RNS Number:8398I
Warner Estate Holdings PLC
30 November 2007
Warner Estate Holdings PLC
A PERIOD OF CONSOLIDATION
Warner Estate Holdings PLC ("Warner Estate" or "Group"), the property investment
and management company has today announced its preliminary results for the half
year ended 30 September 2007.
Financial Highlights
* Adjusted net asset value per share 766p (March 2007: 800p)(i)
* Net asset value per share 752p (March 2007: 774p)(ii)
* Total annualised adjusted negative return 4.3% (September 2006:
positive 23.7%)
* Operating profit before net gain on investments #9.9million
(September 2006: #9.4million)
* Realised profits #11.2million (September 2006: #7.9million)(iii)
* #6.4million capital profits on property disposals - 13% over March
2007 values
* Earnings per share excluding fair value movements 22.1p (September
2006: 15.0p)
* Losses per share 10.7p (September 2006: earnings 73.3p)
* Interim dividend up 12.5% to 11.25p
Business Highlights
* Property owned and under management #3.3billion
* Commercial rent roll owned and under management up 3% to #180million
per annum
* Completion of development at Bouverie Place, Folkestone in November
2007
(i) Adjusted for deferred tax on on assets not within the REIT election and
the proposed interim dividend
(ii) The NAV includes deferred tax on assets not within the REIT
election and is before the proposed interim dividend
(iii) This excludes fair value movements, Group and joint ventures' tax
Philip Warner, Chairman of Warner Estate commented
"Our strategy continues to increse revenue and deliver outperformance against
our IPD benchmark. We are soundly financed both to weather current conditions
and to take advantage of attractive opportunities. Reflecting the Board's
confidence in the future, the interim dividend has been raised by 12.5%."
Date: 30 November 2007
For further information contact:
Warner Estate Holdings PLC City Profile
Philip Warner, Chairman Simon Courtenay
Peter Collins, Finance Director Tel: 020-7448-3244
Michael Stevens, Property Director
Tel: 020-7907-5100
Web: www.warnerestate.co.uk
CHAIRMAN'S STATEMENT
--------------------
The property market has been heavily influenced over the last few months by
turmoil in the financial markets. Although our results reflect that negative
influence, there is much from which shareholders can draw encouragement both in
the results and in the actions flowing from the strategy pursued in recent years
in anticipation of more difficult times. In particular the Group's property
performance has beaten the relevant IPD benchmark, one of our key measurements.
RESULTS OVERVIEW
In the six months to September 2007 adjusted net asset value per share fell by
4% from 800p to 766p and net asset value per share by 3% from 774p to 752p.
Nevertheless, there is further value both in the Apia and AIF asset management
businesses, which generated a recurring operating profit of #2.5million
(September 2006: #2.2million), and in the development pipeline wherein
expenditure is held at cost until completion.
The Group made a loss for the period after tax of #6.0million (September 2006:
#39.0million profit). Realised profit before tax, excluding share of joint
ventures' tax credit, rose by #3.3million to #11.2million (September 2006:
#7.9million) but due to the reduction in property values the Group made a loss
of #9.7million (September 2006: #48.3million profit) before tax. The property
revaluation deficit of #20.9million (September 2006: #24.5million surplus) is
unrealised and actual sales of #45million of property (March 2007 values) were
made at an average profit of 13% during the six months to September 2007.
However the effect of the deficit, albeit mitigated by a tax saving of at least
#2.4million due to our REIT status, was to produce a negative total return of
4.3% (September 2006: positive 23.7%).
A more detailed analysis of the half year will be found in the Reports from the
Property Director and the Finance Director which follow this statement.
The Board has increased the interim dividend to 11.25p against 10p last year, a
rise of 12.5%. Although the dividend is not covered by recurring earnings, it
is covered twice by realised profits after tax and will be paid on 22 February
2008 to shareholders on the register at close of business on 25 January 2008.
STRATEGY AND OUTLOOK
The Group's focus is on income, the generating, improving and increasing of
revenue. The move into fund management was made with that in mind and so too was
the build up of a development capability. Development not only creates new
income but improves the quality of that already flowing. The Group's 200,000 sq
ft shopping centre in Folkestone completed this month, 92% pre-let, and will be
valued at 31 March 2008. In joint venture with Bank of Scotland, construction
started on 100,000 sq ft of retail in Bolton, already 70% pre-let and scheduled
for completion in the next financial year. More development is in the pipeline
and the sales and purchases made over the last few years and continuing have
further upgraded the quality of the portfolio as a whole.
The Group pursues a prudent approach to borrowing and has little exposure to
current credit market conditions. We have a number of long term banking
relationships, which include joint ventures with our banks, and all the Group's
borrowings are on bank balance sheets and not exposed to the commercial mortgage
backed securities (CMBS) market. Although gearing at 86% (currently 83%) was
higher than anticipated at 30 September, following more acquisitions on balance
sheet than in joint venture, the properties purchased have been in the best
performing sector, London offices, and the Group's loan to value ratio (LTV) is
a comfortable 58%. Income cover is, arguably even more important than LTV and
the Group's quantity and quality of rental income have continued to increase.
Only 7% of the Group's revolving facilities are scheduled for renewal during the
current financial year and gearing is expected to reduce following more budgeted
sales.
Yields have moved out across most sectors and the investment market is opaque
and uncertain; this is a reflection of financial markets and limited
transactional evidence, not of the occupational market. Our underlying income
stream has increased on a like for like basis during the period with reduced
void levels and improved rental values. Although we expect further outward
movement in yields, the current share price represents a substantial discount
both to today's NAV and to that which might follow reasonable expectations of
yield shift. Furthermore, the effect on the Group will be ameliorated by the
absence of tax, consequent upon our REIT status, by the improvements in quality
and quantity of income brought about by asset management and by the prospect of
lower interest rates in 2008.
