Hansteen Holdings PLC
2015 Report Annual and Accounts
2015 Annual Report and Accounts Our history
Key developments and milestones
Morgan Jones and Ian Watson have Since 2005, Hansteen has built up a been Joint Chief Executives of Hansteen substantial and profitable portfolio Holdings since launching of industrial investment properties in the Company on AIM in 2005. Germany, the UK, Netherlands, Belgium and France. Prior to establishing Hansteen, Ian and 2007 Morgan founded Ashtenne Holdings as Joint Chief Executives from 1989 until its sale to Warner Estates in 2005. 2005 With more than 25 years’ experience in investing in the industrial property market, both have a proven track record April: Completion of secondary in identifying opportunities requiring placing for an additional intensive management and realising value for their investors. First acquisitions with the purchase £70m of four industrial portfolios located in Germany and the Netherlands for July: 66 properties acquired in 37 transactions, totalling €73m €300m Dealings commence in Hansteen shares following £125m float on AIM
Long-term performance Dividends 2006 3.0p Hansteen has been in business now for ten years, from 2007 3.2p December 2005. This was a period that was particularly 2008 3.2p difficult for property companies. 2009 3.2p 75% 2010 3.5p Growth in Many property companies lost material value, were forced dividends 2011 sellers or required rescue rights issues during the financial 4.0p crisis of 2008 to 2012. Hansteen though performed well 2012 4.5p throughout this period; realised profits grew consistently 2013 4.8p and we were able to buy many property portfolios at 2014 5.0p* distressed prices from businesses in difficulty. 2015 5.25p * in addition to the ongoing dividend of 5.0p, a special dividend of Hansteen’s performance, measured by £100 invested at the 3.0p per share was declared in 2014 time of the Company’s initial public offering in 2005, ranks in the top five out of the 120 property companies publicly quoted at the time or floated in 2006. Equally notable is the robust character of Hansteen’s returns relative to this peer group. Over the period in question, Hansteen was unique in terms of maintaining covered dividend growth and a lower downward volatility of share price. 2015
2012
2009 May: Hansteen sells HPUT II for
June: Full management platform £192.1m established in Germany, UK, and Benelux August: Acquisition of Ashtenne Industrial Fund Units for £103.7m July: Share issue raises increasing Hansteen ownership gross proceeds of December: Property portfolio under management exceeds to 76.5% September: Acquisition of two £200.8m UK industrial estates for £40.6m in successful placing and open offer £1bn December: EPRA net asset August: Launch of the Hansteen UK value per share growth of Industrial Property Unit Trust with five institutional investors £78m of acquisitions completed 9% October: Hansteen moves from AIM to 111p to the Official List and becomes a REIT IFRS profit before tax £51m increased by of disposals completed 30.6% to £171.4m Hansteen Holdings PLC is a leading P06–11 / Joint Chief Executives’ statement Strategic report
Joint Chief Executives’ statement Governance Hansteen’s business model is to buy high-yielding assets, 2015 2014 Our report marks the tenth year of business for (normally multi-let or single-let industrial properties) that £m £m Hansteen Holdings. The report covers the financial are undermanaged and undervalued. We intensively asset Rental income 81.2 78.8 owner and asset manager of a very manage the properties to increase the income and value Cost of sales (12.5) (14.3) results for 2015, property performance in 2015, with the aim of selling within a three to five year period. Returns come from surplus rental income and selling at Management fees 4.1 6.0 followed by information on the long-term performance increased value. We supplement this business model with Share of associates 12.1 10.8
of the business, and concludes with our view of the other opportunity types where we think good profits can be Overheads (18.9) (20.0) Financial statements made, including deals in other sectors, especially land where prospects for the business. we believe we can make planning gains. Net interest payable (18.8) (13.1) Normalised Income Profit 47.2 48.2 Financial results for 2015 Profit on sale of properties 14.5 10.3 Returns from property can be “realised”, i.e. the surplus of rent, sales proceeds or other income over cost, or Other operating income 1.5 6.8 “unrealised”, i.e. valuation growth. We believe that the Ian Watson Normalised Total Profit 63.2 65.3 best measurements of performance are Normalised Joint Chief Executive Profits (our measure of underlying realised profits) and EPRA NAV per share as detailed below. We believe that the best measure of value growth is EPRA NAV per share plus dividends. During 2015, EPRA NAV diverse portfolio of European industrial Normalised Income Profit (“NIP”), recurring earnings increased from 101.7p to 111.2p and in addition there was excluding profits or losses from the sale of properties, both an ordinary dividend and a special dividend, together for the year to 31 December 2015, was £47.2 million totalling 8.1p. This performance equates to a Total Annual (2014: £48.2 million). Normalised Total Profit (“NTP”), Return of 17.3%. This is despite the adverse effect of the comprising NIP plus profits or losses from the sale exchange rate and after fully providing for the Founder of properties and realised profits from one off Long Term Incentive Plan (“Founder LTIP”). items, was £63.2 million (2014: £65.3 million). More details of the financial performance are contained in In our Financial statements, transactions which we carry the Financial review. out in euros are translated into sterling at the average exchange rate during the year. In 2015 there was a significant fall in the value of the euro. The average euro Case study exchange rate was 1.3775 euros to the pound in 2015 and West Hallam 1.2409 in 2014 which resulted in a reduction in the NIP of £4.8 million and a reduction of £5.3 million in the NTP. Based on the same exchange rate as in 2014, the NIP would have Morgan Jones We look for investments property, mainly located in Germany, been 10.6% higher at £52.2 million (2014: £48.2 million), and Joint Chief Executive the NTP would have been 8.4% higher at £68.5 million that are priced attractively (2014: £65.3 million). and which will create a In addition to the currency effect, comparisons between sustainable and high-yielding 2015 and 2014 are further complicated by one-off transactions in 2014. In 2014 Hansteen acquired a bank industrial property portfolio. loan at a discount which enabled it to acquire the HBI Netherlands portfolio. The unwinding of the discount on We also assess other more opportunistic and the bank loan resulted in a reduction in net interest payable management intensive acquisitions which, (included in NIP), of £4.0 million and a £3.4 million gain although lower yielding, will provide greater (included in NTP) relating to the repayment of the loan. In potential for capital growth. 2015 the portfolio showed further material value growth but because we owned the properties rather than the loan, that A good example of this is the purchase of growth is shown as part of the revaluation gain rather than West Hallam Industrial Estate, Ilkeston, in South as part of NTP. Derbyshire which took place in September the UK and the Netherlands. 2015 for £26.8 million, reflecting a yield of 6.4%. NTP plus property valuation gains gave a return of £205.6 The estate covers 118 acres and includes 106 million (2014: £153.8 million). IFRS profit before tax was £171.4 buildings, totalling 1.28 million sq ft, and benefits from million (2014: £131.2 million). large areas of open storage land. The entire site is let to Norbert Dentressangle, on two agreements, The following table sets out the results for Normalised and produces a total annual income of £1.7 million. Income Profit and Normalised Total Profit including the We believe that the property is highly reversionary Group’s share of Associates: with a number of value-adding asset management strategies to be pursued over the next few years.
See our Business model on page 16
06 Hansteen Holdings PLC Annual Report and Accounts 2015 Hansteen Holdings PLC Annual Report and Accounts 2015 07
We look for investments that are priced attractively and P12–13 / Our strategy which will create a sustainable and high-yielding industrial Strategic report Our strategy Governance property portfolio. There are few equivalent platforms Hansteen Holdings is a leading owner and asset manager of a very diverse portfolio of European industrial property, mainly located in Germany, the UK and the Netherlands. Our core mission is to provide to Hansteen’s in the high-yielding property sector. investors with consistent, high and realised returns. Financial statements
Strategic 1 Aquire selectively 2 Manage intensively 3 Increase values 4 Realise and distribute profits priorities We are an entrepreneurial Our locally-based, in-house, After purchase we aim to We focus on realised returns investor who looks for asset management teams have maximise rental income and through rental income and opportunistic investments the skills to meet the most occupancy through active profit on sales generated from that will create a high-yielding complex occupier requirements asset management initiatives a strong and diversified tenant property portfolio and improve occupancy leading to increased values base. This allows Hansteen to pay a well-covered and The combination of a large high-yielding portfolio with growing dividend Progress We have acquired £68.0 million of Our teams have increased the like-for-like All three of our core regions (Germany, The full year dividend of 5.25p per share in 2015 properties at an average yield of occupancy by 148,404 sq m or 25.1% of the UK and The Netherlands) produced represents a 5% increase on 2014. 7.8%. In addition, we have purchased the vacant area at the start of the year. positive value growth. The total uplift in Hansteen has paid a covered dividend £130.1 million of units in AIF, which For the fourth year running, all three value of £153.8 million or 11.1% was the every year since the first distribution represents £197.5 million of property of our core regions have contributed to highest in any year for Hansteen. in 2006 and during that period, it has at a yield of 8.3%. this increase in occupancy. Like-for-like increased by 75%. opportunities to add value and an improving investment passing rent increased by £2.0 million. Key Portfolio yield Like-for-like rent improvement Property valuation increase Full year dividend performance 20142011 8.5% 20142011+00% £1.7 million +00% 20112014 £135.8 million +00 20142011% 5.0p +00% market means that the Group looks forward to the future indicators 20152012 7.8% 20152012Aspe autaturibus £2.0 million Aspe autaturibus 20122015 £153.8 million As pe 20152012 autaturibus 5.25p Aspe autaturibus with confidence.
12 Hansteen Holdings PLC Annual Report and Accounts 2015 Hansteen Holdings PLC Annual Report and Accounts 2015 13
P14–15 / Case study / AIF Strategic report
Case study Governance AIF Financial statements Hansteen increases interest in AIF to 81.8%.
£35.9 million of property was sold from the AIF portfolio during 2015, generating £4.7 million of profit AIF owns 227 properties covering over the December 2014 valuation. The biggest sale 11.3 million sq ft valued at £436.4 million was at Eyston Way, Abingdon where an 80,000 sq ft long leasehold property was sold for £8.6 million reflecting a yield of 5.3%. The price achieved was During 2015, we acquired a further 45.1% in Ashtenne The UK is a very competitive market and the £0.6 million above the December 2014 valuation. Industrial Fund Unit Trust (“AIF”), in three separate increased investment significantly increases our transactions, for a total of £130.1 million, increasing exposure to the UK light industrial sector at a time our interest in AIF to 81.8%. In aggregate, the price when both the occupational and investment markets paid was an 8.4% discount to AIF’s NAV which in large are improving. Since the year end, we have acquired part represents the £10.9 million performance fee an additional 0.9% of the units in issue increasing our £436.4m on those units. The unit purchases represent the holding in AIF to 82.8%. Valuation at acquisition of £197.5 million of property at a yield on 31 December 2015 the passing rent of 8.3%. At 31 December 2015, the Hansteen ownership of AIF (%) portfolio was valued at £436.4 million with a yield on the passing rent of 8.0%. Despite not controlling AIF, 2014 36.7% the acquisition of the additional units provided an 2015 81.8% £34.7m exceptional opportunity both in terms of scale Passing rent roll and price. AIF yield (%)
2014 8.7% 2015 8.0% 8.0% 81.8% Yield Hansteen interest
14 Hansteen Holdings PLC Annual Report and Accounts 2015 Hansteen Holdings PLC Annual Report and Accounts 2015 15
Contents
Strategic report Corporate governance Financial statements 01 Highlights 24 Board of Directors 55 Independent Auditor’s report 02 At a glance 26 Chairman’s Corporate 60 Consolidated income statement 04 Chairman’s review governance statement 61 Consolidated statement of 06 Joint Chief Executives’ 27 Corporate governance comprehensive income statement framework 62 Balance sheets 12 Our strategy 29 Report of the Audit Committee 63 Statements of changes 16 Business model 33 Report of the Nomination in equity 17 Financial review Committee 65 Cash flow statements 20 Principal risks and 35 Report of the Remuneration 66 Notes to the financial uncertainties Committee statements 22 Corporate and social 37 Remuneration policy report 101 Officers and advisers responsibility 40 Annual report on remuneration 101 Financial calendar 50 Directors’ report 54 Statement of Directors’ responsibilities
More information about us on: www.hansteen.co.uk
Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 01
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC £31.7 million over total acquisition cost acquisition total million over £31.7 cost acquisition total over million and £21.2 valuation) 2014 31 December (over million £39.4 raise to million shares Placing of 35.7 Like-for-like occupancy improvement of 148,404 sq m of 148,404 improvement occupancy Like-for-like million per annum of £2.0 improvement roll rent Like-for-like Sale of HPUT II for £192.1 million at a profit to Hansteen of £4.7 million and million of £4.7 million at a profit Hansteen to £192.1 Sale of HPUT II for million profit million of other sales at a yield of 6.9% with a total £86.3 of £8.7 yield of 7.8% at an average acquired properties million of £68.0 of 11.1% portfolio the total across increase valuation Property Acquisition of units in the Ashtenne Industrial Fund Unit Trust (“AIF”) (“AIF”) Unit Trust Industrial Fund of units in the Ashtenne Acquisition increasing our interest from 36.7% to 81.8% the year during to 36.7% from our interest increasing Normalised Total Profit of £63.2 million (FY 2014: £65.3 million) £65.3 million (FY 2014: of £63.2 Profit Total Normalised 41.1%) of 41.2% 2014: (31 December ratio value property Net debt to IFRS profit before tax increased by 30.6% to £171.4 million (FY 2014: £131.2 million) £131.2 million (FY 2014: £171.4 to by 30.6% IFRS tax increased profit before 102p) 2014: (31 December by 9% 111p to increased share per EPRA NAV plus 8.1p dividend paid) (EPRA NAV or 17.3% of 17.6p shareholders to return Total per share) 5.0p (2014: per share 5.25p to by 5.0% year dividend increased Full million) £48.2 million (FY 2014: of £47.2 Profit Income Normalised › › › › › › › › › › › › › › › › › › › › › › Operational highlightsOperational › › › › › › › › Financial highlights Financial Highlights At a glance
We buy undervalued portfolios, often with high levels of vacancy or other opportunities to add value. We apply an intensive programme of improvement using our local management teams and sell to realise the value added. We have created a high-yielding property portfolio that is managed from our 16 offices across Europe and the UK.
Our managed portfolio at a glance
£1.55bn Properties under management £120.2m Million pounds per annum rent roll United Kingdom 39% 3.9m Netherlands 15% Square metres in total 16 Germany 44% Offices 5,277 France & Belgium 2% Tenants
Map legend Where we operate Portfolio breakdown (%)
02 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 03 03
heart heart rship success the r ities ortunities ou eneu f Teamwork opp o are at at are e forge e Entrepr peopl W Our Our by considering investment by considering investment prospects from multiple angles prospects from multiple See our Business model on page 16 Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC Investment case Unna of buying properties Our strategy replacement below at significantly add with opportunities to cost by the sale is highlighted value near at Unna, of our property Dortmund. was the property million, €6.4 for in June 2012 Purchased a profit This represents €13.2 million during 2015. sold for €6.8m cost over Profit of €0.7 million in 2015 and a €6.8 million profit over cost. over million profit and a €6.8 million in 2015 of €0.7 t ect s g principle ce ence and dir and en ell at we do we that exc or ing dealings onest, op e honest, ellence ision and guidin ision and everyth v rust We strive f strive We Exc in T ar We ur in our Our Chairman’s review
I am pleased to present Hansteen’s results and Strategic report for the year ended 31 December 2015. Once again it was a record year. EPRA NAV grew by 9.5p per share after payment of dividends of 8.1p per share, which included a special dividend of 3p per share, making a total return on capital to shareholders of 17.6p per share or 17.3%.
2015 was Hansteen’s tenth year since its initial public offering on AIM in November 2005. It has been a volatile decade which included the banking and financial crisis and during this period our business has grown substantially. We have joined the main market of the London Stock Exchange, converted to a Real Estate Investment Trust (“REIT”), entered the FTSE 250 and EPRA indices and assembled a property portfolio of more than £1.4 billion. Hansteen’s ten-year record of total shareholder return has been amongst the top 10% in the sector. From the start, the business has paid a fully covered dividend which has grown steadily over the period and is now 75% higher than the first dividend in 2006. Results The shareholders’ weighted average total return over the Hansteen’s IFRS pre-tax profit for the year increased by ten year period, based on either share price and dividends 30.6% to £171.4 million (2014: £131.2 million). This is a record or on NAV plus dividends, has been amongst the top result for Hansteen and reflects a strong performance for performing in the REIT sector. Based on NAV growth plus the business throughout the year. The property valuation dividends, the weighted average return on capital invested improvement of the owned or co-owned portfolio was by our shareholders is more than 11% per annum. On share £153.8 million, an increase of 11.1% over the year. price plus dividends the return is 13.6% per annum. Normalised Income Profit (“NIP”), which excludes profits or The Board’s strategy has consistently been to focus losses from the sale of properties, essentially the recurring on realised returns through rental income and profit on earnings of the business, were £47.2 million (2014: £48.2 sales generated from a strong and diversified tenant base. million). Normalised Total Profit (“NTP”), being NIP plus This allows Hansteen to pay a well-covered and growing profits and losses from property sales and realised profits dividend. When Hansteen was listed in 2005, a Founder from one-off items, was £63.2 million (2014: £65.3 million). Long Term Incentive Plan (“Founder LTIP”) was approved Both NIP and NTP were adversely affected by the fall in the by the shareholders. No awards have been made under value of the euro. The Income statement is prepared using the LTIP since it was introduced ten years ago. However, the average currency exchange rate for the year under as a result of the high returns earned by the business over review. The sterling: euro exchange rate applied in our 2015 the last three-year performance period, the Joint Chief results was 11% lower than that in 2014. Both the NIP and Executives have received a material award, under the the NTP would have exceeded the 2014 figures had the Founder LTIP, of 12.1 million shares each, after deduction of exchange rate remained constant. PAYE and National Insurance contributions. Full details of both the plan and the award calculation are set out in the The Group’s EPRA Net Asset Value was 111.2p per share Financial review. (2014: 101.7p) after paying both a normal dividend of 5.1p per share and a special dividend of 3p per share.
04 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 05 £153.8m Property valuation increase committing to large sales the Should or purchases. large to committing
may well result in turbulence in the financial markets in the financial markets in turbulence result may well
property market will normalise relatively quickly. If relatively will normalise market property slow materially as investors wait to see the result see the result to wait as investors materially slow
a protracted period of uncertainty as the details of both period of uncertainty a protracted
the referendum regarding Britain’s membership of the membership Britain’s regarding the referendum
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC
Later this year we will all have to contend with the results with the results contend to will all have year we this Later of referendum as the In all probability, Union (“EU”). European market investment activity in the property approaches, will before that it is likely remain, in a decision to result referendum the could then there the EU, leave to the decision is however be out.worked are and the aftermath withdrawal Britain’s This believes a period. The Board for market and the property any such turbulence weather positioned to is well the Group of spread geographical base, tenant the diverse due to and euro. both sterling to assets and exposure in will prevail environment rate interest that a low It is likely years. few the next over economies the UK and European of our business the strengths should play to This scenario sector, in the property many companies model. Unlike earnings grow to continue to has the capacity Hansteen rental occupancy, of improving a combination through such as selling lower enhancing trading and income growth and buying higher yielding properties. yielding properties both the long above significantly Industrial yields remain of the market, of money. In our sector cost and short-term that trading of speculative not seen the trend have we reached values boom nor have in the previous occurred may sectors property highs. Whilst other their previous this cycle, for growth enjoyed the bulk of value already have to benefit and to continue to industrial property expect we and income of both in terms outperformance relative show growth. capital James Hambro Chairman 2016 14 March £171.4m IFRS pre-tax profit
of 18 million shares. They are embarking on a new embarking on a new They are million shares. of 18 excess them to cycle which will permit LTIP Founder three-year of a compound in excess created in the returns participate that the believes per annum. The Board benchmark of 10% and the of their substantial shareholdings combination Executives’ align the Joint Chief LTIP ongoing Founder with those of shareholders. directly interests Outlook the to fully committed are The Joint Chief Executives under the the award Following business they founded. do so, obligation to without any contractual LTIP, Founder than double their previous more retain chosen to they have in nine million to circa from in Hansteen shareholding Rebecca Worthington will succeed Humphrey as Chair of Humphrey will succeed Worthington Rebecca upon his retirement. Committee the Audit As part of the process of succession planning for Non- planning for of succession As part of the process Rough and David were Young Margaret Directors, Executive was Margaret 2015. on 1 October the Board to welcomed was and David Committee a member of the Audit appointed Committee, as a member of the Remuneration appointed date. the same from effective Board changes Board Mully, a Non- Richard report, in the interim As stated in at the AGM Board the from retired Director Executive Richard member. nine years as a Board after June 2015, 2015 on 30 September the Board from also retired Cotton Humphrey Director. years as a Non-Executive five after at the the Board from that he will retire has indicated Price and he will not propose in 2016 Meeting Annual General to like I would On behalf of the Board, re-election. himself for their exceptional for and Humphrey thank both Richards their appointment, during since Hansteen to contributions wish and we rapidly, has grown which time the Company the future. for them well The interim dividend paid on 20 November 2015 was was 2015 November dividend paid on 20 The interim 2.0p per 2014: (November 2.1p per share to increased ongoing dividend is being increased and the second share), This represents 3p per share). (May 2015: per share 3.15p to date in the full year dividend. The ex-dividend a 5% increase May 2016 and this dividend is payable on 19 is 21 April 2016 of business at the close on on the register shareholders to Distribution (“PID”) of 1.35p Income A Property April 2016. 22 dividend payment. interim is included in this second The Board is committed to a prudently progressive dividend prudently progressive a to is committed The Board by generated income and growing the high reflect policy to the business. Dividend
EPRA Net Asset Value per share 111.2p 111.2p Joint Chief Executives’ statement
Our report marks the tenth year of business for Hansteen Holdings. The report covers the financial results for 2015, property performance in 2015, followed by information on the long-term performance of the business, and concludes with our view of the prospects for the business.
Ian Watson Joint Chief Executive
Morgan Jones Joint Chief Executive
06 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements
07 £m 6.8 6.0 2014 10.3 10.8 78.8 65.3 48.2 (13.1) (14.3) (20.0)
£m
1.5 4.1 2015 12.1 14.5 81.2 47.2 63.2 (12.5) (18.9) (18.8) See our Business model on page 16 We look for investments investments for look We attractively priced that are a and which will create sustainable and high-yielding portfolio. industrial property and opportunistic also assess other more We which, acquisitions management intensive although lower yielding, will provide greater greater yielding, will provide although lower growth. capital for potential of of this is the purchase A good example in South Ilkeston, Hallam Industrial Estate, West in September place which took Derbyshire a yield of 6.4%. million, reflecting £26.8 for 2015 and includes acres 106 118 covers The estate from ft,sq benefits million and 1.28 totalling buildings, is site land. The entire of open storage areas large agreements, on two Norbert Dentressangle, let to million. of £1.7 annual income a total and produces is highly reversionary that the property believe We asset management with a number of value-adding years. few the next be pursued over to strategies Case study West Hallam West Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC We believe that the best measure of value growth is EPRA growth of value that the best measure believe We EPRA NAV plus dividends. During 2015, share per NAV was and in addition there 111.2p to 101.7p from increased a special dividend, together dividend and both an ordinary Annual a Total to equates This performance 8.1p. totalling of the effect the adverse This is despite of 17.3%. Return Founder the for fully providing and after rate exchange LTIP”). Plan (“Founder Incentive Term Long contained in are performance details of the financial More the Financial review. Rental income Cost of sales Management fees Management Share of associates of Share Overheads interestNet payable Profit on sale of properties Normalised Income Profit Income Normalised Other operating income Normalised Profit Total
at a discount which enabled it to acquire the HBI acquire which enabled it to at a discount
bank loan resulted in a reduction in net interest payable in net interest in a reduction bank loan resulted
The following table sets out the results for Normalised Normalised for table sets out the results The following including the Profit Total and Normalised Profit Income of Associates: share Group’s NTP plus property valuation gains gave a return of £205.6 of £205.6 a return gains gave valuation NTP plus property £171.4 was tax before IFRS million). profit £153.8 million (2014: million). £131.2 million (2014: In addition to the currency effect, comparisons between between comparisons effect, the currency In addition to by one-off further complicated are and 2014 2015 a bank acquired Hansteen In 2014 in 2014. transactions on of the discount The unwinding Netherlands portfolio. the million gain million and a £3.4 of £4.0 (included in NIP), of the loan. In the repayment to relating (included in NTP) but growth value further material showed the portfolio 2015 than the loan, that rather the properties owned we because than gain rather as part of the revaluation is shown growth as part of NTP. (2014: £65.3 million). million). £65.3 (2014: loan out in euros are translated into sterling at the average at the average sterling into translated are out in euros a was there In 2015 during the year. rate exchange euro average The euro. value of the fall in the significant and 1.3775was the pound in 2015 to euros rate exchange in the NIP of reduction in a which resulted in 2014 1.2409 Based million in the NTP. of £5.3 reduction million and a £4.8 have the NIP would as in 2014, rate on the same exchange and million), £48.2 million (2014: higher at £52.2 been 10.6% million higher at £68.5 been 8.4% have the NTP would In our Financial statements, transactions which we carry carry which we transactions In our Financial statements, Normalised Income Profit (“NIP”), recurring earnings earnings recurring (“NIP”), Profit Income Normalised the sale of properties, or lossesfrom profits excluding million £47.2 was 2015, 31 December the year to for (“NTP”), Profit Total Normalised million). £48.2 (2014: the sale or lossesfrom NIP plus profits comprising one off from profits and realised of properties million). £65.3 million (2014: £63.2 was items, Financial results for 2015 for Financial results the surplus i.e. be “realised”, can property from Returns or cost, over or other income salesof rent, proceeds that the believe We growth. valuation i.e. “unrealised”, Normalised are of performance best measurements realised profits) of underlying (our measure Profits below. as detailed per share and EPRA NAV Hansteen’s business model is to buy high-yielding assets, buy high-yielding business model is to Hansteen’s that or single-let industrial properties) multi-let (normally asset intensively We and undervalued. undermanaged are and value the income increase to manage the properties year period. five to within a three with the aim of selling and selling at income rental surplus from come Returns supplement this business model with We value. increased becan profits good think we typesopportunity other where especially where land sectors, including deals in other made, planning gains. make can we believe we Joint Chief Executives’ statement Property performance in 2015
In total, the portfolio owned or co-owned by Hansteen, at 31 December 2015, was valued at £1.55 billion, had a rent roll of £120.2 million per annum, and 11.9% vacancy.
If the portfolio was fully occupied at market rents, the rent During 2015, we acquired a further 45.1% in Ashtenne roll would be £146.2 million per annum, reflecting a yield of Industrial Fund Unit Trust (“AIF”), in three separate 9.4%. Despite record valuation growth, the portfolio reduced transactions, for a total of £130.1 million, increasing our from £1.60 billion at the end of 2014 due to sales in 2015. interest in AIF to 81.8%. In aggregate, the price paid was an Hansteen’s attributable property portfolio comprised 3.6 8.4% discount to AIF’s NAV which in large part represents million sq m (2014: 3.2 million sq m) with a rent roll of £112.5 the £10.9 million performance fee on those units. The unit million and a vacancy of 12.1% valued at £1.45 billion (2014: purchases represent the acquisition of £197.5 million of £1.20 billion). property at a yield on the passing rent of 8.3%. At 31 December 2015, the portfolio was valued at £436.4 million All three of our core regions (Germany, the UK and the with a yield on the passing rent of 8.0%. Despite not Netherlands) produced positive value growth. The total controlling AIF, the acquisition of the additional units uplift in value of £153.8 million or 11.1% was the highest in provided an exceptional opportunity both in terms of scale any year for Hansteen. The German portfolio increased by and price. The UK is a very competitive market and the 13.9%, Benelux by 7.3% and the UK by 10.4%. The split increased investment significantly increases our exposure between the first and second half of the year was 7.3% in H1 to the UK light industrial sector at a time when both the and 3.6% in H2. £131.0 million of this uplift is attributable to occupational and investment markets are improving. Since Hansteen. Had the exchange rate, at 31 December 2015, the year end, we have acquired an additional 0.9% of the been the same as at 31 December 2014, the valuation uplift units in issue increasing our holding in AIF to 82.8%. to Hansteen would have been £183.5 million. The portfolio overall has a yield of 7.8% (2014: 8.6%). The analysis of the portfolio, at 31 December 2015, is set out in the table below:
Passing rent Value Built area Vacant Euros Sterling Euros Sterling No. props sq m area% €m £m €m £m Yield Germany 105 1,594,782 10.7% 66.8 49.1 863.3 634.5 7.7% UK 80 365,367 11.2% 16.6 12.2 258.3 190.0 6.4% Netherlands, Belgium & France (“Benelux”) 81 782,983 15.9% 29.0 21.3 336.1 247.0 8.6% Total wholly owned 266 2,743,132 12.2% 112.4 82.6 1,457.7 1,071.5 7.7% AIF* 227 1,047,241 12.0% 47.2 34.7 593.7 436.4 8.0% Hansteen Saltley Unit Trust (“HSUT”)* 1 95,514 2.0% 3.9 2.9 53.5 39.3 7.3% Total attributable to Hansteen 452 3,647,532 12.1% 153.0 112.5 1,970.1 1,448.1 7.8% Total under management 494 3,885,887 11.9% 163.5 120.2 2,104.9 1,547.1 7.8%
* Figures include 100% of the funds’ portfolio. Hansteen has an investment of 81.8% in AIF and 50% in HSUT.
