UAI.L Regulatory News (UAI)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

20 November 2019

U and I Group PLC

Interim Results for the six months ended 30 September 2019

U+I delivers £3.6m development and trading gains in H1; targets delivery of full year guidance

U+I (LSE:UAI), the specialist regeneration developer and investor, announces its interim results for the six months ended 30 September 2019.

H1 2020 highlights

·; £3.6 million of development and trading gains in H1, with the balance of gains targeted later in H2; plan to achieve £35-45 million of gains for the year ending 31 March 2020 through the flexibility of our substantial project portfolio

·; Submitted planning for Phase 1 of our £1.4 billion scheme in Mayfield, Manchester; expect planning consent outcome for Landmark Court, 8 Albert Embankment and Mayfield in H2

·; Investment portfolio capital value down £5.8 million, a decline of 3.2% on a like for like basis, including our share of joint ventures (H1 2019: -2.6%), reflects the market decline in retail sector property values. Core portfolio initial yield of 7.0% (H1 2019: 6.6%)

·; Since half year, c.£24 million of assets are under offer, in line with our strategy to reduce our retail exposure and improve returns to achieve our medium term 10% per annum total return target

·; Impairment in H1 of £6.5 million relating to a forward funded development where construction has completed and is in the process of being sold. U+I anticipates recovering these costs in future periods

·; C.£1 million of annualised savings (representing 5% of the cost base) achieved in H1 as part of £4 million annualised savings targeted over the three year period to FY 2022. Marcus Shepherd appointed Chief Financial and Operating Officer (CFOO) to drive this strategic objective

·; Interim dividend of 2.4 pence per share (H1 2019: 2.4 pence per share) in line with the Board's previously stated policy

(i) U+I changed its financial year end to 31 March in 2019

(ii) Non-GAAP measure

(iii) Loss mainly reflects gains of £3.6 million, a reduction of £9.2 million compared to 31 August 2018, £5.8 million Investment Portfolio valuation decline and £6.5 million impairment of a development asset 

Matthew Weiner, Chief Executive, said:

"Demand for affordable, convenient and vibrant mixed-use places remains strong. Our proven track record and purpose-driven, sustainable approach to reinvent our towns and cities to become efficient and enjoyable places for everyone to benefit from is as relevant as ever. In terms of market outlook we, like many other businesses, continue to experience challenges. Unsurprisingly, the political and economic uncertainties are delaying decision making, particularly within Government and Local Authorities, with the general election the latest event to impact on market activity at a core time of the transactional year.

We delivered £3.6 million of development and trading gains in the first half through profits across three projects. This reflects the weighting of our projects, where the more significant planned gains remain scheduled for later in H2. We continue to target £35-45 million for FY 2020 through the projects outlined at FY 2019, with the usual flexibility where we have identified other projects in our pipeline, such as Harwell, which has the potential to deliver gains earlier than anticipated.

We are actively managing our investment portfolio to improve returns, targeting a 10% total annual return in the medium term. Additionally, we are improving operational efficiency, targeting c.£4 million of annualised savings to FY 2022, representing 20% of our overall cost base. We achieved c.£1 million of these savings in the first half.

Our focus is on delivering value for all from our substantial existing pipeline. We will continue to deliver our valuable public private partnership pipeline and trading activities, while operating more efficiently, both to maximise returns for shareholders and to benefit in the long term those communities in which we work."

Conference call for analysts and investors

The Company will hold an audiocast for sell-side analysts and investors at 9am today hosted by Matthew Weiner (CEO), Richard Upton (CDO) and Marcus Shepherd (CFOO).

The audiocast details are below and the interims presentation will be posted on the corporate website: https://www.uandiplc.com/investors/results-and-presentations/

Audiocast link:

https://webcasting.brrmedia.co.uk/broadcast/5da5a37f34a3cf1389e7da0c

Participant dial-in numbers

Forthcoming announcement dates:

U+I will announce its full year results for the year ending 31 March 2020 in May 2020.

For further information, please contact: 

U+I

Nicola Krafft

+44 (0)20 7828 4777

ir@uandiplc.com

Camarco (Financial PR Adviser)

Geoffrey Pelham-Lane / Tom Huddart

+44 (0)20 3757 4985 / 4991

uandi@camarco.co.uk 

LEI number: 213800HTEQQEIOGR5A58

About U+I

U+I is a specialist regeneration developer and investor.

