ITS FULL YEAR FINANCIAL REPORT
FOR THE 12 MONTHS TO 31 DECEMBER 2014
A record year for the Group
CLS is a property investment company with a diverse portfolio of
GBP1.31 billion modern, well-let properties in the UK, France,
Germany and Sweden. CLS's properties have been selected for their
potential to add value and to generate high returns on capital
investment through active asset management.
FINANCIAL HIGHLIGHTS
-- EPRA net assets per share up 39.9% to 1,774.1 pence (2013: 1,268.4 pence)
-- Profit after tax up 208.4% to GBP194.9 million (2013: GBP63.2 million)
-- EPRA earnings per share up 16.9% to 77.4 pence (2013: 66.2 pence)
-- Portfolio value GBP1,310.1 million (2013: GBP1,132.9 million), up 15.8% in local currencies
-- Robust interest cover of 3.3 times (2013: 3.2 times)
-- Weighted average cost of debt remains low at 3.64% (2013:
3.64%) - one of the lowest in the property sector - and has fallen
to 3.58% since 1 January 2015
-- Distributions to shareholders up 6.4% in the year,
like-for-like, with a proposed GBP10.4 million by way of tender
offer buy-back: 1 in 80 at 1,950 pence, equivalent to 24.4 pence
per share
-- Total shareholder return of 206.6% in five years
-- Entered the FTSE 250 index in December 2014
OPERATIONAL HIGHLIGHTS
Investment Property Portfolio:
-- Three selective acquisitions for GBP29.7 million providing a
blended net initial yield of 6.7%
-- Two opportunistic disposals generating proceeds of GBP37.5
million at a blended yield of 2.9%
-- Vacancy rate at an all-time low of 3.0% (2013: 4.4%)
-- EPRA net initial yield of 6.5%, 290 basis points above cost
of debt, one of the highest differentials in the listed property
sector
Developments:
-- Completion of the GBP55 million development of Spring Mews, SE11 comprising:
o 378 room student accommodation opened and fully let in
September
o 93 room Staybridge Suite Hotel opened in January
-- Completion of the redevelopment 2,769 sqm of office space at 138 Fetter Lane, EC4
-- Further planning consent for design enhancements at Vauxhall Square, SW8
-- Planning consent gained on Westminster Tower, SE1 for 3
additional storeys and 23 luxury riverside apartments
Key Financings:
-- GBP97 million refinancing of Spring Gardens for 6 years at low swap rates
-- EUR24 million acquisition financing of Harburg properties for
7 years at an all in cost fixed at less than 2%
Sten Mortstedt, Executive Chairman of CLS, commented:
"In 2014 we continued to make substantial progress, with the
completion of two important developments in central London,
opportunistic acquisitions, selective disposals, the extension of
our development pipeline, and the lowest ever vacancy rate across
the Group.
"Our portfolio benefited from a 15.8% revaluation uplift, EPRA
NAV rose by 39.9% to a record 1,774.1 pence per share and our
strategy, to invest in attractive, high-yielding office properties
in major cities, should continue to serve the Group well in
2015."
-ENDS-
For further information please contact:
CLS Holdings plc +44 (0)20 7582 7766
www.clsholdings.com
Sten Mortstedt, Executive
Chairman
Henry Klotz, Executive
Vice Chairman
Fredrik Widlund, Chief
Executive Officer
John Whiteley, Chief
Financial Officer
Kinmont Limited +44 (0)20 7087 9100
Jonathan Gray
Smithfield Consultants
Limited +44 (0)20 7360 4900
Alex Simmons
Liberum Capital Limited +44 (0)20 3100 2222
Tom Fyson
Charles Stanley Securities +44 (0)20 7149 6000
Mark Taylor
Hugh Rich
CLS will be presenting to analysts at 8.30am on Wednesday, 4
March 2015, at Smithfield Consultants, 10 Aldersgate Street,
London, EC1A 4HJ.
Conference call dial in numbers as follows:
Participant telephone +44(0)20 3427 1912 (UK Toll)
number:
Confirmation code: 2636578
Please dial in at least 5 minutes prior to the start of the
meeting and quote the above confirmation code when prompted.
Chairman's Statement
OVERVIEW In 2014 we continued to make substantial progress in a
number of areas. These included the completion of two important
developments in central London, opportunistic acquisitions in
Germany and London and selective disposals in London and Paris.
Furthermore, we extended our development pipeline, and the benefits
from our active in-house asset management resulted in our lowest
ever vacancy rate across the Group.
At the year end our property portfolio benefited from a 15.8%
annual revaluation uplift to GBP1.31 billion, the highest ever
level in our history. EPRA NAV rose 39.9% to a record 1,774.1 pence
per share and following a five year compound Total Shareholder
Return of over 25% per annum, in December 2014 we entered the FTSE
350 index.
The Group places a strong emphasis on cash generation. Our
portfolio produces a net initial yield of 6.5% and is financed by
debt with a weighted average cost of 3.64%. In 2014 our rental
income rose 11.1% to GBP84.4 million (2013: GBP76.0 million),
benefiting from the effect of a full year's income from the Neo
portfolio which was acquired last year, and EPRA earnings per share
rose 16.9% to 77.4 pence (2013: 66.2 pence).
Our strategy of running a diversified, modern and efficient
property portfolio with in-house asset management has continued to
prove successful. We operate in close cooperation with our
customers to meet their occupational needs, and this is reflected
in a Group vacancy rate of 3.0%, well below the sector average.
During the year we selectively acquired investments in Germany
and the UK at an aggregate cost of GBP29.7 million, generating a
net initial yield of 6.7% and financed by debt at 1.97%. We also
made some opportunistic disposals in London and Paris at low
yields, thereby recycling our capital for an enhanced return.
The UK market continued to grow in 2014. In London, demand from
overseas investors searching for prime yielding properties remained
robust, with increasing interest beyond the traditional West End
and City locations. In Germany and France the markets were
characterised by low interest rates, a low level of new completions
and improvement in occupier demand. Germany continued to offer the
more attractive opportunities. The Swedish market displayed lower
yields and a high level of activity, driven mainly by domestic
property investors, and we continued to find better value
elsewhere.
PROPERTY PORTFOLIO The increase in EPRA net assets per share was
driven by a significant increase in values across our London
portfolio, particularly in our Vauxhall heartland. The Group's
property portfolio grew by GBP177.2 million or 15.6% over the
period to GBP1.31 billion, due predominantly to a revaluation
uplift of GBP186.5 million. France and Germany contributed
positively, but the vast majority of the increase came from the
London portfolio, particularly from developments and long leases
with secure Government income.
At the year end the contracted rent roll was GBP87.5 million
(2013: GBP85.6 million), of which 68% came from governments and
major corporations and 58% was index-linked.
At Spring Mews SE11, our first student and hotel development
scheme reached completion. The student accommodation was completed
in September, in time for the start of the academic year, and all
378 rooms were let. We have already started letting rooms for
2015/16. At Clifford's Inn, Fetter Lane EC4, construction was
completed at the end of 2014 and we are actively marketing the
2,769 sqm of new office space in a very strong mid-town office
market. We have also secured detailed planning consent to convert
and extend Westminster Tower SE1, providing luxury riverside
apartments overlooking the Houses of Parliament, with a small
amount of office space to be retained on the lower floors.
At Vauxhall Square we have secured further planning consent for
design enhancements, and agreed commercial terms to acquire
additional adjoining land and properties. In January 2014 we
entered into a conditional agreement to grant a long lease in
relation to the student site in Miles Street, on which an enhanced
planning consent has also been achieved. These enhancements have
contributed positively to the uplift in value. During 2015 we will
explore all our available options for this major regeneration
project to make a constructive start in 2017.
In the second half of the year, the Group acquired Berkeley
House in Datchet, Berkshire for GBP2.2 million on a net initial
yield of 10.75%. We also unconditionally exchanged contracts to
acquire two modern, multi-let, office buildings in Harburg, a
waterfront district in the southern part of Hamburg, Germany for
EUR32.4 million before costs. We completed the acquisitions shortly
after the year end. These high-quality offices are located in a
district which is seeing significant investment in infrastructure
and is developing into a popular mixed-use location.
In April the Group took advantage of a strong demand for
development opportunities, and disposed of Cambridge House W6 for
GBP29.5 million. The price was 32% above the December 2013
valuation and corresponded to an initial yield of 2.34%. Part of Le
Quatuor in Montrouge, Paris was sold for EUR9.9 million, 23% above
the June 2014 valuation, to accommodate the Grand Paris Express
project to improve the railway system. The station will be a major
transportation hub which will benefit our remaining holding.
RESULTS EPRA net assets per share have risen by 39.9% to 1,774.1
pence (2013: 1,268.4 pence), and net assets per share by 39.0% to
1,521.1 pence (2013: 1,094.1 pence). Profit after tax grew by
208.4% to GBP194.9 million (2013: GBP63.2 million) and
shareholders' funds rose by 35.8% to GBP652.9 million, after
distributions to shareholders of GBP15.5 million. The balance sheet
remains strong, with cash and liquid resources of GBP162.0
million.
Recurring interest cover increased to 3.3 times (2013: 3.2
times), as the Group continued to enjoy a very low weighted average
cost of debt of just 3.64% (2013: 3.64%), one of the lowest in the
listed property sector. At 31 December 2014 the weighted average
loan to value of our secured debt was 49.7% (2013: 56.3%).
FINANCING The Group continues its strategy of having a wide
variety of financing from banks and other debt providers, and of
ring-fencing debt against individual properties where appropriate.
We secured financing for the Harburg acquisitions with a seven-year
fixed interest rate loan below 2% for the first time. Since the end
of 2014 we have refinanced our largest individual property loan on
Spring Gardens in Vauxhall for 6 years, and this, together with the
Harburg loan, has reduced our pro forma weighted average cost of
debt further to 3.58%. Diversity of financing is important to
reduce risk and we enjoy active lending relationships with 23 debt
providers. Interest rates have remained very low, with further
reductions in the Eurozone. We expect this will remain the case for
an extended period and as a consequence, 68% of our debt is at
floating rates, with 41% being protected against rising interest
rates through interest rate caps.
The Group's corporate bond portfolio has continued to be a
valuable part of our cash management strategy. The portfolio
outperformed the bond market during the year, delivering a total
return of GBP7.7 million, or 8.7% on capital. At the year end the
portfolio consisted of 27 bonds valued at GBP61.8 million with a
running yield of 7.4% on market value, and a weighted average
duration of 15 years.
SUSTAINABILITY During the past twelve months we have continued
our objective to further improve the quality of our portfolio
through carbon reduction programmes, investments in renewable
technology and social engagement within the communities in which we
invest. We have achieved two SKA Gold ratings and three BREEAM Very
Good ratings through our refurbishment programme, and we have
reduced the consumption of electricity, gas and water in our
properties.
More details of these initiatives are set out in the Corporate,
Social and Environmental Responsibility Report in the 2014 Annual
Report and Accounts. In addition we have, in line with our Green
Charter established in 2011, committed additional resources to our
in-house sustainability team to help minimise the impact the Group
and its customers have on the environment.
BOARD CHANGES During the year Tom Thomson, Brigith Terry and
Claes-Johan Geijer retired as non-executive directors and I wish to
record our thanks for their contribution to our success. We have
welcomed Lennart Sten and Elizabeth Edwards who have joined us in
their place. Richard Tice resigned as Chief Executive Officer in
February and, following a successful search by an executive search
firm, we were pleased to welcome Fredrik Widlund as his replacement
in November. Fredrik joins us after a long career at GE
Capital.
DISTRIBUTIONS TO SHAREHOLDERS In 2014, the Group distributed
through tender offer buy-backs GBP10.0 million in May, equivalent
to 22.65 pence per share, and GBP5.5 million in September,
equivalent to 12.61 pence per share. Similarly, the Board is
proposing a tender offer buy-back of 1 in 80 shares at 1,950 pence
per share in April 2015, to distribute GBP10.4 million to
shareholders, equivalent to 24.4 pence per share. This will bring
total distributions for the year to GBP15.9 million, an annual
increase of 6.4% and corresponding to an implied yield of 2.7%,
based on the average market capitalisation for the Group in the
year. A circular setting out the details will be sent to
shareholders with the Annual Report and Accounts.
OUTLOOK Although its forthcoming general election may cause some
temporary political uncertainty, we expect the UK's economy to
continue to grow and the commercial property market to continue to
perform well in 2015.
We also believe that the positive trends seen in London,
including increasing rents and declining vacancies, will cascade
into other parts of the country during the year. The Group's
portfolio is well-positioned to benefit from a continuing strong UK
market.
Even though we expect economic growth in the Eurozone to remain
slow, we believe our overseas assets will continue to benefit from
record low interest rates and a pick-up in demand. Our strategy, to
invest in attractive, high-yielding office properties in secondary
areas of major cities, should continue to serve the Group well in
2015.
Sten Mortstedt
Executive Chairman
4 March 2015
PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance and could
cause the results to differ materially from expected or historical
results. The management and mitigation of these risks are the
responsibility of the Board.
Risk Areas of impact Mitigation
--------------------------------------------------------- ------------------- -----------------------------
Property investment
risks
Underperformance Cash flow Senior management
of investment portfolio Profitability has detailed knowledge
due to: Net asset value of core markets
* Cyclical downturn in property market Banking covenants and experience
gained through
many market cycles.
* Inappropriate buy/sell/hold decisions This experience
is supplemented
by external advisors
and financial models
used in capital
allocation decision-making.
--------------------------------------------------------- ------------------- -----------------------------
Rental income The Group's property
* Changes in supply of space and/or occupier demand Cash flow portfolio is diversified
Vacancy rate across four countries.
Void running The weighted-average
costs unexpired lease
Bad debts term is 6.4 years
Net asset value and the Group's
largest occupier
concentration
is with the Government
sector (46.8%).
--------------------------------------------------------- ------------------- -----------------------------
Rental income Property teams
* Poor asset management Cash flow proactively manage
Vacancy rate customers to ensure
Void running changing needs
costs are met, and review
Property values the current status
Net asset value of all properties
weekly. Written
reports are submitted
monthly to senior
management on,
inter alia, vacancies,
lease expiry profiles
and progress on
rent reviews.
--------------------------------------------------------- ------------------- -----------------------------
Risk Areas of impact Mitigation
------------------------------------- -------------------- ---------------------------
Other investment
risks
Corporate bond investments: Net asset value In assessing potential
* Underperformance of portfolio Liquid resources investments, the
Treasury department
undertakes research
* Insolvency of bond issuer on the bond and
its
issuer, seeks third-party
advice, and receives
legal advice on
the terms of the
bond, where appropriate.
The Treasury department
and Executive Directors
receive updates
on bond price movements
and third party
market analysis
on
a daily basis,
and reports on
corporate bonds
to the full Board
on a monthly basis.
The Executive Directors
formally review
the corporate bond
strategy monthly.
------------------------------------- -------------------- ---------------------------
Development risk
Failure to secure Abortive costs Planning permission
planning permission Reputation is sought only
after engaging
in depth with all
stakeholders.
------------------------------------- -------------------- ---------------------------
Contractor solvency Reduced development Only leading contractors
and availability returns are engaged. Prior
Cost overruns to appointment,
Loss of rental contractors are
revenue the subject of
a due diligence
check and assessed
for financial viability.
------------------------------------- -------------------- ---------------------------
Downturn in investment Net asset value Developments are
or occupational markets Cash flow undertaken only
Profitability after an appropriate
level of pre-lets
have been sought.
------------------------------------- -------------------- ---------------------------
Risk Areas of impact Mitigation
----------------------- ----------------------- ----------------------------
SUSTAINABILITY
RISKS
Increasing building Rental income, Continual assessment
regulation and cash flow, of all properties against
obsolescence vacancy rate, emerging regulatory
net asset changes. Fit-out and
value, profitability, refurbishment projects
liquid resources benchmarked against
third party schemes.
----------------------- ----------------------- ----------------------------
Climate change Net asset Board responsibility
value, profitability, for environment. Dedicated
liquid resources specialist personnel.
Increased due diligence
when making acquisitions.
Investment in energy
efficient plant and
building mounted renewable
energy systems.
----------------------- ----------------------- ----------------------------
Increasing energy Net asset Investment in energy
costs and regulation value, profitability, efficient plant and
liquid resources building mounted renewable
energy systems.
----------------------- ----------------------- ----------------------------
Funding risks
Unavailability Cost of borrowing The Group has a dedicated
of financing Ability to Treasury department
at acceptable invest or and relationships are
prices develop maintained with some
23 banks, thus reducing
credit and liquidity
risk. The exposure on
refinancing debt is
mitigated by the lack
of concentration in
maturities.
----------------------- ----------------------- ----------------------------
Adverse interest Cost of borrowing The Group's exposure
rate movements Cost of hedging to changes in prevailing
market rates is largely
hedged on existing debt
through interest rate
swaps and caps, or by
borrowing at fixed rates.
----------------------- ----------------------- ----------------------------
Breach of borrowing Cost of borrowing Financial covenants
covenants are monitored by the
Treasury department
and regularly reported
to the Board.
----------------------- ----------------------- ----------------------------
Foreign currency Net asset Property investments
exposure value are partially funded
Profitability in matching currency.
The difference between
the value of the property
and the amount of the
financing is generally
unhedged and monitored
on an ongoing basis.
----------------------- ----------------------- ----------------------------
Financial counterparty Loss of deposits The Group has a dedicated
credit risk Cost of rearranging Treasury department
facilities and relationships are
Incremental maintained with some
cost 23 banks, thus
of borrowing reducing credit and
liquidity risk. The
exposure on re-financing
debt is mitigated by
the lack of concentration
in maturities.
----------------------- ----------------------- ----------------------------
Risk Areas of impact Mitigation
------------------- ------------------- -------------------------------
Taxation risk
Increases in Cash flow The Group monitors legislative
tax rates or Profitability proposals and consults
changes to the Net asset external advisors to
basis of taxation value understand and mitigate
the effects of any such
change.
------------------- ------------------- -------------------------------
Political and
economic risk
Break-up of Net asset Euro-denominated liquid
the Euro value resources are kept to
Profitability a minimum. Euro property
assets are largely financed
with euro borrowings.
------------------- ------------------- -------------------------------
Economic downturn Cash flow The Group's property
Profitability portfolio is diversified
Net asset across four countries.
value The weighted-average
Banking covenants unexpired lease term
is 6.4 years and the
Group's largest customer
concentration is with
the Government sector
(46.8%). 58.2% of rental
income is subject to
indexation.
------------------- ------------------- -------------------------------
Going concern
The Group will Pervasive The Directors regularly
not have adequate stress-test the business
working capital model to ensure the
to remain a Group has adequate working
going concern capital.
for the next
12 months.
------------------- ------------------- -------------------------------
business review
The main activity of the Group is the investment in commercial
real estate across five European regions - London, the rest of the
United Kingdom, France, Germany and Sweden - with a focus on
providing well-managed, cost-effective offices for cost-conscious
occupiers in key European cities.
The Group's total property interests have increased to
GBP1,382.1 million at 31 December 2014, comprising the wholly-owned
property investment portfolio valued at GBP1,310.1 million, a hotel
with a value of GBP21.3 million, vacation sites valued at GBP20.5
million (the Group's share), and a 13.5% interest in Swedish listed
property company Catena AB, valued at GBP30.2 million.
PROPERTIES
OVERVIEW At 31 December 2014, the directly held investment
property portfolio was independently valued at GBP1,310.1 million
(31 December 2013: GBP1,132.9 million). This increase of GBP177.2
million primarily comprised new acquisitions and development
expenditure of GBP79.8 million in aggregate, and a GBP186.5 million
valuation uplift; the effects of these were mitigated by disposals
of GBP28.6 million, the transfer of the recently-completed Spring
Mews hotel to Property, Plant and Equipment, and the GBP37.8
million negative impact of exchange rate movements. In local
currencies, the portfolio rose by 15.8%, after acquisitions and
development expenditure. The driver was the outstanding performance
of the London portfolio, which increased in value by 34.1%; Germany
rose by 2.9% and France by 1.7%, whilst the rest of UK fell by 0.3%
and Sweden by 15.8%.
Over 40% of the uplift in the value of the London portfolio came
from four development schemes, of which two reached practical
completion in the second half of the year, a third, Westminster
Tower SE1, gained planning consent, and the fourth, Vauxhall
Square, moved twelve months closer to our gaining vacant possession
in early 2017. The medium-term development programme was extended
during the year, with the planning consent gained on Westminster
Tower, and with two French properties providing the opportunity for
redevelopment.
Of the GBP31.6 million spent on acquisitions in the year,
GBP27.4 million related to two modern, multi-let office buildings
in a suburb of Hamburg. Cambridge House, Hammersmith was sold in
April for GBP29.5 million, 32% above its valuation four months
earlier. Contracted rent rose in the twelve months by 1.7% on a
like-for-like basis, whilst the annualised rent rose by 2.3%,
including GBP3.5 million of income from the completed developments.
The increase in the capital values of the London properties far
outstripped the increase in their rents, reducing the net initial
yield of the overall investment property portfolio (excluding
developments) at 31 December 2014 to 6.5% (2013: 7.0%). The average
rent across the Group remained very affordable at GBP158 per sqm,
and the average capital value was also low at just GBP2,352 per
sqm. This was very close to replacement cost, meaning that the land
element of our investments in key European cities was minimal. This
also highlights how successful the Group can be in attracting
occupiers with cost-effective rents.
The bedrock of the Group's rental income is strong, with 47%
being paid by government occupiers and 21% from major corporations,
and 58% of our rents are subject to indexation. The weighted
average lease length at 31 December 2014 was 6.4 years, or 5.1
years to first break. Some over-rented leases expire in 2015,
notably in Sweden, and thereafter the portfolio is broadly let at
current market rents.
The overall vacancy rate reached an all-time low at just 3.0%
(2013: 4.4%), including a reduction in France of more than a half,
from 10.6% to 5.1%. This is testament to the benefit of active
in-house asset and property management, and of maintaining strong
links with our occupiers to ensure we understand and respond to
their needs.
The benefits of the Group's geographical diversification remain
self-evident: there is strong growth in the London portfolio, at a
time when there are good investment opportunities and readily
available debt in Germany.
The Group maintains its strong commitment to sustainability,
which has benefited both occupiers and the Group. The Corporate,
Social and Environmental Responsibility Report in the 2014 Annual
Report and Accounts provides more detail.
LONDON
The UK economy remains relatively robust - GDP growth was 2.6%
in 2014 and a similar level is forecast for 2015, unemployment is
5.7% and set to fall, and inflation is under control - and London
is the engine which drives it. The property market in London
benefits from these conditions. It continues to show an imbalance
of demand exceeding supply, in both the investment and the
occupancy markets, and this has manifested in a fall in investment
yields and in a rise in rental values, both within Central London
and across its suburbs.
In the two years to 31 December 2013, the Group took advantage
of buying opportunities in suburban London, investing GBP40.9
million at an average net initial yield of 9.9%. A subsequent
significant increase in competition for such offices, coupled with
more readily available bank finance, has since reduced yields by
some 200 basis points. Whilst we continued actively to compete in
these markets in 2014, we restricted our attention to opportunities
in which we could see the better returns, and acquired Berkeley
House, Datchet for GBP2.2 million plus costs, generating a net
initial yield of 10.75%.
We have, however, taken the opportunity to dispose selectively
of certain types of property. Following the sale in late 2013 of
Ingram House, John Adam Street, WC2 for GBP13.2 million at a
capital value before refurbishment costs of over GBP10,000 per sqm,
in April we sold Cambridge House W6 for GBP29.5 million at a net
initial yield of 2.34%, which, considered a development site,
reflected its 50% vacancy.
The London occupancy market strengthened in 2014, and with a
lack of new developments to satisfy this demand, rental values
rose. On average, new lettings were achieved at 8.2% above the ervs
of 31 December 2013. During 2014 ervs of the London portfolio rose
by 9.7%, and at 31 December 2014 the London portfolio was net
reversionary. Those leases which were reversionary were GBP4.1
million or 11.6% under-rented; of the GBP1.3 million (3.7%) of
over-renting in London, more than GBP0.9 million was on leases
which expire in 2022 or later. The vacancy rate for London remains
very low at just 3.3%, excluding development stock (2013: 3.2%).
During 2014, 6,365 sqm became vacant and we let or renewed leases
on 5,661 sqm.
Of the developments in Central London, two have completed, a
third continues to make good progress, and a fourth was added
during the year. At Spring Mews, Vauxhall SE11, practical
completion was reached on the 20,800 sqm mixed-use scheme,
comprising a 378 bed student accommodation building, and a 93
bedroom suite hotel, together with retail and office space. The
student accommodation was ready for the start of the academic year
in September and achieved full occupancy in its first year. At the
hotel a franchise agreement is in place with Intercontinental Hotel
Group for a Staybridge branded suite hotel, run by specialist
franchise operator, Cycas Hospitality. Following the fit-out, the
hotel opened for business shortly after the year end. The 245 sqm
of retail and 1,000 sqm of offices within the scheme are expected
to be let in 2015. Under IFRS, the hotel element of the scheme is
carried in the balance sheet at market value within Property, Plant
and Equipment.
Investment Properties Spring Mews
hotel
---------------------------- ---------------------- ----------------
Value GBP705.0 million GBP21.3 million
Group's property interests 51% 2%
No. of properties 34 1
Lettable space 158,892 sqm 93 rooms
EPRA net initial yield(1) 5.2% n/a
Vacancy rate 3.3% n/a
Valuation uplift 34.1% n/a
Government and major 72% n/a
corporates
Average unexpired lease 7.0 years n/a
length
To first break 6.1 years n/a
---------------------------- ---------------------- ----------------
(1) excluding developments
The comprehensive refurbishment of Clifford's Inn, EC4 was
completed towards the end of the year to provide 2,769 sqm of top
quality office space and eight new residential apartments. The
offices were launched on the occupational market in January 2015
and the eight apartments are to be marketed later in the year.
The Nine Elms/Vauxhall district of London continues to be the
most industrious development area in the capital. The developments
of the new American and Dutch embassies are well advanced, as is
the demolition of Market Towers by Chinese developer Dalian Wanda
Group, in preparation for the development of One Nine Elms, a five
star hotel and high-end residential scheme. Developments are well
advanced at Riverlight, Embassy Gardens and Battersea Power
Station, other developers have started on site in the past twelve
months, such as Sainsbury's/Barratt Homes and Bellway Homes, both
on Wandsworth Road, and Keybridge House on South Lambeth Road was
bought by developer Mount Anvil/A2 Dominion in November.
In early 2017 we are due to gain vacant possession of the site
which comprises Vauxhall Square, SW8, which, adjacent to the main
transport hub, is the gateway into Nine Elms/Vauxhall. We have
continued to make good progress during the year on this 143,000 sqm
mixed-use development scheme in the heart of Vauxhall. In January
2014 we entered into a conditional long lease with a specialist
student housing developer/operator to build and manage the 359
student room building adjacent to the main Vauxhall Square site,
and we continue to make progress to satisfy the conditionality.
Planning consent was granted during the year to reconfigure this
building to provide 454 student rooms. Consent was also granted to
upgrade one of the hotels in our scheme from a mid-market offer to
a four-star hotel with conferencing facilities.
At Westminster Tower, SE1, on the south side of Lambeth Bridge,
detailed planning consent was granted for a major refurbishment of
the existing 14 storey building, the addition of three further
stories, and the conversion from an office building to 34
residential units (of which 11 will be of shared ownership) and
1,441 sqm of offices. Vacant possession is expected to be secured
in the medium term.
The 34.1% uplift in the values of the London portfolio reflected
both strong growth in the value of underlying investment properties
and very strong growth in the values of the four developments. The
let investment properties benefited from an uplift of 9.7% in ervs
in the twelve months, and from a reduction in the true equivalent
yields of 90 bps, which together contributed to a 27.8% uplift in
values. The increase in value of the developments reflected profits
recognised for the first time on completed developments, the
granting of planning consent on Westminster Tower, and the
continued strength of the Nine Elms/Vauxhall area. The valuation of
Vauxhall Square benefited from a 5.5% increase in residential
values reflecting price movements across the Nine Elms/Vauxhall
area, office yields tightened by 50 bps and rents rose by over 15%.
In total the four developments of Spring Mews, Clifford's Inn,
Westminster Tower and Vauxhall Square shared an uplift of 48.3% in
the twelve months after capital expenditure, representing 44% of
the total uplift in London in the year. Of the remaining GBP104.2
million of London's uplift, two properties with long leases to
Central Government departments added GBP63.8 million - an uplift of
30.6% - and the rest of the London portfolio rose by 16.4%. At 31
December 2014 the valuation of the London portfolio, except
Vauxhall Square, was undertaken by DTZ for the first time; Vauxhall
Square continued to be valued by Knight Frank.
REST OF UK
Value GBP97.6 million
Group's property interests 7%
No. of properties 32
Lettable space 98,086 sqm
EPRA net initial yield 12.8%
Vacancy rate 0.9%
Valuation fall -0.3%
Government and major corporates 100%
Average unexpired lease length 6.6 years
To first break 4.1 years
--------------------------------- ----------------
The Rest of UK portfolio was acquired in September 2013 as part
of the Neo portfolio of government-occupied offices across the
UK.
The portfolio is 99% let to 14 government departments. In 2014,
we renewed two leases, at 12.2% above their ervs of 31 December
2013, and agreed five index-linked rent reviews at an average of
17.7% above previous rents; in aggregate GBP265,000 was added to
the rent roll.
The UK economic recovery driven by London has begun to reach
other areas around the UK, and in 2014 ervs rose in the Rest of UK
portfolio. However, the portfolio has a concentration of lease
expiries and breaks in March 2018 and the external valuers are
required by their professional rules to assume that each event
affects the value as if it will be exercised. This negatively
affected the value of the Rest of UK portfolio, increasing its true
equivalent yield by 97 bps, which offset the impact of new lettings
and erv growth, and the portfolio fell marginally in the year by
0.3%. At 31 December 2014 the valuation of the Rest of UK portfolio
was undertaken by DTZ for the first time.
FRANCE
The French economy stagnated in the first half of 2014 before
picking up slightly over the summer. GDP growth is projected to
continue at a slow pace in 2015, helped by lower energy prices, a
favourable exchange rate and improvements in the global
environment.
With an undersupply of new developments, and an increase in the
number of projects on hold, headline rents in Paris stabilised
following their fall in 2013. However, vacancy rates in the markets
of La Defense and the Western Crescent of Paris now stand at
12%.
It is in these difficult conditions that the French team managed
to more than halve our vacancy rate in France to only 5.1% (2013:
10.6%). Whilst 15,949 sqm of space was subject to expiries or
vacancies in the year, 19,317 sqm was let. This was achieved at a
weighted average rent of less than 1.5% below ervs at 31 December
2013.
In August we disposed of Blocks C and D of Le Quatuor, 168
Avenue Jean Jaurès, Montrouge under a compulsory purchase order to
facilitate the expansion of the local train station to accommodate
the Grand Paris project. The disposal was made at a gain of GBP1.7
million above the 2013 external valuation, and Blocks A and B which
remain in our ownership will benefit in the fullness of time from
the improvements to the area which this new railway line will
bring.
Value GBP225.1 million
Group's property interests 16%
No. of properties 26
Lettable space 92,147 sqm
EPRA net initial yield(1) 6.2%
Vacancy rate 5.1%
Valuation uplift 1.7%
Government and major corporates 56%
Average unexpired lease length 5.2 years
To first break 2.6 years
--------------------------------- -----------------
(1) excluding developments
The French portfolio valuation rose by 1.7% in the year in local
currency, but fell by 4.9% in sterling. The underlying portfolio of
24 of our 26 properties rose in value by 2.7%, reflecting the fall
in vacancies across the portfolio, offset by a fall in ervs in the
year of 1.1%. The values of the other two properties fell by 9.1%
in aggregate. These properties were the Group's most central
property in Paris, 1,800 sqm of offices directly opposite the
Banque de France in Rue Croix des Petits Champs, and 3,700 sqm of
offices in Rue Eugène Ruppert in Luxembourg. Both became empty
during the year and provide excellent opportunities to carry out
significant refurbishments or developments in the next few
months.
Top 10 Customers
The ten customers which contribute most rental income to the
Group account for 48.7% of the rent roll, and comprise:
London
Government
* National Crime Agency
Government
* Trillium
Major Corporation
* Cap Gemini
Major Corporation
* BAE Systems
Rest of UK
Government
* Secretary of State
Germany
Government
* City of Bochum
Major Corporation
* BrainLab
Major Corporation
* E.ON
Sweden
Government
* Västra Götaland Country Council
Government
* Vänersborg Kommun
GERMANY
In 2014, Germany's GDP growth of 1.5% remained relatively weak
and it is projected to grow only gradually, its otherwise robust
labour market and expansionary monetary policy being constrained by
weakness in its trading partners.
We continue to see good investment value in German real estate,
supported by favourable financing conditions. Last year we bought
Bismarckallee 18/20 in Freiburg, and in December 2014 we
unconditionally exchanged on the acquisition of Schellerdamm 2 and
Schellerdamm 16, two modern, multi-let office buildings in the
Harburg district of Hamburg providing 18,665 sqm of lettable space
and 287 car parking spaces. Completion took place shortly after the
year end at a price of EUR32.35 million plus costs, generating a
net initial yield of 6.4%, which we financed with a seven-year loan
from a local Sparkasse bank at a cost fixed at less than 2% per
annum.
During 2014, lettings and renewals totalled 6,023 sqm whilst
only 2,256 sqm were vacated by occupiers, and as a consequence the
vacancy rate fell to 2.6% (2013: 3.5%); two years ago the German
portfolio was 7.4% vacant. New leases and renewals were achieved at
an average of 4.1% above ervs at the end of 2013.
The valuation of the German portfolio rose by 2.9% in local
currencies, but fell by 3.4% in sterling. However, the underlying
portfolio of 16 out the 18 properties rose in value by 4.8%, partly
due to the reduction in voids, and partly because the equivalent
yield fell by 20 bps; ervs were virtually unchanged in the year. Of
the other two properties, Harburg was acquired at the end of the
year and rose by 1.4% after costs, and Kapellenstrasse 12,
Feldkirchen fell by 16.6% after the sole tenant announced its
intention to vacate the building when its lease expires at the end
of 2016. The value of this building is unlikely to fall
significantly further in value before then.
Value GBP235.5 million
Group's property interests 17%
No. of properties 19
Lettable space 170,743 sqm
EPRA net initial yield 6.7%
Vacancy rate 2.6%
Valuation uplift 2.9%
Government and major corporates 39%
Average unexpired lease length 7.1 years
To first break 7.0 years
--------------------------------- -----------------
SWEDEN
Investment Property
Value GBP46.9 million
Group's property interests 3%
No. of properties 1
Lettable space 45,354 sqm
EPRA net initial yield 8.5%
Vacancy rate 0.8%
Valuation fall -15.8%
Government and major corporates 96%
Average unexpired lease length 2.8 years
To first break 2.8 years
--------------------------------- ----------------
Financial Investment
Value in Catena GBP30.2 million
Group's property interests 2%
Interest in Catena 13.5%
---------------------------- ----------------
Property, Plant & Equipment
Value in First Camp GBP5.9 million
Group's property interests 2%
Interest in First Camp 58.0%
Gross value of assets GBP35.4 million
Share of gross value of assets GBP20.5 million
-------------------------------- ----------------
The Group's interests in Sweden consist of two operating
segments: Investment Properties and Other Investments. The Other
Investments are an equity stake in a financial investment and a
subsidiary, both of which invest in Swedish real estate, and as
they operate against the same economic backdrop, are considered
together with the directly-held Swedish investment property in this
Strategic Review.
Sweden's economy has continued to show signs of robustness.
Inflation is running at marginally below 0%, unemployment is around
7%, and the Riksbank has reduced its Repo rate to 0% and expects
GDP growth of 2.6% in 2015. The direct property market in Sweden
has remained dominated by domestic demand with readily available
finance, and in 2014 we have been able to find better returns
elsewhere in the areas in which we invest.
At the 45,354 sqm office complex, Vänerparken, near Gothenburg,
negotiations have progressed with the main local government
occupier on lease renewals in mid-2015 which currently account for
SEK 47.0 million of the SEK 71.3 million rental income from the
property. It is likely that this occupier will remain only in part
of the building complex, vacating in particular much of the
basement and storage areas, and at a rent per square metre well
below the current over-rented levels. Ervs at 31 December 2014 have
fallen by 24.5% from their levels twelve months earlier and this is
the primary reason for the fall in the property's market value by
15.8% in local currency (25.6% in sterling) in the year.
Catena AB's share price rose by 5.8% in 2014 to SEK 105.75 per
share, but as sterling appreciated against the krona by 12.4% the
sterling carrying value of the investment fell by a net 7.4%.
Catena remains very profitable and we received a dividend of GBP0.7
million in the year.
At 31 December 2013, the Group held a 44.2% interest in its
associate, Cood Investments AB. During the year the interest in
Cood was sold, and certain income-producing assets of Cood were
acquired by First Camp Sverige Holding AB, a newly-formed
subsidiary in which the Group holds a 58% interest. The assets,
predominantly camp sites in Sweden, were valued at GBP35.4 million
(Group's share: GBP20.5 million) at 31 December 2014, and the
Group's share in the net assets of First Camp at that date was
GBP5.9 million.
Exchange rates to the GBP
EUR SEK
--------------------- ------- --------
At 31 December 2012 1.2317 10.5677
2013 average rate 1.1779 10.1926
At 31 December 2013 1.2041 10.6562
2014 average rate 1.2410 11.2984
At 31 December 2014 1.2876 12.1654
--------------------- ------- --------
RESULTS FOR THE YEAR
HEADLINES Profit after tax of GBP194.9 million (2013: GBP63.2
million) generated EPRA earnings per share of 77.4 pence (2013:
66.2 pence), and basic earnings per share of 449.0 pence (2013:
146.9 pence). Gross property assets at 31 December 2014 were
GBP1,310.1 million (2013: GBP1,132.9 million), EPRA net assets per
share were 39.9% higher at 1,774.1 pence (2013: 1,268.4 pence), and
basic net assets per share rose by 39.0% to 1,521.1 pence (2013:
1,094.1 pence).
A key feature of the Group is its ability to generate cash
through the yield on its portfolio far exceeding its cost of debt,
and the low vacancy rate driven by in-house asset management. Net
cash flow from operating activities, including interest received,
was GBP34.5 million which represented a cash return of 7.2% on
opening net assets.
Approximately 50% of the Group's business is conducted in the
reporting currency of sterling, around 45% in euros, and the
balance is in Swedish kronor. Compared to last year, sterling
strengthened against the euro by 5.4% and against the krona by
10.8%, reducing profits accordingly. Likewise, at 31 December 2014
the euro was 6.9% weaker and the krona 14.2% weaker against
sterling than twelve months previously, reducing the sterling
equivalent value of non-sterling net assets.
INCOME STATEMENT At GBP84.4 million, rental income in 2014 was
GBP8.4 million higher than in 2013, largely through a full year's
impact of acquisitions made in 2013, which added GBP13.6 million,
offset by disposals of GBP2.0 million, and the strength of the
sterling which lowered rent by GBP2.4 million. First Camp added
GBP0.7 million of income for the first time, and net rental income
of GBP82.2 million was 12.4% higher than last year (2013: GBP73.1
million).
We monitor the administration expenses incurred in running the
property portfolio by reference to the income derived from it,
which we call the administration cost ratio, and this is a key
performance indicator of the Group. In 2014, retaining key staff
whilst expanding staff levels for the development programme and
property purchases, drove the increase in administration expenses
of the property segment of the Group to GBP12.8 million (2013:
GBP11.9 million). As a proportion of net rental income, the
administration cost ratio reduced to 15.7% (2013: 16.3%).
The net surplus on revaluation of investment properties of
GBP186.0 million was predominantly generated by the London
portfolio, which rose in value by GBP185.1 million. GBP80.9 million
(an uplift of 48.3%) of this reflected increases in the value of
the four developments mentioned above, GBP63.8 million (an uplift
of 30.6%) was generated on Spring Gardens, SE11 and 214/236 Gray's
Inn Road, WC1, both of which have long leases with Central
Government departments, and GBP40.4 million (an uplift of 16.4%)
came from the rest of the let portfolio.
The majority of the profit on sale of investment properties was
generated by the disposals of Cambridge House W6 and Blocks C and D
of Le Quatuor in Paris, which realised a gain of GBP8.5 million
after costs over their aggregate valuation at 31 December 2013 of
GBP28.6 million.
In August, the Group increased its interest in its associate,
Cood investments AB, from 44.2% to 58.0%, whereupon Cood was
reclassified as a subsidiary at fair value, generating a gain on
reclassification of GBP0.2 million. The increase of 13.8% was
acquired for a price below the fair value of the share of net
assets acquired, which produced a gain on acquisition of GBP1.2
million.
The majority of finance income of GBP7.7 million (2013: GBP7.6
million) was interest income of GBP6.1 million (2013: GBP6.3
million) from our corporate bond portfolio. At 31 December 2014,
this had a value of GBP61.8 million, and remained an important cash
management tool of the Group, earning a return on capital of 8.7%
in the year.
Finance costs of GBP28.1 million (2013: GBP23.7 million) were
higher than last year as they contained a GBP1.3 million loss on
redeeming 25% of the zero coupon note, and non-cash items - an
adverse movement in the fair value of derivatives of GBP0.9 million
(2013: favourable GBP3.3 million) - added GBP4.2 million. The
underlying interest cost, excluding these items, fell to GBP24.8
million (2013: GBP25.2 million), after capitalising interest of
GBP2.9 million (2013: GBP0.9 million) on Spring Mews and Clifford's
Inn, which will not recur next year. A full year of interest on the
GBP80 million secured notes issued in December 2013 to finance the
Neo acquisition added GBP2.9 million to gross interest costs in
2014. However, 68% of our debt is at floating rates to take
advantage of the low interest rate environment, and the fall in
Libor and its European equivalents reduced the cost of bank loans
by GBP0.6 million compared to 2013.
Investments in associates have been largely sold or written down
during the year, and at 31 December 2014 stood at only GBP1.5
million. We received a dividend from Bulgarian Land Development Plc
of GBP0.8 million, and provided GBP2.2 million for the full
impairment of the rest of the carrying value of the investment to
reflect the difficult conditions likely to prevail in the Bulgarian
residential holiday market.
Once again this year the tax charge of 17.7% was significantly
below the weighted average rate of the countries in which we do
business (22.1%), primarily due to indexation allowances available
on United Kingdom properties.
Overall, profit after tax attributable to owners of the Company
of GBP194.9 million (2013: GBP63.2 million) was GBP131.7 million
above that of last year. In 2013, the underlying profit after tax,
before gains on the sale of bonds (GBP14.1 million) and on the
reclassification of an associate (GBP14.9 million), was GBP34.2
million. EPRA profit after tax of GBP33.6 million (2013: GBP28.5
million) was 17.9% or GBP5.1 million higher in 2014, and the
property valuation, net of deferred tax, was GBP154.5 million
higher.
EPRA NET ASSET VALUE At 31 December 2014, EPRA net assets per
share (a diluted measure which highlights the fair value of the
business on a long-term basis) were 1,774.1 pence (2013: 1,268.4
pence), a rise of 39.9%, or 505.7 pence per share. The main reasons
for the increase were the uplift in the valuation of the investment
property portfolio which added 433.5 pence, and underlying profit
after tax which added 98.9 pence. Sundry fair value uplifts of
property, plant and equipment, equities and bonds added 24.0 pence,
but the strength of sterling against the euro and krona reduced
EPRA net assets per share by 45.0 pence.
CASH FLOW, NET DEBT AND GEARING At 31 December 2014, the Group's
cash balances of GBP100.2 million were GBP29.6 million lower than
twelve months previously. Operating activities generated GBP34.5
million, of which GBP15.5 million was returned to shareholders, and
proceeds from property disposals added GBP37.1 million. GBP45.2
million was spent on capital expenditure, particularly on the
developments at Spring Mews and Clifford's Inn, and repayment of
loans exceeded the proceeds from new ones by GBP32.6 million.
Gross debt fell by GBP54.3 million in a relatively quiet year
for completing financing deals, and half of the fall was through
retranslating non-sterling debt. One new loan of GBP22.5 million
was taken out to replace GBP18.7 million repaid, and GBP13.4
million of loans were acquired by First Camp. GBP24.8 million was
returned to the banks through amortisation, and a net GBP18.7
million of overdrafts were repaid. At the end of the year the
weighted average unexpired term of the Group's debt was 3.9 years.
Since the year end, the Harburg acquisition was financed with
EUR24.0 million for seven years at a fixed cost of 1.915% p.a., and
Spring Gardens was refinanced with GBP97 million for six years.
Balance sheet loan-to-value (net debt to gross assets less cash)
fell to 43.4% (2013: 52.8%), and the weighted average loan-to-value
on borrowings secured against properties was a comfortable 49.7%
(2013: 56.3%). Adjusted solidity was 48.0% (2013: 39.9%).
The weighted average cost of debt at 31 December 2014 was 3.64%,
which fell to a pro forma 3.58% after the financings of Harburg and
Spring Gardens in February 2015, and it remains one of the lowest
in the property sector. The cost of new bank financing has fallen
in the past few months, particularly in the UK, but notwithstanding
low medium-term rates, refinancing existing debts as they fall due
will probably gradually increase the average cost of debt of the
Group.
In 2014, our low cost of debt led to recurring interest cover of
a comfortable 3.3 times (2013: 3.2 times).
FINANCING STRATEGY The Group's strategy is to hold its
investment properties predominantly in single-purpose vehicles
financed primarily by non-recourse bank debt in the currency used
to purchase the asset. In this way credit and liquidity risk can
most easily be managed, around 75% of the Group's exposure to
foreign currency is naturally hedged, and the most efficient use
can be made of the Group's assets. Bank debt ordinarily attracts
covenants on loan-to-value and on interest and debt service cover.
The Group had 60 loans across the portfolio from 23 banks, plus a
debenture, a zero coupon note, secured notes and two unsecured
bonds.
To the extent that Group borrowings are not at fixed rates, the
Group's exposure to interest rate risk is mitigated by the use of
financial derivatives, particularly interest rate caps and swaps.
Since 2009, the Board has believed that interest rates were likely
to remain low longer than the forward interest curve would imply,
and, therefore, its policy has been to allow a majority of debt to
remain subject to floating rates. To mitigate the risk of interest
rates increasing more sharply than the Board expected, the Group
entered into interest rate caps. This policy has served the Group
well. At 31 December 2014, 32% of the Group's borrowings were at
fixed rates or subject to interest rate swaps, 41% were subject to
caps and 27% of debt costs were unhedged. With long-term rates now
at historically low levels, particularly for the euro, the Board
may seek to fix rates over the medium term with interest rate swaps
when the opportunity arises, such as on the recent Harburg
acquisition.
The Group's financial derivatives - predominantly interest rate
caps and interest rate swaps - are marked to market at each balance
sheet date. At 31 December 2014 they represented a net liability of
GBP7.3 million (2013: GBP5.2 million).
DISTRIBUTIONS TO SHAREHOLDERS In May 2014, GBP10.0 million was
distributed to shareholders by means of a tender offer buy-back of
1 in 66 shares at 1,495 pence per share. In September, a further
GBP5.5 million was distributed by means of a tender offer buy-back
of 1 in 119 shares at 1,500 pence per share, and a proposed tender
offer buy-back of 1 in 80 shares at 1,950 pence per share to return
GBP10.4 million will be put to shareholders at the Annual General
Meeting in April 2015. This represents a 7.6% uplift in
distribution per share over the equivalent distribution last
year.
SHARE CAPITAL At 1 January 2014, there were 46,856,893 shares in
issue, of which 2,903,103 were held as treasury shares. Shares were
cancelled during the year under the distribution policy of tender
offer buy-backs: in May, 665,966 shares were cancelled in exchange
for GBP10.0 million distributed to shareholders, and in September,
363,763 shares were cancelled in exchange for a distribution of
GBP5.5 million.
Consequently, at 31 December 2014, 42,924,061 shares were listed
on the London Stock Exchange, and 2,903,103 shares remained held in
Treasury.
TOTAL RETURNS TO SHAREHOLDERS
In addition to the distributions and share cancellations
associated with the tender offer buy-backs, shareholders benefited
from a rise in the share price in the year from 1,379 pence on 31
December 2013 to 1,529 pence at 31 December 2014. Accordingly, the
total shareholder return in 2014 was 10.9%. In the five years to 31
December 2014, our total shareholder return of 206.6%, which
represented a compound annual return of 25.1%, was one of the best
performances in the listed real estate sector.
Since the Company listed on the London Stock Exchange, it has
outperformed the FTSE Real Estate and FTSE All Share indices.
KEY PERFORMANCE INDICATORS
Our performance against our key performance indicators is set
out in the 2014 Annual Report and Accounts.
Property Portfolio
Rental data
Gross Net
rental rental Contracted Vacancy
income income rent ERV rate
for for at at Contracted at
the the Lettable year year rent subject year
year year space end end to indexation end
GBPm GBPm sq m GBPm GBPm GBPm %
------------ -------- -------- --------- ----------- ------ --------------- --------
London 32.4 31.7 158,892 34.9 38.9 6.0 3.3%
Rest of
UK 13.3 13.3 98,086 13.3 9.8 6.1 0.9%
France 17.1 17.0 92,147 15.9 15.8 15.9 5.1%
Germany 15.3 14.9 170,743 17.5 16.9 17.1 2.6%
Sweden 6.3 4.6 45,354 5.9 3.7 5.9 0.8%
------------ -------- -------- --------- ----------- ------ ---------------
Total
Portfolio 84.4 81.5 565,222 87.5 85.1 51.0 3.0%
------------ -------- -------- --------- ----------- ------ ---------------
Valuation data
Valuation
movement
in the year
-----------------------
EPRA
Market topped
value EPRA up
of Foreign net net True
property Underlying exchange initial initial equivalent
GBPm GBPm GBPm yield yield Reversion Over-rented yield
------------ ---------- ----------- ---------- --------- --------- ---------- ------------ ------------
London 705.0 185.1 - 5.2% 5.2% 11.6% 3.7% 6.1%
Rest of
UK 97.6 (0.3) - 12.8% 12.9% 2.6% 30.3% 10.0%
France 225.1 4.0 (15.6) 6.2% 6.7% 3.0% 9.4% 6.6%
Germany 235.5 6.9 (15.2) 6.7% 6.8% 2.0% 8.1% 5.9%
Sweden 46.9 (9.2) (7.0) 8.5% 8.5% 2.3% 39.3% 7.0%
------------ ---------- ----------- ----------
Total
Portfolio 1,310.1 186.5 (37.8) 6.5% 6.6% 6.1% 12.0%
------------ ---------- ----------- ----------
Lease Data
Average Passing rent of
lease leases expiring ERV of leases expiring
length in: in:
----------------- ------------------------------ ------------------------------
Year Year
3 After 3 After
To To Year Year to year Year Year to year
break expiry 1 2 5 5 1 2 5 5
years years GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------- -------- ------ ------ ------ ------ ------ ------ ------ ------
London 6.1 7.0 3.3 3.1 5.7 22.9 3.8 3.3 6.7 23.9
Rest of
UK 4.1 6.6 1.6 0.8 2.1 8.9 0.9 1.0 1.4 6.3
France 2.6 5.2 1.6 0.8 5.6 8.0 1.2 0.7 5.0 8.0
Germany 7.0 7.1 1.9 3.3 4.0 8.3 1.9 2.8 3.9 7.8
Sweden 2.8 2.8 3.9 0.2 0.5 1.3 1.7 0.2 0.5 1.3
------ ------ ------ ------ ------ ------ ------
Total
Portfolio 5.1 6.4 12.3 8.2 17.9 49.4 9.5 8.0 17.5 47.3
------ ------ ------ ------ ------ ------ ------
Responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the consolidation
taken as a whole;
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- the annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the company's performance,
business model and strategy.
This statement of responsibilities was approved by the Board on
4 March 2015.
By order of the Board
David Fuller BA FCIS
Company Secretary
4 March 2015
group income statement
for the year ended 31 December 2014
2014 2013
Notes GBPm GBPm
---------------------------------------- ------- -------- ----------
Continuing operations
Group revenue 99.6 91.2
---------------------------------------- ------- -------- --------
Net rental income 2 82.2 73.1
Administration expenses (13.6) (12.4)
Other expenses (4.9) (3.5)
---------------------------------------- ------- -------- --------
Group revenue less costs 63.7 57.2
Net movements on revaluation
of investment properties 8 186.0 (0.2)
Profit on sale of investment
property 8.7 4.5
Fair value gain on reclassification
of an associate as a subsidiary 24 0.2 -
Gain arising from acquisition 24 1.2 -
Profit on sale of joint venture 25 - 1.8
Net gain on sale of corporate
bonds and other financial investments - 14.1
Fair value gain on reclassification
of an associate as an investment - 14.9
---------------------------------------- ------- -------- --------
Operating profit 259.8 92.3
Finance income 3 7.7 7.6
Finance costs 4 (28.1) (23.7)
Share of loss of associates
after tax 11 (2.6) (4.8)
---------------------------------------- ------- -------- --------
Profit before tax 236.8 71.4
Taxation 5 (42.0) (8.2)
---------------------------------------- ------- -------- --------
Profit for the year 194.8 63.2
---------------------------------------- ------- -------- --------
Attributable to:
Owners of the Company 194.9 63.2
Non-controlling interests (0.1) -
---------------------------------------- ------- -------- --------
194.8 63.2
---------------------------------------- ------- -------- --------
Earnings per share from continuing
operations
(expressed in pence per share)
Basic 6 449.0 146.9
Diluted 6 449.0 146.7
---------------------------------------- ------- -------- --------
Group Statement of comprehensive income
for the year ended 31 December 2014
2014 2013
Notes GBPm GBPm
Profit for the year 194.8 63.2
-------------------------------------- ------- ------- -------
Other comprehensive income
Items that will not be reclassified
to profit or loss
Foreign exchange differences (14.7) 3.4
-------------------------------------- ------- ------- -------
Items that may be reclassified
to profit or loss
Fair value gains/(losses)
on corporate bonds and other
financial investments 12 3.2 (1.4)
Fair value losses/(gains)
taken to net gain on sale of
corporate bonds and other
financial investments 12 0.2 (11.2)
Revaluation of property, plant
and equipment 9 6.5 -
Deferred tax on net fair value
(gains)/losses 16 (1.3) 3.1
-------------------------------------- ------- ------- -------
Total items that may be reclassified
to profit or loss 8.6 (9.5)
-------------------------------------- ------- ------- -------
Total comprehensive income
for the year 188.7 57.1
-------------------------------------- ------- ------- -------
Total comprehensive income
attributable to:
Owners of the Company 187.5 57.1
Non-controlling interests 1.2 -
-------------------------------------- ------- ------- -------
188.7 57.1
-------------------------------------- ------- ------- -------
Group Balance Sheet
At 31 December 2014
2014 2013
Notes GBPm GBPm
---------------------------------- ------- -------- ----------
Non-current assets
Investment properties 8 1,310.1 1,132.9
Property, plant and equipment 9 60.4 2.8
Goodwill 10 1.1 1.1
Investments in associates 11 1.5 9.1
Other financial investments 12 99.9 104.3
Derivative financial instruments 18 - 0.4
Deferred tax 16 4.8 6.4
---------------------------------- ------- -------- --------
1,477.8 1,257.0
---------------------------------- ------- -------- --------
Current assets
Trade and other receivables 13 10.8 12.7
Derivative financial instruments 18 - 0.3
Cash and cash equivalents 14 100.2 129.8
---------------------------------- ------- -------- --------
111.0 142.8
---------------------------------- ------- -------- --------
Total assets 1,588.8 1,399.8
---------------------------------- ------- -------- --------
Current liabilities
Trade and other payables 15 (68.1) (40.3)
Current tax (7.7) (3.5)
Borrowings 17 (192.8) (77.5)
Derivative financial instruments 18 (1.0) -
---------------------------------- ------- -------- --------
(269.6) (121.3)
---------------------------------- ------- -------- --------
Non-current liabilities
Deferred tax 16 (105.9) (74.4)
Borrowings 17 (549.5) (717.3)
Derivative financial instruments 18 (6.3) (5.9)
---------------------------------- ------- -------- --------
(661.7) (797.6)
---------------------------------- ------- -------- --------
Total liabilities (931.3) (918.9)
---------------------------------- ------- -------- --------
Net assets 657.5 480.9
---------------------------------- ------- -------- --------
Equity
Share capital 19 11.5 11.7
Share premium 21 82.9 82.9
Other reserves 22 88.8 96.0
Retained earnings 469.7 290.3
---------------------------------- ------- -------- --------
Equity attributable to owners
of the Company 652.9 480.9
Non-controlling interests 4.6 -
---------------------------------- ------- -------- --------
Total equity 657.5 480.9
---------------------------------- ------- -------- --------
The financial statements of CLS Holdings plc (registered number:
2714781) were
approved by the Board of Directors and authorised for issue on 4
March 2015 and
were signed on its behalf by:
Mr S A Mortstedt Mr E H Klotz
Director Director
Group Statement of Changes in Equity
for the year ended 31 December 2014
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interest equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
Arising in 2014:
Total comprehensive
income for the year - - (7.4) 194.9 187.5 1.2 188.7
Adjustment arising
from change in
non-controlling
interest - - - - - 3.4 3.4
Purchase of own shares 19 (0.2) - 0.2 (15.4) (15.4) - (15.4)
Expenses thereof - - - (0.1) (0.1) - (0.1)
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
Total changes arising
in 2014 (0.2) - (7.2) 179.4 172.0 4.6 176.6
At 1 January 2014 11.7 82.9 96.0 290.3 480.9 - 480.9
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
At 31 December 2014 11.5 82.9 88.8 469.7 652.9 4.6 657.5
--------------------------- ------ --------- --------- ---------- ---------- ------- ---------------- --------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interest equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------ --------- --------- ---------- ---------- ------- ---------------- --------
Arising in 2013:
Total comprehensive
income for the year - - (6.1) 63.2 57.1 - 57.1
Issue of share capital - 11.4 - 8.0 19.4 - 19.4
Expenses thereof - - - (0.4) (0.4) - (0.4)
Exercise of share
options - - - 1.4 1.4 - 1.4
Purchase of own shares 19 (0.3) - 0.3 (13.6) (13.6) - (13.6)
Expenses thereof - - - (0.1) (0.1) - (0.1)
------------------------ ------ --------- --------- ---------- ---------- ------- ---------------- --------
Total changes arising
in 2013 (0.3) 11.4 (5.8) 58.5 63.8 - 63.8
At 1 January 2013 12.0 71.5 101.8 231.8 417.1 - 417.1
------------------------ ------ --------- --------- ---------- ---------- ------- ---------------- --------
At 31 December 2013 11.7 82.9 96.0 290.3 480.9 - 480.9
------------------------ ------ --------- --------- ---------- ---------- ------- ---------------- --------
Group Statement of Cash Flows
for the year ended 31 December 2014
2014 2013
Notes GBPm GBPm
---------------------------------------------- ------ ------- --------
Cash flows from operating activities
Cash generated from operations 23 53.3 63.4
Interest paid (24.4) (22.2)
Income tax paid (2.5) (5.4)
---------------------------------------------- ------ ------- --------
Net cash inflow from operating
activities 26.4 35.8
---------------------------------------------- ------ ------- --------
Cash flows from investing activities
Purchase of investment property (4.2) (165.3)
Capital expenditure on investment
property (45.2) (34.3)
Net cash inflow from business 2.9 -
acquisition
Proceeds from sale of investment
property 37.1 13.2
Proceeds from sale of joint venture - 4.4
Interest received 8.1 11.2
Purchase of corporate bonds (70.9) (110.6)
Proceeds from sale of corporate
bonds 82.9 172.9
Purchase of equity investments (5.1) (3.3)
Dividends received from equity
investments 0.7 0.4
Proceeds from sale of equity investments 3.3 3.1
Purchase of interests in associate
undertakings - (0.3)
Loans to associate undertakings (1.0) (1.2)
Distributions received from associate
undertakings 0.8 0.3
Costs on foreign currency transactions (0.9) (1.7)
Costs of corporate disposals - (0.3)
Purchases of property, plant and
equipment (11.3) (0.3)
---------------------------------------------- ------ ------- --------
Net cash outflow from investing
activities (2.8) (111.8)
---------------------------------------------- ------ ------- --------
Cash flows from financing activities
Proceeds from issue of shares - 20.4
Purchase of own shares (15.5) (13.7)
New loans 32.6 207.4
Issue costs of new loans (0.2) (1.9)
Repayment of loans (65.0) (103.4)
Purchase or cancellation of derivative
financial instruments - (0.3)
---------------------------------------------- ------ ------- --------
Net cash (outflow)/inflow from
financing activities (48.1) 108.5
---------------------------------------------- ------ ------- --------
Cash flow element of net (decrease)/increase
in cash and cash equivalents (24.5) 32.5
Foreign exchange loss (5.1) (0.3)
---------------------------------------------- ------ ------- --------
Net (decrease)/increase in cash
and cash equivalents (29.6) 32.2
Cash and cash equivalents at the
beginning of the year 129.8 97.6
---------------------------------------------- ------ ------- --------
Cash and cash equivalents at the
end of the year 14 100.2 129.8
---------------------------------------------- ------ ------- --------
Notes to the group financial statements
31 December 2014
1 General Information
CLS Holdings plc (the "Company") and its subsidiaries (together
"CLS Holdings" or the "Group") is an investment property group
which is principally involved in the investment, management and
development of commercial properties, and in other investments. The
Group's principal operations are carried out in the United Kingdom,
France, Germany and Sweden.
The Company is registered in the UK, registration number
2714781, with its registered address at 86 Bondway, London, SW8
1SF. The Company is listed on the London Stock Exchange.
The annual financial report (produced in accordance with the
Disclosure and Transparency Rules) can be found on the Company's
website www.clsholdings.com. The 2014 Annual Report and Accounts
will be posted to shareholders on 13 March 2015 and will also be
available on the Company's website.
The financial information contained in this announcement has
been prepared on the basis of the accounting policies set out in
the statutory accounts for the year ended 31 December 2014. Whilst
the financial information included in this announcement has been
computed in accordance with International Financial Reporting
Standards (IFRS), as adopted by the European Union, this
announcement does not itself contain sufficient information to
comply with IFRS. The financial information does not constitute the
Company's statutory accounts for the years ended 31 December 2014
or 2013, but is derived from those accounts. Those accounts give a
balanced, true and fair view of the assets, liabilities, financial
position and profit and loss of the Company and the undertakings
included in the consolidation taken as a whole. Statutory accounts
for 2013 have been delivered to the Registrar of Companies and
those for 2014 will be delivered following the Company's Annual
General Meeting. The auditors have reported on those accounts and
the auditors' reports on both the 2013 and 2014 accounts were
unqualified; did not draw attention to any matters by way of
emphasis; and did not contain statements under s498(2) or (3)
Companies Act 2006 or preceding legislation.
Going Concern
The Group's business activities, and the factors likely to
affect its future development and performance, are set out in the
Strategic Review. The financial position of the Group, its
liquidity position and borrowing facilities are described in the
Strategic Review.
The Directors regularly stress-test the business model to ensure
that the Group has adequate working capital and have reviewed the
current and projected financial positions of the Group, taking into
account the repayment profile of the Group's loan portfolio, and
making reasonable assumptions about future trading performance. The
Directors have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence
for the foreseeable future and, therefore, they continue to adopt
the going concern basis in preparing the annual report and
accounts.
