Interim Results

RNS Number : 8677X

Quintain Estates & Development PLC

25 November 2014

 



25 November 2014

Quintain Estates & Development PLC

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

Results for the six months to 30 September 2014

Accelerating operational momentum

Quintain, the London development and investment specialist, announces its results for the six months to 30 September 2014.

Maxwell James, Chief Executive of Quintain, said: "We are pleased to report a robust set of results and further acceleration of the development of new homes at Wembley Park. With 475 homes under construction, 386 submitted for detailed planning consent and a further 850 under public consultation, the development pipeline has been expanded to over 1,700 homes, 34% of the 5,000 for which we hold outline planning consent.

"Wembley Park is now also making a meaningful contribution to our net rent, due primarily to the opening of London Designer Outlet a year ago and the new management arrangements for The SSE Arena in our growing Leisure Quarter. We anticipate further income growth through active asset management and leasing.

"While we continue to assess potential acquisitions for our London Portfolio, with Wembley Park now established as an attractive place to visit and to live, we intend to maintain our focus on improving income from these investment assets and accelerating the pace of residential delivery in this vibrant London location."

Financial Summary

Earnings	September 2014	September 2013	Movement
Profit after tax	£11.1m	£7.1m	£4.0m
Operating profit (continuing operations only)	£14.8m	£2.5m	£12.3m
Adjusted profit before tax	£3.3m	£3.1m	£0.2m
EPRA diluted EPS	0.8p	1.2p	(0.4)p
Net Asset Value per share	September 2014	March 2014
Basic NAV per share	117p	115p	2p
EPRA NAV per share	116p	114p	2p
Financing	September 2014	March 2014
Net debt	£178.3m	£208.9m	£(30.6)m
Balance sheet gearing	29%	35%
Look-through LTV	26%	38%

Operational Highlights

Wembley Park Residential Development

-      Immediate development pipeline at Wembley Park expanded to 1,700 homes, since the end of the reporting period

-      £61m worth of private sales (166 homes) at an average price of £588 per square foot, 13 months prior to completion

-      73 apartments sold prior to Full Year Results at an average of £570 per square foot

-      93 apartments sold since Full Year Results at an average price of £604 per square foot

-      143 of the 475 homes under construction to be owned and managed by Quintain as Private Rented Sector ("PRS") accommodation

Wembley Park Investment Assets

-      Significant uplift in contribution from Wembley Park investment assets to £5.2m (Sept 2013: £1.5m), primarily due to new rental income from London Designer Outlet and the new management arrangements regarding The SSE Arena

-      Over 5 million visitors to London Designer Outlet in first year of trading and delivering gross contracted base rent of £6.0m¹

Financing

-      Debt refinanced and balance sheet gearing remains low at 29% (March 2014: 35%)

Meeting, webcast and conference call

A meeting for analysts 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's website: www.quintain.co.uk or accessed via a conference call facility, using the following details:

Dial in number:                                + 44 20 3059 8125

Password:                                           Quintain

For further information, please contact:

Quintain:             Cressida Curtis / Harriet Pask                                 [e-mail]                                 T: [phone]

Finsbury:             Jenny Davey / Charlotte Whitley                                 [e-mail]                                 T: [phone]

BUSINESS REVIEW

Quintain seeks to create and realise value from commercial and residential real estate in London. The city's differentiated status as a global destination continues to attract significant capital to inner London from both domestic and international investors, and this is having a positive ripple effect on well-connected locations in zones 3 and 4, such as Wembley Park, Quintain's largest asset on which we hold consent to develop 5,000 homes.

Now established as an attractive destination following the opening of London Designer Outlet, our focus is to create high quality homes at Wembley Park at a mainstream price point where under-supply is particularly acute, while remaining well-placed to adjust our emphasis across the Capital as the real estate cycle evolves. We will continue to deploy our capital intelligently, exploring joint venture and land sale options alongside direct development where we believe this will accelerate value creation for shareholders.

Results

The step-change in the perception of Wembley Park that we have achieved over the last year created further value growth from our investment assets and development land during the period and this was the principal driver behind the increase in net asset value to £611.6 million (March 2014: £595.4 million). This reflects a net asset value per share of 117p (March 2014: 115p).

Despite the disposal of our interests in Greenwich Peninsula, Sequel and iQ since the corresponding period in 2013, our measure of underlying earnings, adjusted profit before tax, was broadly in line with last year at £3.3 million (September 2013: £3.1 million). This reflects a marked increase in net rental income at Wembley Park from London Designer Outlet and The SSE Arena and new income streams emerging from recent investments in the London Portfolio, offsetting the impact of disposals.

Wembley Park

Wembley Park comprises £267.6 million of investment assets (March 2014: £254.2 million) and £350.5 million of development assets (March 2014: £334.9 million). Since acquiring our initial land holding in 2002, we have invested in creating a vibrant leisure destination that has transformed this previously neglected space into a great new place to visit and to live in London.

a) Investment Assets

Wembley Park has this year become established as a vibrant leisure destination. 5 million people visited the Park in the 12 months following the opening of London Designer Outlet: a million more people than attended major ticketed events, for which the site was previously known. The recent announcement that a brand new 1,300-seat theatre is to be built at Wembley Park further demonstrates the strength of the new profile we have created for the site.  In achieving this transformation, we have also created a strong and maturing base of high quality investment assets that delivered income for the Group totalling £5.2 million in the six months to 30 September 2014 (September 2013: £1.5 million).

London Designer Outlet

The central driver of perception change has been the opening of London Designer Outlet in October 2013. The performance of the centre has been good, ranking it firmly in the middle of the performance table for UK outlet centres after just one year of trading. The centre is delivering gross contracted rent to Quintain of £6.0 million, after the expiry of rent free periods, and this is typically augmented by an additional turnover element that is reviewed annually.

Experience during the reporting period demonstrates how event days are delivering the anticipated positive impact on both footfall and turnover. An average weekend Stadium event will typically increase the day's footfall by 48% and turnover by 27%. Weekend events at the Arena create a smaller uplift in footfall of 7%, but a 12% increase in turnover. Our investment in attracting mass participation events to the site is also delivering returns, with occasions like the Colour Run increasing footfall by around 25% and turnover by 28%. 66,000 people took part in such events during the period, providing a strong opportunity to introduce the revitalised Wembley Park to a wider audience as well as creating incremental revenue from these bookings and participants' own expenditure on site.  The opening of the 1,300-seat theatre in the Spring of 2016 is expected to have a further positive impact.

The SSE Arena, Wembley

The Arena was re-branded during the period to reflect a new 10 year sponsorship commitment from energy company, SSE. As a result of the deal, the Arena has been refurbished to further cement this building's status as an iconic entertainment venue. AEG, who were appointed in September 2013 to manage the Arena have revitalised both the commercial and content programme at the venue, driving new income and marketing opportunities. Quintain derives income from rent and a share of commercial income, and the new management arrangements for the Arena have made a positive impact on revenues during the period.

Hilton London Wembley Hotel

The Hilton, in which we retain a 50% interest, has now been trading for two years and the maturing of this asset is reflected in three ways, through rising occupancy levels, room rates and revenue from conferencing and banqueting compared with the same period in 2013. The hotel typically sells out at premium rates on nights when events are held at the Stadium or Arena, and we are now also seeing a clear increase in occupancy at other times, driven by the success of its corporate bookings, conferencing and banqueting offer. Occupancy levels over the period averaged 82.5%, an increase of 5% on the equivalent period in 2013. With average room rates also higher, overall revenues are 10% higher for the period when compared with 2013.

Placemaking

The effect on the public's perception of Wembley Park over the last two years has been significant and this will be augmented by further placemaking measures in the near term. Most notable is the arrival of the theatre, subject to planning consent, in 2016 which will generate rental and ancillary income for Quintain, The addition of a new 2 acre green square at the heart of the current residential development site the following year and the evolution of Wembley Park-hosted events such as our new Sunday market, which already attracts circa 8,000 people a week, will also contribute.

Our investment assets at Wembley Park are designed to act as a virtuous circle of complimentary facilities and capture incremental spend. Together, they offer a leisure experience that can include shopping, movies, dining, participating in major events, attending concerts and sporting fixtures and staying overnight. For the first time since the British Empire Exhibition in 1925, Wembley Park is once more living up to its original purpose as an attractive leisure park for Londoners. It is also delivering a robust and growing income stream for Quintain.

b) Residential Development

With the leisure district now operating successfully, substantial progress has been made during the period in accelerating the delivery of homes, both to buy and to rent. While there is evidence that growth in the Prime Central London tier of the housing market is slowing, we continue to experience good demand and strong pricing at Wembley Park where our residential product feeds the under-supplied Mid-Mainstream tier of the market.

With 475 homes under construction, 386 submitted for detailed planning consent and a further 850 under consultation, over 1,700 apartments across the entire Western half of the site are in the immediate development pipeline.

North West Village

To the north, 475 homes are under construction at Emerald Gardens, 143 of which will be owned and operated by Quintain as Private Rented Sector accommodation on opening early in 2016. We have continued to see strong buyer demand for private homes feeding into strong sales volumes and pricing evidence: 166 of the 284 private homes within the development have been sold at an average price per square foot of £588, with the 93 sold since our Full Year Results announcement in May averaging £604 per square foot. At a 20% gross margin, these sales secure over £6 million of future joint venture gross profit for Quintain.