PROPERTY REPORT
---------------
The Group manages a total portfolio of #3.3billion of property for itself and
external investors. Of the property managed, some #1.2billion represents the
Group's equity commitment which is broken down as directly owned property (42%),
share of investment in joint ventures (40%) and share of investment in funds
(18%). It is this equity portfolio which drives the Group's NAV and generates
the majority of its income. The element that is not owned produces management
fee income and the potential for performance fees which supplement the Group's
overall profit performance. In the six months to September 2007 this income
stream produced a profit before tax of #1.5million (September 2006:
#1.0million) for a minimal capital investment.
Across the total managed portfolio, annual rental income for the first six
months increased by #4.8million to #179.9million and income from standing
investments, those managed throughout the period, rose by #1.8million. The main
drivers have been a reduction in void rate which, excluding the Ashtenne
Industrial Fund (which has a deliberate void rate of 10% to14%), now stands at
4.9% representing #6.4million pa, down from 6.3% at March 2007, and our
aggressive asset management programme. The same core income improvement
philosophy is at the heart of our management strategy. Our target void rate at
the start of the year was 5.0% and this has already been achieved.
Total return from our equity portfolio for the first six months was 2.1% (on the
total managed portfolio of #3.3billion it was 2.2%) compared with 1.1% from the
IPD benchmark, with income returns of 2.7% (total managed portfolio 2.8%)
against 2.4% from IPD.
Occupational markets continue to be robust in the face of rising yields, the
opposite of the situation 12 to 24 months ago, and there is now net
disinvestment as opposed to considerable demand. The equity portfolio's ERV
increased by #5.5million over the first six months to #80.2million pa,
representing growth of 7% which provides plenty of opportunity for continuing
income improvement.
The hard work put in over the last three years to bring our development pipeline
forward is now coming to fruition with #1.88million of new contracted income to
come through in the second half of this year following November 2007 completions
at Folkestone and Bardon of which #1.74million is the Group's share. The table
below details the schemes completed and underway during this year.
Rent
achieved to
Anticipated Cost of ERV (at date in
Business Size Practical scheme to commencement total (and Group Comments
Area Project sq ft Completion completion of works) as % of ERV) Interest & Timing
Wholly Owned Folkestone, 200,000 Second half #27million #1.9million #1.6million 100% Centre opened
Bouverie Place 07/08 (85%) 26.11.07
Shopping Centre
Joint Ventures Bardon, Leics, 54,000 Second half #4.4million #0.275million #275,225 50% Practical
Interlink Park 07/08 (100%) completion
achieved
02.11.07
Bolton Shopping 100,000 Second half #35million #3.2million #1.9million 50% Under
Centre - The 08/09 (59.5%) construction
Market Hall
In addition, the Ashtenne Industrial Fund, which the Group asset manages and has
a 6.5% investment in, has an active ongoing development programme with two
projects currently underway at Optima Park in Kent and at Tameside Business Park
in Manchester, which totals 170,000 sq ft.
The autumn credit crunch has brought illiquidity rather than, as yet, market
deals generating comparable evidence of capital value decline; valuations are at
present falling on sentiment and lower volumes.
The IPD Quarterly index recorded a fall in value over the six months to
September 2007 of 1.3%, its first decline since 2001, and the IPD Universe net
initial yield rose by 6 bps to 4.64%. Our own wholly owned portfolio followed a
similar trend with its net initial yield rising by 7bps to 5.09% whilst the
overall managed portfolio of #3.3billion saw its net initial yield rise by 10bps
to 5.24% with a similar rise on the standing investments. A table showing the
complete analysis of the All Property Returns against IPD can be found at the
end of the Property Review. We believe there will be greater falls across the
market in the value of secondary assets, whilst prime investments should remain
more resilient. Our own properties increasingly lean towards prime, as reported
in June 2007, and this trend has continued in the first half year with
#45million of property realising #55million before costs from disposals of
secondary and ex-growth assets at a net 13% above their March 2007 values which
have been replaced by #93million of Central London offices with significant
asset management potential.
KEY STATISTICS
Total under management Warner equity investment
30 September 2007 31 March 2007 30 September 2007 31 March 2007
Capital Value #3,252million #3,221million #1,215million #1,172million
Annualised rent roll #179.9million #175.1million #65.8million #62.6million
Initial Yield 5.24% 5.14% 5.15% 5.06%
Equivalent Yield 6.26% 6.24% 5.95% 5.99%
Average Unexpired Lease 6.80 years 7.16 years 8.63 years 6.96 years
Term
Void Rate 8.6% 10.8% 5.9% 7.5%
Number of Properties 542 562 n/a n/a
Average Lot Size #6.00million #5.73million n/a n/a
*Investment properties and properties under the course of development, where the
capital value is before the accounting adjustment for ground lease interest for
leasehold properties and certain properties treated as finance lease assets of
#4.5million (2006: #1.1million).