08 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 09 Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC Seven sales in Germany totalling €56.2 million were million were €56.2 totalling sales in Germany Seven million of profit €4.0 generating the year, during completed notably €15.1 and more valuation 2014 the December above cost. The sales on included the profit million or 37% in June 2012 at Unna, near Dortmund, purchased property a €13.2 million, generating for sold million, which was €6.4 for over million profit €6.8 and a 2015 million in €0.7 of profit of finding This sale highlights the importance cost. of buying in line with our strategy opportunities are which cost and replacement below at significantly properties add value. to is potential there where able to were we market, investment the strong Despite of 13 light industrial of a portfolio the purchase secure On of costs. million inclusive €21.3 for in Germany properties of €2.8 a passing rent produced the properties acquisition of our efforts million per annum but with the combined this offices, and Hanover Frankfurt in the Dusseldorf, teams million per annum by €3.1 to increased had been roll rent the year end. (“Benelux”) Belgium and France Netherlands, approximately for accounted Benelux 2015, 31 December At 2015 investments. attributable property 17% of Hansteen’s with the region year for has been another improving although with occupancy, and like-for-like in value increases slightly. The like-for-like decreasing rent passing like-for-like 18,213 sq m or 12.8% was of the improvement occupancy end, the the year At at the start of the year. vacancy of the 15.9% representing sq m vacant had 124,600 portfolio rent at the start of the year The passing floor area. total some from per annum and the loss of rent million €29.4 was at million per annum. The closing rent small sales €0.1 was a net million per annum, €29.0 was 2015 31 December or 1.2%. million of €0.3 decrease like-for-like in Belgium the portfolio from completed sales were Three million of €2.4 consideration a total for during 2015 had a million. The properties a loss of £0.2 generating be a the sales to consider of 81%, so we vacancy combined decreases valuation the near-term considering good result on these buildings. totalling properties two comprises portfolio The French million and a of €1.8 roll sq m, with an annual rent 56,000 million. of €19.5 2015, at 31 December valuation, UK approximately for the UK accounted 2015, 31 December At an investments, attributable property 39% of Hansteen’s UK The Hansteen 2014. at 31 December 29.6% from increase sold in May II”) was II (”HPUT Trust Unit Industrial Property million, by £60.8 exposure UK property which reduced 2015, with the further than replaced more but this was million to in AIF units, which has added £197.5 investment as at the UK portfolio The total the attributable portfolio. 1.5 million comprised and co-owned) (both owned year-end of million per annum, a vacancy of £49.8 roll sq m with a rent of proportion million. Hansteen’s of £665.7 and a value 11.2% million. £566.6 was that portfolio (5) sqm 6,457 Vacancy Vacancy 18,213 38,768 32,683 52,288 97,508 50,896 148,404 improvement – rent £0.1 €2.1 €2.6 £0.5 £0.2 £2.3 £0.8 (€0.5) Millions Contracted Contracted Like-for-like movement €1.2 £1.3 £0.7 £0.5 £0.3 €0.9 £2.0 (€0.3) (£0.2) Millions Passing rent Passing France (“HSUT”) Germany 44% of approximately for which accounts Germany, has investments, attributable property Hansteen’s and occupancy income, with like-for-like well, very performed The passing 2015. during significantly all improving value million per annum and the net effect €67.2 was in 2014 rent of €1.5 million decrease a rent was of sales and acquisitions €66.9 was 2015 at 31 December per annum. The closing rent of €1.2 million per million per annum, a net improvement passing in the like-for-like annum or a 1.9% improvement by increased roll rent contracted The like-for-like roll. rent completed leases were as, during 2015, or 3.9% million €2.6 not included in the and so are concessions free with rent statistics. The like-for-like passing rent like-for-like the end of sq m. At 32,683 totalled improvement occupancy representing sq m vacant, had 170,500 the portfolio the year, 11.5%). of vacancy (2014: floor area of the total 10.7% Germany Total UK management under Total Netherlands, Belgium & Europe Total Hansteen Saltley Unit Trust HPUT II The following tabulates these key statistics: tabulates these key The following The passing rent of the portfolio under management at the under of the portfolio The passing rent of million per annum. The effect £137.7 start of the year was roll rent the reduce to saleswas number of the significant in the year have the acquisitions million whereas by £20.5 due to annum. The reduction million per added £5.2 million per annum and £4.2 was movements rate exchange resulted million per annum. This £120.2 was the closing rent million or 1.6%. of £2.0 improvement in a net like-for-like Like-for-like net occupancy (measured by taking the vacant by taking the vacant (measured net occupancy Like-for-like purchases on adding vacancy start of the year, at the area at the end of the the vacancy that with and then comparing the portfolio sq m across 148,404 by has improved year) of the total 3.8% under management. This represents or 25.1% 2015 at 31 under management December portfolio achievement This at the start of the year. area of the vacant space of letting vacant a combination through has come of the units, both important components and selling vacant running, all year the fourth business model. For Hansteen this increase to contributed have regions core of our three in occupancy. UK Balance sheet AIF Joint Chief Executives’ statement Property performance in 2015 continued
Light industrial property is a late cycle capital performer and, notwithstanding the substantial valuation growth we have enjoyed in 2014 and 2015, our overall yield on passing rent for the whole portfolio is 7.8%. As an example, this can be compared with the previous peak valuation of AIF in December 2006, which was around 6%.
The UK had another very active year in terms of sales and Also in September, Belasis Business Park, Billingham in acquisitions with a combined £288.5 million of transactions Teesside, was acquired for £13.8 million, reflecting a yield of in 2015 (excluding the AIF unit purchases). HPUT II was sold 7.9% which rises to 10.4% on contracted rent. The Park for £192.1 million, £35.9 million of property was sold from AIF, provides 33 purpose-built, detached and terraced business and £7.8 million of property was sold from Hansteen’s own units, totalling 129,136 sq ft on a 62 acre site including 1.7 UK portfolio. In total, these sales generated £10.7 million of acres consented for additional development. On acquisition, profit above the 31 December 2014 valuation and £43.4 the property was 84.0% let to 19 occupiers; this was million above gross acquisition cost and subsequent capital subsequently increased to 92.4% by the year end. The expenditure. Hansteen’s share of these 2015 profits was property generates annual rental income of £1.1 million. £9.2 million. The property has an exceptional weighted average unexpired lease term (“WAULT”) of over ten years and UK wholly owned includes several big name tenants. The long lease profile At 31 December 2015, the wholly-owned UK portfolio was is a direct result of the occupiers’ confidence in the valued at £190.0 million and had a rent roll of £12.2 million long-term success of the Teesside chemical sector and per annum, representing a yield of 6.4%, with a vacancy the huge capital investments that some companies have rate of 11.2%. Included within this valuation are seven made in the location. development sites totalling 89.0 hectares valued at £28.1 million, which if stripped out gives a yield on the Ashtenne Industrial Fund Unit Trust (“AIF”) remainder of 7.7%. The like-for-like occupancy increased by At 31 December 2015, the AIF portfolio was valued at £436.4 6,457 sq m equating to 14.3% of the opening vacancy, and million, had a rent roll of £34.7 million per annum, a yield on like-for-like rent increased by £0.7 million. the passing rent of 8.0%, and a vacancy rate of 12.0%. The like-for-like occupancy increased by 38,768 sq m in the year £52.6 million of purchases were completed in 2015 in four with like-for-like passing rent decreasing slightly, as separate transactions. In September, West Hallam Industrial incentives were offered when re-gearing some existing Estate, Ilkeston, in South Derbyshire was acquired for £26.8 leases. million, reflecting a yield of 6.4%. The estate covers 118 acres and includes 106 buildings, totalling 1.28 million sq ft and £35.9 million of property was sold from the AIF portfolio benefits from large areas of open storage land. The entire during 2015 generating £4.7 million of profit over the site is let to Norbert Dentressangle, on two agreements, December 2014 valuation. The biggest sale was at Eyston and produces a total annual income of £1.7 million. We Way, Abingdon, where an 80,000 sq ft long leasehold believe that the property is highly reversionary with a property was sold for £8.6 million reflecting a yield of 5.3%. number of value-adding asset management strategies to The price achieved was £0.6 million above the December be pursued over the next few years. 2014 valuation.
10 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 11
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC Outlook and prospects performer capital cycle is a late Light industrial property we growth the substantial valuation and, notwithstanding yield on passing our overall and 2015, enjoyed in 2014 have can this an example, As is 7.8%. portfolio the whole for rent of AIF in peak valuation the previous with be compared 6%. This is in stark around which was 2006 December which sectors property retail and the office to contrast during highs) (value yield lows previous their surpassed The yield gap done so in 2014. if they had not already 2015 money remains of cost and the industrial property between basis. high, on an historic be that of a to cycle continues of the current Our reading and rates interest of low stretch long, grinding, corrugated of our the strengths which should play to returns low 5,000 with over diverse, is extremely business. Our portfolio tough environment, countries. the Despite in five tenants supply and demand the fundamentals of occupational our of our regions, In all three be positive. to continue hence cost; at less than replacement valued are properties light industrial supply of multi-let is little or no new there months have Recent the market. to coming property with increasing tipping point on the demand side, a marked that “industrial taking the view numbers of commentators shops to of goods from The transfer retail”. is the new in the near be reversed to that is not going sheds is a trend will continue property this, light industrial Aside from future. new for the space commercial affordable, flexible, provide to will strength and beyond. Occupational of 2016 occupiers and growth values investment underpin to continue importantly, the high and resilient Equally prospects. pools of managed diverse of well characteristics income that this business continues ensure light industrial property in shareholders to high returns and distribute generate to to find. difficult increasingly are such returns where an era is that thesefurther fundamentals will Our feeling of in all three this year, and liquidity values strengthen our regions. Jones and Ian Watson Morgan Joint Chief Executives 2016 14 March
2015 results. 2015 During the third measurement period from December 2012 December period from measurement During the third been 14.9% in 2013, have returns the annual total 2015, to Founder As a result, the first in 2015. and 17.3% in 2014 17.1% This has been accrued been made. has now award LTIP in the for the period and is fully accounted throughout Hansteen’s performance, measured by £100 invested at the invested by £100 measured performance, Hansteen’s inranks 2005, in initial public offering time of the Company’s companies publicly out of the property five 120 the top Equally notable is the 2006. in at the time or floated quoted this peer to relative returns of Hansteen’s character robust unique in was the period in question, Over Hansteen group. and a lower dividend growth covered of maintaining terms price. of share volatility downward in at the launch of Hansteen created LTIP, The Founder a long period, over returns on high absolute is based 2005, Hansteen Despite performance. than on relative rather in the first the sector, outperformed continually having periods, the absolute LTIP two covering years, seven per annum of 10% hurdle the required did not beat returns made. was award LTIP no Founder hence compound, Many property companies lost material value, were forced forced were value, lost material companies Many property rights issues rescue during the financial sellers or required well though performed Hansteen 2012. to crisis of 2008 consistently grew profits this period; realised throughout at portfolios buy many property able to were and we businesses in difficulty. from prices distressed Long-term performance Long-term years, from ten for has been in business now Hansteen particularly a period that was was This 2005. December companies. property for difficult Hansteen Property Unit Trust ll (“HPUT II”) Unit Trust Property Hansteen the sale ofThe biggest single sale during the year was advised by Brockton a fund million to £192.1 HPUT II for the At LLP in a partnership with Dunedin Property. Capital million and of £14.3 HPUT II had a passing rent time of sale, of rate an internal The sale created of 11.0%. rate a vacancy with of 27%, in excess the HPUT II investors to return the asset management due to higher return Hansteen’s return. the investment in addition to fees Hansteen Saltley Unit Trust (“HSUT”) Saltley Unit Trust Hansteen in estate sq m industrial the 95,500 Saltley Business Park, of £2.9 is 98% let with a passing rent Birmingham central of £39.3 2015, at 31 December a value, million per annum and million in by £0.3 increased passing rent million. Like-for-like at the the biggest tenant for concession as the rent 2015, have end we the year Since during the year. expired estate the other NAV, the year-end to discount at a small acquired, the estate. 50% in HSUT which owns of the units Our strategy
Hansteen Holdings is a leading owner and asset manager of a very diverse portfolio of European industrial property, mainly located in Germany, the UK and the Netherlands. Our core mission is to provide investors with consistent, high and realised returns.
Strategic 1 Aquire selectively 2 Manage intensively priorities We are an entrepreneurial Our locally-based, in-house, investor who looks for asset management teams have opportunistic investments the skills to meet the most that will create a high-yielding complex occupier requirements property portfolio and improve occupancy
Progress We have acquired £68.0 million of Our teams have increased the like-for-like in 2015 properties at an average yield of occupancy by 148,404 sq m or 25.1% of 7.8%. In addition, we have purchased the vacant area at the start of the year. £130.1 million of units in AIF, which For the fourth year running, all three represents £197.5 million of property of our core regions have contributed to at a yield of 8.3%. this increase in occupancy. Like-for-like passing rent increased by £2.0 million.
Key Portfolio yield Like-for-like rent improvement performance 2014 8.5% 2014+00% £1.7 million +00% indicators 2015 7.8% 2015Aspe autaturibus £2.0 million Aspe autaturibus
12 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 13 s pe autaturibu 00% + As
5.25p
5.0p
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC s Realise and distribute profits
pe autaturibu 2014 2015 4 00% Full year dividend The full year dividend of 5.25p per share per share The full year dividend of 5.25p on 2014. a 5% increase represents dividend has paid a covered Hansteen first distribution the year since every and during that period, it has in 2006 by 75%. increased We focus on realised returns returns realised on focus We through and rental income from generated on sales profit tenant diversified and a strong Hansteen allows This base. and a well-covered pay to growing dividend + As
£153.8 million
£135.8 million Increase values
3 highest in any year for Hansteen. highest in any year for All three of our core regions (Germany, (Germany, regions of our core All three the UK and The Netherlands) produced uplift in The total growth. value positive the was million or 11.1% of £153.8 value After purchase we aim to aim we purchase After maximise rental income and occupancy through active asset management initiatives initiatives management asset leading to increased values 2014 2015 Property valuation increase Case study AIF Hansteen increases interest in AIF to 81.8%.
AIF owns 227 properties covering 11.3 million sq ft valued at £436.4 million
During 2015, we acquired a further 45.1% in Ashtenne The UK is a very competitive market and the Industrial Fund Unit Trust (“AIF”), in three separate increased investment significantly increases our transactions, for a total of £130.1 million, increasing exposure to the UK light industrial sector at a time our interest in AIF to 81.8%. In aggregate, the price when both the occupational and investment markets paid was an 8.4% discount to AIF’s NAV which in large are improving. Since the year end, we have acquired part represents the £10.9 million performance fee an additional 0.9% of the units in issue increasing our on those units. The unit purchases represent the holding in AIF to 82.8%. acquisition of £197.5 million of property at a yield on the passing rent of 8.3%. At 31 December 2015, the Hansteen ownership of AIF portfolio was valued at £436.4 million with a yield on the passing rent of 8.0%. Despite not controlling AIF, 2014 36.7% the acquisition of the additional units provided an 2015 81.8% exceptional opportunity both in terms of scale and price. AIF yield
2014 8.7% 2015 8.0%
14 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 15
81.8% interest Hansteen
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC £35.9 million of property was sold from the AIF portfolio during 2015, generating £4.7 million of profit over the December 2014 valuation. The biggest sale was at Eyston Way, Abingdon where an 80,000 sq ft long leasehold property was sold for £8.6 million reflecting a yield of 5.3%. The price achieved was £0.6 million above the December 2014 valuation. £34.7m Passing rent roll 8.0% Yield £436.4m at Valuation 2015 December 31 Business model
The Group buys undervalued portfolios, often with high levels of vacancy or other tangible opportunities to add value, applies an intensive programme of improvement using its local management teams, and sells to realise the value added.
Buy Manage Sell
1 Disciplined investment 2 Local expertise 3 Realise value We pick our investments We have 16 offices with Returns come from rental based on a thorough experienced management income and selling at assessment of the teams across the UK increased value. opportunities in and our regions in order to create a high continental Europe. yielding portfolio with potential to add value. We work hard at creating We supplement our buy, the right relationships with manage, sell business model Our balance sheet is strong our stakeholders so that we with other opportunity types and we remain committed to are in the prime position to where we think good profits financing on a prudent basis. react when opportunities can be made, including deals arise. We apply an active in other sectors, especially asset management strategy land where we believe we to our properties in order can make planning gains. to improve occupancy and drive rental income which should lead to See the AIF case study increased values. See our strategy on pages 14 and 15 on pages 12 and 13
Strengths of our industrial property portfolio
Industrial property is the most flexible The fundamental Opportunities and economical commercial property type value dynamics exist for adding with the widest occupational audience are strong value Our properties appeal to a huge range of occupiers Our properties are Even in a low growth which means we have an extremely diverse tenant valued at significantly environment, we have base without reliance on any particular tenants or below replacement cost opportunities to add value. industries. Occupational demand in all three core which limits new supply. We have a material vacant regions is currently strong. With over 40 million sq ft element of the portfolio of predominantly industrial property, we have a wide that can be let and we have range of space to meet the requirements of a diverse a significant bank of land mix of tenants. that can be potentially developed.
16 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 17 £m 2015 63.2 39.4 (23.1) (35.4) (56.2) 142.3 130.2 111p EPRA NAV (4p) LTIP dilution December 2015 (7p) FX net of hedging & convertible bond Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC Normalised Profit Total Tax Gearing (2014: 2015 million at 31 December £475.2 Net debt was 44.3%. was value and net debt to This debt million) £416.2 convertible million) million (£73.5 includes the €100 figure adjustment of market bonds and an additional mark to half of the five-year approximately million. After £34.0 has meant that the period, the business performance in the money. Assuming comfortably is already convertible value to as equity the net debt treated were the convertible be 34.3%.would had borrowings, the Group 2015, As at 31 December million £538.6 leases,of including obligations under finance of value including the mark-to-market million) £526.5 (2014: swapped million was of which £205.1 bonds the convertible at capped million was and £58.8 of 0.9% rate at an average rate all-in borrowing of 1.9%. The average rate an average 3.8%). (2014: 3.6% was 2015, at 31 December the Group, for Equity raised Property revaluation and gain on acquisition on gain and Property revaluation movements value fair Exchange and Dividends paid movement NAV (8p) Ongoing dividend
plus special dividend 20p Property revaluation 8p NTP net of tax 102p NAV Dec 2014 EPRA in EPRA NAV per share is summarised in the EPRA NAV in the EPRA is summarised NAV per share in EPRA NAV bridge below: NAV at equity shareholders The net assets attributable to million), £676.0 million (2014: £806.2 were 2015 31 December in IFRS net assets million. The increase of £130.2 an increase and the movement is summarised in the table across Richard Lowes Richard Director Finance This report sets out the key financial financial key the out sets report This informationrelated to Hansteen. Financial review Financial EPRA NAV per share bridge per share EPRA NAV Financial review continued
The aggregate net assets of the Group’s associates, at The Group also has €100.0 million of convertible bonds 31 December 2015, were £326.9 million (2014: £431.7 million). which were issued during 2013, expiring in 2018, with a The aggregate bank loans of the associates were £158.1 coupon rate of 4.0%. In addition, the Group has a £2.4 million million (2014: £234.5 million) which are non-recourse to the finance lease in place to fund a property in Belgium. As at Group. The Associates have no committed undrawn facilities 31 December 2015, the lease has an unexpired term of eight available (2014: £7.8 million). The funds drawn under the years and an interest rate implicit in the lease of 2.8%. facilities bear an average all-in interest rate of 4.7%. The performance of Hansteen’s share price has resulted in In July 2015, Hansteen completed the refinancing of three the conditions that would allow holders to convert the facilities in the UK, replacing them with a single £95.0 million convertible bonds issued in July 2013 being met earlier this corporate revolving credit facility with the Royal Bank of year. As a result, the dilutive impact of the bonds is included Scotland. The acquisition of the BIP portfolio in Germany in in the EPRA NAV per share and diluted EPRA earnings per 2015 utilised the undrawn portion of the €40.0 million facility share measures. This increases the number of shares used with HSBC which was put in place in 2014 and expires in in these calculations reducing the EPRA NAV per share in December 2019. the period by 4p. As yet, no bondholders have opted to convert and the norm in these situations seems to be that As at 31 December 2015, the Group had total bank facilities they are unlikely to do so until closer to the end of the of £451.0 million (2014: £438.3 million), of which £433.5 million convertible period (July 2018). were drawn (2014: £433.8 million). Borrowings are in the same currency as the assets against which they are secured. Cash resources at the year-end were £63.4 million (2014: £110.3 million).
The weighted average debt maturity, at 31 December 2015, was 2.8 years and the weighted average maturity of hedging was 2.6 years.
Analysis of the Group’s bank loan facilities is set out below:
Bank loan facilities as at 31 December 2015 Amount Unexpired Interest Facility undrawn term All-in- Loan to value cover Lender millions millions Years interest rate covenant covenant Helaba €189.1 – 3.1 4.1% 65% 1.85:1 FGH €82.9 – 1.2 3.3% 74% 1.65:1 HSBC €106.1 – 3.0 3.1% 65% 2.00:1 HSBC €40.0 – 3.9 2.5% 65% 2.00:1 BNP Paribas Fortis €6.0 – 7.0 1.4% – – ING €57.8 – 3.5 4.4% 70% 1.30:1 DG Hyp €2.5 – 1.5 3.4% 70% 1.25:1 Total euro facilities €484.4 – Total euro facilities in GBP £356.0 – Royal Bank of Scotland £95.0 £17.5 2.6 2.4% 60% 1.75:1 Total facilities £451.0 £17.5 2.8 3.6%
18 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 19
exceeds the 10% per annum compound growth growth per annum compound the 10% exceeds
or 18% per annum compound over the period, over or 18% per annum compound
hurdle rate of return and no award was made. made. was and no award of return rate hurdle
was believed, would have a number of attractions to to a number of attractions have would believed, was
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC Founder Long Term Incentive Plan (“Founder LTIP”) Plan (“Founder Incentive Term Long Founder a long-term 2005, in offering the time of the initial public At being the the Joint Chief Executives, for scheme, incentive which, in place, put was of Hansteen, Directors Founder Morgan Jones and Ian Watson each held 4,523,809 shares Jones and Ian Watson Morgan which they subscribed pari passu with other investors. hold they now set out above, the issue of shares Following 2.2% each of each representing million shares 16,664,056 the Founder by the issue of as enlarged capital the share shares. LTIP intend of the Joint Chief Executives each In the near term the has the Company years, however, During the last three acquisitions made in the from the significantly benefited of 2013-2015 for return a total earlier period, achieving 63%, which million. The £204.8 to equivalent per share, by 25.2p target in results performance participation in 12.5% of the excess million of 22.9 Directors each of the Founder to awards part of forgo to agreed have Directors The Founder shares. and Employee’s their PAYE to equal in value their awards which due on the vesting of the awards, National Insurance After will be settled on their behalf by the Company. liabilities and National Insurance settlement of these PAYE will be issued with 12,140,247 Directors Founder the two each. shares LTIP, under the Founder of shares the issue to Prior Finance the Group Lowes, to Richard shares gift 500,000 to their but leaving sell some shares to and intend Director, held. previously than double the level at more ownership it scheme, It is a simple and straightforward investors. (net asset return a total achieves if Hansteen whereby, per annum of 10% in excess plus dividends) growth period and thereafter, initial four-year an over compound a share Directors periods, the Founder three-year over return. of that excess quarter which out performance, absolute The scheme only rewards performance good the Company’s means that, however will be no pay-out unless its peers, there to may be relative Accordingly, rate. of the hurdle is in excess return the total the UK to relative performance strong a very despite years of the first seven over sector, property quoted short of fell performance the Company’s life, Hansteen’s
the impact of a significant fall in the value of the euro value of the euro fall in the the impact of a significant speculate than a means to rather against sterling Hedges are implemented at levels which the Board which the Board at levels implemented Hedges are effective. cost are believe policy against Hedging is employed as an insurance profit. for Hedging instruments are used to cover a substantial cover used to Hedging instruments are net net assets and estimated euro of Group proportion the short term. for income euro › › › › Raise Equity raised million (net of expenses) was £39.4 2015, In August a of 112p, at a price million shares the placing of 35.7 from 2015. of 2.3% on 26 August discount the closing price to › › The Group’s current hedging policy, which is regularly which is regularly hedging policy, current The Group’s is as follows: by the Board, reviewed The Group has two €100 million options, expiring in million options, expiring €100 has two The Group the Group In addition, of €1.3:£1. at a rate June 2016, net future million of its expected has hedged €117.5 at six-monthly options expiring with four income euro and 31 December 30 June 2016 between intervals for million and call put €117.5 to These options are 2017. with an €1.6:£1 to €1.35:£1 from rates at varying sterling of The aggregate €1.519:£1. of average weighted overall million €317.5 options amounts to all of these currency €546 million hedges against 58.2% of the Group’s providing The options expiring 2015. net assets at 31 December entered were 2017 December and 27 on 30 June 2017 the for premiums The aggregate during the year. into million. £0.6 during the year were into options entered Currency 31 As at December in sterling. its results reports Hansteen million) million or €547 50% (£401 approximately 2015, in euros. denominated net assets were of the Group’s the Group hedge arises from currency A natural in the same denominated maintaining borrowings minimise To as the assets that they secure. currency exchange changes any adverse in the sterling:euro Hansteen in NAV, decrease and a resultant rate, contracts. currency foreign various has entered Principal risks and uncertainties
The Board recognises that risk management is essential for the Group to achieve its objectives.
Senior management, staff and the Board regularly consider and minimising these risks where possible. The current key the significant risks, which it believes the Group is facing, risks identified by the Board, the steps taken to mitigate identify appropriate controls, set parameters under which them and additional commentary are presented below. management can operate and if necessary instigate action The Board views all risks to be consistent with the prior to improve those controls. year with the exception of the risks related to one or more countries exiting the Eurozone or European Union, which There will always be some risk when undertaking property the Board considers to have increased during the year. investments and the control process is aimed at mitigating
Principal risk Cause Impact Probability Risk management Foreign currency One or more High Low In response to this risk the Group’s borrowings exchange risk countries exiting in Europe are in euro denominated loan facilities the Eurozone or and therefore, to the extent that investments are Reduction in euro European Union financed by debt, a self-hedging mechanism is in place. In relation to the equity element of the denominated Currency Group’s euro investments, the Board monitors the devaluation revenue and assets level of exposure on a regular basis and considers Impairment of the level and timing of when to take out the appropriate hedging instruments in respect of this financial and non- exposure. There is also a risk that one or more of financial assets the countries that the Group operates in could leave the euro, which may affect the nature of the Group’s loans and derivatives or introduce new volatility and currency exposures for the Group to manage. Management are closely monitoring the Eurozone and European Union situation and their findings are regularly reviewed by the Board.
Poor return on Over paying for High Low Supply and demand are reviewed continuously investment and an acquisition through direct information from Hansteen’s network of managing agents and managers. Prices driven up deterioration in Experienced management review each acquisition by increased operating results and due diligence is carried out by external parties. competition The Board is required to approve all acquisitions Reduced number and disposals over a prescribed amount. of investment opportunities
20 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 21 Risk management The Board believes such risks are reduced by reduced such risks are believes The Board and Liquidity Management a Cash to adherence be invested. funds can that sets out how Policy maintained with are and borrowings balances Cash The Group counterparties. of considered a portfolio on a daily balances the cash reviews Treasurer is put on cash surplus possible, basis, and where deposit. bearing interest some extent such risk is to believes The Board the support of high calibre through mitigated advisers. All such employees and professional by a member of the approved appointments are regularly. is monitored and performance Board Whilst there is always a risk that recession or a risk that recession is always Whilst there specific industry legislation may affect new is satisfied that Hansteen’s types, the Board different in five by operating is mitigated exposure Eurozone including some of the stronger countries and bad debts arrears rates, Vacancy economies. with on a monthly basis by country, monitored are any systematic determine to investigated trends tenant. or type of with a portfolio problems may that there acknowledges The Board under internal when banks are be occasions existing with which may conflict pressures more it may prove and financing arrangements properties. challenging the more to secure difficult the out prior to is carried Detailed due diligence Regular meetings are of each property. purchase them fully keep of banks to held with a portfolio opportunities and alerted apprised of commercial is issues early on. Hansteen any potential to to of finance sources alternative also considering exposure. and reduce its strategy develop Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC Probability Medium Medium Medium High Medium High High High Impact Financial difficulties at institutions holding significant deposits High dependence on Joint Chief Executives Banks under pressure internal improve to liquidity Banks considering unutilised loans expensive too Over reliance reliance Over from on income one particular type of tenant the exposing industry to Group specific periods of recession Cause Over reliance on key executives Banking counterparty disruption Lack liquidity of Lack availability of capitalof Tenant failure Tenant and Recession reduced profitability Principal risk Principal Corporate and social responsibility
Environment Equality and diversity In line with Hansteen’s policy of being environmentally Hansteen has a diverse workforce and commitment to and sociably responsible, environmental legislation and being an equal opportunities employer. We understand relevant codes of practice are adhered to. Where possible, that the performance and engagement of our employees Hansteen seeks to reduce emissions and pollution. Details is critical to our business success. Our employment policies of our Greenhouse Gas emissions are detailed in the and practices reflect a culture where decisions are made Directors’ Report. solely on the basis of individual capability and potential in relation to the needs of the business. Community Hansteen continues to support local and national As at 31 December 2015, the composition of Hansteen’s charities. Regular events are held in each office to support employees, including both Executive and Non-Executive charitable causes. We will support staff who voluntarily Directors, is as follows: give up their time to participate in charitable programmes during working hours. We continue to run a work Number experience programme with a local school in London. Male Female Directors – including People Non-Executive Directors 7 2 Hansteen recognises that its present and future success Senior managers is dependent upon its ability to recruit, motivate, manage and Company Secretary 4 3 and retain appropriately qualified staff. As part of our commitment to help reduce barriers to entry, enhance All other staff 46 40 the learning experience and support institutions offering Real Estate courses, we decided to run our Human rights first nationwide intern programme during 2015. Hansteen is respectful of human rights and aims to provide assurance to internal and external stakeholders that we are In June 2015, Hansteen recruited five paid interns committed to the principles of the Universal Declaration of across the UK, offering them the chance to manage a Human Rights. set number of properties. We incentivised the interns on lettings achieved within their property portfolio. We are committed to creating and maintaining a positive Each intern demonstrated striking creativity in the and professional work environment that complies with marketing of their properties and had exposure to general human rights principles. the negotiation of letting and tenancy agreements.
The scheme was designed to offer the interns a comprehensive view of asset management so we could enhance the learning experience as well as their employability after graduation. The feedback we received was that the scheme more than met the interns’ expectations and they felt they could draw on the experience in their ongoing studies. They were also more aware of the various graduate career options available to them outside the traditional milk round.
Hansteen has recruited one of the interns as a Graduate Surveyor in our North West Office. We very much look forward to him joining the team when he finishes his studies in June 2016.
22 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 23 Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC In June 2015, Hansteen recruited five paid interns across the UK, offering them the chance to manage a set number of properties. incentivised We the interns property their lettings within achieved on portfolio. Each intern demonstrated striking creativity in the properties exposure their of had the and marketing to agreements. tenancy negotiation letting and of The scheme was designed to offer the interns a could so we viewcomprehensive asset management of enhance the learning experience as well as their employability after graduation. The feedback we the met than more the scheme received that was interns’ expectations and they felt they could draw on the experience in their ongoing studies. They were also options career graduate the various of aware more round. milk outside the them traditional to available Hansteen has recruited one of the interns as a Graduate Surveyor in our North West Office. We very much look forward to him joining the team when he finishes his studies in June 2016. The success of the intern programme in 2015 has led to this being repeated in 2016 and extended to Germany as well as the UK. Enhanced learning for asset management interns asset management for learning Enhanced Case study Case programme Intern Board of Directors
The Board currently comprises six independent Non-Executive Directors, including the Chairman, and three Executive Directors. The Board is responsible to the shareholders of the Company for the strategy and future development of the Group and the efficient management of its resources.
24 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements
25
3
5 8 2 4 7 1 6 9 Mel Da R vyn Egglenton vid Rough Lowes ichard 3 9 6 to 1995. Fellow of the ACCA. Fellow 1995. to similar role for Ashtenne Holdings plc Ashtenne for similar role and as and 2005 1997 between House of Trafalgar Director Finance of and a Director Limited Property 1988 from Ideal Homes Holdings PLC Non-Executive Director in June 2014. the Board to Appointed of Pendragon also Chairman Currently of the James Family Trustee PLC, of Soho Director Non-Executive Trusts, and Non- Holdings Limited Estates of Irwin Mitchell Director Executive Regional Formerly Holdings Limited. of of KPMG Midlands. Fellow Chairman Senior Independent the ICAEW. Remuneration Chair of the Director, and a member of the Committee Committees. Nomination and Audit Non-Executive Director in October the Board to Appointed and Director A Non-Executive 2015. at John Senior Independent Director a Non- Previously PLC. Group Laing Securities at Land Director Executive Member of the PLC. and Xstrata PLC Committee. Remuneration Finance Director Finance 2006 on 1 January Joined Hansteen was and as Chief Financial Officer in October Director Finance appointed in a this he worked to Prior 2011.
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC M H M Young argaret umphrey Price Jones organ 2 8 5 Non-Executive Director in October the Board to Appointed of Director A Non-Executive 2015. and Limited BlackRock Group Non-Executive Director in October the Board to Appointed a Non-Executive Previously 2010. Property of LondonMetric Director of Pillar Property Director Finance PLC, of Arlington Director and Finance PLC of the ICAEW. Fellow Securities PLC. and a Committee Chair of the Audit member of the Nomination Committee. of Director a Non-Executive formerly Asset BNY Mellon International and AA PLC. Management Limited Committee. Member of the Audit Joint Chief Executive Accountant Qualified as a Chartered Director Ross. Founder with Touche of Ashtenne and Joint Chief Executive Director Founder 2005. to 1989 from Member of the of Hansteen. Nomination Committee.