The average price agreed for an apartment is £366,000, making these homes accessible for households with an income below £100,000 per annum: a significantly under-supplied tier of London's mainstream housing market. The good connectivity to the City and Canary Wharf, the recent transformation of Wembley Park's profile and the range of high quality amenities we have created are noted by our agents as being the main drivers of decisions to purchase. They anticipate further support for sales from the opening next year of the nearby Lycée Français and a 24-hour weekend London Underground service to Wembley Park Station from September.

In April we announced the creation of a joint venture with Keystone to develop Emerald Gardens and, subsequent to the reporting period, this joint venture agreed a £70.0 million development facility with Lloyds Bank to support construction on the site. Both actions support the intelligent use of Quintain's capital, delivering the best return on investment in the shortest period of time.

Earlier this month, an application for detailed planning consent regarding plot NW06 (named "Alto") was submitted. Located next to Emerald Gardens, this development will comprise a further 386 homes and, subject to a positive planning decision, will be under construction next summer with initial completions targeted for 2017. Both Emerald Gardens and Alto will benefit from extensive private green space, 24-hour concierges, residents' facilities such as gyms and lounges and access to the Metropolitan and Jubilee Underground lines within a few minutes' walk.

South West Lands

To the south of the site, we have launched the public consultation regarding the re-masterplanning of the South West Lands, the area that connects the leisure district to Wembley Stadium Overground station. The masterplan, which will be submitted to the Planning Committee early in the New Year, proposes a development of approximately 850 new homes, new shops around Station Square and extensive green space, creating an animated and welcoming southern approach to Wembley Park.

Work over the reporting period has therefore increased our immediate pipeline of residential development to over 1,700 homes.

Intelligent Use of Capital

Our priority is to realise value from Wembley Park as quickly as possible while creating the best return for shareholders through the intelligent use of our capital. With 4,500 homes still to enter construction at Wembley Park, we will continue to consider all delivery structures at appropriate points, and choose to use our own balance sheet, joint ventures - as in the case of Emerald Gardens - or dispose of plots where this will create better risk adjusted returns.

London Portfolio

A year ago, we announced our intention to selectively create a portfolio of income producing London assets with future development or asset management potential to complement our activity at Wembley Park. During the reporting period, this nascent London Portfolio contributed £2.0 million (September 2013: £0.1 million) to the Group and was valued at 30 September 2014 at £83.2 million (March 2014: £23.9 million), following acquisitions in the period of £57 million.

In central London, our work as strategic adviser to the West End of London Property Unit Trust ("WELPUT") contributed to the recognition of the Fund by AREF as delivering the best risk adjusted return over a five year period. This reflects the long-standing track record of our team in repositioning assets. The Trust has also been modernised during the period, with its investible area expanded to encompass opportunities beyond its traditional reach and its conversion to an open-ended Fund.

Quintain has been a co-investor in WELPUT since January, owning units to the value of £5.9 million (March 2014: £5.3 million) and demonstrating our confidence in the continued ability of this vehicle to deliver strong returns. Beyond this, we continue to work with the Greater London Authority regarding the potential development of our holding at West Silvertown and have also begun to make selective direct investment in income-producing assets with active management upside. The acquisitions of Kingsbourne House in Holborn and Aldermary House in the City were announced earlier in the year, and we have subsequently acquired for a combined total of £15.9m two smaller properties in south west London, Collingham House in Wimbledon and Thames House in Teddington, that offer the potential for re-positioning through refurbishment or redevelopment.

Finance

At 29% on 30 September 2014 (March 2013: 35%), balance sheet gearing remains well below our stated ceiling of 50% and we have enhanced our financial platform during the period with the re-financing of £260.0 million of corporate revolving credit facilities with our key relationship banks. This gives Quintain £375.0 million of debt facilities (including the 2020 £115.0 million corporate bond) with an average maturity of five years at a headline margin of 190 basis points. The Group is therefore equipped with an appropriate financial structure to deliver value from our major asset while seeking selective investment and development opportunities elsewhere in London.

Board

Shortly after the period end we announced that Richard Stearn had given notice of his intention to resign from the Board of Quintain to assume the position of Finance Director of The Berkeley Group Holdings plc ("Berkeley"). Richard has made a significant contribution to the successful re-structuring and re-financing of Quintain since joining the Company from Berkeley in January 2012. The process of appointing a successor has begun and Richard will remain with Quintain until either this is achieved or 3 April 2015, whichever is sooner. We offer our thanks for his hard work and wish him success in the future.

Strategy and Outlook

Quintain is well placed to adjust the emphasis of its activities across a range of opportunities as the cycle evolves. With Wembley Park now established as an attractive place to visit and to live, we intend to maintain focus on increasing the pace of delivery at our major asset as this is where we see the best returns for shareholders in the near term.

Over 1,700 homes are now in the immediate pipeline at Wembley Park, representing one third of the apartments for which we hold outline consent. Initial sales prices and volumes achieved during the period give us confidence that, as we increase the pace of delivery, we will unlock substantial value for shareholders while establishing a new destination in London with a sustainable economic composition and unique, highly attractive character.

FINANCE REVIEW

As set out in our most recent Annual Report, Quintain's financial priority is to increase underlying earnings over the long term, through the creation of robust new income streams from a stable financial platform, following a period of significant transition which culminated in May with the disposal of the Company's interest in iQ.

For the six months under review adjusted pre-tax profit was broadly in line with the same period last year at £3.3 million (2013: £3.1 million), from a balance sheet that has seen the disposal of Sequel, our interests in Greenwich Peninsula and iQ in the intervening period.  These disposals, net of acquisitions into the London Portfolio, have seen net debt fall to £178.3 million, compared to £452.8 million at 30 September 2013, providing the Company with the capacity to invest in its core assets. In August, the Company announced the refinancing of its bilateral banking facilities to provide a stable platform for the next phase of Quintain's evolution.

In the period, we have begun to see the benefits of rent at the London Designer Outlet, increased revenue from SSE Arena, Wembley and rent from our London Portfolio acquisitions, which include Kingsbourne House and Aldermary House. These represent wholly owned income streams from our core business with potential for growth.

Quintain now has a more sustainable balance between investment and development assets which provide a firm base from which to derive improved profitability, reduced finance costs and growth. We are now focussed on delivering high quality residential development at Wembley Park following the creation of the joint venture with Keystone in April 2014, which will contribute to the performance in future periods, beginning in 2016/17.

The table below summarises the financial headlines for the period.

		30 September 2014	30 September 2013
		£m	£m
Earnings
Profit after tax		11.1	7.1
Operating profit - continuing operations		14.8	2.5
Adjusted profit before tax		3.3	3.1
EPRA diluted EPS		0.8p	1.2p
	31 March 2014	30 September 2014	30 September 2013
	£m	£m	£m
Net Asset Value per share
Basic	115p	117p	106p
Diluted	114p	116p	106p
EPRA diluted	114p	116p	107p
Financing
Net debt	208.9	178.3	452.8
Bank gearing	35%	29%	76%
Look-through LTV(1)	38%	26%	51%

⁽¹⁾Look through loan to value is defined as the ratio of total net debt (including our share of net debt in joint ventures and associates) to total property assets (including our share of property assets in joint ventures and associates.

1. Results for the period

The Group reported a statutory post-tax profit for the period of £11.1 million (2013: £7.1 million). Turnover includes £22.7 million in respect of the sale of development land at Wembley Park into the Quintain Keystone joint venture. Operating profit for the period was £14.8 million, an increase of £12.3 million, due principally to income and valuation growth at Wembley Park and the new income streams from our acquisitions within the London Portfolio.

Summary income statement	30 September 2014	30 September 2013
	£m	£m
Turnover	38.8	10.8
Gross profit	8.3	3.8
Surplus on revaluation	15.2	7.5
(Loss)/profit on disposals	(0.3)	0.5
Share of loss from joint ventures and associates	(0.4)	(1.1)
Net segmental profit	22.8	10.7
Administrative expenses	(8.0)	(8.2)
Operating profit	14.8	2.5
Net finance costs	(2.4)	(3.3)
Tax charge for the year	(1.4)	(0.2)
Profit on discontinued operations	0.1	8.1
Profit after tax	11.1	7.1

2. Adjusted profit for the period

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 increased by £0.2 million from £3.1 million to £3.3 million as set out below.

Importantly, adjusted gross profit is already more than compensating for disposals with net rental income increasing from £1.3 million to £6.9 million due to significant growth at Wembley Park contributing £4.5 million, principally the London Designer Outlet and SSE Arena, and the new income streams resulting from our recent investments in the London Portfolio contributing £2.0 million.

Adjusted profit for the period	30 September 2014	30 September 2013
	£m	£m
Net rental income	6.9	1.3
Fees from asset and development management	1.1	1.2
Other income	0.7	1.7
Gross profit - continuing operations	8.7	4.2
Gross profit - discontinued operations	0.2	4.6
Administrative expenses	(8.0)	(8.2)
Operating profit	0.9	0.6
Share of profit from joint ventures and associates	1.8	4.1
Net finance income/(costs)	0.6	(1.6)
Adjusted profit before tax	3.3	3.1

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

Reconciliation of adjusted profit to statutory profit	30 September 2014	30 September 2013
	£m	£m
Pre-tax adjusted profit	3.3	3.1
Amortisation of intangible asset	(0.4)	(0.4)
Revaluation surplus/(deficit)
Continuing operations	15.2	7.5
Discontinued operations	-	(1.5)
Joint ventures and associates	(1.0)	1.9
(Loss)/profit on disposal
Continuing operations	(0.3)	0.5
Discontinued operations	(1.0)	(1.2)
Joint ventures and associates	(0.1)	(1.2)
Mark to market adjustments
Continuing operations	(3.0)	(0.9)
Joint ventures and associates	-	0.8
Tax charge
Continuing operations	(1.4)	(0.2)
Discontinued operations	-	(0.4)
Joint ventures	(0.2)	(0.9)
Profit after tax	11.1	7.1

3. Analysis of rental income

Quintain conducts a material proportion of its business through joint ventures. The table below sets out the combined net and gross rental income for continuing operations.

