HSTN.L Regulatory News (HSTN)

Hansteen Holdings PLC

("Hansteen" or the "Group" or the "Company")

Full Year Results

Hansteen Holdings PLC (LSE: HSTN), the investor in UK and continental European industrial property, announces its full year results for the year ended 31 December 2013.

Financial Highlights

· Normalised Income Profit increased by 28% to £39.4 million (2012: £30.8 million)

· Normalised Total Profit increased by 35% to £46.3 million (2012: £34.3 million)

· IFRS profit before tax increased by 41% to £65.3 million (2012: £46.2 million)

· Normalised Income Profit per share, increased by 28% to 6.2p (2012: 4.8p)

· Diluted EPRA earnings per share increased by 6% to 5.0p (2012: 4.7p)

· Full year dividend increased by 7% to 4.8p per share (2012: 4.5p per share)

· EPRA NAV per share increased by 9% to 91p (31 December 2012: 83p)

· Net debt to property value ratio of 49.3% (31 December 2012: 38.6%)

· Two new five year loans totalling €343 million secured against German property announced on 4 March 2014

Operational Highlights

· Total portfolio owned or co-owned increased by 53% to £1.5 billion (2012: £1.0 billion)

· Annualised rent roll from total portfolio up 59% to £134.9 million (2012: £84.7 million)

· 46 sales of £159.6 million with a total profit of £10.0 million

· £53 million investment in the Ashtenne Industrial Fund and contract to manage the Fund

· £91.1 million of properties acquired (excluding the stake in AIF) at an average yield of 10.3% and a vacancy of 21.0%

· Like-for-like occupancy improvement of 104,000 sq m or 22.2% of vacancy at the start of the year

· Property valuation increase across the total portfolio of 3.2% (£46.9 million)

· Launch of the second co-investment fund (HPUTII)

· Issue of €100 million convertible bond with 4% coupon and five year maturity

· €41.7 million acquisition of an impaired loan on HBI Netherlands portfolio at a 51% discount to face value

- See note 3 of the financial statements for a reconciliation of Normalised Income Profit and Normalised Total Profit to the IFRS measure of profit before tax.

- Operational Highlights relate to property, owned and managed, of Hansteen and its associated funds.

James Hambro, Chairman, commented: "We believe that from Hansteen's perspective the property investment market this year is likely to exhibit two strong themes across all the European regions in which we operate. First, recognition by investors that higher yielding regional industrial property should produce superior returns over the next couple of years and second, an appreciation by investors that in order to achieve those returns industrial property requires intensive and specialist management. We have an extensive network of regional offices across our European regions manned by experienced, energetic and incentivised locals with a proven track record of creating value for shareholders.

There are few equivalent platforms to Hansteen's in the high yielding property sector. The combination of a large high yielding portfolio with opportunities to add value and an improving investment market means that we look forward to the remainder of 2014 with confidence."

Ian Watson and Morgan Jones, Joint Chief Executives, added: "The second half of 2013 saw the investment and funding markets change significantly for the better, following five years of decline and poor liquidity. This is particularly true in the UK with growing signs that the investment market in Germany will follow a similar path, in time. At the same time, in each of our regions the occupational market is improving. Having focused on buying properties with vacancies the combination of our successful asset management and the improving markets means that despite showing value growth in 2013 the yield of our portfolio was higher in December 2013 than it was in December 2012. Furthermore, although we have materially improved occupancy levels there is still a significant vacant element with the potential to add both income and value. Accordingly, we are well positioned to benefit from improving market backdrop and expect 2014 to be a very active and successful one for Hansteen."

For more information:

An analyst presentation will be held at 9.30am today at Tavistock Communications, 131 Finsbury Pavement, London, EC2A 1NT. If you would like to attend please contact Faye Walters on +44 20 7920 3150.

Alternatively the dial-in details for the conference call and webex are as follows:

Participant UK Toll Number: 02031394830

Participant UK Toll-Free Number: 08082370030

ITFS List for Participant Connection: http://wpc.1726.planetstream.net/001726/FEL_Events_International_Access_List.pdf 

Participant Pin Code: 95261535#

Audience URL:https://arkadin-event.webex.com/arkadin-event/onstage/g.php?t=a&d=704926062 Login & Pin Code: 646373

Notes to Editors:

HANSTEEN HOLDINGS PLC

Hansteen Holdings PLC (LSE: HSTN) is a European industrial REIT that invests in properties with high yields, low capital costs and opportunity for value improvement across the Netherlands, Germany, Belgium, France and the UK.

Founded by Morgan Jones and Ian Watson, the Company listed on Aim in November 2005 raising £125 million. In 2009, it raised a further £200.8 million by way of a Placing and Open Offer and moved to the Official List, converting to a REIT shortly thereafter. In April 2011, the Company raised a further £150 million by way of a Placing and Open Offer.

At 31 December 2013, Hansteen had total property under management of some 592 assets with a value of £1.5 billion.

Chairman's Review

I am pleased to present the results for the year ended 31 December 2013 and the Company's Strategic Report.

Results and dividend

2013 was a record year for Hansteen in terms of profits and value growth. During the year we made some significant acquisitions, a large number of profitable sales, increases in rental income and improved occupancy. One of the highlights was the acquisition of 27.5% of the Ashtenne Industrial Fund at a discount to NAV and the transfer of the management to Hansteen. The business model and strategy have continued to work well and as a result we can report increased profits, growth in NAV and an increased dividend. After adding back the dividends, the total NAV return for 2013 was 15.0% (2012: 7.0%) and the total shareholder return was 40.8% (2012: 7.9%).

Normalised Total Profit for the year to 31 December 2013 increased by 35.0% to £46.3 million (2012: £34.3 million). Normalised Income Profit, which excludes profits or losses from the sale of properties (i.e. essentially the repeatable earnings of the business), increased by 27.6% to £39.4 million (2012: £30.8 million). Normalised Income Profit per share increased by 27.6% to 6.2p (2012: 4.8p). This is the eighth consecutive year in which Hansteen's normalised profits have increased.