With a >£11.5 billion portfolio of complex, mixed-use, community-focused regeneration projects including a £147.1 million investment portfolio, we are unlocking urban sites bristling with potential in the London City Region (within one hour's commute from Central London), Manchester and Dublin. We exist to create long-term socio-economic benefit for the communities in which we work, delivering sustainable returns to our shareholders.

To find out more, visit www.uandiplc.com or follow us @uandiplc  

Chief Executive's Statement

Results for the six months ended 30 September 2019

First half development and trading gains were £3.6 million from project profits identified as part of our guidance for the year ending 31 March 2020.

In the investment portfolio, which is currently in transition to be more dynamic and focused on regeneration, capital value was down £5.8 million. This represents a 3.2% decline on a like for like basis in the first six months, when including our share of joint ventures (H1 2019: -2.6%). This performance reflected the lower valuations of the retail sector assets. Of our directly held portfolio, 40% is in high-yielding, convenience shopping centres, with 96.8% occupancy, where consumer spend is less discretionary and therefore less susceptible to the structural shift to online retailing.

The added value potential within our investment portfolio is clearly demonstrated at our Swanley Shopping Centre asset in Kent where in H1 we were pleased to secure planning permission for a mixed-use scheme, including over 300 new homes, 46,000 sq.ft. additional retail, commercial and community space and a multi-storey car park. This will further enhance the value of this investment asset and was achieved by the leveraging of our combined investment and development expertise. The residential component is now in the market for disposal and will contribute positively to the investment portfolio's performance in H2.

We were also selected by Barnet Council in North London to work exclusively with them to assess the viability of a major regeneration scheme to transform North Finchley high street, making it more suited to modern needs. If the partnership can deliver a viable solution, this would add a major PPP scheme to our already significant development and trading pipeline.

The Group has incurred additional costs in relation to a forward funded development, where construction has now completed and is in the process of being sold. An impairment of £6.5 million has been recognised during the period in this respect. The Group anticipates recovering these costs in the future and any recovery will be treated as a reversal of impairment when received.

As at 30 September 2019 our net debt stood at £154.1 million representing gearing of 47.1% (31 March 2019: £139.0 million and 38.6%). In the first half of the year, the Group repaid £12.4 million of debt relating to its Bromley development. Since 30 September, a further £5.0 million has been repaid as individual unit sales completed and the remaining £20.3 million will be repaid prior to 31 March 2020 from unit sales proceeds.

We continued to improve our operating efficiency, reducing annualised overheads by c.£1 million in the first half, representing c.5% of our cost base.

Consistent with our previously stated policy, the Board has declared an unchanged interim dividend of 2.4 pence per share, which will be payable on 20 December 2019 to shareholders on the register on 29 November 2019. During H2 we will consider, in conjunction with our shareholders, the Company's preferred method of distributing surpluses to shareholders.

Delivering our strategy

Market context and managing risk

A specialist regeneration developer and investor, with a proven track record of working with local authorities to successfully regenerate our towns and cities, U+I is a preferred partner for both the public sector and third party capital. The public sector owns about 15% of all land in our cities (over 20% in London and up to 40% in some boroughs) but lacks the planning and development expertise and the financial resources to address the growing need for more affordable, convenient and inspiring mixed-used places. As a specialist in this field, U+I is ideally placed to deliver both socio-economic value for communities and superior shareholder returns.

U+I focuses on the three high growth geographies of the London City Region (within one hour's commute from Central London), Manchester and Dublin. These regions are concentrated with highly talented people, attract large numbers of tourists, have excellent transport links and show tolerance for diversity. The London City Region is a global commerce, technology and culture hub with a population that is forecast to grow by 10% in the next seven years. Manchester is the most economically important city outside London with 14% population growth forecast in the next five years. Dublin is the capital of the fastest growing economy in the EU.

While these structural growth drivers are clear, optimum progress is hindered by current political and economic uncertainties which are leading to delayed decisions in both the public sector and in the deployment of capital into major regeneration projects. In the short term, with the general election now set, inactivity in the real estate environment is likely to continue, causing further delays in planning, development and investment decisions. For example, Southwark Council has recently cancelled all of its planning meetings for the rest of 2019, which has delayed the outcome of our application for Landmark Court until early 2020.

While such factors are outside our control, we continue to work flexibly and proactively across all of our projects to deliver the gains we have targeted within our originally planned timescales. If some projects are delayed, as with previous years, there are often other projects that have the potential to deliver earlier gains to support delivery of our overall target gains for the full year. This is one of the benefits of our portfolio approach to development.