Rental income	30 September 2014	30 September 2013
	£m	£m
Group net rental income	6.9	1.3
Share of JV net rental income	2.9	3.3
Combined net rental income	9.8	4.6
Gross rental income
Direct owned	9.3	3.7
JV and associate properties	6.6	6.9

Gross contracted and ERV(1) rent	£m
Gross contracted annual rent
Direct owned	19.0
JV and associate properties	5.5
Gross ERV(1)
Direct owned	23.0
JV and associate properties	5.7

⁽¹⁾ Estimated Rental Value

4. Sales of non-current assets

During the period, £114.9 million of capital was recycled through disposals for the purposes of debt reduction and future investment in Wembley Park and the London Portfolio.

On 14 April 2014, 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 was £22.7 million for the land with a further £9.5 million for future associated infrastructure, a total of £32.2 million. Of this total consideration, £5.0 million of infrastructure is deferred until practical completion and Quintain invested £15.0 million back into the joint venture and £5.6 million as a deposit on the 143 PRS apartments the joint venture is constructing for Quintain, giving net cash proceeds of £6.6 million.

On 16 May 2014, Quintain completed the disposal of its 50% interest in iQ, to its joint venture partner Wellcome Trust, for the consideration of £106.4 million.

5. Results of joint ventures and associates

The Group's share of loss from joint ventures and associates decreased to £0.4 million (2013: £1.1 million).  The net revaluation deficit was £1.0 million (2013: £2.3 million).

Of the £1.0 million net revaluation deficit, £2.7 million related to certain weaker assets within the Quercus Healthcare Fund portfolio. This deficit has been partially offset by a £1.6m increase in valuation of the Hilton Hotel.

6. Net finance expenses

Net finance expenses decreased from £3.3 million to £2.4 million. Bank and other interest payable was £7.3 million, a decrease of £1.6 million on the comparable period last year due to lower net debt, with the average cost of debt increasing to 5.3% (2013: 3.7%) due to the 6.5% coupon on the £115 million bond issued in July 2013, which has a more material impact on the weighted average when overall net debt levels are relatively modest.

Interest expense includes £1.5 million in respect of a provision made against the £10.7 million loans to Albemarle Retain Partnership ('ARP'). The provision reflects the current assessment of the realisable value of the underlying assets in ARP. Interest expense also includes £1.4 million impairment relating to the investment in the Ludgate Environmental Fund, which is held at fair value as determined by reference to its quoted share price. This represents the recycling of the cumulative deficit in cost that has previously been taken to the Statement of Other Comprehensive Income and therefore has no impact on Net Asset Value.

Net finance expenses	30 September 2014 £m	30 September 2013 £m
Bank and other interest payable	7.3	8.9
Recycling of fair value of financial instruments	-	3.0
Recycling of revaluation loss of available for sale financial asset	1.4	-
Impairment of financial assets	1.5	-
Change in fair value of financial instruments	0.2	(0.2)
Gross interest cost	10.4	11.7
Interest capitalised	(6.9)	(7.0)
Interest receivable	(1.1)	(1.4)
	2.4	3.3

7. Valuation

The valuation of the Group's properties as at 30 September 2014, including tenant incentives and our share of gross assets in joint ventures and associates, was £784.1 million. This is an increase of £14.2 million, net of capital expenditure, since 31 March 2014. The increase has arisen principally due to a 5.6% increase in development land over the last six months, following an increase of 8.2% in the second half of last year.  The valuation surplus has been offset in part by the Group's share of a deficit arising in Quercus. 

		30 September 2014 £m	31 March 2014 £m	Movement(1) LFL %
Wembley	Investment assets	267.6	254.2	2.1%
	In development (Quintain Keystone JV)	17.6	-	n/a
	Development land	332.9	334.9	5.6%
London Portfolio	Investment assets, development land	83.2	23.9	1.1%
Quercus	Long-term healthcare	53.7	57.8	(4.8)%
Non-core	Secondary property	29.1	33.3	(0.5)%
Continuing		784.1	704.1	2.8%
iQ	Student accommodation	-	216.0	-
Total		784.1	920.1	2.8%

⁽¹⁾Like for like movement net of capital expenditure and excluding capitalised interest.

8. Net assets per share

	30 September 2014	30 September  2013
IFRS net assets (excluding non-controlling interest)	611.6	549.7
IFRS NAV per share	117	106
EPRA net assets	614.2	554.5
EPRA NAV per share(1)	116	107

⁽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.

9. Contractual capital commitments

As at 30 September 2014, the Group has contractual capital commitments of £19.8 million (30 September 2013: £56.9 million) and the Group's share of capital commitments in relation to its joint ventures was £39.5 million (30 September 2013: £0.2 million). Both relate primarily to ongoing construction and infrastructure work at Wembley. 

10. Cash flow

The net cash inflow from operating activities was £20.7 million (2013: £8.8 million) of which £22.7 million relates to the transfer of land to the Quintain Keystone joint venture. Proceeds from the sale of iQ realised £104.9 million. Investment in the development and purchase of investment properties totaled £78.5 million (2013: £28.8 million) during the period.

11. Risk management

The core risks to the business remain as presented in the Annual Report in May, namely economic risk in relation to real estate valuations, development risk and operational risk.

12. Financing strategy and capital structure

Since 31 March 2014, the Company has reduced net debt from £208.9 million to £178.3 million which results in a gearing of 29%.  We have enhanced our financial platform by extending our bilateral banking facilities through extending the bank facilities from March 2016 to the last quarter of 2018 and into 2019. The key terms are broadly in line with the existing facilities with headline margins of 190 basis points. Together with the £115.0 million bond issued in 2013 and a rolling £20 million overdraft facility, Quintain now has £375.0 million of debt facilities with an average maturity of five years. This presents the opportunity to deliver value at Wembley Park and selectively invest in opportunities elsewhere in London, the intention being to manage the balance sheet gearing between its current level and 50%; ensuring the actual level is appropriate to the nature and risk profile of the Group's assets at any point in time.  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 and providing us with liquidity and operational flexibility. Subsequent to the reporting period, the Quintain Keystone joint venture agreed a £70 million facility with Lloyds Bank to support construction on the site.

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 30 September 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.

The Group's key financial covenants are an interest cover covenant and a gearing covenant as shown below. 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 information on a going concern basis.

Debt summary

	Covenant	30 September 2014	31 March 2014
Cash		£(7.2)m	£(10.3)m
Bank loans and overdrafts  < 1 year		£9.7m	-
Bank loans > 1 year		£175.8m	£219.2m
Net debt		£178.3m	£208.9m
Undrawn committed facilities		£190.3m	£245.5m
Weighted average debt maturity (full facility)		4.7 years	3.1 years
Weighted average interest rate		5.3%	4.2%
Incremental cost of bank debt		3.4%	3.9%
% of debt fixed		89.0%	75.3%
% of debt capped		11.0%	24.7%
Interest cover(1)	1.25x	n/a(3)	20.5x
Gearing(2)	110%	29%	35%

 ⁽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.

⁽²⁾Gearing, per our banking covenants, is 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.

⁽³⁾Net interest receivable, per banking covenant definition.

13. EPRA Information

The basic net asset value per share at 30 September 2014 was 117p, up from 106p in 2013. The EPRA net asset value per share at 30 September 2014 was 116p, up from 107p in 2013.

Reconciliation to EPRA NAV per share	30 September 2014	30 September 2013
IFRS net assets	611.6	549.7
EPRA adjustments
Dilutive effect on options	1.4	-
Deferred tax arising on revaluation movements, capital allowances and derivatives
Group	3.7	8.2
Joint ventures	0.2	(3.9)
Associates	(3.0)	0.3
Fair value adjustments on derivatives
Group	0.4	1.1
Joint ventures	(0.1)	(0.9)
EPRA net assets	614.2	554.5
EPRA NAV per share	116	107

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

EPRA earnings per share	30 September 2014			30 September 2013
	Shares m	Earnings £m	Earnings per share Pence	Shares m	Earnings £m	Earnings per share Pence
IFRS fully diluted earnings per share - continuing operations		11.0	2.1		(1.0)		(0.2)
IFRS fully diluted earnings per share - discontinued operations		0.1	-		8.1		1.5
IFRS fully diluted earnings/(loss) per share	525.8	11.1	2.1	519.8	7.1		1.3
Revaluation movements
Group - continuing operations		(15.2)	(2.9)		(7.5)		(1.4)
Joint ventures and associates - continuing operations		1.0	0.2		2.3		0.4
Joint ventures and associates - discontinued operations		-	-		(4.2)		(0.8)
Group - discontinued operations		-	-		1.5		0.3
Loss/(profit) on disposals
Group - continuing operations		0.3	0.1		(0.5)		(0.1)
Joint ventures and associates - continuing operations		0.1	-		1.2		0.2
Group - discontinued operations		1.0	0.2		1.2		0.2
Deferred tax arising on revaluation movements, capital allowances, derivatives
Group		2.3	0.4		2.0		0.4
Joint ventures		0.3	0.1		0.8		0.2
Fair value adjustments on financial instruments
Group - continuing operations		3.1	0.6		2.8		0.6
Joint ventures - continuing operations		-	-		(0.7)		(0.1)
EPRA earnings per share fully diluted	525.8	4.0	0.8	519.8	6.0		1.2

14. Financial Outlook

Quintain has continued to make significant progress in its financial transformation and has a robust financial platform in place from which to deliver on our strategy of increasing the pace of delivery at Wembley Park. Our focus is to deliver high quality residential development and continuing to grow the income streams of our investment assets. We also have the ability to selectively invest in attractive assets elsewhere in London.

