Final Results for the year ended 31 March 2014

RNS Number : 8772H
Quintain Estates & Development PLC
23 May 2014
 



 

23 May 2014

 

Quintain Estates & Development PLC

("Quintain"/"Company"/"Group")

 

Results for the year ended 31 March 2014

 

Quintain, the London investment and development specialist, announces its results for the year ended 31 March 2014.

Maxwell James, Chief Executive of Quintain said:

"We are delighted to announce a strong set of results that reflect the transformation of Quintain, with continued operational momentum after the year end.  The business has returned to profitability and net asset growth, and we have seeded new sustainable income streams, based in London.

"Supported by the opening of the London Designer Outlet, the sale of new homes at Wembley Park began in March and the first release of 73 apartments has been sold at an average price of £570 per square foot. This creates an excellent baseline for the wider development, where we hold consents to deliver 5,000 new London homes. Supported by our greatly strengthened financial position, we are now focused on accelerating their delivery.

"We have a stated ambition to build up a broader London Portfolio over time and have made selective acquisitions where we see the opportunity to add incremental value through the application of our skills.

"We now have a strong financial position and a clear focus on London. The early price indications at Wembley give us confidence to accelerate development and we are now well placed to maximise value for shareholders."

Strong financial performance and balance sheet

2014

2013

Movement

Profit (loss) after tax


£52.9m

£(40.9)m

£93.8m

Adjusted profit (before capital movements) before tax

£4.2m

£8.2m

£(4.0)m

EPRA diluted earnings per share


1.1p

1.8p

(0.7)p






Basic NAV per share


115p

104p

11p






Group net debt

£137.0m¹

£208.9m

£443.6m

£(306.6)m¹

Balance sheet gearing

23%¹

35%

76%

(53)%¹

Look through LTV

23%¹

38%

53%

(30)%¹

¹Pro-forma balance sheet reflecting iQ disposal, NW01 joint venture and capital expenditure post year end

 

 

Operational Highlights:

Wembley Park

During the year under review

Since the period end

·     Secured planning consent for 475-home development: "Emerald Gardens"

·     Created joint venture with Keystone and construction now underway

·     Exchanged contracts on first residential sales in March 2014

·     73 homes sold to date at an average £570 per square foot

·     Opened London Designer Outlet in October

·     Now 90% let and visited by 2.5 million people

 

London Portfolio

During the year under review

Since the period end

·     Acquired Kingsbourne House during the year for £13.7m, with income of £1.4m

·     Purchased Aldermary House for £40.0m, with income of £2.5m.

 

Capital Recycling

During the year under review

Since the period end

·     £230.0m sale of interest in Greenwich Peninsula, crystallising value and £30.7m profit

·     Sale of 50% interest in iQ student accommodation business to Wellcome Trust for £106.4m, reflecting a 6.1% property yield

·     £39.1m disposal of Sequel assets to focus on London

 

Meeting, webcast and conference call:

A meeting for analysts and institutional investors will take place today at 9am at The Lincoln Centre, 18 Lincoln's Inn Fields, WC2A 3DE.

The meeting can also be watched live through the Company website: www.quintain.co.ukor accessed via a conference call dial in facility, using the following details:

·     Dial-in number: +44 (0)20 3059 8125

·     Password:  Quintain

 

For further information, please contact:

Quintain:  Cressida Curtis/Harriet Pask:  comms@quintain.co.uk

Tel: +44 (0) 20 7495 8968

RLM Finsbury:  Jenny Davey / Charlotte Whitley:  quintain@rlmfinsbury.com 

Tel: +44 (0) 207 251 3801

 

 


 

The Platform for Growth

CHIEF EXECUTIVE'S STATEMENT

In 2012, we set out our strategy to transform Quintain into a London-focused investment and development specialist with a robust financial platform.

The twelve months under review marked the turning point for the Company: our actions during the period re-capitalised the balance sheet, streamlined the portfolio and seeded new sustainable income streams, based in London.

Quintain now provides shareholders with focused exposure to opportunities within London's supply-constrained residential and commercial real estate markets. With a materially strengthened balance sheet we can now drive growth and value for shareholders.

Results

The progress made in the year is reflected in a strong performance which saw a return to profitability and net asset value per share grow by 11% from 104 pence to 115 pence. This growth came from both Greenwich Peninsula, where we crystallised the value created over the previous 18 months at a profit of £30.7 million, and Wembley Park, where we are now bringing new homes to market, following the completion of the commercial district earlier in the period. As a consequence, profit for the year was £52.9 million, compared to a loss of £40.2 million in the prior year. As anticipated, on an adjusted basis profit before tax, which excludes capital movements, was lower than last year at £4.2 million (2013: £8.2 million), following the re-positioning of the portfolio undertaken over the last two years.

Finance

In addition to increasing the net asset value of the business and re-shaping the portfolio, during the period we reduced net debt significantly below our strategic medium-term debt target of £400 million. Net debt at 31 March 2014 was £208.9 million (2013: £443.6 million) and this reduced further to £137.0 million on a pro forma basis following transactions completed after the year end. This represents balance sheet gearing of 23% and we therefore have capacity for investment across all areas of the business, with a target of maintaining gearing below 50%: a level appropriate to our wider portfolio.

The launch of our maiden bond issue in July diversified and increased our sources of funding, increasing liquidity and providing stable long term financing.

Operational Delivery

We began the year with the operational objectives of creating value and increasing the pace of delivery at both Wembley Park and Greenwich Peninsula.

Wembley Park

The operational highlight of the year was the opening in October of London's first outlet centre, which also marked the completion of the first of the four phases of development at Wembley Park. We are pleased to report that London Designer Outlet is 90% let and has already welcomed 2.5 million visitors. The launch of the centre broadens Wembley's leisure offering beyond the major events for which it is renowned and adds an important new income stream to the Group, with strong potential for growth.

As anticipated, the creation of this distinctive offering at Wembley Park and our substantial investment to improve the wider public realm have underpinned strong results from our initial residential marketing, which began in March, exceeding both our sales and volume targets. 73 apartments have been sold and the average unit price is £340,000, endorsing our belief in Wembley Park as an attractive residential district. This indicates average pricing of £570 per square foot, depending on size, location and aspect, with some apartments on the higher floors achieving considerably more.

Greenwich Peninsula

Our work at Greenwich Peninsula during the first half of the year resulted in a series of successful planning approvals and the re-start of construction. This created material value that we then realised through the disposal of our minority interest to Knight Dragon for £230 million, crystallising a profit of £30.7 million against carrying value and a 172% profit on cost. Through this transaction we also halved the Group's net debt, equipping Quintain with a level of gearing suitable to our assets and activities and supportive of a new phase of growth.

London Portfolio

In November, we announced our intention to balance our interest in Wembley Park with a more diverse portfolio of London assets. The objective is to build a new business that leverages our investment and development skills to deliver income, capital growth and outperformance.

We have now begun to selectively invest part of the funds unlocked through the capital recycling of the last 24 months in this business. Two properties have been bought to date, one after the year end, for a total of £53.7 million with an associated income of £3.9 million. We have also invested £5.0 million in the outperforming West End of London Property Unit Trust, to which our team acts as strategic property advisers. The London Portfolio also includes our landholding at West Silvertown, E16, next to the Royal Docks, which offers the opportunity for mixed-use development at an appropriate point in the future.

In building this new business we remain mindful of the point in the real estate cycle and the prospects of the London economy. However, we remain confident in London's long-term strategic positioning and, in particular, its on-going ability to attract substantial domestic and overseas capital as a global financial and cultural centre. The evolution of the occupier profile within the London market presents opportunities suited to the skills of our team and our target risk profile. Quintain's strengthened financial platform enables us to work to our own timetable and the emphasis is on sourcing the right opportunities that meet our criteria.

Asset Management

The transformation of our financial platform through the Greenwich disposal re-positioned Quintain, enabling us to accelerate our strategy of focusing the portfolio on London from a position of strength.

Consequently, after the year end we announced the disposal of our 50% interest in the UK-wide iQ student accommodation business to our joint venture partner, Wellcome Trust, for £106.4 million realising the full net asset value of the business. This unlocked further substantial capital for re-investment into Wembley Park and new London assets where we see the opportunity for greater returns and as a consequence reduces the amount of Group assets based outside London to 12%.

Quercus, the healthcare fund to which we act as asset manager, contributed £3.3 million to underlying profitability in the year, but it also contributed a loss of £6.6 million arising from valuation movements and disposals, reflecting the on-going challenges this market faces. In respect of other activities, during the year we reduced the amount of capital invested in non-core activities from £137.0 million to £59.3 million through a series of disposals, including the sale of the Sequel regional investment property portfolio.

Strategy and Outlook

Quintain is a transformed and materially strengthened business. During the year, we have focused the portfolio on London; created a financial platform that is fit for purpose; and unlocked substantial capital for investment in opportunities that offer the potential for income, capital growth and development profits.

We have a clear strategy for the next phase of Quintain's evolution: to blend investment and development activities through the cycles, delivering significant shareholder value and outperformance through our relative scale, portfolio and team.

The immediate opportunity is to drive performance through the delivery of high quality residential development at Wembley Park into a supply-constrained market and the application of the Group's investment and development skills to a growing portfolio of London assets. The platform is in place: our focus now is on growth.

 

 

Maxwell James

Chief Executive

22 May 2014



 

Finance Review

 

Quintain's financial priorities over the course of the year were to strengthen the financial position of the business through a reduction in net debt and to increase underlying earnings over the long term, through the creation of robust new income streams.

 

During the year the balance sheet was re-capitalised as a result of disposals and a bond issue. The disposal of the Company's 40% interest in Greenwich Peninsula Regeneration Limited ("GPRL") at a substantial profit has significantly accelerated Quintain's de-leveraging strategy, reducing net debt to below our long term target of £300 million. The liquidity and financing position of the Group was also strengthened through the issue of a £115.0 million 6.5% Sterling bond in July 2013. The bond issue diversified the sources of funding available to the Company, increasing liquidity, and will provide stable, long term financing for Quintain, more closely aligned with the Company's asset profile and activities. Following the year end, the disposal of Quintain's interest in iQ has reduced debt further to facilitate investment in income generating assets at Wembley Park and the Company's growing London Portfolio.

 

In what has been a period of significant transition for the Company and its asset base, the year saw the anticipated reduction in adjusted pre-tax profit, which fell from £8.2 million to £4.2 million, due to disposals and the re-shaping of our portfolio, now more focused on London. New income streams will progressively flow through from rent at the London Designer Outlet, the new management arrangements at Wembley Arena following AEG's appointment as manager and from our London Portfolio, following the recent acquisitions of Kingsbourne House and, after the year end, Aldermary House.  During this period of re-positioning, reduced administration costs and net finance expenses have partially offset the impact of disposals.

 

The table below summarises the financial headlines for the year.

 

Current Pro-forma(2)

31 March 2014

31 March 2013


£m

£m

£m

Earnings




Profit/(loss) after tax


52.9

(40.9)

Adjusted profit before tax(1)


4.2

8.2

EPRA diluted EPS


1.1p

1.8p

Balance Sheet




Net debt

137.0

208.9

443.6

Bank gearing

23%

35%

76%

Look-through LTV

23%

38%

53%

Net Asset Value per share




Basic


115p

104p

Diluted


114p

104p

EPRA diluted


114p

105p

(1) Adjusted profit excludes disposals, valuation and mark to market adjustments but includes discontinued operations

(2) Pro-forma net debt reflecting iQ disposal, NW01 joint venture and capital expenditure in April 2014

 

1. Results for the year

The Group reported a statutory post-tax profit for the year of £52.9 million (2013: £40.9 million loss). Operating profit for the year was £12.5 million, an increase of £49.5 million, due principally to a valuation surplus of £22.4 million this year, compared to a deficit of £23.0 million last year. Our share of loss from joint ventures and associates decreased by £5.5 million to £2.5 million; the reduction due primarily to revaluation movements and disposals in Quercus.



 

 

Summary income statement

31 March 2014

31 March 2013


£m

£m

Gross profit

8.3

13.0

Surplus/(deficit) on revaluation

22.4

(23.0)

Profit/(loss) on disposals

1.7

(0.4)

Share of loss from joint ventures and associates

(2.5)

(8.0)

Net segmental profit/(loss)

29.9

(18.4)

Administrative expenses

(17.4)

(18.6)

Operating profit/(loss)

12.5

(37.0)

Net finance costs

(7.8)

(12.3)

Tax credit for the year

6.3

13.0

Profit/(loss) on discontinued operations

41.9

(4.6)

Profit/(loss) after tax

52.9

(40.9)

 

2. Adjusted profit for the year

 

Adjusted profit before tax (our measure of underlying earnings, which excludes disposals, valuation and mark to market adjustments but includes discontinued operations) for the year decreased by £4.0 million from £8.2 million to £4.2 million as set out below. The reduction was the anticipated consequence of the re-positioning of the business during the year.