We also continue to focus on delivering milestone events within our existing valuable public private partnerships (PPP) pipeline. As part of this we are actively progressing discussions with potential funding partners for three key PPP projects at Mayfield, Manchester; 8 Albert Embankment and Landmark Court in London, totalling some £2 billion gross development value (GDV) of projects. There is positive interest in our projects - particularly from Asian, North American and domestic investors - which is particularly encouraging given the levels of caution from inward capital to the UK. The most important milestone to advance these discussions remains securing a resolution to grant planning and we expect a decision on all three projects in H2. We will provide an update on progress in our full year results.

Development and trading

In addition to the £3.6 million secured in H1 2020 from gains from three projects, we continue to make progress across the key projects targeted to deliver our FY 2020 gains. U+I is often second half performance weighted, with a slightly higher weighting this financial year than is typical due to the predominantly trading nature of the projects concerned. We continue to manage our portfolio flexibly to deliver the gains we have targeted within our originally planned timescales.

As an example of this flexibility, Harwell, our joint venture innovation and science cluster in the Oxford corridor, is added to our H2 development and trading guidance. We believe the real estate market for science and research led facilities is strong, with occupational demand for space high. Having delivered over 500,000 sq.ft. of new space over the last five years, we believe that an additional capital partner is required to drive the next phase of growth. We commenced Phase 1 of a marketing campaign to secure this partner in November 2019, with a view to entering into a recapitalisation of the joint venture this financial year, subject to terms and pricing. The potential transaction does not change our future guidance for either development and trading gains or the investment portfolio.

Below are the key value triggers that will support delivery of our profits for each project.

* Held in joint venture

We are making good progress on our regeneration strategy in Dublin. Having acquired assets in 2018, these are now subject to an earlier than anticipated rezoning to residential uses, with Dublin City Council in detailed consideration to change the planning designation on our White Heather property within H2. This is a major step to generating value.

In relation to the Hendy Wind Farm, following construction and commissioning of the initial turbine in FY 2019, further construction is required and this is progressing.

Consequently, whilst practical completion of the project will be delayed until Q1 2021, a potential forward sale of the project in H2 would enable profit recognition in FY 2020.

Central to this profit recognition is Ofgem accreditation under the relevant subsidy regime. We, in conjunction with the project's advisors, are of the view that the project has strong grounds for accreditation and aspects of our accreditation application are currently being progressed. Based on our and market experiences elsewhere, we cannot be certain that accreditation will be achieved in H2.

An entrepreneurial portfolio

Our three core geographies of London City Region, Manchester and Dublin, where there is a significant shortfall in quality mixed-use schemes, provide exciting opportunities for development as the public sector looks to improve the socio-economic and financial productivity of its land holdings.

The housing crisis is increasing the pressure on Local Authorities who fail to meet the Government's test of having a five-year supply of housing land. This means that certain Local Authorities will need to grant more planning consents. With a 23% reduction in golf memberships over the last decade marking a steady decline in the sport, we have seen an opportunity to meet housing needs from the regeneration of obsolete golf course land. Over the last two years, we have built up a golf related portfolio of assets comprising a golf driving range and three golf courses. We have submitted for planning on two courses, the latest in September on Broke Hill Golf Course in Sevenoaks. In total, our "golf" portfolio now comprises 390 acres assembled for an investment of c.£10.5 million. This land has a potential GDV of over £875 million, capable of delivering in excess of £50 million of gains to the Company by the end of FY 2022.

As we seek to bring forward our major PPP schemes, we are targeting securing planning consents at 8 Albert Embankment and Landmark Court - two of our major PPP projects in London City Region - in FY 2020. In October 2019 we also submitted planning applications for the first phase of our significant £1.4 billion mixed-use regeneration project at Mayfield, Manchester. This included designs for a 6.5 acre public park (the first in Manchester city centre for over 100 years), an eight storey (72,000 sq.ft. NIA) office building, a twelve storey (230,000 sq.ft. NIA) office building, a multi-storey car park, together with public realm improvements. The offices are in response to strong occupier interest at Mayfield and the wider Manchester market. We are targeting securing resolution to grant planning across these three projects by FY 2020. The delivery of our larger PPP projects will support the planned growth of Development Management fees to c.£6.5 million per annum by FY 2022 (FY 2019: £2.5 million per annum; FY 2016: £0.7 million per annum).