WARNER EQUITY PORTFOLIO
Property Type Ownership
Share of Net
Wholly Joint Share of Annualised Initial Equivalent
Owned Ventures Funds Total Rent Roll ERV Yield Yield Weighting
#million #million #million #million #million #million
Shopping Centres 85 289 - 374 19.2 26.6 4.75% 5.89% 30.8%
Shopping Centre 25 - - 25 n/a n/a n/a n/a 2.1%
Development
Other Retail 116 - - 116 6.0 6.8 4.99% 5.43% 9.5%
Total Retail 226 289 - 515 25.2 33.4 4.78% 5.82% 42.4%
Offices 205 51 137 393 22.4 26.7 5.20% 5.97% 32.3%
Distribution 18 148 - 166 10.7 10.7 5.95% 5.95% 13.7%
Industrial 44 - 83 127 7.0 8.9 5.41% 6.68% 10.5%
Other 14 - - 14 0.5 0.5 n/a n/a 1.1%
Total Equity 507 488 220 1,215 65.8 80.2 5.15% 5.95% 100.0%
UNDER MANAGEMENT
Number Capital Annualised rent Net initial
of properties value roll ERV yield
#million #million #million %
Aggregate of all properties
Wholly Owned* 78 506.7 27.3 31.6 5.09%
Joint Ventures (50% owned)
* Agora / Agora Max Shopping Centres* 11 577.7 29.2 42.2 4.60%
* Radial Distribution* 14 296.6 18.3 18.4 5.90%
* Greater London Offices* 2 102.4 4.6 6.1 4.26%
Funds asset managed by the Group
Apia Regional Offices 22 501.0 28.2 32.7 5.27%
Ashtenne Industrial** 415 1,267.3 72.3 94.7 5.42%
Total under management 542 3,251.7 179.9 225.7 5.24%
* Capital value is before accounting adjustments for ground lease interest for
leasehold properties, and certain properties treated as finance lease assets
** Includes 100% of the Space Northwest JV portfolio
Wholly Owned Portfolio
Value: #506.7million (Cushman & Wakefield and Directors)
Rental Income: #27.3million pa
Acquisition activity has been almost exclusively focused on Central London with
close to #100million of acquisitions across three office buildings: America
House, America Square, London EC3 (#26.0million); 16 Upper Woburn Place London
WC1 (#22.6million) and Cable House, New Broad Street, London EC2 (#44.0million).
85% of the Wholly Owned properties are located in London and the South East.
The strategy for selling out of smaller ex-growth properties has continued with
the realisation of approximately #55million, a net surplus of 13% on March 2007
valuations, from the sale of 11 assets.
Rental income has increased by #2.81million pa (11.5%) over the half year.
Development
Within our Wholly Owned portfolio the new 200,000 sq ft Bouverie Place Shopping
Centre, Folkestone reached practical completion in November 2007, 92% pre-let
(by floor area) and in Aylesbury, where we are working with Aylesbury Vale
District Council on the 265,000 sq ft (24,628 sq m) extension to the Hale Leys
Centre, a planning application is expected to be made in early 2008. The
acquisition of JS Real Estate plc in March 2007 included a number of potential
new development opportunities most notably Herluin Way, Weston-Super-Mare,
40,000 sq ft of out-of-town retail.
In our joint ventures the 54,000 sq ft extension by Radial to Interlink Park,
Bardon, Leicestershire, also reached practical completion in November and is
100% pre-let. Works on the 100,000 sq ft (9,294 sq m) extension to Agora's
shopping centre in Bolton are continuing to programme and budget, 70% pre-let
(by floor area) including the two anchor stores leased to H&M Hennes and Zara.
Recent new pre-lets at #164 and #172 per sq ft headline Zone A are ahead of the
initial estimated rental value at the start of the scheme. The project is on
course for opening in autumn 2008.
In the Funds, AIF completed its 85,500 sq ft (7,946 sq m) industrial scheme of
15 units at Quadrant Centre, Gloucester in April 2007. Construction started in
May 2007 on the redevelopment of Tameside Business Centre, Manchester consisting
of 78,000 sq ft (7,249 sq m) of new office/industrial space. Phase 2 of Optima
Park, Crayford, Kent a six unit 93,000 sq ft (8,643 sq m) industrial park, was
completed in August 2007 with 45% of the space pre-let or pre-sold at practical
completion.
PROPERTY JOINT VENTURES (ALL 50% OWNED)
Agora / Agora Max Shopping Centres
Value: #577.7million (DTZ and Directors)
Rental Income: #29.2million pa
In June 2007 planning consent was granted for a new 1,400 sq ft (130 sq m) cafe
in The Grange Shopping Centre, Birkenhead which will be a flagship
sustainability project. Work is due to commence on site in early 2008. Recent
lettings in The Grange and Pyramids Shopping Centres include Caffe Nero and
Republic, improving both the food and fashion offer.
At The Pallasades in Birmingham discussions continue with Network Rail regarding
their Gateway proposals for New Street Station. The scheme proposes extensive
changes to the station and the shopping centre. We continue to improve the
retail offer at the centre with six new lettings completed since March including
a new letting to Pret a Manger, who have introduced the first of their new
concept 'Pret Pod'.
Improvement works are planned in Cavern, Liverpool and early phases of the
extension to Fishergate in Preston are being pursued with retailer attitude to
the centre continuing to be encouraging.
In both Preston and Bolton we have extended the joint ventures' ownerships with
the acquisition of Victoria and Albert Buildings in Preston for #1.25million and
32-34 Corporation Chambers, in Bolton, for #0.35million. Both provide
significant asset management opportunities. At Middleton, through active
management we have increased the rental level in the main mall from #72 per sq
ft Zone A (ITZA) to #78 per sq ft ITZA.
Total income in Agora and Agora Max increased over the period by #500,000 pa.
Radial Distribution
Value: #296.6million (DTZ and Directors)
Rental Income: #18.3million pa
Following the purchase of a fourth 222,000 sq ft warehouse at DIRFT, Daventry
for #17.9million in January of this year, Radial now has 14 UK assets with a
total floor space of 3.2million sq ft under management. The new unit at DIRFT
is vacant but has the benefit of a full rental cover until July 2008.