 

Adjusted profit for the year (including discontinued operations)

31 March 2014

31 March 2013


£m

£m

Net rental income

7.2

12.3

Fees from asset and development management

5.5

5.7

Other income

2.2

5.8

Gross profit

14.9

23.8

Administrative expenses

(17.4)

(18.6)

Operating (loss)/profit

(2.5)

5.2

Share of profit from joint ventures

9.4

8.2

Net finance expenses

(2.7)

(5.2)

Adjusted profit before tax

4.2

8.2

 

Net rental income has fallen from £12.3 million to £7.2 million due principally to disposals (mainly the Sequel regional investment property portfolio) and costs associated with the London Designer Outlet pre-opening and the impact of transitioning the management of Wembley Arena to AEG. Fees from asset and development management of £5.5 million have remained broadly flat with a small reduction of £0.2 million with growth in income from our London asset management team off-setting the reduction in management fees from Quercus.

 

Other income has reduced from £5.8 million last year to £2.2 million principally due to the one-off income received in the summer of 2012 from LOCOG over the Olympics period. The £1.2 million reduction in administrative expenses is due to lower staff costs.

 

During the year £2.8 million of direct staff costs of our specialist asset and estate management teams have been reclassified from administrative expenses to cost of sales in the year as the Board is of the opinion that this provides a better appreciation of the underlying profitability of these activities. As a result the prior year comparative has been restated and £2.5 million has been reclassified from administrative expenses to cost of sales.

 

The table below provides a reconciliation between adjusted and statutory profit.

 

Reconciliation of adjusted profit to statutory profit

31 March 2014

31 March 2013


£m

£m

Pre-tax adjusted profit

4.2

8.2

Amortisation of intangible asset

(0.8)

(0.8)

Trading property impairment - joint ventures

-

(0.5)

Revaluation surplus/(deficit)



Continuing operations

22.4

(23.0)

Discontinued operations

4.7

(0.8)

Joint ventures and associates

(4.9)

(14.6)

Profit/(loss) on disposal



Continuing operations

1.7

(0.4)

Discontinued operations

32.5

(10.7)

Joint ventures

(1.5)

(0.7)

Mark to market adjustments



Continuing operations

(3.9)

(5.4)

Discontinued operations

0.5

(1.4)

Tax credit/(charge)



  Continuing operations

6.3

13.0

  Discontinued operations

(8.3)

(6.8)

  Joint ventures

-

3.0

Profit/(loss) after tax

52.9

(40.9)

 

3. Analysis of rental income

 

Quintain conducts a significant proportion of its business through joint ventures. The table below sets out the combined net and gross rental income on a statutory basis (ie. excluding discontinued operations).

 

Rental income

31 March 2014

31 March 2013


£m

£m

Group net rental income

3.8

5.6

Share of JV net rental income

6.4

5.7

Combined net rental income

10.2

11.3

Gross rental income



  Direct owned

10.3

10.9

  JV properties

13.0

7.2

 

The gross contractual annual rent and gross Estimated Rental Value presented below are look forward measures that take account of post-balance sheet events. As a result iQ rental income has been excluded and Aldermary House included.

 

Gross contracted and ERV rent

£m

Gross contracted annual rent


  Direct owned

15.1

  JV properties

5.6

Gross ERV(1)


  Direct owned

23.4

  JV properties

5.8

(1) Estimated Rental Value

 

4. Sales of non-current assets

 

During the year £322.2 million of capital was recycled through disposals for debt reduction and future investment in Wembley Park and the Company's London Portfolio. These disposals resulted in a pre-tax profit of £34.2 million.

 

Net cash from sales of non-current assets:

£m

GPRL

227.9

Sequel

52.4

Greenwich Peninsula N0204 Block B Unit Trust

15.8

Greenwich Retail

6.9

Andium House, Jersey

3.3

Synergy Building

3.0

Other disposals

12.9


322.2

 

On 21 October 2013, Quintain completed the disposal of its Sequel regional investment property business and an additional property, Gelderd Point in Leeds, for gross consideration of £39.1 million, in line with the Company's strategy to exit non-core activities outside London. On 22 November 2013, Quintain also completed the disposal of Stadium Retail Park, the remaining asset in the Sequel portfolio, for £14.2 million.  The Sequel operating segment has been presented as a discontinued operation.

 

On 22 November 2013, Quintain received £230.0 million on completion of the disposal of its remaining 40% interest in GPRL to its joint venture partner, Knight Dragon.  Of the gross consideration, £185.8 million was in respect of the GPRL shares and GPRL loan stock and a further £44.2 million in settlement, at fair value, of the £50 million outstanding deferred receivable arrangement entered into on completion of Knight Dragon's initial acquisition of its share in the GPRL joint venture in July 2012.  The transaction realised a profit on disposal of £28.6 million after costs.  This represented a profit on historic cost of £116.1 million (a premium of 172%). 

 

On 12 February 2014, Quintain disposed of its 50% interest in Greenwich Peninsula N0204B Block B Unit Trust (a joint venture with Lend Lease) and the 100% interest in the retail unit in the same building to Tristan Capital Partners for a combined consideration of £17.1 million cash. The entire Greenwich operating segment is presented in discontinued operations.

 

On 14 April 2014, post year end, Quintain entered into a 50:50 joint venture with Keystone Developers S.A. for the development of the next residential plot at Wembley Park. The consideration under the agreement is £22.7 million for the land with a further £9.5 million for future associated infrastructure, a total of £32.2 million.

 

Following the year end, on 16 May 2014, Quintain completed the disposal of its 50% interest in iQ to its joint venture partner Wellcome Trust for consideration of £106.4 million. The joint venture interests are classified as held for sale as at 31 March 2014 and the iQ operating segment is presented in discontinued operations.

 

5. Results of joint ventures

 

The Group's share of loss from joint ventures, on a statutory basis, decreased to £2.7 million (2013: £8.1 million) which excludes iQ as this is presented as discontinued operations.  The net revaluation deficit was £5.1 million (2013: £14.7 million).

 

The adjusted profit from joint ventures (which excludes disposals, valuation and mark to market adjustments but includes discontinued operations) increased by £1.2 million to £9.4 million. This included £6.9 million from iQ (2013: £5.2 million) and £2.5 million from Quercus (2013: £3.0 million).

 

Of the £5.1 million net revaluation deficit, £5.2 million related to Quercus.  This 8.1% reduction reflects the ongoing challenging environment for operators in the healthcare sector.  In addition to the valuation deficit, our share of Quercus' loss on properties disposed of in year was £1.5 million, as the Fund disposed of a number of its weaker properties.  Quintain's share of Quercus's adjusted profit was reduced to £3.3 million, compared to £4.4 million in the prior year.  This is made up of Quintain's share of Quercus' net profit for the year (£2.5 million) and net fee income earned from Quintain's role as asset manager. The reduction principally reflects the reduced size of the portfolio, following disposal of £64 million of properties in the year (of which Quintain's share is £7.2 million), the proceeds from which were used to repay debt.

 

6. Net finance expenses

 

Net finance expenses decreased from £12.3 million to £7.8 million. Bank and other interest payable was £17.5 million, an increase of £1.0 million on the comparable period last year, with the average cost of debt increasing to 4.2% (2013: 3.2%) due to the 6.5% coupon on the bond issued in July 2013. The net charge attributable to hedging adjustments on financial instruments decreased from £10.3 million to £4.2 million. Interest receivable increased from £1.4 million to £2.7 million reflecting the interest earned on a loan to the Hilton joint venture. Interest expense includes £2.5 million in respect of a provision made against the £10.7 million loans to Albemarle Retail Partnership ("ARP"). The provision reflects the current assessment of the realisable value of the underlying assets in ARP.

 

Net finance expenses

31 March 2014

£m

31 March 2013

£m

Bank and other interest payable

17.5

16.5

Recycling of fair value of financial instruments(1)

4.2

9.4

Impairment of financial instrument

2.5

-

Change in fair value of financial instruments

-

0.9

Gross interest cost

24.2

26.8

Interest capitalised

(13.7)

(13.1)

Interest receivable

(2.7)

(1.4)


7.8

12.3

(1) During the year the amortisation of the fair value of the re-pricing of certain interest rates  swaps  in prior years was completed.  This item will not therefore recur in 2014/15.

 

 

7. Valuation

 

The valuation of the Group's properties, excluding tenant incentives, as at 31 March 2014, including our share of gross assets in joint ventures and associates, was £704.1 million, an increase of £17.5 million, net of capital expenditure, since 31 March 2013. The increase has arisen principally on two assets, first, the development land at Wembley Park which has benefited from the activity undertaken over the year and the strength of the London residential market and, secondly, Wembley Arena which has been enhanced by the new management arrangements put in place during the year.  The valuation surplus has been offset in part by the Group's share of a deficit arising in Quercus for whom margins remain under pressure. 

 


31 March 2014

£m

31 March 2013

£m

%

Movement(1)

Wembley

Investment assets

254.2

199.6

4.4%

Development land and trading properties

 

334.9

 

294.5

 

8.2%

Quercus

Long-term healthcare

57.8

71.7

(8.1)%

London Portfolio

Investment assets, development land

23.9

8.5

0.8%

Non-core

Land, residential

27.5

43.4

(0.4)%

Quantum

Science parks

5.8

5.5

1.8%

Continuing


704.1

623.2

4.7%

Greenwich/Sequel

Disposals in the year

-

228.3

n/a

iQ

Student accommodation

216.0

208.7

3.1%

Total


920.1

1,060.2

4.1%

(1) Like for like growth, excluding capitalised interest (movement is 2.5% including interest)

 

8. Taxation

 

The Income Statement shows a tax credit of £6.3 million (2013: £13.0 million) due to utilising previously unrecognised capital losses.  This figure, which relates to continuing operations has been offset by a £4.8 million tax charge created by the profits shown in discontinued operations.

 

9. Investment assets

 

31 March 2013

 

Additions

 

Disposals/ transfers

 

Reclassified as held for sale

Valuation

 

Other

 

31 March 2014

 


£m

£m

£m

£m

£m

£m

£m

Investment properties

562.5

69.6

(96.8)

-

21.0

13.7

570.0

Joint ventures

356.8

-

(168.7)

(106.2)

(5.1)

3.5

80.3

Other non-current assets

64.4

-

(43.2)

-

(0.1)

0.5

21.6


983.7

69.6

(308.7)

(106.2)

15.8

17.7

671.9

 

The decrease in investment properties is primarily due to the disposals, especially Sequel, offset by valuation uplifts and ongoing capital expenditure at Wembley, particularly on the London Designer Outlet.

 

Joint venture investments decreased as a result of the disposals of GPRL and Greenwich Peninsula N0204 Block B Unit Trust and the reclassification of iQ to assets held for sale.

 

The decrease in other non-current assets reflects the settlement on disposal of GPRL of the discounted value of the £50 million deferred consideration arising from the 2012 part disposal of GPRL.

 

10. Net assets per share

 

31 March 2014

31 March 2013

IFRS net assets (excluding non-controlling interest)

£595.4m

£538.1m

IFRS NAV per share

115p

104p

EPRA net assets

£598.2m

£542.5m

EPRA NAV per share(1)

114p

105p

(1) The EPRA NAV per share excludes the fair value adjustments for debt and related derivatives and deferred taxation on revaluations and is calculated on a fully diluted basis

 

11. Contractual capital commitments

 

As at 31 March 2014, the Group's contractual capital commitments of £19.0 million (31 March 2013: £57.7 million) relate primarily to ongoing construction and infrastructure work at Wembley.

 

12. Cash flow

 

The net cash outflow from operating activities was £21.2 million (2013: £1.3 million).

 

Proceeds from sale of investment properties, joint ventures and other non-current investments, notably GPRL and Sequel, realised £322.2 million (2013: £130.0 million). Investment continued on the development pipeline, most notably the completion of the London Designer Outlet at Wembley. Investment in the development pipeline totaled £69.0 million (2013: £63.9 million) during the year. Net operating income distributed by joint ventures contributed £8.2 million (2013: £4.4 million).

 

The net cash generated from disposals allowed £384.0 million (2013: £54.3 million) of borrowings to be repaid during the year, this was offset by the issue of the bond for £115.0 million (2013: £nil), with net debt reducing from £443.6 million to £208.9 million at the year end. The pro-forma net debt, reflecting iQ disposal, NW01 joint venture and capital expenditure in April 2014 is £137.0 million.

 

13. Financing strategy and capital structure

 

Over the course of the year, the Company has reduced net debt from £443.6 million to £208.9 million and, following transactions since the year end, to £137.0 million on a proforma basis, which results in a gearing of 23%.  This presents the opportunity to invest in both Wembley Park and our London Portfolio, the intention being to manage the gearing between 23% and 50%; a level appropriate to the nature and risk profile of the Group's assets.  Our financing structure needs to be flexible and cost-effective, taking account of the availability of debt and other sources of finance. This has been achieved through securing funding at the corporate level, giving us the scope to fund efficiently across all areas of the portfolio, as well as providing us with liquidity and operational flexibility.