Richard Stearn

Finance Director

25 November 2014

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

·       the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

·       the interim management report includes a fair review of the information required by:

a)   DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

On behalf of the Board

Maxwell James Chief Executive 24 November 2014

Richard Stearn Finance Director 24 November 2014

Forward looking statements

This document contains certain forward-looking statements which, by their nature, involve risk and uncertainty because they relate to or depend upon future events and circumstances. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by these forward looking statements, including a number of factors outside Quintain's control. All forward-looking statements are based upon information known to Quintain on the date of this document 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. Quintain gives no undertaking to update forward-looking statements whether as a result of new information, future events or otherwise, except to the extent legally required.

INDEPENDENT REVIEW REPORT TO QUINTAIN ESTATES AND DEVELOPMENT PLC

Introduction 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 which comprises the Consolidated Income Statement, Consolidated Statement of Other Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

As disclosed in note 1.1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 

Our responsibility 

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

Scope of review 

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

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. 

Bill Holland

for and on behalf of KPMG LLP 

Chartered Accountants 

15 Canada Square

London

E14 5GL

24 November 2014

Quintain Estates & Development PLC

Introduction and table of contents

The notes to the interim financial statements have been grouped together under the following headings: ·  Preparation of financial statements ·  Performance for the period ·  Property assets, joint ventures and associates ·  Acquisitions and disposals ·  Other assets and liabilities ·  Funding

Primary statements

Consolidated Income Statement

Consolidated Statement of Other Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Section 1:  Preparation of financial statements

1.1 Accounting policies

1.2 Significant judgements and estimates

1.3 Going concern

Section 2:  Performance for the period

2.1 Underlying results for the period

2.2 Segmental information

2.3 Revenue, cost of sales and gross profit

2.4 Property revaluation movements

2.5 Net finance expenses

2.6 Taxation

2.7 Earnings per share and net asset value per share

Section 3:  Property assets, joint ventures and associates

3.1 Investment properties

3.2 Capital commitments

3.3 Investment in joint ventures and associates

Section 4:  Acquisitions and disposals

4.1 Discontinued operations

Section 5:  Other assets and liabilities

5.1 Non-current receivables

5.2 Current trade and other receivables

5.3 Other payables (non-current)

5.4 Current trade and other payables

Section 6:  Funding

6.1 Bank loans and other borrowings

Consolidated Income Statement        

For the six months ended 30 September 2014

	Notes	Unaudited Six months ended	Unaudited Six months ended	Audited Year ended
		30 Sept 2014	30 Sept 2013	31 March 2014
			Restated1
		£m	£m	£m
Revenue	2.3	38.8	10.8	32.6
Cost of sales	2.3	(30.5)	(7.0)	(24.3)
Gross profit		8.3	3.8	8.3
Administrative expenses		(8.0)	(8.2)	(17.4)
Operating profit/(loss) before recognition of results from joint ventures, associates, non-current asset sales and revaluation		0.3	(4.4)	(9.1)
Share of profit/(loss) from joint ventures (including revaluation)	3.3	1.3	(1.1)	(2.7)
Share of (loss)/profit from associates	3.3	(1.7)	-	0.2
Operating loss before non-current asset sales and revaluation		(0.1)	(5.5)	(11.6)
(Loss)/profit from sale of non-current assets		(0.3)	0.5	1.7
Surplus on revaluation of investment properties	2.4	15.2	7.5	22.4
Operating profit		14.8	2.5	12.5
Finance income	2.5	1.1	1.4	2.7
Finance costs	2.5	(3.5)	(4.7)	(10.5)
Profit/(loss) before tax		12.4	(0.8)	4.7
Tax (charge)/credit for the period	2.6	(1.4)	(0.2)	6.3
Profit/(loss) for continuing operations		11.0	(1.0)	11.0
Discontinued operations
Gross profit		0.2	4.6	5.8
Share of profit from joint ventures	3.3	0.9	5.8	8.6
(Loss)/profit from sale of non-current assets		(1.0)	(1.2)	32.5
Deficit on revaluation of investment properties		-	(1.5)	(1.4)
Operating profit		0.1	7.7	45.5
Finance income		-	1.9	2.4
Finance costs		-	(1.1)	(1.2)
Profit before tax		0.1	8.5	46.7
Tax charge for the period		-	(0.4)	(4.8)
Profit on discontinued operations	4.1	0.1	8.1	41.9
Profit for the financial period		11.1	7.1	52.9
Attributable to:
Equity shareholders		11.1	7.1	52.9
Non-controlling interest		-	-	-
		11.1	7.1	52.9
Earnings per share (pence):
Basic and diluted	2.7	2.1	1.3	10.2
Earnings per share - continuing operations (pence):
Basic and diluted	2.7	2.1	(0.2)	2.1

¹See note 1.1.

Consolidated Statement of Other Comprehensive Income

For the six months ended 30 September 2014

	Notes	Unaudited Six months ended	Unaudited Six months ended	Audited Year ended
		30 Sept 2014	30 Sept 2013	31 March 2014
			Restated1
		£m	£m	£m
Profit for the financial period		11.1	7.1	52.9
Surplus/(deficit) on revaluation of other non-current investments		0.5	0.1	(0.1)
Recycling of revaluation loss of available for sale financial asset		1.4	-	-
Fair value adjustment on cash flow hedges		0.2	4.8	6.8
Share of other comprehensive income in joint ventures, net of tax	3.3	-	0.3	0.3
Tax on other comprehensive income		(0.2)	(1.2)	(4.6)
Other comprehensive income for the financial period - continuing operations		1.9	4.0	2.4
Share of other comprehensive income for the financial period in discontinued operations		-	0.4	0.9
Total comprehensive profit for the financial period		13.0	11.5	56.2
Attributable to:
Equity shareholders		13.0	11.5	56.2
Non-controlling interest		-	-	-
		13.0	11.5	56.2

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

¹See note 1.1

Consolidated Balance Sheet

As at 30 September 2014

	Notes	Unaudited as at	Unaudited as at	Audited as at
		30 Sept 2014	30 Sept 2013	31 March 2014
		£m	£m	£m
Non-current assets
Investment properties	3.1	653.8	556.8	570.0
Owner-occupied properties, plant and equipment		7.7	0.3	2.0
Intangible assets		5.6	6.3	6.0
Investment in joint ventures	3.3	62.4	204.9	80.3
Investment in associates	3.3	34.3	1.5	1.7
Non-current receivables	5.1	11.6	6.9	11.0
Deferred tax asset		-	-	0.9
Total non-current assets		775.4	776.7	671.9
Current assets
Trading properties		5.9	9.6	28.5
Trade and other receivables	5.2	38.3	27.4	42.3
Cash and cash equivalents		7.2	26.7	10.3
Assets held for sale		-	256.5	106.2
Total current assets		51.4	320.2	187.3
Total assets		826.8	1,096.9	859.2
Current liabilities
Bank loans and other borrowings	6.1	(9.7)	(34.3)	-
Trade and other payables	5.4	(26.2)	(49.8)	(27.9)
Current tax liability		(1.3)	(1.0)	(1.3)
Liabilities held for sale		-	(42.9)	-
Total current liabilities		(37.2)	(128.0)	(29.2)
Non-current liabilities
Bank loans and other borrowings	6.1	(172.6)	(404.2)	(216.7)
Deferred tax liability		(0.7)	-	-
Obligations under finance leases		(1.2)	(9.9)	(10.7)
Other payables	5.3	(3.5)	(4.8)	(7.2)
Total non-current liabilities		(178.0)	(418.9)	(234.6)
Total liabilities		(215.2)	(546.9)	(263.8)
Net assets		611.6	550.0	595.4
Equity
Share capital		131.5	130.2	130.2
Share premium		138.9	137.3	137.3
Other capital reserves		108.7	107.2	107.0
Cash flow hedge reserve		(0.3)	(6.9)	(0.5)
Retained earnings		240.6	189.7	229.2
Own shares reserve		(7.8)	(7.8)	(7.8)
Equity shareholders' funds		611.6	549.7	595.4
Non-controlling interest		-	0.3	-
Total equity		611.6	550.0	595.4
Net asset value per share (pence):	2.7
Basic		117	106	115
Diluted		116	106	114

Consolidated Statement of Changes in Equity

For the six months ended 30 September 2014 (unaudited)

	Issued capital	Share premium account	Other capital reserves	Cashflow hedge reserve	Retained earnings	Own shares held reserve	Equity shareholders' funds	Non-controlling interest	Unaudited Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance 1 April 2014	130.2	137.3	107.0	(0.5)	229.2	(7.8)	595.4	-	595.4
Profit for the financial period	-	-	-	-	11.1	-	11.1	-	11.1
Other comprehensive income for the period, net of tax	-	-	1.7	0.2	-	-	1.9	-	1.9
Total comprehensive income for the financial period	-	-	1.7	0.2	11.1	-	13.0	-	13.0
Cost relating to share-based payment schemes	-	-	-	-	0.3	-	0.3	-	0.3
Issue of share capital	1.3	1.6	-	-	-	-	2.9	-	2.9
Balance 30 September 2014	131.5	138.9	108.7	(0.3)	240.6	(7.8)	611.6	-	611.6

