SMP.L Regulatory News (SMP)

Date of issue: 5th July 2016

ST. MODWEN PROPERTIES PLC

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

Half Year Results for the six months to 31st May 2016

ST. MODWEN DELIVERS STRONG UNDERLYING PROFITS

St. Modwen Properties PLC (LSE: SMP), the UK's leading regeneration specialist, announces its half year results for the six months to 31st May 2016.

Financial Highlights

- Shareholders' equity NAV per share up 2% to 421p (Nov 2015: 414p) and EPRA NAV per share up 1% to 451p (Nov 2015: 446p)

- Profit before all tax of £30m (H1 2015: £206m including £128m New Covent Garden Market (NCGM) valuation gain)

- Results include a one-off £13m impact from the increase in Stamp Duty Land Tax (SDLT) and a £21m impact from the reduction in the NCGM valuation

- Trading profits of £34m in line with prior period's record levels (H1 2015: £35m)

- Valuation gains of £28m before the impacts of SDLT and NCGM highlighted above

- Interim dividend increased by 2% to 1.94p per share (H1 2015: 1.9p per share)

Operational Highlights

- Commercial property development contributes £21m to strong property profits of £36m (H1 2015: £37m)

- 15% increase in residential profits to £15m (H1 2015: £13m), supported by good sales rates across the UK

- Increased investment in Private Rented Sector

- Major projects reaching important milestones with further long-term development potential:

o NCGM, Nine Elms, London - works to interim flower market have commenced as we progress towards vacant possession in 2017

o Bay Campus, Swansea University - works to phase 1c comprising 538 student apartments (bringing total number of student bedrooms to 2,000) on budget and on schedule for opening in September 2017

o Longbridge, Birmingham - town centre phase 2 now complete with further lettings to national retailers. Works to the Royal Centre for Defence Medicine facility progressing well

Bill Oliver, Chief Executive, St. Modwen said:

"These results demonstrate our ongoing ability to deliver strong underlying profits from our robust £1.7bn portfolio.

"Our 6,000 acre land bank provides us with the flexibility to focus our attention on those areas of the market that will provide the strongest shareholder returns. Value is also realised from a variety of asset management initiatives, whilst supported by the strength of the regional business which makes up over 75% of our total portfolio by value.

"Following the Referendum held on 23rd June 2016, we are now operating in a period of uncertainty in relation to many factors that impact the property market. Whilst it is too early to accurately predict how the UK property market will respond, until we have more clarity we believe it is appropriate to take a more cautious approach to the delivery of our development strategy".

Enquiries:

A presentation for analysts and investors will be held at 9.30am today at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC1A 4HD. If you would like to attend, please contact Jenni Nkomo at FTI on +44 (0)20 3727 1000

or jenni.nkomo@fticonsulting.com.

A live webcast of the presentation will be available at www.stmodwen.co.uk and presentation slides will also be available to download. 

Alternatively, details for the live dial-in facility are as follows:

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

This Results Announcement contains certain forward looking statements which, by their nature, involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward looking statements. Any forward looking statements made by or on behalf of the Company are made in good faith based on the information available at the time the statement is made; no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. The Company does not undertake to update forward looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Nothing in this Results Announcement should be construed as a profit forecast.

NOTES TO EDITORS:

St. Modwen Properties PLC

St. Modwen is the UK's leading regeneration specialist. The Company operates across the full spectrum of the property industry from a network of regional offices, a residential business and through joint ventures with public sector and industry leading partners.

The Company is focused wholly upon regeneration with an outstanding 30 year track record of adding value by managing schemes through the planning process, remediating brownfield land and active asset management and development.

With extensive experience in dealing with complex and challenging sites, St. Modwen has a land bank of over 6,000 acres and is focused on the long-term development of commercial property and residential land.

St. Modwen's £1.7bn national portfolio of over 100 projects includes the regeneration of New Covent Garden Market, London, the transformation of Longbridge, Birmingham and the on-going regeneration of over 2,500 acres of former industrial land in South Wales which includes the delivery of the new Bay Campus for Swansea University.