Basic earnings per share were 9.1p (2012: 6.2p) and diluted EPRA earnings per share in 2013 were 5.0p (2012: 4.7p). Profit before tax increased by 41.4% to £65.3 million (2012: £46.2 million).

The Group's EPRA Net Asset Value was 91p per share (2012: 83p), an increase of 9%. This compares to an average cost per share of 86p for an investor who purchased shares at flotation and at every subsequent fund raising. In addition to the NAV growth, Hansteen has paid a total of 26.5p of dividends per share since flotation.

Good progress was made on the policy of diversifying the Group's funding sources. During the year we issued a Euro convertible bond with a 4% coupon and a five year maturity; and following the end of the year, we announced terms for the re-financings of both of our bank facilities in Germany with lenders new to Hansteen. On 4 March 2014, the completion of two new five year loans was announced; a €235 million loan with a consortium of German banks at an average interest rate of 3.5% and a €108 million loan from HSBC at an average interest rate of 2.9%.

The Board recognises the importance of dividends to our shareholders and remains committed to a prudently progressive dividend policy reflecting the strong and growing cash flow generated by the business. Accordingly, the Board increased the interim dividend paid on 21 November 2013 by 5.6% to 1.9p per share (November 2012: 1.8p per share) and will pay a second interim dividend, increased by 7.4% to 2.9p per share (May 2013: 2.7p). This dividend is payable on 21 May 2014 to shareholders on the register at the close of business on 26 April 2014. A Property Income Distribution of 0.4p is included in this second interim dividend payment.

The total dividend of 4.8p per share (2012: 4.5p) is a 6.7% increase on 2012. Hansteen has paid a covered dividend every year since the first dividend distribution in 2006 and during that period, the dividend has increased by 60.0%.

Our business

Hansteen is a leading owner and asset manager of European industrial property, primarily in Germany and the UK. 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.

Our core mission is to provide investors with consistent, high and realised returns.

Our strategy

Our strategy is achieved through the methodical and detailed assessment of investment opportunities in the UK and Continental Europe. We look for investments that will create a high yielding industrial property portfolio as well as other more opportunistic and management intensive acquisitions which, although lower yielding, will provide greater potential for capital growth. We seek to produce sustainable growth in our rental income and occupancy through active asset management initiatives which should lead to increased values. We aim to realise and distribute these profits to our shareholders over the property cycle.

We generate shareholder value by:

· Disciplined investment

We pick our investments based on a thorough assessment of the opportunities in order to create a high yielding portfolio with potential to add value. Our balance sheet is strong and we remain committed to financing on a prudent basis.

· Diverse portfolio

Our properties have a wide range of tenants and are in several European countries, primarily in Germany and the UK. None of our 6,000 tenants accounts for more than 1.5% of the annual rent roll.

· Industry expertise

Our people are at the centre of our success. We have 14 offices with experienced management teams across the UK and our regions in Continental Europe. We work hard at creating the right relationships with our stakeholders so that we are in the prime position to act when opportunities arise.

Board changes

At the end of 2013, Stephen Gee gave notice of his intention to retire as a Non-Executive Director in 2014. Stephen has been a member of the Board since Hansteen was formed in 2005 and on behalf of the Board and the whole Company I would like to thank him for his substantial contribution and commitment to Hansteen's growth and success. The selection process to find Stephen's replacement and one additional Non-Executive Director to join the Board has commenced and is ongoing.

Outlook

Since flotation in November 2005, Hansteen has assembled a property portfolio of £1.5 billion, the majority of which was purchased from forced sellers in a distressed market. Although the downturn in the property market has been deeper and more prolonged than could reasonably have been foreseen, we have ensured that our acquisitions represent good value and are prudently financed. The strategy of building the portfolio at the bottom of the cycle is starting to show clear signs of success as the market is improving and higher income properties are gaining in value. Our Interim Report confirmed that improvement was gathering momentum and the pace and strength of the recovery in the UK industrial investment market in the fourth quarter of 2013 has in fact exceeded most projections.

The Board believes that the property investment market in 2014 is likely to exhibit two strong themes that will benefit Hansteen across all the European regions in which the Group operates. Firstly, recognition by investors that higher yielding regional industrial property should produce superior returns over the next couple of years and, secondly, that in order to achieve those returns industrial property requires specialist management.

There are few equivalent platforms in the high-yielding property sector. The combination of that platform, a large, high-yielding portfolio with value-add opportunities and an improving investment market means that the Board looks forward to 2014 with confidence.

Jamie Hambro

Chairman

10 March 2014

Joint Chief Executives' Review and Finance Report

Our business model remains unchanged and is based on two key strengths: an entrepreneurial and opportunistic approach to buying and selling property, funding and deal structuring; and a focussed, disciplined and skilled asset management and marketing platform. We believe that acquiring the right property at the right price is key to the success of the business and that high yielding industrial properties with opportunities to add value have historically performed strongly. Whilst selling has been limited in recent years, 2013 has provided improved selling conditions with increased liquidity in the market, particularly in the UK. Typically we sell after the business plan for each property has been implemented in order to crystallise the value that has been added. The £159.6 million of sales have realised £10.0 million of profit and released capital for reinvestment elsewhere.

Key Performance Indicators ("KPIs")

Financial KPIs

In our view returns are best measured by looking at realised profits and valuation growth. We believe these measures are best reflected by the following:

Normalised Total Profit for the year to 31 December 2013 increased by 35.0% to £46.3 million (2012: £34.3 million). Normalised Income Profit, which excludes profits or losses from the sale of properties (i.e. essentially the repeatable earnings of the business), increased by 27.6% to £39.4 million (2012: £30.8 million). This is the eighth consecutive year in which Hansteen's Normalised Income Profit has increased. Normalised Income Profit per share increased by 27.6% to 6.2p (2012: 4.8p).

The table below sets out the results for Normalised Income Profit and Normalised Total Profit including our share of associates.