Consolidated Statement of Changes in Equity

For the six months ended 30 September 2013 (unaudited)

	Issued capital	Share premium account	Other capital reserves	Cashflow hedge reserve	Retained earnings	Own shares held reserve	Equity shareholders' funds	Non-controlling interest	Unaudited 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 financial period	-	-	-	-	7.1	-	7.1	-	7.1
Other comprehensive income for the period, net of tax	-	-	0.1	4.3	-	-	4.4	-	4.4
Total comprehensive income for the financial period	-	-	0.1	4.3	7.1	-	11.5	-	11.5
Cost relating to share-based payment schemes	-	-	-	-	0.1	-	0.1	-	0.1
Balance 30 September 2013	130.2	137.3	107.2	(6.9)	189.7	(7.8)	549.7	0.3	550.0

Consolidated Statement of Changes in Equity

For the year ended 31 March 2014

	Issued capital	Share premium account	Other capital reserves	Cashflow hedge reserve	Retained earnings	Own shares reserve	Equity shareholders' funds	Non-controlling interest	Audited 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
Cost relating to share-based payment schemes	-	-	-	-	1.1	-	1.1	-	1.1
Disposal of subsidiary with a non- controlling interest	-	-	-	-	-	-	-	(0.3)	(0.3)
Transfer between reserves	-	-	-	7.3	(7.3)	-	-	-	-
Balance 31 March 2014	130.2	137.3	107.0	(0.5)	229.2	(7.8)	595.4	-	595.4

Consolidated Cash Flow Statement

For the six months ended 30 September 2014

		Unaudited Six months ended	Unaudited Six months ended	Audited Year ended
		30 Sept 2014	30 Sept 2013	31 March 2014
		£m	£m	£m
Operating activities
Profit for the financial period		11.1	7.1	52.9
Adjustments for:
Depreciation of plant and equipment		0.3	0.1	0.1
Amortisation of intangible assets		0.4	0.4	0.8
Cost relating to share-based payment schemes		0.3	0.1	0.6
Net finance expenses		2.4	2.5	6.6
Loss/(profit) on sale of non-current assets		1.3	0.7	(34.2)
Surplus on revaluation of investment properties		(15.2)	(6.0)	(21.0)
Share of profit from joint ventures		(2.2)	(4.7)	(5.9)
Share of loss/(profit) from associates		1.7	-	(0.2)
Taxation		1.4	0.6	(1.5)
		1.5	0.8	(1.8)
(Increase)/decrease in trade and other receivables		(0.9)	0.6	(15.3)
Increase in trade and other payables		2.7	14.5	5.9
Decrease in trading properties		22.7	0.6	5.1
Cash generated from operations		26.0	16.5	(6.1)
Interest paid		(5.7)	(7.9)	(16.0)
Interest received		0.4	0.5	1.2
Tax paid		-	(0.3)	(0.3)
Net cashflow from operating activities		20.7	8.8	(21.2)
Investing activities
Proceeds from sale of investment properties		1.0	6.8	75.3
Purchase and development of investment properties		(78.5)	(28.8)	(69.0)
Purchase of owner-occupied properties, plant and equipment		(2.7)	(0.1)	(1.8)
Purchase of other non-current investments		-	-	(5.8)
Proceeds from sale of non-current investments		1.6	1.5	3.2
Proceeds from sale of joint ventures		104.7	-	243.7
Capital and loan payments advanced to joint ventures		(15.4)	-	-
Capital and loan repayments received from joint ventures		-	2.1	5.2
Distributions received from joint ventures		1.7	2.7	8.2
Net cashflow from investing activities		12.4	(15.8)	259.0
Financing activities
Proceeds from new borrowings		-	115.0	115.0
Repayment of borrowings		(43.4)	(123.9)	(384.0)
Payment of loan issue costs		(2.1)	(1.6)	(2.3)
Payment of finance lease liabilities		(0.4)	(0.4)	(0.8)
Net cashflow from financing activities		(45.9)	(10.9)	(272.1)
Net decrease in cash		(12.8)	(17.9)	(34.3)
Cash at start of period		10.3	44.6	44.6
Cash at end of period		(2.5)	26.7	10.3
Cash is represented by:
Cash and cash equivalents		7.2	26.7	10.3
Bank overdraft		(9.7)	-	-
		(2.5)	26.7	10.3

Notes to the accounts

For the six months ended 30 September 2014

Section 1: Preparation of financial statements

1.1 Accounting policies

The financial information contained in this half year report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The results for the year ended 31 March 2014 are an abridged version of the full accounts for that year, which received an unqualified report from the auditors, did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 or include a reference to any matter to which the auditors drew attention by way of matter of emphasis without qualifying their report, and have been filed with the Registrar of Companies. The annual financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The condensed set of financial statements included in this report has been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union.

The comparative Consolidated Income Statement has been restated to show the discontinued operations separately from continuing operations (see note 4.1).  In the 31 March 2014 financial statements staff costs were reclassified from administrative expenses to cost of sales to better to reflect the nature of work done by certain employees, as a result the September 2013 comparative has been restated and £1.4m of staff costs have been reclassified.

Significant accounting policies

The same accounting policies, presentation and key sources of estimation are followed in this condensed set of financial statements as applied to the latest audited annual financial statements, as amended to reflect the adoption of new standards, amendments and interpretation which became effective in the period. The following standards, amendments and interpretations endorsed by the EU are effective for the period ended 30 September 2014, and had no material impact on the financial information:

IAS 27 (revised) 'Separate Financial Statements'

IAS 28 (revised) 'Investment in Associates and Joint Ventures'

IAS 32 (amended) 'Offsetting Financial Assets and Financial Liabilities'

IAS 36 (amended) 'Recoverable Amounts Disclosures for Non-Financial Assets'

IAS 39 (amended) 'Novation of Derivatives and Continuation of Hedge Accounting'

IFRS 10 'Consolidated Financial Statements'

IFRS 11 'Joint Arrangements'

IFRS 12 'Disclosures of Interest in Other Entities'

1.2 Significant judgements and estimates

The preparation of the interim financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenue and expense 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 the estimates.

In preparing these financial statements the key judgements and estimates made by the Board are consistent with those applied in the financial statements as of, and for the year ended, 31 March 2014. There have been no material changes to reportable contingent liabilities since 31 March 2014 and the Group's financial performance does not suffer materially from seasonal fluctuations.

1.3 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 30 September 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. 

Notes to the accounts (continued)

Section 2: Performance for the period

2.1 Underlying results for the period

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

		Unaudited Six months ended 30 Sept 2014				Unaudited Six months ended 30 Sept 2013 restated				Audited Year ended 31 March 2014
	Adjusted	Removal of discontinued operations	Capital1	Total	Adjusted	Removal of discontinued operations	Capital1	Total	Adjusted	Removal of discontinued operations	Capital1	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue	39.1	(0.3)	-	38.8	16.3	(5.5)	-	10.8	39.8	(7.2)	-	32.6
Cost of sales	(30.2)	0.1	(0.4)	(30.5)	(7.5)	0.9	(0.4)	(7.0)	(24.9)	1.4	(0.8)	(24.3)
Gross profit/(loss)	8.9	(0.2)	(0.4)	8.3	8.8	(4.6)	(0.4)	3.8	14.9	(5.8)	(0.8)	8.3
Administrative expenses	(8.0)	-	-	(8.0)	(8.2)	-	-	(8.2)	(17.4)	-	-	(17.4)
Operating profit/(loss) before recognition of results from joint ventures, associates, non-current asset sales and revaluation	0.9	(0.2)	(0.4)	0.3	0.6	(4.6)	(0.4)	(4.4)	(2.5)	(5.8)	(0.8)	(9.1)
Share of profit/(loss) from joint ventures	0.8	(0.9)	1.4	1.3	4.1	(5.8)	0.6	(1.1)	9.4	(8.6)	(3.5)	(2.7)
Share of profit/(loss) from associates	1.0	-	(2.7)	(1.7)	-	-	-	-	-	-	0.2	0.2
Profit/(loss) from the sale of non-current assets	-	1.0	(1.3)	(0.3)	-	1.2	(0.7)	0.5	-	(32.5)	34.2	1.7
Surplus on revaluation of investment properties	-	-	15.2	15.2	-	1.5	6.0	7.5	-	1.4	21.0	22.4
Operating profit/ (loss)	2.7	(0.1)	12.2	14.8	4.7	(7.7)	5.5	2.5	6.9	(45.5)	51.1	12.5
Finance income	1.1	-	-	1.1	3.3	(1.9)	-	1.4	5.1	(2.4)	-	2.7
Finance costs	(0.5)	-	(3.0)	(3.5)	(4.9)	1.1	(0.9)	(4.7)	(7.8)	1.2	(3.9)	(10.5)
Net finance income/(expenses)	0.6	-	(3.0)	(2.4)	(1.6)	(0.8)	(0.9)	(3.3)	(2.7)	(1.2)	(3.9)	(7.8)
Profit/(loss) before tax	3.3	(0.1)	9.2	12.4	3.1	(8.5)	4.6	(0.8)	4.2	(46.7)	47.2	4.7

¹For these purposes revaluation movements, disposals, mark to market adjustments and amortisation of intangibles are included within capital items for continuing operations.