A bespoke 54,000 sq ft extension and lease re-gear was completed to the Antalis
warehouse at Interlink Park, Bardon, Leicestershire in November.
Radial is now focusing on its stated strategy to extend growth further into
Europe and hopes to purchase at least two European warehouses within the next
six to nine months.
Total income in Radial increased over the period by #33,000 pa.
Greater London Offices
Value: #102.4million (CBRE)
Rental Income: #4.6million pa
Assets owned by the joint venture continue to perform well on the back of strong
market conditions. We completed the refurbishment of vacant space at 55 Old
Broad Street and let all 27,100 sq ft to MWB Business Exchange at #40 per sq ft
against ERV of #37.50 per sq ft.
Total income fell over the period by #312,000 pa (6.8%).
MULTI-INVESTOR PROPERTY FUNDS
Apia Regional Office Fund
Value: #501.0million (DTZ)
Rental Income: #28.2million pa
The Fund remains one of the few specialists investing exclusively in city centre
offices outside Central London.
Over the six month period ending September 2007 there has been a total of c.
35,000 sq ft of lettings representing new contracted income of #273,000 pa and
helping to reduce the overall void rate from 6.4% at March 2007 to a historical
low level of 5.4%.
Notable letting successes have been achieved in the Scottish properties with a
further floor (14,253 sq ft) letting in 225 Bath Street, Glasgow to WA Fairhurst
and a total of 10,000 sq ft in Apex 123, Edinburgh to EC Harris and Cyril Sweet,
all ahead of ERV, and each following completed refurbishment projects.
Ashtenne Industrial Fund (AIF)
Value: #1.27billion (King Sturge and DTZ)
Rental Income: #72.3million pa
There has been little transactional activity in 2007 due to market conditions
and uncertainty over pricing. This change in the market was foreseen so the
team has been focused on the large number of value enhancing opportunities
inherent in the Fund. As a result of this activity the void level of AIF has
fallen from 11.14% in March 2007 to 10.1% in September 2007 (200,000 sq ft
reduction). Rental income has increased by #1.62million pa (2.3%).
Over the last two years AIF has acquired #130million of assets (held at existing
use value) which have potential for either residential, office or retail
alternative use. If planning applications for better use are achieved these
properties will supplement the returns of the Fund in the short to medium term.
The most noticeable transaction in the period was the sale of four vacant
estates in the northwest for #8.2million which represented a 30% return on
costs.
With the healthy occupier market throughout the UK for good quality industrial
units under 10,000 sq ft, AIF is well placed due to the size of units it owns
to minimise the effects of the present correction which is taking place in
industrial values.
All Property
Value 6 Month Returns Spot measures as at 30
September 2007
% WEH 100% Equity Total Capital Income Initial Equivalent Void
Equity Value Invested Return Growth Return Yield Yield Rate
#million #million
Wholly Owned 100% 506.7 506.7 3.0% 0.4% 2.7% 5.09% 5.93% 6.0%
Joint Ventures
* Agora / Agora
Max (Shopping
Centres) 50% 577.7 288.8 0.5% (1.9)% 2.5% 4.60% 5.90% 6.9%
* Radial
(Distribution) 50% 296.6 148.3 0.0% (3.0%) 3.1% 5.90% 5.87% 0.0%
* Greater
London Offices 50% 102.4 51.2 6.2% 3.5% 2.5% 4.26% 5.31% 0.0%
Funds asset managed
by the Group
* Apia 27% 501.0 137.4 2.8% 0.0% 2.8% 5.27% 5.88% 5.4%
(Regional Offices)
* AIF (Industrial) 7% 1,267.3 82.6 2.6% (0.2%) 2.8% 5.42% 6.88% n/a
Total (excl. AIF from voids) 3,251.7 1,215.0 2.2% (0.6%) 2.8% 5.24% 6.3% 4.9%
AIF included in
void rate 8.6%
IPD Monthly Index Industrials 0.6% (2.1%) 2.8% 5.38% 6.28% 11.1%
IPD Monthly Index Offices 3.4% 1.0% 2.4% 4.51% 5.57% 10.4%
IPD Monthly Index Retails (0.4%) (2.7%) 2.3% 4.45% 5.31% 7.2%
IPD Monthly Index Shopping Centre 0.3% (2.3%) 2.6% 4.93% 5.90% 8.8%
IPD All Property (excl. Industrials from voids) 1.1% (1.3%) 2.4% 4.64% 5.56% 8.5%
IPD Industrials
included in void
rate 8.9%
FINANCIAL REPORT
----------------
The information contained in this review is extracted or calculated from the
attached income statement, balance sheet, cashflow statement, statement of
recognised income and expense, statement of changes in equity and notes, as has
the information included in the presentation on these results that has been
posted on the Group's website together with these results. The presentation
contains some additional analysis of the results, particularly in respect of the
analysis of the Group's REIT and non-REIT income. It should also be noted that
this is the first period in which the Group has announced its results as a REIT
whereas the comparatives for September 2006 covered a period when the Group was
not a REIT and therefore comparable REIT information is not available. In
addition the Group's results include #2.0 million of tax credits in the pre tax
profit line as required under IFRS accounting for the profits of joint ventures
which have been reallocated to the tax line in the following commentary.
RESULTS
For the six months to 30 September 2007, the Group made a loss before tax of
#9.7million, which includes property revaluation deficits of #20.9million
compared to a #24.5million surplus in 2006.