Investment portfolio

Capital value in the investment portfolio was down £5.8 million. This represents a 3.2% decline on a like for like basis in the first six months, when including our share of joint ventures. Notwithstanding this decline, occupancy remains strong at 91.5% across the portfolio and at 96.8% for shopping centres. In H1, we suffered no impact from CVAs across our centres.

C.80% of our investment portfolio assets delivered a largely flat capital value performance, a further indication of their income sustainability, whilst four of our retail assets delivered value declines of 10% or more. Since the half year end, three assets worth a total of c.£24 million are under offer at an overall premium to September 2019 valuation. This includes two non-core retail assets outside of our key geographies that we had identified for disposal. It also includes our single largest void which is under offer on the basis of a 30 year lease with an option to purchase. Completion of this transaction, which is subject to planning, would take overall portfolio occupancy to 93.6%.

Our transition strategy is progressing as we seek to generate superior rental and capital growth, through the ownership of our own regeneration assets. We have identified a minimum of £50 million of potential U+I assets for transition into the portfolio over the next two years which forms part of up to £175 million targeted to transition across over the next five years. Over time, we believe that our transition strategy will lead to consistent returns of 10% per annum. We are currently evaluating the first phase of assets that could transition to ensure they meet our return criteria.

Business optimisation

Following an extensive review of our operations to assess where business improvements could be made, we plan to deliver an annualised overhead saving by FY 2022 of circa £4 million, which is the equivalent of 20% of our current cost base. This, supplemented by increased Development Management fees, will result in a significant £7.5 million decrease in the uncovered element of our overhead before contribution from rental income from £17.5 million to £10.0 million by FY 2022.

With effect from today, Marcus Shepherd (formerly Chief Financial Officer) has been appointed Chief Financial and Operating Officer under the combined title of CFOO. By combining these roles, we can give single point accountability for the delivery of our efficiencies programme.

Summary and outlook

We continue to focus on managing our portfolio to deliver gains in H2 within originally planned timescales, as well as on realising the full potential of our development pipeline over the longer term. Our investment portfolio transition strategy is well underway, and our focus on overhead savings will underpin enhanced shareholder returns over the coming years.

Our strategic vision remains to deliver high quality regeneration aligned to the growth trends of urbanisation and unfulfilled demand for affordable, convenient and inspiring places. We look forward to delivering this for the benefit of both our shareholders and communities alike.

Financial review

Net assets attributable to shareholders decreased by £33.1 million to £327.0 million (31 March 2019: £360.1 million) reflecting the result for the period and the payment of £9.5 million of dividends declared in respect of the previous financial year (£5.1 million supplemental dividend and £4.4 million final dividend).

The result for the six months to 30 September 2019 was a loss before tax of £23.9 million (31 August 2018: £4.2 million loss).

Our guidance for development and trading gains for the financial year has been reconfirmed as a range of £35-45 million, following the delivery of £3.6 million of gains in the first half of the year, reflecting the previously notified second half weighting.

The Group has incurred additional costs in relation to a forward funded development, where construction has now completed and is in the process of being sold. An impairment of £6.5m has been recognised during the period in this respect. The Group anticipates recovering these costs in the future and recovery will be treated as a reversal of impairment when received.

As at 30 September 2019 our net debt stood at £154.1 million representing gearing of 47.1% (31 March 2019: £139.0 million and 38.6%). In the first half of the year, the Group repaid £12.4 million of debt relating to its Bromley development. Since 30 September, a further £5.0 million has been repaid as individual unit sales completed and the remaining £20.3 million will be repaid prior to 31 March 2020 from unit sales proceeds.

Overall, the weighted average maturity of our debt is 5.9 years with a weighted average interest rate of 4.7%, excluding joint ventures.

The introduction of IFRS 16 has resulted in the recognition on the Group's balance sheet of £44.5 million of lease liabilities and £42.9 million of right-of-use assets as at 30 September 2019. In addition, interest expense now includes a charge of £1.4 million relating to property assets held via long leasehold arrangements.

The Group continues to monitor its risk profile on a regular basis. The main business risks continue to be construction and planning risk with an increasing element of market/political risk as the Government continues its Brexit related negotiations. The Risk Management Committee continually reviews the Group's risk profile, reporting to the Audit and Risk Committee and the Board. Principal risks are categorised either as external risks, whose occurrence is beyond the control of the Group, or business risks which the Board manage as part of the Group's operations. Further details can be found in the U and I Group PLC 2019 Annual Report.

Portfolio analysis

Income generating properties as at 30 September 2019

Investment property - key statistics

* Based on the core investment property assets only.

