The Company has expanded its activities significantly in recent years, seeking to increase shareholder funds through the generation and retention of increased net rental streams, development profits and valuation surpluses. This growth has been financed through an increase in secured debt borrowed primarily from UK high street banks and, since 2013, through the use of unsecured debt in the form of a Retail Bond and a Convertible Bond. In assessing the needs of the business the Company is conscious that it needs to manage any risks inherent in this leveraged approach to growing the business. It seeks to do this through the use of unsecured debt (24% of total debt), by maintaining an appropriate debt maturity profile and by hedging its interest rate exposure.
The Company uses gearing on a tactical basis throughout the property cycle, being raised to accentuate property performance when property returns are judged to materially outperform the cost of debt and lowered when seeking to reduce exposure to the property cycle.
At 31 March 2017, the Company’s see-through loan to value (“LTV”), being the ratio of see-through net borrowings to the value of the see-through property portfolio, was 51%. This metric has varied between 45% and 55% in the last five years and, subsequent to the year end, has fallen below 50% following the recent sales of properties in Cardiff and Great Yarmouth.
Looking forward, the Company will seek to operate within an LTV range of 40%-50% for the foreseeable future, subject to being able to maximise opportunities in the market whilst remaining aware of the risks of higher levels of gearing.
During the year, the average debt maturity reduced to 3.6 years (2016: 4.5 years), with no secured loan repayable before November 2019, whilst marginally increasing the average cost of debt at 4.3% (2016: 4.2%). The Company has a significant level of liquidity with cash and unutilised bank facilities of £267m (2016: £193m) to fund capital works on its portfolio.