30 September 2007 30 September 2006
#million #million
Recurring profit before taxation 5.1 6.5
Non-recurring profits 6.1 1.4
Realised profits 11.2 7.9
Fair value movements (20.9) 40.4
(Loss) / profit before tax (9.7) 48.3
Joint ventures' tax 2.0 (5.8)
(7.7) 42.5
Group tax 1.7 (3.5)
(Loss) / profit after tax (6.0) 39.0
The realised profit before tax rose by #3.3million to #11.2million compared to
the equivalent period in 2006. This increase was due to capital profits in the
period of #6.4million compared to #1.8million in the comparable period and
represented a 13% profit over the 31 March 2007 values.
The Group's recurring profits fell by #1.4million to #5.1million. The main
reason for the reduction, accounting for #1.1million of the adverse variance, is
the disposal of higher yielding properties and their replacement with Central
London properties at lower yields with potential for significant growth,. The
other main constituents are increased void costs of #0.5million arising mainly
due to development works and additional administration costs which have been
partly offset by an increase in asset management fees.
Recurring profit before tax is analysed below and, as noted above, due to the
Group's conversion to a REIT best estimates have been used to reallocate head
office costs for the period to 30 September 2006.
Recurring Profit 30 September 2007 30 September 2006
#million #million
Net income from property investment activities 10.1 9.3
Net income from asset management activities 1.0 0.6
Share of joint ventures' profits 0.7 0.6
Unallocated head office costs (0.9) (0.8)
Income from investment in funds 2.8 2.5
Net interest payable (8.6) (5.7)
5.1 6.5
The average cost of debt during the period was 5.6% compared to 6.8% last year.
The reduction in the cost of debt, despite a significant increase in interest
rates, is due to last year's repayment of #65.5million of expensive debt coupled
with a reduction in the Group's borrowing margins.
The reduction in property asset values of #20.9million includes #3.2million
relating to three assets purchased in the last six months, two of which have
increased in value although not sufficiently to totally offset the costs of
acquisition. The most recent purchase, Cable House, London for #44million,
exchanged in August, completed on the 24 September and had its #2.5million of
purchase costs written off. Given the purchase of a property within a month of
the period end the impact of costs being written off is particularly acute in
these results.
Fair Value Movements 30 September 2007 30 September 2006
#million #million
Property
- Wholly Owned (11.4) 8.2
- Share of Joint Ventures (9.5) 16.3
(20.9) 24.5
Investments in Funds
- AIF (0.7) 4.2
- Apia (0.3) 7.9
Other Investments (0.2) 1.1
Swaps & Caps Marked to Market
- Wholly Owned 0.5 0.7
- Share of Joint Ventures 0.7 2.0
(20.9) 40.4
Due to the reduction in property values in the half year, the Group's total
adjusted return was a negative 4.3% compared to a positive 23.7% in the
comparable period last year.
Return 30 September 2007 30 September 2006
#million #million
(Loss) / profit for the period (6.0) 39.0
(Less) / add back deferred tax movement on revaluations (3.0) 1.7
during the period
Change in fair value of fixed rate debt, net of tax (0.2) 0.9
Total adjusted return for the period (9.2) 41.6
Equity shareholders' funds at start of period 432.7 350.6
Annualised return on shareholders' funds -2.8% 22.2%
Annualised adjusted return on shareholders' funds -4.3% 23.7%
REIT Analysis
The profit before tax has been analysed in the table below between profits
falling within the REIT regime and therefore not taxable and those which remain
taxable. This shows that the Group made a loss in the period on its non-REIT
business which was exacerbated by the fact that under the REIT rules all costs
are apportioned against profits leaving no unallocated head office costs. The
period does not include any income from performance fees that might be
receivable by the Group as, whilst both funds managed by the Group have
performed well in their year to date, they have December year ends and it is too
early to say whether any performance fees will be earned this year.
REIT Non-REIT Capital Fair Head Total
Value Office
Movement Costs**
Asset
Management Other Total
#million #million #million #million #million #million #million #million
Profit/(loss)
before reallocated
costs* 6.2 0.8 (1.1) (0.3) 6.7 (20.9) (1.4) (9.7)
Reallocated costs** (0.3) (1.1) - (1.1) - - 1.4 -
Profit/(loss)
before tax* 5.9 (0.3) (1.1) (1.4) 6.7 (20.9) - (9.7)
Current tax - 0.1 1.0 1.1 - (0.1) - 1.0
Deferred tax - - - - - 2.7 - 2.7
Profit/(loss) 5.9 (0.2) (0.1) (0.3) 6.7 (18.3) - (6.0)
after tax
* This excludes tax credits in the joint ventures of #2.0million
** These are pure head office costs which are reallocated to arrive at the
REIT profit
Tax
This is the first year in which the Group has operated as a REIT. All profits,
whether revenue or capital, that arise within the REIT part of the Group are not
taxable and, as the non-REIT element of the business in total made a loss, there
is no corporation tax payable in the period. The Group will continue to show
deferred tax on its listed and unlisted investments as these do not fall within
the REIT although any distribution income from the Funds is not subject to tax.
Movements on the value of interest rate swaps are also subject to deferred tax.
During the period the income statement includes a credit of #0.8million due to a
reduction in the value of the Group's investments. In addition, our share of
joint venture results will show deferred tax movements on the valuation of
properties within Agora Max and Greater London Offices as these have not been
elected for REIT status. Our share of joint venture results includes a deferred
tax credit of #2.2million as the decrease in the value of the properties owned
by Agora Max exceeded the increase in those owned by Greater London Offices and
this is offset by a charge of #0.2million on our share of the positive fair
value movement of the joint venture interest rate swaps.
In terms of the impact of the REIT the Group paid no corporation tax on its REIT
income and would have paid #2.4million in capital gains tax on the capital
profits made in the period if we had not converted to a REIT. This represents
15% of the REIT conversion charge paid by the Group excluding the joint
ventures.
Fund Management
This business manages #1.8billion (March 2007: #1.8billion) of assets and has
seven regional offices which employ 130 people of which 29 are service charge
recoverable. The Ashtenne Industrial Fund and Apia Regional Office Fund have
four and fourteen years respectively to run.
Summary Fund Management Income Statement
30 September 2007 30 September 2006
#million #million
Asset management and other fees 6.2 5.3
Direct expenditure (3.7) (3.1)
Operating profit 2.5 2.2
Head office recharges (0.8) (1.0)
1.7 1.2
Performance fees - -
Reallocated net interest (0.2) (0.2)
Profit before reallocated costs 1.5 1.0
Operating margin 40% 41%
AIF Asset Management
30 September 2007 30 September 2006
#million #million
Asset management fees 3.2 2.6
Letting and other fees 2.0 1.8
Total fees 5.2 4.4
Direct expenditure (3.2) (2.7)
Operating profit 2.0 1.7
Head office recharges (0.7) (0.8)
1.3 0.9
Performance fees - -
Reallocated net interest (0.2) (0.2)
Profit before reallocated costs 1.1 0.7
Operating margin 38% 38%
Group investment in AIF
Distributions from fund 0.8 1.1
Value of units at 30 September 2007 44.1 42.9
% share of fund 6.52% 6.52%
Annualised yield on holding 3.87% 5.24%
Total fees earned by this business increased by 18% year-on-year as a result of
the expansion of AIF in the period with the profit before performance fees and
reallocated net interest being 44% higher at #1.3million. Negotiations to
review the formulae for the performance fee assessment and to extend the life of
the Fund, which currently has four years to run, have been scheduled for 2008.
This business is carried in the Group's accounts at #11million being the
acquisition goodwill net of surpluses made on the disposal of assets purchased
as part of the acquisition. An interest element of #0.2million (September 2006:
#0.2million) relating to the carrying value of this goodwill has been
reallocated to this business unit and profit before tax and reallocated group
costs has risen by 57% to #1.1million.
Apia Asset Management
Income statement
30 September 2007 30 September 2006
#million #million
Asset management fees 1.0 0.9
Direct expenditure (0.5) (0.4)
Operating profit 0.5 0.5
Head office recharges (0.1) (0.2)
0.4 0.3
Performance fees - -
Profit before reallocated costs 0.4 0.3
Operating margin 50% 55%
Group investment in Apia
Distributions from fund 2.0 1.4
Value of units at 30 September 2007 74.5 71.8
% share of fund 27.43% 28.59%
Annualised yield on holding 5.43% 3.77%
In the period to 30 September 2007 the business earned #1.0million in management
fees, an increase of 11% from September 2006. This increase resulted in profit
in the period of #0.4million. The Group's accounts and therefore the NAV do not
include any value for the Apia fund management business which was set up two
years ago and established in-house rather than purchased from a third party.
Management Fees
The table below briefly summarises the main terms on which the Group received
its management fee income from each of the funds.
Management
Fee % Property
Year Property Valuation Rent Roll
End Asset Value 30 September 2007 30 September
Name Other Fees Performance Fees 2007
AIF 31/12 0.5% Lettings, rent Based on outperforming the IPD #1,267.3million #72.3million
(a) reviews, disposals, all industrial index on a
additions, etc 3-year rolling basis
Apia 31/12 0.4%(b) n/a Based on outperforming the IPD #501.0million #28.2million
(a) regional office index
(excluding business parks) on
a 3-year rolling basis and a
minimum 10% total return.
(a): The performance fees in these Funds are receivable in the second half of the Group's financial
year to 31 March as the fees are calculated on the results of the Funds for the year to 31 December.
(b): The Apia management fee reduces to 0.35% on the property assets managed between #0.5billion
and #1.0billion and to 0.3% on the property assets managed over #1.0billion.
Earnings per Share
Losses per share were 10.7p (September 2006: earnings 73.3p). Earnings per
share excluding valuation movements were 22.1p (September 2006: 15.0p). The
earnings per share figures are not strictly comparable as those for 2006 include
a full tax charge on realised profits and deferred tax on properties which are
now within the REIT and this reduced the earnings per share by 6.5p per share.
This period's earnings are further analysed as follows:
#million Pence per share
REIT profits 5.9 10.6
Capital profits 6.7 12.0
Non-REIT losses (0.3) (0.5)
12.3 22.1
Revaluation movements (properties, investments and derivative (18.3) (32.8)
financial instruments)
(6.0) (10.7)
Dividends
Under the REIT rules, 90% of the profits of the property rental business (the
REIT profits) for the year must be distributed by way of a dividend known as a
Property Income Distribution ("PID"). This distribution will be made net of 22%
withholding tax unless shareholders have filled in the appropriate forms
allowing the dividend to be paid gross, details of which were circulated to
shareholders earlier this month and are contained on the Group's website.
The Group has made the decision to declare an interim dividend of 11.25p, the
whole of which will be distributed as a PID. As seen in the table above, 10.6p
relates to REIT profits which will be 100% distributed. The remaining 0.65p of
the interim dividend relates to capital profits made on the disposal of the
Group's investment properties. These profits are not liable to tax and any
distributions are treated as part of the PID.
Cashflow
The cashflow from operations in the period shows an outflow of #16.2million.
