Half Year Results

 Date of issue:  1st July 2014

ST. MODWEN PROPERTIES PLC

("St. Modwen", the "Company" or the "Group")

Half Year Results for the six months to 31st May 2014

 STRATEGY FOR GROWTH GENERATES 32% INCREASE IN PROFIT BEFORE ALL TAX TO £51.3M

St. Modwen Properties PLC (LSE: SMP), the UK's leading regeneration specialist, announces its half year results for the six months to 31st May 2014.

Financial Highlights - excellent increased returns

- 32% increase in profit before all tax to £51.3m (H1 2013: £38.8m)

- 6% increase in shareholders' equity NAV per share to 294.2p (Nov 2013: 278.8p per share) and EPRA NAV up 6% to 314.4p per share (Nov 2013: 297.7p per share)

- Realised property profits of £19.1m (H1 2013: £16.1m)

- Net valuation gain of £35m (H1 2013: £23m) comprising added value gains generated by the Company of £16m (H1 2013: £18m) and market driven valuation gains of £19m (H1 2013: £5m)

- Launch of £100m convertible bond in February 2014 and refinancing of debt portfolio, extending average life to 4.2 years (Nov 2013: 2.5 years) and reducing weighted average cost of debt to 5.1% (Nov 2013: 5.6%)

- 10% increase in interim dividend to 1.463p per share (H1 2013: 1.33p per share)

Operational Highlights - major projects gathering momentum alongside growth in commercial property sector

- Increasing commercial development pipeline across the UK reflecting the gradual, overall improvement of this market

- Good progress made across all major projects:

o New Covent Garden Market - submission of a planning application in May 2014 for the redevelopment of the New Covent Garden Market site

o Swansea University, Bay Campus - next phase of the £450m campus now agreed with Swansea University, comprising an additional 545 student apartments. Delivery of the first phase progressing extremely well and is on target for the scheduled completion in September 2015

o Longbridge, Birmingham - a resolution to grant planning permission was secured on 26th June 2014 for the second phase of the Town Centre, comprising a 150,000 sq ft Marks & Spencer full-offer store and 45,000 sq ft of additional retail accommodation

o London residential sites - excellent sales rates continue to be achieved for both the Millbrook Park (RAF Mill Hill) and St. Andrew's Park (RAF Uxbridge) sites, demonstrating the favourable conditions in the London residential market.

- Positive outlook for residential land activity and good sales rates being achieved for both St. Modwen Homes and the Persimmon joint venture, with increasing demand at a growing number of sales outlets.

Bill Oliver, Chief Executive of St. Modwen, commented:

"Against a backdrop of improving optimism across the country, we are prudently increasing our pipeline of development activities and actively pursuing new opportunities to meet growing investor interest and occupier demand.

"Whilst we are still some way from a wholesale UK recovery, confidence is starting to return to the regions. Here our traditional engine of growth, commercial development, is beginning to gain momentum with over 1m sq ft of regional commercial projects in progress. This combined with our improving valuations particularly in the residential sector, underpin our confidence for continued outperformance as we work towards the full year."

Enquiries:

[email protected]

As the Group utilises a number of joint venture arrangements, additional disclosures are provided to give a better understanding of our business. These include information on the Group including its share of joint ventures together with non-statutory measures such as trading profit and profit before all tax. A full reconciliation of such measures is provided in Note 2 to the Condensed Financial Statements.

A presentation for analysts and investors will be held at 9.30am today at the offices of

FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC1A 4HD. If you would like to attend, please contact Kirsty Allan at FTI on +44 (0)20 3727 1000

or [email protected] 

Alternatively, the dial-in details are as follows:

HALF YEAR REVIEW

Our business model is focused on the long-term, sustainable development of our UK-wide land bank and in both flat and buoyant markets, we seek to add value at every stage of the development life cycle. In recent years we have concentrated on driving the ongoing performance of our existing assets whilst progressing them through the planning process but, with occupier markets starting to show signs of improvement, we have now turned our attention to commencing new development in order to capitalise on this demand.

The recovery started in London and the South East and it is now positive to see it extending to the regions. I am pleased, therefore, to announce that our strategy for growth over the last few years has been reflected in an excellent set of half year results that have led to an increase in shareholders' equity NAV per share of 6% to 294.2p (Nov 2013: 278.8p per share).