Notes to the accounts (continued)

2.2 Segmental information

The Group 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 services), Quercus (asset management of and share of results due to 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. All of the Group's revenues are derived from external customers. There are no inter-segmental revenues.  The 30 September 2013 comparative segmental analysis has been restated to reflect the current business structure.  The segmental information of the Group's results for the six months ended 30 September 2014 was as follows:

	Wembley	London Portfolio	Quercus	Non-Core	Total from continuing operations	Discontinued operations iQ	Total
	£m	£m	£m	£m	£m	£m	£m
Revenue	33.1	3.7	0.7	1.3	38.8	0.3	39.1
Cost of sales	(27.8)	(1.4)	(0.5)	(0.8)	(30.5)	(0.1)	(30.6)
Gross profit	5.3	2.3	0.2	0.5	8.3	0.2	8.5
Share of profit from joint ventures	0.8	-	-	0.5	1.3	0.9	2.2
Share of (loss)/profit from associates	-	-	(1.8)	0.1	(1.7)	-	(1.7)
Profit/(loss) from the sale of non-current assets	0.5	-	-	(0.8)	(0.3)	(1.0)	(1.3)
Surplus/(deficit) on revaluation of investment properties	14.6	0.9	-	(0.3)	15.2	-	15.2
Operating profit/(loss) before administrative expenses	21.2	3.2	(1.6)	-	22.8	0.1	22.9
Adjusted	4.7	2.7	1.2	1.0	9.6	1.1	10.7
Capital1	16.5	0.5	(2.8)	(1.0)	13.2	(1.0)	12.2
Operating profit/(loss) before administrative expenses	21.2	3.2	(1.6)	-	22.8	0.1	22.9

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

Notes to the accounts (continued)

2.2 Segmental information (continued)

The segmental information of the Group's results for the six months ended 30 September 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	6.0	1.5	1.1	2.2	10.8	1.1	1.2	3.2	16.3
Cost of sales	(3.8)	(1.1)	(0.6)	(1.5)	(7.0)	(0.4)	-	(0.5)	(7.9)
Gross profit	2.2	0.4	0.5	0.7	3.8	0.7	1.2	2.7	8.4
Share of (loss)/profit from joint ventures	-	-	(2.2)	1.1	(1.1)	7.0	(1.2)	-	4.7
Profit/(loss) from the sale of non-current assets	2.0	-	-	(1.5)	0.5	-	-	(1.2)	(0.7)
Surplus/(deficit) on revaluation of investment properties	7.6	0.6	-	(0.7)	7.5	-	-	(1.5)	6.0
Operating profit/(loss) before administrative expenses	11.8	1.0	(1.7)	(0.4)	10.7	7.7	-	-	18.4
Adjusted	2.2	0.8	1.8	2.0	6.8	3.2	0.2	2.7	12.9
Capital¹	9.6	0.2	(3.5)	(2.4)	3.9	4.5	(0.2)	(2.7)	5.5
Operating profit/(loss) before administrative expenses	11.8	1.0	(1.7)	(0.4)	10.7	7.7	-	-	18.4

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

Notes to the accounts (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
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 the sale of non-current assets	2.5	-	-	(0.8)	1.7	-	32.3	0.2	34.2
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
Capital¹	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

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

Notes to the accounts (continued)

2.2 Segmental information (continued)

The segmental information of the Group's Balance Sheet as at 30 September 2014 was as follows:

	Wembley	London Portfolio	Quercus	Non-Core	Total
	£m	£m	£m	£m	£m
Investment properties	555.5	83.2	-	15.1	653.8
Intangible assets	-	5.6	-	-	5.6
Investment in joint ventures	43.8	-	-	18.6	62.4
Investment in associates	-	-	32.5	1.8	34.3
Non-current receivables	3.1	6.6	-	1.9	11.6
Trading properties	0.3	-	-	5.6	5.9
Other current assets	25.9	4.0	0.5	8.3	38.7
Total segmented assets	628.6	99.4	33.0	51.3	812.3
Unallocated assets					14.5
Total assets					826.8
Capital expenditure	8.9	58.3	-	5.4	72.6

Notes to the accounts (continued)

2.2 Segmental information (continued)

The segmental analysis of the Group's Balance Sheet as at 30 September 2013 (restated) was as follows:

	Wembley	London Portfolio	Quercus	Non-core	iQ	Greenwich	Total
	£m	£m	£m	£m	£m	£m	£m
Investment properties	513.7	9.2	-	28.1	-	5.8	556.8
Intangible assets	-	6.3	-	-	-	-	6.3
Investment in joint ventures	30.4	-	36.1	17.8	104.1	16.5	204.9
Investment in associates	-	-	-	1.5	-	-	1.5
Non-current receivables	4.5	-	-	2.4	-	-	6.9
Trading properties	0.2	-	-	9.4	-	-	9.6
Other current assets	3.1	-	-	10.7	-	-	13.8
Total segmented assets	551.9	15.5	36.1	69.9	104.1	22.3	799.8
Unallocated assets							40.6
Assets held for sale							256.5
Total assets							1,096.9
Capital expenditure	37.9	-	-	0.2	-	-	38.1

Notes to the accounts (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	Total
	£m	£m	£m	£m	£m
Investment properties	526.4	23.9	-	19.7	570.0
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
Trading property	23.0	-	-	5.5	28.5
Other current assets	29.4	3.4	0.5	11.4	44.7
Total segmented assets	609.5	38.6	34.8	59.3	742.2
Unallocated assets					10.8
Assets held for sale					106.2
Total assets					859.2
Capital expenditure	53.7	14.5	-	0.2	68.4

Notes to the accounts (continued)

2.3 Revenue, cost of sales and gross profit

	Unaudited six months ended 30 Sept 2014			Unaudited six months ended 30 Sept 2013			Audited year ended 31 March  2014
						restated
	Revenue	Cost of sales	Gross profit	Revenue	Cost of sales	Gross profit	Revenue	Cost of sales	Gross profit
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Rental income	9.3	(2.4)	6.9	3.7	(2.4)	1.3	10.3	(6.5)	3.8
Income from sale of trading properties	22.7	(22.7)	-	0.6	(0.7)	(0.1)	5.1	(5.4)	(0.3)
Fees from asset and development management	2.5	(1.4)	1.1	2.5	(1.3)	1.2	9.6	(6.5)	3.1
Intangible asset amortisation	-	(0.4)	(0.4)	-	(0.4)	(0.4)	-	(0.8)	(0.8)
Other income	4.3	(3.6)	0.7	4.0	(2.2)	1.8	7.6	(5.1)	2.5
	38.8	(30.5)	8.3	10.8	(7.0)	3.8	32.6	(24.3)	8.3

Net rental income	Unaudited Six months ended 30 Sept 2014	Unaudited Six months ended 30 Sept 2013	Audited Year ended 31 March 2014
		restated
	£m	£m	£m
Group net rental income	6.9	1.3	3.8
Share of JV and associate net rental income	2.9	3.3	6.4
Combined net rental income	9.8	4.6	10.2

Notes to the accounts (continued)

2.4 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:

		Unaudited Six months ended 30 Sept 2014	Unaudited Six months ended 30 Sept 2013	Audited Year ended 31 March 2014
			restated
		£m	£m	£m
Recognised in Income Statement:
Surplus on revaluation of directly held investment properties		15.2	7.5	22.4
Surplus/(deficit) on revaluation of investment properties in joint ventures		1.6	(2.3)	(5.1)
(Deficit)/surplus on revaluation of investment properties in associates		(2.6)	-	0.2
		14.2	5.2	17.5

Included in discontinued operations is a deficit on revaluation of investment properties of £nil (30 September 2013: £1.5m and 31 March 2013: £1.4m) relating to the Sequel portfolio and a surplus on investment properties in joint ventures of £nil (30 September 2013: £4.2m and 31 March 2014: £6.1m).

2.5 Net finance expenses

		Unaudited Six months ended 30 Sept 2014	Unaudited Six months ended 30 Sept 2013	Audited Year ended 31 March 2014
			restated
		£m	£m	£m
Interest expense on bank debt and associated swaps		6.9	8.6	16.8
Interest on obligations under finance leases		0.4	0.3	0.7
Interest payable		7.3	8.9	17.5
Recycling of revaluation loss of available for sale financial asset		1.4	-	-
Impairment of financial assets (note 5.2)		1.5	-	2.5
Change in fair value of ineffective caps		0.2	(0.1)	-
Recycling of fair value adjustment on effective swaps		-	3.0	4.2
Interest capitalised		(6.9)	(7.1)	(13.7)
Finance costs		3.5	4.7	10.5
Finance income: interest income on loans and receivables		(1.1)	(1.4)	(2.7)
		2.4	3.3	7.8

Notes to the accounts (continued)

2.6 Taxation

i) Tax charge/(credit) on profit/(loss)

		Unaudited Six months ended 30 Sept 2014	Unaudited Six months ended 30 Sept 2013	Audited Year ended 31 March 2014
			restated
		£m	£m	£m
UK current tax at 21% (30 Sept 2013 and 31 March 2014: 23%)		-	-	(4.4)
Deferred tax		1.4	0.2	(1.9)
Tax charge/(credit)		1.4	0.2	(6.3)

Tax expense is recognised based on the best estimate of the weighted-average annual income tax rate expected for the full financial year multiplied by the pre-tax income of the interim reporting period.