This outflow includes some #18.1million in respect of the JS Real Estate PLC ("
JSRE") acquisition; the bulk of which was the #13.6million redemption of loan
notes that have been refinanced by equivalent bank debt and the purchase of
#4.5million of JSRE shares and related costs in April, the funding of which was
put in place prior to 31 March 2007. The operation's cashflow also does not
include dividends received from the Group's investments in the Funds of
#2.75million which are received quarterly and the Group would treat as part of
its operations cashflow. These items have been adjusted for in the following
cashflow:
Six months ended 30 September 2007
#million
Operating cashflow 4.7
Dividends (6.2)
(1.5)
Capital Movements
- Net property acquisitions (60.4)
- Net purchases of own shares (1.7)
- Net loan repayments (20.6)
- Other movements (4.6)*
(87.3)
Net cash outflow (88.8)
* This mainly relates to the JSRE share purchases and related costs referred to
above
Balance Sheet
As at 30 September 2007, shareholders' funds were #418.4million (March 2007:
#432.7million), a decrease of 3%. The underlying elements of the movement in
equity shareholders' funds are analysed in the table below.
#million Pence per share
Equity shareholders' funds at 31 March 2007 432.7 773.8
Change in number of shares in issue 3.8
777.6
Movement in the period to 30 September 2007 (Group and share of
joint ventures)
Profit before fair value losses 11.2 20.1
Net fair value losses (20.9) (37.5)
Taxation - current 1.0 1.8
Taxation - deferred 2.7 4.9
Loss for the period (6.0) (10.7)
Other equity movements
Shares issued 0.1 0.2
Dividends paid (6.1) (11.0)
Investment in own shares (1.7) (3.1)
Share based payments reserve (0.6) (1.1)
Equity shareholders' funds at 30 September 2007 418.4 751.9
As shown in the table below, the equity shareholders' funds have been adjusted
for the remaining deferred tax on fair value gains on the Group's investment in
Apia and AIF along with our share of the fair value gains in Agora Max and
Greater London Offices which have not been elected for REIT status. The Group
does not anticipate this deferred tax will materialise. In addition, we have
adjusted for the fair value on fixed rate debt which is not included on the
balance sheet along with the interim proposed dividend which is also excluded.
The Group's net asset value per share at 30 September 2007 was 751.9p; the
adjustments result in an adjusted net asset value per share of 766.3p.
30 September 2007 31 March 2007
#million Pence per #million Pence per
share share
Equity shareholders' funds 418.4 751.9 432.7 773.8
Add back deferred tax on revaluation gains (including JVs) 13.8 24.8 19.0 34.0
Less proposed dividend (6.3) (11.3) (6.2) (11.0)
Add fair value adjustments on derivative financial instruments 0.5 0.9 0.7 1.3
Add fair value gain on Folkestone - - 1.2 2.1
Adjusted equity shareholders' funds 426.4 766.3 447.4 800.2
Financing
The Group is cognisant of the various difficulties that the current financial
and credit market conditions could present. However, the potential impact on
the Group's funding is limited for the following reasons:
1. Although the commercial mortgage backed securities ("CMBS") market is
effectively closed, the Group's borrowings are on balance sheet and
therefore not exposed to the CMBS market. There are two tranches of
funding in the joint ventures where the financing was sold by the banks
onto the CMBS market in 2006 but these are not due for renewal until 2011.
2. The disparity between the bank base rate and 3-month LIBOR is currently
around 50bps compared to a norm of 15 to 20bps. This problem has been
avoided by rolling any unhedged debt either on the overnight money market
or at 1-week LIBOR depending on the rates available. This has recently
meant rolling at a rate of 7bps or 8bps above the bank base rate of 5.75%.
3. The margins currently being charged by banks for new debt facilities have
increased by 30bps to 40bps compared to the position before August 2007.
Over the next twelve months the Group only has one facility, representing
less than one fifth of the Group's total facilities, which is due for
renewal in 2008. There is also one facility in the Agora joint venture
with Bank of Scotland which is due for renewal in April 2008. The other
joint venture facilities are not due for renewal until 2009 or 2011 whilst
the facilities in the funds are in place until 2010 and 2011.
Debt
Total net borrowings for the Group as at 30 September 2007 were #365.6million
(March 2007: #296.6million) including loan notes of #6.2million. The increase
in net debt of #69.0million was mainly utilised to fund the acquisition, net of
disposals, of three properties with a combined value of over #90million for the
wholly owned portfolio. Net gearing on adjusted equity shareholders' funds has
risen from 66% at the year end to 86% at 30 September 2007. The breakdown of
debt at 30 September 2007, compared with 31 March 2007, is set out below.
On balance sheet Share of joint Share of funds Total
ventures
#million #million #million #million
Net short-term debt / (cash) 69.1 64.3 (6.0) 127.4
Long term debt 296.5 260.3 94.6 651.4
Total net debt at 30 September 2007 365.6 324.6 88.6 778.8
Of which:
Total net recourse debt 340.1 - - 340.1
Long-term non-recourse debt 25.5 324.6 88.6 438.7
Gearing (on adjusted 86% 183%
shareholders' funds)
Recourse gearing 80% 80%
Total net debt at 31 March 2007 296.6 321.8 90.7 709.1
Gearing (on adjusted 66% 158%
shareholders' funds)
Recourse gearing 61% 61%
Since 30 September 2007, cash received from two properties sold before the
period end totalling #10.6million has reduced net debt to #355million and
reduced gearing to 83%.
The Group debt of #366million is secured by #579million of assets which
represents a loan to value (LTV) of 63%. The Group has additional assets that
can be used as chargeable security in excess of #50million which, if taken into
account, reduces the LTV to 58%.
The Group's average cost of debt at 30 September 2007 was 6.48% (March 2007:
6.18%). The increase of 30bps is due to the increase in interest rates from
5.25% at 31 March 2007 to 5.75% at 30 September 2007 on the unhedged portion of
debt. The Group's Rental Income to Interest cover was 1.5 times (March 2007:
1.8 times). The reduction is due to the purchase of low yield properties during
the period, along with the increase in bank base rate on the unhedged portion of
the Group debt.