 

On 29 July 2013 Quintain successfully completed the issue of a £115 million 6.5% seven year Sterling bond, the net proceeds of which have been applied to refinance part of the Company's existing bank borrowing, with on-going maturities now balanced between two and seven years, increasing the weighted average maturity to 2018.

 

Since we announced our results last May, we have repaid £269.1 million of loans.

 

The Group financial statements have been prepared on a going concern basis, which assumes that the Group will continue to meet its liabilities as they fall due. At 31 March 2014 the Group has prepared detailed cashflow forecasts which show that it has committed undrawn facilities to finance its committed capital expenditure and other outflows, which will enable it to continue in operational existence for the foreseeable future.

 

The Group's key financial covenants are an interest cover covenant, which requires the Group's adjusted operating profit plus realised revaluation surpluses on disposal divided by adjusted net finance expenses excluding finance lease interest to be greater than 1.25 times, and a gearing covenant, which requires the net borrowings of the Company and its wholly-owned subsidiaries to be less than 110% of its equity, as defined in the banking covenants. The Group has a gearing ratio of 35% at March 2014 and an interest cover ratio of 20.5 times at 31 March 2014, on the basis of the covenant definitions due to the inclusion of realised historical cost profit on the disposal of GPRL. The Group's forecasts show that the Group is expected to continue to meet both financial covenants for the foreseeable future.  Based on this analysis the directors consider it is appropriate to prepare the financial statements on a going concern basis.

 

At 31 March 2014, Quintain's interest rate was 75.3% hedged (2013: 65.1%) with swaps and the remainder covered by caps. The fair value adjustment on these interest rate hedging instruments was a credit of £2.6 million (2013: £0.1 million debit).

 

Debt summary

 

Covenant

31 March 2014

31 March 2013

Cash


£(10.3)m

£(44.6)m

Bank loans < 1 year


-

£71.0m

Bank loans > 1 year


£219.2m

£417.2m

Net debt


£208.9m

£443.6m

Weighted average debt maturity


4.3 years

2.6 years

Weighted average interest rate


4.2%

3.2%

% of debt fixed


75.3%

65.1%

% of debt capped


24.7%

34.9%

Interest cover(1)

1.25x

20.5x

8.5x

Gearing(2)

110%

35%

76%

Undrawn committed facilities


£245.5m

£69.5m

 (1)Interest cover, per our banking covenants, is defined as adjusted operating profit, including discontinued operations, before net finance expenses plus realised surpluses on disposals divided by adjusted net finance costs excluding finance lease interest. This year, the calculation includes the material profit realised on the disposal of the Group's interests in GPRL, the Greenwich joint venture.

(2)Gearing, per our banking covenants, is defined as the ratio of net borrowings of the Company and its wholly owned subsidiaries to equity shareholders' funds adjusted for intangible assets, deferred tax and cumulative mark to market movements.

 

 

Covenant

Quercus

Joint ventures:



Net debt (QED share)


£27.4m

Weighted average debt maturity


2.8 years

Weighted average interest rate


4.8%

% of debt fixed/capped interest rate


67%

Interest cover

1.5x

2.9x

Loan to value

60%

54%

 

14. EPRA Information

 

The basic net asset value per share at 31 March 2014 was 115p, up from 104p in 2013. The EPRA net asset value per share at 31 March 2014 was 114p, up from 105p in 2013.

 

 

Reconciliation to EPRA NAV per share

31 March 2014

31 March 2013

IFRS net assets

595.4

538.1

EPRA adjustments



Dilutive effect of options

2.8

-

Deferred tax arising on revaluation movements, capital allowances and derivatives



   Group

1.2

5.1

   Joint ventures

(0.9)

(4.6)

   Associates

0.3

0.5

Fair value adjustments on derivatives



   Group

0.4

3.0

   Joint ventures

(1.0)

0.4

EPRA net assets

598.2

542.5

EPRA NAV per share

114p

105p

 

The table below reconciles EPRA earnings per share to the reported IFRS fully diluted earnings per share.

 

EPRA earnings per share

31 March 2014

31 March 2013


Shares

m

£m

Pence

Shares

m

£m

Pence

IFRS fully diluted earnings/(loss) per share - continuing operations


11.0

2.1p


(36.3)

(7.0)p

IFRS fully diluted earnings/(loss) per share - discontinued operations


41.9

8.1p


(4.6)

(0.9)p

IFRS fully diluted earnings/(loss) per share

520.0

52.9

10.2p

518.4

(40.9)

(7.9)p

Revaluation movements







   Group - continuing operations


(22.4)

(4.3)p


23.0

4.5p

   Joint ventures and associates - continuing operations


4.9

0.9p


14.7

2.8p

   Group - discontinued operations


1.4

0.3p


11.0

2.1p

   Joint ventures - discontinued operations


(6.0)

(1.2)p


(10.2)

(1.9)p

(Profit)/loss on disposals







  Group - continuing operations


(1.7)

(0.3)p


0.4

0.1p

  Joint ventures - continuing operations


1.5

0.3p


-

-

  Group - discontinued operations


(32.5)

(6.3)p


10.7

2.0p

Deferred tax arising on revaluation movements, capital allowances and derivatives







   Group


(1.9)

(0.4)p


(11.4)

(2.2)p

   Joint ventures


3.5

0.7p


0.3

0.1p

Fair value adjustments on derivatives







   Group - continuing operations


6.7

1.3p


10.3

1.9p

   Joint ventures - discontinuing operations


(0.5)

(0.1)p


1.5

0.3p

EPRA earnings per share fully diluted

520.0

5.9

1.1p

518.4

9.4

1.8p

 

 

15. Financial Outlook

 

Following the strengthening of our business in the year Quintain now has a re-capitalised balance sheet and a more sustainable balance between investment and development assets. Looking forward this will provide a platform for improved profitability, reduced finance costs and growth.

 

We shall begin to see the benefits of new income streams from rent at the London Designer Outlet, our 50% interest in the Hilton London Wembley Hotel, increased revenue from Wembley Arena and growing rent from our London portfolio. In the year under review, the contribution from these has been significantly limited due either to the timing of their inception or the level of investment made in their start-up or transitional phase. We can also look forward to delivering on the immediate opportunity to deliver high quality residential development at Wembley Park following the creation of the joint venture with Keystone, which will impact the performance in future periods, beginning in 2016/17.

 

 

Richard Stearn

Finance Director

22 May 2014



 

BUSINESS REVIEW

1. Wembley Park

The Group's largest asset is Wembley Park, a major new district comprising £589.1 million of investment properties and development land in North West London. The masterplan is designed to accommodate up to 12,000 residents across 87 acres, making this one of the most significant new neighbourhoods in the Capital.

With the completion of the retail and leisure offering centred around London Designer Outlet, the core opportunity is the residential development for which Quintain holds planning consent for 5,000 new London homes.

The London Housing Market

The London housing market continues to perform strongly. Average prices grew 12.4% during the financial year, supported by resurgent demand and enduring constraints on supply.

In the long-term, demand is underpinned by significant population growth, which is forecast by the Greater London Authority to increase by 19% to 10 million people over the next 17 years. Mortgage availability is improving: borrowing this winter reached its highest level since August 2008 and the Bank of England reports that lenders expect to increase the supply of mortgage credit over the current quarter. Better access to mortgage funding is supporting domestic demand, which has risen over the year as consumer confidence in the UK's recovery grows. This complements the continued international appetite for investing in London, deepening and diversifying sources of demand and increasing its sustainability.

Demand for housing in London has outpaced supply for some time. Analysis from Savills estimates a current shortfall of around 21,500 homes each year, despite the emergence of further large-scale regeneration schemes recently increasing the pipeline.

The most poorly-supplied sub-sectors of the London housing market are the mid- and lower-mainstream brackets. Together these account for 6,500 - or 30% - of the annual shortfall of London homes. Prices commanded in these sub-sectors range from £450 - £1,000 per square foot and are typically located in transport zones 3 to 5 of London. Wembley Park sits firmly in this classification.

However, whilst unrequited demand provides a platform for house price inflation, the recovery in the wider economy has inevitably led to rising construction costs, accentuated by increasing costs of labour, energy and transportation, moderating overall profitability.

Phase 1: Creating Realm, Reputation and Revenue

To ensure the attraction and longevity of this significant residential location, over the last decade we have invested in developing West End class leisure and retail assets, and appointed best in class operators to maximise their performance. These have transformed the tone of the location, created exceptional local amenities for our future residents and established new high quality income streams for Quintain that will increase as the development matures.

London Designer Outlet

In October 2013, we opened London's first outlet centre at Wembley Park, operated by sector expert, Realm. In the seven months since opening, 2.5 million people have visited the Outlet, which is now 90% let.  Quintain has retained ownership of London Designer Outlet, the retail tenants of which pay a base rent with a turnover-component, with an upwards-only annual review mechanism.

 

Hilton London Wembley Hotel

The 4 star Hilton hotel opened in July 2012. As the asset and the environment in which it operates mature, the performance of the hotel is building strength. Average occupancy in Q1 2014 was 22% higher than in Q1 2013 and the strength of the additional conference and events offering is manifested through an increasing number of bookings from major corporates such as Barclays, KPMG, McDonalds and Disney. Quintain owns the hotel in a 50:50 joint venture. Interest is earned on partner loans and Quintain will receive its share of income from the joint venture once its partner has earned a preferred return.

Wembley Arena

In September, we introduced AEG Facilities as operator of Wembley Arena on a 15 year operating agreement. AEG is the leading global venues operator with whom we previously worked at Greenwich Peninsula. AEG's introduction to the Millennium Dome resulted in its transformation into The O2, which was subsequently named the most successful venue in the world in its first year of operation.

AEG has the expertise, global reach and portfolio to improve significantly the quality and quantity of acts at Wembley Arena and, as owner, Quintain will benefit directly from this through a profit share mechanism, in addition to a guaranteed base rent.

A Virtuous Circle

For 90 years, visitors to Wembley have been able to see global music and sporting stars perform. Following a decade of investment and development by Quintain, they can now also shop at London's only outlet centre, visit a nine-screen cinema, enjoy a meal, stay at a 4 star hotel or play five-a-side next to the world's most iconic football stadium. The assets operate as a virtuous circle, with each component benefiting from a symbiotic relationship: as each improves the others benefit. For instance, an increase in the quality of acts at the Arena will attract more people to the site. These visitors may need somewhere to park, somewhere to eat and somewhere to stay the night. Quintain derives income from fulfilling all these requirements, as well as supporting similar needs of conference delegates to the Stadium, Brent Civic Centre and Hilton Hotel. Wembley Park has begun to provide a meaningful income stream for the Group, and this is anticipated to grow as the development matures and further attractions are added. In total, Wembley Park contributed £4.8m, or 37% of the Group's continuing income, during the financial year and we expect this to grow substantially as the assets mature.

2. Phase 2: Residential Development at North West Village

Of Quintain's outline planning consent to develop a further 5,000 homes at Wembley Park, a quarter will be located in the "North West Village" quadrant of the site.

In December, we secured detailed consent for the next 475-home development, named Emerald Gardens, which is the first to be developed in the North West Village. This phase is designed predominantly to provide a range of one and two-bedroom apartments and residents will benefit from a dedicated gym, an acre of private gardens and a 24 hour concierge.

Marketing of these homes began on 13 March 2014 and sales over the last two months have exceeded our expectations in both volume and price: 73 homes have been sold at an average price of £340,000, or £570 per square foot. The response to the initial sales launch has demonstrated that the overall improvements delivered across the site, including the opening of London Designer Outlet, have materially enhanced the market position and established Wembley Park as a desirable residential location. Whilst the strong performance is reflected in an increase in the Wembley Park valuation, this also reflects increasing costs as the economy recovers.

Emerald Gardens will be developed in a joint venture with Keystone to enable us to deliver more homes more quickly at Wembley Park and allocate capital to the creation of a Quintain-owned private rental sector ("PRS") business.

Construction of Emerald Gardens has begun and the first residents will move in during the first quarter of 2016 and the development will be complete around the end of that year.

NW06

Following the creation of the joint venture with Keystone, work has now begun on the next residential plot, NW06. Flanagan Lawrence Architects are working up proposals for the development, which will be situated next to Emerald Gardens and Brent Civic Centre.

Initial designs anticipate the creation of approximately 300 homes on this site, which will contain amenity and work spaces on the ground floor facing a new public London square. We expect to submit an application for detailed planning consent in September with a view to starting construction in 2015.

A New Private Rental Sector ("PRS") Business

The Joint Venture with Keystone is building for Quintain two buildings containing 143 homes. We will retain and operate these buildings as the initial portfolio of a new PRS business.

PRS is becoming a significant new sector within the modern London residential mix: over a quarter of Londoners now rent in the private sector and the continued attraction of the Capital for highly skilled young people supports demand for professionally-managed rental accommodation. Strong parallels can be found to our experience in the student accommodation sector.

We anticipate the expansion of our dedicated PRS portfolio at Wembley Park to approximately 500 homes over the next five years, with a yield on cost of 7%. In addition to providing a robust new income stream, the retention of these homes will enable Quintain to benefit from capital growth due to both house price inflation and our continued improvement of the neighbourhood.  