Consolidated statement of comprehensive income

unaudited for the six months ended 30 September 2019

All amounts in the Consolidated statement of comprehensive income relate to continuing operations.

Notes 1 to 19 form an integral part of these condensed consolidated interim financial statements

Consolidated balance sheet

unaudited as at 30 September 2019

Notes 1 to 19 form an integral part of these condensed consolidated interim financial statements.

Consolidated statement of changes in equity

unaudited as at 30 September 2019

Notes 1 to 19 form an integral part of these condensed consolidated interim financial statements.

Consolidated cash flow statement

unaudited for the six months ended 30 September 2019

Notes 1 to 19 form an integral part of these condensed consolidated interim financial statements.

Notes to the interim financial information

unaudited for the six months ended 30 September 2019

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

a) General information

The principal activity of U and I Group PLC and its subsidiaries is property investment and development in the UK and Republic of Ireland.

The condensed consolidated interim financial statements for the six months ended 30 September 2019 comprise the results of the Company and its subsidiaries and were authorised by the Board for issue on 19 November 2019.

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of its registered office is 7A Howick Place, London, SW1P 1DZ.

The condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the 13-month period ended 31 March 2019, which were prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union, were approved by the Board of Directors on 21 May 2019 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

These condensed consolidated interim financial statements have been reviewed, not audited.

b) Basis of preparation of half-year report

These condensed consolidated interim financial statements for the six months ended 30 September 2019 have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting', as adopted by the European Union. The condensed consolidated interim financial statements should be read in conjunction with the Group's annual financial statements for the 13-month period ended 31 March 2019, which have been prepared in accordance with IFRS, as adopted by the European Union.

Going concern basis

The Group has considerable financial resources. Rental income continues to be robust, with the risk of significant default assessed by the Directors as low. Development and trading activities are well diversified across regions and sectors. Debt finance is secured for appropriate periods and the Group is comfortable with its covenant positions. As a result, the Directors believe that the Group is well placed to manage its business risks successfully. The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Having assessed the principal risks facing the Group, the Directors considered it appropriate to continue to adopt the going concern basis of accounting in preparing the interim financial statements.

c) Significant events and transaction

The key events for the Group during the interim period were:

·; The Group has submitted planning applications for a number of key sites during the period in respect of its direct and joint venture development and trading portfolio.

·; Development and trading activity continued to be strong with a high level of construction work (£20.9 million) and disposals (£31.9 million) in the period (note 9).

·; The Group's directly owned investment property portfolio suffered a valuation deficit of £5.6 million (3.8%).

·; The Group has incurred additional costs in relation to a forward funded development, where construction has now completed and is in the process of being sold. An impairment of £6.5 million has been recognised during the period in this respect.

d) Judgements and key sources of estimation uncertainty

The preparation of financial statements requires management to make judgements, assumptions and estimates that affect the application of accounting policies and reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing the condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the 13-month period ended 31 March 2019.

In addition, following the application of IFRS 16, Leases, the Group was required to make judgements and estimates in respect of the following:

·; Lease term - the Group needs to determine the likelihood of leases being terminated or extended.

·; Incremental borrowing rate - the Group needs to establish an appropriate rate to use depending on the type and use of the asset.

e) Accounting policies

The accounting policies applied in these condensed consolidated interim financial statements are consistent with those of the Group's financial statements for the 13-month period ended 31 March 2019, as described in those financial statements other than stated below (refer note 17).

A number of new standards and amendments to standards have been issued and are effective from 1 April 2019. The most significant of these are set out below:

- IFRS 16 Leases

The Group adopted IFRS 16, Leases using the modified approach from 1 April 2019, as permitted under the specific transition provisions in the standard. Comparatives for the 13-month period to 31 March 2019 have therefore not been restated.

The impact of adoption of the leasing standard and the new accounting policies are disclosed in note 17. No other standards have had any impact on the Group's accounting policies and did not require retrospective adjustment.

f) Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements and should be read in conjunction with the Group's financial statements as at 31 March 2019.

Uncertainty surrounding the United Kingdom's exit from the European Union continues to be an area of risk for the Group, especially as the next exit deadline again moves closer. The Group continues to monitor the Brexit negotiations and their potential impact along with the impending General Election in December 2019. Otherwise, there have been no changes in risk management or in any risk management policies since the year end.

Liquidity risk

Compared to the period ended 31 March 2019, there is no material change in the contractual undiscounted cash out flows for financial liabilities.