Our continued success not only demonstrates the benefits of our long-term sustainable business model but also serves as a firm indication of the upturn in the UK residential and commercial property markets. This improvement is illustrated clearly by the market driven valuation gains in our commercial and residential assets of £19m (H1 2013: £5m). We have continued to add value to our portfolio as a result of our asset management capabilities and our ability to secure higher value planning permissions which has generated added value gains of £16m (H1 2013: £18m).

Whilst we are still some way from a wholesale UK recovery, confidence is starting to return to the regions. Here, our traditional engine of growth is beginning to gain momentum, with over 1m sq ft of regional commercial projects in progress.

Of our four major projects, two are regionally based: the development of Swansea University's £450m Bay Campus and the £1bn regeneration of Longbridge, Birmingham. Both projects are progressing well and illustrate the sorts of opportunities for large, profitable commercial development outside of London.

In the meantime, the property market within London continues to be extremely favourable. I am therefore very pleased to announce our half year results having achieved the important milestone of submitting the planning application for the redevelopment of the New Covent Garden Market site in Nine Elms, London. We are now working with the local authority and our other partners towards securing permission for the development of this landmark, multi-phased project and subject to planning, we anticipate starting on site in the first half of 2015.

Both our Persimmon joint venture and our St. Modwen Homes sites are experiencing excellent sales rates across the country and appetite for our residential land remains strong. Even accounting for the disposal of the Elephant & Castle Shopping Centre in November 2013, our portfolio of income producing assets continues to provide good returns with rental income increased to £18.5m (H1 2013: £18.2m) and occupancy levels slightly up on last year at 89% (H1 2013: 88%).

Finally, we are encouraged by the Chancellor's recent proposals to accelerate development of disused industrial sites in order to create 200,000 new homes per annum by 2020. Brownfield land is an area in which St. Modwen specialises and to have Government backing to prioritise this land for further development is a positive sign.

This excellent performance and the prospects for the full year have again given the Board the confidence to increase the Company's interim dividend by 10% to 1.463p per share. This will be paid on 3rd September 2014 to shareholders on the register at 8th August 2014.

PORTFOLIO

Our £1.2bn property portfolio comprises the following categories of assets:

· Commercial Land and Development

· Residential Land and Development

· Income Producing Properties

COMMERCIAL LAND AND DEVELOPMENT - Increasing pipeline of development opportunities

Having taken action early and positioned ourselves well during the downturn, our development programme is now growing and we are in a strong position to generate consistent and sustainable development returns. Key milestones for our major projects include:

New Covent Garden Market, Nine Elms, London - We have now submitted the revised planning application for the regeneration of the 57 acre New Covent Garden Market site. The largest proposed regeneration scheme in Nine Elms on the South Bank, this landmark, multi-phased project will secure the future of New Covent Garden Market, the UK's largest fruit, vegetable and flower market, through the development of new facilities. 

The development releases 20 acres of surplus land which will be transformed into a high quality residential neighbourhood benefitting from fantastic riverside views and comprising approximately 3,000 new homes, 135,000 sq ft of new office space and 100,000 sq ft of retail, leisure and new community facilities, including shops, cafes and restaurants.

The designs build on the planning permission already secured by the Covent Garden Market Authority in 2012. The proposals will provide over 500,000 sq ft of modern market facilities consolidated on one site for the 200 tenant businesses which employ over 2,500 people.

Subject to receipt of planning permission, development work on the new market is anticipated to commence in the first half of 2015.

Swansea University, Bay Campus - All of the 775,000 sq ft educational buildings and the 917 student apartments in the first phase of this £450m campus development project are now under construction and the scheme is well underway to welcome students in September 2015. A new Student Accommodation Development Agreement was signed with the University in June 2014 to deliver an additional £50m of new student residences and major new facilities. This brings the total amount of campus space under construction to around 1m sq ft, including 465,000 sq ft of world-leading research, innovation and education facilities and 1,462 new student apartments.

Longbridge, Birmingham - The regeneration of this 468 acre site continues to move ahead with almost 100% of the retail space in the first phase of the Town Centre now occupied or let. Works are nearing completion for the 30,000 sq ft specialist Construction Centre for Bournville College and in June 2014, we secured a resolution to grant planning permission for the second phase of the Town Centre which will include a 150,000 sq ft Marks & Spencer full-offer store and 45,000 sq ft of additional retail, plus car parking. We expect to start on site with the flagship Marks & Spencer store in the Autumn, with planned completion scheduled to enable trading by Christmas 2015. 