The Group's EPRA Net Asset Value was 91p per share (2012: 83p), an increase of 9%. Dividend per share 4.8p (2012: 4.5p), an increase of 6.7%.

Property KPIs

On our wholly owned portfolio the annualised rental income at 31 December 2013 increased to £73.5 million (2012: £71.8 million). Despite the fact that on a like-for-like basis the portfolio showed a valuation increase of £12.6 million the yield of the wholly owned portfolio increased to 8.6% (2012: 8.5%). Occupancy of the wholly owned portfolio increased to 84.6% (2012: 82.3%).

As the business has more fully deployed its balance sheet, net debt to value has increased to 49.3% (2012: 38.6%). There is further analysis of some of these numbers on a like-for-like basis later in this review.

Significant transactions

AIF

One of the most significant transactions during the year was announced in August 2013 with the £53 million acquisition of a 27.5% stake in the Ashtenne Industrial Fund ("AIF"). This was the culmination of a complex series of moves including the subscription of £42.5 million of new units and the acquisition of the 6.9% stake held by Warner Estate Holdings PLC and controlled by Warner's banks. This resulted overall in a purchase at a 22% discount to AIF's September 2013 NAV. This acquisition discount contributed £16.1 million of immediate value to Hansteen. From an earnings perspective, the £53 million investment is expected to generate an initial annual profit contribution of around 10%.

In addition to its investment return, Hansteen has become the asset manager of AIF and will receive asset management fees of approximately £3.0 million per annum as well as a potential performance fee following the signing of a new asset management contract.

During the period since Hansteen has taken management responsibility, there have been a number of successful initiatives resulting in increased rent of £0.7 million per annum and a valuation increase of £26.5 million or 5.8%, the first valuation uplift in AIF in 13 quarters.

HPUT II

In May 2013, we announced the launch of a second UK industrial property fund, Hansteen UK Industrial Property Unit Trust II ('HPUTII' or the 'Fund'). The Fund was launched with £107 million of equity, one third provided by Hansteen and two thirds from clients of Aviva Investors Real Estate Multi-managers (REMM). HPUTII has the capacity to invest up to £200 million in UK industrial property and at 31 December 2013 had invested £75.6 million. The life of the Fund will be six years and with initial targeted returns of 12 to 15% per annum, has had a good start with a 2013 return of approximately 15%.

As founder, core investor and asset manager of HPUTII, we will receive an asset management fee, a potential performance fee and the return on our investment.

HBI Loan Acquisition

The most recent transaction of 2013 was announced in late December with the purchase from UniCredit Bank AG of 50% of a loan secured against a portfolio of mainly multi-let light industrial property in the Netherlands. The other 50% of the loan is held by ING. The €41.7 million paid to UniCredit represents a 51% discount to the face value of the loan and was satisfied from existing cash resources. The current borrower, Lancelot Land BV, is in breach of the loan and it is our intention to work with ING over time to crystallise the value inherent in the loans.

The whole portfolio, against which the loan is secured, extends to more than 370,000 sq m across 40 good quality industrial estates, with the majority in the core Randstad area of the Netherlands. The gross annual rental income of the portfolio is more than €15.0 million and the current vacancy rate is approximately 20%. We believe that there is a significant opportunity to add value as the purchase price is at a discount to both the value of the loan and the underlying properties.

We believe that this acquisition will prove to have taken place at around the low point in the Netherlands property cycle.

Convertible Bond

In July, Hansteen issued €100 million five-year Convertible Bonds. These are loan instruments secured on the financial strength of the Company rather than on properties, like our bank debt. Embedded in the Bonds is an option for the Bond holders to convert their Bonds into Hansteen's ordinary shares in the future at a premium to the share price at the date of the Bond issue.

The benefit to Hansteen of such an arrangement is that the Group has a flexible, unsecured loan at a competitive interest rate (4% per annum). If the shares perform well the Bonds will not have to be repaid and will convert into Hansteen shares. Whether or not the Bonds convert, they will have provided finance on better terms than could have been secured by way of an equity issue or bank debt at the time.

The initial conversion price was set at 99p per share, which represented a premium of 22.5% above the then share price. The conversion price is expected to reduce over the five years depending on the level of dividends.

Under IFRS the Bonds are accounted for by making a charge to the income statement to reflect the current market price of the Bonds. At 31 December 2013 this mark-to-market adjustment included in the income statement and the balance sheet was £16.2 million. EPRA earnings, EPRA NAV and our net debt ratio exclude the mark-to-market adjustment.

German Refinancing

During 2013, we made significant progress towards refinancing the existing €310.6 million bank loans secured on the German portfolio. In February 2014, both the HBOS facility which was due to expire in October 2014 and the UniCredit facility which was due to expire in February 2015, were refinanced for five year terms with lenders new to Hansteen. HSBC Bank plc has provided a €108 million facility. A €235.0 million facility (the "Helaba" loan) has been provided by a consortium of lenders including Landesbank Hessen-Thüringen Girozentrale (Helaba), Natixis Pfandbriefbank AG, SEB AG and various entities managed or advised by AXA REIM SGP. The combined terms equate to less than 4% per annum gross interest costs, including amortised fees. The Board believes that in addition to these facilities providing well priced and secure borrowings for the medium term, the banks involved are likely to be enduring and growing partners for Hansteen's continental European business.

Asset management achievements

Asset management platform

Our asset management team now extends to 14 offices across the UK and continental Europe. The team has performed strongly in 2013 delivering 850 new leases and renewals (2012: 704 leases and renewals), generating annual rent of £24.6 million (2012: £22.4 million). The team has the skills and experience to meet occupier requirements and the detailed and effective property management approach has enabled us to successfully absorb new acquisitions and manage them effectively from day one.

As we have developed the asset management infrastructure, one of our objectives has been to take the marketing of our properties in-house to improve occupational take up using the knowledge and experience of our asset managers. An additional benefit associated with this decision has been the decrease in fees paid to third party marketing agents relative to rent generated from new lettings and lease renewals. In 2013, letting fees paid were £1.0 million on new lettings and renewals of £24.6 million compared to letting fees of £1.2 million on new lettings and renewals of £22.4 million in 2012.