R J Ian Ian Watson Worthington ebecca ames Hambro
7 4 1 NON-EXECUTIVE DIRECTORS EXECUTIVE DIRECTORS of Countryside Properties PLC. PLC. Properties of Countryside and Chief Executive Founder Formerly Partners Capital Lodestone of Officer of Director a Non-Executive LLP, and Development of Quintain Estates Member of the ICAEW. Fellow PLC. Nomination andof the Audit, Committees. Remuneration Appointed to the Board in June 2014. in June 2014. the Board to Appointed also Chief Financial Officer Currently and Finance PLC Aga Rangemaster and Deputy Chief Executive Director Non-Executive Director of the Remuneration Committee. of the Remuneration Appointed Non-Executive Chairman of Chairman Non-Executive Appointed Currently 2005. in December Hansteen Capital of J O Hambro also Chairman James Limited, Management Group of Director & Partners, Hambro a PLC, Health Properties Primary of Circle Director Non-Executive of and Chairman PLC Property the Blind. Chair of the Guide Dogs for and member Nomination Committee Non-Executive Chairman Qualified as a solicitor with with Qualified as a solicitor Gouldens. and Joint Chief Director Founder 1989 from of Ashtenne Executive Joint Chief Executive of Director Founder 2005. to Nomination Committee. Hansteen. Member of the Hansteen. Chairman’s Corporate governance statement
As Chairman, I am responsible for the Group’s Corporate governance framework. During the year the Board achieved and maintained high standards of corporate governance and will continue to adapt this framework as necessary in 2016.
Following the Board evaluation, I remain satisfied that the performance of all the Directors proposed for re-election continues to be effective and that each Director demonstrates commitment to their role.
Succession planning Richard Mully retired as a Non-Executive Director of the Company at the Annual General Meeting on 8 June 2015 and Richard Cotton retired as a Non-Executive Director of the Company on 30 September 2015. The Board welcomed two new Non-Executive Directors, David Rough and Margaret Young, to the Board on 1 October 2015. David was appointed to the Remuneration Committee and Margaret to the Audit Committee effective from 14 October 2015. Melvyn Board evaluation Egglenton succeeded Richard Mully as the Senior The Board formally evaluates its performance and that of Independent Director upon his retirement from the Board at its Committees annually. Having undertaken its first the Annual General Meeting in 2015 and, in addition, externally facilitated Board evaluation in 2013 in line with the succeeded Richard Cotton as Chairman of the Remuneration requirements of the UK Corporate Governance Code and Committee on 30 September 2015. undertaken an evaluation using a series of questionnaires in 2014, the Board has undertaken a further evaluation Humphrey Price has indicated that he will retire from the using a series of questionnaires in 2015. In addition, I met Board at the Annual General Meeting in 2016 and he will not with each of the Non-Executive Directors to evaluate their propose himself for re-election. Rebecca Worthington will individual performances and the Non-Executive Directors succeed Humphrey as Chair of the Audit Committee upon met without me present to evaluate my performance as his retirement. Chairman. Richard Mully and Richard Cotton both made a major Overall, the findings of the evaluation were positive, contribution to Hansteen during their time as Directors and recognising the amount of work that the Board and senior their experience and advice has been invaluable during a management team has undertaken during the year to period of rapid growth. improve procedures in a number of areas. Board sessions have been scheduled to provide the Board with the opportunity to discuss fully those topics which the Directors indicated needed further consideration by the Board. The Board is confident that the performance of the Board and the Committees was and is effective and that all Directors James Hambro demonstrate full commitment in their respective roles. Chairman
14 March 2016
26 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 27 Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC The Chairman and Joint Chief Executives roles and Joint Chief Executives The Chairman of the role The division of responsibilities between is of the Joint Chief Executives, and the roles Chairman, annually by reviewed writing and clearly defined, set out in the leadership for is responsible The Chairman the Board. ensuring that all working of the Board, and effective in particular the Non- including members of the Board, contribute an opportunity to have Directors, Executive and timely is appropriate and that there effectively, with shareholders. communication for responsibility executive has delegated The Board who are the Joint Chief Executives to running the Group and and operational direction the strategic for responsible of the Group. financial performance Board the for is a matter Directors The appointment of new made by the recommendations following as a whole, Nomination Committee. of the Board Standing committees Committee Audit Price Humphrey comprised Committee The Audit and Rebecca Mully, Melvyn Egglenton Richard (Chairman), Mully retired when Richard until 8 June 2015 Worthington was Young Margaret and its Committees. the Board from Senior 2015. on 14 October the Committee to appointed Directors Executive auditor, of the external representatives the attend to and senior management may be invited including details of its report, meetings. The Committee’s responsibilities, 32. is set out on pages 29 to Nomination Committee James Hambro comprised The Nomination Committee and Richard Cotton Richard Price, Humphrey (Chairman), Morgan Mully and any one of the Joint Chief Executives, at any one time until 5 May 2015, Jones and Ian Watson, Worthington and Rebecca when Melvyn Egglenton
All Directors, except Humphrey Price, will offer themselves will offer Price, Humphrey except All Directors, Meeting. Annual General at the 2016 re-election for or other connection with the Company, are able to able to are with the Company, or other connection is judgement. independent Melvyn Egglenton exercise the Senior Independent Director. three Executive Directors. The biographies of these The biographies Directors. Executive three is satisfied The Board set out on page 25 are Directors each of whom is Directors, that the Non-Executive has no commercial management and independent from Non-Executive Directors, including the Chairman, and including the Chairman, Directors, Non-Executive Board composition Board six independent comprises currently The Board The role of the Board of Directors of the Board The role of the the shareholders to is responsible The Board of the development and future the strategy for Company As resources. of its and the efficient management Group reserved of matters has a schedule a result, the Board annual of its decision, which includes approval for and divestment policy, approval budgets, acquisition and of finance the raising projects, of major capital is supplied, in a timely management policies. The Board enable it to it needs to fashion, with the information of informed is also kept its duties. The Board discharge legislation and changing commercial changes in relevant independent to has access risks, and each Director of the and services and the advice advice professional meets at least five The Board Secretary. Company timesas required. a year with ad hoc meetings of the information included in this Corporate governance governance included in this Corporate of the information with information together 28 on pages 26 to statement Report 53. on pages 50 to in the Directors’ contained The Company complies with the Corporate governance governance with the Corporate complies The Company the Financial Conduct pursuant to requirements statement Rules by virtue and Transparency Disclosure Authority’s The Company complied with the main principles of the UK Corporate Corporate UK the of principles main the with complied Company The Reporting Financial the by “Code”) published (the Code Governance Council inSeptember 2014 throughout the year. Corporate governance framework governance Corporate Corporate governance framework continued
were also appointed to the Committee. Richard Mully Board and Committee meeting attendance retired from the Board and its Committees on 8 June The schedule below sets out the number of principal Board 2015 and Richard Cotton retired on 30 September and Committee meetings held during the year ended 2015. The Committee is responsible for reviewing the 31 December 2015 together with individual attendance by structure, size and composition of the Board and for Board Members at those meetings. making recommendations in respect of any changes and appointments. The Committee’s report, including details In addition to Board meetings, the Board held a number of of its responsibilities, is set out on pages 33 and 34. dedicated strategy sessions during the year to consider the development of the Company’s strategy and business Remuneration Committee model. In between Board meetings, the Board receives a The Remuneration Committee comprised Richard Cotton monthly performance pack containing detailed information (Chairman), Melvyn Egglenton, James Hambro, Richard on the entire property portfolio. Mully and Rebecca Worthington until 8 June 2015 when Richard Mully retired from the Board and its Committees. Relations with shareholders Melvyn Egglenton took over as Chairman of the Committee The Executive Directors regularly meet with institutional from Richard Cotton on 30 September 2015. David Rough shareholders and analysts. Private investors are was appointed to the Committee on 14 October 2015. also encouraged to meet with the Board and to The Committee is responsible for making recommendations participate in the Annual General Meeting. The to the Board on all aspects of remuneration policy for Chairmen of the Audit, Nomination and Remuneration Executive Directors. The Committee’s report is set out on Committees are available to answer questions, where pages 35 to 49. appropriate, at the Annual General Meeting.
The terms of reference of the Audit Committee, Nomination Committee and Remuneration Committee are available on the Company’s website www.hansteen.co.uk.
Nomination Remuneration Board Audit Committee Committee Committee James Hambro 8 – 3 5 Ian Watson**** 8 – 2 – Morgan Jones**** 8 – 1 – Richard Lowes 8 – – – Melvyn Egglenton 8 3 3 5 Richard Mully* 3 1 1 4 Richard Cotton** 5 – 1 4 Humphrey Price 7 3 3 – Rebecca Worthington 8 3 2 5 David Rough*** 2 – – 1 Margaret Young*** 2 – – – Number of meetings during the year 8 3 3 5
* Richard Mully was eligible to attend three Board meetings, one Audit Committee meeting, one Nomination Committee meeting and four Remuneration Committee meetings before his retirement. ** Richard Cotton was eligible to attend six Board meetings, one Nomination Committee meeting and four Remuneration Committee meetings before his retirement. *** David Rough and Margaret Young were eligible to attend two Board meetings following their appointments and David Rough was also eligible to attend one Remuneration Committee meeting. ****Either of the Joint Chief Executives attends the Nomination Committee.
28 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 29
compliance with external and internal financial and internal with external compliance judgements made; significant disclosures; statutory and the principal risks of the Group; whether the Annual Report Statements and Financial and understandable. balanced fair, are developing and implementing the policy for the provision the provision and implementing the policy for developing by the auditor; of non-audit services with the Group’s relationship maintaining an appropriate objectivity the effectiveness, reviewing auditor, external considering auditor, of the external and independence them paid to and the fees of their work both the scope audit and non-audit services; for the recommendation to relating all matters considering and appointment, remuneration re-appointment, for auditor; external of engagement of the Group’s terms audit requirements, internal the Group’s monitoring and the audit process; controls financial internal full year financial statements and the interim reviewing applying the the Board, their submission to prior to policies financial and any changes to accounting Group’s and requirements; reporting risks on a of the Group’s undertaking a review bi-annual basis. policies used; of accounting the appropriateness and policies; standards reporting reviewing the content of the Annual Report of the Annual and Financial the content reviewing as taken on whether, the Board and advising statements and understandable and balanced is fair, it a whole, to shareholders for necessary the information provides business and model performance, assess the Company’s strategy; and procedures ensuring that management has systems of financial information; the integrity ensure to in place Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC › › › › › › › › › › › › › › Role and responsibilities of the Committee Role and responsibilities reliable sufficient, receives is satisfied that it The Committee allow to management in order from and timely information responsibilities. fulfil its objectives and it to principal responsibilities include: The Committee’s › › › › › this review. from No issues arose › › › › › › reviewed of the Committee, reference of The full terms › › › website on the Company’s available are in 2015, www.hansteen.co.uk. Financial reporting the following and considered reviewed The Committee reporting and the preparation of financial in respect areas and annual financial statements: of the interim
to the financial reporting timetable. During 2015 the 2015 During reporting timetable. the financial to scheduled meetings and times for met three Committee each meeting is shown at details of members attendance on page 28. The Committee meets regularly during the year aligned meets regularly The Committee The Company believes the Committee contains the right contains the Committee believes The Company support the to skill and experience of knowledge, balance business its strategy. in achieving Senior representatives of the external auditors, Executive Executive auditors, of the external Senior representatives attend to and senior management may be invited Directors The Company discretion. the meetings at the Committee’s the Committee. to acts as secretary Secretary Composition of the Committee Composition (the Committee has established an Audit The Board Corporate with the UK in accordance “Committee”) During the year ended (the “Code”). Code Governance of the Chairman was Price Humphrey 2015, 31 December Worthington and Rebecca Melvyn Egglenton Committee. of a member Mully was Richard the other members. were in June the Board from until his retirement the Committee on 14 October joined the Committee Young Margaret 2015. by the Board considered members are All committee 2015. Egglenton, Melvyn Price, be independent.to Humphrey recent all have Young and Margaret Worthington Rebecca Code. by the required as experience financial and relevant links with the have No members of the Committee auditor. external Company’s Humphrey Price Humphrey Chairman of the Audit Committee Report of the Audit Committee Audit the of Report Report of the Audit Committee continued
In order to carry out this work, the Committee considered Internal audit the work and recommendations of the Finance team led by The Committee keeps under review the Company’s need for the Finance Director, Richard Lowes. In addition, the an internal audit function. The majority of the processing Committee received regular reports from the external and accounting for the day-to-day transactions of the auditor setting out their views of the accounting treatments Group is outsourced to third-party suppliers. Management and judgements included in the financial statements. The maintain a close relationship with these suppliers and reports from the external auditor are based on a full audit perform regular detailed reviews of their work and report to of the annual financial statements and a review of the the Committee if any significant concerns are raised by interim financial statements. these reviews. The Committee regularly reviews the internal controls to ensure that they are adequate for the size and The significant issues considered by the Committee in complexity of the business. On this basis the Committee relation to the financial statements were: believes that the internal procedures performed by management are performed to the same degree as an ›› valuation and presentation of the Founder Long Term internal audit function. The Committee and the Board will Incentive Plan (“Founder LTIP”) charge; continue to monitor this position on an ongoing basis. ›› accounting for the investment in Ashtenne Industrial Fund Unit Trust (“AIF”); The Group has in place a formal whistleblowing policy ›› accounting for the disposal of the investment in and a dedicated independent whistleblowing hotline, Hansteen UK Industrial Property Unit Trust (“HPUT II”); as part of the arrangements set up and monitored by ›› cash box accounting for the share issue; the Committee, so that employees are able to report any ›› investment property valuations; matters of concern. The Board has appointed Humphrey ›› going concern, viability statement, debt maturity and Price as the Board member with responsibility for the covenant compliance; Company’s whistleblowing arrangements. ›› recognition of overseas deferred tax assets; and ›› reversal of previous impairment of trading properties. External auditors and their independence The Group’s external auditor is Deloitte LLP (“Deloitte”). In addition to requesting that the external auditor focus on In forming its opinion on the independence and objectivity these areas and report to the Committee with their findings of the external auditor, the Committee takes into account the Committee also undertook the following actions: the safeguards operating within Deloitte and they are asked to provide a formal statement of their independence ›› the Committee reviewed and challenged management’s to the Company annually. In addition, to safeguard that assumptions supporting the valuation and presentation independence, the Company ensures compliance with its of the Founder LTIP charge; policy governing the provision of non-audit services by the ›› the Committee considered the form and substance of external auditor under which Deloitte may not provide a the Group’s influence over AIF; service which places them in a position where they may ›› the Committee considered the structure of the share be required to audit their own work. placing and reviewed management’s accounting; ›› members of the Committee with relevant and current Specifically, Deloitte are precluded from providing services expertise in property valuations met with valuers of the relating to bookkeeping or other services relating to Group property portfolio to discuss the valuations; accounting records or financial statements of the Group, ›› reviewed the underlying assumptions in the going financial information system design and implementation, concern forecasts, viability calculations and the appraisal or evaluation services, actuarial services, any reasonableness of the stress tests carried out in relation management functions, investment banking services, legal to those forecasts; and services unrelated to the audit, remuneration related ›› considered the supporting evidence for recognition of services or advocacy services. overseas deferred tax assets.
No issues arose from the above.
30 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 31 the timely identification and resolution of areas of resolution of areas and the timely identification judgement; accounting the quality and timeliness of papers analysing those judgements; of the value to approach the management team’s auditindependent audit and the booking of any adjustments arising; and review for documents public of draft the timely provision and the Committee. by the auditor Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC › › › › A comprehensive auditor assessment is questionnaire auditor A comprehensive and by each member of the Committee annually completed from is obtained In addition, feedback Director. the Finance including the members of the senior management team, team. The the wider finance and from Joint Chief Executives, analysis and the resulting collated responses are are and any concerns by the Committee considered year the third Every auditor. discussed with the external will meet with the Committee audit partner external discuss the formally to Director and Finance Chairman using this evaluation audit process quality of the external of those discussions will feed and the outcome framework years. the subsequent three for the audit process into role in the team’s of the management The effectiveness is assessed the principally using audit process external measures: performance following › › › › with the necessary meets as considered The Committee without management being present. auditor external gave Committee report, the During the financial year under of the audit of the the effectiveness to particular focus the disposal of HPUT II, of additional units in AIF, acquisition and properties of trading of the impairment the reversal LTIP. the Founder for accounting auditor appointment External 2006 since auditor external been the Group’s have Deloitte its first Annual Report and prepared when the Group the for The audit partner responsible Financial Statements. years in five is changed every audit matters Group’s issued by the Standards with the Ethical accordance audit partner is in his The current Board. Practices Auditing year in office. third the extent of non-audit services provided by the external by the external provided of non-audit services the extent in a position not placed that they are ensure to auditor work. audit their own to the scope of the audit as set out in the external auditor’s auditor’s of the audit as set out in the external the scope engagement letter; plan; work overall auditor’s the external proposal; fee auditor’s the external describing their auditor the external from a report identify, objectivity and to ensure to arrangements and, of interest; and manage any conflicts report › › › › › External audit effectiveness External in its framework a formal has adopted The Committee audit process external of the of the effectiveness review the audit team, of the audit partner, which includes a review of the audit, including identification the planning and scope of the Company of the audit, the role of risks, the execution audit process, in an effective and the management team how with the Committee, by the auditor communications of the Committee, supports the work auditor the external and the insights and adds value, the audit contributes how and the and objectivity of the audit firm independence shareholders. to audit report quality of the formal, Payments made by the Group for audit and non-audit fees for made by the Group Payments disclosed on page 77. the year are for Where non-audit services are provided, the fees are based are the fees provided, are non-audit services Where related. not success and are undertaken on the work of and remuneration the nature to is given Consideration the to by Deloitte provided other services for received fee them that the from is sought and confirmation Group to enable them to the annual audit is adequate payable for of with the scope their obligations in accordance perform all non-audit has fully evaluated the audit. The Committee during the year against its by Deloitte undertaken work and that it is appropriate comfortable policy and remains justified. the fees During 2015, services provided by Deloitte and their by Deloitte provided services During 2015, acting as external in addition to the Group, to associates income of overseas in respect included tax advice auditor, The Committee taxes. transfer and property tax, VAT certain from particular benefit that it receives believes auditor by the external being provided non-audit services of the Company knowledge their wide and detailed due to out set the controls to is used, subject and so discretion Deloitte. from services in obtaining such above, › › › › › To fulfil its responsibilities regarding the external auditor, auditor, external the responsibilitiesregarding fulfil its To reviewed: the Committee Report of the Audit Committee continued
Audit tender The Directors have reviewed, as part of the year-end The Committee has established a tendering policy that procedures, the effectiveness of the system of internal requires an audit tender every ten years. The audit for the controls for the period under review and up to the year ending 31 December 2016 was tendered during the date of this report, the key element of which is a risk year. Three audit firms were invited to tender, including the management process whereby key risks to achieving current incumbent, Deloitte. A panel, including the Chairman our objectives and strategy as well as related controls of the Audit Committee and the Finance Director, considered and monitoring procedures in respect of those risks are written submissions and oral presentations from each of identified in a risk register. The risk register is reviewed the firms. Following this competitive tender process the bi-annually and updated where appropriate and reports Audit Committee recommended to the Board and the Board received from the executive on control procedures, and approved the reappointment of Deloitte for the year ending any areas for improvement are agreed for subsequent 31 December 2016. A new audit partner will lead the audit action. The Company’s principal risks and uncertainties for the year ending 31 December 2016. are reported in the Strategic Report on pages 20 and 21 and include the judgements and uncertainties used Internal controls and risk management in determining the fair value of investment property, An ongoing process for identifying, evaluating and fluctuations in foreign exchange rates, taxation and the managing the most significant risks faced by the Group has variability of rental income as well as the availability been in place throughout the year and up to the date of of credit and over-reliance on key executives. approval of the Annual Report and Accounts. The Board regularly considers and sets the parameters under which This process is supported by: the business can operate without further or specific consideration by the Board. That process, which accords ›› Management structure There is a clear organisational with the Turnbull guidance and the Board’s review of that structure with well-defined lines of reporting and process, is set out below. responsibility. ›› Financial reporting There are reporting disciplines The Directors acknowledge their responsibility for the including performance monitoring and profit and cash Group’s system of internal controls, including the review of forecasting. its effectiveness and suitable monitoring procedures, in ›› Investment appraisal The Group has a clearly defined order to safeguard shareholders’ investment and the framework for capital and development expenditure and assets of the Group as well as the integrity of its accounting subsequent ongoing appraisals. records and provide reliable information for use within the business and for publication. The Directors acknowledge In addition, the key internal controls include regular that such a system is designed to manage rather than meetings of the Board and Committee whose overall eliminate the risk of failure to achieve business objectives responsibilities are set out above. and can provide only reasonable and not absolute assurance against material misstatement or loss. During the course of its reviews of the system of internal controls, the Board has not identified nor been advised of any failings or weaknesses which it has determined to be significant. Therefore a confirmation in respect of necessary actions has not been considered necessary.
Humphrey Price Chairman of the Audit Committee
14 March 2016
32 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 33
reviewing the structure, size and composition of the and composition size the structure, reviewing with the Board to and making recommendations Board any changes required; to regard Directors; for planning succession approval, Board identifying and nominating, for as and when theyvacancies fill Board to candidates arise; of required annually the time commitment reviewing and Directors; Non-Executive regarding the Board to making recommendations Committees and Remuneration membership of the Audit of each Committee. with the Chairman in consultation Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC › › › › › issues of succession. issues of succession. be able to to considered are All of the Directors to discharge Company to the time sufficient allocate I During the year, their responsibilities effectively. The Blind of Guide Dogs for Chairman appointed was the Henry Smith charity. I from down and stepped & Partners, James of Hambro be Chairman to continue Management Holdings Capital of JO Hambro Chairman and PLC Health Properties of Primary Director Ltd, PLC. Property of Circle Director a Non-Executive a number of matters for is responsible The Committee and its committees. of the Board composition the to relating for: In particular it is responsible › › › › › Role and responsibilities of the Committee Role and responsibilities the under review keep is to the Committee of The role its refreshment, plan for to of the Board, composition consider and to and structure, balance to with regard The full terms of reference of the Nomination Committee, of the Nomination Committee, reference of The full terms on the Company’s available are 2015, in October reviewed of and conditions The terms www.hansteen.co.uk. website for available appointments are Directors the Non-Executive Meeting or at Annual General inspection at the Company’s office. registered the Company’s The Committee is required, in accordance with its in accordance is required, The Committee During a year. meet at least once to of reference, terms recommend times to met three the Committee 2015 Roughthe appointment of David and Margaret to and then and its Committees the Board to Young year the coming for of Reference its Terms approve during the year. its performance evaluate and to Composition of the Committee Composition has established a Nomination Committee The Board the majority of members of which are (the “Committee”), by the as required Directors independent Non-Executive The Committee Code. Governance UK Corporate 2014 Price, Humphrey (Chairman), Jamescomprises Hambro and either Worthington and Rebecca Melvyn Egglenton Jones and Ian Morgan of the Joint Chief Executives, Mully and Richard Richard at any one time. Watson, the year during members of the Committee were Cotton June 2015 on 8 the Board from until their retirement The Company respectively. 2015 and 30 September the Committee. to acts as secretary Secretary James Hambro James Chairman of the Nomination Committee Report of the Nomination Committee Nomination the of Report Report of the Nomination Committee continued
Gender diversity Activities during 2015 Hansteen strives to have an equal, diverse and inclusive The Committee’s focus in 2015 was on the further workforce. The Company embraces diversity and provides development of the Board’s succession plan, in particular an environment where every employee has the opportunity the appointment of two additional Non-Executive Directors to achieve their full potential. It is one of Hansteen’s key to join the Board. These appointments fill the vacancy targets that people treat each other with dignity and created by the retirement of Richard Cotton in September respect. The Board is aware of the requirement within the 2015 and the forthcoming vacancy which will arise when UK Corporate Governance Code to report on their diversity Humphrey Price retires from the Board at the Annual policy, including gender, and on any measurable objectives General Meeting in 2016. The Committee engaged the set for implementing such a policy and the progress in services of an external executive search consultancy, meeting these. The Board approved Hansteen’s diversity Lomond Consulting, which has no other relationship with and inclusion policy in 2013. The policy is set out in the the Company, to assist in the recruitment process. From an Employee Handbook and, as part of their induction, all new initial list of ten candidates put forward, and meeting criteria employees must confirm that they have read and agreed by the Committee, a short list of four was drawn up understood the policy. The Board’s policy on diversity, based on their level of relevant experience. The candidates including gender, together with objectives that it has set for on the shortlist were invited to meet me and other implementing the policy, and progress on achieving these members of the Board and as a result of those discussions objectives, are set out in the Corporate and Social we welcomed David Rough and Margaret Young to the Responsibility section of the Annual Report. Board on 1 October 2015. Both David and Margaret strengthen the Hansteen Board with their breadth of Committee evaluation knowledge, skills and experience and I look forward to The performance of the Committee was evaluated as part working with them both to deliver Hansteen’s strategy. of the internally managed Board evaluation exercise undertaken in relation to the year ended 31 December 2015 As a result of the recommendations of the Nomination and the Committee was found to be operating effectively. Committee, Margaret Young was appointed to the Audit Committee and David Rough was appointed to the Remuneration Committee.
James Hambro Chairman of the Nomination Committee
14 March 2016
34 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 35
approval of an award under the Performance Share Plan Share under the Performance of an award approval and members of the Directors (“PSP”) the Executive to senior management team; the annual bonus for, and targets the design of, agreeing 2015; the year ending 31 December scheme for and of reference terms of the Committee’s review during the year; and performance in light of three-year LTIP of the Founder review period starting three-year and new performance 1 January 2016. year ended 31 December 2014 and consideration of and consideration 2014 year ended 31 December feedback; shareholder Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC › › › › › › › › reward and Performance in another resulted during 2015 performance The Group’s by 9.5p increase the EPRA NAV year which saw record after was This growth 111.2p. to 101.7p from per share making a total payment of dividends of 8.1p per share Profit or 17.3%. per share the year of 17.6p gain over 25% increase a represented £148.2 million tax of after the Committee In this context, year. the previous over of payment under the annual is satisfied that the level is appropriate Directors the Executive bonus scheme for the Joint Chief Executives, of the maximum for (61.7% Director). the Finance of the maximum for 76.7% in were Directors the Executive Base for salary increases for increase the aggregate below line with or at a level the Group. employees across performance with a three-year of PSP awards In respect under which 50% of each 2015, period ending 31 December and 50% against targets against NAV is measured award part and 0% of the TSR part is 75% of the NAV TSR targets, vest. to expected has Hansteen under the PSP, the TSR targets to In relation of its share nature non-volatile relatively the from suffered most of the when the PSP period commenced In 2012 price. discounts price at substantial share were group comparator
approval of the Directors’ Remuneration Report for the Report for Remuneration of the Directors’ approval 2014; year ended 31 December Long under the Founder award of the expected review the three-year for LTIP”) (“Founder Plan Incentive Term 2015: period ending 31 December performance Meeting of Annual General of the final outcome review the Report for Remuneration the Directors’ for voting review of the achievement of the 2014 annual bonus of the 2014 of the achievement review against target; measures scheme performance Directors; Executive of base salaries for review › › › › › › › › › › ANNUAL STATEMENT ANNUAL and determine is to of the Committee The primary role the specific pay and benefits the Board to recommend that they ensure to Directors, the Executive for packages their individual for rewarded fairly, but responsibly, are performance. overall the Group’s to contributions support the business is to objective The Committee’s long-term the Group’s promote to of the Group, strategy with shareholders’ align remuneration and to success the Group’s also administers The Committee returns. the Committee plans. During the year, incentive share activities: out the following carried Melvyn Egglenton Chairman of the Remuneration Committee Report of the Remuneration Committee (the “Committee”) “Committee”) (the Committee Remuneration the of Report 2015. December 31 ended year the for On behalf of the Board, I am pleased to introduce the introduce to pleased am I Board, the of behalf On Report of the Remuneration Committee Remuneration the of Report Report of the Remuneration Committee continued
to their NAV. The average discount for the sector was 21% The following report has been prepared in accordance with whereas Hansteen’s discount was only 5%. During the the Companies Act 2006 and Schedule 8 of the Large and following three years, those companies which had been at Medium-Sized Companies and Groups (Accounts and very deep discounts rose to premiums. Since then many of Reports) Regulations 2008, as amended, and meets the the companies have fallen back to significant discounts. relevant requirements of the Listing Rules of the Financial Throughout the period, Hansteen’s share price remained in Conduct Authority and the UK Corporate Governance Code. a relatively narrow band around the NAV. The Report is presented in two main parts – the Remuneration policy report and the Annual Report on The Founder LTIP was established at IPO in November Remuneration. The Remuneration policy was approved by 2005 to recognise and reward the two Founder Directors shareholders at the Annual General Meeting held on 9 June for the delivery of high absolute returns over an extended 2014 and it is intended that the policy will apply for three period. Under the scheme, if the growth in EPRA NAV years from that date. The Remuneration Committee per share plus dividends exceeds compound growth of anticipates reviewing the Remuneration Policy in late 2016/ more than 10% per annum over a three-year period, early 2017 and submitting it to the shareholders for then the Founder Directors will each receive awards in approval at the Annual General Meeting to be held in 2017. shares equivalent to 12.5% of the excess. There have The Company does not currently comply with the been no Founder LTIP payments relating to the first two requirements for malus and clawback provisions in Section measurement periods 2006-2009 and 2010-2012. However, D: Remuneration of the UK Corporate Governance Code. No for the three years ended 31 December 2015 the EPRA malus and clawback provisions are in place for the Founder NAV per share for the Group, after adding back dividends LTIP or PSP schemes because these changes to the Code paid increased by 52.7p per share. This represents a were made after the current Remuneration Policy was return of 63% or 18% per annum compound over the approved by the shareholders. This change to the Code will period and exceeds the 10% per annum compound growth be taken into consideration at the next review of the target by 25.2p per share, equivalent to £204.8 million. Remuneration Policy. An ordinary resolution will be The participation in 12.5% of the excess performance proposed at the forthcoming Annual General Meeting on results in awards to each of the Founder Directors of 6 June 2016 to approve the Annual Report on Remuneration 22.9 million shares. The Founder Directors have agreed and this Annual Statement, both of which are subject to an to forgo part of their awards equal in value to their PAYE advisory vote. and Employee’s National Insurance liabilities due on the vesting of the awards, which will be settled on their behalf by the Company. After settlement of these PAYE liabilities and National Insurance liabilities each of the Founder Directors will be issued with 12,140,247 shares. Melvyn Egglenton Policy for 2016 Chairman of the Remuneration Committee No changes to the structure of remuneration for Executive and Non-Executive Directors were made in the year ended 14 March 2016 31 December 2015 and none are proposed for the year ending 31 December 2016.