London residential sites - At Millbrook Park, Mill Hill, we have completed the sale of land for the development of 89 homes in the period to CALA Homes for £13m and anticipate the sale of a further five acre land parcel in the second half of the year. Construction of the new primary school at St. Andrew's Park, Uxbridge, is on track to welcome pupils in September this year and works to the new access road to the north of the site have recently commenced which will release land for the new hotel, theatre and care home. We are targeting the sale of a further three acres of land in the second half of the year for which five housebuilders have been shortlisted to submit bids.

Across our broader portfolio, we continue to make good progress on our development projects and have recently been selected by West Berkshire Council to redevelop a 25 acre industrial site in Newbury into a new mixed-use development comprising business, retail and residential accommodation. Additionally, occupational demand continues to increase across the UK and has given us the confidence to expand our development pipeline to over 1m sq ft. Project highlights include:

Energy - In April, we commenced generating power at our 30 acre Solar Park at the Baglan Bay site in South Wales, which is one of the sites acquired in 2009 as part of the 2,500 acre BP portfolio. The Park comprises 20,000 photovoltaic panels and is now generating electricity anticipated at 5m KwH per annum, sufficient to supply energy to more than 1,200 homes. It will provide an annual income in the region of £600,000. We continue to pursue a number of other energy-related opportunities to utilise our existing land bank of brownfield land.

Trentham Lakes, Stoke-on-Trent - In May, we secured planning consent to build a 310,000 sq ft distribution hub for Screwfix at our Trentham Lakes site in Stoke-on-Trent. This is an extension to Screwfix's existing 320,000 sq ft facility which we built in 2002 and will be constructed on an adjoining eight acres of land. The facility will then be sold to M&G Real Estate, the freeholders of Screwfix's existing facility, as part of the transaction.

Great Homer Street, Liverpool - This major regeneration project has planning consent for 200,000 sq ft of retail, including a 110,000 sq ft Sainsbury's store, 480 new homes and a new market. We anticipate starting on site with the first phase of this scheme, comprising the retail accommodation and improvements to public realm, in the second half of this year.

RESIDENTIAL LAND AND DEVELOPMENT - Ongoing improvement

Our residential activities are achieving excellent sales rates and an expanding pipeline of developments. We maximise opportunities in our residential land bank via three clear routes to market:

· Residential Land Sales - the development and sale of 'oven ready', predominantly brownfield, sites with viable implementable planning permissions in place

· Persimmon Joint Venture - maximising value through development with the backing of one of the UK's leading large housebuilders; and

· St. Modwen Homes - in-house development under our own brand, using our extensive housebuilding expertise to capture additional development profits.

Residential Land Sales

We continue to secure viable residential-led planning permissions across our portfolio and are experiencing a growing number of enquiries for our land from housebuilders eager to meet the increase in housing demand. In the first half of the year we agreed or/ completed seven land sales, representing 43 acres and £40m of value and are targeting further land sales in the second half representing circa 70 acres and circa £80m of value. 

Residential Development

In 2010, we took the initiative to broaden our exposure to the housebuilding sector by forming a joint venture with Persimmon and launching our own housebuilding brand in the form of St. Modwen Homes. These actions, in line with the improving residential market, have proven to be very successful in driving shareholder returns whilst tapping into our on-the-ground expertise in complex remediation and planning and making best use of our significant land bank. Help to Buy, a notable increase in consumer confidence, and a supportive mortgage market have undoubtedly helped the continued good housing sales rates which are growing in momentum across the country. We are on track to achieve and possibly exceed the sales targets we set at the start of the year.

Persimmon Joint Venture

Our joint venture with Persimmon is in full flow with all eight sites under the agreement performing well and 231 completions of homes secured in the first half of the year (H1 2013: 53). Of the 2,323 plots in the joint venture, all have the benefit of planning permission and 571 are now complete.

St. Modwen Homes

Our own housebuilding brand continues to achieve noteworthy success with strong customer interest and visitor levels leading to 121 completions in the period (H1 2013: 19).

St. Modwen Homes has eight sites under construction, of which five have been launched to the market for sale. An additional five sites have planning and will commence production for 2015.

Our overall sales position for both St. Modwen Homes and our joint venture with Persimmon in the period is shown in the table below:

*104 of these reservations relate to social housing and are expected to be delivered in 2015.

In the period, this area of the business generated £9m of profits (H1 2013: £2m).

INCOME PRODUCING PROPERTIES - Consistent income stream

The business confidence stemming from the improving economy is reflected in the increase in our net rental income of £18.5m (H1 2013: £18.2m) notwithstanding the sale of the Elephant & Castle Shopping Centre in November 2013 which had previously contributed £2m of net rent per annum.