2 Segment information
The Group has two operating divisions - Investment Property and
Other Investments. Other Investments comprise corporate bonds,
shares in Catena AB, Bulgarian Land Development Plc, First Camp
Sverige Holding AB and Cood Investments AB, and other small
corporate investments. The Group manages the Investment Property
division on a geographical basis due to its size and geographical
diversity. Consequently, the Group's principal operating segments
are:
Investment London
Property -
Rest of United Kingdom
France
Germany
Sweden
Other Investments
There are no transactions between the operating segments.
The Group's results for the year ended 31 December 2013 by
operating segment were as follows:
Investment Property
-------------------------------------------
Rest
of Other
London UK France Germany Sweden Investments Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------- ------ ------- -------- ------- ------------- -------
Rental income 32.4 13.3 17.1 15.3 6.3 - 84.4
Other property-related
income 1.0 - 0.3 - - 0.7 2.0
Service charge
income 4.9 0.2 4.8 3.0 0.3 - 13.2
Service charges
and similar
expenses (6.6) (0.2) (5.2) (3.4) (2.0) - (17.4)
------------------------ ------- ------ ------- -------- ------- ------------- -------
Net rental income 31.7 13.3 17.0 14.9 4.6 0.7 82.2
Administration
expenses (3.2) (0.2) (1.6) (1.2) (0.2) (0.8) (7.2)
Other expenses (2.0) (0.4) (1.0) (1.1) (0.1) (0.3) (4.9)
------------------------ ------- ------ ------- -------- ------- ------------- -------
Group revenue
less costs 26.5 12.7 14.4 12.6 4.3 (0.4) 70.1
Profit on sale
of investment
property 6.8 - 1.9 - - - 8.7
Net movements
on revaluation
of investment
properties 185.1 (0.4) 3.4 7.0 (9.1) - 186.0
Fair value gain
on reclassifying
an amount as
a subsidiary - - - - - 0.2 0.2
Gain arising
from acquisition - - - - - 1.2 1.2
------------------------ ------- ------ ------- -------- ------- ------------- -------
Segment operating
profit/(loss) 218.4 12.3 19.7 19.6 (4.8) 1.0 266.2
Finance income - - - - - 7.7 7.7
Finance costs (10.1) (3.3) (3.0) (2.4) (0.9) (8.4) (28.1)
Share of loss
of associates
after tax - - - - - (2.6) (2.6)
------------------------ ------- ------ ------- -------- ------- ------------- -------
Segment profit/(loss)
before tax 208.3 9.0 16.7 17.2 (5.7) (2.3) 243.2
------------------------ ------- ------ ------- -------- ------- -------------
Central administration
expenses (6.4)
------------------------ ------- ------ ------- -------- ------- ------------- -------
Profit before
tax 236.8
------------------------ ------- ------ ------- -------- ------- ------------- -------
The Group's results for the year ended 31 December 2013 by
operating segment were as follows:
Investment Property
-------------------------------------------
Rest
of Other
London UK France Germany Sweden Investments Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------- ------ ------- -------- ------- ------------- -------
Rental income 30.8 3.9 19.2 15.5 6.6 - 76.0
Other property-related
income 0.7 - 0.4 0.1 - - 1.2
Service charge
income 5.1 - 5.4 3.1 0.4 - 14.0
Service charges
and similar
expenses (6.5) (0.1) (5.7) (3.4) (2.4) - (18.1)
------------------------ ------- ------ ------- -------- ------- ------------- -------
Net rental income 30.1 3.8 19.3 15.3 4.6 - 73.1
Administration
expenses (3.0) - (1.4) (1.3) (0.6) (0.5) (6.8)
Other expenses (1.5) (0.1) (0.6) (1.1) (0.2) - (3.5)
------------------------ ------- ------ ------- -------- ------- ------------- -------
Group revenue
less costs 25.6 3.7 17.3 12.9 3.8 (0.5) 62.8
Profit on sale
of investment
property 4.5 - - - - - 4.5
Net movements
on revaluation
of investment
properties 15.3 (4.3) (9.2) (0.6) (1.4) - (0.2)
Profit on sale
of joint venture 1.8 - - - - - 1.8
Net gain on
sale of corporate
bonds and other
financial investments - - - - - 14.1 14.1
Fair value gain
on reclassification
of an associate
as an investment - - - - - 14.9 14.9
------------------------ ------- ------ ------- -------- ------- ------------- -------
Segment operating
profit/(loss) 47.2 (0.6) 8.1 12.3 2.4 28.5 97.9
Finance income - - - - - 7.6 7.6
Finance costs (9.1) (0.5) (3.2) (2.9) (0.8) (7.2) (23.7)
Share of loss
of associates
after tax - - - - - (4.8) (4.8)
------------------------ ------- ------ ------- -------- ------- ------------- -------
Segment profit/(loss)
before tax 38.1 (1.1) 4.9 9.4 1.6 24.1 77.0
------------------------ ------- ------ ------- -------- ------- -------------
Central administration
expenses (5.6)
------------------------ ------- ------ ------- -------- ------- ------------- -------
Profit before
tax 71.4
------------------------ ------- ------ ------- -------- ------- ------------- -------
Other segment information:
Capital
Assets Liabilities expenditure
------------------ -------------- ---------------
2014 2013 2014 2013 2014 2013
GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- -------- ------ ------ ------- ------
Investment
Property
London 717.9 542.2 402.4 374.9 45.5 78.9
Rest of UK 100.2 98.7 81.8 82.2 - 101.5
France 229.8 245.1 184.7 206.2 2.3 4.7
Germany 239.5 220.3 160.2 147.7 29.4 13.2
Sweden 49.7 67.5 36.6 44.5 3.0 2.1
Other Investments 251.7 226.0 65.5 63.4 30.1 -
------------------- -------- -------- ------ ------ ------- ------
1,588.8 1,399.8 931.3 918.9 110.3 200.4
------------------- -------- -------- ------ ------ ------- ------
Included within the assets of other investments are investments
in associates of GBP1.5 million (2013: GBP9.1 million).
3 FINANCE INCOME
2014 2013
GBPm GBPm
---------------------- ------ ------
Interest income 7.0 7.2
Other finance income 0.7 0.4
---------------------- ------ ------
7.7 7.6
---------------------- ------ ------
4 FINANCE COSTS
2014 2013
GBPm GBPm
------------------------------------------ ------ ------
Interest expense
Bank loans 13.3 13.9
Debenture loan 3.2 3.3
Zero coupon note 1.3 1.4
Secured notes 3.2 0.3
Unsecured bonds 4.8 5.1
Amortisation of loan issue costs 1.9 2.1
------------------------------------------ ------ ------
Total interest costs 27.7 26.1
Less interest capitalised on development
projects (2.9) (0.9)
------------------------------------------ ------ ------
24.8 25.2
Loss on partial redemption of zero 1.3 -
coupon note
Movement in fair value of derivative
financial instruments
Interest rate swaps: transactions
not qualifying as hedges 0.5 (3.4)
Interest rate caps: transactions
not qualifying as hedges 0.4 0.1
Foreign exchange variances 1.1 1.8
------------------------------------------ ------ ------
28.1 23.7
------------------------------------------ ------ ------
5 taxation
2014 2013
GBPm GBPm
------------------------------- ------ ------
Current tax charge 7.2 5.3
Deferred tax charge (note 16) 34.8 2.9
------------------------------- ------ ------
42.0 8.2
------------------------------- ------ ------
A deferred tax charge of GBP1.3 million (2013: credit of GBP3.1
million) was recognised directly in equity (note 16).
The charge for the year differs from the theoretical amount
which would arise using the weighted average tax rate applicable to
profits of Group companies as follows:
2014 2013
GBPm GBPm
--------------------------------------------- ------ ------
Profit before tax 236.8 71.4
--------------------------------------------- ------ ------
Tax calculated at domestic tax rates
applicable to profits in the respective
countries 52.3 16.5
Expenses not deductible for tax purposes 0.6 0.1
Tax effect of unrecognised losses/(profits)
in associates and joint ventures 0.3 (0.7)
Tax effect of fair value movements 0.9 -
on investments
Adjustment in respect of indexation
allowance on United Kingdom properties (3.5) (4.2)
Non-taxable income (2.8) (2.4)
Gain arising from acquisition (0.3) -
Change in tax rate - (1.6)
Deferred tax on losses (recognised)/not
recognised (3.3) 0.9
Deferred tax liability released on (0.8) -
disposals
Other deferred tax adjustments (0.2) (0.1)
Adjustment in respect of prior periods (1.2) (0.3)
--------------------------------------------- ------ ------
Tax charge for the year 42.0 8.2
--------------------------------------------- ------ ------
The weighted average applicable tax rate of 22.1% (2013: 23.1%)
was derived by applying to their relevant profits and losses the
rates in the jurisdictions in which the Group operated.
6 EARNINGS PER SHARE
Management has chosen to disclose the European Public Real
Estate Association (EPRA) measure of earnings per share which has
been provided to give relevant information to investors on the
long-term performance of the Group's underlying property investment
business. The EPRA measure excludes items which are non-recurring
in nature such as profits (net of related tax) on sale of
investment properties and of other non-current investments, and
items which have no impact to earnings over their life, such as the
change in fair value of derivative financial instruments and the
net movement on revaluation of investment properties, and the
related deferred taxation on these items.
2014 2013
Earnings GBPm GBPm
---------------------------------------- -------- -------
Profit for the year 194.9 63.2
Net movements on revaluation
of investment properties (186.0) 0.2
Group's share of gain arising (1.2) -
from acquisition
Profit on sale of investment
property (8.7) (4.5)
Impairment of carrying value
of associates 2.2 4.0
Change in fair value of derivative
financial instruments 0.9 (3.3)
Fair value gain on reclassification (0.2) -
of an associate as a subsidiary
Fair value gain on reclassification
of an associate as an investment - (14.9)
Profit on sale of joint venture - (1.8)
Net (gain)/loss on sale of corporate
bonds and other financial investments - (14.1)
Deferred tax relating to the
above adjustments 31.7 (0.3)
---------------------------------------- -------- -------
EPRA earnings 33.6 28.5
---------------------------------------- -------- -------
Weighted average number of ordinary 2014 2013
shares Number Number
------------------------------------- ----------- -----------
Weighted average number of ordinary
shares in circulation 43,410,928 43,026,586
Dilutive share options - 59,992
------------------------------------- ----------- -----------
Diluted weighted average number
of ordinary shares 43,410,928 43,086,578
------------------------------------- ----------- -----------
Earnings per Share 2014 2013
Pence Pence
--------------------- ------- -------
Basic 449.0 146.9
Diluted 449.0 146.7
EPRA 77.4 66.2
--------------------- ------- -------
300,000 share options were granted on 11 March 2010 at an
exercise price of 470 pence, and exercised on 17 May 2013.
7 NET ASSETS PER SHARE
Management has chosen to disclose the two European Public Real
Estate Association (EPRA) measures of net assets per share: EPRA
net assets per share and EPRA triple net assets per share. The EPRA
net assets per share measure highlights the fair value of equity on
a long-term basis, and so excludes items which have no impact on
the Group in the long term, such as fair value movements of
derivative financial instruments and deferred tax on the fair value
of investment properties. The EPRA triple net assets per share
measure discloses net assets per share on a true fair value basis:
all balance sheet items are included at their fair value in
arriving at this measure, including deferred tax, fixed rate loan
liabilities and any other balance sheet items not reported at fair
value.
2014 2013
Net assets GBPm GBPm
------------------------------------ ------- -------
Basic net assets attributable to
owners of the Company 652.9 480.9
Adjustment to increase fixed rate
debt to fair value, net of tax (29.2) (21.1)
Goodwill as a result of deferred
tax (1.1) (1.1)
------------------------------------ ------- -------
EPRA triple net assets 622.6 458.7
Deferred tax on property and other
non-current assets 102.4 72.5
Fair value of derivative financial
instruments 7.3 5.2
Adjustment to decrease fixed rate
debt to book value, net of tax 29.2 21.1
------------------------------------ ------- -------
EPRA net assets 761.5 557.5
------------------------------------ ------- -------
2014 2013
Number of ordinary shares Number Number
------------------------------------------ ----------- -----------
Number of ordinary shares in circulation 42,924,061 43,953,790
Dilutive share options - -
------------------------------------------ ----------- -----------
Diluted number of ordinary shares 42,924,061 43,953,790
------------------------------------------ ----------- -----------
2014 2013
Net Assets Per Share Pence Pence
---------------------- -------- --------
Basic 1,521.1 1,094.1
Diluted 1,521.1 1,094.1
EPRA 1,774.1 1,268.4
EPRA triple net 1,450.5 1,043.6
---------------------- -------- --------
8 Investment properties
Rest
of
London UK France Germany Sweden Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------- ------ ------- -------- ------- --------
At 1 January 2014 519.9 97.9 240.6 214.4 60.1 1,132.9
Acquisitions 2.3 - - 27.4 1.9 31.6
Capital expenditure 42.8 - 2.3 2.0 1.1 48.2
Disposals (22.4) - (6.2) - - (28.6)
Transfer to property,
plant and equipment (22.7) - - - - (22.7)
Net movement on
revaluation of
investment properties 185.1 (0.4) 3.4 7.0 (9.1) 186.0
Rent-free period
debtor adjustments - 0.1 0.6 (0.1) (0.1) 0.5
Exchange rate
variances - - (15.6) (15.2) (7.0) (37.8)
------------------------ ------- ------ ------- -------- ------- --------
At 31 December
2014 705.0 97.6 225.1 235.5 46.9 1,310.1
------------------------ ------- ------ ------- -------- ------- --------
Rest
of
London UK France Germany Sweden Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------- ------ ------- -------- ------- --------
At 1 January 2013 436.8 0.7 239.6 197.4 60.0 934.5
Acquisitions 52.7 100.5 - 12.1 - 165.3
Capital expenditure 26.9 - 4.7 1.1 2.1 34.8
Disposals (11.3) - - - - (11.3)
Net movement on
revaluation of
investment properties 14.3 (3.3) (9.2) (0.6) (1.4) (0.2)
Rent-free period
debtor adjustments 0.5 - - 0.1 (0.1) 0.5
Exchange rate
variances - - 5.5 4.3 (0.5) 9.3
------------------------ ------- ------ ------- -------- ------- --------
At 31 December
2013 519.9 97.9 240.6 214.4 60.1 1,132.9
------------------------ ------- ------ ------- -------- ------- --------
The investment properties (and the hotel and the owner-occupied
property detailed in note 9) were revalued at 31 December 2014 to
their fair value. Valuations were based on current prices in an
active market for all properties. The property valuations were
carried out by external, professionally qualified valuers as
follows:
London: DTZ; Knight Frank (2013: Lambert Smith Hampton; Knight
Frank)
Rest of UK: DTZ (2013: Savills)
France: Jones Lang LaSalle
Germany: Colliers International
Sweden: CB Richard Ellis
Property valuations are complex and require a degree of
judgements and are based on data which is not publicly available.
Consistent with EPRA guidance, we have classified the valuations of
our property portfolio as level 3 as defined by IFRS 13. In
addition to note 3(i), inputs into the valuations include
equivalent yields and rental income and are described as
'unobservable' as per IFRS 13. These inputs are analysed by segment
in the property portfolio information. All other factors remaining
constant, an increase in rental income would increase valuations,
whilst an increase in equivalent nominal yield would result in a
fall in value and vice versa.
Investment properties included leasehold properties with a
carrying amount of GBP49.6 million (2013: GBP57.4 million).
Interest capitalised within capital expenditure in the year
amounted to GBP2.9 million (2013: GBP0.9 million).
Where the Group leases out its investment property under
operating leases the duration is typically three years or more. No
contingent rents have been recognised in either the current or the
comparative year.
Substantially all investment properties (and the owner-occupied
property detailed in note 9) are secured against debt.
In 2010 the Group purchased a property in London for GBP1.8
million. Under the terms of the purchase agreement, should the site
be developed additional consideration may become due to the vendor.
The maximum liability in respect of this is estimated to be GBP0.5
million. At the balance sheet date the fair value of the liability
was GBPnil (2013: GBPnil).