36 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 37 Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC 1 To attract, retain and motivate high-calibre individuals. high-calibre and motivate retain attract, To market. the external to relative remuneration non-variable competitive provide To skills and experience. performance, and reward recognise To › › › Normally reviewed in January each year having regard to market practice, to Group and Group to practice, market to regard in January each year having reviewed Normally of responsibility. scope and to individual performance, with determined Salaries are or maximum salary increase. is no maximum salary There and and individual performance Group and also to practice market competitive to regard other Group for be in line with increases will typically Salary increases responsibility. of scope of account take to this level above increase to has discretion employees but the Committee individual development and responsibility, in scope increase such as individual circumstances level. market and alignment to in role, and performance when deciding salary levels. is considered individual performance overall although None, Pension skills and an individual’s reflecting Directors Executive high-calibre and retain help recruit To experience. pension funds. to Contributions Employer contribution of maximum of 16% of base salary. of maximum of 16% Employer contribution None Benefits role and to the appropriate benefits package and cost-effective a competitive provide To Directors. of Executive location medical fuel, private private car allowance, company of a comprise the provision Benefits and permanent assurance family, life and immediate Director the Executive for insurance to required with the technology also provided are Directors Executive health insurance. and efficiently. out their duties effectively carry enable them to reflect an to to time time from Committee by the may be adjusted The benefits package level. market align to and to particular circumstances individual’s if may be offered allowances relocation as other benefits such the above, In addition to by the Committee. and reasonable appropriate considered of provision. cost Full None. Base salary › › › Operation Maximum opportunity measures Performance Element and link to Purpose strategy Operation Maximum opportunity Performance measures Performance Element and link to Purpose strategy Operation Maximum opportunity measures Performance Purpose and link to and link to Purpose strategy Executive Directors Executive pay Fixed Element Summary policy table The following table summarises the key elements of the Group’s Remuneration Policy for Directors, which was approved by approved which was Directors, for Policy Remuneration elements of the Group’s summarises table the key The following Annual the 2013 in be found can Policy Meeting. Details of the full Remuneration Annual General at the 2014 shareholders at www.hansteen.co.uk/investors. website the Company’s from Report available Remuneration policy report policy Remuneration Remuneration policy report continued
Summary policy table continued Executive Directors continued Variable pay Element Annual performance related bonus scheme Purpose and link to To reward excellent financial performance and achievement of strategic, financial and strategy operational objectives linked to investor expectations at the beginning of the year. Operation Measures and targets are reviewed and set annually by the Committee at the beginning of the financial year and the levels of award are determined by the Committee after the year-end based on the performance against targets. Bonus awards are paid in cash, are non-pensionable and are subject to a claw back in relation to fraud or gross misrepresentation. Maximum opportunity Up to 100% of base salary but limited to 75% of base salary for each of the Joint Chief Executives in view of their participation in the Founder Long Term Incentive Plan. Performance measures A combination of financial and non-financial targets, such as occupancy and cost efficiency targets, corporate targets and a discretionary element to reward overall performance. The exact measures, weightings and targets are determined by the Committee each year taking into account the Group’s key strategic priorities and the budget for the year. Element Performance share plan (“PSP”) Purpose and link to To incentivise and reward outstanding performance and ensure alignment with shareholders’ strategy interests. Operation Awards of share options on an annual basis. Awards are normally exercisable over a two-year period normally commencing no earlier than three years from date of grant, subject to continued employment and performance conditions. Maximum opportunity Annual awards subject to a maximum value at grant of 150% of base salary but limited to 75% of base salary for each of the Joint Chief Executives in view of their participation in the Founder Long Term Incentive Plan. Performance measures Targets are set by the Committee in accordance with the strategic objectives of the Group at the time the awards are granted and measured over a three-year performance period. Element Founder Long Term Incentive Plan (“Founder LTIP”) Purpose and link to Legacy arrangement forming part of the Founder Directors’ arrangements established at IPO strategy (November 2005) to incentivise the existing Joint Chief Executives and to recognise and reward the delivery of exceptional returns to shareholders. This arrangement cannot be offered to any other Directors. Operation Contractual rights operating over three-year performance periods to award shares where the NAV per share growth exceeds the Target NAV per share. The current performance period is 2013 to 2015. Maximum opportunity For each Joint Chief Executive, an award of shares with a value equal to 12.5% of the NAV per share growth in excess of a Target NAV per share multiplied by the number of shares in issue at the end of the performance period. Performance measures In the relevant three year performance period, the NAV per share must have compound growth in excess of 10% per annum. The NAV per share growth and the Target NAV are measured after including dividends and other returns to shareholders. The performance measure was chosen to reward the Founder Directors if the Group’s return to shareholders is significant in absolute terms.
38 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 39
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC Shareholding requirement Shareholding ensure and to the Company to Directors of the Executive the commitment demonstrate To and the shareholders. the Company with those of alignment of their personal interests in the and then maintain a shareholding build to required are Directors The Executive Company. build and to required are Directors years of their appointment, the Executive Within three base salary. their pre-tax to equal in value in the Company then maintain a shareholding None. Fees individuals. high-calibre and retain attract To in the annual do not participate Directors Non-Executive periodically. reviewed are Fees no other benefits. schemes and receive incentive bonus or long-term paid in cash. are Fees reflect to set at a level are Fees increase. maximum fee or fee is no individual maximum There of fees surveys to and by reference role and responsibilities of the relevant time commitment capitalisation. market with comparable of companies directors non-executive paid to by the Board responsibilities determined all Board for fee is paid an all-inclusive The Chairman of the Committee. on the recommendation chairing Board for additional fees plus paid a basic fee are Directors Non-Executive by the Board determined These are acting as Senior Independent Director. or for Committees of the Committee. on the recommendation in within the limit in the Articles of £750,000 of Association must remain fees Overall aggregate. None. those arrangements. The E
Executive Directors continued Directors Executive pay Variable Element Purpose and link to and link to Purpose strategy Operation Maximum opportunity measures Performance Directors Non-Executive Element and link to Purpose strategy Operation Maximum opportunity measures Performance
Notes: 1. facilitate enablethemto to Company bythe provided andsofundsare pensionarrangements theirown for responsible are Directors xecutive Annual report on remuneration
This Annual report on remuneration provides details on how the Group’s remuneration policy was applied in the year ended 31 December 2015 and how it will be applied in 2016. It will be subject to an advisory vote by shareholders at the Annual General Meeting.
Fixed pay/benefits The Committee has approved that there will be no increase to the base salaries of Ian Watson and Morgan Jones in 2016. An increase to base annual salary of 9.3% for Richard Lowes was approved with effect from 1 January 2016 in line with increases in the wider employee population.
2015 Salary 2016 Salary £000 £000 Executive Directors Ian Watson 420 420 Morgan Jones 420 420 Richard Lowes 270 295
Melvyn Egglenton No changes will be made to pension and benefit provision. Chairman of the Remuneration Committee Variable annual pay Implementation of policy for 2016 The Board has set new targets for the Executive Directors In line with the Remuneration Policy, the key elements for the annual bonus in line with the Group’s strategic, of the 2016 remuneration package for the Executive financial and operational objectives. The maximum potential Directors are: bonus will continue to be limited to 75% of base salary for each of the Joint chief Executives in view of their ›› Fixed pay/benefits – base annual salary and benefits, participation in the Founder LTIP and is also set at 75% for pension contributions and insurance cover as stated in the Finance Director. This and the changes to the annual the Summary policy table in the Remuneration policy bonus targets are within the scope of the approved report section of this report. Remuneration Policy. ›› Variable annual pay – cash payments under the annual performance related bonus scheme. ›› Variable long-term pay – share based long-term incentives under the PSP and the Founder LTIP with performance criteria.
40 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 41 % of Potential award % of Potential Up to 20% of award. Up to Up to 20% of award. Up to 20% of award. Up to of award. 10% Up to of award. 10% Up to 20% of award. Up to Vesting Nil 25% On a straight-line basis between 25% and 100% in proportion to the Company’s ranking between Median and Upper Quartile. Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC TSR/NAV Growth Growth TSR/NAV Ranking Median Below Median Between Median and Upper quartile Founder LTIP Founder performance three-year a new LTIP Under the Founder on 1 January period will commence measurement Each Founder 2018. and end on 31 December 2016 with a of shares an award entitled to will be Director per a 10% over 12.5% to equivalent of the excess value over per share in the NAV growth annum compound adding period after measurement the performance The shareholders. to back dividends and other returns that the Founder agreed have Joint Chief Executives ten over a dilution limit of 10% be subject to will LTIP issues and that they share new for years, adjusted years post vesting. two for will hold their shares award.
Based on overall performance Based on overall Normalised Total Profit before tax from £48 million to £64 million, to £48 million from tax before Profit Total Normalised the Founder excluding raising any capital with adjustment for full award. achieve to Plan shares, Share and Performance LTIP 50,000 of is a net improvement range target The occupancy (pro-rata). metres square 100,000 to metres square expenses/ range is an administrative efficiency target The cost (pro-rata). 17.5% to of 16.0% ratio rent business operational of a two-year and execution Production plan. the Board. plan to succession submit a To include asset, to liability and hedging of strategy Development strategies. Normalised Income Profit before tax from £48 million to £52 £48to million from tax before Profit Income Normalised the excluding raising any capital for million, with adjustment achieve to Plan shares, Share and Performance LTIP Founder full › › › › › › › › Performance measure Performance › › › › › › › ›
Financial Targets Financial Targets 40% of award) (up to Target (up to 20% of award) (up to Occupancy/Cost Occupancy/Cost Targets Efficiency 20% of award) (up to Target Corporate Element Discretionary 20% of award) (up to The bonus criteria for 2016 include four elements: include four 2016 for criteria The bonus The comparator group is determined by the Committee by the Committee is determined group The comparator in the property of companies a peer group and comprises reserves the Committee awards, When granting sector. group of the comparator the constituents vary the right to in reasonable such other actions as it considers or take group that any member of the comparator the event in the be listed to cease exist, or its shares to ceases or otherExchange Stock London Official List of the or it is so changed as to exchange, stock recognised unsuitable as a it,of the Committee, in the opinion make of the The percentage group. member of the comparator schedule: the following that vests is subject to award Performance Share Plan Share Performance at grant a maximum value subject to are Annual awards 75% salary of base to of 150% of base salary but limited of their in view each of the Joint Chief Executives for Plan. For Incentive Term Long participation in the Founder will be awarded Director each Joint Chief Executive 2016, at grant PSP with a value options under the share nil-cost will also be Director of 75% of his base salary. The Finance the PSP with a value options under share nil-cost awarded will vest of 75% The awards of his base salary. at grant 50% will conditions: performance separate based on two and 50% by TSR ranking the Group’s to vest by reference in ranking, EPRA Net Asset Value the Group’s to reference a three-year over group a comparator to relative each case performance that meet the period. Awards performance equal annual in three exercisable are conditions period. the end of the performance instalments following Annual report on remuneration continued
Audited information Single figure table
Performance Taxable related Share Salary/fees benefits bonus schemes Pension Total £000 £000 £000 £000 £000 £000 Executive Directors Ian Watson 2015 420 53 194 27,085 67 27,819 2014 415 54 303 271 66 1,109 Morgan Jones 2015 420 50 194 27,085 67 27,816 2014 415 51 303 271 66 1,106 Richard Lowes 2015 270 35 155 111 43 614 2014 263 38 192 176 42 711 Non-Executive Directors James Hambro 2015 93 – – – – 93 2014 92 – – – – 92 Richard Mully1 2015 22 – – – – 22 2014 51 – – – – 51 Richard Cotton² 2015 36 – – – – 36 2014 50 – – – – 50 Melvyn Egglenton3 2015 52 – – – – 52 2014 27 – – – – 27 Humphrey Price 2015 50 – – – – 50 2014 50 – – – – 50 Rebecca Worthington3 2015 48 – – – – 48 2014 27 – – – – 27 Margaret Young4 2015 11 – – – – 11 2014 – – – – – – David Rough4 2015 11 – – – – 11 2014 – – – – – – Stephen Gee5 2015 – – – – – – 2014 23 – – – – 23 Total 2015 1,433 138 543 54,281 177 56,572 Total 2014 1,413 143 798 718 174 3,246
Notes: 1. Richard Mully retired from the Board on 8 June 2015. 2 Richard Cotton retired from the Board on 30 September 2015. 3. Melvyn Egglenton and Rebecca Worthington were appointed to the Board on 10 June 2014. 4. Margaret Young and David Rough were appointed to the Board on 1 October 2015. 5. Stephen Gee retired from the Board on 10 June 2014.
42 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 43
% Award granted Award % 5% awarded to the Joint to 5% awarded Chief Executives. the to awarded 15% Director. Finance the to 12.5% awarded Joint Chief Executives. the to awarded 17.5% Director. Finance 0% awarded. awarded. 19.2% 12.5% awarded. 12.5% awarded.
The business plans were The business plans were and the related submitted of the liability development with the together strategy of the foreign review policy were exchange during the year. progressed the reflect The awards during performance record the year and the continued of the development to and staff systems manage the portfolio. Normalised Income Profit Profit Income Normalised 6.8p. tax per share before Profit Total Normalised 9.1p. tax per share before of 148,404 Improvement (pro-rata). metres square expenses/ Administrative of 12%. ratio rent › › › › › › Actual achieved Actual › › › › › › Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC immediate family, and life assurance and permanent health and permanent assurance and life family, immediate by the Group. provided insurance bonus Performance-related the year ended bonus for The maximum potential was Directors each of the Executive for 2015 31 December 75%). 75% (2014: of base salary the against measured were bonus awards The 2015 targets: following In the Annual Report on Remuneration for the year ended for In the Annual Report on Remuneration that the Group estimated it was 2014, 31 December of the NAV and 100% 0% of the TSR ranking achieved at the time of publishing the report. ranking growth used price The share did not change. The actual rankings £1.04. was in 2014 of the awards the value calculate to was vested on the day that the awards price The share disclosed in the 2014 amounts The comparative £1.22. theseto changes reflect to been restated have table above value. the estimated LTIP schemes – Founder Share schemes includes included under share the value The value each of the two that vest to awards LTIP of the Founder the for growth EPRA NAV subject to Directors Founder period that ended on 31 December performance three-year in EPRA NAV if the growth LTIP, Under the Founder 2015. of growth compound plus dividends exceeds per share performance the three-year per annum over than 10% more awards will each receive Directors period, then the Founder 12.5% to equivalent of the excess. in shares
Review of foreign exchange exchange of foreign Review hedging policy. The target range was a net was range The target square of 60,000 improvement metres square 120,000 to metres (12.5%). (pro-rata) in administrative Improvement 15%–16% to ratio expenses/rent (12.5%). (pro-rata) Submit detailed business plans to all the main regions for the Board (UK, and Benelux) and Germany strategy. implement approved in Optimise liability strategy to approach support of the agreed business plans. the regional Normalised Income Profit before before Profit Income Normalised 7.5p to 6.9p from tax per share full award achieve to (pro-rata) (15%). before Profit Total Normalised 9.2p to 6.9p from tax per share full award achieve to (pro-rata) 20%. Based on overall performance. Based on overall › › › › › › › › Performance measure Performance › › › › › › › ›
Target Discretionary Element Discretionary 20% of award) (up to Taxable benefits Taxable the monetary or deemedcomprise benefits Taxable fuel and private allowance, of the car monetary value and Director the Executive for insurance medical private Salary and fees Salary and for base salary Salaries comprise and fees Non-Executive for fees and Directors Executive paid Gee were of Stephen The fees Directors. 2014. during Limited Clifton Wallace to Financial Targets Financial Targets 35% of award) (up to In total, the Committee awarded bonuses to each Joint bonuses to awarded the Committee In total, 0% of the TSR will achieve that the Group it is estimated a total (i.e. ranking growth and 75% of the NAV ranking expected awards of the share %). The value vesting of 37.5 over price share being the average vest is based on £1.17, to that the share the extent To of 2015. the last quarter equal in three vest, they will be exercisable awards 2018. March to 2016 March instalments from Share schemes – Performance Share Plan Share schemes – Performance Share schemes includes included under share an The value that will vest PSP awards of the of the value estimate the three for targets performance TSR and NAV subject to Based on an 2015. year period that ended on 31 December 2016, as at 14 March targets assessment of performance Chief Executive Director of £194,355 representing 61.7% 61.7% representing of £194,355 Director Chief Executive the to bonus and £155,318 of his maximum potential of his maximum 76.7% representing Director Finance bonus potential. Occupancy/Cost Occupancy/Cost Targets Efficiency of award) 25% (up to Target Corporate 20% of award) (up to Annual report on remuneration continued
EPRA NAV was 83.2p on 1 January 2013 and was 118.3p The Founder Directors have agreed to forgo part of their on 31 December 2015 prior to the Founder LTIP award. awards equal in value to their PAYE and Employees’ Dividends paid during the period amounted to 17.6p per National Insurance liabilities due on the vesting of the share. The EPRA NAV at 31 December 2015, after adding awards, which will be settled on their behalf by the back dividends paid during the three-year performance Company. After settlement of these PAYE liabilities and period exceeded the target NAV per share of 110.7p by National Insurance liabilities each of the Founder Directors 25.2p or £204.8 million. The number of shares to be awarded will be issued with 12,140,247 shares. to each of the Founder Directors is based on 12.5% of the outperformance which amounts to £25.6 million. In Pensions accordance with the Founder LTIP, the number of shares Where the Executive Directors are responsible for their own to be issued has been calculated using the average pension arrangements the pension value included in the mid-market quotation for the first 20 dealing days Single Figure Table represents the amounts paid by the after 31 December 2015 which was 111.955p. This results Company to the Executive Directors to facilitate those in 22,906,127 shares which will be vested to each of the pension arrangements. None of the Executive Directors two Founder Directors on 15 March 2016. have a prospective right to a defined benefit pension.
In accordance with the Companies Act 2006 and Schedule 8 Payments to past Directors of the Large and Medium-Sized Companies and Groups No payments were made during the year. (Accounts and Reports) Regulations 2008 Part 3 the value of the awards has been included in the Single Figure Table Payments for loss of office based on the average share price over the last quarter of No payments were made for loss of office during the year. 2015, being £1.17 per share resulting in £26,909,470 attributable to each of the two Founder Directors.
Share scheme interests Performance Share Plan The Executive Directors’ total interests under the PSP are summarised below:
Number of share options Share price for Award date award (p) Face value Performance period Exercise period Awarded Lapsed Vested Ian Watson July 2012 72.34 £281,250 01/12 – 12/13 06/14 – 06/16 388,789 170,095 145,796 July 2012 72.34 £281,250 01/12 – 12/14 06/15 – 06/17 388,789 194,394 64,798 March 2013 85.22 £296,250 01/13 – 12/15 03/16 – 03/18 347,630 – – April 2014 110.20 £311,250 01/14 – 12/16 04/17 – 04/19 282,441 – – April 2015* 114.90 £315,000 01/15 – 12/17 03/18 – 03/20 274,151 – – Morgan Jones July 2012 72.34 £281,250 01/12 – 12/13 06/14 – 06/16 388,789 170,095 145,796 July 2012 72.34 £281,250 01/12 – 12/14 06/15 – 06/17 388,789 194,394 64,798 March 2013 85.22 £296,250 01/13 – 12/15 03/16 – 03/18 347,630 – – April 2014 110.20 £311,250 01/14 – 12/16 04/17 – 04/19 282,441 – – April 2015* 114.90 £315,000 01/15 – 12/17 03/18 – 03/20 274,151 – – Richard Lowes July 2012 72.34 £182,813 01/12 – 12/13 06/14 – 06/16 252,713 110,562 94,768 July 2012 72.34 £182,813 01/12 – 12/14 06/15 – 06/17 252,713 126,357 42,119 March 2013 85.22 £187,500 01/13 – 12/15 03/16 – 03/18 220,019 – – April 2014 110.20 £196,875 01/14 – 12/16 04/17 – 04/19 178,652 – – April 2015* 114.90 £202,500 01/15 – 12/17 03/18 – 03/20 176,240 – –
* The threshold vesting, basis for the awards and exercise price for these awards are dealt with in the notes below.
Notes Company over five consecutive dealing days immediately Annual awards are nil cost options subject to a maximum preceding the award date. The Executive Directors did not value at grant of 150% of base salary but limited to 75% of exercise any of the vested options during the year. base salary for each of the Joint Chief Executives in view of their participation in the Founder Long Term Incentive Plan. The three-year performance period for the third award ended on 31 December 2015. It is estimated that 37.5% of The share price used to calculate the number of shares those share options will vest and are exercisable at nil cost under each award was determined by reference to the in three equal instalments from March 2016 to March 2018, average mid-market price of an ordinary share of the subject to continued employment of the Director.
44 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 45 – – – – – – –
Vestedand exercisable awards 22,906,127 22,906,127 Shares subject to Founder LTIP – – – – – – – – – theyear Exercised during Exercised – – – – – – 210,594 210,594 136,887 Vestedand exercisable – – – – – – 131,620 202,495 202,495 exercisable Shares subject to PSP awards Vestedbut not Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC such excess multiplied by the number of ordinary shares in shares the number of ordinary multiplied by such excess as Joint Chief Executives each of the payable to issue will be to automatically scheme repeats award This an award. periods. three-year consecutive over performance reward the be used when determining to per share The price entitled are the Joint Chief Executives number of shares mid-market is the average LTIP the Founder to pursuant to the first for on the Main Market such shares quotation for of the the end following dealing days immediately 20 period. three-year relevant period ended on performance the three-year For at 31 January per share the base NAV 2015 31 December 110.7p was NAV the Target per share, 83.2p was 2013 per share. commencing period performance the three-year For per share is 111.2p per share the base NAV 1 January 2016 is 148.0p per share. NAV and the Target interests and share shareholdings Directors’ guidelines Shareholding Executive policy requiring a introduced The Company in the maintain a minimum holding of shares to Directors Company at the 2013 Annual General Meeting. Within three Meeting. Within three Annual General at the 2013 Company are Directors years of their appointment, Executive in build, and then maintain, a holding of shares to expected base salary. one year’s equal to the Company on Directors of the Executive shareholdings The current base their respective to compared 2015 31 December Jones 1,240% – Morgan – 1,240%, Ian Watson salaries are: – 300%. Lowes and Richard instead shares will be issued with 12,140,247 Directors disclosed in the table. shares of the 22,906,127 the beneficial and other been no changes to have There of shares in the ordinary of the Directors interests on this page from as shown Holdings PLC Hansteen other than the increase 2016, 14 March to 2015 31 December Jones and Ian of Morgan shares in the holding of ordinary LTIP. in the Founder the vesting of shares following Watson Jones and Ian of Morgan shares in ordinary The interest 16,664,056 each to shares by 12,140,247 will increase Watson 2016. March each on 15 shares – – – – – – measures 574,911 904,222 904,222 performance
Unvested with Unvested – – – – 704,107 375,000 Shares 200,000 4,523,809 4,523,809 Ordinary shares Ordinary Humphrey Price Humphrey RoughDavid Worthington Rebecca Young Margaret Morgan Jones Morgan Lowes Richard James Hambro Melvyn Egglenton Ian Watson Directors’ interests as at 31 December 2015 December as at 31 interests Directors’ As noted on page 41, the PSP awards vest based on a vest on page 41, the PSP awards As noted Plan Incentive Term Long Founder established IPO in at arrangements As part of the founder a share entitled to are the Joint Chief Executives 2005, Any amount performance. dependent on Company award be satisfied by the is to LTIP payable under the Founder The number of of the Company. shares of ordinary award depends on the LTIP under the Founder awarded shares (including per share growth net asset value Company’s a exceeding shareholders) to dividends and other returns per annum (the “Target of 10% rate growth compound of For the purposes period. a defined three-year over NAV”) net be the diluted to is taken net asset value this scheme, with the guidelines in accordance adjusted asset value Organisation Public Real Estate issued by the European is that EPRA NAV believes The Committee (“EPRA NAV”). but NAV calculating methodology for the most appropriate basis as the use such other NAV to it has the discretion is no if EPRA NAV as appropriate shall determine Committee market as the appropriate regarded longer reasonably that EPRA NAV the extent To the Company. benchmark for to (including dividends and other returns share per ordinary 12.5% of per share, NAV the Target exceeds shareholders) The number of share options that are exercisable will exercisable options that are of share The number at the value, market with an aggregate include a number the dividends that of the value equal to of exercise, date being exercised options on those share accrued have would period. of the performance the beginning from PSP awards of the and 25% ranking growth TSR and NAV is met. threshold The performance vest if the minimum issued all the awards the same for are targets performance date. under the PSP to The number of shares subject to Founder LTIP awards awards LTIP Founder subject to The number of shares amounts to the gross are included in the table above entitled. The are Directors which each of the Founder part of their forgo to agreed have Directors Founder and Employee’s their PAYE to equal in value awards liabilities of the due on the vesting National Insurance which will be settled on their behalf by the awards, liabilities PAYE settlement of these After Company. liabilities Founder each of the and National Insurance None of the ordinary shares held by Directors have have held by Directors shares None of the ordinary awards LTIP Founder PSP and measures. performance detailed above. issued are Annual report on remuneration continued
Non-Audited information including annual bonus). The Company reserves the right External directorships to require him to take any outstanding holiday during The Executive Directors are permitted, subject to the prior any notice period or to make payment in lieu thereof. written consent of the Board to accept appointments as Non-Executive Directors on other boards so long as none of The Company may terminate Richard Lowes such interests prejudice the business interests of the employment by giving less than twelve months’ Company or of any Group Company. None of the Executive notice and may require that he mitigates his losses Directors have any fee paying external directorships. by seeking alternative employment. The Company shall assess his mitigation prospects in determining Executive Directors’ service contracts the amount of any payment in lieu of notice. The dates of the service agreements with the Company of each Director who served as an Executive Director during The Company also has the right to terminate Richard the year and their unexpired term, are stated below: Lowes’ service agreement summarily without notice or payment in lieu of notice for cause. Date of service agreement Unexpired term New Executive Directors loss of office Morgan Jones 22 November 2005 12 months Notice Periods for new Executive Directors will be limited to Richard Lowes 18 October 2010 12 months a maximum of 12 months. Ian Watson 22 November 2005 12 months Once notice has been given by either party, the Company Existing Directors loss of office will reserve the right to terminate the Executive Director’s The contracts remain in force at the date of this report, are employment at any time during the applicable notice period on a full-time basis and provide for 12 months’ notice of by making a payment in lieu of the remaining period of termination by either party. If the Company gives notice to notice. Consistent with best practice, any payment in lieu of the relevant Executive (except where termination is for notice will consist solely of the Executive Director’s base cause), the Company must make a payment in lieu of notice salary and the cost to the Company of providing all other of the Executive’s base salary plus an amount equal to the contractual benefits under his/her service agreement for cost to the Company of providing all other contractual the remaining period of notice, net of tax, but will exclude benefits over the immediately preceding twelve-month annual bonus and other entitlements or benefits referable period (including any contractual bonus payment made in to his/her employment. that period, other than any payment under the Founder LTIP), net of tax. The Company reserves the right to require The Company will also reserve the right to give less than the Executive to take any outstanding holiday during any 12 months’ notice and require the Executive Director to notice period or to make payment in lieu thereof. mitigate his/her losses by seeking alternative employment, and will assess the Executive Director’s mitigation prospects The Company also has the right to terminate each of the in determining the amount of any payment in lieu of notice. Joint Chief Executive’s service agreements summarily without notice or payment in lieu of notice for material Performance Share Plan breach by the Executive of the relevant agreement (that is The PSP rules incorporating leaver provisions were “for cause” e.g. gross misconduct). approved by shareholders at the Annual General Meeting in 2012: Under the Founder LTIP, if either of the Joint Chief Executives is a good leaver (including termination by the ›› For good leavers (e.g. on death or for ill health, disability, Company in breach of contract or unfair dismissal), awards retirement or redundancy) prior to the end of the are still subject to performance but the performance period relevant performance period, awards will vest over the is shortened to the date of cessation of employment. number of shares reasonably determined by the Awards are forfeited where cessation of employment is for Committee taking account of factors that the Committee another reason, such as termination for cause. reasonably considers relevant (including, but not limited to, the proportion of the performance period which has Richard Lowes’ service agreement is terminable by either elapsed and the extent to which any performance party giving not less than 12 months’ notice. Once notice conditions have been or would have been satisfied if has been given by either party, the Company may, in its pro-rated to the date of cessation of employment). absolute discretion, terminate his employment at any time ›› For good leavers after the end of the performance period during the applicable notice period by making a payment in but before the vesting date of an award (or a proportion lieu of the remaining period of notice consisting of his base of the award), awards will vest over the number of salary and the cost to the Company of providing all other shares reasonably determined by the Committee, but contractual benefits under his service agreement for the the only factor the Committee must take into account in remaining period of notice, net of tax (but excluding any that determination is the proportion of the vesting other entitlements or benefits referable to his employment, period which has elapsed.
46 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 47 re-election Date on which which on Date nextsubject to 6 June 2016 6 June 2016 6 June 2016 6 June 2016 6 June 2016 6 June 2016 re-appointment or re-appointmentor 9 June 2014 9 June 2014 1 October 2015 1 October 2015 1 October 13 2010 October 15 November 2005 November 15 Effective date of engagement had the Non-Executive Director continued in office until in office continued Director had the Non-Executive Director’s the Non-Executive of of expiry the date appointment, or any the initial appointment whether of thereof. extension Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC The following table sets out dates of the Non-Executive of the Non-Executive sets out dates table The following on which the appointment and the date of letters Directors’ or re-appointment to subject is next Director Non-Executive re-election. James Hambro Melvyn Egglenton Price Humphrey Rough David Worthington Rebecca Young Margaret and table graph Performance total Company’s the compare graphs The following Real FTSE Estate (“TSR”) two to return shareholder with dividends growth, price share TSR measures indices. to Prior date. on the ex-dividend be reinvested deemed to the performance detailing the graph for 2009 6 October FTSE comparison is the for used the index flotation, since up (which Index & Services Investment Real Estate All-Share been a constituent have would until that point the Company used for the index member of). 2009, 6 October From Investment Real Estate All-Share is the FTSE comparison into conversion Company’s the reflect Index, to Trusts seven-year The that date. from a REIT with effect All- solely against the FTSE compares graph performance Index. These indices Trusts Investment Real Estate Share considered as they are been chosen by the Committee have assess benchmarks against which to the most appropriate this purpose for of the Company performance the relative based on are these time periods. The graphs and for Datastream. by Thomson Reuters underlying data provided Index Hansteen If the Non-Executive Director resigns voluntarily but voluntarily resigns Director If the Non-Executive or objection to, a reasonable of having solely because decision on a with, a Board disagreement reasonable matter commercial of policy or a material matter material the case, In this Company or the Group. the affecting a severance will be entitled to Director Non-Executive if or, of the annual fee a quarter to payment equivalent been paid have that would amount of fees less, the total When an offer for the entire issued share capital of the issued share for the entire When an offer (unless wholly unconditional becomes Company except by the Board), in office continue to requested the outset in from is wholly unconditional an offer where at the end of will terminate the appointment which case will be Director period and the Non-Executive the offer of the annual fee. quarter a payment of a entitled to Awards are generally forfeited where departure is for for is departure where forfeited generally are Awards for or termination as resignation such another reason, permit to has discretion the Committee although cause, level the good leaver exceeding not level a to vesting up above. as determined of the Committee’s on the date occurs Vesting and on early vesting (as described above), determination that from is permitted of options (if appropriate) exercise but not the Committee by determined a period for date of of cessation the date 12 from months exceeding employment. 0 29/11/05 31/12/06 31/12/07 31/12/08 31/12/09 31/12/10 31/12/11 31/12/12 31/12/13 31/12/14 31/12/15 20 60 80 40 › › › › 120 160 180 140 Performance since flotation 100 › › › Directors Non-Executive do not the Chairman, including Directors, The Non-Executive the Company. with or Employment contracts Service have of Appointment a Letter has Director Each Non-Executive the Articles and to of Association subject to which provides, be appointments can that Directors by rotation, retirement upon either party giving not less than three terminated with in accordance However notice. months’ prior written are all Directors B.7.1 Code Governance the UK Corporate eligible for not and are annual re-election subject to or any other payment on payment in lieu of notice circumstances: in the following except termination › Annual report on remuneration continued
Seven-year Performance Hansteen Index 300
250
200
150
100
50
0 01/01/2009 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
This table shows the single figure remuneration and percentage of bonus and incentive vesting for the Joint Chief Executives for the last seven years.
Joint Chief Single figure Annual bonus pay out against maximum Long-term incentive vesting rates against Year Executive £000 opportunity % maximum opportunity % 2015 Ian Watson 27,085 61.7 37.5% Morgan Jones 27,085 61.7 37.5% 2014 Ian Watson 1,109 97.5 50.00% Morgan Jones 1,106 97.5 50.00% 2013 Ian Watson 1,052 97.5 56.25% Morgan Jones 1,050 97.5 56.25% 2012 Ian Watson 793 82.9 – Morgan Jones 789 82.9 – 2011 Ian Watson 671 95.0 – Morgan Jones 667 95.0 – 2010 Ian Watson 604 87.7 – Morgan Jones 600 87.7 – 2009 Ian Watson 499 89.8 – Morgan Jones 497 89.8 –
As described on page 43 the Joint Chief Executives Performance Salary/ Taxable Related participate in the Founder LTIP. The number of shares to be fees benefits bonus issued is not subject to a maximum opportunity, but based % change 2014 to 2015 % % % on performance against set criteria. The long-term incentive Joint Chief Executives 1.2% (2.0)% (36)% vesting rates against maximum opportunity therefore All employees employed relate only to the PSP scheme. over two-year period 9.0% (2.0)% 287% Percentage change in remuneration This table to the right shows the percentage change in remuneration of the Joint Chief Executives for the last financial year compared to all employees that were employed during both the financial year and the preceding financial year.