HALF YEAR REVIEW

This year marks our 30th anniversary as a listed company. Having reached such a key milestone, it is important to remember the four fundamental business attributes that have helped us become the UK's leading regeneration specialist:

- 6,000 acre land bank - a resource providing us with the flexibility to move with market demands and to ensure we pursue those projects that will continuously generate the best value.

- Strength in the regions - over 75% of our £1.7bn* portfolio by value is located in the regions where assets are either being prepared for development, constructed or actively run for income at any one time.

- Long-term value creation - our team of skilled professionals has the vision to generate long-term maximum value, through our own actions, across our portfolio of complex and predominantly brownfield projects.

- Recurring income - covering the Group running costs and supporting the business as a whole.

Over the last six months, these four strengths have delivered excellent business performance and have resulted in profit before all tax of £30m (H1 2015: £206m including £128m benefit from NCGM). During the period we have continued to grow the business, increasing shareholders' equity NAV per share by 2% to 421p.

These results absorb two negative factors:

- NCGM revaluation - during the period and based on recent transactional evidence, NCGM was revalued principally on the basis of a residential sales price reduction of 3.75%. This resulted in a £21m reduction of the valuation of our share of this asset. The NCGM valuation is consistent with our expectations and demonstrates that market evidence does not support the level of negative sentiment expressed during the first half of the year towards Central London Zone 1 residential prices and Nine Elms in particular.

- Stamp Duty Land Tax (SDLT) - a one-off £13m impact from the increase in SDLT announced in the recent Budget.

During the period we have continued to work our assets hard and have secured added value gains of £15m and market gains of £13m in the value of our portfolio to substantially offset the above.

*on a proportionally consolidated basis including share of joint ventures. Please see note 2c to the Condensed Financial Statements.

PORTFOLIO

Our £1.7bn property portfolio comprises the following categories of assets:

- Commercial land and development;

- Residential land and development; and

- Income producing properties.

The business is performing very well and we have experienced significant positive activity in the regions.

Commercial land and development - £157m (9% of portfolio value)

We continue to replenish our commercial development pipeline with new opportunities through acquisitions and by securing significant development agreements. It now stands at 1.7m sq ft and represents £236m of gross development value. Following the Referendum decision, we will continue to monitor the phasing of the pipeline.

In addition, we continue to stimulate business growth by converting our land bank into development opportunities and securing a steady stream of planning permissions across the UK. Currently, we have planning for the delivery of a further 13m sq ft of commercial space. We are also pursuing planning applications for an additional 6.5m sq ft of commercial development.

During the period we have signed a number of key development agreements. All are excellent examples of new and significant opportunities that we have added to our portfolio. Highlights include:

- Spray Street Quarter, Woolwich, London - £200m regeneration project in joint venture with Notting Hill Housing for a mixed-use development.

- Chippenham Gateway, Wiltshire - £90m development of this 79 acre site for 1m sq ft of industrial accommodation.

- Stanton Cross, Wellingborough - in June 2016 we signed an agreement with Bovis Homes to be the company's commercial development partner for the delivery of 1m sq ft of industrial accommodation as part of this £900m major regeneration project.

In terms of our major projects, all are contracted to deliver specific milestones and continue to provide long-term opportunities to create value. For example, at New Covent Garden Market we have started works to the interim flower market site which will allow us to secure vacant possession of the 10 acre Nine Elms Square site in 2017.

Residential land and development - £738m (44% of portfolio value)

Residential value is realised through three routes to market:

- Residential land sales;

- Housebuilding; and

- Private Rented Sector.

Residential land sales - enhancing the value of predominantly brownfield land through remediation and securing viable and implementable planning permissions before either developing or selling to third party housebuilders.

We have experienced good demand from housebuilders across the UK seeking to meet ongoing demand for new housing.

Housebuilding - via in-house development under our own housebuilding brand St. Modwen Homes or in joint venture with Persimmon Homes.

Strong growth in this area of the business has translated into a profit increase of 15% to £15m (H1 2015: £13m) of which St. Modwen Homes contributed over 50%.

Reservation rates exceeded the national average at 0.82 units per outlet per week. Sales rates have also remained strong with a total of 461 residential completions achieved in the period (H1 2015: 429).

In line with expectations set out in November 2015, St. Modwen Homes has now overtaken the Persimmon joint venture in terms of profit delivery and is active on 14 sites across the UK.

In terms of the entire residential portfolio, there are already 26,167 plots with planning recognition* in the pipeline which we will realise either through land sales or delivery by St. Modwen Homes.

* Allocated in local plan or similar, resolution to grant, outline permission or detailed permission.

Private Rented Sector (PRS) - the development of residential accommodation specifically for the private rental market.

PRS enables us to use our land bank both to deliver development profits and to grow our rental income. It is fast becoming an established part of the portfolio and comprises the following:

Completed developments - comprising 64 apartments across two schemes, providing a total of £0.7m net rental income and approximately £15m gross development value:

- Wembley Central - 38 apartments.

- Edison Place, Rugby - 26 apartments.

Future pipeline - comprising approximately 1,400 apartments across nine schemes (subject to planning), providing approximately £12m net rental income and approximately £250m gross development value and including the following schemes:

- St. Andrew's Park, Uxbridge 

- Edmonton Green, Enfield 

- Lee Green, Lewisham 

Income producing portfolio - £804m (47% of portfolio value)

Net rental income has increased significantly in the period to £24.8m (H1 2015: £18.6m), largely driven by the retention of income producing properties from our development portfolio with highlights including:

- Bay Campus, Swansea University - the first two phases of student accommodation have contributed an annualised net rental income of £2.6m with the next phase opening September 2017 increasing total rental income to £4.8m.

- Longbridge, Birmingham - the new town centre (incorporating Marks & Spencer and additional national retailers) has contributed an additional £2.8m.

The other area driving our net rental income is the high volume of acquisitions we have completed in the period and towards the end of the prior year, including:

- Warth Industrial Estate, Bury - a 257,000 sq ft industrial estate situated on a 14.3 acre site and providing an annualised net rental income of £1.1m.

- Crosby Town Centre, Liverpool - 26 retail units within the town centre providing an annualised net rental income of £0.3m.

- Kirkby Town Centre, Merseyside - comprising 400,000 sq ft of retail and leisure space, leased to 80 tenants and providing an annualised net rental income of £3.3m.

Our gross rent roll is now £62m compared with £58.4m at November 2015 and has resulted in increased coverage of the Company's business running costs, excluding direct residential overheads, to over 100%.

Occupancy levels remain stable at 89% and average lease length is seven years.

Outlook

Our 6,000 acre land bank provides us with the flexibility to focus our attention on those areas of the market that will provide the strongest shareholder returns. Value is also realised from a variety of asset management abilities whilst supported by the strength of the regional business which makes up over 75% of our total portfolio by value.

We will continue to consider new commercial opportunities to add to our robust £1.7bn portfolio and seek to dispose of those properties to which we can no longer add significant value.

Following the Referendum held on 23rd June 2016, we are now operating in a period of uncertainty in relation to many factors that impact the property market. Whilst it is too early to accurately predict how the UK property market will respond, until we have more clarity we believe it is appropriate to take a more cautious approach to the delivery of our development strategy.

FINANCIAL REVIEW

Overview

We have had a strong first half of the year, with underlying trading profits in line with the comparative period's record levels as a result of continued activity across our core commercial and residential businesses. We delivered growth through the improvement in the regional property markets and our ability to perform development, investment and asset management actions.

We aim to cover our recurring overheads and interest costs with revenue from our income producing portfolio and have grown our gross rent roll to £62m over the past twelve months with the retention of income producing assets, particularly at our Swansea and Longbridge properties. As a result of these actions, our coverage of business running costs, which excludes direct residential overheads, has now increased to over 100% for the first time.

The valuation gain on our UK-wide property portfolio (on a proportionately consolidated basis including share of joint ventures) was £28m, excluding SDLT and the NCGM revaluation. Including the effect of these items, it fell by £6m. The £28m increase comprises £15m in added value gains that the valuers consider to be from our own actions and a £13m market valuation increase in our portfolio.