Our long-term interest in Wembley Park, our control over the neighbourhood and the excellent performance of our existing lettings operation, which averages 97% occupancy, give us confidence in our ability to seed a highly successful new PRS business here that can deliver a meaningful and robust income stream for the Group.

2. London Portfolio

Within the business, we have an experienced London team that has the skills to successfully acquire, plan, re-develop and manage assets.

At our Interim Results in November 2013, we announced our intention to build a portfolio of properties that offer the potential for income, capital growth and outperformance. This will balance our long-term development interest at Wembley Park and leverages existing skills across the team. Our first acquisition was made in February, with a second asset acquired after the year end.

London Commercial Market

Strengthening occupier demand and a shortage of high quality office space in established districts support London's continued attractiveness as a location for real estate investment. As a result, competition for some assets in traditional locations is undoubtedly intense.

London saw a 38% increase in foreign investment during 2013, closing the gap on global leader, New York. However, capital values remain 19% below their 2007 peak. This aligns London to major commercial centres such as New York, Milan and Paris, but considerably behind others that have surpassed 2007 levels by as much as 45%.

With UK economic confidence rising, businesses are increasingly ready to commit to space, but commercial supply and quality remain key challenges for occupiers. 40% of new commercial space coming to the London market in 2014 is already pre-let and supply is forecast to fall sharply again over the next two years. This is supporting rental values and encouraging occupiers to consider re-developed property in alternative locations.

Selective Investment

Our team has the ability to drive value from opportunities across a wide spectrum. The twin criteria for asset selection are the ability to increase the level and quality of the Group's income stream and, where possible, acquire assets that offer the opportunity for capital value improvement through imaginative re-positioning, asset management or more substantive re-development.

This is an exceptional moment in London's evolution. Significant investment in infrastructure coupled with constrained supply, rising business confidence and the changing profile and requirements of potential occupiers is creating specific opportunities to which the unique blend of Quintain's skills and our target risk profile are particularly suited.

Kingsbourne House, purchased in February for £13.7 million, is typical of the assets that we find attractive. Located in Holborn above one of the busiest Underground stations in London, the property currently delivers £1.4 million of rental income that plays to our objective of increasing streams of robust revenue. The area will benefit from the arrival in 2018 of Crossrail, and the site also offers the potential for re-development in the longer-term. Our team, which exchanged the off-market transaction in just two weeks, has the capability to increase the value of the property and the income we receive through imaginative re-development when the time is right, while the active management required until that point is core to our skill set. This property sits right in the middle of our opportunity potential spectrum.

Aldermary House, acquired after the period end for £40.0 million, is further towards the investment end of the spectrum. A 10-storey building located opposite the construction site of Bloomberg's new London headquarters in the City, Aldermary's contracted annual rental income is £2.5 million. In addition to this established income stream, we see the potential for rental uplift from a combination of active management and the improvements that the area will experience over the next two years with the completion of Bloomberg Place.

During the reporting period, we also invested £5.0 million in the West End of London Property Unit Trust ("WELPUT"). This is a high-performing Fund, managed by Schroder's, and gives Quintain exposure to commercial assets of exceptional quality in central London. The property portfolio and Trust returns outperformed the IPD West End and Mid-Town benchmark over three months, twelve months, three years, five years and ten years to the end of February 2014. Quintain's team has acted as strategic property adviser to WELPUT for ten years, generating fee income for the Group. This year, as a result of the capital recycling undertaken over the last 24 months, for the first time we have had the capital to acquire units in this Fund and this represents the purest investment activity within the London Portfolio.

At the development end of the spectrum, we own, in partnership with the Greater London Authority, a 12.5 acre landholding at West Silvertown between the Royal Docks and Greenwich Peninsula. This location will be transformed over the next decade with the arrival of Crossrail and the Mayor of London's stated aim to make Royal Docks the Capital's "next business district". The intention is to progress a development at an appropriate point in the future and it presently generates income from use as a storage facility.

Looking broadly across the area bordered by London's north and south circular roads, we are focused on the selective acquisition of assets where our existing property skills can deliver income, capital growth and outperformance. In some cases this will mean the complete re-positioning of a property to attract a new quality of tenant through re-configuration and re-development. In others, active management, light refurbishment and careful marketing can deliver a meaningful return. In all cases, we are seeking to establish and grow sustainable income streams that complement the exceptional exposure to London residential development that is offered by Quintain.



 

Risk Management

 

In addition to general economic, security and regulatory risks that are part of the general commercial environment and faced by a wide range of companies, we consider there to be a number of risks specific to our Company. In managing the business, the identification and monitoring of risk is crucial to enable the Group to deliver its strategic objectives.

 

How we manage risk

During the year the Board has reviewed its approach to risk management and has introduced a new structure, which is captured in the Quintain risk management policy and guidelines. The objective is to align our risk management approach under a new framework, designed to be fully integrated with, and help shape, Quintain's strategy. The Board has established a Group Risk Committee ('GRC') which comprises the Chairman and the Executive Directors and meets bi-annually. The revised approach has applied a consistent and robust methodology across the business to identify, assess, manage and report risk. Smaller, dedicated risk committees called Functional Risk Forums ('FRF') meet at least bi-annually to consider the keys risks aligned to their strategy and objectives.

 

A risk register is maintained for each FRF: Wembley, London Portfolio, Regional Portfolio, iQ, Quercus, WELPUT and Central London Asset Management, Finance and Taxation, Operations and Transactions. The most significant risks will be reported to the Group Risk Committee. In addition to the 'bottom up' operational and financial risks assessed by the Functional Risk Forums, the Executive Directors assess the 'top down' Group-wide strategic risks facing the Group on a regular basis.

 

All risks are assessed for impact (using financial and non-financial measures) and likelihood of occurrence on a gross, net and target basis. Set out below is management's view of the current specific principal business risks and actions taken in mitigation.

 

 

Description and implication of risk

Mitigation

Strategic risk

Inability to capitalise on market opportunities through difficulty in sourcing investment opportunities at attractive prices or poor investment decisions.

Heightened exposure to events that threaten or disrupt London's status as a premier destination, in particular Wembley.


The Group has an experienced team seeking the right balance of investment and development opportunities. All investment decisions are based on the quality of related sustainable income streams.

The Group has various security measures in place at Wembley and works closely with local authorities to maximise the safety of visitors.

 

Operational risk

Inability to deliver robust income growth where income streams are concentrated in assets which are not our core specialism and are reliant on external management and market factors.

 

 

Experienced and skilled asset managers have been engaged to run the operating assets. Detailed financial information is prepared and profit forecasts are updated and reviewed at least quarterly.

 

 

Property valuations

Property valuations are inherently subjective and uncertain and may result in excessive volatility in the income statement.


We use external independent valuers that are well regarded in the industry and we keep in close contact to understand the factors affecting the movements in valuations.  The Company's external valuers meet with the Audit Committee bi-annually, in advance of the full and half year results, to present their valuation reports.

With respect to the development assets, valuers support their stand back valuation with other metrics including value per acre, value per net developable square foot and discounted cashflow.

Personnel

The need to retain and develop our staff and ensure that we recruit high calibre people is essential to the delivery of the business strategy.

Succession and resource planning is regularly reviewed by the Executive Management and Board as appropriate.

Remuneration and benefits are considered competitive, strongly linked to performance and are regularly benchmarked with Quintain's peers.

A Group-wide bi-annual performance appraisal process focuses on continual personal development and training needs.

The response to the annual employee survey allows management to understand and address employees' issues. Regular formal staff meetings and informal events enable staff to talk to senior management, and weekly news updates on business developments and successes allow all employees to understand key activities around the Group.

Market

The Group's business is dependent on the macro-economic and property market conditions in London. Deterioration in residential and commercial property markets could lead to a decline in the value of the Group's property portfolio, tenant default and a reduction in income from these properties. Development land, which makes up 48% of the Group's gross assets, is subject to greater volatility in valuations compared to income producing assets.


The Group has rebalanced its portfolio and is focussed on acquiring good quality assets with strong income and/or development potential.

Each property portfolio is led by an experienced asset management team who is knowledgeable and experienced in mitigating the impact of occupier failures, lease breaks and expiries.

 

Reputation

Quintain's reputation with stakeholders is important in the continued effective operation of the business. Support from the public sector is essential in continuing to achieve detailed planning consents.

 

Relationships with joint venture partners and other professional organisations are critical to delivery of the business strategy.  The negative impact of, for example, a regulatory breech, significant loss in asset value, poorly conceived design and planning or a poor health and safety record could result in an adverse long term impact on the Company's creditability with investors and other key stakeholders.

 


On-going senior management engagement with stakeholders allows greater management of reputational risk. All transactions that could result in a material impact on Quintain's reputation are reviewed by the Board.

 

The Risk and Audit Committees regularly review key risks in each business area.  The Board receives reports from the Audit Committee and reviews all key projects focussing on the reputational and commercial risks to the Group.

Development

The Group is exposed to risks associated with development projects. For example:

·   Delays could occur for regulatory or funding reasons.

·   Obtaining planning consents.

·   Counterparty risk (contractors may become bankrupt or insolvent, or development partners may fail to meet their obligations).

·   Control of construction phasing and costs are vital to prevent overspend or delay once on site, which has a direct impact on successfully delivering project plans to meet valuation forecasts.

 

Quintain's project management team is key to managing development risk by:

§ Transferring risk to contractors where possible.

§ Engagement with local authorities to ensure development proposals are in accordance with local policies and statutes.

§ On-going monitoring of development progress against budget and schedule.

§ Monitoring the level of committed future capital expenditure on the Group's development programme relative to the level of debt.

Liquidity

 

Changes in the availability of financing and/or costs of borrowing may adversely impact Quintain's ability to ensure sufficient liquidity is available to deliver the business plan.

 

Following the issue of a £115m seven year bond in July 2013 and the subsequent refinancing of part of Quintain's corporate debt, Quintain's debt facilities now expire between 2016 and 2020.


The Company has prepared detailed cashflow forecasts which show that it has committed undrawn facilities to finance its committed capital expenditure and other outflows, which will enable it to execute its business plan.

Further capital for the continued build out of Wembley will come from asset sales, supported by a clear marketing strategy; and joint venture partnerships, which management continues actively to seek; supported by the on-going re-financing of the Group's banking facilities.

 

Management monitors this risk by using a financial modelling tool that can forecast and test different business scenarios (including prospective transactions) analysing the impact on liquidity and headroom.

 

Environmental performance

At a corporate level, our obligations to report on our greenhouse gas emissions and other non-financial KPIs, and to participate in the CRC EES require that systems are in place to collect and report on this data.

 

Poor performance and a performance profile that fails to improve over time could result in financial loss and reputational damage, whilst a failure to future proof the assets we manage may result in reduced investor and occupier interest.

 

 

We have identified an internal committee responsible for 'Our Buildings', delivering against the asset performance area of our Responsibility Policy.

We closely monitor the performance of our assets and work with our building managers and agents to understand consumption patterns in order to drive reductions both in emissions, and in costs for us and our tenants.

The feasibility of mitigation measures are considered across all development.  Measures include passive design to help counter the effects of overheating, the use of sustainable methods to improve drainage and reduce flood risk, and design for reduced energy and water use to reduce demand for resources.

 

 

 

 

Responsibility Statement

We confirm that to the best of our knowledge:

 

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

 

·  The Management Report¹ and the Principal Risks sections of this report include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

 

¹ The Management Report encompasses the Chief Executive's Statement, Finance Review and the Business Review.

 

 

 

 

 

 

 

On behalf of the Board

William Rucker                                                                                                 Richard Stearn

Director                                                                                                               Director              

22 May 2014                                                                                                       22 May 2014

 

 

 

Forward-looking statements

 

This document contains certain "forward-looking" statements reflecting, amongst other things, current views on our markets, activities and prospects.  By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may or may not occur and which may be beyond Quintain Estates and Development's ability to control or predict (such as changing political, economic or market circumstances).  Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements.  Any forward-looking statements made by or on behalf of Quintain Estates and Development speak only as of the date on which they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared.  Except to the extent required by law, Quintain Estates and Development does not undertake to update or revise forward-looking statements to reflect any changes in Quintain Estates and Development's expectations with regard thereto or any changes in information, events, conditions or circumstances on which any such statement is based.