48 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 49 Votes
withheld withheld 45,239 20,876
(abstentions)
cast Total votes 517,396,524 537,081,432 7.08% 2.59% % Against %
Votes against 13,425,142 38,009,265 % For % 97.41% Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC 92.92% The performance of the Committee was assessed was during the Committee of The performance and of the Board evaluation part of the internal the year as effectively. be operating to found and was its Committees Committee, Remuneration of the of reference The full terms are 2015, in October undertaken a review following updated at www.hansteen.co.uk. website on the Company’s available assist it where to advice seeks external The Committee appointed were PricewaterhouseCoopers appropriate. a review following 2015 in September by the Committee advisers. The Committee remuneration of the Company’s the year during PricewaterhouseCoopers consulted VAT, excluding them of £85,000, to fees and approved on charged advice, independent remuneration for that considered basis. Having a time and expenses tax advisory and provided PricewaterhouseCoopers the year, during the Company to service compliance provided is satisfied that the advice the Committee is both independent and by PricewaterhouseCoopers the to adhere PricewaterhouseCoopers objective. of Conduct. Code Group Consultants’ Remuneration the support from seeks internal The Committee where Secretary and the Company Directors Executive meetings Committee and they may all attend necessary, any discussions for not present but are by invitation, remuneration. their own to directly that relate Meeting at the Annual General Voting Meeting held on 8 June 2015, Annual General the At of the and at the meeting in respect proxy by cast votes as set out below. were report remuneration Directors’ shareholders put to most recently Policy The Remuneration Meeting on 9 June at the Annual General approved was and by a poll at the meeting proxy by cast and votes 2014 below. as set out were
for Votes 48% 36.0
499,072,167 503,971,382 2014 2015 24.3 Overal expenditure on pay 67% 56.2 Dividends 2014 2015 33.6 (2%) 47.2 2014 2015 48.2 Resolution text Resolution Approval of Annual Report on Remuneration of Annual Report on Remuneration Approval policy of Remuneration Approval The committee and its advisers and The committee until 8 June of the Committee Chairman was Cotton Richard Egglenton. by Melvyn was succeeded which he after 2015 Mully until Richard were Other members of the Committee and Worthington Rebecca James Hambro, 8 June 2015, All of the members of 2015. 14 October Rough David from independent by the Board. considered are the Committee to considered was the Board, of Chairman James Hambro, The be independent on his appointment as Chairman. a year, and no less than twice meets regularly, Committee has any personal and no member of the Committee in the other than as a shareholder, financial interest, no day-to-day members have decided. Committee matters Details of in the running of the Company. involvement in the Corporate be found at meetings can attendance Report. Governance Normalised Income Profit has been chosen as a metric for has been chosen as a metric Profit Income Normalised that it represents believe as the Directors this comparison performance and is a key of the Group underlying earnings the year-on- reflects movement The percentage indicator. of pay expenditure in the overall The increase year change. award LTIP the Founder in the year for includes the charge in the investment increase the substantial which reflects during the year. valuations property Relative importance of spend on pay of spend importance Relative of importance the relative shows below This chart financial key the Group’s to pay compared spend on the year. in shareholders dividends paid to and measures Normalised Income Profit Directors’ report
The Directors present their Annual Report and the audited financial statements of the Company and the Group for the year ended 31 December 2015. The Corporate governance statement set out on pages 26 to 28 forms part of this report.
Principal activities Key Performance Indicators The Company is the parent company of a group whose The Directors consider the following to be key performance principal activities comprise property investment, indicators (“KPIs”), as disclosed in the Strategic report: development, management and associated business, focusing on industrial property investments in Continental Key performance indicator 2015 2014 Europe and the UK, although it will also seek to profit from Normalised Income Profit £47.2m £48.2m opportunistic acquisitions in other property sectors both in Normalised Total Profit £63.2m £65.3m the UK and abroad. IFRS Net asset value (“NAV”) (per share) 105p 99p The subsidiary undertakings of the Group in the year are EPRA NAV (per share) 111p 102p listed in note 18 to the financial statements. Annualised rental income £82.6m £84.2m Net debt to value 41.2% 41.1% Business review Dividend (per share) – The Group’s focus is on UK and Continental European excluding special dividend 5.25p 5.0p industrial investments which in the opinion of the Board Yield 7.7% 8.7% have high-income yields compared to relatively low Occupancy (area) 88% 86% financing costs. To date these investments have been in the UK, Belgium, France, Germany and the Netherlands. A smaller part of the Group’s activity is dedicated to Dividend opportunistic property investment opportunities which to For the year ended 31 December 2015, an interim dividend date have included land and residential investments. More of 2.1p per share was paid on 20 November 2015, of which detailed information about the Group’s business, activities 1.5p per share was attributable to a REIT Property Income and financial performance is incorporated into this report Distribution (“PID”) in respect of the Group’s tax exempt by reference and can be found in the Strategic report on property rental business. The second dividend of 3.15p per pages 1 to 23. share will be payable on 19 May 2016 to shareholders on the register on 21 April 2016 of which 1.35p per share will be There are no further matters to report under section 417 of attributable to a PID. the Companies Act 2006. Post balance sheet events Results On 12 February 2016 the Group acquired a further 0.9% The results for the year ended 31 December 2015 are of the units in Ashtenne Industrial Fund Unit Trust for shown in the income statement on page 60 of the financial consideration of £2.5 million taking its total interest to 82.8%. statements. The pre-tax profit for the year ended 31 December 2015 was £171.4 million (2014: £131.2 million) On 4 March 2016 the Group acquired the remaining 50% of and the net assets are shown in the balance sheet as the units in the Hansteen Saltley Unit Trust for a net price £806.7 million (2014: £676.4 million). The EPRA NAV per share of £9.3 million taking its ownership to 100%. Initial was 111p (2014: 102p). In the Directors’ view the Normalised accounting for the acquisition is yet to be completed. Income Profit, Normalised Total Profit and EPRA NAV are the most appropriate performance measures for the Group. The Founder Directors have agreed to forgo part of their awards under the Founder Long Term Incentive Plan equal in value to their PAYE and Employee’s’ National Insurance
50 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 51
Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC asset manager of a diverse high-yielding portfolio of high-yielding portfolio diverse asset manager of a different in three principally located industrial property the reduces of tenants a wide variety let to countries economic changes impact of adverse in the general in any one sector conditions or market environment Group. on the overall or country predominantly comprises portfolio property The Group’s and flexible the most simple, light industrial units. These are types and have property of all commercial economical adaptable to be extraordinarily themselves to shown trends. occupational and new practices changing working at valued are in the main the properties Furthermore, below and let at rents cost replacement substantially below together builds. Taken justify new to necessary the levels and stock limit the supply of new to operate these factors stock. the existing for maintain the demand help to reasonable a Based have on this assessment, the Directors in continue will be able to that the Group expectation the and meet its liabilitiesas they fall due over operation assessment. period of their detailed three-year capital Share with details of together capital, Details of the issued share capital issued share in the Company’s the movements has The Company 28. in note shown during the year are fixed no right to which carry shares one class of ordinary at general one vote the right to carries Each share income. meetings of the Company. restrictions of a holding on the size no specific are There by both governed which are of shares, nor on the transfer of the Articles of Association and provisions the general of any not aware are legislation. The Directors prevailing that shares holders of the Company’s between agreements of securities or on on the transfer in restrictions may result rights. voting 31. set out in note schemes are Details of employee share the over No person has any special rights of control fully paid. are and all issued shares capital share Company’s shares Treasury Meeting on at the Annual General given was Approval of purchases market make to the Directors for 8 June 2015 nominal an aggregate up to shares ordinary the Company’s it in considered of £6,856,331.30 the Directors when value During the do so. to of the Company the best interests in shares ordinary 900,000 purchased the Company year, of 123.05 per at a price pence June 2015 on 11 the Company The financial model has been stress tested for severe but severe for tested stress model has been The financial in aggregate, both individually and plausible scenarios, inreductions the impact of to understand specifically and therefore income declines in rental valuations, property along withrates in interest and increases profit operating tests mitigating actions. The stress and available current of of a variety model the impact to enable the Group its threaten that could events and internal external or liquidity solvency performance, business future model, of any assess the effectiveness to the Board and allow the mitigate to that may be required management actions impacts of the events. and business as the owner of the Group’s The nature
the impact of potential events arising from adverse adverse from arising events the impact of potential on the conditions economic in general movements including generation, flow cash operating Group’s vacancies. and increased failures tenancy the impact on the various loan covenants of reductions of reductions loan covenants the impact on the various and income in rental decline valuations, in the property and rates; in interest increase › › The Group’s debt maturity profile for its long-term funding for its long-term debt maturity profile The Group’s None of the Report on page 18. is detailed in the Strategic within expire due to bank loan facilities are current Group’s 12the next management process months. As part of its risk and flows cash its forecast has considered the Group account: taking into compliance covenant forecast In addition, note 34 to the financial statements includes the the financial statements 34 to In addition, note managing its for policies objectives, and processes Group’s objectives; details of its financial risk management capital; its financial instruments and hedging activities; and its risk and liquidity risk. credit to exposures viability statement Long-term revision C2.2 of the 2014 with provision In accordance position current and in light of the Group’s of the Code, and the principal risks detailed on pages and 21, 20 prospects assessed the Group’s have the Directors a assessment is over and viability. The Directors’ in line with the 2018 December period to three-year is The review lease lengths of its tenants. typical taking into forecast, based on a detailed three-year forecast positions, and operating financial account prospects, renewal debt maturity and flows, cash and REIT compliance compliance covenant forecast mitigating actions. available and along with current These forecasts show that the Group has sufficient that the Group show These forecasts to manage its business finance and available headroom Based on this assessment,risks successfully. the Directors and the that the Company expectation a reasonable have in operational continue to resources adequate have Group a period of at least 12 months. Thus they for existence the basis in preparing adopt the going concern to continue Annual Report and Accounts. › › are described in the Strategic report on pages 1 to 23. on pages 1 to report described in the Strategic are Going concern business with the factors activities, together The Group’s and performance development, its future affect to likely its position of the Group, as the financial position as well facilities position and the borrowing liquidity flows, cash is exposed are detailed in the Strategic report on pages report detailed in the Strategic are is exposed 21. to 20 Financial instruments and risk management Financial instruments policies and financial and reviews agrees The Board on information risk management. Further instruments for to the financial 34 in note contained is financial instruments statements. risks and uncertainties Principal Group which the to uncertainties The principal risks and liabilities due on the vesting of the awards, which will be which liabilities of the awards, due on the vesting settlement of After Company. their behalf by the settled on liabilities each liabilities Insurance and National these PAYE 12.1 will be issued with million Directors of the Founder million shares. of 22.9 of the full award instead shares Directors’ report continued
share to be held in treasury. The shares were purchased No. of ordinary to meet the Company’s future obligations to participants shares held Percentage under the Company’s Performance Share Plan 2012 Aberdeen Asset Management 42,979,007 5.97% (the “Plan”). In addition, on 11 June 2015, the Company Aberforth Partners 37,081,309 5.15% transferred from treasury to participants in the Plan, Baillie Gifford & Co 34,064,909 4.73% 181,328 ordinary shares in the Company for nil consideration M & G Investment Management 32,925,617 4.57% in order to satisfy the exercise of nil-cost call rights by Legal & General Investment participants under the Plan. As at 31 December 2015, Management 30,230,275 4.20% there remain 1,546,341 ordinary shares held in treasury, Jupiter Asset Management 30,000,000 4.17% representing 0.214% of the issued ordinary shares. Standard Life Investments 27,088,912 3.76% BlackRock Investment Directors Management 25,994,831 3.61% The Directors who served throughout the year are Rathbone Investment detailed on page 25. David Rough and Margaret Young Management 23,461,433 3.26% were appointed on 1 October 2015. Richard Mully 283,826,293 39.43% retired as a Director at the Annual General Meeting on 8 June 2015 and Richard Cotton retired as a Director on 30 September 2015. The appointment and Payment policy replacement of Directors by the Company is governed The Group’s policy is to settle all agreed liabilities within the by its Articles of Association, the Companies Acts and terms established with suppliers. At 31 December 2015 related legislation. The Articles themselves may be there are 15 days’ purchases outstanding (2014: 15 days) in amended by special resolution of the shareholders. respect of the Company’s trade creditors.
In accordance with the Governance Code all the current Corporate and social responsibility serving Directors will retire and offer themselves for Greenhouse Gas Emissions re-election at the forthcoming 2016 Annual General Meeting It is Hansteen’s policy to comply with environmental with the exception of Humphrey Price, who will retire from legislation and relevant codes of practice. In line with recent the Board at the Annual General Meeting in 2016. guidance issued by DEFRA (the Department for Environment, Food and Rural Affairs), we set out below the None of the Directors had any interests in any material required information for the year ended 31 December 2015. contract during the year relating to the business of the Group. Quantification and reporting methodology We have followed the 2013 UK Government environmental Subject to the Company’s Memorandum of Association, reporting guidance. DEFRA greenhouse gas conversion the Articles, any legislation and any directions given factors have been used for the purposes of this report. by special resolution, the business of the Company will be managed by the Directors, who may exercise all We have used the operational control approach, which the powers of the Company, whether relating to the therefore only includes information regarding those management of the business of the Company or not. emissions for which we have direct control and influence on. In particular, the Board may exercise all the powers of We have therefore included carbon emissions derived from the Company to borrow money and to mortgage or gas, electricity, heating oil and district heating charge any of its undertakings, property, assets and consumptions attributable to Hansteen. Energy uncalled capital and to issue debentures and other consumption is assessed as attributable to Hansteen if it is securities and give security for any debt, liability or used for the benefit of vacant property space or for obligation of the Company to any third party. common parts or communal facilities at properties which are held directly or managed by Hansteen. Directors’ indemnities The Company has made qualifying third-party indemnity Operational scopes provisions for the benefit of its Directors which were made We have measured our Scope 1 and Scope 2 emissions as during the year and remain in force at the date of this detailed below. report. Base Year Substantial interests We have used 2013 as our base year as it is the first year As at 14 March 2016, the Company had been notified, in for which we have reliable data and it was typical in respect accordance with the UK Listing Authority’s Disclosure Rules of our operations. and Transparency Rules, that the following shareholders held, or were beneficially interested in, 3% or more of the Intensity measurement voting rights in the Company’s issued share capital: We have chosen the metric gross global Scope 1 and 2 2 2 emissions in tonnes of CO2e per vacant m , per m and per £m revenue as these are common metrics for our industry sector.
52 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 53
None None None None None None None None None None None None None None Specific Specific
represents for for represents relevant scope relevant % this % represents for relevant scope relevant for exclusions, % this this % exclusions, Specific exclusions, Specific on a – 2 – – – e/£m e/£m 2 2 e/m 2 revenue revenue 0.0103 0.0016 Intensity Intensity 0.0025 0.0032 0.0023 Intensity Intensity 0.0123 0.0013 0.0022 0.0024 0.0088 measurement measurement measurement tonnesCO tonnes CO tonnes – 2 2 – – – e/ e/ 2 2 totalm totalm Intensity Intensity 0.0096 Intensity Intensity 0.0003 0.0006 0.0008 0.0004 0.0012 0.0013 0.0005 0.0048 0.0008 tonnesCO tonnes CO tonnes measurement measurement measurement – 2 2 – – – e/ e/ 2 2 0.0017 Intensity Intensity 0.0499 0.0076 0.0063 Intensity Intensity 0.0030 0.0175 vacant m vacant 0.0067 vacant m vacant 0.0026 0.0068 0.0090 tonnesCO tonnes CO tonnes measurement measurement measurement
–
– – – – – – – e) e) 2 2 Annual Report and Accounts 2015 Accounts Report and Annual HoldingsHansteen PLC 312 292 205 407 2014 2015 182 345 308 1,304 1,241 1,739 3,815 3,815 2,520 2,520 (tonnesCO (tonnes CO (tonnes UK Belgium France Germany Netherlands Germany Netherlands Ashtenne Belgium France operations U operations Associates Scope 2 – indirect emissions from the use of purchased control: operational our under electricity heating and
2014 Scope 1 – direct emissions from owned/controlled K/Saltley
Scope 1 – direct emissions from owned/controlled 2015 Scope 2 – indirect emissions from the use of purchased control: operational our under electricity heating and Total gross emissions gross Total Carbon offsets Green tariff emissions net annual Total Total gross emissions gross Total Carbon offsets Green tariff net emissions annual Total 14 March 2016 2016 14 March Furmston Teresa Secretary Company Approved by the Board of Directors and signed on behalf of the Board. of Directors by the Board Approved Following a competitive audit tender process in 2015, the Board resolved to reappoint Deloitte LLP for the year ended LLP for Deloitte reappoint to resolved the Board in 2015, process audit tender a competitive Following and a as auditor in office continue their willingness to expressed LLP have Deloitte Accordingly, 2016. 31 December Meeting. Annual General at the forthcoming them will be proposed reappoint to resolution This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies2006. Act of the of s418 with the provisions in accordance and should be interpreted is given This confirmation Targets of CO 1 and 2 emissions in tonnes global Scopes our gross reduce is to target Our emissions reduction Auditors Companies Act of the by Section (as defined 418 audit information is no relevant there aware, are So far as the Directors as taken have that he ought to all the steps has taken and each Director is unaware, auditor of which the Company’s 2006) is auditor establish that the Company’s and to audit information of any relevant himself aware make to in order a Director of that information. aware like-for-like basis by 10% from 2015 to 2020. We achieved a like-for-like reduction of 10.5% during 2015 (2014: 5.4%). 5.4%). (2014: during 2015 of 10.5% reduction a like-for-like achieved We 2020. to 2015 from basis by 10% like-for-like Employees 2015 during the year ended 31 December in each week number of employees employed by the Company The average 250. did not exceed Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements under IFRSs as adopted by the EU. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:
›› properly select and apply accounting policies; ›› present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; ›› provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and ›› make an assessment of the Company’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement We confirm that to the best of our knowledge:
›› the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; ›› the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Company face; and ›› the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.
This responsibility statement was approved by the Board of Directors and is signed on its behalf by:
Morgan Jones and Ian Watson Joint Chief Executives
14 March 2016
54 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 55
Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen
the Directors’ explanation on page 51 as to how they have assessed the prospects of the Group, over what period they over of the Group, assessed the prospects they have how as to on page 51 explanation the Directors’ a whether they have as to and their statement be appropriate, that period to done so and why they consider have and meet its liabilities as they fall due over in operation continue will be able to that the Group expectation reasonable or qualifications any necessary to attention drawing disclosures the period of their assessment, including any related assumptions. the Directors’ confirmation on page 20 that they have carried out a robust assessmentrobust the of the principal risks facing out a carried 20 that they have on page confirmation the Directors’ or liquidity; solvency performance, its business model, future threaten including those that would Group, being managed or mitigated; they are how on pages and 21 that describethe disclosures 20 those risks and explain adoptto it appropriate considered about whether they statements the financial 3 to in note statement the Directors’ to uncertainties any material of them and their identification in preparing basis of accounting the going concern of the of approval the date a period of at least 12 from months do so over to continue ability to the Group’s financial statements; the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, asCompanies Act of the requirements with the in accordance been prepared have the financial statements the IAS Article 4 of Regulation. statements, financial the Group regards the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at company’s and of the parent of the Group’s state of the a true and fair view give the financial statements the year then ended; for profit and of the Group’s 2015 31 December Financial Reporting with International in accordance prepared properly been have financial statements the Group Union; (IFRSs) by the European as adopted Standards with IFRSs by the as adopted in accordance prepared properly been have financial statements company the parent and Act 2006; the Companies of with the provisions as applied in accordance Union and European › › › › › › › › Independence we are that confirm and we Auditors for Standards Ethical with the Financial Reporting Council’s comply to required are We We with those standards. responsibilities in accordance fulfilled our other ethical have and we independent of the Group standards. to in those referred non-audit services any of the prohibited not provided we have also confirm We agreed with the Directors’ adoption of the going concern basis of accounting and we did not identify any such material material did not identify any such and we basis of accounting adoption of the going concern with the Directors’ agreed We as is not a guarantee this statement be predicted, can or conditions events not all future because However, uncertainties. as a going concern. continue ability to the Group’s to › › › › Going concern and the Directors’ assessment of the principal risks that would threaten the solvency or the solvency threaten of the principal risks that would assessment and the Directors’ Going concern The financial statements comprise the Consolidated income statement, the Consolidated statement of comprehensive comprehensive of statement Consolidated statement, the income Consolidated comprise the The financial statements changes of in equity, statements and Company sheets, the Consolidated balance and Company the Consolidated income, that framework reporting to 34. The financial 1 notes related and the statements flow cash and Company the Consolidated the Union and, as regards and IFRSs by the European as adopted law is applicable has been applied in their preparation 2006. Companies Act of the with the provisions as applied in accordance financial statements, company parent to: in relation to attention or draw add to nothing material have We › liquidity of the Group of the going appropriateness the regarding statement the Directors’ reviewed have Listing Rules by the we As required on the statement and the Directors’ the financial statements 3 to within note contained of accounting basis concern on page 51. report the Directors’ within contained viability of the Group longer-term › › › Opinion on financial statements of Hansteen Holdings PLC statements of Hansteen Opinion on financial In our opinion: Independent Auditor’s report Auditor’s Independent PLC Holdings Hansteen of members the to Independent Auditor’s report continued
Our assessment of risks of material misstatement The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team:
Risk How the scope of our audit responded to the risk
Investment property valuation ›› For all significant portfolios, we met and challenged the external See also note 17 to the financial statements, and the Audit valuers, and assessed whether they are acting independently, Committee’s Report on pages 29 to 32. including consideration of any other services provided to the Group and the basis upon which their fees are calculated. This included At 31 December 2015, the Group held wholly-owned investment reviewing the terms of their engagement. and trading properties valued at £1,072m, in addition to owning a share of two funds holding properties valued at a total of ›› We tested the tenancy schedules for integrity by agreeing a sample £476 million. of entries to lease agreements (to gain assurance over accuracy), and agreeing a sample of lease agreements to the tenancy schedule Investment properties are held at fair value on the balance (to gain assurance all leases were recorded). In addition, we visited a sheet. During the year, a net valuation gain of £110.8 million was sample of properties, with occupied and vacant units, in Germany and recorded. The fair values are calculated by third-party valuation the Netherlands, to confirm the accuracy of tenancy data and assess experts using information, such as lease agreements and the condition of the properties. tenancy data, in addition to professional judgement concerning marketing conditions and factors impacting individual properties. ›› Audit analytics were applied to compare the audited tenancy schedule with the data provided to the valuers thereby testing the The valuation process is inherently judgemental, which is why we integrity of the underlying data used by the valuers in their consider this to be a risk of material misstatement. In particular, valuations. This was supported by review of the reconciliation that changes in assumptions such as the time a property will remain management had performed to determine whether the data used by vacant when a tenant leaves, the rent free period required to the valuers matched the tenancy schedules maintained by the Group. attract a new tenant, and the level of expenditure required to maintain the property can lead to significant movements in the ›› We employed analytics to identify properties which exhibited value of the property, as can changes in the underlying market valuation movements and yields outside of our predetermined conditions. thresholds. These were discussed in detail with the external valuers and copies of the valuation calculations were obtained and analysed in order to satisfy ourselves that the assumptions applied were appropriate. In addition, we tested a sample of other properties to determine whether the valuations were appropriately performed, and considered the value realised on property disposals compared to previous valuations to assess historical valuation reliability.
›› We checked that the valuation reports have been recorded correctly in the financial statements and appropriate disclosures have been made.
Calculation and presentation of the Founder LTIP ›› We reviewed minutes of the meetings of the Board of Directors and See also note 31 to the financial statements, the Audit the Remuneration Committee, in addition to evaluating the scheme Committee’s Report on pages 29 to 32, and the Remuneration agreements and other correspondence between the Group and the Committee’s Report on pages 35 to 49. Founder LTIP members.
On 1 January 2013, the current three-year Founder Long Term ›› We independently recalculated the closing position of the scheme Incentive Plan (‘Founder LTIP’) performance period commenced in and the resulting charge for the year. which the Joint Chief Executives participate. ›› We met with the Chairman of the Remuneration Committee and the Payment under the scheme is made if the EPRA Net Asset Value Chairman of the Audit Committee to discuss the key assumptions, (‘NAV’) per share of the Group at 31 December 2015 exceeds 110.7 the outcome of our audit work, and the level of disclosure in the pence (representing a compound annual growth of 10% over the Annual Report. three-year period). At 31 December 2015 the Group’s EPRA NAV per share is 111 pence, as stated in Note 14. ›› We evaluated the level of disclosure in the Annual Report, in particular the presentation of the charge within diluted metrics and Since the performance period ended on 31 December 2015, non-statutory performance measures. management has calculated the actual award as 22.9 million shares to each of the Founder Directors using the closing net ›› We consulted with Deloitte Remuneration specialists on the asset position. The charge recorded in the income statement for presentation and disclosure of the scheme, particularly with respect the year is £23.2m. to the Director Remuneration Reporting requirements.
The risk of inappropriate valuation of the award has reduced compared with the previous year due to the performance period ending on 31 December 2015, removing the judgement associated with forecasting future performance. However, we consider that the Founder LTIP continues to be a significant audit risk based on the size of the award.
There is a further risk that insufficient prominence and disclosure will result in the impact of the Founder LTIP scheme not being clear to users of the financial statements.
56 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 57
Annual Report and Accounts 2015 Accounts Report and Annual
PLC
Hansteen Holdings Holdings Hansteen obtaining the unit purchase documentation and bank statement to validate the purchase of additional units in AIF; examining the Unit Sale Agreement in relation to the HPUT II disposal and assessed management’s accounting treatment; assessing the reversal of trading property impairments, including evaluating the third party valuations obtained by management; and checking the gains and losses recognised on a sample of property disposals to property valuation reports and sale and purchase agreements. each transaction was accounted for in compliance with IFRS; each transaction was accurately recorded by agreeing the value to underlying documentation, including assessing cut-off of such transactions; the underlying assumptions and judgements in the measurement of each and appropriate; were transaction each transaction was fairly presented and disclosed in the financial statements. evaluating management’s assessment of ‘control’ over AIF and the impact of additional unit purchases on the currentequity accounting treatment; › › › › › › › › › › › › › How the scope of our audit responded to the risk to our audit responded of scope the How › › › › In respect of significant non-recurring transactions that occurred during the ouryear, procedures also included: › the annual report. Throughout our audit work we were alert to significant non-recurring transactions, in addition to completing a review of legal correspondence and Board meeting minutes, to assess whether the list of these transactions we considered was complete. For all significant non-recurring transactions, we assessed whether: We evaluatedWe the presentation of significant non-recurring transactions in
the reversal of impairment of trading properties of £2.3m; and the sale of properties with a total book value of £46.1m during the year ended 31 December 2015. the purchase of additional units in Ashtenne Industrial Fund Unit (“AIF”), Trust increasing Hansteen’s share in AIF to 82.8%; the disposal of Hansteen UK Industrial Property Unit (“HPUTTrust II”); a UK multi-let industrial property fund in which the Group had a stake of 33%; the conversion criteria for the convertible bond have been met for the quarter ended 31 December 2015 as the parity value of the bond has exceeded €130,000 for 20 consecutive days in the qualifying 30-day period. No Bondholders exercised their conversion rights; – whilst a covenant breach would have real commercial implications on the implications commercial real have would breach – whilst a covenant compliance and covenant Going concern risk. be a key to not determined this was year, in the current in the covenants the headroom given Group, of the level impact on the Group, a significant have would with REIT requirements – whilst non-compliance Taxation year audit. for the current audit effort significant and this risk does not require judgement is low › › › › › › › › › › › › Significant non-recurring transactions See also notes 10, 17 and 19 to the financial statements, and the Audit Committee’s Report on pages 29 to 32. The nature of the Group’s operations gives rise to non- recurring transactions which can result in significant gains and losses. In the current the year, Group completed a number of significant non-recurring transactions, including: Risk These transactions are, by their nature, one-off and often complex. There are management judgementsinherent in their measurement, such as in calculating the value of the transactionor its resulting gain or loss, and their presentation in the financial statements has a material impact on the results for the year. of the financial statements. We applied a lower threshold of £0.7 million (2014: £1.9 million) for testingimpacting all balances for million) £1.9 million (2014: £0.7 of threshold We applied a lower of the financial statements. 5%) of EPRA earnings. 5% (2014: which represents EPRA earnings, In addition to net assets, we consider EPRA earnings per share to be a critical financial performance measure for the measure financial performance be a critical to per share EPRA earnings consider net assets, we In addition to We determined materiality for the group to be £10.4 million (2014: £9.5 million), based on professional judgement, the based on professional million), £9.5 million (2014: be £10.4 to the group for materiality determined We have We financial statements. to users of the relevant most and the financial measures of auditing standards requirements used net assets on the basis that We materiality. determining 1.5%) of net assets as the benchmark for used 1.5% (2014: The most movements. by net asset value being driven value business, with shareholder is an asset-intensive the Group borrowings. property and associated investment are in the financial statements balances significant opinion thereon, and we do not provide a separate opinion on these matters. a separate do not provide and we opinion thereon, of materiality Our application probable that the it that makes in the financial statements as the magnitude of misstatement define materiality We both in We use materiality be changed or influenced. person would knowledgeable decisions of a reasonably economic of our work. the results and in evaluating of our audit work planning the scope EPRA group’s is based on the per share EPRA earnings analysts and investors. to metric on the basis that it is a key Group 14 Note in to equity holders of the parent tax attributable after IFRS to profit million, which is reconciled of £18.0 earnings › our forming and in as a whole, of our audit of the financial statements in the context addressed were These matters Last year our report included two other risks which are not included in our report this year: not included in our report other risks which are included two year our report Last › Independent Auditor’s report continued
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £200,000 (2014: £190,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reported to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit Our audit was scoped by obtaining an understanding of the Group and its environment, including group-wide controls, and assessing the risks of material misstatement.
As in the prior year, our Group audit scope focused primarily on the audit work in the United Kingdom, Germany and the Netherlands, where full audits were carried out based on our assessment of the identified risks of material misstatement identified above. The Group audit team performed the audits of the wholly-owned entities in the United Kingdom and Germany, and component auditors performed the audits, based on instructions from the Group audit team, of the wholly-owned entities in the Netherlands and in a change from the prior year following the Group increasing its stake, the UK-based Ashtenne Industrial Fund Unit Trust (“AIF”). In addition, the Group team also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit or audit of specified account balances.
The components subject to a full audit represent the principal business units of the Group and account for 97% (2014: 97%) of the Group’s revenue, 98% (2014: 99%) of the Group’s profit before tax and 97% (2014: 97%) of the Group’s net assets. Our audit work was executed at levels of materiality applicable to each component which were lower than group materiality, and ranged between £4.2 million and £7.8 million (2014: £5.2 million to £7.1 million).
The Group audit team continued to follow a programme of planned visits that has been designed so that either the Senior Statutory Auditor or another senior member of the Group audit team visits each of the Group’s principal business units at least once every three years, including the overseas components audited directly by the Group audit team. In the year ended 31 December 2015, we visited operations in Germany and the Netherlands.
In years when we do not visit a significant component that is audited by a component auditor, we will include the component audit partner in our team briefing, discuss their risk assessment, and review documentation of the findings from their work. The Senior Statutory Auditor or another senior member of the Group audit team participated in all of the close meetings of the Group’s principal business units.
Opinion on other matters prescribed by the Companies Act 2006 In our opinion:
›› the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and ›› the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion:
›› we have not received all the information and explanations we require for our audit; or ›› adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or ›› the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting records and returns. We have nothing to report arising from these matters.
58 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 59 Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen materially inconsistent with the information in the audited financial statements; or statements; financial in the audited with the information inconsistent materially in the acquired of the group with, our knowledge inconsistent based on, or materially incorrect materially apparently our audit; or performing of course otherwise misleading. › › › 14 March 2016 14 March for and on behalf of Deloitte LLP and on behalf of Deloitte for Auditor and Statutory Accountants Chartered Kingdom Reading, United Darren Longley Longley Darren Auditor Senior Statutory Scope of the audit of the financial statements the audit of the financial statements of Scope give to sufficient in the financial statements about the amounts and disclosures obtaining evidence An audit involves or error. fraud caused by misstatement, whether material from free are that the financial statements assurance reasonable company’s and the parent the Group’s to appropriate policiesThis includes are an assessment of: whether the accounting accounting of significant disclosed; the reasonableness applied and adequately been consistently and have circumstances read all the we In addition, of the financial statements. presentation and the overall estimates made by the Directors; financial with the audited inconsistencies to identify material report in the annual financial and non-financial information with, inconsistent based on, or materially incorrect materially that is apparently identify any information and to statements material of any apparent aware become the audit. If we of performing by us in the course acquired the knowledge our report. for the implications consider we or inconsistencies misstatements This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies of the Companies 16 Part 3 of with Chapter a body, in accordance members, as the Company’s is made solely to This report are we members those matters Company’s the to might state so that we has been undertaken Our audit work Act 2006. do not we by law, permitted fullest the extent To no other purpose. and for report them in an auditor’s to state to required our audit members as a body, for and the Company’s anyone other than the company to or assume responsibility accept formed. have we the opinions or for this report, for work, Respective responsibilities of Directors and auditor Respective responsibilities of Directors of the the preparation for responsible are responsibilities statement, the Directors fully in the Directors’ more As explained an express to audit and responsibility is Our a true and fair view. satisfied that they give for being and financial statements (UK andAuditing on Standards and International law with applicable in accordance opinion on the financial statements and understood effective, are procedures control that our quality ensure aim to and tools Our audit methodology Ireland). and independent team review standards professional include our dedicated and systems applied. Our quality controls partner reviews. In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired acquired our knowledge between any inconsistencies identified have whether we consider to required are we In particular, and understandable balanced is fair, the annual report that they consider statement during the audit and the Directors’ Committee the Audit to communicated that we discloses those matters and whether the Annual Report appropriately or inconsistencies not identified any such we have that confirm been disclosed. We should have consider which we misleading statements. › › › Our duty to read other information in the Annual Report in other information read Our duty to in our opinion, information you if, to report to required are we (UK and Ireland), on Auditing Standards Under International in the Annual Report is: Corporate governance statement governance Corporate the to relating statement governance part of the Corporate review to also required are Under the Listing Rules we arising report to nothing have We Code. Governance of the UK Corporate provisions with certain compliance Company’s our review. from Consolidated income statement for the year ended 31 December 2015
Group Group 2015 2014 Note £m £m Revenue 5 85.3 88.1 Cost of sales 5 (10.2) (17.8) Gross profit 5 75.1 70.3 Other operating income 10 1.2 6.8 Administrative expenses 8 (43.8) (34.7) Share of results of associates and gain on sale of associate 53.2 43.2 Profit on sale of investment properties 4.4 3.6 Fair value gains on investment properties 110.8 62.9 Operating profit 200.9 152.1 Finance income 11 5.2 10.8 Finance costs 11 (34.7) (31.7) Profit before tax 171.4 131.2 Tax 12 (23.1) (12.8) Profit for the year 8 148.3 118.4 Attributable to: Equity holders of the parent 148.2 118.3 Non-controlling interests 0.1 0.1 148.3 118.4 Earnings per share Basic 14 21.3p 17.6p Diluted 14 19.4p 17.0p
All results derive from continuing operations.
60 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 61 £m 0.1 0.5 2014 97.1 97.2 97.2 Group (21.7) (21.2) 118.4 – £m 0.1 2015 Group (19.6) (19.6) 128.7 128.7 128.6 148.3 Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen Exchange differences arising on translating foreign operations Exchange differences recycled to the income statement on disposal of subsidiary Non-controllinginterests Equity holders of the parent All components of other comprehensive (expense)/income will be recycled to profit and loss. profit to will be recycled (expense)/income of other comprehensive All components Other comprehensive (expense)/income: Profit for the year after tax Total other comprehensiveTotal (expense)/income for the year Consolidated statement of comprehensive income income comprehensive of statement Consolidated 2015 December 31 ended year the for Total comprehensiveTotal income for the year Attributable to: Balance sheets as at 31 December 2015
Group Group Company Company 2015 2014 2015 2014 Note £m £m £m £m Non-current assets Goodwill 15 0.3 0.6 – – Property, plant and equipment 16 0.4 0.5 – – Investment property 17 1,059.1 953.9 – – Investment in subsidiary undertakings 18 – – 585.2 393.5 Investment in associates 19 261.3 156.4 – – Deferred tax asset 20 0.6 2.4 – 1.7 Derivative financial instruments 21 0.4 5.1 0.4 5.1 1,322.1 1,118.9 585.6 400.3 Current assets Investment properties held for sale 17 1.6 7.5 – – Trading properties 22 10.8 6.7 – – Trade and other receivables 23 24.6 25.3 106.7 125.5 Derivative financial instruments 21 9.4 0.5 9.4 0.5 Cash and cash equivalents 24 63.4 110.3 43.4 75.5 109.8 150.3 159.5 201.5 Total assets 1,431.9 1,269.2 745.1 601.8 Current liabilities Trade and other payables 25 (38.9) (34.0) (105.8) (120.8) Current tax liabilities (6.1) (3.2) (0.8) (0.5) Borrowings 26 (6.2) (29.2) – – Obligations under finance leases 27 (0.2) (0.1) – – (51.4) (66.5) (106.6) (121.3) Non-current liabilities Borrowings 26 (530.0) (494.6) (77.0) – Obligations under finance leases 27 (2.2) (2.6) – – Derivative financial instruments 21 (5.2) (5.7) (36.0) (21.4) Deferred tax liabilities 20 (36.4) (23.4) – – (573.8) (526.3) (113.0) (21.4) Total liabilities (625.2) (592.8) (219.6) (142.7) Net assets 806.7 676.4 525.5 459.1 Equity Share capital 28 72.2 68.6 72.2 68.6 Share premium 114.5 114.4 114.5 114.4 Other reserves (1.4) (0.5) (1.7) (0.8) Translation reserves (8.7) 10.9 – – Retained earnings 629.6 482.6 340.5 276.9 Equity attributable to equity holders of the parent 806.2 676.0 525.5 459.1 Non-controlling interest 0.5 0.4 – – Total equity 806.7 676.4 525.5 459.1
The financial statements of Hansteen Holdings PLC, registered number 05605371, were approved by the Board of Directors and authorised for issue on 14 March 2016. Signed on behalf of the Board of Directors:
Morgan Jones and Ian Watson Joint Chief Executives
62 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 63 – – £m 0.2 Total (1.1) 12.1 (0.8) 19.5 46.3 39.4 (21.2) (33.6) (19.6) 118.4 (56.2) 555.0 676.4 148.3 806.7 – – – – – – – – – – – – – £m 0.1 0.1 0.3 0.4 0.5 Non- interest controlling – – £m 0.2 Total (1.1) 12.1 (0.8) 19.5 46.3 39.4 (21.2) (33.6) (19.6) 118.3 (56.2) 554.7 676.0 148.2 806.2 – – – – – Annual Report and Accounts 2015 Accounts Report and Annual £m (0.1) 12.1 (0.2) 35.7 19.5 41.8 (33.6) 118.3 (56.2) 344.1 482.6 148.2 629.6 PLC earnings Retained – – – – – – – – – – – – – – – – £m 41.8 (41.8) Merger Merger reserve – – – – – – – – – – – – – £m Hansteen Holdings Holdings Hansteen (8.7) 32.1 10.9 (21.2) (19.6) reserves Translation – – – – – – – – – – – – £m 0.3 0.2 (1.1) (1.4) (0.5) (0.8) Other reserves – – – – – – – – – – – – – £m 0.1 0.3 Share 114.1 114.4 114.5 premium – – – – – – – – – – – – – £m 4.5 3.6 Share 64.1 72.2 68.6 capital earnings for the year for the year Transferred to retained Shares issued
Balance at 31 December 2015 December 31 at Balance Balance at 1 January 2014 Group Statements of changes in equity in changes of Statements 2015 December 31 ended year the for Dividends Dividends Share-based payments Share-based payments Share options exercised Share options exercised Purchase of own shares Purchase of own shares Profit for the year Other comprehensive income Other income comprehensive Profit for the year Balance at 31 December 2014 Shares issued Other comprehensive income Other income comprehensive Statements of changes in equity for the year ended 31 December 2015 continued
Non- Share Share Other Translation Merger Retained controlling capital premium reserves reserves reserve earnings Total interest Total Company £m £m £m £m £m £m £m £m £m Balance at 1 January 2014 64.1 114.1 – – – 242.4 420.6 – 420.6 Shares issued 4.5 – – – 41.8 – 46.3 – 46.3 Transferred to retained earnings – – – – (41.8) 41.8 – – – Dividends – – – – – (33.6) (33.6) – (33.6) Share-based payments – – – – – 12.1 12.1 – 12.1 Share options exercised – 0.3 – – – (0.1) 0.2 – 0.2 Purchase of own shares – – (0.8) – – – (0.8) – (0.8) Profit for the year – – – – – 14.3 14.3 – 14.3 Balance at 31 December 2014 68.6 114.4 (0.8) – – 276.9 459.1 – 459.1 Shares issued 3.6 0.1 – – – 35.7 39.4 – 39.4 Dividends – – – – – (56.2) (56.2) – (56.2) Share-based payments – – – – – 19.5 19.5 – 19.5 Share options exercised – – 0.2 – – (0.2) – – – Purchase of own shares – – (1.1) – – – (1.1) – (1.1) Profit for the year – – – – 64.8 64.8 – 64.8 Balance at 31 December 2015 72.2 114.5 (1.7) – – 340.5 525.5 – 525.5
No share premium is recorded in the Company’s financial statements in relation to the current or prior year share issues through the operation of the merger relief provisions of the Companies Act 2006. The merger reserve comprised the share premium generated under the cash-box arrangement for the Placing and Open Offer in April 2014 which was transferred to retained earnings.
Other reserves comprises a gain upon acquisition of a minority interest and a deficit relating to the purchase of the Company’s own shares. See note 28. As permitted by section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these accounts. The Company’s profit for the financial year amounted to £64.8 million (2014: £14.3 million). Of the Company’s retained earnings of £340.5 million (2014: £276.9 million), £338.8 million (2014: £293.1 million) is available for distribution.
64 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 65 – – – – – – – – – £m 9.7 0.7 4.8 2014 (3.6) (0.9) (0.3) 47.3 47.3 (0.8) 51.4 75.5 25.8 28.5 46.9 (26.1) (13.8) (33.0) Company – – – – – – – – – – £m 1.1 2.5 2015 (1.1) (0.7) (0.6) (0.8) 76.7 75.5 59.2 43.4 40.0 (19.1) (71.4) (31.3) 177.8 (56.2) (251.7) Company – – – £m 1.0 0.7 4.8 2014 (1.4) (7.0) (0.4) (0.9) (0.2) 47.3 25.1 (0.8) 57.8 27.8 53.9 39.2 Group 66.4 34.0 (51.7) (42.9) (33.0) 110.3 344.8 (101.1) (284.5) – – – – Annual Report and Accounts 2015 Accounts Report and Annual £m 1.1 3.6 0.3 2015 (1.1) (0.1) (0.7) (0.6) (2.0) (0.2) 32.1 31.0 53.2 63.4 45.0 Group 84.0 40.0 (62.7) (79.5) (79.9) (44.9) (56.2) 110.3 PLC (130.1) 29 24 Note Hansteen Holdings Holdings Hansteen Dividends received Dividends Interest received Investments subsidiaries in premium share subsidiary of Repayment Cash and cash equivalents at beginning of year Effect of changes in foreign exchange rates Investments associates in Proceeds from sale of subsidiary Proceeds from sale of associate Additions to property, plant and equipment properties investment to Additions Proceeds from sale of investment properties Proceeds on disposal of derivative financial instruments Distributions receivedDistributions associates from Repayments of obligations under finance leases New borrowings raised of expenses) (net Bank loans repaid Outflows on derivative financial instruments Own shares acquired Proceeds from issue of shares Dividends paid Cost of issuing shares Net cash inflow/(outflow) from operating activities Investing activitiesInvesting Cash and cash equivalents at end of year Net cash generated by financing activities Net (decrease)/increase in cash and cash equivalents Net cash in)/generated (used by investing activities Financing activities Cash flow statements flow Cash 2015 December 31 ended year the for Notes to the financial statements
1. General information Hansteen Holdings PLC is a company which was incorporated in the United Kingdom and registered in England and Wales on 27 October 2005. The Company is required to comply with the provisions of the Companies Act 2006. The address of the registered office is 1st Floor, Pegasus House, 37-43 Sackville Street, London W1S 3DL.
The Group’s principal activity is investing in mainly industrial properties in Continental Europe and the United Kingdom.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates. Foreign operations are included in accordance with the policies set out in note 3.
2. Adoption of new and revised standards The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has not had any significant impact on the amounts reported in these financial statements, but may impact the accounting for future transactions and arrangements:
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions Annual Improvements to IFRSs: 2010-2012 Annual Improvements to IFRSs Annual Improvements to IFRSs: 2011-2013 Annual Improvements to IFRSs
Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group:
IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers IFRS 16 Leases Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations Amendments to IAS 1 Disclosure Initiative Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants Amendments to IAS 27 Equity Method in Separate Financial Statements Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between and Investor and its Associate or Joint Venture Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exemption Annual Improvements to IFRSs: 2012-2014 Annual Improvements to IFRSs
The Directors are currently evaluating the impact of the adoption of the above standards and interpretations in future periods on the financial statements of the Group.
3. Significant accounting policies Basis of accounting The financial statements have been prepared on a going concern basis, as detailed in the Directors’ Report on pages 50 to 53 and in accordance with International Financial Reporting Standards (“IFRSs”) adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost basis, except for the revaluation of investment properties and certain financial instruments.
Certain comparative amounts have been adjusted where relevant to ensure comparability with the current year’s presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates.
66 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 67 Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen Non-current assets held for sale assets held for Non-current a through recovered amount will be carrying for sale if their classified as held are assets and disposal groups Non-current as met only when the sale is highly is regarded This condition use. continuing than through rather sale transaction Management must be condition. sale in its present immediate for is available disposal group) and the asset (or probable the sale within one year from completed as a recognition qualify for to the sale which should be expected to committed of classification. date Goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the combination. Cash- combination. the from benefit to units expected cash-generating each of the Group’s to Goodwill is allocated is when there frequently annually, or more impairment for tested are which goodwill has been allocated units to generating unit is less than the carrying amount of the cash-generating If the recoverable that the unit may be impaired. an indication to the unit allocated amount of any goodwill carrying the reduce to first loss is allocated amount of the unit, the impairment amount of each asset in the unit. An on the basis of the carrying the other assets of the unit pro-rata and then to in a subsequent period. goodwill is not reversed for loss recognised impairment Goodwill arising in a business combination is recognised as an asset and initially measured at cost. If the Group’s interest in interest If the Group’s at cost. as an asset and initially measured Goodwill is recognised in a business arising combination consideration the sum of the liabilitiesexceeds contingent identifiable assets, liabilities and of the acquiree’s the fair value in profit immediately is recognised the excess in the acquiree, interest and the amount of any non-controlling transferred of associates. of results share Group’s gain. This is included in the purchase or loss as a bargain Non-controlling interests in the acquiree are measured at the non-controlling shareholder’s proportionate share of the share proportionate shareholder’s at the non-controlling measured are in the acquiree interests Non-controlling identifiable net assets. acquiree’s The measurement period is the period from the date of acquisition to the date the Group obtains complete information information complete obtains the Group the date to of acquisition the date period is the period from The measurement a maximum of one year. and is subject to date as of the acquisition that existed about facts and circumstances If the initial accounting for a business combination is incomplete by the end of the reporting period in which the by the end of the reporting is incomplete a business combination for If the initial accounting Those is incomplete. which the accounting for the items amounts for provisional reports the Group occurs, combination to recognised, period, or additional assets and liabilities are during the measurement adjusted amounts are provisional would that, date if known, as of the acquisition existed that obtained about facts and circumstances information new reflect as of that date. recognised the amounts affected have Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling the amount of any non-controlling transferred, of the sum of the consideration as the excess Goodwill is measured the net if any, over in the acquiree, held equity interest previously of the Group’s and the fair value in the acquiree interests date. and liabilities assumed at the acquisition amounts of identifiable assets acquired Business combinations at the is measured of the acquisition method. The cost using the acquisition for accounted of subsidiaries are Acquisitions or assumed, and equity liabilities of assets given, incurred of exchange, at the date fair values, of the aggregate The as incurred. statement in the income recognised are costs Acquisition-related instruments issued by the Group. date. values at the acquisition at their fair recognised assets and liabilities identifiable are acquiree’s All intra-group transactions, balances, income and expenses are eliminated on consolidation. eliminated and expenses are income balances, transactions, All intra-group Adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those policies used into to bring the accounting of subsidiaries the financial statements made to Adjustments are used by the Group. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from from statement income included in the consolidated the year are or disposed of during of subsidiariesThe results acquired of disposal. date to the effective or up of acquisition date the effective Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity. the Group’s from separately identified subsidiaries are in the net assets of consolidated interests Non-controlling and the of the original business combination at the date of the amount of those interests consist interests Non-controlling the non- to applicable Losses of the combination. the date of changesequity since in share interests’ non-controlling of against the interest allocated equity are subsidiary’s in the interest of the non-controlling in excess interest controlling an additional make a binding obligation and is able to has that the non-controlling the extent to except the Group the losses. cover to investment Basis of consolidation by the controlled Company and entities of the statements the financial incorporate financial statements The consolidated the govern to has the power the Company where is achieved Control 31(its subsidiaries) December. made up to Company from its activities. benefits to obtain entity so as policies of an investee financial and operating Notes to the financial statementscontinued
3. Significant accounting policies continued Non-current assets (and disposal groups) classified as held for sale, except investment properties, are measured at the lower of carrying amount and fair value less costs to sell. Investment properties classified as held for sale are carried at fair value.
Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.
Rental income is recognised on an accruals basis. Where a lease incentive is granted, which does not enhance the value of the property, or a rent-free period is granted, the effective cost is amortised on a straight-line basis over the lease term.
Property management fees are recognised in the period to which they relate.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Revenue from the sale of trading and investment properties is recognised when the significant risks and returns have been transferred to the buyer. This generally coincides with the transfer of the legal title or the passing of possession to the buyer. The profit on disposal of trading and investment properties is determined as the difference between the consideration received and the carrying amount of the asset at the commencement of the accounting period plus any additions in the period.
Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Where a property is held under a head lease it is initially recognised as an asset as the sum of the premium paid on acquisition and the present value of minimum ground rent payments. The corresponding rent liability to the head leaseholder is included in the balance sheet as a finance lease obligation. Where only the buildings element of a property lease is classified as a finance lease, the ground rent payments for the land element are shown within operating leases. Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. When accounting for a lease of land and buildings, the Group considers the land and buildings elements separately. The Group does not classify those land elements that are held under operating leases as investment property.
Foreign currencies The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period in which they arise. Exchange differences arising on the retranslation of non- monetary items carried at fair value are included in profit or loss for the period in which they arise except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s foreign currency translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.
68 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 69 Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen three years three five years years three Investments in subsidiary undertakings Investments impairment. for less provisions at cost stated in subsidiary undertakings are Investments Fixtures and fittings Office equipment properties Investment capital for and/or rentals earn held to and leasehold property freehold which comprises properties, Investment Acquisitions ownership. of rewards risks and assumes the significant when the Group as acquired treated are appreciation, initially are nature and subsequent additions of a capital costs transaction including related properties of investment based their fair values to revalued are properties the investment date reporting each At at cost. in the accounts recognised of investment changes Gains value in the fair or losses arising from sheet date. at the balance valuation on a professional for the period in which they arise. or loss included in profit are property Computer equipment Computer Depreciation is charged so as to write off the cost or valuation of computers, fixtures and fittings and office equipment, and fittings and fixtures less computers, valuation of cost or off the write so as to is charged Depreciation bases: method, on the following useful lives, using the straight-line their estimated over value, residual Property, plant and equipment Property, accumulated at cost less stated are equipment, which and fittings and office fixtures computers, This comprises loss. impairment and any recognised depreciation Operating profit Operating changes in before profit on sale of subsidiaries, but and of associates results of share the after is stated profit Operating to relating movements exchange foreign costs and finance income, financial instruments, finance of derivative fair value funding. intercompany Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against to set off current right is a legally enforceable offset tax assets and liabilities when there are Deferred to intends and the Group by the same taxation authority levied taxes income to tax liabilities and when they relate current tax assets and liabilities on a net basis. settle its current Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset apply in the period when the liability to expected that are at the tax rates tax is calculated Deferred or credited charged items to when it relates statement, except in the income or credited tax is charged Deferred is realised. tax is also dealt with in equity. the deferred in which case equity, to directly Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets carrying the between on differences be payable or recoverable to tax is the tax expected Deferred of taxable profit,computation tax bases used in the corresponding and the and liabilities in the financial statements all for recognised generally tax liabilities are sheet liability method. Deferred using the balance for and is accounted that taxable that it is probable extent to the recognised tax assets are and deferred differences taxable temporary on a tax is measured Deferred can be utilised. differences temporary against which deductible available will be profits basis. non-discounted The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the as reported profit from net differs Taxable profit for the year. profit payable is based on taxable The tax currently it taxable or deductible in other years and that are or expense of income items it excludes because statement income tax is calculated and deferred current liability for Group’s The taxable or deductible. never that are items further excludes sheet date. by the balance enacted or substantively enacted been have that using tax rates Taxation tax. and deferred payable of the tax currently the sum represents The tax expense Share-based payments Share-based and is expensed of grant at the date employees is determined payments to share-based of equity-settled The fair value vest. Fair that will eventually of options estimate vesting period based on the Company’s the over basis on a straight-line future of estimated value less the discounted price share by use of a binomial model or the Company’s is measured value best based on management’s used in the binomial model has been adjusted life The expected dividends, as appropriate. considerations. restrictions and behavioural exercise non-transferability, of the effects for estimate, Notes to the financial statementscontinued
3. Significant accounting policies continued Investments in associates An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment.
Trading properties Trading properties are carried at the lower of cost and net realisable value and are treated as acquired when the Group assumes the significant risks and rewards of ownership. Cost includes development costs specifically attributable to properties in the course of development. Net realisable value represents the estimated selling price less further costs expected to be incurred to completion and disposal.
Financial instruments Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Financial assets All financial assets are recognised and derecognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following categories: financial assets “at fair value through profit or loss” (“FVTPL”), ‘held-to-maturity’ investments, “available-for-sale” (“AFS”) financial assets and “loans and receivables” The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets at FVTPL Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is classified as held for trading if: ›› it has been acquired principally for the purpose of selling in the near future; or ›› it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or ›› it is a derivative that is not designated and effective as a hedging instrument.
70 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 71 Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen it becoming probable that the borrower will enter bankruptcy or financial re-organisation. or financial bankruptcy will enter that the borrower probable it becoming significant financial difficulty of the issuer or counterparty; or or counterparty; of the issuer financial difficulty significant or or principal payments; default or delinquency in interest the financial asset forms part of a group of financial assets or financial liabilities of financial or both, which is managed and its part of a group forms the financial asset risk management or documented with the Group’s basis, in accordance on a fair value is evaluated performance or on that basis; internally is provided Group about the and information strategy, investment as FVTPL. be designated that can derivatives embedded one or more containing part of a contract it forms such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise that inconsistency recognition or measurement a reduces such designation or significantly eliminates arise; or › › › › › › Cash and cash equivalents and cash Cash highly liquid investments in hand and demand deposits and other short-term cash comprise equivalents and cash Cash value. risk of changes in an insignificant subject to and are amount of cash a known to convertible readily that are Where an AFS financial asset is considered to be impaired, cumulative gains previously recognised in other comprehensive comprehensive in other recognised gains previously cumulative to be impaired, considered an AFS financial asset is Where if, in a subsequent period the of AFS equity instruments, case and loss in the period. In the to profit reclassified are income the after occurring an event to objectively be related can and the decrease loss decreases amount of impairment and loss. Any profit through loss is not reversed impairment recognised the previously recognised, was impairment in equity. directly loss is recognised an impairment subsequent to in fair value increase If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an to objectively be related can and the decrease loss decreases in a subsequent period, the amount of the impairment If, profit through reversed loss is impairment recognised the previously recognised, was the impairment after occurring event does not exceed reversed is the impairment at the date amount of the investment that the carrying the extent or loss to not been recognised. the impairment been had have would what the amortised cost The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the loss directly by the impairment reduced amount of the financial asset is The carrying When a account. the use of an allowance through amount is reduced the carrying where receivables, of trade exception of recoveries Subsequent account. off against the allowance it is written uncollectible, is considered receivable trade amount of the carrying Changes in the account. against the allowance credited are off written amounts previously or loss. in profit recognised are account allowance › › › Impairment of financial assets Impairment sheet date. at each balance Financial assets, other than those at FVTPL, of impairment indicators assessed for are after that occurred events that, of one or more as a result evidence is objective there where impaired Financial assets are been impacted. have investment of the cash flows of the financial asset, future the estimated the initial recognition include: could of impairment evidence Objective AFS financial assets are not investments, or held-to-maturity receivables not classified as loans and financial assets that are Non-derivative are AFS financial assets as AFS. classified as FVTPL not designated are and are initial recognition on trading held for of On sale or impairment income. in other comprehensive or losses gains recognised with fair value at fair value measured or loss to profit is reclassified income in other comprehensive recognised the asset, gain or loss previously cumulative the profit or loss. Dividends on an in recognised are losses financial assets on AFS adjustment. Impairment as a reclassification payment is established. receive to right when the entity’s or loss in profit recognised AFS equity instrument are Loans and receivables Loans in an active not quoted payments that are or determinable fixed that have loans, and other receivables receivables, Trade cost using the effective at amortised measured are receivables Loans and receivables. classified as loans and are market for except rate, interest by applying the effective is recognised income Interest method, less any impairment. interest be immaterial. would of interest when the recognition receivables short-term › or loss. The net gain in profit or loss recognised gain with any resultant Financial assets at FVTPL at fair value, stated are on the financial asset. earned any dividend or interest or loss incorporates in profit or loss recognised › A financial asset other than a financial asset held for trading may be designated as at as be trading may designated if: recognition for FVTPL upon initial than a financial asset held A financial asset other › Notes to the financial statementscontinued
3. Significant accounting policies continued Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial guarantee contract liabilities Financial guarantee contract liabilities are measured initially at their fair values and are subsequently measured at the higher of: ›› the amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and ›› the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition policies set out above.
Financial liabilities Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial liabilities”.
Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: ›› it has been incurred principally for the purpose of disposal in the near future; or ›› it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or ›› it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: ›› such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or ›› the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the Group is provided internally on that basis; or ›› it forms part of a contract containing one or more embedded derivatives that can be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.
The convertible bond is designated as fair value through profit or loss and is presented on the balance sheet at fair value with all gains and losses, including the write off of issuance costs, recognised in the income statement within net financing costs. The interest charge in respect of the coupon rate on the bonds has been recognised within net financing costs on an accruals basis.
Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.
72 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 73 Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen Accounting for investments in associates investments for Accounting assess the control management to requires in associates investments for of accounting the appropriateness Determining variable to or rights exposure the investee, over has the Group the power specifically, an investee, has over the Group the amount of affect to the investee over use its power to and the ability with the investee its involvement from returns returns. investor Calculation of share-based payments of share-based Calculation Plan and Founder Share payments, including the Performance share-based to in relation the expense In calculating vesting and the and options awards of share the probability estimate to is required Plan, the Company Incentive Long-Term of making a variety These estimates involve sheet date. and the balance date and option at the grant of a share fair value dividend rates rates, exchange rates, interest costs, yields, administrative costs, and related rents assumptions concerning acquisitions. of property and level and the rate Deferred tax Deferred the level estimate management to tax assets requires as deferred be recognised of tax losses the amount to Determining entity and jurisdiction. can be offset relevant that those losses against, in each taxable profits of future and probability Accounting for complex transactions complex for Accounting and other associates property, sale of investment and the purchase for transactions into enters frequently The Group requires transactions for the Accounting complex. can be to be one-off and tend financial assets. These transactions in the financial statements. any gain or loss, and deciding upon the presentation judgements such as in calculating the ongoing from separately presented then they are their impact is significant, disclosed and, where are Transactions results of the Group. financial Investment property valuations property Investment The and judgement involved. of uncertainty is a degree there properties of investment the fair value In determining rates, discount the appropriate ones of which are of assumptions, the significant based on a number are valuations provide to valuers professional uses external The Group expenditure. and capital income rental estimates of future properties. of the investment independent valuations 4. Critical accounting judgements and key sources of estimation uncertainty sources judgements and key accounting 4. Critical sheet date at the balance of estimation uncertainty sources other key and the future assumptions concerning The key are: these accounts used in preparing A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is liability if the remaining asset or a non-current as a non-current is presented A derivative as presented within 12 or settled are months. Other derivatives be realised to than 12 months and it is not expected more liabilities. assets or current current Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently and are into is entered contract a derivative at the date at fair value initially recognised are Derivatives or loss in profit gain or loss is recognised The resulting sheet date. at each balance their fair value to re-measured immediately. Derivative financial instruments financial Derivative foreign and rate to interest exposure to manage its financial instruments of derivative a variety into enters The Group caps. and swaps rate and options and interest contracts forward exchange risk, including foreign rate exchange De-recognition of financial liabilities De-recognition or they cancelled discharged, are obligations financial liabilities when, and only when, the Group’s derecognises The Group or terms on substantially different the same lender from another by replaced financial liability is an existing Where expire. as a de-recognition treated is or modification exchange substantially modified, such an liability are of an existing the terms amounts is carrying respective in the the difference liability, and of a new and the recognition of the original liability statement. income in the recognised Notes to the financial statementscontinued
5. Revenue and cost of sales An analysis of the Group’s revenue and cost of sales is as follows:
Group Group 2015 2014 £m £m Investment property rental income 81.2 78.8 Trading property sales – 3.3 Property management fees 4.1 6.0 Revenue 85.3 88.1 Direct operating expenses relating to investment properties that generated rental income (12.5) (14.3) Direct operating expenses relating to investment properties that did not generate rental income – (0.1) Direct operating expenses (12.5) (14.4) Cost of sales of trading properties – (3.4) Reversal of previous write down of trading properties 2.3 – Cost of sales (10.2) (17.8) Gross profit 75.1 70.3
Including interest income of £0.3 million (2014: £6.6 million) total revenue was £85.6 million (2014: £94.7 million).
6. Normalised Income Profit and Normalised Total Profit Normalised Income Profit and Normalised Total Profit are adjusted measures intended to show the underlying earnings of the Group before fair value movements and other non-recurring or otherwise non-cash one-off items. A reconciliation of the Normalised Income Profit and Normalised Total Profit to the profit before tax prepared in accordance with IFRS rules is set out below.
2015 2014 Share of Share of Group associate Total Group associate Total Group £m £m £m £m £m £m Investment property rental income 81.2 23.0 104.2 78.8 21.3 100.1 Direct operating expenses (12.5) (3.0) (15.5) (14.3) (2.9) (17.2) Property management fees 4.1 – 4.1 6.0 – 6.0 Administrative expenses (18.9) (3.2) (22.1) (20.0) (2.6) (22.6) Net interest payable (18.8) (4.7) (23.5) (13.1) (5.0) (18.1) Normalised Income Profit 35.1 12.1 47.2 37.4 10.8 48.2 Profit on sale of investment properties 4.4 3.1 7.5 3.6 6.9 10.5 Loss on sale of trading properties – – – (0.2) – (0.2) Total profits on sale of properties 4.4 3.1 7.5 3.4 6.9 10.3 Other operating income 1.2 0.3 1.5 6.8 – 6.8 Reversal of previous write down of trading properties 2.3 – 2.3 – – – Gain on sale of investment in associate 4.7 – 4.7 – – – Normalised Total Profit 47.7 15.5 63.2 47.6 17.7 65.3 Negative goodwill and other gains – 10.9 10.9 – 1.6 1.6 Acquisition and reorganisation costs 0.2 – 0.2 – – – LTIP charge (23.2) – (23.2) (13.6) – (13.6) Impairment of goodwill (0.3) – (0.3) (1.1) – (1.1) Fair value gains on investment properties 110.8 20.2 131.0 62.9 25.1 88.0 Change in fair value of currency options 4.7 – 4.7 1.0 – 1.0 Change in fair value of interest rate swaps and caps 0.2 0.3 0.5 (5.1) (1.2) (6.3) Change in fair value of convertible bond (11.2) – (11.2) 3.2 – 3.2 Foreign exchange losses (4.4) – (4.4) (6.9) – (6.9) 124.5 46.9 88.0 43.2 Profit before tax 171.4 131.2
Administrative expenses as presented in Normalised Income Profit exclude £24.9m (2014: £14.7m) largely relating to the Founder LTIP charge and expenses relating to the sale of investments in associates.