The team in the UK has grown significantly due to the AIF transaction and we have opened a new office in the North East of England. We now have teams in London, Glasgow, Leeds, Warrington, Birmingham, Cardiff and Gateshead. We are delighted that after purchasing the asset management business of Warner a number of key individuals transferred over to Hansteen and the continuity in the tenant relationships and marketing of the vacant units coupled with the existing Hansteen management approach has started to show some excellent early results.

Occupancy

Like-for-like net occupancy (measured by taking the vacant area at the start of the year, adding vacancy on purchases and then comparing with the vacancy at the end of the year) has improved by 104,000 sq m across the portfolio under management. This represents 2.5% of the total portfolio under management at 31 December 2013 or 22.2% of the vacant area at the start of the year. Hansteen's wholly owned properties have contributed significantly to this excellent performance by improving the like-for-like occupancy by 75,000 sq m (3.4% of the portfolio at 31 December 2013 or 18.6% of the vacant area the start of the year). It is pleasing to note that for the second year running, all three of our core regions have contributed to this increase in occupancy.

Property valuation

The value of the total portfolio increased by £46.9 million or 3.2% from December 2012. £12.6 million of this increase came from the wholly owned portfolio and Hansteen's share of the valuation gain in the three UK funds was £8.3 million. Interestingly, at the half year values marginally declined underlining just how dramatic the improvement in values in the second half of 2013 has been.

The value of the German portfolio increased by €19.0 million or 2.8% with the UK wholly owned portfolio also increasing by £2.5 million or 2.1%. The Benelux portfolio valuation decreased by €7.2 million or 3.9% with a decrease in the Netherlands and Belgium offsetting slightly increased values in France. HPUT values have increased by £4.6 million or 3.6% with HPUTII values increasing by £3.2 million or 4.4%. Since September, AIF values improved by £26.5 million or 5.8%, the first valuation uplift in AIF in 13 quarters.

Property Acquisitions and Sales

The Group has made a number of significant purchases in 2013 which we believe will produce strong returns in the coming years. Excluding the acquisition of the stake in Ashtenne Industrial Fund ('AIF'), £91.1 million of properties have been acquired in the year at an average initial yield of 10.3%. £62.9 million of these purchases were wholly owned properties at an average yield of 10.6%, the majority of which were subsequently transferred to seed HPUTII, the balance were acquisitions by HPUTII.

2013 has been our busiest year yet in terms of property sales with 46 transactions totalling £159.6 million at an aggregate 9.3% premium to December 2012 book values, an average exit yield of 7.3% and an overall profit of £10.0 million over December 2012 book value. £110.9 million of these sales were wholly owned properties producing a profit of £6.2 million. The remaining £48.7 million were co-investment properties producing a profit of £3.8 million of which Hansteen's share was £1.3 million.

11 sales were completed in Germany for a total consideration of €28.9 million, generating a profit of €2.1 million. In the second half of the year we sold a vacant 14,000 sq m property at Venlo in south-eastern Netherlands for €0.8 million and the property at Lyon in east-central France for €2.5 million, both slightly below valuation.

A significant amount of property has been both purchased and sold from the wholly owned UK portfolio during 2013. In January, we purchased 32 properties located across England, Wales and Scotland from The Industrial Trust for £60.0 million. The portfolio comprised 149,000 sq m with a vacancy rate of 16.0% by floor area with a rent of £6.1 million per annum reflecting an initial yield of 10.1%. Over the year we sold £82.8 million generating a profit of £4.7 million. In May 2013, approximately £49.0 million of the properties in The Industrial Trust portfolio were used to seed the launch of HPUTII. Additionally, £33.9 million of property was sold in 12 different transactions at £2.7 million above December 2012 valuation and at an average yield of 5.2%.

HPUT had a particularly active year completing a total of 14 sales for £41.9 million at an average yield of 6.1% and generating a profit to the fund of £3.5 million. Since taking control of the AIF portfolio, three sales have completed for a total consideration of £4.1 million generating profits of £0.1 million over valuation.

HPUTII exchanged contracts at the end of January for the acquisition of a portfolio comprising 17 industrial estates from Industrial Property Investment Fund ('IPIF'). 16 of these completed on 28th February 2014 (£41.2 million) and one of the properties (£1.1 million) will complete once an outstanding purchase condition has been satisfied by the vendor. The total portfolio reflects a net initial yield of 7.7% rising to 8.25% on contracted rents. The void rate is 4.7% and we believe the application of our rigorous asset management model together with the improvement in the occupational market described later will enable us to deliver rental performance.

Sales are an integral part of the Hansteen business model, realising profits after intensive asset management and value growth. The Board expects this to continue in 2014 with selective sales in both the UK and Continental Europe.

Property Portfolio

In total, the portfolio that is owned or co-owned is valued at £1.5 billion, has a rent roll of £134.9 million per annum, and a vacancy of 16.3%. It comprises 4.1 million sq m with a yield of 8.8% generated from 592 estates with 5,900 tenants in five different countries. If the portfolio was fully occupied at market rents the rent roll would be £169.7 million per annum with a yield of 11.0 %. This is the first time that our wholly owned properties together with our shares of the three UK funds properties ("Hansteen's share of attributable property investments") has exceeded £1 billion in value.

The Group's wholly owned property portfolio at 31 December 2013 consisted of 2.2 million sq m, a decrease from 2.3 million sq m at the start of the year due to sales. The portfolio is valued at £849.5 million (2012: £843.1 million) and has a yield of 8.6% (2012: 8.5%). The performance of the portfolio on a like-for-like basis, allowing for acquisitions, sales and currency movement has been very positive. Rent has improved by £2.8 million per annum. The passing rent at the start of the year was £71.8 million per annum, the net effect of sales and acquisitions was a rent reduction of £2.5 million per annum, the gain due to exchange rate movements was £1.3 million per annum and the closing rent was £73.5 million per annum, a net like-for-like improvement of 4.0%.