 

 

Quintain Estates and Development plc

Consolidated Income Statement        

For the year ended 31 March 2014

Notes

2014

2013




Restated1



£m

£m

Revenue

2.3

32.6

39.5

Cost of sales

2.3

(24.3)

(26.5)

Gross profit


8.3

13.0

Administrative expenses

2.4

(17.4)

(18.6)

Operating loss before recognition of results from joint ventures,

non-current asset sales and revaluation


(9.1)

(5.6)

Share of loss from joint ventures (including revaluation)

3.4

(2.7)

(8.1)

Share of profit from associates


0.2

0.1

Operating loss before non-current asset sales and revaluation


(11.6)

(13.6)

Profit/(loss) from sale of non-current assets


1.7

(0.4)

Surplus/(deficit) on revaluation of investment properties

2.5

22.4

(23.0)

Operating profit/(loss)


12.5

(37.0)

Finance income

2.6

2.7

1.4

Finance costs

2.6

(10.5)

(13.7)

Profit/(loss) before tax


4.7

(49.3)

Tax credit for the year


6.3

13.0

Profit/(loss) from continuing operations


11.0

(36.3)





Discontinued operations




Gross profit


5.8

10.0

Share of profit from joint ventures


8.6

8.9

Profit/(loss) from sale of non-current assets


32.5

(10.7)

Deficit on revaluation of investment properties


(1.4)

(11.0)

Operating profit/(loss)


45.5

(2.8)

Finance income


2.4

4.1

Finance costs


(1.2)

(2.4)

Profit/(loss) before tax


46.7

(1.1)

Tax charge for the year


(4.8)

(3.5)

Profit/(loss) from discontinued operations

4.1

41.9

                        (4.6)





Profit/(loss) for the financial year


52.9

(40.9)





Attributable to:




Equity shareholders


52.9

(40.9)

Non-controlling interest


-

-



52.9

(40.9)





 

Earnings/(loss) per share (pence):




Basic and diluted

2.7

10.2

(7.9)





Earnings/(loss) per share - continuing operations (pence):




Basic and diluted

2.7

2.1

(7.0)

 

1See notes 1.1 and 4.1.

Consolidated Statement of Other Comprehensive Income

For the year ended 31 March 2014

Notes

2014

2013




restated



£m

£m





Profit/(loss) for the financial year


52.9

(40.9)

Deficit on revaluation of other non-current investments

5.1

(0.1)

(0.4)

Fair value adjustment on cash flow hedges


6.8

10.2

Share of other comprehensive income in joint ventures, net of tax

3.4

0.3

0.4

Tax on other comprehensive income


(4.6)

(2.4)

Other comprehensive income for the financial year - continuing operations


2.4

7.8

Share of other comprehensive income/(loss) in discontinued operations                 


0.9

(0.2)

Total comprehensive income/(loss) for the year


56.2

(33.3)





Attributable to:




Equity shareholders


56.2

(33.3)

Non-controlling interest


-

-



56.2

(33.3)

 

All other comprehensive income may be reclassified as profit and loss in the future.

 

 

 

Consolidated Balance Sheet

As at 31 March 2014

Notes

2014

2013



£m

£m

Non-current assets




Investment properties

3.1

570.0

562.5

Owner-occupied properties, plant and equipment


2.0

0.2

Intangible assets


6.0

6.7

Investment in joint ventures

3.4

80.3

356.8

Investment in associates


1.7

1.5

Non-current receivables

5.1

11.0

54.1

Deferred tax asset


0.9

1.9

Total non-current assets


671.9

983.7

Current assets




Trading properties

3.3

28.5

10.2

Trade and other receivables

5.2

42.3

33.1

Cash and cash equivalents


10.3

44.6

Assets held for sale

4.2

106.2

-

Total current assets


187.3

87.9

Total assets


859.2

1,071.6

Current liabilities




Bank loans and other borrowings

6.1

-

(71.0)

Trade and other payables

5.4

(27.9)

(28.8)

Current tax liability


(1.3)

(1.4)

Total current liabilities


(29.2)

(101.2)

Non-current liabilities




Bank loans and other borrowings

6.1

(216.7)

(415.2)

Obligations under finance leases


(10.7)

(11.1)

Other payables

5.3

(7.2)

(5.7)

Total non-current liabilities


(234.6)

(432.0)

Total liabilities


(263.8)

(533.2)

Net assets


595.4

538.4

Equity




Share capital

6.2

130.2

130.2

Share premium


137.3

137.3

Other capital reserves


107.0

107.1

Cash flow hedge reserve


(0.5)

(11.2)

Retained earnings


229.2

182.5

Own shares reserve


(7.8)

(7.8)

Equity shareholders' funds


595.4

538.1

Non-controlling interest


-

0.3

Total equity


595.4

538.4





Net asset value per share (pence):

2.7



Basic


115

104

Diluted


114

104

 

Approved by the Board of Directors on 22 May 2014 and signed on its behalf by:

 

 

 

 

WILLIAM RUCKER                                                                                                    RICHARD STEARN

Director                                                                                                                    Director


Consolidated Statement of Changes in Equity

For the year ended 31 March 2014

Share capital

Share

premium

Other capital reserves

Cash flow hedge reserve

Retained earnings

Own shares reserve

Equity shareholders' funds

Non-controlling interest

Total

equity



£m

£m

£m

£m

£m

£m

£m

£m

£m

Balance 1 April 2013

130.2

137.3

107.1

(11.2)

182.5

(7.8)

538.1

0.3

538.4

Profit for the year

-

-

-

-

52.9

-

52.9

-

52.9

Other comprehensive (loss)/income

for the year, net of tax

-

-

(0.1)

3.4

-

-

3.3

-

3.3

Total comprehensive (loss)/income

for the year

-

-

(0.1)

3.4

52.9

-

56.2

-

56.2

Costs relating to share-based

payment schemes

-

-

-

-

1.1

-

1.1

-

1.1

Disposal of a subsidiary with a non-controlling interest

-

-

-

-

-

-

-

(0.3)

(0.3)

Transfer between reserves

-

-

-

7.3

(7.3)

-

-

-

-

Balance as at 31 March 2014

130.2

137.3

107.0

(0.5)

229.2

(7.8)

595.4

-

595.4

 

Consolidated Statement of Changes in Equity

For the year ended 31 March 2013

Share capital

 

Share

premium

Other capital reserves

Cashflow hedge reserve

Retained earnings

Own shares

reserve

Equity shareholders' funds

Non-controlling interest

Total

equity



£m

£m

£m

£m

£m

£m

£m

£m

£m

Balance 1 April 2012

130.2

137.3

107.5

(19.2)

224.6

(8.7)

571.7

0.3

572.0

Loss for the year

-

-

-

-

(40.9)

-

(40.9)

-

(40.9)

Other comprehensive (loss)/income for

the year, net of tax

-

-

(0.4)

8.0

-

-

7.6

-

7.6

Total comprehensive (loss)/income for

the year

-

-

(0.4)

8.0

(40.9)

-

(33.3)

-

(33.3)

Shares awarded to employees under

share-based payment schemes

-

-

-

-

(0.9)

0.9

-

-

-

Costs relating to share-based

payment schemes

-

-

-

-

(0.3)

-

(0.3)

-

(0.3)

Balance as at 31 March  2013

130.2

137.3

107.1

(11.2)

182.5

(7.8)

538.1

0.3

538.4

 


 

Consolidated Cashflow Statement

For the year ended 31 March 2014


2014

2013



£m

£m

Operating activities




Profit/(loss) for the financial year


52.9

(40.9)

Adjustments for:




Depreciation of plant and equipment


0.1

-

Amortisation of intangible assets


0.8

0.8

Costs relating to share-based payment schemes


0.6

(0.3)

Net finance expenses


6.6

10.6

(Profit)/loss on sale of non-current assets


(34.2)

11.1

(Surplus)/deficit on revaluation of investment properties


(21.0)

34.0

Share of profit from joint ventures


(5.9)

(0.8)

Share of profit from associates


(0.2)

(0.1)

Tax credit


(1.5)

(9.5)



(1.8)

4.9

(Increase)/decrease in trade and other receivables


(15.3)

6.9

Increase/(decrease) in trade and other payables


5.9

(4.5)

Proceeds from trading properties


5.1

4.2

Cash generated from operations


(6.1)

11.5

Interest paid


(16.0)

(16.2)

Interest received


1.2

3.5

Tax paid


(0.3)

(0.1)

Net cashflow from operating activities


(21.2)

(1.3)

Investing activities




Proceeds from sale of investment properties


75.3

130.0

Purchase and development of investment properties


(69.0)

(63.9)

Purchase of owner-occupied properties, plant and equipment


(1.8)

(0.2)

Purchase of other non-current investments


(5.8)

-

Proceeds from sale of other non-current investments


3.2

-

Purchase of subsidiary net of cash acquired


-

(4.1)

Proceeds from sale of joint ventures


243.7

-

Capital and loan payments advanced to joint ventures


-

(13.1)

Capital and loan repayments received from joint ventures


5.2

41.7

Distributions received from joint ventures


8.2

4.4

Net cashflow from investing activities


259.0

94.8

Financing activities




Proceeds from new borrowings


115.0

-

Repayment of borrowings


(384.0)

(54.3)

Payment of loan issue costs


(2.3)

(1.3)

Payment of finance lease liabilities


(0.8)

(0.8)

Net cashflow from financing activities


(272.1)

(56.4)

Net (decrease)/increase in cash and cash equivalents


(34.3)

37.1

Cash and cash equivalents at start of year


44.6

7.5

Cash and cash equivalents at end of year


10.3

44.6

 

 

 

 

Notes to the accounts

For the year ended 31 March 2014

 

Section 1: Preparation of financial statements

 

1.1 Basis of preparation

The Board approved the Group financial statements on 22 May 2014.  These have been prepared in accordance with International Financial Reporting Standards and Interpretations issued by the International Financial Reporting Interpretations Committee as adopted by the European Union ('IFRS') and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements are presented in Sterling and have been prepared on a historical cost basis except that investment properties, other non-current investments and certain financial instruments have been stated at fair value.

 

The Greenwich, iQ and Sequel operating segments have been classified as discontinued operations (see note 4.1). The comparative Consolidated Income Statement has been restated to show the discontinued operations separately from continuing operations.  During the year £2.8m of staff costs have been reclassified from administrative expenses to cost of sales better to reflect the nature of work done by certain employees, as a result the prior year comparative has been restated and £2.5m of staff costs have been reclassified.

 

1.2 Going concern

The Group financial statements have been prepared on a going concern basis, which assumes that the Group will continue to meet its liabilities as they fall due. At 31 March 2014, the Group has prepared detailed cash flow forecasts which show that it has committed undrawn facilities to finance its committed capital expenditure and other outflows, which will enable it to continue in operational existence for the foreseeable future.

 

1.3 Significant judgements, estimates and assumptions

The preparation of financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities as at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements that are not readily apparent from other sources. However, the actual results may differ from these estimates. The key areas where management has made significant judgements are around estimates regarding the valuation of properties on the balance sheet and in joint ventures. Other areas of estimation and uncertainty are the classification of share-based incentive schemes as equity or cash settled and recoverability of receivables.

 

Other areas of judgement, risk and uncertainty which are relevant to an understanding of these results and the Group's financial position are referred to in the Finance Review.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised.

 

1.4 Basis of consolidation

The Group's financial statements consolidate those of the Company and its subsidiaries, together referred to as the Group, and equity account for the Group's interest in joint ventures and associates. 

 

Subsidiaries are those entities controlled by the Group. Control exists when the Group has power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date it ceases.

 

The disposal of shares in subsidiaries and interests in joint ventures where properties constitute the only or main asset are accounted for as property transactions unless the fair values attributed to other assets and liabilities within the entity differ from their carrying values

Notes to the accounts

continued

 

Section 2: Performance for the year

 

2.1 Underlying results for the year

Underlying results for the year are provided to enable readers of the accounts to differentiate between items of an underlying operating nature and those relating to capital or revaluations.

 


2014


2013

restated


Adjusted

Removal of discontinued operations

Capital1

Total

Adjusted

Removal of discontinued operations

Capital(1)

Total


£m

£m

£m

£m

£m

£m

£m

£m

Revenue

39.8

(7.2)

-

32.6

52.1

(12.6)

-

39.5

Cost of sales

(24.9)

1.4

(0.8)

(24.3)

(28.3)

2.6

(0.8)

(26.5)

Gross profit/(loss)

14.9

(5.8)

(0.8)

8.3

23.8

(10.0)

(0.8)

13.0

Administrative expenses

(17.4)

-

-

(17.4)

(18.6)

-

-

(18.6)

Operating (loss)/profit before recognition of results from

non-current asset sales and revaluation

(2.5)

(5.8)

(0.8)

(9.1)

5.2

 

 

 

(10.0)

(0.8)

(5.6)

Share of profit/(loss) from joint ventures

9.4

(8.6)

(3.5)

(2.7)

8.2

(8.9)

(7.4)

(8.1)

Share of profit from associates

-

-

0.2

0.2

-

-

0.1

0.1

(Loss)/profit from sale of non-current assets

-

(32.5)

34.2

1.7

-

 

10.7

(11.1)

(0.4)

Surplus/(deficit) on revaluation of investment properties

-

1.4

21.0

22.4

-

 

11.0

(34.0)

(23.0)

Operating profit/(loss)

6.9

(45.5)

51.1

12.5

13.4

2.8

(53.2)

(37.0)

Finance income

5.1

(2.4)

-

2.7

5.5

(4.1)

-

1.4

Finance costs

(7.8)

1.2

(3.9)

(10.5)

(10.7)

2.4

(5.4)

(13.7)

Net finance expenses

(2.7)

(1.2)

(3.9)

(7.8)

(5.2)

(1.7)

(5.4)

(12.3)

Profit/(loss) before tax

4.2

(46.7)

47.2

4.7

8.2

1.1

(58.6)

(49.3)

 

(1) For these purposes revaluation movements, trading property provisions, disposals, mark to market adjustments and amortisation of intangibles are included within capital items.