Occupancy levels have increased slightly to 89% (H1 2013: 88%) whilst the average lease length is up at 5.1 years (H1 2013: 4.9 years) reflecting longer leases held at newly created investments, including Longbridge Town Centre.

In particular, our out of town/ edge of town retail properties are performing well with good footfall and steadily increasing demand from occupiers for space. This is largely due to the demographic of our sites which attract convenience shoppers, namely those who shop out of necessity rather than as a lifestyle pastime.

FINANCE

Our business model is based on core rental and other income covering the running costs of the business (property outgoings, overheads and interest). This provides firm foundations upon which we can add value to the portfolio through planning gain and robust asset management activities and, in turn, maximise development profits.

As we use a number of joint venture arrangements, the statutory financial statement disclosures do not always provide a straightforward way of understanding our business. To enable a better understanding, we have also provided information including the Group's share of joint ventures and a full reconciliation is provided in Note 2 to the Condensed Financial Statements.

Financial Performance

We have once again produced an exceptional set of half year results, achieving a 32% increase in profit before all tax to £51.3m (H1 2013: £38.8m).

The ongoing growth of the residential market and our increasing pipeline of commercial development underpinned this strong performance for the first six months of the year, with good potential for further growth. The first phase of the Town Centre at Longbridge, launched in August 2013, is generating annual rental income of £0.7m. This is expected to increase to £4m on completion of the Town Centre including the creation of the 150,000 sq ft pre-let to Marks & Spencer and 45,000 sq ft of additional retail for which we received a resolution to grant planning in June 2014. 

We aim to cover our recurring overhead and interest costs with revenue from our income producing portfolio. In the first half of the year, coverage of 88% was slightly lower than we would like but we expect this to improve in the second half of the year. This cost base also fully absorbs the cost of the housebuilding business, income from which is included in property profits. Were these costs to be excluded from the ratio calculation, the recurring costs of the business would be broadly matched by recurring income. Trading profit for the six months of £16.4m (H1 2013: £13.4m) is ahead of targets set at the start of the year.

Residential development is now gathering good momentum and experiencing strong and tangible returns. The high volume of reservations and completions should enable us to achieve our targets for the full year. 

Property Valuation Movements

There are two distinct parts to the property valuation movements: those movements resulting from activities that we undertake specifically to add value to our assets, and those resulting from changes in the overall property market. Jones Lang LaSalle provides this valuation split for us as part of the independent property valuations that they undertake every six months.

For the first six months of this year, in line with market movements, yields for our income producing portfolio have improved slightly with equivalent yields now at 9.0% (Nov 2013: 9.2%) and net initial at 7.7% (Nov 2013: 7.8%).

The market driven valuation increase for income producing properties and commercial land is £8m and our residential land portfolio has seen market increases in value of £11m. When these figures are combined with the £16m gain we have generated through our own activities (principally due to residential planning) we have achieved overall valuation gains of £35m (H1 2013: £23m).

Financial Results

Profit before all tax has increased by 32% to £51.3m. This is an excellent result, showing continued strong growth beyond that achieved in the first half of 2013 of £38.8m. Profit before all tax is also stated after movements in the market value of our interest rate derivatives (hedges and swaps). The valuations are based on the financial market's forward prediction curves for interest rates. These remained relatively constant during the reporting period, producing a credit broadly in line with payments made.

After allowing for the above and tax costs for both joint ventures and the Group, our profit after tax was £45.2m (H1 2013: £34.3m).

Balance Sheet

The assets and liabilities of the New Covent Garden Market contract will only be recognised on our Balance Sheet once detailed planning consent is received and the contract becomes fully unconditional. This is currently expected to be within H1 2015.

Net Assets (NAV)

At the period end, the shareholders' equity value of net assets was £650m or 294.2p per share (Nov 2013: £614m or 278.8p per share). In line with industry best practice we also report net assets per share using EPRA (European Public Real Estate Association) methodology*. In the period our diluted EPRA NAV increased 6% to 314.4p per share (Nov 2013: 297.7p per share).

*Note: as a development business many of the EPRA metrics are inappropriate as they are geared to property investors.

Funding

Our ongoing cash management and financing initiatives have created substantial headroom in our banking facilities, with £174m of undrawn facilities in place.

Since the year end, we substantially restructured our debt portfolio in line with our strategy to increase the diversity and longevity of the funding base while reducing its cost.

· In February, we successfully launched an offering of £100m of unsecured guaranteed convertible bonds due 2019. The net proceeds of the offering were used to repay existing debt.

· A new seven year £50m revolving credit facility with Santander has replaced the previous £30m facility which was due to expire in January 2016.

· A new four year £99m revolving credit facility with Barclays on improved terms replaces the previous £84m Barclays facility that was due to expire in September 2015.

· A new five year £125m revolving credit facility with the Royal Bank of Scotland on improved terms replaces the previous £95m facility which was due to expire in November 2015.

· In view of the net addition of £165m of facilities we have cancelled the Lloyds £100m facility that was due to expire in November 2014, restructuring the interest rate hedging across the new debt lines.

Overall this has extended the weighted average facility maturity to 4.2 years (Nov 2013: 2.5 years), and reduced the weighted average interest rate to 5.1% (Nov 2013: 5.6%). The benefits of the increased value, term and diversity of facilities at a reduced cost should accrue to the business in the coming years.

Gearing levels have been maintained at 55% (Nov 2013: 54%) while our see through loan-to-value ratio (including our share of joint venture properties and debts) is 35% (Nov 2013: 33%). Debt levels stand at £368m (Nov 2013: £341m) and we continue to assess all options to increase further the diversity of our funding sources to ensure that we are delivering best value for both the business and our shareholders.

Principal Risks and Uncertainties

The key risks which could have a material impact on the Group's performance, together with the corresponding mitigating actions, are set out on pages 46 to 49 of the Annual Report for the year ended 30th November 2013, which is available at www.stmodwen.co.uk.

These risks comprise: (1) uncertainty in the economic and market environment which increases the risk attached to property valuation and development returns; (2) risks attached to the availability of funding in the property market and the management of cash flow fluctuations; (3) management of construction and development; (4) regulatory and compliance risk; and (5) recruiting, maintaining and motivating highly skilled staff. 

These risks are expected to continue to remain relevant for the second half of the financial year.

OUTLOOK

London and the South East continues to perform well and, having submitted the planning application for New Covent Garden Market, we are now a significant step closer towards achieving unconditional status on this transaction during 2015.

It is extremely encouraging to see renewed demand from occupiers and investors in the regional markets throughout the UK. Combined with an improving residential market, we expect this to lead to a sustained ability to generate future improvement in the net asset value of the Group and deliver good returns for the business and our shareholders alike.

Bill Oliver Michael Dunn

Chief Executive Group Finance Director

30th June 2014

Group Income Statement

for the period to 31st May 2014

Group Statement of Comprehensive Income

for the period to 31st May 2014

Group Balance Sheet

as at 31st May 2014

Group Statement of Changes in Equity

for the period to 31st May 2014

On 7th April 2014 the Group issued 1,000,000 ordinary shares of 10p each at par. The shares were allotted and issued to The St. Modwen Properties PLC Employee Share Trust to satisfy the exercise of awards made under the Company's share-based incentive arrangements.

On 1st March 2013 the Group completed a 'cash box' placing of 20,016,057 ordinary shares of 10p each at £2.45 per share. Net proceeds were £47.9m after share issue costs of which the £2.0m nominal value of the shares was credited to share capital and the balance to other reserves.

Group Cash Flow Statement

for the period to 31st May 2014

Notes to the Condensed Financial Statements

The annual financial statements of St. Modwen Properties PLC are prepared in accordance with IFRSs as issued by the International Accounting Standards Board, as adopted by the European Union (EU) and applied in accordance with the provisions of the Companies Act 2006. The condensed financial statements included in this half year report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the EU.

The same accounting policies and methods of computation are followed in the condensed financial statements as applied in the Group's latest annual audited financial statements. The following standards have been adopted in the period:

· IFRS 13 Fair Value Measurement: This standard applies to IFRSs that require or permit fair value measurements or disclosures and provides a single IFRS framework for measuring fair value and requires disclosures about fair value measurement. The adoption of this standard has had no impact on the measurement of fair value for the Group's assets and liabilities and no retrospective changes were required as a result of adopting this standard. Additional disclosures required by this standard are set out in note 7.

· IAS 19 (Revised 2011) Employee Benefits: No material impact on the Group's Condensed Financial Statements.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Half Year Report. The directors have considered these factors and reviews the financial position of the Group, including its joint ventures.

The review included an assessment of future funding requirements based on cash flow forecasts extending to 30th November 2014, valuation projections and the ability of the Group to meet covenants on existing borrowing facilities. The directors were satisfied that the forecasts and projections were based on realistic assumptions and that the sensitivities applied in reviewing downside scenarios were appropriate.

As described in the Half Year Report, there are no corporate or joint venture facilities that require renewal before November 2014.

Based on their assessment, the directors are of the opinion that the Group has adequate committed resources to fund its operations for the foreseable future and so determine that it remains appropriate for the condensed financial statements to be prepared on a going concern basis.

(a) Trading profit and profit before all tax

The non-statutory measures of trading profit and profit before all tax, which include the Group's share of joint ventures and associates, have been calculated as set out below:

(1) Stated before the deduction of net realisable valuation provisions of: Group £0.2m (period to 31st May 2013: £1.0m, year ended 30th November 2013: £1.7m); Joint ventures and associates £nil (period to 31st May 2013: £nil, year ended 30th November 2013: £nil). These items are reclassified to investment property revaluations together with negative goodwill arising on acquisitions as a result of fair value adjustments to property assets of £2.6m (period to 31st May 2013: £nil, year ended 30th November 2013: £nil).

(2) Stated before mark-to-market of derivatives and other non-cash items of: Group £5.1m (period to 31st May 2013: £1.6m, year ended 30th November 2013: £3.2m); Joint ventures and associates £nil (period to 31st May 2013: £0.1m, year ended 30th November 2013: £nil). These items are reclassified to other finance costs.

(3) Stated before mark-to-market of derivatives and other non-cash items of: Group £3.7m (period to 31st May 2013: £3.5m, year ended 30th November 2013: £8.0m); Joint ventures and associates £1.1m (period to 31st May 2013: £0.7m, year ended 30th November 2013: £2.1m). These items are reclassified to other finance income.

(4) Stated after inclusion of negative goodwill arising as a result of deferred tax on property revaluations included as part of fair value adjustments of £0.5m (period to 31st May 2013: £nil, year ended 30th November 2013: £nil).

(b) Property valuations

Property valuations, including, the Group's share of joint ventures and associates, have been calculated as set out below:

The split of property valuation gains between added value and market movements is based on an analysis of total property valuation movements provided by the Group's external valuer: Jones Lang LaSalle LLP, Chartered Surveyors.

 (c) Property portfolio

The property portfolio, including the Group's share of joint ventures and associates, is derived from the Balance Sheet as detailed below:

(1) Represents deductions for 'barter' properties, principally RAF Northolt as part of the Project MoDEL arrangements between VSM Estates Limited and the Ministry of Defence.

As at 31st May 2014 the Group had assets of £326.3m (31st May 2013: £238.1m, 30th November 2013: £228.6m) included within the Group's property portfolio (excluding joint ventures and associates) which were wholly owned, unencumbered and able to be pledged as security for the Group's debt facilities.

The Group's property portfolio, including share of joint ventures and associates can be split by category as detailed below:

(d) Movement in net debt

Movement in net debt as discussed in the Half Year Report is calculated as set out below:

(e) Trading cash flow

Trading cash flows are derived from the Group Cash Flow Statement as set out below:

(f) Group Balance Sheet

VSM Estates (Holdings) Limited and its subsidiary undertakings (VSM) are party to a series of contracts with the Ministry of Defence known as Project MoDEL. The property assets of VSM are subject to purchase on deferred terms and, to increase disclosure of the impact of these arrangements, the following additional split of the Group Balance Sheet showing the proportion attributable to VSM has been provided:

(g) Net assets per share

Net assets per share are calculated as set out below:

* Shares in issue exclude 490,349 shares held by the Company's Employee Benefit Trust (31st May 2013: 105,080 shares, 30th November 2013: 72,582 shares).

 (h) Gearing and loan-to-value

The following table shows the calculation of:

· gearing being the ratio of net debt to total equity; and

· loan-to-value (LTV) being the ratio of net debt to the property portfolio (representing amounts that could be used as security for that debt).

3. revenue and gross profit

The Group operates exclusively in the UK and all of its revenues derive from its portfolio of properties which the Group manages as one business. Therefore, the condensed financial statements represent the results and financial position of the Group's sole business segment.

Shares held by the Company's Employee Benefit Trust are excluded from the above calculations.

As the Group is principally a development business EPRA earnings per share on a basic and diluted basis are not provided. These calculations exclude development profits and would not provide a meaningful measure of the performance of the Group.