Deferred tax has been calculated at the substantively enacted rate of 20% effective from 1 April 2015.

 2.7 Earnings per share and net asset value per share

Earnings per share

	Unaudited 30 Sept 2014			Unaudited 30 Sept 2013 restated			Audited 31 March 2014
	Earnings £m	Number of shares m	Earnings per share pence	Earnings £m	Number of shares m	Earnings per share pence	Earnings £m	Number of shares m	Earnings per share pence
Issued shares		524.6			521.5			521.3
Less: Treasury shares		(2.2)			(2.2)			(2.2)
Basic - continuing operations	11.0	522.4	2.1	(1.0)	519.3	(0.2)	11.0	519.1	2.1
Basic - discontinued operations	0.1	522.4	-	8.1	519.3	1.5	41.9	519.1	8.1
Basic	11.1	522.4	2.1	7.1	519.3	1.3	52.9	519.1	10.2
Adjustment:
Employee share-based payment schemes	-	3.4		-	0.5		-	0.9
Diluted	11.1	525.8	2.1	7.1	519.8	1.3	52.9	520.0	10.2
Revaluation movements - continuing operations	(14.2)	-		(5.2)	-		(17.5)	-
Revaluation movements - discontinued operations	-	-		(2.7)	-		(4.6)	-
Losses/(gains) on disposals - continuing operations	0.4	-		0.7	-		(0.2)	-
Losses/(gains) on disposals - discontinued operations	1.0	-		1.2	-		(32.5)	-
Fair value adjustments on financial instruments - continuing operations	3.1	-		2.1	-		6.7	-
Fair value adjustments on financial instruments  - discontinued operations	-	-		-	-		(0.5)	-
Deferred tax	2.6	-		2.8	-		1.6	-
EPRA	4.0	525.8	0.8	6.0	519.8	1.2	5.9	520.0	1.1

Notes to the accounts (continued)

2.7 Earnings per share and net asset value per share (continued)

Net asset value per share

Although not required under IFRS, net asset value per share is considered a key performance indicator in the sector in which the Group operates.

	Unaudited 30 Sept 2014			Unaudited 30 Sept 2013 restated			Audited 31 March 2014
	Equity shareholders' funds £m	Number of shares m	Net asset value per share pence	Equity shareholders' funds £m	Number of  shares m	Net asset value per share pence	Equity shareholders' funds £m	Number of shares m	Net asset value per share pence
Net assets	611.6	526.1		549.7	521.5		595.4	521.5
Less: Treasury shares	-	(2.2)		-	(2.2)		-	(2.2)
Basic	611.6	523.9	117	549.7	519.3	106	595.4	519.3	115
Adjustment:
Employee share-based payment schemes	1.4	3.5		-	0.7		2.8	6.9
Diluted	613.0	527.4	116	549.7	520.0	106	598.2	526.2	114
Fair value of derivatives	0.3	-		0.2	-		(0.6)	-
Deferred tax	0.9	-		4.6	-		0.6	-
EPRA	614.2	527.4	116	554.5	520.0	107	598.2	526.2	114

Notes to the accounts (continued)

Section 3: Property assets, joint ventures and associates

3.1 Investment properties 

The movements in investment properties were as follows:

				Unaudited 30 Sept 2014	Unaudited 30 Sept 2013	Audited 31 March 2014
				£m	£m	£m
Opening balance				570.0	562.5	562.5
Additions - capital expenditure				3.2	38.3	55.1
Additions - new property				69.4	-	14.5
Interest capitalised				6.9	7.1	13.7
Disposals				(10.9)	(3.2)	(74.1)
Transfer to trading properties				-	-	(22.7)
Revaluation surplus - continuing				15.2	7.5	22.4
Revaluation deficit - discontinued				-	(1.5)	(1.4)
Transferred to assets held for sale				-	(53.9)	-
Closing balance				653.8	556.8	570.0

The Group's investment properties were externally valued as at 30 September 2014 on the basis of market value by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors.

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

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 period.

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)

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 £332.9m Expected average private residential sales price inflation 4.5%. Expected average private residential build cost inflation 4.3% Private residential sales value; £590 to £665 per sq. ft NIA. Private residential direct build cost; £240 to £340 per sq. ft NIA. Future site-wide costs £153.5m Risk adjusted discount rate of 14.5%.	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
Wembley investment assets 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 £222.6m Gross ERV: £18.8m Net Initial Yield: 4.4% (0% - 9.4%) Equivalent Yield: 7.1% (5.8% - 11.9%)	The estimated fair value would increase if: An increase in the Gross ERV A decrease in the Net Initial Yield A decrease in the Equivalent Yield
London Portfolio investment assets: 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 and potential for alternative use.	Value of London Portfolio investments assets £83.2m Gross ERV: £6.0m Net Initial Yield: 5.6% (3.9% - 7.9%) Equivalent Yield: 5.9% (4.0% - 7.8%)	The estimate fair value would increase if: An increase in the Gross ERV A decrease in the Net Initial 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.

Notes to the accounts (continued)

3.2 Capital commitments

As at 30 September 2014, the Group had capital commitments of £19.8m (30 September 2013: £56.9m and 31 March 2014: £19.0m) in relation to its own developments held as investment properties.

The Group's share of capital commitments in relation to its joint ventures was £39.5m (30 September 2013: £0.2m and 31 March 2014: £0.1m).

3.3 Investment in joint ventures and associates

The movements in investment in joint ventures were as follows:

			Unaudited 30 Sept  2014	Unaudited 30 Sept 2013	Audited 31 March 2014
				restated
			£m	£m	£m
Opening balance			80.3	356.8	356.8
Additions			15.4	1.0	-
Amounts repaid			-	(2.1)	(2.6)
Amounts repaid by discontinued operation			-	-	(2.7)
Disposals			-	-	(168.7)
Distributions			(0.3)	(3.3)	(6.3)
Reclassified as held for sale			-	(155.2)	(106.2)
Reclassified as associate			(34.3)	-	-
Recognition of deferred profit			-	2.3	2.9
Share of profit/(loss), net of tax			1.3	(1.1)	(2.7)
Share of (loss)/profit discontinued operations, net of tax			-	5.8	8.6
Share of other comprehensive income, net of tax			-	0.3	0.3
Share of other comprehensive income discontinued operations, net of tax			-	0.4	0.9
Closing balance			62.4	204.9	80.3

The movements in investment in associates were as follows:

			Unaudited 30 Sept  2014	Unaudited 30 Sept 2013	Audited 31 March 2014
			£m	£m	£m
Opening balance			1.7	1.5	1.5
Reclassified from joint ventures			34.3	-	-
Share of (loss)/profit, net of tax			(1.7)	-	0.2
Closing balance			34.3	1.5	1.7

During the period Quercus Healthcare Property Unit Trust ("Quercus") was reclassified as an associate following a dilution in voting rights held by the Group.

Notes to the accounts (continued)

3.3 Investment in joint ventures and associates (continued)

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

Summarised income statements for the six months ended 30 September 2014

	Quantum	Hilton	Quintain Keystone	Other joint ventures	Total continuing joint ventures
	£m	£m		£m	£m
Rental income	0.4	4.0	-	-	4.4
Income from sale of trading properties	-	-	-	0.4	0.4
Revenue	0.4	4.0	-	0.4	4.8
Cost of sales	(0.2)	(1.6)	(0.6)	(0.4)	(2.8)
Gross profit/(loss)	0.2	2.4	(0.6)	-	2.0
Administrative expenses	-	(1.7)	-	-	(1.7)
Operating profit/(loss)	0.2	0.7	(0.6)	-	0.3
Loss on disposal of investment properties	-	-	-	-	-
Surplus on revaluation of investment properties	-	1.6	-	-	1.6
Profit/(loss) before net finance expenses and tax	0.2	2.3	(0.6)	-	1.9
Finance income	0.3	-	-	-	0.3
Finance costs	-	(0.7)	-	-	(0.7)
Profit/(loss) before tax	0.5	1.6	(0.6)	-	1.5
Tax	-	(0.3)	0.1	-	(0.2)
Profit/(loss) after tax	0.5	1.3	(0.5)	-	1.3

Included in discontinued operations is a share of profit from joint ventures of £0.9m relating to the iQ joint venture which was classified as assets held for sale as at 31 March 2014.

The Group's share of the summarised income statements for Quercus for the period ended 30 September 2014 was as follows. The other associates' results are not presented as they are immaterial.

		Unaudited 30 Sept 2014 £m
Rental income		2.2
Income from sale of trading properties		0.6
Revenue		2.8
Cost of sales		(0.8)
Gross profit		2.0
Administrative expenses		(0.3)
Operating profit		1.7
Loss on disposal of investment properties		(0.1)
Deficit on revaluation of investment properties		(2.7)
Finance costs		(0.7)
Loss before tax		(1.8)
Tax		-
Loss after tax		(1.8)

Notes to the accounts (continued)

3.3 Investment in joint ventures and associates (continued)

Summarised balance sheets as at 30 September 2014

	Quantum	Hilton	Quintain Keystone	Other joint ventures	Group share in joint ventures
	£m	£m	£m	£m	£m
Investment properties	6.4	29.4	-	-	35.8
Trading properties	-	-	17.6	0.2	17.8
Deferred tax asset	-	-	0.1	-	0.1
Other assets	12.8	1.8	2.5	0.2	17.3
Total assets	19.2	31.2	20.2	0.4	71.0
Current liabilities:
Trade and other payables	(0.9)	(2.1)	(5.3)	(0.1)	(8.4)
Non-current liabilities:
Bank loans and other borrowings	-	(21.0)	(15.0)	-	(36.0)
Other liabilities	-	(0.2)	-	-	(0.2)
Net assets/(liabilities)	18.3	7.9	(0.1)	0.3	26.4
Represented by:
Group share of net assets	18.3	7.9	(0.1)	0.3	26.4
Loans to JVs	-	21.0	15.0	-	36.0
Total investment	18.3	28.9	14.9	0.3	62.4

The Group's share of the summarised balance sheet for Quercus for the period ended 30 September 2014 was as follows.  The other associates' results are not presented as they are immaterial.