Notes to the accounts

continued

 

Section 2: Performance for the year continued

 

2.2 Segmental information

Following recent disposals and the launch of a new strategy, the Group has revised its internal financial reporting structure better to reflect the shape of the business. The Group now has four reportable segments being Wembley (comprising investment and development assets at Wembley Park), London Portfolio (comprising investment assets in London and the WELPUT asset management service), Quercus (asset management of and joint venture investment in the Quercus Healthcare Fund), and Non-Core (comprising secondary property investments and the Quantum joint venture). The factors used to determine the Group's reportable segments relate to the way in which the business is aligned and the manner in which results and assets are reported to the Board (as the Board is considered to be the chief operating decision maker) and therefore the basis that resource allocations are made.

 

The measure of segment result is considered to be adjusted operating profit before administrative expenses. The Board reviews administrative expenses, finance expenses and tax at Group level and does not allocate these costs to segments. The Group's segment asset and liability disclosures reflect the Board's primary focus on property, joint venture and investment assets at the segment level with all other assets being reviewed at the Group level. Liabilities are only reviewed at the Group level and not allocated to segments.

  

All activities are based in the United Kingdom and Channel Islands.


Notes to the accounts continued

 

 

Section 2: Performance for the year continued

 

2.2. Segmental information continued

The segmental information of the Group's results for the year ended 31 March 2014 was as follows:

 

Wembley

London Portfolio

Quercus

Non-core

Total from continuing operations

Discontinued operations

Total


iQ

Greenwich

Sequel


£m

£m

£m

£m

£m

£m

£m

£m

£m

Revenue

15.2

7.6

2.0

7.8

32.6

2.1

1.6

3.5

39.8

Cost of sales

(10.3)

(6.2)

(1.2)

(6.6)

(24.3)

(0.9)

-

(0.5)

(25.7)

Gross profit

4.9

1.4

0.8

1.2

8.3

1.2

1.6

3.0

14.1

Share of (loss)/profit from

joint ventures

(0.2)

-

(4.2)

1.7

(2.7)

13.5

(4.9)

-

5.9

Share of profit from associates

-

-

-

0.2

0.2

-

-

-

0.2

Profit/(loss) from sale of non-current

assets

2.5

-

-

(0.8)

1.7

-

32.3

0.2

34.2

Surplus/(deficit) on revaluation of

investment properties

22.5

0.2

-

(0.3)

22.4

-

-

(1.4)

21.0

Operating profit/(loss) before

administrative expenses

29.7

1.6

(3.4)

2.0

29.9

14.7

29.0

1.8

75.4











Adjusted

4.8

2.2

3.3

2.7

13.0

8.1

0.2

3.0

24.3

Capital(1)

24.9

(0.6)

(6.7)

(0.7)

16.9

6.6

28.8

(1.2)

51.1

Operating profit/(loss) before

administrative expenses

29.7

1.6

(3.4)

2.0

29.9

14.7

29.0

1.8

75.4

 

(1) For these purposes revaluation movements, trading property provisions,disposals, mark to market adjustments and amortisation of intangibles are included within capital items.

 

 

 

Notes to the accounts continued

 

Section 2: Performance for the year continued

 

 

2.2 Segmental information continued

The segmental information of the Group's results for the year ended 31 March 2013 (restated) was as follows:

 

Wembley

London Portfolio

Quercus

Non-core

Total from continuing operations

Discontinued operations

Total


iQ

Greenwich

Sequel


£m

£m

£m

£m

£m

£m

£m

£m

£m

Revenue

26.9

2.8

2.5

7.3

39.5

2.3

2.1

8.2

52.1

Cost of sales

(17.0)

(2.3)

(1.2)

(6.0)

(26.5)

(0.6)

(0.1)

(1.9)

(29.1)

Gross profit

9.9

0.5

1.3

1.3

13.0

1.7

2.0

6.3

23.0

Share of (loss)/profit from joint ventures

(0.2)

-

(8.8)

0.9

(8.1)

14.3

(5.4)

0.8

Share of profit from associates

-

-

-

0.1

0.1

-

-

0.1

(Loss)/profit from sale of non-current

assets

(2.8)

-

-

2.4

(0.4)

-

(10.4)

(11.0)

 Deficit on revaluation of

investment properties

(16.0)

(0.9)

-

(6.1)

(23.0)

-

(0.1)

(11.0)

(34.1)

Operating (loss)/profit before

administrative expenses

(9.1)

(0.4)

(7.5)

(1.4)

(18.4)

16.0

(13.9)

(4.9)

(21.2)











Adjusted

10.6

1.3

4.4

1.8

18.1

6.9

0.7

6.3

32.0

Capital(1)

(19.7)

(1.7)

(11.9)

(3.2)

(36.5)

9.1

(14.6)

(11.2)

(53.2)

Operating (loss)/profit before

administrative expenses

(9.1)

(0.4)

(7.5)

(1.4)

(18.4)

16.0

(13.9)

(4.9)

(21.2)

 

(1) For these purposes revaluation movements, trading property provisions, disposals, mark to market adjustmentsand amortisation of intangibles are included within capital items.

 

 

 

 

Notes to the accounts continued 

 

Section 2: Performance for the year continued

 

2.2 Segmental information continued

The segmental information of the Group's Balance Sheet as at 31 March 2014 was as follows:

 

Wembley

London Portfolio

Quercus

Non-core

Unallocated

Total


£m

£m

£m

£m

£m

£m

Non-current assets







Investment properties

526.4

23.9

-

19.7

-

570.0

Owner-occupied

properties, plant and

equipment

1.7

-

-

-

0.3

2.0

Intangible assets

-

6.0

-

-

-

6.0

Investment in joint     

ventures

27.7

-

34.3

18.3

-

80.3

Investment in associates

-

-

-

1.7

-

1.7

Non-current receivables

3.0

5.3

-

2.7

-

11.0

Deferred tax asset

-

-

-

-

0.9

0.9

Total non-current assets

558.8

35.2

34.3

42.4

1.2

671.9

Current assets







Trading properties

23.0

-

-

5.5

-

28.5

Other current assets

27.7

3.4

0.5

11.4

9.6

52.6

Assets held for sale

-

-

-

-

106.2

106.2

Total current assets

50.7

3.4

0.5

16.9

115.8

187.3

Total assets

609.5

38.6

34.8

59.3

117.0

859.2

Total current liabilities

-

-

-

-

(29.2)

(29.2)

Total non-current

liabilities

-

-

-

-

(234.6)

(234.6)

Total liabilities

-

-

-

-

(263.8)

(263.8)

Net assets/(liabilities)

609.5

38.6

34.8

59.3

(146.8)

595.4

Capital expenditure

53.7

14.5

-

0.2

0.4

68.8


Notes to the accounts continued

 

Section 2: Performance for the year continued

 

 

2.2 Segmental information continued

The segmental information of the Group's Balance Sheet as at 31 March 2013 (restated) was as follows:

 

Wembley

London Portfolio

Quercus

Non-core

iQ

Greenwich

Sequel

Unallocated

Total


£m

£m

£m

£m

£m

£m

£m

£m

£m

Non-current assets










Investment properties

461.2

8.5

-

31.8

-

5.7

55.3

-

562.5

Owner-occupied

properties, plant and

equipment

-

-

-

-

-

-

-

0.2

0.2

Intangible assets

-

6.7

-

-

-

-

-

-

6.7

Investment in joint     

ventures

29.2

-

38.8

16.7

100.2

171.9

-

-

356.8

Investment in associates

-

-

-

1.5

-

-

-

-

1.5

Non-current receivables

7.2

-

-

3.6

-

43.3

-

-

54.1

Deferred tax asset

-

-

-

-

-

-

-

1.9

1.9

Total non-current assets

497.6

15.2

38.8

53.6

100.2

220.9

55.3

2.1

983.7

Current assets










Trading properties

0.5

-

-

9.7

-

-

-

-

10.2

Other current assets

9.3

1.4

0.9

12.5

0.1

2.0

5.9

45.6

77.7

Total current assets

9.8

1.4

0.9

22.2

0.1

2.0

5.9

45.6

87.9

Total assets

507.4

16.6

39.7

75.8

100.3

222.9

61.2

47.7

1,071.6

Total current liabilities

-

-

-

-

-

-

-

(101.2)

(101.2)

Total non-current

liabilities

-

-

-

-

-

-

-

(432.0)

(432.0)

Total liabilities

-

-

-

-

-

-

-

(533.2)

(533.2)

Net assets/(liabilities)

507.4

16.6

39.7

75.8

100.3

222.9

61.2

(485.5)

538.4

Capital expenditure

53.1

-

-

1.9

-

10.3

-

-

65.3


Notes to the accounts

continued

 

Section 2: Performance for the year continued

 

2.3 Revenue, cost of sales and gross profit                                      


2014

2013

restated


Revenue

 

£m

Cost of

sales

£m

Gross

profit

£m

Revenue

 

£m

Cost of

sales

£m

Gross

profit

£m

Rental income

10.3

(6.5)

3.8

11.0

(5.4)

5.6

Income from sale of

trading properties

5.1

(5.4)

(0.3)

11.0

(11.3)

(0.3)

Fees from asset

and development management

9.6

(6.5)

3.1

5.1

(2.7)

2.4

Income from hotel operations

-

-

-

2.4

(1.5)

0.9

Intangible asset amortisation

-

(0.8)

(0.8)

-

(0.8)

(0.8)

Other income

7.6

(5.1)

2.5

10.0

(4.8)

5.2


32.6

(24.3)

8.3

39.5

(26.5)

13.0

 

 

Net rental income

2014

2013



restated


Total

Total


£m

£m

Group net rental income

3.8

5.6

Share of JV net rental income

6.4

5.7

Combined net rental income

10.2

11.3

 

 

2.4 Administrative expenses

The analysis of the Group's administrative expenses was as follows:

 


2014

2013




restated



£m

£m

Directors' remuneration


3.0

2.8

Staff costs


7.3

8.8

Total staff costs


10.3

11.6

Legal and other professional fees


2.3

2.2

Office costs


2.1

3.2

Depreciation of property, plant and equipment


0.1

-

Operating lease payments


0.8

0.8

General expenses


0.7

0.8

Onerous lease provision


1.1

-



17.4

18.6

 

Future minimum lease payments payable by the Group under non-cancellable operating leases, excluding the onerous lease, are £8.7m (2013: £3.0m) payable evenly over the next ten years. The onerous lease provision relates to the rent payable on the Group's existing head office, which is being vacated during the summer of 2014.

 

 

 

 

 

 

 

Notes to the accounts

continued

 

Section 2: Performance for the year continued

 

2.5 Property revaluation movements

The revaluation movements on the Group's investment properties whether held directly or through joint ventures and the associates were as follows:

 

2014

2013

restated


£m

£m

Surplus/(deficit) on revaluation of directly held investment properties

22.4

(23.0)

Deficit on revaluation of investment properties in joint ventures

(5.1)

(14.7)

Surplus on revaluation of investment properties in associates

0.2

-


17.5

(37.7)

 

Included in discontinued operations is a deficit on revaluation of investment properties of £1.4m (2013: £11.0m) relating to the Sequel portfolio and a surplus on investment properties in joint ventures of £6.1m (2013: £10.2m) of which iQ represents £6.5m (2013: £13.6m).

 

 

2.6 Net finance expenses

 


2014

2013




restated



£m

£m

Recognised in Income Statement:




Interest expense on bank debt and associated swaps


16.8

15.8

Interest on obligations under finance leases


0.7

0.7

Impairment of loans granted (note 5.2)


2.5

-

Change in fair value of ineffective caps


-

0.9

Recycling of fair value adjustment on effective swaps


4.2

9.4



24.2

26.8

Interest capitalised


(13.7)

(13.1)

Finance expenses


10.5

13.7

Finance income: interest income on loans and receivables


(2.7)

(1.4)



7.8

12.3





Recognised in Other Comprehensive Income:




Net change in fair value of quoted investments


0.1

0.4

Effective portion of changes in fair value of cashflow hedges


(2.6)

(0.8)

Recycling of fair value adjustment on effective swaps


(4.2)

(9.4)



(6.7)

(9.8)

 

The interest capitalised relates to investment properties in the course of construction. The average rate of interest used for capitalisation was 5.9% (2013: 5.4%).