Currency risk

The Directors closely monitor the Group's exposure to Euro denominated assets and liabilities. During the period, the Group has maintained investments in the Republic of Ireland. The Board will enter into foreign currency hedging instruments to limit exposure if deemed appropriate.

Fair value estimation

 The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

·; Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

·; Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

·; Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group's assets that are measured at fair value at 30 September 2019:

The following table presents the Group's assets and liabilities that are measured at fair value at 31 August 2018:

There have been no reclassifications of financial assets during the period.

Fair value measurement using significant unobservable inputs (level 3)

A review of the fair value of financial assets is performed at each reporting date with any significant changes in value reported to the Board and Audit and Risk Committee. Level 3 assets consist of loans to other real estate businesses. Each receivable is reviewed as to its recoverability. If recoverability is in doubt an appropriate provision would be made based on the best estimate of the loan recoverable. The Board have concluded that there are no financial assets which are recognised at FVPL where the loan amount is not the best evidence of fair value. For those assets valued at FVOCI, the Board takes in to account future cashflows and risk adjusted discount rates.

Contingent consideration in a business combination

The Group had no contingent consideration liabilities at 30 September 2019, 31 August 2018 or 31 March 2019.

Group's valuation processes

The Group engages external, independent and qualified valuers to determine the fair value of Level 3 investment property assets (refer note 7). The valuation process involves the Investment Team, our asset service provider and valuers. Every six months, prior to the valuation date, full tenancy information, verified by both the Investment Team and asset service provider is provided to the valuers. New lettings, completed and pending lease events and asset management proposals are provided by the Investment Team on an asset by asset basis. The valuers assimilated income information is checked by the Investment Team before the valuers report numbers.

The fair value of Level 3 assets is also determined by utilising the valuers own internal databases and propriety/external resources for both rental and capital evidence/yield evidence. In addition, they will review local sales data or, where the assets are held for the purpose of extending an existing retail asset, by reviewing appraisals relating to the proposed scheme.

The key unobservable assumptions used in the valuations are:

More information relating to valuation methodology is contained within the Group's financial statements as at 31 March 2019.

The carrying value of the following financial assets and liabilities approximate to their fair value:

·; Trade and other receivables

·; Other current financial assets

·; Cash and cash equivalents

·; Trade and other payables

g) Related parties

Related party disclosures are given in note 16.

h) Capital commitments

As at 30 September 2019, the Group had no contracted capital expenditure or commitments for loans to its associates (31 August 2018: £nil, 31 March 2019: £0.1 million).

2. SEGMENTAL ANALYSIS

The Group is organised for management purposes into two operating divisions, whose principal activities are as follows:

Operating segmental information for the periods ending 30 September 2019, 31 August 2018 and 31 March 2019 are reported below.

These divisions are the basis on which the Group reports its primary segmental information. All operations occur and all assets are located in the United Kingdom or the Republic of Ireland. All revenue arises from continuing operations.

Unallocated amounts relate to general corporate assets and liabilities which cannot be allocated to specific segments.

3. FINANCE INCOME AND COSTS

4. INCOME TAX

Income tax charge is recognised based on management's estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the period to 30 September 2019 is 19.0% (the estimated tax rate for 31 March 2019 was 19.0%).

5. DIVIDENDS

The £5.1 million supplemental dividend, approved on 21 May 2019, was paid on 12 July 2019. The final dividend of £4.4 million for the 13-month period to 31 March 2019 was paid on 6 September 2019.

An interim dividend was declared by the Board on 19 November 2019 and has not been included as a liability or deducted from retained earnings as at 30 September 2019. The interim dividend is payable on 20 December 2019 to Ordinary shareholders on the register at the close of business on 29 November 2019. The interim dividend in respect of the six-month period to 30 September 2019 will be recorded in the financial statements for the year ending 31 March 2020.

6. (LOSS)/EARNINGS PER SHARE AND NET ASSETS PER SHARE

Management has chosen to disclose the European Public Real Estate Association (EPRA) adjusted net assets per share and earnings per share from continuing activities in order to provide an indication of the Group's underlying business performance and to assist comparison between European property companies.

The calculation of basic and diluted (loss)/earnings per share and EPRA adjusted (loss)/earnings per share is based on the following data:

The Directors consider the acquisition and disposal of trading assets to be part of the core business of the Group and therefore have not adjusted profit for the gain on disposal when calculating EPRA adjusted earnings per share.

Basic and diluted net assets per share and EPRA adjusted basic, diluted and triple net assets per share have been calculated as follows: