Half Yearly Report

For further information please contact:

Media enquiries:

McKay Securities PLC

Capital Access Group

Simon Perkins, Managing Director

Simon Courtenay

Giles Salmon, Finance Director

Harry Rippon

01189 502333

020 3763 3400

Details of the programme for the payment of the interim dividend are as follows:

Ex-dividend date 26th November 2015

Record date 27th November 2015

Interim dividend payment 7th January 2016

The Directors have declared an interim dividend of 2.7 pence per share, (2014: 2.7 pence per share), which will be paid as an ordinary dividend.

Profit before tax, adjusted to exclude unrealised movements in the value of the Group's property portfolio, net profit on the disposal of properties and non-cash items, increased by 33.8% to £3.96 million for the six month period to 30th September 2015 (30th September 2014: £2.96 million).

The independent valuation of the Group's property portfolio at 30th September 2015 totalled £398.63 million, resulting in a £26.36 million (7.1%) valuation surplus for the period (30th September 2014: £14.80 million/4.8%).

Net sale proceeds from the disposal of investment property, including a deferred payment of £0.25 million from a prior year sale, was £0.85 million, realising a £0.32 million surplus over book value.

The negative value of the Group's remaining interest rate hedging instruments reduced by £4.74 million over the period to £19.84 million (30th September 2014: negative £26.72 million).

With the inclusion of these items, profit before tax (IFRS) increased to £34.59 million (30th September 2014: £13.94 million).

Net asset value per share increased over the period by 12.9% to 263 pence (31st March 2015: 233 pence). Net asset value per share (EPRA) increased by 4.1% to 281 pence (31st March 2015: 270 pence).

The Board has declared an interim dividend of 2.7 pence per share (2014: 2.7 pence).

Overview

This has been a period of substantial progress on many fronts, arising from our strategic decision in early 2014 to take advantage of anticipated improvements in the office and industrial markets of the South East and London. The £86.71 million proceeds from the Capital Raising at that time have been successfully invested in new acquisitions and refurbishment projects or allocated to our development programme and the benefits are increasingly apparent.

The results reveal a 20.8% increase in rental income for the period, which was the main contributor to the 33.8% increase in adjusted profit before tax. Contracted rental income increased by 7.2% over the period to £21.97 million pa, and the potential future benefit of the growth strategy is highlighted by the scale of the £9.97 million pa portfolio reversion, which takes the estimated rental value (ERV) of the portfolio to £31.94 million pa. If this reversion were to be released in full, contracted rental income would increase by a further 45.4% which would have a material positive impact on future earnings.

Strong investor appetite in our markets, a bottleneck in the supply of good quality and new business space and consistent occupier demand continue to deliver growth in capital and rental values. Our portfolio valuation surplus of 7.1% (£26.36 million) and underlying rental growth of 4.6%, reflect the benefit of our enlarged, proactively managed portfolio in these market conditions.

In May 2015, we took advantage of the low interest rate environment to ensure appropriate funding of portfolio initiatives and re-structured loans with three of our existing lenders and a new long term lender. As a result, loan facilities have increased to £175.00 million with a longer expiry profile, swap cancellations have re-balanced our historic over-hedged position, and our cost of debt has reduced.

Market review

Within the office and industrial markets of London and the South East, the supply of new and Grade A floor space has continued to reduce and is at increasingly constrained levels. This looks set to continue for the foreseeable future as the number of viable refurbishment and redevelopment schemes remains limited. This constrained occupier choice is maintaining upward pressure on rental values across these markets, and particularly in central and outer London where significant uplifts in office rental values have been seen over the last twelve months.

Within our core South East office market, which now accounts for 46.3% of the portfolio by value, the supply of new and Grade A floor space has reduced by 15.2% over the last twelve months to 5.7 million sq ft; representing only 6.7% of the total office supply. The vacancy rate for new floor space is lower still at 1.9% (1.6 million sq ft), which has reduced by half over the last five years.

Named occupier demand for South East office floor space has remained healthy, with competitive occupational costs beginning to attract footloose occupiers from central London along the main transport corridors to the south and particularly to the west, where Crossrail is set to transform access in 2018/2019. At the end of September 2015, named demand totalled 4.2 million sq ft, which was 8.1% higher than March 2015 and 6.6% higher than September 2014. This sustained demand has led to lettings totalling 1.6 million sq ft so far this calendar year, which is 57.8% higher than at this stage last year. The majority of lettings continue to be for new or Grade A floor space, particularly in the sub 60,000 sq ft size band, putting further pressure on availability and occupier choice. This demand profile fits the vacancy in our portfolio and particularly our schemes under construction in Reading and Redhill.

In the City, conditions have also remained positive over the period. The supply of office space reduced to 5.3 million sq ft, equivalent to a vacancy rate of 5.2%; the lowest since 2001. For new and Grade A floor space, supply reduced to 1.9 million sq ft, equivalent to a vacancy rate of 1.9%. There has been a pick up in development as a response to this shortfall and 8.3 million sq ft is under construction. However, as a consequence of the lack of existing supply and robust demand, 42.4% of this is already pre-let. Take up so far this year totals 5.2 million sq ft and 2.5 million sq ft for new and Grade A space. Named demand in the City core remains at a healthy level of 4.4 million sq ft.

Acquisitions and disposals

At the end of the period, the portfolio consisted of 40 properties, valued at £398.63 million.

One acquisition was made early in the period at a cost of £11.33 million (yielding 6.6%). This has taken the total number of acquisitions since the January 2014 Capital Raising to eight, at a combined cost of £73.83 million. The property acquired consisted of a warehouse distribution facility (96,850 sq ft) at Brunel Way, Theale, with excellent access to Junction 12 of the M4 motorway. The property was constructed in 1984 with a low site density and large yard and is let to 2020 with a tenant only break clause in January 2018, subject to a twelve month rent penalty payable by the tenant if exercised. Should the tenant leave, the potential exists to either refurbish or redevelop the unit to increase the low passing rent of £0.75 million pa (£7.74psf) for this well located asset.

As noted at the year end, we continue to review the disposal of properties, and smaller properties in particular, where the potential for further gains are limited. As a result, we sold 20 Hosier Street, Reading at the end of September 2015 for £0.61 million, securing a net surplus over book value of 8.4%. The surplus from investment properties for the period, totalling £0.32 million, was enhanced by the receipt of a dilapidations payment in respect of Access House, Newbury sold at the end of last year.

Other disposals remain under consideration. These include our two adjoining properties in Blackfriars Road, London, SE1 where the potential exists to capture the significant uplift in value achieved when the comprehensive refurbishment was pre-let in 2012. Agents have been instructed and we will update the market in due course if a sale is achieved.

Leasing activity

The portfolio ERV (net of ground rents) increased by 5.8% overall to £31.94 million pa over the period. On a like for like basis (excluding development properties), the ERV increased by 4.8% overall (IPD Monthly Index: 2.4%), by 5.4% for South East offices (IPD: 4.9%), by 8.7% for London offices (IPD: 6.5%) and by 1.4% for South East Industrials (IPD: 3.5%).

Contracted rental income (net) increased by 7.2% to £21.97 million pa, and there is potential to realise further increases from the portfolio reversion of £9.98 million pa. This consists of existing void properties with an ERV of £2.34 million pa, three development properties with an ERV of £5.69 million pa, and potential rental uplifts of £1.95 million pa at rent review or lease expiry.

Over the period, 24 market lettings were achieved with a combined contracted rental value of £1.37 million pa, which was 5.8% ahead of March 2015 ERVs. These were achieved across the portfolio, with occupier demand most apparent for good quality refurbished space in established centres. Quoting rents for our vacant floor space at the end of the period were moving up.

At lease break or expiry, twenty out of thirty two tenants were retained. This maintained a high retention rate of 62.5% and secured rents totalling £0.80 million pa, generally in line with ERVs and 1% ahead of the rent previously passing. After taking this leasing activity into account, portfolio occupancy at the end of the period increased from 91.2% to 92.7%, and from 73.2% to 74.8% with inclusion of the three development projects.

Development programme

Good progress was made over the period with the three speculative development projects, which represent a combined ERV of £5.69 million pa of the total portfolio reversion.

In Reading, works at 9 Greyfriars Road remain on programme, with completion in spring 2016. The comprehensive refurbishment of this 1980's office building will deliver Grade A space and enhance its potential to benefit from close proximity to the recently upgraded railway station and the improving rental values in central Reading generally.

Completion of our 48,000 sq ft office scheme in central Redhill, being marketed as Prospero, remains on programme for mid 2016, and is attracting interest from local companies and those looking to locate out of London. The vacancy rate in Redhill for new and Grade A floor space remains below 5%.

At 30 Lombard Street, EC3 our selected contractor has carried out strip out works and demolition is due to commence on completion of final approvals. The existing 35,820 sq ft 1960's building is to be replaced with a striking, high quality office building of 58,000 sq ft in keeping with this prime, City location programmed for completion in mid 2018. Letting agents have been appointed.

Refurbishment projects

The conversion of Strawberry Hill House, Newbury from office use to medical centre has progressed well over the period. The works, and completion of the pre-let to two local practices on a 25 year Government backed lease, are programmed for spring 2016, doubling the previous office rental to £0.25 million pa.

This project was identified at the time of the Capital Raising along with the comprehensive office refurbishment of 66 Wilson Street, London, EC2, 329 Bracknell, and Switchback Office Park, Maidenhead. These projects all completed last year and Wilson Street was let as a whole in late 2014. Over the period, contracted rental income from Bracknell and Maidenhead increased by 29.6% to £0.89 million pa, and the combined ERV increased by 20.7% to £1.49 million pa. Occupier demand and higher rental values at Bracknell have justified further upgrading works to vacant suites on the second floor which will complete shortly and good interest is being shown in the remaining available space. At Maidenhead, there is good interest in Unit 6 (4,519 sq ft) which was the last of the units recently upgraded. Refurbishment of the final unit (8,640 sq ft) is now under consideration.

Elsewhere, refurbishment of the fifth floor (5,070 sq ft) at Portsoken House, London, EC3 completed over the period and looks set to move rental values forward in this prominent building that is benefitting from the increasing popularity of this location. Upgrading works to the reception and common parts are also planned to complement this further.

At The Mille, Brentford and 1 Crown Square, Woking, improvements to internal and external common areas and vacant floor space anticipated on acquisition last year are due to commence shortly. These properties have been integrated into the portfolio and now need upgrading to achieve their full rental potential.

Valuation

The independent valuation of the Group's property portfolio at 30th September 2015 totalled £398.63 million, resulting in a 7.1% (£26.36 million) surplus for the period. This outperformed the IPD Monthly Index surplus of 4.3%. On a sector basis, the valuation surplus for South East offices was 8.6% (IPD: 7.6%), London offices 9.6% (IPD: 8.6%) and South East Industrials 6.4% (IPD: 7.0%). The total portfolio return was 9.6% (IPD: 7.2%).

The initial yield of the portfolio was 4.5% (March 2015: 4.8%), increasing to 5.2% (March 2015: 5.5%) on the expiry of letting incentives. At ERV, the reversionary yield was 7.6% (March 2015: 8.1%) and the equivalent yield was 6.4% (March 2015: 6.6%). Contributing to the gain was a 4.8% increase in like for like rental values excluding development projects.

The 7.1% valuation surplus for the period compares with 4.8% for the first half of last year and 9.0% for the second half. Lower growth for this half year, which we anticipated at the end of last year, is mainly due to the slowing pace of yield compression. This puts greater emphasis on the importance of development and active management to capture improving market rental values.

This has proved to be the case over the period, with strong valuation gains achieved where improvement works have positioned buildings to secure rental growth, and where the quality of our assets provide scope to realise gains at forthcoming rent reviews.

Finance

Net asset value increased by £29.44 million to £244.93 million over the period and net asset value per share increased by 12.9% to 263 pence. The main contributor to this increase was the valuation surplus of £26.36 million. This was enhanced by a positive movement of £4.74 million in the negative value of interest rate hedging instruments, after incurring £13.16 million of swap cancellation costs referred to below.

EPRA net asset value per share, which excludes the negative value of hedging instruments, increased by 4.1% to 281 pence since 31st March 2015 (270 pence) and by 9.8% since the refinancing of debt facilities announced on 11th May 2015 (256 pence). At that time, the Group's loan facilities were increased by £20.00 million to £175.00 million. Of this increased amount, £55.00 million was secured on a 15 year term with a new lender and the remainder provided by three of the Group's existing clearing banks. The new facilities extended the weighted average length of debt from 1.6 years to 9.1 years and have reduced the cost of debt over the period to 4.4% (30th September 2014: 6.6%).

As part of the refinancing, the notional value of the Group's hedging instruments was reduced from £80.00 million to £45.00 million at a cost of £13.16 million; equivalent to a reduction in EPRA NAV per share as at 31st March 2015 of 14.3 pence to 256 pence. The full cost was offset to a degree by a lender contribution, resulting in EPRA NNNAV increasing on the same basis by 2.6 pence to 233 pence.

Adjusted profit before tax of £3.96 million was £1.00 million higher than the corresponding period last year. This was primarily due to income from recent acquisitions and letting activity in the 12 months since September 2014, contributing to gross rental income increasing by 20.8% (£1.75 million) to £10.17 million. Non recoverable property costs of £1.25 million were similar to the corresponding period last year.

Administration costs for the period increased by £0.88 million to £3.00 million, due to a combination of increased staffing levels and higher costs generally associated with running an enlarged business.

Interest payable for the period reduced by £0.10 million from the corresponding period last year to £2.27 million, despite drawn debt increasing from £93.50 million to £132.00 million. The lower cost reflects the benefit of the loan refinancing earlier in the period and an increase in interest capitalised as the development programme accelerates. With the new £55.00 million fixed interest loan facility and the reduced level of £45.00 million of interest rate hedging instruments, up to £100.00 million of the Group's debt is on fixed rates. The floating rate for debt drawn over this level is currently lower than fixed rates, resulting in a reduction in the average cost of debt.

The ratio of drawn debt to portfolio value (LTV) was 33.1% (30th September 2014: 29.1%), and the gearing ratio to shareholders' funds, adjusted in accordance with banking covenants, was 49.9% (30th September 2014: 42.0%). Compliance has been maintained with all covenants over the period.

Dividend

The Board is pleased to declare an interim divided of 2.7 pence per share, which maintains the level of dividend paid for the same period last year. This will be paid as an ordinary dividend on 7th January 2016.

Future prospects

Although our London and South East markets have been in recovery for a number of years, the outlook remains positive. This is based on the constrained supply of new and Grade A stock and consistent levels of occupier demand. With continued economic growth, this encouraging balance looks set to be maintained, supporting the release of significant potential from the portfolio and in particular from our development programme of prime buildings.

Management remains focused on these priorities and the continued delivery of our strategy to release this potential.

D.O. Thomas

Chairman

17th November 2015

CONSOLIDATED PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

-----------------------------------------------------------------------------------------------------------

6 months

6 months

12 months

to 30th

to 30th

to 31st 

September 

September

March

2015 

2014

2015

(Unaudited) 

(Unaudited)

(Audited)

Notes

£'000

£'000

£'000 

Gross rents and service charges receivable

11,695

10,470 

21,409

Direct property outgoings

(2,776)

(3,243)

(6,487) 

---------- 

-------- 

---------

Net rental income from investment properties

3

8,919 

7,227 

 14,922 

Administration costs

(2,996)

(2,111)

(5,439)

---------- 

-------- 

---------

Operating profit before gains on investment properties

5,923 

5,116 

9,483

Profit on disposal of investment properties

315 

142 

679

Revaluation of investment properties

6

25,885 

14,498 

42,097

---------- 

------- 

---------

Operating profit

32,123 

19,756 

52,259

Net finance costs

- finance costs

5

(2,276)

(6,541)

(19,802) 

- finance income

5

4,746 

10 

32

Profit on disposal of associated undertaking

-

712 

793

---------- 

---------- 

----------- 

Profit before taxation

34,593 

13,937 

 33,282

Taxation

-

- 

-

---------- 

--------- 

----------

Profit for the period

 34,593 

13,937 

 33,282 

Other comprehensive income:

Items that will not be reclassified subsequently to profit or loss

Actuarial movement on defined benefit pension scheme

-

- 

(493)

Other

88 

- 

- 

---------- 

-------- 

---------

Total comprehensive income for the period

34,681 

13,937 

 32,789 

---------- 

-------- 

--------- 

Earnings per share

4

Basic

37.27p

15.13p

36.08p

Diluted

36.75p

14.87p

35.48p

Adjusted earnings per share figures are shown in note 4.

GROUP STATEMENT OF FINANCIAL POSITION

-------------------------------------------------------------------

As at

As at

As at

30th 

30th

31st 

September

September

March

2015

2014

2015

(Unaudited)

(Unaudited)

(Audited)

Notes

£'000

£'000)

£'000

Non-current assets

Investment properties

6

395,576

319,467 

350,204 

Plant and equipment

67

74 

63 

Investments

- 

712 

793 

-----------

----------- 

-----------

Total non-current assets

395,643 

320,253 

351,060 

-----------

---------- 

-----------

Current assets

Trade and other receivables

7,809 

9,480 

10,339 

Cash and cash equivalents

9,385 

7,121 

-

-----------

---------- 

-----------

Total current assets

17,194 

16,601 

10,339 

-----------

---------- 

-----------

Total assets

412,837 

336,854

361,399

-----------

----------

----------

Current liabilities

Trade and other payables

(12,258)

(12,344)

(9,938)

Finance lease liabilities

(286)

(286)

(286)

Interest rate derivatives

7

(2,944)

(3,633)

(6,164)

Cash and cash equivalents

- 

- 

(572)

----------

--------- 

----------

Total current liabilities

(15,488)

(16,263)

(16,960)

----------

-------- 

---------

Non-current liabilities

Loans and other borrowings

(129,522)

(93,316)

(91,302)

Pension fund liabilities

(1,875)

(1,588)

(1,940)

Finance lease liabilities

(4,121)

(4,121)

(4,121)

Interest rate derivatives

7

(16,899)

(23,085)

(31,581)

-----------

---------- 

-----------

Total non-current liabilities

(152,417)

(122,110)

(128,944)

-----------

---------- 

-----------

Total liabilities

(167,905)

(138,373)

(145,904)

-----------

---------- 

-----------

Net assets

244,932 

198,481 

215,495 

-----------

---------- 

-----------

Equity

Called up share capital

18,486 

18,485

18,486

Share premium account

75,917 

75,917

75,917

Other distributable reserves

 40,177 

52,060

36,340

Revaluation reserve

 110,352

52,019

84,752

-----------

----------

-----------

Total equity

244,932 

198,481

215,495

-----------

----------

-----------

Net asset value per share

9

263p

215p

233p

EPRA net asset value per share

281p

240p

270p

GROUP CASH FLOW STATEMENT

------------------------------------------------

6 months

6 months

12 months

to 30th 

to 30th

to 31st 

September

September

March

2015

2014

2015

(Unaudited)

(Unaudited)

(Audited)

£'000

£'000

£'000

Operating activities

Profit before tax

34,593 

13,937 

33,282 

Adjustments for:

Depreciation

12 

16 

44 

Other non-cash movements

552 

430 

1,354 

Profit on disposal of investment properties

(315)

(142)

(679)

Movement in revaluation of investment properties

 (25,885)

(14,498)

(42,097)

Net finance (income)/costs

(2,470)

6,531 

19,769 

Profit on disposal of associate undertaking

- 

(712)

(793)

--------

-------- 

---------

Cash flow from operations before changes in working capital

6,487

5,562 

10,880 

Decrease/(increase) in debtors

 2,482

(1,779)

(3,439)

Increase in creditors

1,372 

3,763 

2,704 

----------

-------- 

---------

Cash generated from operations

 10,341 

7,546 

10,145 

Interest paid

(1,330)

(1,378)

(5,227)

Swap cancellation fee

(13,165)

- 

- 

Interest received

9 

10 

32 

----------

--------- 

--------

Cash flows from operating activities

(4,145)

6,178 

4,950 

----------

-------- 

--------

Investing activities

Proceeds from sale of investment properties

865 

3,217 

6,886 

Proceeds from sale of investments

793 

- 

- 

Purchase and development of investment properties

(19,987)

(55,395)

(60,949)

Purchase of other fixed assets

(15)

(74)

(94)

---------

-------- 

----------

Cash flows from investing activities

(18,344)

(52,252)

(54,157)

---------

--------

----------

Financing activities

Proceeds from issue of share capital

- 

509 

510 

Increase in borrowings

37,992 

56,000 

53,935 

Equity dividends paid

(5,546)

(5,414)

(7,910)

----------

--------- 

---------

Cash flows from financing activities

32,446 

51,095 

46,535 

----------

-------- 

---------

Net increase/(decrease) in cash and cash equivalents

9,957

5,021 

 (2,672)

Cash and cash equivalents at the beginning of the period

(572) 

2,100 

 2,100 

----------

-------- 

---------

Cash and cash equivalents at end of period

9,385

7,121 

 (572)

----------

-------- 

---------

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the parent company

Share capital

£'000

Share premium

£'000

Revaluation reserve

£'000

Other

 distributable

reserves

 £'000

Total equity £'000

At 31st March 2014

18,352

75,541

37,354 

57,988 

189,235 

Profit for the year

- 

- 

- 

 33,282 

33,282 

Other comprehensive income:

Transfer surplus on revaluation of

Properties

- 

- 

 42,097 

(42,097)

- 

Other

- 

- 

- 

(19)

(19)

Transfer on disposal of investment in

associated undertaking

- 

- 

 1,417 

(1,417)

- 

Transfer on disposal of investment

properties

- 

- 

3,884 

(3,884)

- 

Actuarial loss on defined benefit

pension scheme

- 

- 

- 

(493)

(493)

---------

---------

---------

---------

---------

Total comprehensive income for the year

- 

- 

47,398 

(14,628)

32,770 

Issue of new shares net of costs

134 

376 

- 

- 

510 

Dividends paid in year

- 

- 

- 

(7,910)

(7,910)

Fair value of share based payments

- 

- 

- 

 890 

890 

---------

---------

---------

--------- 

-----------

At 31st March 2015

 18,486

75,917 

84,752 

36,340 

215,495 

---------

---------

---------

--------- 

-----------

Profit for the period

- 

- 

- 

34,593 

34,593 

Transfer surplus on revaluation of

Properties

- 

‑ 

25,885

(25,885)

‑

Other

- 

- 

- 

88 

88

Transfer on disposal of investment

Properties

- 

‑ 

(285)

285 

-

--------

--------

-------- 

-------- 

---------

Total comprehensive income for the

period

- 

- 

25,600 

9,081 

34,681 

Dividends paid in period

- 

- 

- 

(5,546)

(5,546)

Fair value of share based payments

- 

- 

- 

302 

302 

-------- 

-------- 

---------- 

---------

---------- 

At 30th September 2015

18,486 

75,917 

110,352 

40,177 

244,932 

---------

---------

---------- 

--------- 

---------- 

6 months

6 months

12 months

to 30th 

to 30th

to 31st 

September

September

March

2015

2014

2015

(Unaudited)

(Unaudited)

(Audited)

£'000

£'000

£'000

Profit before tax

34,593 

13,937 

33,282 

Fair value (gain)/loss on swaps

(4,737)

4,160 

15,187 

Movement in valuation of investment properties

(25,885)

(14,498)

(42,097)

Profit on disposal of investment properties

(315)

(142)

(679)

Profit on disposal of associated undertaking and

revaluation movements

-

(712)

(793)

IFRS2 adjustment to share based payments

302 

213 

 890 

---------- 

-------- 

-------- 

Adjusted profit before tax

3,958 

2,958 

 5,790 

---------- 

-------- 

-------- 

3

Net rental income from investment properties

6 months

6 months

12 months

to 30th 

to 30th

to 31st 

September

September

March

2015

2014

2015

(Unaudited)

(Unaudited)

(Audited)

£'000

£'000

£'000

Gross rents receivable

9,694 

8,114 

 17,005 

SIC15 adjustment (spreading of rental incentives)

477 

303 

 612 

---------- 

-------- 

--------- 

Gross rental income

10,171 

8,417 

17,617 

Service charges receivable

1,524 

2,053 

 3,792 

---------- 

-------- 

--------- 

11,695 

10,470 

 21,409 

Direct property outgoings

(2,776)

(3,243)

(6,487)

---------- 

--------- 

--------- 

 8,919 

7,227 

14,922 

---------- 

-------- 

--------- 

Rent receivable under the terms of the leases is adjusted, in accordance with SIC15, for the effect of any incentives given.

4

Earnings per share

6 months

6 months

12 months

to 30th

to 30th

to 31st

September

September

March

2015

2014

2015

p

p

p

Basic earnings per share

 37.27 

15.13 

36.08 

Change in fair value of derivatives

(5.11)

4.52 

16.46 

Movement in revaluation of investment properties

(27.89)

(15.75)

(45.63)

Profit on disposal of investment properties

(0.34)

(0.15)

(0.74)

Associated undertaking disposals and revaluation

- 

(0.77)

 (0.86)

Adjusted profit share based payments

0.33 

0.24 

0.97 

---------

---------

--------

Adjusted earnings per share

4.26 

3.22 

 6.28 

---------

---------

-------

Basic earnings per share on ordinary shares is calculated on the profit in the half year of £34,593,000 (September 2014: £13,937,000 and March 2015: £33,282,000) and 92,807,763 (September 2014: 92,085,186 and March 2015: 92,255,120) shares, being the weighted average number of ordinary shares in issue during the period.

6 months

6 months

12 months

to 30th

to 30th

to 31st

September

September

March

2015

2014

2015

Number

of shares

Number

of shares

Number

of shares

Weighted average number of ordinary shares in issue

 92,807,763 

92,085,186 

92,255,120

Number of shares under option

 1,705,818 

2,341,454 

2,233,578

Number of shares that would have been issued at fair

value

(391,633)

(763,020)

(672,668)

--------------- 

---------------

--------------

Diluted weighted average number of ordinary shares in

issue

94,121,948 

93,663,620 

93,816,030

---------------

---------------

---------------

6 months

6 months

12 months

to 30th

to 30th

to 31st

September

September

March

2015

2014

2015

p

p

p

Basic earnings per share

 37.27 

15.13 

 36.09 

Effect of dilutive potential ordinary shares under option

 (0.52)

(0.26)

(0.60)

------- 

 -------

 ------- 

Basic diluted EPS

36.75 

14.87 

35.48 

Change in fair value of derivatives

 (5.03)

4.44 

16.19 

Movement in revaluation of investment properties

(27.50)

(15.48)

(44.87)

Profit on disposal of investment properties

(0.34)

(0.15)

(0.72)

Associated undertaking disposals and revaluation

- 

(0.75)

(0.86)

Adjusted profit for share based payments

0.32 

0.23 

0.95 

---------

--------- 

--------

Adjusted diluted earnings per share

 4.20 

3.16 

 6.17 

----------

----------

--------

Adjusted profit for share based payments

(0.32)

(0.23)

(0.95)

----------

----------

--------

EPRA earnings per share

3.88

2.93 

 5.22 

----------

----------

---------

5

Net finance costs

6 months

6 months

12 months

to 30th

to 30th

to 31st

September

September

March

2015

2014

2015

(Unaudited)

(Unaudited)

(Audited)

£'000

£'000

£'000

Interest on bank overdraft and loans

 2,671 

2,427 

4,896 

Finance lease interest on leasehold property

Obligations

142 

98 

 285 

Finance arrangement costs

228 

50 

 100 

Fair value loss on derivatives

- 

4,160 

 15,188 

Capitalised interest

(765)

(194)

(667)

---------

---------

---------

Finance expense

2,276 

6,541 

19,802 

Fair value gain on cancellation

(4,737)

- 

- 

Interest receivable

(9)

 (10)

(32)

---------

--------- 

--------- 

Finance income

(4,746)

(10)

(32)

---------

--------- 

--------- 

Net finance costs

(2,470)

6,531 

19,770 

---------

--------- 

----------

During the period the Group cancelled £35 million of swaps at a cost of £13.17 million.

6

Investment properties

As at 30th

As at 30th

As at 31st

September

September

March

2015

2014

2015

(Unaudited)

(Unaudited)

(Audited)

£'000

£'000

£'000

Valuation

At 1st April 2015

350,204

252,645 

252,645 

Additions

- acquisition

11,337

51,710 

51,710 

- development

 8,721

3,709 

10,000 

Revaluation surplus

 26,362

14,802 

42,708 

Adjustment for rents recognised in advance under

SIC15

(477)

(304) 

(612) 

Disposals

(550)

(3,075) 

(6,207)

Amortisation of grossed up headlease liabilities

 (21)

(20) 

(40)

-----------

------------

-----------

Book value

395,576 

319,467 

350,204 

------------

------------

----------

Adjustment for grossing up of headlease liabilities

(3,765)

(3,805)

(3,785)

Adjustment for rents recognised in advance under 

SIC15

6,819 

6,033 

6,342 

-----------

-----------

-----------

Valuation

398,630 

321,695 

352,761 

-----------

-----------

-----------

7

Liabilities

The Group adopts a policy of ensuring that its exposure to interest rate fluctuations is mitigated by the use of financial instruments. Interest rate swaps have been entered into to achieve this purpose. 

The Group does not hold or issue derivative financial instruments for trading purposes.

As at 30th September 2015 (Unaudited)

Maturity

1Next

credit

break

Amount

£'000

Rate

Fair

value

before

BCVA

2BCVA

Fair

value

£'000

Interest rate swaps

Sept 2032

Sept 2022

45,000

5.17%

(21,789)

1,946

(19,843)

As at 30th September 2014 (Unaudited)

Maturity

1Next

credit

break

Amount

£'000

Rate

Fair

value

before

BCVA

2BCVA

Fair

value

£'000

Interest rate swaps

Sept 2032

Sept 2022

75,000

5.17%

(27,771)

2,531

(25,240)

Interest rate swaps

Dec 2032

Dec 2017

5,000

4.65%

(1,558)

80

(1,478)

---------

---------

--------

----------

80,000

(29,329)

2,611

(26,718)

----------

----------

--------

----------

As at 31st March 2015 (Audited)

Maturity

1Next

credit

break

Amount

£'000

Rate

Fair

value

before

BCVA

2BCVA

Fair

value

£'000

Interest rate swaps

Sept 2032

Sept 2022

75,000

5.17%

(39,297)

3,731

(35,566)

Interest rate swaps

Dec 2032

Dec 2017

5,000

4.65%

(2,282)

103

(2,179)

---------

----------

-------

-----------

80,000

(41,579)

3,834

(37,745)

----------

----------

-------

----------

1Credit breaks are triggered by the bank and require the prevailing mark to market value to be paid or received.

2BCVA - Bilateral Credit Valuation Adjustment is now required by IFRS 13 to be incorporated in the mark to market valuations.

 As at 30th

 As at 30th

As at 31st

September

September

March

2015

2014

2015

(Unaudited)

(Unaudited)

(Audited)

£'000

£'000

£'000

Current

(2,944)

(3,633)

(6,164)

Non-current

(16,899)

(23,085)

(31,581)

----------

----------

----------

(19,843)

(26,718)

(37,745)

----------

----------

----------

8

Dividends

6 months

6 months

12 months

to 30th

to 30th

to 31st

September

September

March

2015

2014

2015

(Unaudited)

(Unaudited)

(Audited)

£'000

£'000

£'000

Final dividend

Year ended 31st March 2015

5,546

-

-

Year ended 31st March 2014

-

5,414

5,414 

Interim dividend

Year ended 31st March 2014

-

- 

2,496 

----------

----------

----------

 5,546

5,414 

7,910 

----------

----------

----------

The final dividend of 6.0 pence per share (£5,546,000) for the year ended 31st March 2015 was paid on 30th July 2015. 

The Directors have declared an interim dividend of 2.7 pence per share (2014: 2.7 pence per share).

Since becoming a REIT, the Group is required to distribute at least 90% of qualifying income profits each year as a Property Income Distribution (PID), and the interim dividend of 2.7 pence per share will be paid as part of this distribution. Further REIT information is available on the Company's website.

9 Net asset value per share

30th September 2015

Net assets

£'000

Shares

'000

Net

asset value per share

p

Basic

244,932

93,158

 263 

Shares under option

863

1,552

(3)

------------

 ----------

 ----- 

Diluted/EPRA NNNAV

245,795

94,710

260 

Adjustment for fair value of derivatives

19,843

-

21 

---------- 

---------

----- 

EPRA NAV

265,638

94,710

281 

30th September 2014

Net assets

£'000

Shares

'000

Net

asset value per share

p

Basic

198,481 

92,426

215 

Number of shares under option

1,458 

2,125

(3)

----------- 

 ----------

 ----- 

Diluted/EPRA NNNAV

199,939 

94,551

212 

Adjustment for fair value of derivatives

26,718 

-

28 

----------- 

 -----------

 ----- 

EPRA NAV

226,657 

94,551

240

31st March 2015

Net assets

£'000

Shares

'000

Net

asset value per share

p

Basic

215,495 

92,426

233 

Number of shares under option

1,433 

2,125

(3)

----------- 

 ----------

 ----- 

Diluted/EPRA NNNAV

216,928 

94,551

230 

Adjustment for fair value of derivatives

37,745 

-

40 

----------- 

 -----------

 ----- 

EPRA NAV

254,673 

94,551

270 

10

Disclaimer

The Interim Report of McKay Securities PLC for the six months to 30th September 2015 has been drawn up and presented for the purposes of complying with English law. If any issue were to arise in relation to any liability under or in connection with the Interim Report for the six months to 30th September 2015, it would also be determined in accordance with English law.

11

Interim Report

The Interim Report is being posted to all shareholders on 27th November 2015. Copies are available to members of the public from the Company's registered office at 20 Greyfriars Road, Reading, Berkshire RG1 1NL, and on the Company's website at www.mckaysecurities.plc.uk.