9 Property, plant and equipment
Land Owner- Fixtures
and occupied and
Hotel buildings property fittings Total
GBPm GBPm GBPm GBPm GBPm
-------------------------- ------ ----------- ---------- ---------- ------
Cost or valuation
At 1 January 2013 - - 2.6 1.3 3.9
Additions - - - 0.3 0.3
Disposals - - - (0.1) (0.1)
-------------------------- ------ ----------- ---------- ---------- ------
At 31 December 2013 - - 2.6 1.5 4.1
Additions - 10.9 - 0.4 11.3
Acquired during the year - 18.0 - 1.2 19.2
Transfer from investment
properties 21.3 - - 1.4 22.7
Exchange rate variances - (1.8) - - (1.8)
Revaluation - 5.0 1.5 - 6.5
-------------------------- ------ ----------- ---------- ---------- ------
At 31 December 2014 21.3 32.1 4.1 4.5 62.0
-------------------------- ------ ----------- ---------- ---------- ------
Comprising:
At cost - - - 4.5 4.5
At valuation 31 December
2014 21.3 32.1 4.1 - 57.5
-------------------------- ------ ----------- ---------- ---------- ------
21.3 32.1 4.1 4.5 62.0
-------------------------- ------ ----------- ---------- ---------- ------
Accumulated depreciation
and impairment
At 1 January 2013 - - (0.2) (0.9) (1.1)
Depreciation charge - - - (0.3) (0.3)
Eliminated on disposals - - - 0.1 0.1
-------------------------- ------ ----------- ---------- ---------- ------
At 31 December 2013 - - (0.2) (1.1) (1.3)
Depreciation charge - - - (0.3) (0.3)
-------------------------- ------ ----------- ---------- ---------- ------
At 31 December 2014 - - (0.2) (1.4) (1.6)
-------------------------- ------ ----------- ---------- ---------- ------
Net book value
At 31 December 2014 21.3 32.1 3.9 3.1 60.4
-------------------------- ------ ----------- ---------- ---------- ------
At 31 December 2013 - - 2.4 0.4 2.8
-------------------------- ------ ----------- ---------- ---------- ------
A hotel and an owner-occupied property were revalued at 31
December 2014 based on the external valuation performed by DTZ and
Knight Frank, respectively, as detailed in note 8.
The land and buildings were revalued at 31 December 2014 based
on an external valuation performed by Forum Fastighetsekonomi
AB.
10 goodwill
2014 2013
GBPm GBPm
--------------------------------- ------ ------
Cost
At 1 January and at 31 December 1.1 1.1
Amortisation
At 1 January and 31 December - -
--------------------------------- ------ ------
Net book value
At 31 December 1.1 1.1
--------------------------------- ------ ------
Goodwill comprised GBP0.8 million (2013: GBP0.8 million) on the
acquisition of a French property portfolio in 2004 and GBP0.3
million (2013: GBP0.3 million) on a German property acquisition in
2005.
Impairment review 2014 and 2013
Goodwill was reviewed for impairment at 31 December 2014 and at
31 December 2013 using the key assumptions set out below. No
adjustment for impairment was required.
Key assumptions:
Unamortised goodwill at 31 December 2014 and at 31 December 2013
related to contingent deferred tax arising on acquisitions of
corporate entities for which an equal deferred tax liability was
recognised in the balance sheet. Management have reviewed the
sensitivity to a fall in property values of each cash-generating
unit. A fall of 10% would result in a potential impairment of
goodwill of up to GBP0.1 million (2013: GBP0.1 million).
11 Investments in associates
Net assets Goodwill Impairment Total
GBPm GBPm GBPm GBPm
----------------------------- ------------- --------- ----------- ------
At 1 January 2014 15.6 1.5 (8.0) 9.1
Share of loss of associates
after tax (0.4) - (2.2) (2.6)
Dividends received (0.8) - - (0.8)
Disposal (6.8) - 3.5 (3.3)
Exchange rate differences (1.4) (0.2) 0.7 (0.9)
----------------------------- ------------- --------- ----------- ------
At 31 December 2014 6.2 1.3 (6.0) 1.5
----------------------------- ------------- --------- ----------- ------
Net assets Goodwill Impairment Total
GBPm GBPm GBPm GBPm
----------------------------- ----------- --------- ----------- -------
At 1 January 2013 25.5 7.8 - 33.3
Additions 5.6 (5.3) - 0.3
Share of (loss)/profit
of associates after
tax (0.8) 4.2 (8.2) (4.8)
Dividends received (0.3) - - (0.3)
Reclassification of
associate as an investment (14.8) (5.4) - (20.2)
Exchange rate differences 0.4 0.2 0.2 0.8
----------------------------- ----------- --------- ----------- -------
At 31 December 2013 15.6 1.5 (8.0) 9.1
----------------------------- ----------- --------- ----------- -------
The Group's interests in its principal associates were as
follows:
Bulgarian
Land
Development Other
Plc associates Total
At 31 December 2014 GBPm GBPm GBPm
------------------------------- ------------- ------------ ------
Interest held in ordinary
share capital
Revenues 0.1 7.0 7.1
-------------------------------- ------------- ------------ ------
Share of loss of associates
after tax, before impairment (0.2) (0.2) (0.4)
Impairment (2.2) - (2.2)
-------------------------------- ------------- ------------ ------
Share of loss of associates
after tax (2.4) (0.2) (2.6)
-------------------------------- ------------- ------------ ------
Assets 6.2 0.8 7.0
Liabilities (0.2) (0.6) (0.8)
-------------------------------- ------------- ------------ ------
Net assets 6.0 0.2 6.2
Goodwill - 1.3 1.3
Impairment (6.0) - (6.0)
-------------------------------- ------------- ------------ ------
Investments in associates - 1.5 1.5
-------------------------------- ------------- ------------ ------
Bulgarian
Land
Catena Development Other
AB Plc associates Total
At 31 December 2013 GBPm GBPm GBPm GBPm
--------------------------- ------- ------------- ------------ ------
Interest held in ordinary
share capital 13.8% 48.3% various
Revenues 0.6 0.2 6.4 7.2
--------------------------- ------- ------------- ------------ ------
Share of profit/(loss)
of associates after
tax, before impairment 1.0 (0.6) (1.2) (0.8)
Impairment - (4.0) - (4.0)
--------------------------- ------- ------------- ------------ ------
Share of profit/(loss)
of associates after
tax 1.0 (4.6) (1.2) (4.8)
--------------------------- ------- ------------- ------------ ------
Assets - 7.8 17.6 25.4
Liabilities - (0.4) (9.4) (9.8)
--------------------------- ------- ------------- ------------ ------
Net assets - 7.4 8.2 15.6
Goodwill - - 1.5 1.5
Impairment - (4.0) (4.0) (8.0)
--------------------------- ------- ------------- ------------ ------
Investments in associates - 3.4 5.7 9.1
--------------------------- ------- ------------- ------------ ------
Catena AB
At 1 January 2013 the Group had a 29.9% interest in Catena AB
("Catena"), a listed Swedish property company. On 30 September
2013, Catena issued new shares in payment for an acquisition,
reducing the Group's interest in Catena to 13.8%. Consequently, the
investment in Catena was reclassified as an available-for-sale
financial investment and held at fair value by reference to
Catena's share price. Henry Klotz, Executive Vice Chairman of the
Company, is the Non-Executive Chairman of Catena AB.
Bulgarian Land Development Plc
At 31 December 2014 the Group had a 48.3% (2013: 48.3%) interest
in Bulgarian Land Development Plc ("BLD"), an unlisted developer of
residential and commercial real estate in Bulgaria. Henry Klotz,
Executive Vice Chairman of the Company, is the Non-Executive
Chairman of BLD.
Other associates
On 15 August 2014, the Group increased to 58.0% (2013: 44.2%)
its interest in Cood Investments AB ("Cood"), an unlisted
residential property company specialising in vacation sites in
Sweden. Consequently, the investment in Cood was reclassified as a
subsidiary. Henry Klotz, Executive Vice Chairman of the Company, is
a non-executive director of Cood.
At 31 December 2014 the Group had a 20.0% (2013: 20.0%) interest
in Nyheter 24, an unlisted Swedish on-line news and media
business.
Impairment
2014
An impairment review was carried out to assess the Group's
carrying value of BLD based upon a review of BLD's audited net
assets, which were prepared under IFRS, and of its cash flow
forecasts. On the basis of this review and following the receipt of
a dividend of GBP0.8 million, an impairment of GBP2.2 million was
made against the carrying value of the Group's interest in BLD at
31 December 2014.
The fair value of Nyheter 24 was determined on acquisition to be
GBP1.9 million and was based upon detailed profit forecasts. As the
progress to date has not been materially dissimilar from these
forecasts, management considered the carrying value of Nyheter 24
not to be impaired at 31 December 2014.
2013
An impairment review was carried out to assess the Group's
carrying value of BLD based upon a review of BLD's audited net
assets, which were prepared under IFRS, and of its cash flow
forecasts. On the basis of this review an impairment of GBP4.0
million was made against the carrying value of the Group's interest
in BLD at 31 December 2013.
The consideration for the acquisition of the interest in Cood in
2013 was GBP0.3 million and on assessing the fair value of the net
assets acquired, negative goodwill of GBP5.3 million arose. As
required under IAS 28, the negative goodwill was credited to the
Group Statement of Comprehensive Income in 2013. As part of this
fair value review, a review of the goodwill on the original
interest acquired in 2012 was carried out and an impairment of
GBP1.1 million made to the Group Statement of Comprehensive Income
in 2013. At 31 December 2013, the fair value of the Group's
interest in Cood was assessed based on Cood's results to date, net
assets, and profit forecasts. On the basis of this review an
impairment of GBP4.2 million was made against the carrying value of
the Group's interest in Cood at 31 December 2013.
The fair value of Nyheter 24 was determined on acquisition to be
GBP1.9 million and was based upon detailed forward forecasts. As
the progress to date has not been materially dissimilar from these
forecasts, management considered the carrying value of Nyheter 24
not to be impaired at 31 December 2013.
12 Other Financial investments
Destination
Investment of 2014 2013
type Investment GBPm GBPm
------------------------ ---------------------- ------------- ------ ------
Available-for-sale
financial investments
carried at Listed corporate
fair value bonds UK 19.1 28.4
Eurozone 3.9 10.8
Other 38.8 30.2
------ ------
61.8 69.4
Listed equity
securities UK 0.2 0.2
Sweden 34.6 34.1
Other - 0.3
Unlisted investments Sweden 3.3 0.3
---------------------- -------------------------------------- ------ ------
99.9 104.3
------------------------------------------------------------- ------ ------
The movement of other financial investments, analysed based on
the methods used to measure their fair value, was as follows:
Level Level Level
1 2 3
Quoted Observable Other
market market valuation
prices data methods* Total
GBPm GBPm GBPm GBPm
----------------------------------- -------- ------------ ----------- -------
At 1 January 2014 34.6 69.4 0.3 104.3
Acquisitions arising
from business combinations - - 3.0 3.0
Additions 2.5 70.9 2.6 76.0
Disposals (0.6) (80.9) (2.7) (84.2)
Fair value movements
recognised in reserves
on available-for-sale
assets 2.6 0.6 - 3.2
Fair value movements
recognised in profit
before tax on available-for-sale
assets 0.1 - 0.1 0.2
Exchange rate variations (4.4) 1.8 - (2.6)
----------------------------------- -------- ------------ ----------- -------
At 31 December 2014 34.8 61.8 3.3 99.9
----------------------------------- -------- ------------ ----------- -------
Level Level Level
1 2 3
Quoted Observable Other
market market valuation
prices data methods* Total
GBPm GBPm GBPm GBPm
----------------------------------- -------- ------------ ----------- --------
At 1 January 2013 2.3 127.3 0.3 129.9
Additions 37.7 110.6 - 148.3
Disposals (4.1) (156.5) - (160.6)
Fair value movements
recognised in reserves
on available-for-sale
assets (1.4) - - (1.4)
Fair value movements
recognised in profit
before tax on available-for-sale
assets 0.9 (12.1) - (11.2)
Loss on permanent impairment - (0.3) - (0.3)
Exchange rate variations (0.8) 0.4 - (0.4)
----------------------------------- -------- ------------ ----------- --------
At 31 December 2013 34.6 69.4 0.3 104.3
----------------------------------- -------- ------------ ----------- --------
* Unlisted equity shares valued using multiples from comparable
listed organisations.
Corporate Bond Portfolio
At 31 December 2013
Travel
and Food
Sector Banking Insurance tourism producers Other Total
--------- ------------ ----------- --------- ----------- -------------- ---------
Value GBP30.3m GBP1.8m GBP5.7m GBP1.6m GBP22.4m GBP61.8m
Running
yield 7.6% 6.5% 6.6% 9.0% 7.2% 7.4%
--------- ------------ ----------- --------- ----------- -------------- ---------
Issuers RBS Brit SAS Findus Dell
Insurance
HSBC Stena Enel
Lloyds British Seadrill
Airways
Investec T-Mobile
Barclays Stora
Enso
Unicredit Centurylink
Deutsche Transocean
SNS Bank ArcelorMittal
Commerzbank Corral
Finans
Credit Telecom
Agricole Italia
Bank of
Ireland
Societe
Generale
--------- ------------ ----------- --------- ----------- -------------- ---------
13 Trade and other receivables
2014 2013
GBPm GBPm
------------------- ------ ------
Current
Trade receivables 4.6 1.3
Prepayments 1.7 1.2
Accrued income 1.5 2.7
Other debtors 3.0 7.5
------------------- ------ ------
10.8 12.7
------------------- ------ ------
There was no concentration of credit risk with respect to trade
receivables as the Group had a large number of customers spread
across the countries in which it operated.
There were no material trade and other receivables classified as
past due but not impaired (2013: none). No trade and other
receivables were interest-bearing.
Included within other debtors is GBP1.1 million (2013: GBP6.0
million) due after more than one year.
14 Cash and cash equivalents
2014 2013
GBPm GBPm
-------------------------- ------ ------
Cash at bank and in hand 95.2 129.8
Short-term bank deposits 5.0 -
-------------------------- ------ ------
100.2 129.8
-------------------------- ------ ------
At 31 December 2014, Group cash at bank and in hand included
GBP11.0 million (2013: GBP11.0 million) which was restricted by a
third-party charge.
Cash and short-term deposits are invested at floating rates of
interest based on relevant national LIBID and base rates or
equivalents in the UK, France, Germany and Sweden.
The cash and cash equivalents currency profile was as
follows:
Cash
at bank
and in Short-term
hand Deposits Total
At 31 December 2014 GBPm GBPm GBPm
--------------------- --------- ----------- ------
Sterling 59.5 5.0 64.5
Euro 16.8 - 16.8
Swedish Krona 17.1 - 17.1
Other 1.8 - 1.8
--------------------- --------- ----------- ------
95.2 5.0 100.2
--------------------- --------- ----------- ------
Cash
at bank
and
in hand
At 31 December 2013 GBPm
--------------------- ---------
Sterling 106.7
Euro 9.5
Swedish Krona 13.6
----------------------- ---------
129.8
--------------------- ---------
15 Trade and other payables
2014 2013
GBPm GBPm
--------------------------------- ------ ------
Current
Trade payables 1.6 6.1
Social security and other taxes 2.1 1.3
Other payables 34.1 7.0
Accruals 15.3 14.5
Deferred income 15.0 11.4
--------------------------------- ------ ------
68.1 40.3
--------------------------------- ------ ------
16 Deferred tax
2014 2013
GBPm GBPm
----------------------------- ------ ------
Deferred tax assets:
- after more than 12 months (4.8) (6.4)
Deferred tax liabilities:
- after more than 12 months 105.9 74.4
----------------------------- ------ ------
101.1 68.0
----------------------------- ------ ------
The movement in deferred tax was as follows:
2014 2013
GBPm GBPm
------------------------------------------- ------ ------
At 1 January 68.0 69.1
Charged in arriving at profit after
tax 34.8 2.9
Charged/(credited) to other comprehensive
income 1.3 (3.1)
Deferred tax on acquisition 1.3 (2.1)
Exchange rate variances (4.3) 1.2
------------------------------------------- ------ ------
At 31 December 101.1 68.0
------------------------------------------- ------ ------
The movement in deferred tax assets and liabilities during the
year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, was as follows:
Tax
losses Other Total
Deferred tax assets GBPm GBPm GBPm
-------------------------------- -------- ------ ------
At 1 January 2014 (4.5) (1.9) (6.4)
Charged/(credited) in arriving
at profit after tax 3.1 (1.7) 1.4
Charged to other comprehensive
income - 0.1 0.1
Exchange rate variances 0.1 - 0.1
-------------------------------- -------- ------ ------
At 31 December 2014 (1.3) (3.5) (4.8)
-------------------------------- -------- ------ ------
Tax
losses Other Total
Deferred tax assets GBPm GBPm GBPm
--------------------------------- -------- ------ ------
At 1 January 2013 (5.5) (3.2) (8.7)
Charged in arriving at profit
after tax 3.1 1.4 4.5
Credited to other comprehensive
income - (0.1) (0.1)
Deferred tax on acquisition (2.1) - (2.1)
--------------------------------- -------- ------ ------
At 31 December 2013 (4.5) (1.9) (6.4)
--------------------------------- -------- ------ ------
Fair value
adjustments
to
UK capital investment
allowances properties Other Total
Deferred tax liabilities GBPm GBPm GBPm GBPm
-------------------------------- ------------ ------------- ------ ------
At 1 January 2014 8.0 65.5 0.9 74.4
Charged in arriving
at profit after tax 2.6 30.5 0.3 33.4
Charged to other comprehensive
income - - 1.2 1.2
Deferred tax on acquisition - - 1.3 1.3
Exchange rate variances - (4.2) (0.2) (4.4)
-------------------------------- ------------ ------------- ------ ------
At 31 December 2014 10.6 91.8 3.5 105.9
-------------------------------- ------------ ------------- ------ ------
Fair
value
adjustments
to
UK capital investment
allowances properties Other Total
Deferred tax liabilities GBPm GBPm GBPm GBPm
--------------------------------- ------------ ------------- ------ ------
At 1 January 2013 9.4 64.7 3.7 77.8
(Credited)/charged in
arriving at profit after
tax (1.4) (0.3) 0.1 (1.6)
Credited to other comprehensive
income - - (3.0) (3.0)
Exchange rate variances - 1.1 0.1 1.2
--------------------------------- ------------ ------------- ------ ------
At 31 December 2013 8.0 65.5 0.9 74.4
--------------------------------- ------------ ------------- ------ ------
Deferred tax assets are recognised in respect of tax losses
carried forward to the extent that the realisation of the related
tax benefit through future taxable profits is probable. At 31
December 2014 the Group did not recognise deferred tax assets of
GBP10.6 million (2013: GBP8.4 million) in respect of losses
amounting to GBP47.0 million (2013: GBP33.7 million) which can be
carried forward against future taxable income or gains. The
majority of deferred tax assets recognised within the "other"
category relate either to deferred tax on swaps with a negative
book value or to corporate bonds carried at below cost. Losses
recognised as deferred tax assets can be carried forward without
restriction.
17 Borrowings
Total
Current Non-current borrowings
At 31 December 2014 GBPm GBPm GBPm
--------------------- -------- ------------ ------------
Bank loans 187.4 350.9 538.3
Debenture loans 1.6 27.4 29.0
Zero coupon note - 11.2 11.2
Unsecured bonds (0.3) 89.1 88.8
Secured notes 4.1 70.9 75.0
--------------------- -------- ------------ ------------
192.8 549.5 742.3
--------------------- -------- ------------ ------------
Total
Current Non-current borrowings
At 31 December 2013 GBPm GBPm GBPm
--------------------- -------- ------------ ------------
Bank loans 72.6 507.5 580.1
Debenture loans 1.5 29.0 30.5
Zero coupon note - 13.4 13.4
Unsecured bonds (0.6) 92.3 91.7
Secured notes 4.0 75.1 79.1
--------------------- -------- ------------ ------------
77.5 717.3 794.8
--------------------- -------- ------------ ------------
Arrangement fees of GBP3.7 million (2013: GBP5.5 million) have
been offset in arriving at the balances in the above tables.
Bank loans
Interest on bank loans is charged at fixed rates ranging between
3.1% and 11.2%, including margin (2013: 3.1% and 11.2%) and at
floating rates of typically LIBOR, EURIBOR or STIBOR, plus a
margin. Fixed rate margins range between 0.8% and 1.8% (2013: 0.8%
and 1.8%) and floating rate margins range between 0.8% and 3.8%
(2013: 0.8% and 3.8%). All bank loans are secured by legal charges
over the respective properties, and in most cases a floating charge
over the remainder of the assets held in the company which owns the
property. In addition, the share capital of some of the
subsidiaries within the Group has been charged.
Debenture loans
The debenture loans represent amortising bonds which are
repayable in equal quarterly instalments of GBP1.2 million (2013:
GBP1.2 million) with final repayment due in January 2025. Each
instalment is apportioned between principal and interest on a
reducing balance basis. Interest is charged at an annual fixed rate
of 10.8%, including margin. The debentures are secured by a legal
charge over a property and securitisation of its rental income.
Zero coupon note
The zero coupon note accrues interest at an annual rate of
11.2%, including margin. It is unsecured and is redeemable as a
balloon repayment of principal and interest of GBP32.8 million in
aggregate in February 2025. GBP3.6 million of the zero coupon note
was bought back in the year at a cost of GBP4.9 million.
Unsecured bonds
On 11 September 2012, the Group issued GBP65.0 million unsecured
retail bonds, which attract a fixed rate coupon of 5.5% and are due
for repayment in 2019. The bonds are listed on the London Stock
Exchange's Order book for Retail Bonds.
On 15 April 2011, the Group issued SEK 300 million unsecured
bonds. The bonds attract a floating rate coupon of 3.75% over three
months' STIBOR and are due for repayment in 2016. After two years,
the Group has an option to redeem all outstanding bonds subject to
an early repayment premium. The bonds were listed on the NASDAQ OMX
Stockholm on 5 July 2011.
Secured notes
On 3 December 2013, the Group issued GBP80.0 million secured,
partially-amortising notes. The notes attract a fixed rate coupon
of 4.17% on the unamortised principal, the balance of which is
repayable in December 2022.
Loan covenants
A subsidiary of the Group has an amortising secured bank loan
with a carrying amount of GBP8.5 million which expires in July
2017. A covenant of the loan requiring a minimum level of net
rental income from the secured property was in breach at 31
December 2014. The Group is in discussions with the bank to effect
a remedy of the breach in accordance with the terms of the loan
and, therefore, the loan was not payable on demand at 31 December
2014. Save for this, there were no loan covenants in breach at 31
December 2014 (2013: none).
The maturity profile of the carrying amount of the Group's
borrowings was as follows:
Zero
Bank Debenture coupon Unsecured Secured
loans loans note bonds notes Total
At 31 December GBPm GBPm GBPm GBPm GBPm GBPm
2014
--------------------- -------- ---------- -------- ---------- -------- --------
Within one year
or on demand 188.3 1.7 - - 4.2 194.2
More than one
but not more
than two years 158.1 1.8 - 24.7 4.2 188.8
More than two
but not more
than five years 153.4 6.8 - 65.0 12.5 237.7
More than five
years 40.5 18.7 11.2 - 54.9 125.3
--------------------- -------- ---------- -------- ---------- -------- --------
540.3 29.0 11.2 89.7 75.8 746.0
Unamortised
issue costs (2.0) - - (0.9) (0.8) (3.7)
--------------------- -------- ---------- -------- ---------- -------- --------
Borrowings 538.3 29.0 11.2 88.8 75.0 742.3
Less amount
due for settlement
within 12 months (187.4) (1.6) - 0.3 (4.1) (192.8)
--------------------- -------- ---------- -------- ---------- -------- --------
Amounts due
for settlement
after 12 months 350.9 27.4 11.2 89.1 70.9 549.5
--------------------- -------- ---------- -------- ---------- -------- --------
Zero
Bank Debenture coupon Unsecured Secured
loans loans note bonds notes Total
At 31 December GBPm GBPm GBPm GBPm GBPm GBPm
2013
--------------------- ------- ---------- -------- ---------- -------- -------
Within one year
or on demand 73.7 1.5 - - 4.2 79.4
More than one
but not more
than two years 155.4 1.7 - - 4.2 161.3
More than two
but not more
than five years 321.3 6.1 - 28.2 12.5 368.1
More than five
years 32.8 21.2 13.4 65.0 59.1 191.5
--------------------- ------- ---------- -------- ---------- -------- -------
583.2 30.5 13.4 93.2 80.0 800.3
Unamortised
issue costs (3.1) - - (1.5) (0.9) (5.5)
--------------------- ------- ---------- -------- ---------- -------- -------
Borrowings 580.1 30.5 13.4 91.7 79.1 794.8
Less amount
due for settlement
within 12 months (72.6) (1.5) - 0.6 (4.0) (77.5)
--------------------- ------- ---------- -------- ---------- -------- -------
Amounts due
for settlement
after 12 months 507.5 29.0 13.4 92.3 75.1 717.3
--------------------- ------- ---------- -------- ---------- -------- -------
The interest rate risk profile of the Group's fixed rate
borrowings was as follows:
At 31 December At 31 December
2014 2013
-------------------------- -------------------------
Weighted
Weighted average
Weighted average Weighted period
average period average for
fixed for fixed which
rate which rate rate
of financial rate of financial is
liabilities is fixed liabilities fixed
% Years % Years
---------- -------------- ---------- -------------- ---------
Sterling 6.2 7.5 6.2 8.5
Euro 5.0 0.7 5.0 1.7
---------- -------------- ---------- -------------- ---------
The interest rate risk profile of the Group's floating rate
borrowings was as follows:
At 31 December At 31 December
2014 2013
-------------------------------- --------------------------------
% of % of
net Average net Average
floating capped floating capped
rate interest Average rate interest Average
loans rate tenure loans rate tenure
capped % Years capped % Years
--------------- ---------- ---------- -------- ---------- ---------- --------
Sterling 68 3.0 1.4 63 3.0 2.2
Euro 72 3.2 1.2 70 3.1 2.2
Swedish Krona - n/a n/a - n/a n/a
--------------- ---------- ---------- -------- ---------- ---------- --------
The carrying amounts of the Group's borrowings are denominated
in the following currencies:
Fixed Floating
rate rate
financial financial
liabilities liabilities Total
At 31 December 2014 GBPm GBPm GBPm
--------------------- ------------- ------------- ------
Sterling 205.4 202.2 407.6
Euro 25.3 228.0 253.3
Swedish Krona - 81.4 81.4
--------------------- ------------- ------------- ------
230.7 511.6 742.3
--------------------- ------------- ------------- ------
Fixed Floating
rate rate
financial financial
liabilities liabilities Total
At 31 December 2013 GBPm GBPm GBPm
--------------------- ------------- ------------- ------
Sterling 200.6 213.9 414.5
Euro 28.1 260.3 288.4
Swedish Krona - 81.1 81.1
Other - 10.8 10.8
--------------------- ------------- ------------- ------
228.7 566.1 794.8
--------------------- ------------- ------------- ------
The carrying amounts and fair values of the Group's borrowings
are as follows:
Carrying
amounts Fair values
-------------- --------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
------------------------ ------ ------ ------ ------
Current borrowings 192.8 77.5 192.8 77.5
Non-current borrowings 549.5 717.3 586.0 743.7
------------------------ ------ ------ ------ ------
742.3 794.8 778.8 821.2
------------------------ ------ ------ ------ ------
Arrangement fees of GBP3.7 million (2013: GBP5.5 million) have
been offset in arriving at the balances in the above table.
The fair value of non-current borrowings represents the amount
at which a financial instrument could be exchanged in an arm's
length transaction between informed and willing parties, discounted
at the prevailing market rate, and excludes accrued interest.
The Group has the following undrawn committed facilities
available at 31 December:
2014 2013
GBPm GBPm
---------------------------- ------ ------
Floating rate:
- expiring within one year 39.0 9.5
- expiring after one year - 3.1
---------------------------- ------ ------
39.0 12.6
---------------------------- ------ ------
18 Derivative financial instruments
2014 2014 2013 2013
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
-------------------------- --------- ------------- -------- -------------
Non-current
Interest rate swaps - (6.3) - (5.9)
Interest rate caps - - 0.4 -
-------------------------- --------- ------------- -------- -------------
- (6.3) 0.4 (5.9)
------------------------------------ ------------- -------- -------------
Current
Interest rate swaps - - - -
Forward foreign exchange
contracts - (1.0) 0.3 -
-------------------------- --------- ------------- -------- -------------
- (1.0) 0.3 -
------------------------------------ ------------- -------- -------------
- (7.3) 0.7 (5.9)
------------------------------------ ------------- -------- -------------
The valuation methods used to measure the fair value of all
derivative financial instruments were derived from inputs which
were either observable as prices or derived from prices (Level
2).
There were no derivative financial instruments accounted for as
hedging instruments.
Interest rate swaps
The aggregate notional principal of interest rate swap contracts
at 31 December 2014 was GBP41.8 million (2013: GBP35.2
million).
The average period to maturity of these interest rate swaps was
4.1 years (2013: 4.2 years).
Forward foreign exchange contracts
The Group uses forward foreign exchange contracts from time to
time to add certainty to, and to minimise the impact of foreign
exchange movements on, committed cash flows. At 31 December 2014
the Group had GBP2.6 million of outstanding net foreign exchange
contracts (2013: GBP1.4 million).
19 Share capital
Number
---------------------------------------
Ordinary
Ordinary shares Total
shares Total in Treasury ordinary
in Treasury ordinary circulation shares shares
circulation shares shares GBPm GBPm GBPm
---------------- ------------- ---------- ------------ ------------- --------- ----------
At 1 January
2014 43,953,790 2,903,103 46,856,893 11.0 0.7 11.7
Cancelled
following
tender offers (1,029,729) - (1,029,729) (0.2) - (0.2)
---------------- ------------- ---------- ------------ ------------- --------- ----------
At 31 December
2014 42,924,061 2,903,103 45,827,164 10.8 0.7 11.5
---------------- ------------- ---------- ------------ ------------- --------- ----------
Number
-----------------------------------------
Ordinary
Ordinary shares Total
shares Total in Treasury ordinary
in Treasury ordinary circulation shares shares
circulation shares shares GBPm GBPm GBPm
---------------- ------------- ------------ ------------ ------------- --------- ----------
At 1 January
2013 43,305,876 4,803,103 48,108,979 10.8 1.2 12.0
Cancelled
following
tender offers (1,252,086) - (1,252,086) (0.3) - (0.3)
Exercise
of share
options 300,000 (300,000) - 0.1 (0.1) -
Ordinary
shares issued
from treasury
shares 1,600,000 (1,600,000) - 0.4 (0.4) -
---------------- ------------- ------------ ------------ ------------- --------- ----------
At 31 December
2013 43,953,790 2,903,103 46,856,893 11.0 0.7 11.7
---------------- ------------- ------------ ------------ ------------- --------- ----------
Ordinary shares have a nominal value of 25 pence each.
20 Tender offer buy-backs
A tender offer by way of a Circular dated 14 March 2014 for the
purchase of 1 in 66 shares at 1,495 pence per share was completed
in May. It returned GBP10.0 million to shareholders, equivalent to
22.65 pence per share.
A tender offer by way of a Circular dated 22 August 2014 for the
purchase of 1 in 119 shares at 1,500 pence per share was completed
in September. It returned GBP5.5 million to shareholders,
equivalent to 12.61 pence per share.
A further tender offer will be put to shareholders in April 2015
for the purchase of 1 in 80 shares at a price of 1,950 pence per
share which, if approved, will return GBP10.4 million to
shareholders, equivalent to 24.38 pence per share.
21 share premium
2014 2013
GBPm GBPm
-------------------------------------- ------ ------
At 1 January 82.9 71.5
Ordinary shares issued from treasury
shares - 11.4
-------------------------------------- ------ ------
At 31 December 2014 82.9 82.9
-------------------------------------- ------ ------
22 Other reserves
Capital Cumulative Fair
redemption translation value Other
reserve reserve reserve reserves Total
GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ------------- --------- ---------- -------
At 1 January 2014 22.0 47.2 (1.3) 28.1 96.0
Purchase of own
shares:
- cancellation
pursuant to tender
offer 0.2 - - - 0.2
Exchange rate variances - (14.0) (0.3) - (14.3)
Available-for-sale
financial assets:
- net fair value
gains in the year - - 7.8 - 7.8
- deferred tax
thereon - - (0.9) - (0.9)
------------------------- ------------ ------------- --------- ---------- -------
At 31 December
2014 22.2 33.2 5.3 28.1 88.8
------------------------- ------------ ------------- --------- ---------- -------
Capital Cumulative Fair
redemption translation value Other
reserve reserve reserve reserves Total
GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ------------- --------- ---------- -------
At 1 January 2013 21.7 43.8 8.2 28.1 101.8
Purchase of own
shares:
- cancellation
pursuant to tender
offer 0.3 - - - 0.3
Exchange rate variances - 3.4 - - 3.4
Available-for-sale
financial assets:
- net fair value
losses in the year - - (12.6) - (12.6)
- deferred tax
thereon - - 3.1 - 3.1
------------------------- ------------ ------------- --------- ---------- -------
At 31 December 2013 22.0 47.2 (1.3) 28.1 96.0
------------------------- ------------ ------------- --------- ---------- -------
The cumulative translation reserve comprises the aggregate
effect of translating net assets of overseas subsidiaries into
sterling since acquisition.
The fair value reserve comprises the aggregate movement in the
value of corporate bonds, other available-for-sale assets and
owner-occupied property since acquisition, net of deferred tax.
The amount classified as other reserves was created prior to
listing in 1994 on a Group reconstruction and is considered to be
non-distributable.
23 Cash generated from operations
2014 2013
GBPm GBPm
--------------------------------------- -------- -------
Operating profit 259.8 92.3
Adjustments for:
Net movements on revaluation of
investment properties (186.0) 0.2
Depreciation and amortisation 0.3 0.3
Profit on sale of investment property (8.7) (4.5)
Profit on sale of joint venture - (1.8)
Gain arising on acquisition (1.2) -
Non-cash rental income (0.5) (0.5)
Fair value gain on reclassification (0.2) -
of an associate as a subsidiary
Net gain on sale of corporate bonds
and other financial investments - (14.1)
Fair value gain on reclassification
of an associate as an investment - (14.9)
Changes in working capital:
(Increase)/decrease in debtors (2.0) 1.2
(Decrease)/increase in creditors (8.2) 5.2
--------------------------------------- -------- -------
Cash generated from operations 53.3 63.4
--------------------------------------- -------- -------
24 BUSINESS ACQUISITIONS
Cood Investment AB and First Camp Sverige Holding AB
On 11 February 2014, the Group acquired a 58.0% interest in a
newly incorporated company, First Camp Sverige Holding AB ("FCSH").
On 15 August 2014, FCSH acquired a 23.8% interest in Cood
Investment AB ("Cood") for the consideration of SEK 3. As a result,
the Group's interest in Cood increased from 44.2% to 58.0% and Cood
was reclassified from an associate to a subsidiary. A fair value
gain on reclassification to a subsidiary of GBP0.2 million has been
recognised in the group income statement.
The Group has consolidated the gross results and balance sheet
of Cood and accounted for its non-controlling interests in
accordance with IFRS 3, Business Combinations. A gain of GBP1.2
million arose on acquisition which was credited to the group income
statement. The book values and the provisional fair values of the
assets and liabilities at the date of the acquisition, translated
at the prevailing exchange rate, were as follows:
Fair Fair
value value
of of
Fair Fair pre-existing additional
Book value value 44.2% 13.8%
values adjustment Total share acquired
At 15 August 2014 GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- -------- ------------ ------- -------------- ------------
Non-current assets
- property, plant and
equipment 15.6 3.6 19.2 8.5 2.6
Non-current assets
- other 8.4 (5.4) 3.0 1.3 0.4
Trade and other receivables 9.3 (4.9) 4.4 2.0 0.6
Cash and cash equivalents 2.9 - 2.9 1.3 0.4
Current liabilities (16.7) - (16.7) (7.4) (2.2)
Non-current liabilities
- debt (3.3) - (3.3) (1.5) (0.4)
Non-current liabilities
- deferred tax (0.3) (1.0) (1.3) (0.6) (0.2)
---------------------------------------------- -------- ------------ ------- -------------- ------------
Net assets at date
of acquisition 15.9 (7.7) 8.2 3.6 1.2
---------------------------------------------- -------- ------------ -------
Book value as an associate (3.4) -
Total consideration - -
for net assets acquired
---------------------------------------------- -------- ------------ ------- -------------- ------------
Gain arising on reclassification/acquisition 0.2 1.2
---------------------------------------------- -------- ------------ ------- -------------- ------------
Fair value adjustments arose on operating property assets and
receivables: the operating property assets were fair valued to
market value, net of the associated deferred tax; provisions
against receivables which became due from Group subsidiaries were
reversed.
The fair value assessment was made on a provisional basis.
Cash flows on acquisition were:
Fair
value Fair
of value
pre-existing of additional
44.2% 13.8%
share acquired
GBPm GBPm GBPm
---------------------------------------- ------ -------------- ---------------
Cash - - -
Total consideration for assets - - -
acquired
Less non-cash consideration - - -
Less cash acquired (2.9) (1.3) (0.4)
---------------------------------------- ------ -------------- ---------------
Net cash inflow arising on acquisition (2.9) (1.3) (0.4)
---------------------------------------- ------ -------------- ---------------
On 14 November 2014, FCSH acquired assets and shares in
companies from Cood and the Group simultaneously disposed of its
interest in Cood for nominal value. No gain or loss arose on this
disposal.
25 BUSINESS DISPOSALS
Fielden House Limited
On 11 April 2013, the Group disposed of its one-third interest
in the issued share capital of a joint venture, Fielden House
Investment Limited. The joint venture was previously reported
within the UK geographical segment.
2013
GBPm
------
Net assets disposed of:
Non-current assets 2.7
Current assets 0.1
Current liabilities (0.1)
Non-current liabilities (2.0)
------
0.7
Gain on disposal of joint venture 1.8
------
Total consideration 2.5
------
Satisfied by:
Cash 2.5
Deferred consideration -
------
2.5
------
Net cash inflow arising on disposal:
Cash consideration 2.5
Cash and cash equivalents disposed of (0.1)
Borrowings disposed of 2.0
------
4.4
------
26 RELATED PARTY TRANSACTIONS
Associates and Joint Ventures
A Group company provided accounting services to Bulgarian Land
Development plc, an associate of the Group, for which a charge of
GBP25,000 was made (2013: GBP40,433), of which GBP6,250 (2013:
GBP6,250) remained outstanding at the balance sheet date.
At 31 December 2014, the Group had a convertible loan of
GBP411,002 (2013: GBP469,210), due from Nyheter24 Media Network AB,
an associate company. Until 1 May 2015, this loan is interest free,
and thereafter attracts Swedish base rate plus 2%. At any date
between 1 May 2016 and 30 June 2016, the Group is permitted to
convert the loan into shares in Nyheter24 Media Network AB at SEK
40.5 each.
In 2013, the Group sold its one-third interest in Fielden House
Investment Limited (see note 34).
On 11 March 2013, the Group acquired an additional 27.6%
interest in Cood Investments AB ("Cood"), for GBP0.3 million,
increasing its interest to 44.2%. This was a related party
transaction as: first, the trust in which Sten Mortstedt, Executive
Chairman of CLS Holdings plc, is interested (the "Trust")
simultaneously acquired at the same price per share an additional
13.8% interest in Cood, increasing its interest to 22.2%; and,
second, a company in which Christer Sandberg has an interest
("Christer Sandberg's company") owned 9.8% of Cood. Christer
Sandberg is a director of certain Group companies.
On 25 July 2013, Cood issued a two year convertible loan bearing
an annual interest rate of 12% and convertible into preference
shares (the "Convertible Loan"). The conversion price was SEK
10,000 per Cood preference share, and each preference share would
carry ten times the voting rights and capital rights of an ordinary
share. The loanholder could elect to be paid the loan coupon in
cash or payment-in-kind (being preference shares in Cood). The
Convertible Loan was convertible at the option of the loanholder
only, and at any time between 1 January 2014 and 31 May 2015. The
Group's participation in the Convertible Loan amounted to SEK
23,220,000; the Trust simultaneously participated in the
Convertible Loan for an amount of SEK 11,650,000 and Christer
Sandberg's company for an amount of SEK 5,170,000.
At 1 January 2014, the Group had provided to Cood up to GBP8.0
million of lending facilities at market rates, of which
GBP3,324,362 was outstanding. On 16 February 2014, the Group lent a
further GBP1,027,048 under the existing loan facility.
On 11 February 2014, the Group acquired for GBP2,393 a 58.0%
interest in FCSH (note 33), in which company the Trust has a 29.1%
interest and Christer Sandberg's company. As required under IFRS 3
"Business Combinations", the Group has consolidated the results and
balance sheet of FCSH and, therefore, any loans and accrued
interest have been eliminated.
On 15 August 2014, the Group acquired a controlling interest in
Cood.
On 18 September 2014, the outstanding loan and accrued interest
on both the Convertible Loan and loan facility were novated from
Cood to First Camp Sverige Holding AB ("FCSH").
Up to 18 September 2014, interest of GBP211,563 (2013:
GBP81,000) was charged on the Convertible Loans, of which GBPnil
(2013: GBP77,476) was outstanding at the balance sheet date; and
interest of GBP227,305 (2013: GBP270,229) was charged on the loan
facility, of which GBPnil (2013: GBP25,109) was outstanding at the
balance sheet date.
On 14 November 2014, the Group, together with the Trust and
Christer Sandberg's company, sold their entire holdings in Cood for
nominal value.
Transactions with Directors
Distributions totalling GBP8,813,580 (2013: GBP8,096,147) were
made through tender offer buy-backs in the year in respect of
ordinary shares held by the Company's Directors.
During the year, a company owned by Sten Mortstedt rented office
space to a Group company, Vänerparken Investment AB
("Vänerparken"), at a cost of GBP35,403 (2013: GBP39,240). At the
balance sheet date a Group company, Museion Förvaltning AB, had
signed an agreement to lease the office space until 30 September
2018 at a cost of GBP35,403 per annum. Also, a company owned by
Sten Mortstedt purchased accountancy services from Vänerparken
during the year amounting to GBPnil (2013: GBP4,710). In relation
to all of these transactions, no balances were outstanding at the
balance sheet date (2013: GBPnil).
During the year a son of Joe Crawley rented premises from the
Group at an arm's length rent for three months.
Directors' Remuneration
The remuneration of the Directors, who are the key management
personnel of the Group, is set out below in aggregate for each of
the categories specified in IAS 24 Related Party Disclosures.
Information about the remuneration of individual directors is
provided in the audited part of the Remuneration Committee Report
in the 2014 Annual Report and Accounts.
2014 2013
GBPm GBPm
------------------------------ ------ ------
Short-term employee benefits 2,054 1,653
Post-employment benefits 35 21
Other long-term benefits 250 538
------------------------------ ------ ------
2,339 2,212
------------------------------ ------ ------
glossary of terms
ADJUSTED NET ASSETS or adjusted shareholders' funds
Net assets excluding the fair value of financial derivatives,
deferred tax on revaluations, and goodwill arising as a result of
deferred tax
ADJUSTED NET GEARING
Net debt expressed as a percentage of adjusted net assets
ADJUSTED SOLIDITY
Adjusted net assets expressed as a percentage of adjusted total
assets
ADJUSTED TOTAL ASSETS
Total assets excluding deferred tax assets
Administration Cost Ratio
Recurring administration expenses of the Investment Property
operating segment expressed as a percentage of net rental
income
Balance sheet loan to value
Net debt expressed as a percentage of total assets less cash and
short-term deposits
CONTRACTED RENT
Annual contracted rental income after any rent-free periods have
expired
CORE PROFIT
Profit before tax and before net movements on revaluation of
investment properties, profit on sale of investment properties,
subsidiaries and corporate bonds, impairment of intangible assets
and goodwill, non-recurring costs, change in fair value of
derivatives and foreign exchange variances
DILUTED EARNINGS PER SHARE
Profit after tax divided by the diluted weighted average number
of ordinary shares
DILUTED NET ASSETS
Equity shareholders' funds increased by the potential proceeds
from issuing those shares issuable under employee share schemes
DILUTED NET ASSETS PER SHARE OR DILUTED NET ASSET VALUE
Diluted net assets divided by the diluted number of ordinary
shares
DILUTED NUMBER OF ORDINARY SHARES
Number of ordinary shares in circulation at the balance sheet
date adjusted to include the effect of potential dilutive shares
issuable under employee share schemes
DILUTED WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
Weighted average number of ordinary shares in issue during the
period adjusted to include the effect of potential weighted average
dilutive shares issuable under employee share schemes
EARNINGS PER SHARE
Profit after tax divided by the weighted average number of
ordinary shares in issue in the period
EPRA
European Public Real Estate Association
EPRA EARNINGS PER SHARE
Profit after tax, but excluding net gains or losses from fair
value adjustments on investment properties, profits or losses on
disposal of investment properties and other non-current investment
interests, impairment of goodwill and intangible assets, movements
in fair value of derivative financial instruments and their related
current and deferred tax
EPRA NET ASSETS
Diluted net assets excluding the fair value of financial
derivatives, deferred tax on revaluations, and goodwill arising as
a result of deferred tax
EPRA NET ASSETS PER SHARE
EPRA net assets divided by the diluted number of ordinary
shares
EPRA net initial yield
Annual passing rent less net service charge costs on investment
properties expressed as a percentage of the investment property
valuation after adding purchasers' costs
EPRA topped up net initial yield
Annual net rents on investment properties expressed as a
percentage of the investment property valuation after adding
purchasers' costs
EPRA TRIPLE NET ASSETS
EPRA net assets adjusted to reflect the fair value of debt and
derivatives and to include the fair value of deferred tax on
property revaluations
EPRA TRIPLE NET ASSETS PER SHARE
EPRA triple net assets divided by the diluted number of ordinary
shares
ESTIMATED RENTAL VALUE (ERV)
The market rental value of lettable space as estimated by the
Group's valuers
INTEREST COVER
The aggregate of group revenue less costs, divided by the
aggregate of interest expense and amortisation of loan issue costs,
less interest income
liquid resources
Cash and short-term deposits and listed corporate bonds
NET ASSETS PER SHARE OR NET ASSET VALUE (NAV)
Equity shareholders' funds divided by the number of ordinary
shares in circulation at the balance sheet date
NET DEBT
Total borrowings less liquid resources
NET GEARING
Net debt expressed as a percentage of net assets
NET INITIAL YIELD
Annual net rents on investment properties expressed as a
percentage of the investment property valuation
NET RENT
Contracted rent less net service charge costs
OCCUPANCY RATE
Contracted rent expressed as a percentage of the aggregate of
contracted rent and the ERV of vacant space
OVER-RENTED
The amount by which ERV falls short of the aggregate of passing
rent
PASSING RENT
Contracted rent before any rent-free periods have expired
Property LOAN TO VALUE
Property borrowings expressed as a percentage of the market
value of the property portfolio
RENT ROLL
Contracted rent
SOLIDITY
Equity shareholders' funds expressed as a percentage of total
assets
TOTAL SHAREHOLDER RETURN
For a given number of shares, the aggregate of the proceeds from
tender offer buy-backs and change in the market value of the shares
during the year adjusted for cancellations occasioned by such
buy-backs, as a percentage of the market value of the shares at the
beginning of the year
True equivalent yield
The capitalisation rate applied to future cash flows to
calculate the gross property value, as determined by the Group's
external valuers
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EADDLEESSEEF
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