		Unaudited 30 Sept 2014 £m
Investment properties		53.7
Deferred tax asset		3.4
Other assets		5.2
Trade and other payables		(1.7)
Bank loans and other borrowings (non-current)		(28.1)
Net assets		32.5

The valuation of properties held within Quercus as at 30 September 2014 was performed by Savills (UK) Limited, within Hilton by Savills Advisory Services Limited and within the Quantum Unit Trust by CBRE Limited.  Valuations have been undertaken on the basis of market value and in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors

Notes to the accounts (continued)

3.3 Investment in joint ventures and associates (continued)

Summarised income statements for the six months ended 30 September 2013 (restated)

	Quercus	Quantum	Hilton	Other joint ventures	Total continuing joint ventures
	£m	£m	£m	£m	£m
Rental income	2.8	0.3	3.7	0.1	6.9
Income from sale  of trading properties	0.2	-	-	1.7	1.9
Other income	-	1.1	-	-	1.1
Revenue	3.0	1.4	3.7	1.8	9.9
Cost of sales	(0.4)	(0.3)	(1.5)	(1.9)	(4.1)
Gross profit/(loss)	2.6	1.1	2.2	(0.1)	5.8
Administrative expenses	(0.4)	-	(1.5)	-	(1.9)
Operating profit/(loss)	2.2	1.1	0.7	(0.1)	3.9
Loss on disposal of investment properties	(1.2)	-	-	-	(1.2)
Deficit on revaluation of investment properties	(2.3)	-	-	-	(2.3)
(Loss)/profit before net finance expenses and tax	(1.3)	1.1	0.7	(0.1)	0.4
Finance income	-	0.3	-	-	0.3
Finance costs	(0.9)	-	(0.7)	-	(1.6)
(Loss)/profit before tax	(2.2)	1.4	-	(0.1)	(0.9)
Tax	-	(0.2)	-	-	(0.2)
(Loss)/profit  after tax	(2.2)	1.2	-	(0.1)	(1.1)
Share of other comprehensive income:
Effective portion of changes in fair value of cash flow hedges, net of tax	0.3	-	-	-	0.3
	0.3	-	-	-	0.3

Notes to the accounts (continued)

3.3 Investment in joint ventures and associates (continued)

Summarised balance sheets as at 30 September 2013

	Greenwich1	iQ	Quercus	Quantum	Hilton	Other joint ventures	Group share in joint ventures
	£m	£m	£m	£m	£m	£m	£m
Investment properties	13.0	212.9	61.6	5.6	27.8	-	320.9
Trading properties	-	-	0.7	-	-	3.0	3.7
Deferred tax asset	2.9	-	3.4	-	0.3	-	6.6
Other assets	0.8	16.2	4.7	12.9	1.4	1.7	37.7
Total assets	16.7	229.1	70.4	18.5	29.5	4.7	368.9
Current liabilities:
Trade and other payables	(0.2)	(10.7)	(3.5)	(1.0)	(1.7)	(1.5)	(18.6)
Non-current liabilities:
Bank loans and other borrowings	(32.6)	(111.5)	(30.8)	-	(21.1)	-	(196.0)
Other liabilities	-	(2.8)	-	(0.3)	-	-	(3.1)
Net (liabilities)/assets	(16.1)	104.1	36.1	17.2	6.7	3.2	151.2
Represented by:
Group share of net (liabilities)/assets	(16.1)	104.1	36.1	17.2	6.7	3.2	151.2
Loans to JVs	32.6	-	-	-	21.1	-	53.7
Total investment	16.5	104.1	36.1	17.2	27.8	3.2	204.9

¹N0204

Notes to the accounts (continued)

3.3 Investment in joint ventures and associates (continued)

Summarised income statements for the year ended 31 March 2014

	Quercus	Quantum	Hilton	Other joint ventures	Total 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 cash flow hedges, net of tax	0.3	-	-	-	0.3
	0.3	-	-	-	0.3

Notes to the accounts (continued)

3.3 Investment in joint ventures and associates (continued)

Summarised balance sheets as at 31 March 2014

	Quercus	Quantum	Hilton	Other joint ventures	Group share in 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	59.2
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	80.3

Section 4: Acquisitions and disposals

4.1 Discontinued operations

During the period the Group sold its 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. During the prior year the Group sold its interest in Greenwich, primarily being its 40% interest in GPRL sold to its joint venture partner, Knight Dragon Limited and its Sequel property portfolio.

As a result of the above disposals all of these operating segments were presented as discontinued operations. The comparatives for the period ended 30 September have been restated to reflect sales that occurred since 30 September 2013.

		Unaudited 30 Sept 2014 £m	Unaudited 30 Sept 2013 restated £m	Audited 31 March 2014 £m
Cash flows from/(used in) discontinued operations
Net cash from operating activities		0.2	0.2	9.0
Net cash from investing activities		106.1	3.6	311.4
Net cash used in financing activities		-	(0.5)	(38.5)
Effect on cash flows		106.3	3.3	281.9

Notes to the accounts (continued)

Section 5:  Other assets and liabilities

5.1 Non-current receivables

		Unaudited 30 Sept 2014 £m	Unaudited 30 Sept 2013 £m	Audited 31 March 2014 £m
Investments at fair value		8.6	4.0	8.1
Loans at amortised cost		3.0	2.9	2.9
		11.6	6.9	11.0

5.2 Current trade and other receivables

		Unaudited 30 Sept 2014 £m	Unaudited 30 Sept 2013 £m	Audited 31 March 2014 £m
Trade receivables		5.8	4.5	6.5
Amount due from related parties		1.2	3.7	3.5
Other receivables		8.4	2.7	7.9
Trade and other receivables		15.4	10.9	17.9
Prepayments and accrued income		14.7	2.3	12.9
Loans at amortised cost		6.7	10.7	8.2
Investments at fair value		1.5	3.1	3.1
Interest rate caps at fair value		-	0.4	0.2
		38.3	27.4	42.3

The Group has two unsecured loans totaling £10.7m (30 September 2013: £10.7m and 31 March 2014: £10.7m) to an associate, Albemarle Retail Properties LLP, which carry a coupon of 10% per annum.  The Board has assessed the recoverability of the loans to Albemarle Retail Properties LLP and has concluded that a further £1.5m provision is required in the period, giving a total impairment provision of £4.0m, based on anticipated proceeds arising from property sales.

5.3 Other payables (non-current)

		Unaudited 30 Sept 2014 £m	Unaudited 30 Sept 2013 £m	Audited 31 March 2014 £m
Unsecured loan notes		1.4	1.2	4.2
Interest rate swaps at fair value		0.1	0.5	0.2
Other creditors		2.0	3.1	2.8
		3.5	4.8	7.2

Notes to the accounts (continued)

5.4 Current trade and other payables

		Unaudited 30 Sept 2014 £m	Unaudited 30 Sept 2013 £m	Audited 31 March  2014 £m
Trade payables		1.2	6.7	3.3
Other creditors		-	17.6	1.2
Accruals and deferred income		24.6	24.5	23.0
Interest rate swaps at fair value		0.4	1.0	0.4
		26.2	49.8	27.9

Section 6:  Funding

6.1 Bank loans and other borrowings

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

	Unaudited 30 Sept 2014	Unaudited 30 Sept  2013	Audited 31 March  2014
	£m	£m	£m
Current liabilities	9.7	34.3	-
Non-current liabilities	172.6	404.2	216.7
	182.3	438.5	216.7
Non-current liabilities
1 - 2 years	-	20.0	-
2 - 5 years	60.0	270.5	102.6
After 5 years	115.8	116.7	116.6
	175.8	407.2	219.2
Amortised borrowing costs	(3.2)	(3.0)	(2.5)
	172.6	404.2	216.7
Undrawn facilities	190.3	147.5	245.5

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

During the period the bank facilities of £240.0m have been extended from March 2016 to the last quarter of 2018 and into 2019.

As at 30 September 2014, the fair values of the Group's financial assets and liabilities were equal to their book values with the exception of non-current liabilities: bank loans and other borrowings which have a negative fair value adjustment of £10.1m (30 September 2013: £3.7m and 31 March 2014: £9.7m) as assessed by JC Rathbone Associates Limited.

ii) After taking account of derivatives, the interest rate risk profile of the Group's borrowings was as follows: 

	Unaudited 30 Sept 2014	Unaudited 30 Sept 2013	Audited 31 Mar 2014
	£m	£m	£m
Fixed	165.0	315.0	165.0
Capped	20.5	126.5	54.2
Total debt	185.5	441.5	219.2
Weighted average interest rate of debt	5.3%	3.7%	4.2%

---

¹ After expiry of rent free period

 

END

 

 

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