74 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 75
£m 1.1 1.1 6.8 2014 11.7 13.9 43.2 66.5 70.3 42.5 Result (34.7) 152.1 131.2 (20.9)
£m 1.5 1.4 3.6 8.6 2014 (0.1) (0.4) 19.3 51.2 19.2 35.5 14.8 88.1 62.9 Revenue
£m 1.3 1.2 0.7 2015 75.1 43.7 15.0 53.2 14.4 Result 171.4 115.2 (43.8) (29.5) 200.9
Annual Report and Accounts 2015 Accounts Report and Annual £m 2.1 1.4 1.0 4.4 2015 17.6 18.7 14.7 (0.2) 14.8 76.6 85.3 49.4 110.8 PLC Revenue Hansteen Holdings Holdings Hansteen Net finance costs Profit before tax Total gains on investmentTotal properties profit Operating Total changesTotal in fair value of investment properties Administrativeexpenses Profit on disposal of investment properties Total segmentTotal result Other operating income Changes in fair value of investment properties by segment: Belgium Germany Netherlands UK Share of results of associate and gain on sale of associate France UK Germany Netherlands France Belgium Group 7. Operating segments Operating 7. and results revenues Segment the to reported the information which represents location, by geographic determined segments are reportable The Group’s result A segment’s and assessment of segment performance. allocation of resource the purposes for Directors Group’s are managed costs expenses finance and net 5. Administrative in note for the Group as detailed profit of its gross consists also segments. Gains/(losses) by segment are properties to on investment not allocated therefore and are costs as central below. presented During 2015 goodwill was impaired by £0.3 million (2014: £1.1 million). million). £1.1 million (2014: by £0.3 impaired was goodwill During 2015 Other operating income comprises £0.6 million income from an option to purchase a property which was not utilised by the not utilised which was property a purchase to an option from million income £0.6 comprises income Other operating an insurance comprising million included £3.6 income operating other In 2014 receipts. million insurance plus £0.6 purchaser to a gain arising on relating million £3.2 period and in a previous damaged by fire property an investment to relating receipt in the Netherlands that the loan portfolio of a property part of the acquisition as repaid of a loan that was the repayment upon. secured was The Founder LTIP charge of £23.2 million relates to a bonus share award for the three-year period that ended on the three-year for award share a bonus to million relates of £23.2 charge LTIP The Founder 31. See note million). £13.6 (2014: 2015 31 December Negative goodwill and other gains relates to a gain recognised upon acquiring units in the Ashtenne Industrial Fund Unit Industrial Fund units in the Ashtenne upon acquiring a gain recognised to gains relates goodwill and other Negative winding-up of a on the million recognised of units and £1.3 acquisition to million in relation £0.3 million (2014: of £10.9 Trust partnership). Notes to the financial statementscontinued
7. Operating segments continued Segment assets For the purposes of monitoring segment performance and allocated resources between segments, the Directors monitor the investment and trading properties attributable to each segment. All assets are allocated to reportable segments with the exception of investments in associates and elements of cash, derivatives and tax balances that are managed centrally.
2015 Additions to Non- Investment Trading Total Other Total investment current properties* properties properties assets assets properties assets Group £m £m £m £m £m £m £m Belgium 15.4 – 15.4 1.3 16.7 0.2 15.4 France 14.3 – 14.3 0.9 15.2 1.2 14.3 Germany 634.5 – 634.5 19.9 654.4 23.3 633.5 Netherlands 217.3 – 217.3 7.0 224.3 2.2 217.4 UK 179.2 10.8 190.0 224.5 414.5 53.0 393.1 Total segment assets 1,060.7 10.8 1,071.5 253.6 1,325.1 79.9 1,273.7 Unallocated assets 106.8 48.4 Total assets 1,431.9 1,322.1
2014 Additions to Non- Investment Trading Total Other Total investment current properties* properties properties assets assets properties assets Group £m £m £m £m £m £m £m Belgium 18.4 – 18.4 1.3 19.7 0.3 18.4 France 11.6 – 11.6 0.9 12.5 0.1 11.6 Germany 604.8 – 604.8 26.3 631.1 48.1 605.3 Netherlands 212.2 – 212.2 5.8 218.0 92.1 212.3 UK 114.4 6.7 121.1 171.2 292.3 0.8 270.9 Total segment assets 961.4 6.7 968.1 205.5 1,173.6 141.4 1,118.5 Unallocated assets 95.6 0.4 Total assets 1,269.2 1,118.9
* Includes investment properties held for sale.
8. Profit for the year Profit for the year has been arrived at after (charging)/crediting:
Group Group 2015 2014 £m £m Net foreign exchange losses (4.4) (6.9) Acquisition and reorganisation costs 0.2 – Depreciation of property, plant and equipment (0.2) (0.2) Impairment of goodwill (0.3) (1.1) Profit on sale of investment properties 4.4 3.6 Increase in fair value of investment properties 110.8 62.9 Reversal of previous write down of trading properties 2.3 – Auditor’s remuneration (0.5) (0.6) Staff costs (see note 9) (12.2) (9.5) Share-based payment charge including social security costs (see note 9) (23.8) (14.8)
76 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 77 – £m £m 55 49 1.1 1.1 2.7 0.1 0.1 0.1 5.3 0.5 0.6 4.0 0.4 8.0 0.4 £m 2014 2014 2014 104 12.1 34.7 24.3 24.3 Group Group Group Number – – – £m £m 56 43 99 1.5 3.5 4.3 0.5 0.5 0.3 0.3 0.2 4.0 0.4 £m 2015 2015 2015 19.5 10.3 43.8 36.0 36.0 Group Group Group Number Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen Share-based payments note (see 31) Other social security costs Social security costs on share-based payments Audit-related services Audit-related complianceTaxation services annual accounts Wages and salaries Pension costs Other Professional feesProfessional Impairment of goodwill administrativeTotal expenses Staff costs(see note 9) The Company had no employees in either the current or preceding financial year. financial year. or preceding had no employees in either the current The Company Pension costs comprise amounts payable by the Group to personal pension schemes of employees. to amounts payable by the Group comprise costs Pension Fees payable to the Company’s auditor and their associates for the audit of the Company’s subsidiaries audit feesTotal non-auditTotal services remuneration auditor’s Total Finance and administration 9. Staff costs Staff 9. was: Directors) Non-Executive monthly number of employees (excluding The average Taxation compliance and advisory services fees comprise fees for UK and overseas income tax, VAT and property tax and property tax, VAT income UK and overseas for fees comprise fees and advisory services compliance Taxation the auditor’s and how services non-audit for policy on the use of auditors Details of the Company’s advisory services. Report 32. on pages services 29 to No Committee set out in the Audit are safeguarded and objectivity was independence arrangements. fee contingent pursuant to provided were Fees payable to the Company’s auditor and their associates for the audit of the Company’s The analysis of administrative expenses is as follows: The analysis of administrative The analysis of auditor’s remuneration is as follows: is as remuneration The analysis of auditor’s Property Their aggregate remuneration was:remuneration Theiraggregate Notes to the financial statementscontinued
10. Other operating income In 2015, other operating income includes £0.6 million from an option to purchase a property which was not utilised by the purchaser plus £0.6 million insurance receipts.
In 2014, other operating income included £3.6 million comprising an insurance receipt relating to an investment property damaged by fire in a previous period and £3.2 million relating to a gain that arose on the repayment of a loan. The loan was repaid as part of the acquisition of a property portfolio in the Netherlands on which the loan was secured.
11. Net finance costs
Group Group 2015 2014 £m £m Interest receivable on bank deposits 0.3 0.3 Other interest receivable – 6.3 Interest income 0.3 6.6 Interest payable on borrowings (19.0) (19.6) Interest payable on obligations under finance leases (0.1) (0.1) Net interest expense (18.8) (13.1) Change in fair value of currency options 4.7 1.0 Change in fair value of interest rate swaps and caps 0.2 (5.1) Change in fair value of convertible bond (11.2) 3.2 Foreign exchange losses (4.4) (6.9) Net finance costs (29.5) (20.9) Finance income 5.2 10.8 Finance costs (34.7) (31.7) Net finance costs (29.5) (20.9)
In 2014, other interest receivable includes a discount of £1.6 million recognised upon early repayment of a loan facility and a discount of £4.0 million recognised on a loan purchased in 2013.
12. Tax Group Group 2015 2014 £m £m UK current tax Credit in respect of prior years – (0.4) On net income of the current year 0.5 – Foreign current tax Charge in respect of prior years 1.8 – On net income of the current year 5.0 3.5 Total current tax 7.3 3.1 Deferred tax in respect of prior years (see note 20) (0.2) – Deferred tax in respect of the current year (see note 20) 16.0 9.7 Total tax charge 23.1 12.8
UK Corporation tax is calculated at 20.25% (2014: 21.50%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
78 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 79 – £m £m 0.1 2014 2014 (1.6) (5.7) (4.0) (3.8) (0.4) 13.7 19.9 12.8 33.6 28.2 Group Group 131.2 £m £m 1.6 0.1 0.5 2015 2015 (9.1) (1.2) (3.5) 23.1 15.2 34.7 56.2 20.5 20.5 Group Group 171.4 Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen Tax charge forTax the year Change in deferred tax due to change in tax rate Adjustment in respect of prior years Tax at the UK corporationTax tax rateof 20.25% (2014: 21.50%) effect of:Tax UK tax not payable due to REIT exemption Deferred tax assets not recognised (Income)/expenses that are not in taxable profit As a REIT, the Company is required to pay Property Income Distributions (“PIDs”) equal to at least 90% of the Group’s at least 90% Group’s of the Distributions (“PIDs”) equal to Income pay Property to is required the Company As a REIT, million of the dividends £20.4 20%). (currently rate the basic deduction of withholding tax at after net income, exempted million). £9.6 PIDs (2014: is attributable to 2015 paid during the year ended 31 December Amounts recognised as distributions equity to holders in the period: Second dividend for the year ended 31 December 2014 of 3.0p (2014: 2.9p) per share 13. Dividends 13. The Group elected to be a UK REIT in 2009 following admission to the Official List. The UK REIT rules exempt the profits of exempt the the Official List. admission to The UK REIT rules following be a UK REIT in 2009 to elected The Group tax provided from also exempt tax. Gains are on UK properties UK corporation business from rental property the Group’s a UK REIT remain tax. To UK corporation to otherwise subject UK activities are The Group’s trading. not held for they are qualifying activity the Group’s of the Group, of the principal company be met in respect to of conditions a number are there Act 2010. Tax set out in the UK REIT legislation in the Corporation of business which are and its balance Profit before tax Effect of different tax rates in overseas subsidiaries The tax charge for the year can be reconciled to the profit per the income statement as follows: as statement per the income the profit to be reconciled the year can for The tax charge Special dividend for the year ended 31 December 2014 of 3.0p (2014: nil) per share Interim dividend for the year ended 31 December 2015 of 2.1p (2014: 2.0p) per share Notes to the financial statementscontinued
14. Earnings per share and net asset value per share The European Public Real Estate Association (“EPRA”) has issued recommended bases for the calculation of certain earnings per share (“EPS”) information. Diluted EPRA EPS is reconciled to the IFRS measure in the following table.
2015 2014 Weighted Weighted average Earnings average Earnings number of per number of per Earnings shares share Earnings shares share Group £m m pence £m m pence Normalised Income Profit 47.2 697.4 6.8 48.2 673.9 7.1 Normalised Total Profit 63.2 697.4 9.1 65.3 673.9 9.7
Basic EPS 148.2 697.4 21.3 118.3 673.9 17.6 Dilutive share options 14.1 138.6 – 24.1 Diluted EPS 162.3 836.0 19.4 118.3 698.0 17.0
Basic EPS 148.2 697.4 21.3 118.3 673.9 17.6 Adjustments: Revaluation gains on investment properties (110.8) (62.9) Profit on the sale of investment properties (4.4) (3.6) Net profit on option receipt (0.6) – Impairment of goodwill 0.3 1.1 Profit on derecognition of a financial asset – (3.2) Loss on sale of trading properties – 0.2 Cost of acquiring subsidiaries 0.2 – Change in fair value of derivatives (4.9) 4.1 Change in fair value of convertible bond (excluding foreign exchange) 16.4 3.4 Adjustment in respect of associates (40.7) (31.1) Income tax on the above items 16.6 10.0 EPRA EPS 20.3 697.4 2.9 36.3 673.9 5.4 Dilutive share options (2.3) 138.6 – 24.1 Diluted EPRA EPS 18.0 836.0 2.2 36.3 698.0 5.2
The calculations for net asset value (“NAV”) per share are shown in the table below:
2015 2014 Equity Number Net asset Equity Number Net asset shareholders’ of value shareholders’ of value funds shares per share funds shares per share Group £m m pence £m m pence Basic NAV 806.2 766.3 105 676.0 685.0 99 Unexercised share options – 1.7 – 24.1 Diluted NAV 806.2 768.0 105 676.0 709.1 95 Adjustments: Revaluation of trading properties 0.2 – Goodwill (0.3) (0.6) Fair value of interest rate derivatives 5.2 5.7 Adjustments in respect of associates 0.6 0.4 Mark-to market of convertible bond 107.5 90.8 18.4 Deferred tax 35.8 21.1 EPRA NAV 955.2 858.8 111 721.0 709.1 102
80 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 81 – £m £m 1.1 1.1 0.1 2.5 1.2 0.7 0.5 0.2 0.6 0.6 0.6 0.2 0.6 0.2 0.4 0.4 0.8 0.4 2014 Total (0.1) (1.3) (1.8) Group – – – – £m £m 0.1 0.1 0.1 0.1 0.5 0.3 0.2 0.2 0.4 0.3 0.3 0.6 0.6 0.6 0.2 0.4 2015 (0.3) (0.3) Group Computer equipment – £m 0.1 0.1 0.3 0.3 0.6 0.3 0.2 0.3 0.6 0.2 0.4 fittings Fixturesand Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen At 31 December Carrying amount: Carrying At 31 December By segment: UK Additions At 1 January 2015 Disposal Impairment Impairment: At 1 January At 31 December Additions At 31 December 2015 Disposal Impact of foreign currency movements Cost: At 1 January Charge for the year Group Cost: At 1 January 2014 16. Property, plant and equipment Property, 16. During 2015, the goodwill that was allocated to the acquisition of the Spencer Group portfolio in 2011 was impaired by impaired was in 2011 portfolio Group of the Spencer the acquisition to allocated the goodwill that was During 2015, million. by £1.1 impaired was portfolio the Belgian to allocated the goodwill that was During 2014, £0.3m. The Group tests goodwill annually for impairment or more frequently if there are any indications that goodwill might be any indications are if there frequently or more impairment goodwill annually for tests The Group the valuation to sell by reference to less costs on the basis of fair value determined are amounts The recoverable impaired. valuers. by external as performed of the underlying properties 15. Goodwill 15. Accumulated depreciation: Accumulated At 1 January 2014 At 1 January 2015 Charge for the year At 31 December 2015 Net book value: At 31 December 2015 At 31 December 2014 Notes to the financial statementscontinued
17. Investment property
Group Group 2015 2014 £m £m At 1 January 953.9 834.9 Additions – direct property purchases 68.0 135.6 – capital expenditure 11.9 5.8 Lease incentives 0.9 0.3 Letting costs 0.2 0.1 Revaluation 110.8 62.9 Disposals (39.1) (27.4) Transfer to investment property held for sale (1.6) (7.5) Exchange adjustment (45.9) (50.8) At 31 December 1,059.1 953.9 Investment property held for sale: At 1 January 7.5 4.6 Disposals (7.0) (4.6) Transfer from investment property 1.6 7.5 Exchange adjustment (0.5) – At 31 December 1.6 7.5
Included within the property valuation is £2.6 million (2014: £2.5 million) in respect of tenant lease incentives granted. Investment property includes £2.6 million of property (2014: £2.7 million) held under finance leases.
Properties classified as held for sale at 31 December 2015 represent properties that were actively marketed as at the year end and have subsequently been sold, or agreements for their sale have been entered into.
All investment properties are stated at fair value as at 31 December and have been valued by independent professionally qualified external valuers CBRE, DTZ, Cushman and Wakefield, Jones Lang LaSalle or Knight Frank LLP. The valuations have been prepared in accordance with the RICS Valuation – Professional Standards January 2014, published by The Royal Institution of Chartered Surveyors and with IVA1 of the International Valuation Standards.
The valuations are based on a number of assumptions, the significant ones of which are the appropriate discount rates, estimates of future rental income and capital expenditure. Rental income and yield assumptions are supported by market evidence where relevant.
The Group has pledged certain of its investment properties to secure bank loan facilities and a finance lease granted to the Group (see note 27).
In accordance with IFRS 13, the Group’s investment property has been assigned a valuation level in the fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). In general, the Group’s investment property as at 31 December 2015 is categorised as Level 3.
82 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements
83 % % 7.6 Max 9.9 6.9 8.9 Max 11.9 10.7 10.2 13.0 10.2 12.9
Yield Yield % % Min Min 5.3 2.3 4.1 4.1 6.4 9.2 4.4 6.3 2.0 10.7
£ £ Max Max 13.5 61.1 97.4 57.2 27.5 12.5 78.2 75.2 28.8 62.0 £ £ Annual Report and Accounts 2015 Accounts Report and Annual Min Min 8.7 1.0 3.2 3.2 0.9 Rent per sq m 21.9 21.5 Rent per sq m 10.2 20.7 25.4 PLC £m £m 2014 2015 11.6 18.4 15.4 14.3 217.3 114.4 212.2 179.2 961.4 634.5 604.8 1,060.7 Fairvalue at 31 December 31 Fair value at value Fair 31 December December 31 Hansteen Holdings Holdings Hansteen UK Total France Germany Netherlands As at 31 December 2015, the Group had entered into contracts for £2.5 million (2014: £2.2 million) of building works that were that were of building works million) £2.2 million (2014: £2.5 for contracts into had entered the Group 2015, As at 31 December not complete. All other factors being equal there is a positive relationship between estimated rental values and property values such that such values and property values rental estimated between relationship is a positive there being equal All other factors Reversionary between The relationship of a property. valuation the increase would values rental in estimated an increase valuation. a property decrease yields would in Reversionary such that an increase is negative values yields and property such that the valuation conditions by market determined these as they are inputs between interrelationships are There them. between in any one period depends on the balance movement Belgium Information about fair value measurements using unobservable inputs (Level 3) using unobservable inputs (Level measurements value about fair Information Investment properties are valued using a capitalisation methodology applying a yield to current and estimated rental rental and estimated current a yield to methodology applying using a capitalisation valued are properties Investment used in each region of the ranges inputs and details be unobservable to considered are values Yields and rental income. as follows: are Total France Germany UK Netherlands Belgium Notes to the financial statementscontinued
18. Investment in subsidiary undertakings
Company Company 2015 2014 £m £m Cost and net book value: Balance at 1 January 393.5 372.4 Additions 9.0 – Recapitalisation of subsidiaries 242.8 68.6 Impairment of subsidiaries (60.1) (0.5) Repayment of share capital – (47.0) Balance at 31 December 585.2 393.5
Of the £242.8m capitalisation during 2015, £106.1m was injected into a number of UK wholly owned subsidiaries as part of a corporate structure rationalisation. Following the sale of assets to other Group companies from both these entities and from a new entity acquired for £9.0m during the year, the Company received dividends of £96.0m. These entities were then wound up resulting in a write down to the carrying value of the investments of £60.1m.
No subsidiaries are excluded from consolidation.
Details of the Company’s subsidiaries at 31 December 2015 are as follows:
Proportion Proportion of of ownership voting power Place of interest held incorporation % % Held directly DV4 Properties West Hallam Co. Limited British Virgin Islands 100.00 100.00 Hansteen France SAS France 100.00 100.00 Hansteen (Jersey) Securities Limited Jersey 100.00 100.00 Hansteen Jersey Investments Limited Jersey 100.00 100.00 Hansteen Netherlands B.V. Netherlands 100.00 100.00 Hansteen Netherlands (2) B.V. Netherlands 100.00 100.00 Ashtenne 2013 Limited United Kingdom 100.00 100.00 Hansteen Belgium Limited United Kingdom 100.00 100.00 Hansteen Europe Limited United Kingdom 100.00 100.00 Hansteen FM Limited United Kingdom 100.00 100.00 Hansteen (General Partner) Limited* United Kingdom 100.00 100.00 Hansteen (General Partner 2) Limited* United Kingdom 100.00 100.00 Hansteen Germany (2) Limited United Kingdom 100.00 100.00 Hansteen Germany (3) Limited United Kingdom 100.00 100.00 Hansteen Germany Limited United Kingdom 100.00 100.00 Hansteen Germany Residential Limited United Kingdom 100.00 100.00 Hansteen Industrial Estates Limited* United Kingdom 100.00 100.00 Hansteen Industrial Investments Limited* United Kingdom 100.00 100.00 Hansteen Land Limited United Kingdom 100.00 100.00 Hansteen Limited United Kingdom 100.00 100.00 Hansteen LP Limited* United Kingdom 100.00 100.00 Hansteen LP 2 Limited United Kingdom 100.00 100.00 Hansteen OBP Limited* United Kingdom 100.00 100.00 Hansteen Property Investments Limited United Kingdom 100.00 100.00 Hansteen SPI Limited* United Kingdom 100.00 100.00 Hansteen SPO Limited* United Kingdom 100.00 100.00 Hansteen STC Limited* United Kingdom 100.00 100.00 Hansteen Office and Retail Limited* United Kingdom 100.00 100.00
84 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 85 % held 50.0 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 votingpower Proportion of of Proportion % interest 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 99.74 94.90 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Proportion ofownership Placeof Belgium Belgium Belgium Belgium Belgium incorporation Netherlands Netherlands Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Luxembourg Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen ocess of being liquidated. ocess Subsidiary in the pr
Hansteen Neukirchen-Vluyn S.à r.l Hansteen Neuss S.à r.l Hansteen Paderborn S.à r.l Hansteen Philipp-Reis Strasse S.à r.l Hansteen Pleidelsheim S.à r.l Hansteen Porschestrasse S.à r.l Hansteen Querumer Forst S.à r.l Hansteen Regensburg S.à r.l Hansteen Rodenbach S.à r.l Hansteen Soltau S.à r.l Hansteen S.à r.l Tegel Hansteen S.à Troisdorf r.l Hansteen Viersen S.à r.l Hansteen Waldstrasse S.à r.l Hansteen Ormix B.V. * or management. investment development, is engaged in property above Each of the undertakings listed Held indirectly Held Arman B01 BVBA Ridderkerk Property B.V. I.P.I NossegemI.P.I NV Small Island Management NV Tycoons Immo BVBATycoons Waterloo Investments NV Hansteen Luxembourg S.à r.l Hansteen Maisach S.à r.l Hansteen Miraustrasse S.à r.l Hansteen Bad Schonborn S.à r.l Hansteen Billbrook S.à r.l Hansteen Borsigstrasse S.à r.l Hansteen Braunschweig S.à r.l Hansteen Bremen S.à r.l Hansteen Cologne S.à r.l Hansteen Delta GP S.à r.l Hansteen Dormagen S.à r.l Hansteen DusseldorfS.à r.l Hansteen Geldern S.à r.l Hansteen Germany S.à (4) r.l Hansteen Germany (5) S.à r.l Hansteen Germany (6) S.à r.l Hansteen Germany (7) S.à r.l Hansteen Germany (8) S.à r.l Hansteen Germany Holdings S.à r.l Hansteen Gladbeck S.à r.l Hansteen Gottmadingen S.à r.l Hansteen Hannover S.à r.l Hansteen Holzhauser Markt S.à r.l Hansteen Ladbergen S.à r.l Hansteen Leipzig S.à r.l Hansteen Luxembourg Investments S.à r.l Notes to the financial statementscontinued
19. Investment in associates Group Group 2015 2014 £m £m Cost and net book value: Balance at 1 January 156.4 124.7 Investment in associates 130.1 42.9 Capital redemption – (6.1) Disposal of associate (38.7) (25.1) Share of results of associates 46.9 43.2 Distributions received (32.1) (20.1) Distributions accrued (1.3) (3.1) At 31 December 261.3 156.4
During 2015, the Group acquired a further 45.1% stake in Ashtenne Industrial Fund Unit Trust, bringing its total investment to 81.8% (2014: 36.7%). In May 2015 the Group disposed of its investment in Hansteen UK Industrial Property Unit Trust II (“HPUT II”). During 2014, the Group acquired a 9.2% stake in Ashtenne Industrial Fund Unit Trust. The Group also acquired additional units in HPUT II. In October 2014 the Group disposed of the majority of the portfolio held in Hansteen UK Industrial Property Unit Trust (“HPUT”). As part of the transaction, the Group acquired a 50% interest in Hansteen Saltley Unit Trust.
The Group has the following interests in associates: Proportion of Proportion of ownership voting power Place of interest held incorporation % % Associates Ashtenne Industrial Fund Unit Trust (“AIF”) Jersey 81.82 81.82 Hansteen Saltley Unit Trust (“HSUT”) Jersey 50.00 50.00 Ashtenne Industrial (General Partner) Limited United Kingdom 33.00 33.00 Ashtenne Industrial Fund Limited Partnership United Kingdom 81.84 33.00 Ashtenne Industrial Fund Nominee No 1 Limited United Kingdom 33.00 33.00 Ashtenne Industrial Fund Nominee No 2 Limited United Kingdom 33.00 33.00 Ashtenne (AIF) Limited United Kingdom 33.00 33.00 Ashtenne Caledonia Limited United Kingdom 33.00 33.00 Ashtenne Severnside Limited United Kingdom 33.00 33.00 Somers Road Management Company Limited United Kingdom 33.00 33.00
AIF is a collective investment scheme within the meaning of Section 235 of the Financial Services and Markets Act 2000. At the balance sheet date the Group owned 81.82% of the issued units. Under IFRS 10 Consolidated financial statements, a number of factors should be considered when determining whether the Group has control of AIF. Based upon this assessment, taking into consideration the structure of AIF and the fact that the Group does not have the power to direct the activities of AIF, it has concluded that it does not control AIF and has accounted for the investment as an associate.
Aggregated amounts relating to associates
HPUT II HSUT AIF 2015 2014 Summarised balance sheets £m £m £m £m £m Investment properties – 39.3 436.4 475.7 644.3 Cash – 1.1 20.5 21.6 40.1 Borrowings – (19.9) (137.1) (157.0) (234.5) Other net liabilities – (1.0) (12.4) (13.4) (18.2) Net assets – 19.5 307.4 326.9 431.7
HPUT II HSUT AIF 2015 2014 £m £m £m £m £m Revenues 5.7 3.1 37.3 46.1 62.2 Profit 2.1 5.1 63.1 70.3 127.0
The summarised financial information above represents amounts in the associates’ financial statements prepared in accordance with IFRSs but relating to the period of ownership by the Group.
86 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 87 – – – – – – £m £m £m 1.7 1.0 0.6 2014 Total Total (1.7) 19.1 24.4 24.4 (15.8) (21.0) (36.4) (35.8) Company – – – – – – – – – – £m £m £m 2.4 0.6 0.6 2015 (1.8) 17.5 17.5 39.3 timing timing Company Short-term Short-term differences differences – – – – £m £m £m 1.7 1.7 1.7 1.7 0.1 3.9 2014 (1.7) (2.0) (0.2) 16.6 59.2 72.8 Group 40.8 Losses Losses – – – – – Annual Report and Accounts 2015 Accounts Report and Annual £m £m £m 1.1 rate rate 1.5 1.4 0.1 1.0 0.6 0.4 2015 (0.1) 15.7 30.7 49.4 70.8 Group PLC Currency Currency Currency contracts contracts derivatives derivatives and interest and interest and – – – – £m £m 1.3 (39.1) (16.2) (39.1) (24.2) valueof valueof Carrying Carrying properties properties investment investment Hansteen Holdings Holdings Hansteen Deferred tax liabilities (Charge)/credit to income Deferred tax assets Exchange differencesExchange At 31 December 2015 Expiring in 2019 The impact 18% in April 2020. of 20% and to rate the current from 19% in April 2017 will fall to tax rate The UK corporation to the Group. changes is not significant of these rate Losses Expiring in 2018 Unutilised losses carried forward and deductible temporary differences for which no deferred tax asset has been deferred for which no differences and deductible temporary forward Unutilised losses carried as follows: expire recognised At 31 December 2015 the Group has unutilised tax losses of £55.5 million (2014: £75.2 million) available for offset against for available million) £75.2 million (2014: has unutilised tax losses of £55.5 the Group 2015 31 December At of such losses. million) £16.0 £6.1 million (2014: respect of in recognised been tax asset has A deferred taxable profits. future and deductible temporary losses of £49.4m of the remaining in respect tax asset has been recognised No deferred taxable profits. of future to the unpredictability due £70.8m of differences At 1 January 2015 At 31 December 2015 Company At 1 January 2015 Group 20. Deferred tax Deferred 20. Expiring in 2020 Expiring in 2021 Charge to income Expiring in 2024 Carried forward without restriction – LossesTotal Deductible temporary differences(no expiry date) Notes to the financial statementscontinued
21. Derivative financial instruments The Group enters into derivative financial instruments to provide an economic hedge to its interest rate and foreign exchange risks. Further details on interest rate and foreign exchange risks are included in note 34.
Group Group Company Company 2015 2014 2015 2014 £m £m £m £m Currency options 9.8 5.6 9.8 5.6 Interest rate swaps (5.2) (5.7) – – Convertible bond – – (36.0) (21.4) 4.6 (0.1) (26.2) (15.8) Current assets 9.4 0.5 9.4 0.5 Non-current assets 0.4 5.1 0.4 5.1 Non-current liabilities (5.2) (5.7) (36.0) (21.4)
Foreign currency derivative financial instruments
Average contract Notional exchange rate principal amount Fair value 2015 2014 2015 2014 2015 2014 Group and Company EUR:GBP EUR:GBP £m £m £m £m Currency options – buy sterling: sell euro In less than one year 1:1.321 1:1.300 195.5 26.1 9.4 0.5 In more than one year but less than two 1:1.600 1:1.322 49.6 194.7 0.4 5.1
Interest rate derivative financial instruments
Average contract fixed interest rate Notional principal amount Fair value 2015 2014 2015 2014 2015 2014 Group % % £m £m £m £m Interest rate swaps – receive floating pay fixed In less than one year 1.0 1.2 11.9 20.0 – – In more than one year but less than two 0.9 0.8 35.3 12.4 (0.6) – In more than two years but less than five 0.9 0.7 157.9 209.5 (4.6) (5.7) 205.1 241.9 (5.2) (5.7) Interest rate caps – receive floating pay fixed In less than one year – 2.7 – 32.8 – – In more than one year but less than two 1.7 – 25.7 – – – In more than two years but less than five 2.6 2.2 33.0 63.8 – – 58.7 96.6 – –
Average contract fixed interest rate Notional principal amount Fair value 2015 2014 2015 2014 2015 2014 Company % % £m £m £m £m Interest rate swaps – receive floating pay fixed In less than one year 1.0 – 11.9 – – – 1.0 – 11.9 – – –
88 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 89 – – – – – – £m £m £m 6.7 0.1 0.1 2.6 0.2 2014 2014 2014 (3.4) 10.1 Group 118.1 125.5 125.2 120.8 Company Company
– – – – – – £m £m £m 7.3 6.7 1.8 0.1 2.3 0.6 2015 2015 2015 10.8 98.5 Group 106.7 105.8 106.0 Company Company – – £m £m 7.1 7.5 7.8 9.7 8.1 3.9 0.7 2014 2014 14.5 25.3 Group Group 34.0 – – Annual Report and Accounts 2015 Accounts Report and Annual £m £m 7.5 7.8 1.6 7.4 8.1 3.8 6.9 2015 2015 38.9 24.6 20.4 Group Group PLC Hansteen Holdings Holdings Hansteen Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. and ongoing costs. purchases trade amounts outstanding for principally comprise payables and accruals Trade The average credit period taken for trade purchases by the Company is 15 days (2014: 15 days). For most suppliers no days). For 15 days (2014: is 15 by the Company purchases trade for period taken credit The average is charged interest Thereafter, of the invoice. the date the first from payables30 days for on the trade charged is interest and other payables approximates amount of trade The carrying rates. interest at various on the outstanding balances their fair value. Trade payables Trade Amounts owed by related parties Amounts owed by subsidiary undertakings 25. Trade and other payables Trade 25. 24. Cash and cash equivalents and cash Cash 24. of bank deposits with an original maturity and short-term held by the Group cash comprise equivalents and cash Cash and cash Included within cash their fair value. to of these assets approximates value months or less. The carrying three million). £1.9 (2014: cash is £nil of restricted equivalents Group trade receivables are shown after deducting a provision for bad and doubtful debts of £5.1 million (2014: £5.9 million). million). £5.9 million (2014: £5.1 doubtful debts of for bad and deducting a provision after shown are receivables trade Group their fair value. approximates and other receivables of trade value The carrying Trade receivables Trade Balance at 1 January Additions Reversal of prior year write down Disposals Balance at 31 December 23. Trade and other receivables and other Trade 23. Part of a prior year write down was reversed as a result of an increase in the expected net realisable value of the trading of the trading value net realisable in the expected of an increase as a result reversed was down of a prior year write Part properties. The carrying amount approximates to the fair value of the trading properties. of the trading the fair value to amount approximates The carrying 22. Trading properties 22. Trading Amounts owed to subsidiary undertakings Other payables Prepayments and accrued income and Prepayments Other receivablesOther Accruals Deferred income Notes to the financial statementscontinued
26. Borrowings
Group Group 2015 2014 £m £m Bank loans 433.5 433.8 Convertible bond 107.5 96.3 Unamortised borrowing costs (4.8) (6.3) 536.2 523.8 Current liability 6.2 29.2 Non-current liability 530.0 494.6 The bank loans and convertible bond are repayable as follows: Within one year or on demand 7.8 30.9 Between one and two years 66.9 14.3 Between three and five years 464.6 482.3 Over five years 1.7 2.6 541.0 530.1 Undrawn committed facilities Expiring between two and five years 17.5 4.5
Covenants Interest Facility Drawn Expiry Loan to value cover €82.9 million €82.9 million April 2017 74%* 165% €2.5 million €2.5 million June 2017 70% 125% €100.0 million €100.0 million July 2018 – – £95.0 million £77.5 million July 2018 60% 175% €106.1 million €106.1 million December 2018 65% 200% €189.1 million €189.1 million February 2019 65% 185% €57.8 million €57.8 million June 2019 70% 130% €40.0 million €40.0 million December 2019 65% 200% €6.0 million €6.0 million March 2025 – –
* On the €82.9 million facility the loan to value covenant reduces by 2% per year.
Security for secured borrowings at 31 December 2015 is provided by charges on property with an aggregate carrying value of £1,037 million (31 December 2014: £929 million).
In July 2013, Hansteen (Jersey) Securities Limited issued €100 million of convertible bonds with a coupon of 4.0%. The bonds will, subject to the satisfaction of certain conditions, be convertible into ordinary shares of the Company. The initial conversion price was set at a premium of 22.5% above the volume weighted average share price between launch and pricing, and will be subject to adjustments pursuant to the terms and conditions of the bonds.
Bonds can be converted at the option of the bond holder from 15 July 2016. The bonds may be converted before this date if Hansteen’s share price (expressed in euro at the current exchange rate) is more than 130% of the current conversion price (expressed in euro at a fixed exchange rate) for a period of 20 consecutive dealing days within the 30 dealing days ending on the day before the last dealing day of any calendar quarter. Bond holders can only exercise their conversion rights in the quarter following the quarter in which the ratio was above 130% for the required period.
Under the terms of the bonds, the Company will have the right to elect to settle any conversion entirely in ordinary shares of the Company, cash or a combination of shares and cash. If not previously converted, redeemed or purchased and cancelled, the bonds will be redeemed at par in July 2018.
90 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 91 – – £m £m £m 1.9 2.7 2.7 0.1 2.6 0.7 4.5 2014 2014 2014 (0.1) 31.2 64.1 68.6 530.1 498.9 31 December 31 – % m £m 3.7 1.5 2.9 0.7 3.0 0.3 2.2 2.4 2.4 0.2 2014 2015 (0.2) 44.8 lease payments lease shares Present value of 685.6 640.5 Numberof –
£m £m £m 3.1 2.7 3.6 2.0 0.9 0.2 2014 2015 2015 (0.4) 77.5 72.2 68.6 541.0 463.5 31 December 31 m % Annual Report and Accounts 2015 Accounts Report and Annual £m 2.7 2.7 1.6 2.3 2.6 2.4 0.9 0.2 0.2 2015 2015 (0.3) 35.7 shares 721.5 685.6 PLC Number of of Number Minimum lease payments Hansteen Holdings Holdings Hansteen At 31 December Equity raise On 17 April 2015, 0.2 million share options were exercised. On 17 April 2014, 0.3 million share options were exercised. See note 31. See note exercised. options were 0.3 million share On 17 April 2014, exercised. options were million share 0.2 On 17 April 2015, The share capital comprises one class of ordinary shares carrying no right to fixed income. There are no specific are There income. fixed no right to carrying shares one class of ordinary comprises capital The share UK REIT restrictions. for except of shares, or the transfer of a shareholding on the size restrictions Issued and fully paid ordinary shares of 10p each At 1 January 28. Share capital Share 28. The fair value of the Group’s lease obligations approximates their carrying amount. The Group’s obligations under the amount. Group’s The their carrying lease obligations approximates of the Group’s The fair value the leased assets. by the lessors’over rights secured lease are finance The finance lease is denominated in euro and has an outstanding term of eight years (2014: nine years). For the year nine years). years (2014: of eight term and has an outstanding in euro lease is denominated The finance five every fixed are rates 2.8%). Interest 2.8% (2014: the lease was implicit in rate the interest 2015 ended 31 December this. reflect to adjusted repayments and capital rate years, and interest In the second to fifth years inclusive After five years Less: future finance charges Amounts payable under finance leases: Within one year 27. Obligations under finance leases Obligations under finance 27. The Group enters into derivative financial instruments to provide an economic hedge to its interest rate risk. Further details risk. rate to its interest hedge an economic to provide financial instruments derivative into enters The Group taking into 21. After note disclosed in are derivatives rate 34 and the interest included in note risk are rate on interest (2014: borrowings for the euro 3.4% are rates interest average weighted the swaps rate of the interest the effect account 4.3%). (2014: 3.3%) borrowings the sterling 2.5% and for Euro Sterling Group Interest rate and currency profile and currency rate Interest Group Share options exercised Amount due for settlement after 12 months Present value of lease obligations Less: amount due for settlement within 12 months Notes to the financial statementscontinued
28. Share capital continued On 27 August 2015, pursuant to a placing and open offer, the Company raised gross proceeds of £40.0 million (£39.4 million net of expenses) through the issue of 35.7 million shares at a price of 112p per ordinary share.
On 2 April 2014, pursuant to a placing and open offer, the Company raised gross proceeds of £47.1 million (£46.3 million net of expenses) through the issue of 44.8 million shares at a price of 105p per ordinary share.
During the year, the Company acquired some of its own shares in order to settle obligations under the Performance Share Plan.
Number m £m At 1 January 2015 0.8 0.8 Acquired 11 June 2015 0.9 1.1 Issued to employees 12 June 2015 (0.2) (0.2) At 31 December 2015 1.5 1.7
29. Notes to the cash flow statement
Group Group Company Company 2015 2014 2015 2014 £m £m £m £m Profit for the year 148.3 118.4 64.8 14.3 Adjustments for: Share-based payments 19.5 12.2 19.5 12.2 Depreciation of property, plant and equipment 0.2 0.2 – – Goodwill impairment 0.3 1.1 – – Share of profits of associate and gain on sale of associate (53.2) (43.2) – – Profit on sale of investment properties (4.4) (3.6) – – Reversal of prior year write down of trading properties (2.3) – – – Gain on disposal of loan – (3.0) – (3.4) Fair value gains on investment properties (110.8) (62.9) – – Impairment of investment in subsidiary – – 60.1 0.5 Dividends received – – (177.8) (25.8) Net finance costs 29.5 20.9 12.1 (2.9) Tax charge 23.1 12.8 1.7 (0.1) Operating cash inflows/(outflows) before movements in working capital 50.2 52.9 (19.6) (5.2) (Increase)/decrease in trading properties (1.8) 3.4 – – (Increase)/decrease in receivables (2.4) 2.2 42.6 8.5 Increase/(decrease) in payables 6.3 0.4 (36.5) (11.9) Cash generated from/(used by) operations 52.3 58.9 (13.5) (8.6) Income taxes paid (4.5) (1.6) – – Interest paid (16.8) (18.1) (5.6) (5.2) Net cash inflow/(outflow) from operating activities 31.0 39.2 (19.1) (13.8)
92 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 93 – £m £m 1.5 5.0 2014 2014 77.4 32.5 72.0 39.0 Group Group (years) 311.2 161.8 Average Average remaining life remaining – £m £m 1.4 4.6 2015 2015 72.9 36.9 30.9 84.8 Group Group Group 316.2 158.5 Number exercisable – year atend of Outstanding Annual Report and Accounts 2015 Accounts Report and Annual PLC Exercised (100,000) year atstart of 100,000 Outstanding Hansteen Holdings Holdings Hansteen price Exercise 120.5p 2005 Share Option Scheme Share 2005 plan incentive Long-term Plan Share Performance › › › The total share-based payment charge for the year under this scheme was £nil (2014: £nil). £nil (2014: the year under this scheme was for payment charge share-based The total Year issuedYear 2006 2005 Share Option Scheme Share 2005 and during the year had one participant. senior employees of the Group certain open to Option Scheme is Share The 2005 on the of the Company shares of the ordinary price market quoted average the equal to at a price exercisable Options are The options conditions. performance vesting period that is not subject to a three-year The options have of grant. date if the forfeited normally Options are of grant. the date from ten years a period of after unexercised if they remain expire The this scheme during the year. under granted the options vest. No options were before the Group employee leaves in the schemes table summarises during the year: movements the following › million). £12.1 million (2014: the year under these schemes £19.5 for was payment charge share-based The total 31. Share-based payments Share-based 31. schemes. equity-settled share had three the Group 2015, During the year ended 31 December › › In the second to fifth years inclusive After five years Within one year
The Group as lessor The Group had the Group date sheet leases. As at the balance operating under properties leases all of its investment The Group leases: operating non-cancellable under receivable rentals minimum aggregate future the following for with tenants contracted Operating lease payments represent rentals payable by the Group under ground rent leases for land relating to certain of certain to land relating leases for rent ground under payable by the Group rentals lease payments represent Operating for rentals properties and respect of its office rentals payable in properties, as investment classified its buildings that are cars. company The expense relating to operating leases in the year was £1.5 million (2014: £1.3 million). £1.3 (2014: million leases £1.5 was in the year operating to relating The expense Within one year In the second to fifth years inclusive After five years 30. Operating lease arrangements lease Operating 30. as lessee The Group lease payments under non- minimum future for outstanding commitments had the Group sheet date As at the balance leases, which fall due as follows: operating cancellable Notes to the financial statementscontinued
31. Share-based payments continued Founder Long-term incentive scheme (“Founder LTIP”) The Founders and Joint Chief Executives are entitled to a share award dependant on the growth in EPRA NAV. The target for the Founder LTIP is that EPRA NAV per ordinary share (after adding back dividends and other returns to shareholders) must exceed a compound growth rate of 10% per annum in a three-year period. The Founder LTIP scheme has repeated to reward performance in each three-year period; the current performance period ended on 31 December 2015.
The value of the share award for each Chief Executive is calculated as 12.5% of the excess growth over the 10% growth target. Any amount payable under the Founder LTIP is to be satisfied by the award of ordinary shares of the Company.
The price per share to be used when determining the number of shares which the Joint Chief Executives are entitled to is 111.955p being the average mid-market quotation for such shares on the Main Market for the first 20 dealing days immediately following the end of the relevant period.
The excess growth in EPRA NAV over the performance target over the performance period was £51.3million and as such each Chief Executive is entitled to 22,906,127 ordinary shares in the Company.
The total share-based payment charge for the year under this scheme was £18.9 million with associated social security costs of £4.3 million (2014: £11.1 million with associated social security costs of £2.5 million).
Performance Share Plan (“PSP”) The PSP awards share options with a nil exercise price to executive directors and senior employees. The number of options granted is calculated with reference to the employee’s salary and the share price prior to the grant date. To reflect the fact that 2012 was a transitional year between the 2005 Share Option Scheme and the PSP, two awards were granted to participants, one with a two-year performance period and one with a three-year performance period. Vesting of the awards is staggered over the three years following the performance period, with one third vesting each year if performance targets are met. Performance targets are based on Total Shareholder Return and Net Asset Value growth relative to a peer group of listed UK REITs.
Outstanding Outstanding Average Exercise at start of at end of Number remaining life Year issued price year Granted Exercised Lapsed year exercisable (years) 2012 nil 1,461,441 – (158,865) (16,703) 1,285,873 558,075 6.5 2013 nil 1,270,244 – – (815,904) 454,340 – 7.2 2014 nil 1,095,168 – – (131,597) 963,589 – 8.3 2015 nil – 1,081,373 – (134,900) 946,473 – 9.2
The total share-based payment charge for the year under this scheme was £0.6 million with associated social security costs of nil (2014: £1.0 million and £0.2 million respectively).
The inputs to the valuation were:
2015 2014 Weighted average share price 115.5p 109.2p Weighted average exercise price nil nil Weighted average fair value 88.0p 79.4p Expected volatility 18.24% 22.86% Expected life 5 years 5 years Risk free rate 0.76% 1.07%
94 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 95 – – – – £m £m 0.1 0.1 2.2 2.0 0.6 0.2 0.4 2014 2014 Group – – – – £m £m 1.9 1.6 1.8 1.4 0.1 0.1 0.1 2015 2015 related parties Group Amounts owed by
– £m 1.2 5.9 0.1 1.0 3.0 0.2 0.4 2014 – – Annual Report and Accounts 2015 Accounts Report and Annual £m 4.1 0.1 2.9 0.3 0.2 0.6 2015 PLC Provision of services of Provision Hansteen Holdings Holdings Hansteen Short-term employee benefits Short-term Norwepp Limited Partnership Surplus funds in subsidiary companies are loaned to the Company at EURIBOR plus 1.75% to 3.75% (2014: 1.75% to 3.75%), 3.75%), to 1.75% (2014: 3.75% to at EURIBOR plus 1.75% the Company loaned to are funds in subsidiary companies Surplus Securities Limited. (Jersey) Hansteen for 5.02%) 2.50% 3.00%) or 5.08%LIBOR plus 2.50% (2014: (2014: to 3.00% to Company with subsidiaries Transactions is activities. Interest their investment funding for long-term provide loans with its subsidiaries to into enters The Company to 1.10% (2014: 3.75% to 1.10% or EURIBOR plus 3.0%) to 1.75% 3.0% (2014: to on these loans at LIBOR plus 1.75% charged which undertakes Limited, subsidiary, Hansteen by its management management fees is charged The Company 3.75%). on behalf of the Company. day-to-day management of the Group Remuneration of key management personnel of key Remuneration is and the Company, management personnel of the Group the key who are of the Directors, remuneration The aggregate the to charged part of the management fee and forms Limited is paid by Hansteen The remuneration set out below. part of the in the audited is provided of individual Directors about the remuneration information Further Company. Report 49. on pages 35 to Remuneration The Group provides management services to companies controlled by its associates, which are made at prices comparable comparable made at prices which are by its associates, controlled companies to management services provides The Group of the Group’s details for 19 parties. See note unrelated to provided similar services for be charged those that would to associates. Hansteen UK Industrial Property Limited 33. Related-party transactions Related-party 33. Group transactions Trading not parties who are with related transactions trading into subsidiaries entered Group During the year, The Founder Directors have agreed to forgo part of their awards under the Founder Long-Term Incentive Plan equal in Incentive Long-Term under the Founder their awards part of forgo to agreed have Directors The Founder on which will be settled liabilities due on the vesting of the awards, and Employees’ National Insurance their PAYE to value Founder liabilities each of the liabilities and National Insurance PAYE settlement of these After their behalf by the Company. million shares. of 22.9 the full award of issued with 12.1 will be instead million shares Directors members of the Group: On 4 March 2016 the Group acquired the remaining 50% of the units in the Hansteen Saltley Unit Trust for a net price of a net price for Saltley Unit Trust 50% of the units in the Hansteen the remaining acquired the Group 2016 On 4 March be completed. is yet to the acquisition for Initial accounting 100%. to its ownership million taking £9.3 On 12 February 2016 the Group acquired a further 0.9% of the units in Ashtenne Industrial Fund Unit Trust for for Unit Trust Industrial Fund of the units in Ashtenne a further 0.9% acquired the Group 2016 On 12 February 82.8%. to interest million taking its total of £2.5 consideration 32. Events after the balance sheet date sheet after the balance 32. Events to May 2016 will be payable on 19 per share of 3.15p 2015 of the year ended 31 dividend in respect December A second on 21 April 2016. on the register shareholders Post-employment benefits Post-employment Hansteen Saltley Unit Trust Apia Regional Office Fund Ashtenne Industrial Fund Limited Partnership Treforest UnitTreforest Trust Hansteen UK Industrial Property II Limited Partnership Notes to the financial statementscontinued
33. Related-party transactions continued A summary of the transactions with the subsidiaries is as follows:
Company Company 2015 2014 £m £m Interest-bearing loans made to subsidiaries 32.2 68.7 Interest-bearing loans repaid by subsidiaries (1.6) (6.8) Interest bearing loans made by subsidiaries (1.8) (11.7) Interest-bearing loans repaid to subsidiaries 16.4 19.1 Interest-free loans made to subsidiaries – 5.4 Interest-free loans repaid by subsidiaries (32.2) (25.0) Interest-free loans made by subsidiaries (0.9) – Interest income received in respect of interest-bearing loans 2.4 2.0 Interest paid in respect of interest-bearing loans (4.8) (4.9) Management fees charged to the Company 1.2 (1.6)
The balances outstanding at the year end from transactions with subsidiaries are as follows: Company Company 2015 2014 £m £m Amounts due from subsidiaries included in trade and other receivables 106.0 125.2 Amounts due to subsidiaries included in trade and other payables (98.5) (118.1) 7.5 7.1
34. Financial instruments The table below sets out the categorisation of the financial instruments held by the Group at 31 December 2015. Where the financial instruments are held at fair value the valuation level indicates the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety. Group Group Company Company Valuation 2015 2014 2015 2014 level £m £m £m £m Financial assets Designated as held for trading Currency options 2 9.8 5.6 9.8 5.6 Loans and receivables Trade and other receivables 16.5 18.2 106.6 125.4 Cash and cash deposits 63.4 110.3 43.4 75.5 79.9 128.5 150.0 200.9 89.7 134.1 159.8 206.5 Financial liabilities Designated as held for trading Interest rate swaps 2 (5.2) (5.7) – – Convertible bond derivative 3 – – (36.0) (21.4) (5.2) (5.7) (36.0) (21.4) At fair value through profit and loss Convertible bond 1 (107.5) (96.3) – –
At amortised cost Obligations under finance leases (2.4) (2.7) – – Borrowings (428.7) (427.5) (77.5) – (431.1) (430.2) (77.5) – Other financial liabilities Payables and accruals (32.0) (25.9) (105.8) (120.8) (575.8) (558.1) (219.3) (142.2)
96 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 97 £m £m 2.1 2.7 2014 2014 (3.9) (0.2) 96.3 Group Group (18.4) (25.5) (53.9) 397.8 397.8 427.5 418.9 968.1 676.0 344.8 41.1% (110.3) (284.5) 58.8% £m £m 2.3 2.4 2015 2015 (4.4) (0.2) 44.9 Group Group 84.0 (19.8) (63.4) (63.4) 107.5 (34.0) 397.8 428.7 441.2 441.2 806.2 54.7% 41.2% 1,071.5 Annual Report and Accounts 2015 Accounts Report and Annual PLC Hansteen Holdings Holdings Hansteen Net debt to value ratio Cash and cash equivalents debtNet Equity attributable to equity holders of the parent Net debt to equity ratio Carrying value of investment and trading properties Amortisation of bank loan fees Repayments of obligations under finance leases Foreign exchange movements recognised in the income statement New bank loans raised of expenses) (net Bank loans repaid Other Foreign exchange movements recognised in equity Convertible bond mark-to-market bond Convertible The Group’s management reports quarterly to the Board and bi-annually to the Audit Committee, an independent body Committee, the Audit and bi-annually to the Board to quarterly management reports The Group’s risk exposures. mitigate to risks and policies implemented that monitors The Group seeks to minimise the effects of these risks by using derivative financial instruments to economically hedge economically to financial instruments of these risks by using derivative minimise the effects seeks to The Group of by the Board policies approved by the Group’s is governed The use of financial derivatives these risk exposures. basis. and management on a continuous by the Board limits is reviewed with policies and exposure Compliance Directors. for speculative financial instruments, in financial instruments, including derivative or trade into does not enter The Group purposes. Financial risk management objectives reports risk internal through of the Group to the operations relating and manages the financial risks monitors The Group risk, risk (including currency These and magnitude of risks. risks include market by degree which analyse exposures risk and liquidity risk. credit risk), risk and price rate interest Net debt at beginning of year Cash flow Net (increase)/decrease in cash and cash equivalents Obligations under finance leases Reconciliation of movement in net debt in the year in net debt in the of movement Reconciliation Net debt to equity ratio Net debt to equity The Group’s management reviews the capital structure on a semi-annual basis in conjunction with the Board. As part of the Board. with on a semi-annual basis in conjunction structure the capital management reviews The Group’s and debt. with each class of capital and the risks associated capital of cost the management considers this review, The Group is not subject to externally imposed capital requirements. imposed capital externally is not subject to The Group Capital risk management Capital while as a going concern continue be able to will entities that in the Group ensure to manages its capital The Group of structure The capital of the debt and equity balance. the optimisation through stakeholders to maximising the return cash equivalents cash and leases, under finance the obligations of debt, includes which consists the borrowings, the Group all as earnings, and retained reserves issued capital, comprising parent, equity holders of the to and equity attributable sheet. disclosed in the balance Convertible bond bond Convertible Borrowings Notes to the financial statementscontinued
34. Financial instruments continued Market risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including: ›› interest rate swaps and caps to mitigate the risk of rising interest rates; and ›› forward foreign exchange contracts and currency options to hedge the exchange rate risk arising on translation of the Group’s investment in foreign operations which have the euro as their functional currency.
Foreign currency risk management The Group’s exposure to foreign currency arises from the fact that there are foreign operations which transact business denominated in euro, with the translation of the local trading performance and local net asset to sterling for each financial period and at each balance sheet date giving rise to an exposure to fluctuations in the sterling: euro exchange rate. The Group’s approach to managing this exposure is to fund investments in euro-denominated operations with equity that is partly hedged by forward currency options to limit the overall exposure of the Group.
The carrying amounts of the Group’s foreign currency denominated financial instruments at the reporting date are as follows. The carrying amount of the Group’s non-financial instruments in euro-denominated operations is also presented.
GBP EUR Total 2015 £m £m £m Financial instruments (59.9) (446.9) (506.8) Less principal amount of currency options – (245.1) (245.1) (59.9) (692.0) (751.9) Non-financial instruments 454.6 844.3 1,298.9 Net exposure 394.7 152.3 547.0
GBP EUR Total 2014 £m £m £m Financial instruments 40.6 (479.7) (439.1) Less principal amount of currency options – (220.8) (220.8) 40.6 (700.5) (659.9) Non-financial instruments 273.3 830.3 1,103.6 Net exposure 313.9 129.8 443.7
Foreign currency sensitivity analysis The Group is exposed to the euro through its operations in Belgium, France, Germany and the Netherlands. At 31 December 2015 the net assets of the Group were £806.7 million (2014: £676.4 million) of which £401.2 million were denominated in euro (2014: £348.8 million). At 31 December 2015 the Group had currency options in place to buy £231.5 million for €317.5 million.
The table below shows the impact of a 10% strengthening or weakening of sterling against the euro in relation to financial instruments alone.
Group Group Company Company 2015 2014 2015 2014 £m £m £m £m Increase foreign exchange rates by 10% Increase in profit before tax 15.2 10.3 23.1 9.2 Increase in other comprehensive income 42.4 36.1 – – Decrease foreign exchange rates by 10% Decrease in profit before tax 10.7 (7.2) 1.0 (5.9) Decrease in other comprehensive income (51.8) (44.2) – –
Interest rate risk management The Group is exposed to interest rate risk as entities in the Group borrow funds at floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts and interest rate cap contracts.
98 Hansteen Holdings PLC Annual Report and Accounts 2015 Strategic report Governance Financial statements 99 £m 2014 (3.6) (0.4) Company £m 0.6 2015 (0.4) Company £m 9.6 2014 (7.5) Group Annual Report and Accounts 2015 Accounts Report and Annual £m Increase/(decrease) in profit before tax: 3.0 2015 (2.7) Group PLC Hansteen Holdings Holdings Hansteen Liquidity risk management short, the Group’s which monitors of Directors, with the Board liquidity risk management rests for responsibility Ultimate manages liquidity basis. The Group on a regular funding and liquidity management requirements medium and long-term was value property the net debt to and banking facilities. 2015 reserves As at 31risk by maintaining adequate December against the not secured that were properties and trading 41.2% had £34.3 million of investment and the Group borrowings. Group’s Cash deposits are held at banks with high credit ratings assigned by international credit rating agencies. rating credit assigned by international ratings held at banks with high credit deposits are Cash Other receivables consist principally of tax and VAT receivables. These items do not give rise to significant credit risk. credit significant rise to do not give These items receivables. principally of tax and VAT consist Other receivables Potential customers are evaluated for creditworthiness and where necessary collateral is secured. There is no There is secured. collateral necessary and where creditworthiness for evaluated are customers Potential has a the Group as business segment or company either geographical to risk within the portfolio credit of concentration roll. rent 1%) of the gross than 1% (2014: more for accounting customer base with no one customer diverse spread well The Group’s maximum exposure to credit risk is £79.9 million (2014: £128.5 million) comprising trade and other receivables and other receivables trade comprising million) £128.5 (2014: million risk is £79.9 credit to maximum exposure The Group’s million of £7.5 receivables its trade risk is attributable primarily to principal credit deposits. The Group’s and cash and cash and both the current to relative is low balance The tenants. from due principally of rents which consist million) £7.8 (2014: the Company. and net assets of the Group Credit risk management Credit to loss in a financial resulting obligations will default on its contractual the risk that a counterparty to risk refers Credit the Group. Interest rate swap and cap contracts and cap swap rate Interest interest rate and floating fixed between the difference exchange to agrees the Group contracts, swap rate Under interest its has limited the Group contracts, cap rate notional principal amounts. Under interest on agreed amounts calculated to enable the Group Such contracts on its borrowings. payable interest by capping rates in interest increases to exposure on exposures cash flow debt held and the rate of issued fixed on the fair value rates interest the risk of changing mitigate debt held. rate the issued variable There would have been no effect on amounts recognised directly in equity. directly recognised on amounts effect been no have would There Increase interest rates by 1% Decrease interest rates by 1% Interest rate sensitivity analysis rate Interest and both derivatives for rates interest to exposure based on the been determined have The sensitivity analyses below during the year. instruments non-derivative Notes to the financial statementscontinued
34. Financial instruments continued Liquidity and interest risk tables The following table details the Group’s remaining contractual maturity for its non-derivative and derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest dates on which the Group can be required to pay. The table includes both interest and principal cash flows. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the interest and foreign currency rates as at the reporting date.
Less than One to two Two to five More than one year years years five years Total Group £m £m £m £m £m 2015 Borrowings (7.8) (66.9) (464.6) (1.7) (541.0) Interest on borrowings (14.3) (13.2) (12.7) (0.2) (40.4) Obligations under finance leases (0.2) (0.2) (0.7) (1.6) (2.7) Interest rate swaps (1.7) (1.5) (1.5) – (4.7) Payables and accruals (32.0) – – – (32.0) (56.0) (81.8) (479.5) (3.5) (620.8) 2014 Borrowings (30.9) (14.3) (482.3) (2.6) (530.1) Interest on borrowings (15.8) (15.0) (27.1) (0.3) (58.2) Obligations under finance leases (0.2) (0.2) (0.9) (1.8) (3.1) Interest rate swaps (1.8) (1.8) (3.3) – (6.9) Payables and accruals (25.9) – – – (25.9) (74.6) (31.3) (513.6) (4.7) (624.2)
Less than One to two Two to five More than one year years years five years Total Company £m £m £m £m £m 2015 Convertible bond derivative – – (36.0) – (36.0) Payables and accruals (105.8) – – – (105.8) (105.8) – (36.0) – (141.8) 2014 Convertible bond derivative – – (21.4) – (21.4) Payables and accruals (120.8) – – – (120.8) (120.8) – (21.4) – (142.2)
100 Hansteen Holdings PLC Annual Report and Accounts 2015 Officers and advisers
Company Secretary Property valuers Principal bankers Teresa Jane Furmston Jones Lang LaSalle FGH Bank N.V. 30 Warwick Street Liedseveer 50 Registered office London W1B 5NH Postbus 2244 1st Floor, Pegasus House 3500 GE Utrecht 37-43 Sackville Street Knight Frank LLP The Netherlands London W1S 3DL 1 Marsden Street Registered in England & Manchester M2 1HW The Royal Bank of Scotland PLC Wales No. 5605371 Corporate Banking Cushman & Wakefield 3rd Floor Stockbrokers 125 Old Broad Street 2 Whitehall Quay Peel Hunt LLP London EC2N 1AR Leeds LS1 4HR Moor House 120 London Wall CBRE Limited Landesbank Hessen-Thüringen London EC2Y 5ET Henrietta House Immobilienfinanzierung Südwest Henrietta Place Girozentrale Auditors London W1G 0NB Main Tower Deloitte LLP Neue Mainzer Straße 52-58 Abbots House DTZ 60311 Frankfurt am Main Abbey Street Parnassusweg 803 Germany Reading RG1 3BD 1082 LZ Amsterdam HSBC Bank PLC Solicitors The Netherlands 8 Canada Square Jones Day LLP London E14 5HQ 21 Tudor Street London EC4Y 0DJ ING Commercial Banking ING Real Estate Finance DLA Piper Scotland LLP P.O. Box 1800, 1000 BV Rutland Square Amsterdam Edinburgh EH1 2AA Bijlmerplein 888, 1102 MG Amsterdam Registrars The Netherlands Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Financial calendar
Ex-Dividend Date 21 April 2016 Record Date 22 April 2016 Posting Dividend 18 May 2016 Dividend Payable 19 May 2016 Annual General Meeting 6 June 2016
Hansteen Holdings PLC Annual Report and Accounts 2015 101 Hansteen Holdings PLC
2015 Report Annual and Accounts
Hansteen Holdings PLC First Floor, Pegasus House 37-43 Sackville St, London W1S 3DL 020 7408 7000 www.hansteen.co.uk