The total value of property owned by the three Funds in which Hansteen had an interest at 31 December 2013 was £688.3 million, an increase of £525.7 million. The portfolio's now extend to 1.9 million sq m with a rent roll of £61.5 million per annum and a vacancy of 17.5%.

Within the REIT sector Hansteen's portfolio is unique both in terms of its yield and diversity. The analysis of the portfolio at 31 December 2013 is set out in the table below:

* Figures include 100% of the funds' portfolio. Hansteen has an investment of 33.3% in HPUT, 33.3% in HPUT II and 27.5% in AIF.

We set out below, a brief status report on each of our core regions.

Germany

Germany, which accounts for approximately 55% of Hansteen's share of attributable property investments, has had another successful year with income, occupancy and value, all showing positive movements. The passing rent in 2012 was €60.5 million per annum and the net effect of sales and acquisitions during 2013 was a rent reduction of €1.3 million per annum. The closing rent at 31 December 2013 was €62.1 million per annum, a net improvement of €2.9 million per annum or a 4.9% improvement in the like-for-like rent roll. The like-for-like occupancy movement has been equally impressive with the 2013 improvement totalling 25,000 sq m. Occupancy in the second half of 2013 has grown by 58,000 sq m as like-for-like occupancy in Germany had fallen by 33,000 sq m in H1 2013. The portfolio ended the year with 184,000 sq m vacant, representing 12.3% of the total floor area (2012 vacancy: 13.9%).

UK

The UK portfolio owned or co-owned has increased significantly during the year due to formation of the second HPUT fund (HPUTII) and the acquisition of the stake in AIF. These two transactions have added over 1.6 million sq m of property with a rent of almost £51.0 million per annum. The total UK portfolio comprises 2.1 million sq m with a rent roll of £71.7 million per annum, a vacancy of 17.5% and a value of £813.4 million. Hansteen's proportion of that portfolio is £326.3 million which accounts for 31.1% of Hansteen's share of attributable property investments.

UK Wholly Owned

At 31 December 2013, the wholly owned portfolio has a rent roll of £10.2 million per annum and a value of £125.1 million, representing a yield of 8.2% with a vacancy rate of 17.9%, improved from 26.0% at 31 December 2012. Included within this value are five development sites totalling 78.8 hectares valued at £10.1 million.

The passing rent at the start of the year was £10.3 million per annum, the net effect of sales and acquisitions was a rent reduction of £1.1 million per annum, and the closing rent was £10.3 million per annum, a net like-for-like improvement of £1.1 million or 11.6%. The improvement in occupancy is the most impressive statistic with a like-for-like improvement of 44,500 sq m or 54.2% of the vacancy at 31 December 2012.

HPUT

In addition to its wholly owned properties, Hansteen has a one third stake in the Hansteen Property Unit Trust (HPUT). At 31 December 2013, HPUT owned 283,561 sq m of property with a rent roll of £10.5m, a vacancy of 13.2%, a value of £131.4 million and a yield on the passing rent of 8.0%.

Performance in terms of both occupancy and rental income has also been good. Like-for-like occupancy has increased by 26,800 sq m with like-for-like rent improving by £0.15 million per annum. At the end of 2013, the HPUT had a NAV of £1.18 per unit (£1 par), having produced a distribution of 7.0%. The total return for 2013 was 15.8%.

HPUT II

In May 2013, we announced the launch of the Hansteen UK Industrial Property Unit Trust II ("HPUT II") in which Hansteen has a one third stake. The Fund was seeded with approximately £49.0 million of property from the Hansteen wholly owned portfolio and has the capacity to invest up to approximately £200 million in UK industrial property. 22 further properties have been added to the portfolio throughout the year bringing its portfolio to 217,842 sq m with a value at 31 December 13 of £76.8 million, a vacancy of 23.3%, a rent roll of £7.0 million per annum and a yield on the passing rent of 9.2%.

Like-for-like occupancy has decreased since acquisition by 5,200 sq m with like-for-like rent also falling by £0.3 million per annum. This decrease is due to three large lease expiries indentified when the properties were purchased from The Industrial Trust and the UK asset management team are focussing their attention on these new vacancies to improve both the occupancy and the rent roll.

AIF

Following the announcement, at the end of August, that we were to purchase a significant stake in the AIF, the portfolio has performed very well under Hansteen management. At the start of the new asset management contract, the 1.4 million sq m of multi let industrial properties in the UK had over 3,000 units, on 240 individual estates, with an annual rent roll of £43.5 million and vacancy rate of 18%. At 30 June 2013, the gross asset value of the properties was £460 million.

Under Hansteen management, we have managed to grow the income and increase the occupancy. Like-for-like occupancy has grown by 7,100 sq m with the like-for-like rent roll improving by £0.7 million per annum. The like-for-like valuation uplift from 30 September 2013 to 31 December 2013 is £26.5 million or 5.8%. At 31 December 2013, the portfolio was valued at £480.1 million, had a rent roll of £43.9 million per annum and had a vacancy rate of 17.4%, a yield on the passing rent of 9.1%. As the regional asset management teams become more familiar with the AIF properties, it is expected that the rent roll will grow further, occupancy will continue to improve and values will keep on rising during 2014.

Netherlands, Belgium and France

At 31 December 2013, Benelux accounted for approximately 14% of Hansteen's share of attributable property investments. In general, 2013 has been a successful year with like-for-like net occupancy improving by 5,100 sq m. The passing rent at 31 December 2012 was €14.9 million and the net effect of sales and acquisitions was a rent reduction of €0.3 million. The closing rent was €13.8 million per annum, a like-for-like decrease of €0.8 million per annum.

This reduction is all due to the Netherlands where some significant tenants have vacated their units at lease expiry. Like-for-like occupancy has decreased by 2,400 sq m. Like-for-like rent has remained broadly flat in Belgium but with a 7,000 sq m improvement in like-for-like occupancy, the rent roll will improve in early 2014 when various rent concessions due to a number of new lettings come to an end.

After the sale of the property in Lyon, the French portfolio comprises two properties totalling 56,000 sq m with an annual rent roll of €1.54 million.

Finance

NAV

Net assets attributable to the equity shareholders at 31 December 2013 were £554.7 million (2012: £515.4 million). The increase of £39.3 million in the year arises principally from £58.0 million profit for the year and £8.2 million gain on foreign currency movements on overseas net assets less the dividends paid of £29.4 million.

There were 641.4 million shares in issue at 31 December 2013 (2012: 638.8 million) with a further 9.9 million shares under option at exercise prices below the market price at that time giving 651.3 million shares for dilutive measures (2012: 639.8 million). As at 31 December 2013 IFRS Diluted NAV per share was 85p (2012: 81p) and EPRA NAV per share was 91p (2012: 83p).

Gearing

Net debt increased by £110.2 million during the year to £432.2 million at 31 December 2013 (2012: £325.0 million). The increase of £110.2 million included £16.2 million attributable to the mark-to-market of the convertible bond with the balance being primarily due to increased net investments in investment properties and associates and the acquisition of the HBI Netherlands loan.

Excluding the mark-to-market adjustment of the convertible bond, net debt to property value at 31 December 2013 was 49.3% (2012: 38.6%) and net debt to shareholders equity at 31 December 2013 was 75.0% (2012: 62.9%) reflecting our continued policy of maintaining gearing at a prudent level.

As at 31 December 2013 the Group had borrowings of £492.9 million of which £290.0 million was swapped at an average rate of 2.007% and £98.5 million was capped at an average rate of 4.633%. The average all-in borrowing rate for the Group at 31 December 2013 was 3.7% (2012: 3.1%).

The aggregate net assets of the associates of the Group at 31 December 2013 were £420.3 million and aggregate bank loans of £346.0 million which are non-recourse to the Group. The committed undrawn facilities available to the Associates amount to £8.9 million. The funds drawn under the facilities bear an average all-in interest rate of 4.4%.

Funding

During the year the Group secured new bank loan facilities of £21.3 million from RBS to finance various UK properties. The Group subsequently repaid £10.3 million of the bank loans from property sales proceeds leaving the facility at £11 million, all of which was fully drawn at 31 December 2013.

In September 2013, the Group acquired part of the existing UniCredit loan to Hansteen for €54.0 million representing a discount of €2.5 million to the face value of the loan. This achieved two objectives; firstly to reduce the net amount owing to UniCredit which we believed was necessary prior to its refinancing and secondly to create value for Hansteen when the loan was repaid.

At 31 December 2013, the Group had total bank facilities of £391.8 million, all of which were fully drawn. Borrowings are in the same currency as the assets against which they are secured. Cash resources at the year-end were £57.8 million.

Subsequent to the year end, both the HBOS facility, which was due to expire in October 2014, and the UniCredit facility, which was due to expire in February 2015, amounting to €310.6 million in aggregate were refinanced for five year terms with HSBC and Helaba. The new facilities amounting to €343.0 million in total were fully drawn in February 2014 and together with the issue of the €100 million convertible bond in 2013 has significantly extended and diversified the Group's funding facilities.

Of the Group's £391.8 million bank borrowings at 31 December 2013, 73% was swapped at an average rate of 2.007% with a further 25% capped at an average of 4.6% giving an all in average rate of 3.6%. The weighted average debt maturity at 31 December 2013 was 1.8 years and the weighted average maturity of hedging was 1.1 years.

Following the recent refinancing, as at 28 February 2014 the Group has £407.5 million of bank borrowings. 45.7% was swapped at an average rate of 1.0% with a further 14.8% capped at an average of 2.6% giving an all in average rate of 3.7%. The weighted average debt maturity has been extended to 4.4 years and the weighted average maturity of hedging has been extended to 4.2 years. Analysis of the Group's bank loan facilities is set out below:

Bank loan facilities as at 31 December 2013

* Net of Hansteen's share of UniCredit bank loan

Bank loan facilities as at 28 February 2014

In addition to the above bank loan facilities, the Group has a €3.7million finance lease in place to fund a property in Belgium. As at 31 December 2013, the lease has an unexpired term of 10 years and an interest rate implicit in the lease of 4.8%. In addition, the Group issued €100.0 million convertible bonds during the year, expiring 2018, with a coupon rate of 4.0%.

Currency

Hansteen reports its results in Sterling although, at present, approximately 57.5% (£319.0 million or €383.0 million) of its net assets at 31 December 2013 were denominated in Euros.

The Board reviews its currency hedging policy on a regular basis. The current policy can be summarised as:

· Hedging instruments are used to cover a substantial proportion of Group Euro net assets and estimated net Euro income for the short-term.

· Hedges are implemented at levels which the Board believe are cost effective.

· Hedging is employed as an insurance policy against the impact of a significant fall in the value of the Euro against Sterling rather than a means to speculate for profit.

The Group's investments in Europe are partly matched with Euro borrowings and to that extent there is a natural currency hedge. To mitigate the risk of a significant fall in the Sterling value of the portfolio and the resulting fall in the NAV caused by a weakening Euro, the Group has €200 million currency options at an average exchange rate of €1.2372 representing 52.2% of the current Euro denominated net assets. These options expire in June 2014.

As cover for Euro income, the Group has hedged €70 million net Euro income with four options expiring at sixth monthly intervals on 30 June 2014, 31 December 2014, 30 June 2015 and 31 December 2015. Each option is to put €17.5 million and call for GBP at an exchange rate of €1.3/£1. The options expiring on 30 June 2015 and 31 December 2015 were entered into during the year. The aggregate premiums for these options were £0.4 million.

The Markets

In each region in which we operate, two types of market demand are relevant; firstly tenant demand as this governs the strength and sustainability of our rent rolls and secondly investor demand as this provides the backdrop to our buying and selling activity.

During the summer of 2013, we recorded an improvement in investor sentiment particularly in the UK and therefore prepared a number of properties for sale during the second half of the year. This sales programme culminated in £76.4 million of assets being sold in the final quarter of 2013 predominantly to UK Institutions and in nearly all cases at prices materially above the most recent valuation. Early evidence in 2014 suggests that UK appetite for regional industrial property remains high both from Institutional purchasers as well as national and local property companies who are buoyed by the improvement in occupier confidence and access to liquidity.

Whilst it appears that this investor demand is driven to some extent by weight of money, all the Hansteen UK offices are reporting increased occupier enquiries and take-up which in previous cycles would be the precursor to rental growth.

In Germany the occupier market has been strong since the end of 2010 but our offices in Germany are reporting increased enquiries and further improving demand. Given that in Germany the gulf between current light industrial rents and that which would be necessary to justify development is even larger than in the UK, it is likely that continued occupational strength will feed through into increasing rents at some stage. Investment demand for light industrial property in Germany has not yet shown the dramatic pick up we have seen in the UK but there are signs that it is on a similar trajectory albeit 6 to 12 months behind.

In the Benelux, there are early signs of investor activity and new bank lending in the light industrial sector after several years of almost total investor inactivity. It remains to be seen whether this improvement in sentiment will be sustained. To some extent this will depend on whether the occupational market also starts to materially improve. Whilst there are very early indications that this may be the case, particularly in Belgium, we have yet to see a sustained increase in occupational demand in the Netherlands.

Outlook

During the last few years we have focused on buying well and consistently growing our earnings and dividends. Throughout that period however, we have always believed that there would come a time in the cycle where our approach would produce value growth to enhance those income returns.

2013 has been a year in which we have seen the Hansteen business model prove its value. We have highlighted the significant number of properties purchased at a low point (in terms of occupancy, value and management) as well as the intensive management approach that we employ through a well establish regional network of asset managers. Both of these factors are key to the business model and have enabled us to sustainably increase rental yield and grow values. We have also been able to realise some of this added value in 2013 with opportunistic sales across all of our regions.

The second half of 2013 saw the investment and funding markets change significantly for the better following five years of decline and poor liquidity. This is particularly true in the UK with growing signs that the investment market in Germany will follow a similar path in time. At the same time, to a lesser or greater extent, in each of our regions the occupational market is improving. Having focused on buying properties with vacancies the combination of our successful asset management and the improving markets means that despite showing value growth in 2013 the yield of our portfolio was higher in December 2013 than it was in December 2012. Furthermore, although we have materially improved occupancy levels there is still a significant vacant element with the potential to add both income and value. Accordingly, we are well positioned to benefit from improving market backdrop and expect 2014 to be a very active and successful one for Hansteen.

Morgan Jones and Ian Watson

Joint Chief Executives

Richard Lowes

Finance Director

10 March 2014

Principal Risks and Uncertainties

The Board recognises that risk management is essential for the Group to achieve its objectives. Whilst our principal risks have remained unchanged over the course of the year, senior management staff and the Board regularly consider the significant risks, which it believes are facing the Group, identify appropriate controls and if necessary instigate action to improve those controls.

There will always be some risk when undertaking property investments but the control process is aimed at mitigating and minimising these risks where possible. The key risks identified by the Board, the steps taken to mitigate them and additional commentary is as follows:

· Changes in the general economic environment expose the Group to a number of risks including falls in the value of its property investments, loss of rental income and increased vacant property costs due to the failure of tenants to renew or extend leases as well as the potential for tenants to become bankrupt. The Board believes these risks are reduced due to its policy of assembling a portfolio with a wide spread of different tenancies in terms of actual tenants, industry type and geographical location as well as undertaking thorough due diligence on acquisitions. The level of exposure to individual tenants is regularly monitored to ensure they are within manageable limits. Rent deposits or bank guarantees are requested where appropriate to mitigate against the effect of tenant defaults. Where possible, purchases are achieved at low capital values and with due investigation of tenant finances.

· Over-borrowing by the Group with inability to meet repayment requirements, insufficient credit facilities, significant interest rate increases or facility covenant breaches represents a risk to the Group. In response to these risks Hansteen maintains a prudent approach to its borrowing levels by seeking to maintain headroom within its debt facility covenants and have cash resources that exceed immediate loan repayment requirements. The Board actively monitors current debt and equity levels as well as considering the future levels of debt and equity required to sustain the business. Current and projected compliance with loan covenants are monitored and compliance certificates are prepared on a regular basis. For all money borrowed consideration is given to procuring the appropriate hedging instruments to protect against increases in interest rates.

·   By investing in property in mainland Europe the Group is exposed to a foreign currency exchange rate risk. In response to this risk the Group's borrowings in Europe are in Euro denominated loan facilities and therefore, to the extent that investments are financed by debt, a self hedging mechanism is in place. In relation to the equity element of the Group's Euro investments the Board monitors the level of exposure on a regular basis and considers the level and timing of when to take out the appropriate hedging instruments to cover this exposure. There is also a risk that one or more of 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.

· In addition to the need to act as a responsible landlord, there may be occasions when pollution on a site owned by a property investment company becomes its responsibility and risk of non compliance with laws and regulations is apparent. Each acquisition undertaken by the Group includes an environmental report from a specialist consultancy. These reports may highlight the need for further investigation and in some cases remediation. The Group's policy is then to either undertake such investigations or remediation or potentially reject the purchase as no longer viable.

· Loss of REIT status and payment of additional corporation tax would arise from a breach of REIT compliance requirements. The risk of a breach of certain limits imposed by REIT legislation is mitigated through regular review of the Group's actual and forecast performance against REIT regime requirements.

Corporate and Social Responsibility

Hansteen is committed to being socially and environmentally responsible. It is Hansteen's policy to comply with environmental legislation and relevant codes of practice. Hansteen seeks to reduce emissions and pollution, where possible. Details of our Greenhouse Gas emissions are detailed in the Directors' Report.

Hansteen supports local and national charities and regular events are held in each office to support charitable causes. We have supported staff who voluntarily gave up their time to teach children from local schools during working hours. Additionally, a work experience programme has been established with a local school in London.

Human Rights 

Hansteen respects Human Rights and aims to provide assurance to internal and external stakeholders that we are committed to human rights and the principles of the Universal Declaration of Human Rights.

We are committed to creating and maintaining a positive and professional work environment that reflects and respects the basic rights of freedom to lead a dignified life, free from fear or want, and where stakeholders are free to express their independent beliefs. Our employment policies and practices reflect a culture where decisions are made solely on the basis of individual capability and potential in relation to the needs of the business.

Equality and Diversity

Hansteen is a company where every employee, current and potential candidate has the opportunity to achieve their full potential, and where people treat each other with dignity and respect. In our increasingly competitive business environment we understand that the performance and engagement of our employees is central to our business success. Our employment policies and practices reflect a culture where decisions are made solely on the basis of individual capability and potential in relation to the needs of the business.

We recognise the value of a diverse workforce in helping us understand the needs of our large and diverse tenant base and that this can help ensure we tailor our services accordingly, support rental growth and tenant retention. We operate in increasingly diverse communities both in the UK and in the other territories; our diversity is evident in our workforce and our tenants, suppliers and other stakeholders.

The Board is keen to ensure that Hansteen benefits from the highest quality Board comprising individuals with an appropriate balance of skills and experience. We are proud to be a diverse business at all levels.

As at 31 December 2013, the composition of Hansteen's employees, including both Executive and Non-Executive Directors, was as follows:

Responsibility statement of the directors on the annual report

The responsibility statement has been prepared in connection with the Company's full Annual Report for the year ended 31 December 2013. Certain parts of the Annual Report are not included in this announcement, as described in note 1.

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; and

· the Chairman's Statement and the Joint Chief Executives' Review and Finance Review include 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 they face.

By order of the Board

Ian Watson and Morgan Jones

Joint Chief Executives

10 March 2014

Consolidated income statement for the year ended 31 December 2013

All results derive from continuing operations.

Consolidated statement of comprehensive income for the year ended 31 December 2013

All components of other comprehensive income/(expense) will be recycled to profit and loss.

Balance sheet as at 31 December 2013

Approved by the Board of Directors and authorised for issue on 10 March 2014.

Statement of changes in equity for the year ended 31 December 2013

Cash flow statement for the year ended 31 December 2013

Notes to the financial statements

1. General information

Hansteen Holdings PLC ('the Company') 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 6th Floor, Clarendon House, 12 Clifford Street, London W1S 2LL.

The Company together with its subsidiaries ('the Group') 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 below.

Basis of preparation

The financial information set out in these condensed financial statements does not constitute the Company's statutory accounts for the years ended 31 December 2013 or 2012, but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

The statutory accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation and with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretations Committee as endorsed by the EU relevant to its operations and effective for accounting periods beginning on 1 January 2013.

Subject to changes of accounting policy noted below, the accounts are prepared on the basis of the accounting policies as set out in the previous annual financial statements.

2. Revenue and cost of sales

An analysis of revenue and cost of sales is as follows:

Including interest income of £1,262,000 (2012: £1,495,000) total revenue was £84,223,000 (2012: £78,752,000).

3. 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 non-cash one-off items. A reconciliation of the Normalised Income Profit and Normalised Total Profit reconciled to the profit before tax prepared in accordance with IFRS rules is set out below.

Negative goodwill recognised on acquisition relates to an adjustment to the purchase price of the Spencer group (£330,000) and the gain recognised upon investing in the Ashtenne Industrial Fund Unit Trust (£19,313,000).

Acquisition and reorganisation costs relate to the costs of integrating the asset management business of Warner Estate Holdings plc.

4. Operating segments

Segment revenues and results

The Group's reportable segments are determined by geographic location, which represents the information reported to the Group's Directors for the purposes of resource allocation and assessment of segment performance. A segment's result consists of its gross profit as detailed for the Group in note 2. Administrative expenses and net finance costs are managed as central costs and are therefore not allocated to segments. Gains/(losses) on investment properties by segment is also presented below.

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.

* Includes investment properties held for sale.

5. Profit on disposal of subsidiary

On 24 May 2013, the Group disposed of two thirds of its interest in a subsidiary which resulted in a gain of £1,308,000. The Group retains a stake of one third of the fund and has accounted for this share as an associate.

6. Net finance costs

7. Tax

UK Corporation tax is calculated at 23.25% (2012: 24.50%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The tax charge for the year can be reconciled to the profit per the income statement as follows:

The Group elected to be treated as a UK REIT in 2009 following admission to the Official List. The UK REIT rules exempt the profits of the Group's property rental business from UK corporation tax. Gains on UK properties are also exempt from tax provided they are not held for trading. The Group's UK activities are otherwise subject to UK corporation tax. To remain a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activity and its balance of business which are set out in the UK REIT legislation in the Corporation Tax Act 2010.

8. Dividends

As a REIT, the Company is required to pay Property Income Distributions ('PIDs') equal to at least 90% of the Group's exempted net income, after deduction of withholding tax at the basic rate (currently 20%). £11,882,000 of the dividends paid during the year ended 31 December 2013 is attributable to PIDs (2012: £6,133,000).

9. 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.

The calculations for net asset value (NAV) per share are shown in the table below:

10. Investment property

Included within the property valuation is £2,503,000 (2012: £2,843,000) in respect of tenant lease incentives granted. Investment property includes £3,017,000 (2012: £2,989,000) property held under finance leases.

Properties classified as held for sale at 31 December 2013 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; DTZ, Jones Lang LaSalle or Knight Frank LLP. The valuations have been prepared in accordance with the RICS Valuation - Professional Standards 2012, 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.

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 actives markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). All of the Group's investment property as at 31 December 2013 is categorised as Level 3. Details of inputs used in the fair value measurement can be found in the Strategic Report. An increase in passing rent and a decrease in discount rate would increase the valuation.

As at 31 December 2013, the Group had entered into contracts for £4 million of building works that were not complete.

11. Investment in associates