 

Notes to the accounts

continued

 

Section 2: Performance for the year continued

 

2.7 Earnings per share and net asset value per share

 

i) Earnings/ (loss) per share



2014




2013

restated


Profit

after

tax

Weighted

average

number  of

shares

Earnings per share


Loss

after

tax

Weighted average number

 of shares

Earnings

per share


£m

m

pence


£m

m

pence

Basic

52.9

519.1

10.2


(40.9)

518.4

(7.9)

Diluted

52.9

520.0

10.2


(40.9)

518.4

(7.9)

Basic - continuing operations

 

11.0

 

519.1

 

2.1


(36.3)

518.4

(7.0)

Diluted - continuing operations

11.0

520.0

2.1


(36.3)

518.4

(7.0)

 

 

ii) Net asset value per share



2014




2013


Equity shareholders' funds

Number

of

shares

Net asset

value

per share


Equity shareholders' funds

Number

of

shares

Net asset

value

per share


£m

m

pence


£m

m

pence

As per accounts

595.4

521.5



538.1

521.0


Less: Treasury

shares

-

(2.2)



 

-

 

(2.2)


Basic

595.4

519.3

115


538.1

518.8

104

Adjustments:








Share-based incentive schemes

2.8

6.9



 

-

 

0.1


Diluted

598.2

526.2

114


538.1

518.9

104

 

Although not required under IFRS, net asset value per share is considered a key performance indicator in the sector in which the Group operates.  Contingent share entitlements have been excluded from the calculation in ii) where the conditions had not been met at the balance sheet date.

Notes to the accounts

continued

 

Section 3: Property assets, joint ventures and associates

 

3.1 Investment properties

 


Freehold

Long leasehold

Short

leasehold

Total

 



£m

£m

£m

£m

Balance 31 March 2012


786.4

34.2

5.3

825.9

Additions


54.8

10.5

-

65.3

Interest capitalised


13.2

-

-

13.2

Disposals


(302.6)

(5.3)

-

(307.9)

Revaluation (deficit)/surplus - continuing operations


(22.0)

(1.2)

0.2

(23.0)

Revaluation deficit - discontinued operations


(8.0)

(2.3)

(0.7)

(11.0)

Balance 31 March 2013


521.8

35.9

4.8

562.5

Additions


40.3

14.8

14.5

69.6

Interest capitalised


13.7

-

-

13.7

Disposals


(50.9)

(19.1)

(4.1)

(74.1)

Transfer to trading property


(22.7)

-

-

(22.7)

Revaluation surplus - continuing operations


18.5

3.9

-

22.4

Revaluation (deficit)/surplus - discontinued operations


(1.7)

0.9

(0.6)

(1.4)

Balance 31 March 2014


519.0

36.4

14.6

570.0

 

Of the additions shown above, £55.1m (2013: £55.0m) related to construction on development sites and improvements to existing properties, £14.5m (2013: £nil) related to the purchase of Unit Trusts that own a short leasehold property and £nil (2013: £10.3m) related to the purchase of property from a joint venture.

 

The historical cost of the Group's investment properties as at 31 March 2014 was £584.6m (2013: £660.9m), which included capitalised interest of £88.1m (2013: £77.0m).

 

The average rate used for interest capitalisation is shown in note 2.6.

 

Investment properties are required to be analysed by level depending on the valuation method adopted, in accordance with IFRS 13 Fair Value Measurement:

 

Level 1: valuation based on quoted market prices traded in active markets

Level 2: valuation based on inputs other than quoted prices included within Level 1 that maximise the use of observable data either directly or from market prices or indirectly derived from market prices.

Level 3: where one or more inputs to valuation are not based on observable market data.

All investment property held by the Group is classified as Level 3 and there have been no transfers between levels of the fair value hierarchy during the year.

 

The key assumptions made in the valuation of the Group's development land at Wembley are:

- future development costs including construction cost inflation;

- future residential sales values including residential sales growth rates;

- the implementation strategy for the relevant plots;

- the timing and conditions of planning consent; and

- the discount rate applied.

Notes to the accounts

continued

 

Section 3: Property assets, joint ventures and associates continued

 

3.1 Investment properties continued

 

The following table shows the valuation technique in measuring the fair value of development land at Wembley, as well as the significant unobservable inputs used.

 

Valuation technique

Significant unobservable inputs

Inter-relationship between key unobservable inputs and fair value measurement

The fair value is derived from the estimated future rental income and residential sales (subject to the valuers' growth forecasts) from which are deducted future costs comprising base construction, infrastructure and future planning obligations.  The net difference is then discounted at an annual rate.  This is then cross checked against relevant land sale transactions on a per acre basis, residential land sales rates per sq. ft and land value as a percentage of Gross Development Value ('GDV').

Value of Wembley development land £312.2m

 

Expected average private residential sales price inflation 5%.

 

Expected average private residential build cost inflation 4%

 

Private residential sales value; £535 to £635 per sq. ft NIA.

 

Private residential direct build cost; £240 to £340 per sq. ft NIA.

 

Future site-wide costs £162m

 

Risk adjusted discount rate of 15%.

 

The estimated fair value would increase if:

 

 

Expected average private residential sales price inflation was higher

 

Expected average private residential build cost inflation was lower

 

Private residential sales value was higher

 

 

Private residential direct build costs was lower

 

Future site-wide costs are reduced

 

Risk adjusted discount rate was lower

 

The key assumptions made in the valuation of the Group's investment properties are:

- the amount and timing of future income streams;

- anticipated maintenance costs and other landlord's liabilities; and

- an appropriate yield.

 

Valuation technique

Significant unobservable inputs

Inter-relationship between key unobservable inputs and fair value measurement

The valuations reflect the tenancy data supplied by the group along with associated revenue costs and capital expenditure.  The fair value of the commercial investment portfolio has been derived from capitalising the future estimated net income receipts at capitalisation rates reflected by recent arm's length sales transactions. 

 

Value of Wembley investment assets £214.2m

 

Gross ERV: £19.6m

 

Net Initial Yield: 4.4% (0% - 9.4%)

 

Reversionary Yield: 8.0% (5.5% - 13.3%)

 

Equivalent Yield: 7.5% (5.5% - 11.6%)

 

The estimated fair value would increase if:

 

 

An increase in the Gross ERV

 

A decrease in the Net Initial Yield

 

A decrease in the Reversionary Yield

 

A decrease in the Equivalent Yield

 

The relationship between the unobservable inputs and their impact on the fair value measurement is not certain. Changes to the tenancies and/or income profile of an investment asset may also impact the fair value outside one or more of the above inter-relationships according to individual circumstances.

 

All of the Group's properties were externally valued as at 31 March 2014 on the basis of Market Value by external, professionally qualified valuers in accordance with the Royal Institution of Chartered Surveyors ('RICS') Valuation Professional Standards. Such valuations are carried out every six months.

 

The Group's land and property holdings at Wembley, Greenwich, Silvertown and Redhill have been valued by Savills Advisory Services Ltd. Other properties in the United Kingdom have been valued by Cushman & Wakefield, Jones Lang LaSalle Limited and Christie + Co.

 

Notes to the accounts

continued

 

Section 3: Property assets, joint ventures and associates continued

 

3.1 Investment properties continued

 

A reconciliation of the valuations carried out by the external valuers to the carrying values shown in the Balance Sheet was as follows:

 

2014

2013


£m

£m

Per valuers' reports



Savills Advisory Services Limited

636.9

582.0

Other valuers

25.3

64.8


662.2

646.8

Adjustment for properties held in joint ventures and associates and as trading

(90.6)

(93.8)

Investment properties at market value

571.6

553.0

Adjustment in respect of rent-free periods and other tenant incentives

(12.3)

(1.6)

Adjustment in respect of minimum payment under head leases separately included as a liability in the Balance Sheet

10.7

11.1

As shown in the Balance Sheet

570.0

562.5

 

3.2 Capital commitments

As at 31 March 2014, the Group had capital commitments of £19.0m (2013: £57.7m) in relation to development properties.

  

The Group's share of capital commitments in relation to its joint ventures was £0.1m (2013: £2.0m).

 

3.3 Trading properties

 

As at 31 March 2014, properties held for resale had a carrying value of £28.5m (2013: £10.2m), which includes capitalised interest of £2.3m (2013: £0.9m).

                  

During the year, property of £22.7m (2013: £nil) was transferred from non-current investment properties to trading property  and the Group sold trading properties with carrying values of £5.2m (2013: £11.0m).

 

On 14 April 2014, post year end, the Group entered into a 50:50 joint venture with Keystone Developers S.A. for development of the next residential plot at Wembley Park. The consideration under the agreement is £22.7m consideration for the land with a further £9.5m for future associated infrastructure, a total of £32.2m.

Notes to the accounts

continued

 

Section 3: Property assets, joint ventures and associates continued

 

3.4 Investments in joint ventures and associates

 

Investments in joint ventures

 

a)    The Group's interest in its joint ventures was as follows:

 

% of

ownership

Country of

incorporation

Joint venture

partners

Quercus Healthcare Property Unit Trust (Quercus)(1)

 

11.22

Channel Islands

 

Aviva

iQ Unit Trust (iQ)(2)

49.98

Channel Islands

Wellcome Trust

 

Quantum Unit Trust (Quantum)

 

50.00

Channel Islands

Aviva

Crest Nicholson BioRegional Quintain LLP

(OneBrighton)

50.00

United Kingdom

Crest Nicholson

HHW (Investment) LP (Hilton)

50.00

United Kingdom

Oaktree

 

(1)        Quercus is accounted for as a joint venture as the Group has a 50% share of the general partner which controls the operation of the Unit Trust.

  

(2)        iQ is presented as held for sale and discontinued operations as at 31 March 2014 (see note 4.1).

 

b) The movement in investment in joint ventures was as follows:

 

2014

2013


£m

£m

Opening balance

356.8

273.6

Additions

-

133.4

Amounts advanced

-

10.3

Amounts repaid

(2.6)

(39.2)

Amounts repaid by discontinued operation

(2.7)

-

Disposals

(168.7)

(15.5)

Reclassified as held for sale

(106.2)

-

Distributions

(6.3)

(6.8)

Provisions released

2.9

-

Share of loss, net of tax

(2.7)

(8.1)

Share of profit discontinued operation, net of tax

8.6

8.9

Share of other comprehensive income, net of tax

0.3

0.4

Share of other comprehensive income discontinued operations, net of tax

0.9

(0.2)

Closing balance

80.3

356.8

 

Notes to the accounts

continued

 

Section 3: Property assets, joint ventures and associates continued

 

3.4 Investments in joint ventures and associates continued

 

c) The Group's share of the results of its joint venture operations was as follows:

 

Summarised income statements for the year ended 31 March 2014

Quercus

 

 

Quantum

 

 

Hilton

Other

joint

ventures

Group share

in continuing  joint

ventures


£m

£m

£m

£m

£m

Rental income

5.1

0.7

7.1

0.1

13.0

Income from sale of trading properties

0.3

-

-

4.0

4.3

Other income

-

1.1

-

-

1.1

Revenue

5.4

1.8

7.1

4.1

18.4

Cost of sales

(0.6)

(0.7)

(3.0)

(4.3)

(8.6)

Gross profit

4.8

1.1

4.1

(0.2)

9.8

Administrative expenses

(0.7)

-

(2.6)

-

(3.3)

Operating profit/(loss)

4.1

1.1

1.5

(0.2)

6.5

Loss from sale of non-current assets

(1.5)

-

-

-

(1.5)

(Deficit)/surplus on revaluation of investment properties

(5.2)

0.1

-

-

(5.1)

(Loss)/profit before net finance expenses and tax

(2.6)

1.2

1.5

(0.2)

(0.1)

Finance income

-

0.5

-

-

0.5

Finance costs

(1.6)

-

(1.5)

-

(3.1)

(Loss)/profit before tax

(4.2)

1.7

-

(0.2)

(2.7)

Tax

-

0.1

(0.1)

-

-

(Loss)/profit after tax

(4.2)

1.8

(0.1)

(0.2)

(2.7)







Share of other comprehensive income:






Effective portion of changes in fair value of cashflow hedges, net of tax

0.3

-

-

-

0.3


0.3

-

-

-

 

Notes to the accounts

continued

 

Section 3: Property assets, joint ventures and associates continued

 

3.4 Investments in joint ventures and associates continued

 

Summarised balance sheets as at 31 March 2014

Quercus

 

 

Quantum

 

Hilton

Other

joint

ventures

Group share

in continuing joint

ventures


£m

£m

£m

£m

£m

Investment properties

57.2

5.8

27.8

-

90.8

Trading properties

0.6

-

-

0.1

0.7

Deferred tax asset

3.4

-

0.2

-

3.6

Other assets

5.4

13.2

1.0

0.3

19.9

Total assets

66.6

19.0

29.0

0.4

115.0

Current liabilities:






Trade and other payables

(1.6)

(1.1)

(1.3)

-

(4.0)

Bank loans and other borrowings

(2.2)

-

-

-

(2.2)

Non-current liabilities:






Bank loans and other borrowings

(28.5)

-

(21.1)

-

(49.6)

Net assets

34.3

17.9

6.6

0.4







Represented by:






Group share of net assets

34.3

17.9

6.6

0.4

59.2

Loans to JVs

-

-

21.1

-

21.1

Total investment

34.3

17.9

27.7

0.4

 

 

 

 

 

Notes to the accounts

continued

 

Section 3: Property assets, joint ventures and associates continued

 

3.4 Investments in joint ventures and associates continued

 

Summarised income statements for the year ended 31 March 2013

Quercus

 

 

Quantum

 

 

Hilton

Other

joint

ventures

Total continuing

joint

ventures


£m

£m

£m

£m

£m

Rental income

6.3

0.6

-

0.3

7.2

Income from sale of trading properties

-

-

-

2.6

 

 

2.6

Revenue

6.3

0.6

-

2.9

9.8

Cost of sales

(0.8)

(0.6)

-

(2.1)

(3.5)

Gross profit

5.5

-

-

0.8

6.3

Administrative expenses

(0.8)

-

-

-

 

(0.8)

Operating profit

4.7

-

-

0.8

5.5

Loss from sale of non-current assets

(0.7)

-

-

-

(0.7)

(Deficit)/surplus on revaluation of investment properties

(14.2)

0.8

(1.3)

-

 

(14.7)

(Loss)/profit before net finance expenses and tax

(10.2)

0.8

(1.3)

0.8

 

(9.9)

Finance income

-

0.5

-

-

0.5

Finance costs

(1.7)

-

-

-

(1.7)

(Loss)/profit before tax

(11.9)

1.3

(1.3)

0.8

(11.1)

Tax

3.1

(0.4)

0.3

-

3.0

(Loss)/profit after tax

(8.8)

0.9

(1.0)

0.8

 

(8.1)







Share of other comprehensive income:






Effective portion of changes in fair value of cashflow hedges, net of tax

0.4

-

-

-

 

0.4


0.4

-

-

-

0.4


Notes to the accounts

continued

 

Section 3: Property assets, joint ventures and associates continued

 

3.4 Investments in joint ventures and associates continued

 

Summarised balance sheets as at 31 March 2013

Greenwich

 

 

iQ

 

 

Quercus

 

 

Quantum

 

Hilton

Other

joint

ventures

Group share

in joint

ventures


£m

£m

£m

£m

£m

£m

£m

Investment properties

13.0

208.7

70.8

5.5

27.8

-

325.8

Trading properties

154.5

-

0.9

-

-

4.8

160.2

Deferred tax asset

3.3

-

3.4

-

0.3

-

7.0

Other assets

11.2

11.6

3.4

12.6

0.6

1.2

40.6

Total assets

182.0

220.3

78.5

18.1

28.7

6.0

533.6

Current liabilities:








Trade and other payables

(10.1)

(6.0)

(3.0)

(2.0)

(0.9)

(3.9)

(25.9)

Bank loans and other borrowings

-

-

(5.6)

-

-

-

(5.6)

Non-current liabilities:








Bank loans and other borrowings

(83.8)

(111.2)

(30.9)

-

-

-

(225.9)

Other liabilities

-

(2.9)

(0.2)

(0.1)

-

-

(3.2)

Net assets

88.1

100.2

38.8

16.0

27.8

2.1

273.0









Represented by:








Group share of net assets

88.1

100.2

38.8

16.0

27.8

2.1

273.0

Loans to JVs

83.8

-

-

-

-

-

83.8

Total investment

171.9

100.2

38.8

16.0

27.8

2.1

356.8

 

Notes to the accounts

continued

 

Section 4: Acquisitions and disposals

 

4.1 Discontinued operations

During the year the Group entered into negotiations to sell its remaining 50% interest in iQ to its joint venture partner, Wellcome Trust. The sale completed on 16 May 2014 and consideration consisted of £106.4m in cash, which reflects the Group's share of the net asset value of iQ as at 31 March 2014. As a result the operating segment iQ has been classified as held for sale as at 31 March 2014 and presented as a discontinued operation.

 

The Group has disposed of its Greenwich operating segment. On 22 November 2013, the Group sold its 40% interest in GPRL to its joint venture partner, Knight Dragon Limited.  Consideration consisted of £185.8m for the purchase of the GPRL shares and GPRL loan stock held by the Group and £44.2m for the acceleration of the deferred receivable arrangement entered into on completion of the GPRL joint venture in July 2012. On 12 February 2014 the Group disposed of its 50% ownership of the Greenwich Peninsula N0204B Block B Unit Trust (a joint venture with Lend Lease) and the 100% owned retail unit in the same building for a combined consideration of £17.1m cash. The Group recognised a gain on disposal of £32.3m.

 

During the year the Group agreed to sell its Sequel regional property portfolio, excluding Stadium Retail Park. The sale completed on 21 October 2013. Stadium Retail Park was disposed of on 22 November 2013. The Group recognised a gain on disposal of £0.2m.

 

The results for the discontinued operations for the year are shown in note 2.2.

 


2014

£m

2013

£m

Cash flows (used in)/from discontinued operations




Net cash from operating activities


9.0

14.2

Net cash from investing activities


311.4

28.1

Net cash used in financing activities


(38.5)

(1.8)

Effect on cash flows


281.9

40.5

 


2014

pence

2013

pence

Earnings per share - discontinued operations (pence):




Basic and diluted


8.1

(0.9)

 

 

4.2 Assets and liabilities held for sale

As at 31 March 2014, the iQ assets held at fair value less costs to sell comprised of £106.2m, presented as investment in joint venture.

 

 

Notes to the accounts

continued

 

Section 5: Other assets and liabilities

 

5.1 Non-current receivables

 

The movement in other non-current receivables was as follows:

 

2014

2014

2014

2013

2013

2013


Loans at amortised cost

Investments at fair value

Total

Loans at amortised cost

Investments at fair value

Total


£m

£m

£m

£m

£m

£m

Opening balance

48.6

5.5

54.1

12.0

2.9

14.9

Additions

-

5.8

5.8

46.1

6.1

52.2

Repayment

(1.2)

-

(1.2)

1.2

-

1.2

Reclassified as current receivable

 

-

 

(3.1)

 

(3.1)

(10.7)

(3.1)

(13.8)

Impairment

(1.3)

-

(1.3)

-

-

-

Disposals

(43.2)

-

(43.2)

-

-

-

Revaluation loss

-

(0.1)

(0.1)

-

(0.4)

(0.4)

Closing balance

2.9

8.1

11.0

48.6

5.5

54.1

 

On 17 January 2014, Quintain acquired 8,269 units in the West of London Property Unit Trust ('WELPUT') for £5.0m which are held as 'Investments at fair value'.

 

5.2 Current trade and other receivables

 


2014

£m

2013

£m

Trade receivables


6.5

4.7

Amounts due from related parties


3.5

3.9

Other receivables


7.9

7.8

Trade and other receivables


17.9

16.4

Prepayments and accrued income


12.9

2.7

Loans at amortised cost


8.2

10.7

Investments at fair value


3.1

3.1

Interest rate caps at fair value


0.2

0.2



42.3

33.1

 

On 5 February 2013, Quintain acquired 6.0m units in the TM Hearthstone UK Residential Property Fund in exchange for 27 residential units in Quadrant Court valued at £6.1m. Units in the fund are redeemable quarterly over a minimum of two years and are held as 'Investments at fair value.'

 

During the year ended 31 March 2011, the Group granted two unsecured loans totaling £10.7m to an associate, Albemarle Retail Properties LLP, which carry a coupon of 10% per annum. The receivables are now shown as a current receivable in the Balance Sheet at amortised cost. The Board has assessed the recoverability of the loans to Albemarle Retail Properties LLP and has concluded that an impairment provision of £2.5m is required based on anticipated proceeds arising from property sales. During the year the Group received interest of £0.9m (2013: £1.1m).

 

 

 

 

 

 

 

 

 

Notes to the accounts

continued

 

Section 5: Other assets and liabilities continued

 

5.2 Current trade and other receivables continued

 

The ageing of trade and other receivables and loans at amortised cost was as follows:

 

2014

2014

2014

2013

2013

2013


Gross

Impairment

Net

Gross

Impairment

Net

Trade and other receivables:

£m

£m

£m

£m

£m

£m

Not past due

10.0

-

10.0

12.8

-

12.8

Past due less than one month

6.1

-

6.1

2.5

-

2.5

Past due one to three months

-

-

-

0.9

-

0.9

Past due three to six months

1.9

(0.2)

1.7

0.3

(0.1)

0.2

Past due over six months

0.3

(0.2)

0.1

0.4

(0.4)

-


18.3

(0.4)

17.9

16.9

(0.5)

16.4

Loans at amortised cost:







 Non-current

4.2

(1.3)

2.9

48.6

-

48.6

 Current

10.7

(2.5)

8.2

10.7

-

10.7


33.2

(4.2)

29.0

76.2

(0.5)

75.7

 

5.3 Other payables (non-current)

2014

£m

2013

£m

Unsecured loan notes

4.2

1.2

Interest rate swaps at fair value

0.2

1.1

Other creditors

2.8

3.4


7.2

5.7

 

The Company acquired Grafton Advisers (2006) LLP in February 2012 and, in addition to the cash consideration, the Grafton management team was issued with Unsecured Loan Notes ('loan notes') which are redeemable to the extent that certain fees, including performance fees arising from WELPUT, are earned over five years, with the maximum amount receivable by the Grafton management team being £5.0m. The loan notes carry 2% coupon and the holders have the right to apply to proceeds in subscribing for Quintain ordinary shares at a price of 55 pence per share. During the current year, loan notes of £0.5m were issued in accordance with this agreement and subsequently redeemed for shares. The increase in the year represents the fair value of the loan notes based on actual fees for the year and estimated relevant fees for the next three years. Nigel Kempner, an Executive Director, is entitled to 53.34% of the loan notes.

 

5.4 Current trade and other payables

2014

£m

2013

£m

Trade payables

3.3

0.8

Other payables

1.2

4.0

Accruals and deferred income

23.0

21.9

Interest rate swaps at fair value

0.4

2.1


27.9

28.8


Notes to the accounts

continued

 

Section 6: Funding

 

6.1 Bank loans and other borrowings

 


2014

£m

2013

£m

Current liabilities:




Bank loans


-

71.0

Non-current liabilities:




Bank loans (including the Bond)


216.7

415.2



216.7

486.2





Non-current liabilities:




Bank loans


219.2

417.2

Unamortised borrowing costs


(2.5)

(2.0)



216.7

415.2

 

The Group raised a £115.0m seven year 6.5% Sterling Bond in the year which is due for repayment in July 2020.

 

The loans are secured by floating charges over assets owned by subsidiary undertakings.

 

The maturity profile of the Group's debt was as follows:

 

2014

2013

2014

2013




Total

debt

Total

debt

Undrawn

facilities

 Undrawn facilities




£m

£m

£m

£m

Within one year



-

71.0

-

-

From one to two years 



-

62.1

5.0

-

From two to five years



102.6

353.4

240.5

69.5

After five years



116.6

1.7

-

-




219.2

488.2

245.5

69.5

 

The interest rate profile of the Group's debt before interest rate swap arrangements at the balance sheet date was as follows:

 

Percent


2014

£m

2013

£m

1.0 - 2.0


-

34.3

2.0 - 3.0


97.6

363.4

3.0 - 4.0


6.6

37.5

4.0 - 5.0


-

35.0

5.0 - 6.0


-

18.0

6.0 - 7.0


115.0

-



219.2

488.2

 

Notes to the accounts

continued

 

Section 6: Fundingcontinued

 

6.1 Bank loans and other borrowings continued

 

After taking account of interest rate swap arrangements, the risk profile of the Group's borrowings was as follows:


2014


2013


Fixed

Capped

Total

debt


Fixed

Capped

Total

debt


£m

£m

£m


£m

£m

£m

Sterling

165.0

54.2

219.2


318.0

170.2

488.2

 

 

The weighted average interest rate and the weighted average period of the Group's fixed rate debt were as follows:

2014

%

2013

%

2014

years

2013

years

Sterling

5.63

3.85

5

1

 

 

The maturity profile of the Group's share of debt held within its joint ventures was as follows:


2014

£m

2013

£m

Less than one year


2.2

5.6

From one to two years


8.8

5.6

From two to five years


20.2

151.2



31.2

162.4

 

The Group's key financial covenants are an interest cover covenant (bank debt only), which requires the Group's adjusted operating profit plus realised revaluation surpluses on disposal divided by adjusted net finance expenses excluding finance lease interest to be greater than 1.25 times, and a gearing covenant, which requires the net borrowings of the Company and its wholly-owned subsidiaries to be less than 110% of its equity. As at 31 March 2014, the Group has a gearing ratio of 35% (2013: 76%) and an interest cover ratio of 20.5 times (2013: 8.5 times).

 

6.2 Share capital


Number of

shares

m

Nominal

value

£m

Allotted, called up and fully paid:




In issue as at 31 March 2013


521.0

130.2

Issue of shares under shared-based payment schemes


0.5

-

In issue as at 31 March 2014


521.5

130.2

 

As at 31 March 2014, share capital included 2.2m (2013: 2.2m) shares held by ESOP Trusts. These shares had a nominal value of £0.6m (2013: £0.6m).

 

Financial Statements

 

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2014 or 2013 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the registrar of companies, and those for 2014 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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