Following a year of net investment to grow our income producing asset base in 2015, the first half of 2016 has been more in balance and net borrowings now stand at £454m (Nov 2015: £443m). Our refinancing programme has continued, with the renegotiation and extension of our facilities with Barclays. This has increased our weighted average facility life to 3.7 years which otherwise would have reduced to 3.1 years (Nov 2015: 3.6 years). Combined with our previous refinancing, we have further reduced our weighted average cost of debt, which now stands at 3.8% (Nov 2015: 3.9%). With £554m of committed facilities against net borrowings of £454m, we have ample funding to transact.

Further demonstrating the financial resilience of the Group, we are operating well within the covenants that apply to our corporate banking facilities:

- net assets must be greater than £250m (actual £939m);

- gearing must not exceed 175% (actual 54%);

- see-though interest cover ratio must be greater than 1.25x (actual 3.9x); and

- see-through loan to value must not exceed 65% (actual 30%).

We regularly test our covenant compliance by reference to severe forecast downside scenarios and continue to have good levels of headroom against each of them.

Our see-through loan-to-value ratio has remained constant at 30% (Nov 2015: 30%). Gearing and adjusted gearing (all borrowings adjusted to amortised cost and excluding finance leases) have also remained constant at 54% and 48%, respectively (Nov 2015: 54% and 48%).

During the period, in line with market movements, equivalent yields for our income producing properties reduced to 7.4% (Nov 2015: 7.7%), this combined with limited regional rental growth led to a market driven valuation increase for our portfolio of £13m over the period (H1 2015: £20m).

Presentation of financial information

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

Property profits

Property profits of £36m (H1 2015: £37m) have remained broadly consistent with last year's record levels and comprise:

- £15m (H1 2015: £13m) from house-building profits.

- £21m (H1 2015: £24m) from commercial property profits as our development pipeline crystallises into realised property profits.

Overheads

Ongoing growth in the business has been supported through investment in additional staff to service both St. Modwen Homes and the development pipeline. This brings our average headcount to 336 full-time equivalent employees (Nov 2015: 309). Our recruitment drive in the first half of the year has led to an increase in administrative expenses to £17.0m (H1 2015: £12.1m).

Finance costs and income

Net interest charges of £11.6m (H1 2015: £10.5m) are higher than in the prior period, reflecting higher average debt levels than in the comparative period in 2015, partially offset by the reduction in our weighted average cost of debt to 3.8% for this half-year from 3.9% for the year ended 30th November 2015.

Property valuation

Basis of valuation

All of our investment properties are independently valued every six months by our external valuers Cushman & Wakefield (C&W formerly DTZ) and Jones Lang LaSalle (JLL, for NCGM only). Our valuers base their valuations upon an open market transaction between a willing buyer and a willing seller at the Balance Sheet date. Therefore, no value is taken for any future expected increases but discounts are applied to reflect any future uncertainties. In accordance with accounting standards, valuation movements are reflected as gains or losses in the Income Statement. Where appropriate, we will also independently assess our work in progress for any impairment issues. Valuations in all our asset classes have been validated wherever possible by open market transactions during the period.

Movements in the period

Property valuation movements are made up of two main elements: those resulting from our own actions that we undertake specifically to add value to our assets (land renewal, planning gain, robust asset management), and those resulting from changes in the overall property market. Our valuers provide this split as part of their independent property valuations.

Brexit and valuation uncertainty

The result of the EU Referendum, on 23rd June 2016, to leave the European Union meets the definition of a non-adjusting event after the end of the reporting period for accounting purposes. This is because of the effect it could have on the valuation of the Group's investment properties, which is the most significant item on the Group's Balance Sheet. Since the Referendum date it has not been possible to gauge the effect that this decision will have on property valuations with reference to transactions in the market place.

We are now entering a period of uncertainty in relation to a number of factors impacting the property investment and letting markets which is likely to last for some period of time while the UK renegotiates its relationships with the EU and other nations. Further information on this event and the valuation uncertainty paragraphs included by the Group's property valuers in their valuation certificates are disclosed in note 6 to the Condensed Financial Statements.

Profit before all tax

Our profit before all tax is stated before tax on joint venture income and after movements in the market value of our interest rate swaps and convertible bond. The derivative valuations are based on the financial market's forward prediction curves for interest rates. As a result of a reduction in the fair value of the liability for our convertible bond, together with the movement in the fair value of our interest rate swaps, we recognised net finance income of £1.0m (H1 2015: £6.5m charge). Profit before all tax of £30m compares with £206m for the equivalent period in the prior record year, which benefitted from a £128m NCGM valuation increase.

Taxation and profits after tax

Our tax charge (including joint venture tax and deferred tax) fell to £3.7m (H1 2015: £37.3m) because of the substantial gain on recognising NCGM in the comparative period. As a result, profits after tax are £26.3m (H1 2015: £168.4m). Basic earnings per share for the first six months of the year are 11.8p (H1 2015: 76.0p).

As a property group, tax and its treatment is often an integral part of transactions. The outcome of tax treatments, including tax planning, is recognised by the Group to the extent that the outcome is reasonably certain. The effective rate of tax for the period was 16.8% (Nov 2015: 13.7%) which benefits from certain investment gains not being taxable as a result of indexation and the property ownership structure within the Group. As a result of proposed changes in the Group structure the effective tax rate is expected to continue to move towards, but remain below, the standard rate of tax.

Restatements

Following receipt of the first rental income during the second half of 2015, further consideration was given to the revenue streams associated with the first two phases of student accommodation at the Bay Campus development for Swansea University.

Due to the fixed (subject only to annual RPI adjustment) nature of the Group's annual rental payments to M&G, meaning that the Group retains exposure (both positive and negative) to all variability in net rentals generated from the properties, it was concluded that the transaction was more appropriately accounted for as a finance lease arrangement, rather than as the sale of 50% of the assets.

Consequently, for the year ended 30th November 2015 we restated our 2014 results and opening Balance Sheet as reported in the Financial Statements for that period. This restatement has now also been applied to the results for the six months ended 31st May 2015 to reflect recognition by the Group of the elements below:

- the whole (rather than 50%) of the property interest in the student accommodation;

- to account for the amounts due to M&G as a finance lease liability;

- to eliminate the construction contract accounting recognised in respect of the proportion of the development work performed on these sites that was funded by M&G; and

- to revalue the site during the course of construction.

Details of this restatement are included in the notes to the Condensed Financial Statements.

Hedging and cost of debt

We aim to have predictable costs attached to our borrowing and therefore hedge a portion of our interest rate risk. At 31st May 2016, 42% of our net borrowings were fixed or hedged (Nov 2015: 48%).

With forward starting swaps in place, and the expiry of our fixed to floating swaps, our proportion of borrowings hedged will increase over time. As any new financing is put in place we will ensure that our hedging positions are appropriate for our future development expectations.

Principal risks and uncertainties

Other than risks arising from the EU Referendum noted above, the key risks which could have a material impact on the Group's performance, together with the corresponding mitigating actions, are set out on pages 38 to 41 of the Annual Report for the year ended 30th November 2015, which is available at www.stmodwen.co.uk.

These risks comprise uncertainty in the economic, political and market environment; the availability of funding and the management of cash flow fluctuations; management of construction and development (including joint venture arrangements); regulatory, operational and compliance risk; and recruiting, developing and retaining highly skilled staff.

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

Bill Oliver Rob Hudson

Chief Executive Group Finance Director

4th July 2016

Group Statement of Changes in Equity (continued)

for the period to 31st May 2016

Accounting Policies

for the period to 31st May 2016

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

The Condensed Financial Statements have been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates as set out in the notes to the Group's annual financial statements for the year ended 30th November 2015.

Prior period restatement

During the second half of 2015 further consideration was given to the revenue streams associated with the first two phases of student accommodation at the Bay Campus development for Swansea University. Due to the fixed (subject only to annual RPI adjustment) nature of the Group's annual rental payments to M&G, meaning that the Group retains exposure (both positive and negative) to all variability in net rentals generated from the properties, it was concluded that the transaction was more appropriately accounted for as a finance lease arrangement, rather than as the sale of 50% of the assets. The restatement was reflected in the financial statements for the year ended 30th November 2015. Consequently, we have restated our May 2015 results to reflect recognition by the Group of the following elements:

· the whole (rather than 50%) of the property interest in the student accommodation;

· to account for the amounts due to M&G as a finance lease liability;

· to eliminate the construction contract accounting recognised in respect of the proportion of the development work performed on these sites that was funded by M&G; and

· to revalue the site during the course of construction.

The impact on previously reported financial information is as follows:

(1) Includes £0.3m in respect of the year ended 30th November 2014.

The impact on previously reported financial information for the year ended 30th November 2015 relating to Swansea University is disclosed on pages 117 and 118 of the Group's Annual Report for the year ended 30th November 2015.

Going Concern

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

The review included an assessment of future funding requirements based on cash flow forecasts extending to 30th November 2017, valuation projections and the ability of the Group to meet covenants on existing borrowing facilities. The directors were satisfied that the forecasts and projections were based on realistic assumptions and that the sensitivities applied in reviewing downside scenarios were appropriate.

There are no corporate or joint venture facilities that require renewal before 2019.

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

1. Segmental Information

IFRS 8 requires the identification of the Group's operating segments, defined as being discrete components of the Group's operations whose results are regularly reviewed by the Chief Operating Decision Maker (being the Chief Executive) to allocate resources to those segments and to assess their performance. The Group divides its business into the following segments:

· Residential development, being housebuilding activity through St. Modwen Homes and the Persimmon joint venture; and

· The balance of the Group's portfolio of properties which the Group manages internally, and reports as a single business segment.

All revenues in the tables above are derived from continuing operations exclusively in the UK.

1. Segmental Information (continued)

1. Segmental Information (continued)

(1) Stated before mark-to-market of derivatives, amortisation of loan arrangement fees, other non-cash items and tax of £3.1m credit (31st May 2015: £22.9m charge, 30th November 2015: £18.8m charge). These amounts are reclassified to other profits/(losses) of joint ventures and associates.

(2) Stated before mark-to-market of derivatives, amortisation of loan arrangement fees and other non-cash items of £2.3m (31st May 2015: £7.4m, 30th November 2015: £8.1m). These amounts are reclassified to other finance costs.

(3) Stated before mark-to-market of derivatives and other non-cash items of £5.7m (31st May 2015: £0.9m, 30th November 2015: £1.5m). These items are reclassified to other finance income.

1. Segmental Information (continued)

2. Non Statutory Information

(a) Trading Profit and Profit before all Tax

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

(a) Trading Profit and Profit before all Tax (continued)

(1) Stated before the deduction of net realisable valuation provisions of: Group £0.3m (Six months to 31st May 2015: £nil, Year ended 30th November 2015: £ 1.4m); Joint ventures and associates £nil (Six months to 31st May 2015: £nil, Year ended 30th November 2015: £nil). These items are reclassified to investment property revaluations.

(2) Stated before mark-to-market of derivatives and other non-cash items of: Group £2.3m (Six months to 31st May 2015: £7.4m, Year ended 30th November 2015: £8.1m); Joint ventures and associates £2.4m (Six months to 31st May 2015: £0.6m, Year ended 30th November 2015: £0.6m). These items are reclassified to other finance costs.

(3) Stated before mark-to-market of derivatives and other non-cash items of: Group £5.7m (Six months to 31st May 2015: £0.9m, Year ended 30th November 2015: £1.5m); Joint ventures and associates £nil (Six months to 31st May 2015: £0.6m, Year ended 30th November 2015: £0.6m). These items are reclassified to other finance income.

(b) Property Valuations

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

The split of property valuation gains between added value and market movements is based on an analysis of total property valuation movements provided by the Group's external valuers.

(c) Property Portfolio 

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

As at 31st May 2016 the Group had assets of £650.1m (31st May 2015: £488.4m, 30th November 2015: £633.2m) included within the Group's property portfolio (excluding joint ventures and associates) which were wholly owned, unencumbered and able to be pledged as security for the Group's debt facilities.

(c) Property Portfolio (continued)

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

(d) Movement in net debt

Movement in net debt is set out below:

(e) Trading cash flow

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