At 30 September 2007, the Group had #468million of borrowing facilities of which
#415million were revolving credit facilities and the balance, term debt
facilities (see table below). Since the period end the Group has refinanced
#27million of term debt facility to fund the Folkestone development through
utilisation of its existing revolving credit facilities. As a result, the Group
now has #441million of borrowing facilities, more than half of which roll on an
ongoing basis. Of these facilities, the amount unutilised was #102million at 30
September 2007 (March 2007: #171million) and #39million (March 2007:
#54million) can be utilised without the provision of any additional security.
This is sufficient to meet our working capital requirements.
Debt Analysis
Committed Drawn Amount
Facilities Debt Hedged
#million #million #million
Group 468 366 196
Joint Ventures
Agora 160 148 143
Agora Max 235 235 234
Radial 260 218 154
GLO 72 72 72
Managed Funds
Apia 240 237 195
AIF 480 455 335
With regard to the joint ventures discussions have commenced with the bank with
a view to extending the Agora Shopping Centres' borrowing facility for a further
five years from April 2008. The development at Market Hall, Bolton, within the
Agora Shopping Centre joint venture, has bank funding in place until the
completion of this development in September 2008.
At 30 September 2007, the Group held investments in the Apia Regional Office
Fund and the Ashtenne Industrial Fund amounting to 27.4% and 6.5% respectively.
At this date Apia had debt of #237million with property under management of more
than #500million and AIF had debt of #455million with property under management
of more than #1.2billion. The Funds have loan to value ratios of 47% and 41%
and rental income to interest cover ratios of 2.2 and 2.4 times respectively.
Hedging
The interest rate exposure on the Group's debt is managed to ensure that there
is a balance between flexibility and certainty. The Group has put in place a
strategy to build up 80% to 90% of cover on the floating rate debt over a period
of time so that the hedging instruments will have different maturity and call
dates, in order to ensure that at any given time there will be more than 75% of
cover on the floating rate debt. The exact timing of these additional hedges is
dependent on the ability to obtain rates which are at competitive levels.
Proportion of Floating Rate Debt Hedged as at 30 September 2007
Group on Balance Sheet Share of Joint Ventures
#million #million
Fixed Rate debt 25.5 -
Floating Rate debt 340.1 324.6
365.6 324.6
Percentage of floating rate loans at 30 September 2007
Covered by swaps 14% 70%
Covered by caps 44% 23%
58% 93%
Percentage of floating rate loans at 31 March 2007
Covered by swaps 18% 70%
Covered by caps 39% 23%
57% 93%
Against Group debt, there is now #25.5million of fixed rate debt together with
swaps of #47million and a cap of #150million which provide coverage of 58% of
the floating rate debt. When combined, the total amount of hedging and fixed
rate debt comprises 61% of the total Group debt. With effect from 1 April next
year a further #25million swap becomes effective at a rate of 4.16% at which
point the coverage rises to 68%.
The Group's share of the #649.2million of net debt in the joint ventures is
hedged by caps amounting to #151million and swaps of #451million which comprises
93% of the total joint venture net debt.
Both of the Funds, Apia and AIF, were 82% and 74% covered by a combination of
swaps and caps as at 30 September 2007.
Post Balance Sheet Events
The developments at Folkestone and Bardon (owned by Radial Distribution), which
are included in these results at cost, completed in November 2007. Any
valuation movements will be included in the results for the year ending 31 March
2008.
DIRECTORS' STATEMENT OF RESPONSIBILITIES
----------------------------------------
The Directors confirm that this condensed set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by
the European Union, and that the Interim Announcement herein includes a fair
review of the information as required by 4.2.7 and 4.2.8 of the Disclosure and
Transparency Rules.
The Directors of Warner Estate Holdings PLC are stated in the Group's Annual
Report for the year ended 31 March 2007.
By the order of the Board
D J Lanchester
Secretary
30 November 2007
INDEPENDENT REVIEW REPORT TO WARNER ESTATE HOLDINGS PLC
-------------------------------------------------------
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2007, which comprises the consolidated income statement, consolidated
balance sheet, consolidated statement of recognised income and expense,
consolidated statement of changes in equity, consolidated cash flow statement
and related notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
30 November 2007
Notes:
(a) The maintenance and integrity of the Warner Estate Holdings PLC website is
the responsibility of the directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred
to the interim report since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
SIGNIFICANT EVENTS DURING SIX MONTH PERIOD TO 30 SEPTEMBER 2007
---------------------------------------------------------------
Date Detail Category
April 2007 Company converts to a Real Estate Investment Trust (REIT) Group
April 2007 Purchase of St Magnus House, Aberdeen by Apia Regional Office Fund for Funds
#23.7million
May 2007 Purchase of 2 America Square, London EC3 for #25.1million and 16 Upper Group Investment
Woburn Place, London WC1 for #21.75million Property
August 2007 Purchase of Cable House, 56 - 62 New Broad Street, London EC2 for #44million Group Investment
Property
August 2007 250,000 Ordinary shares purchased as Treasury shares Group
SIGNIFICANT EVENTS POST 30 SEPTEMBER 2007
-----------------------------------------
Date Detail Category
November 2007 Completion of development at Bouverie Place, Folkestone Group
November 2007 Completion of extension at Interlink Park, Bardon Joint Ventures
UNAUDITED CONSOLIDATED INCOME STATEMENT
---------------------------------------
For the six months ended 30 September 2007
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
Notes 2007 2006 2007
#000 #000 #000
Revenue 21,950 21,349 53,424
Rental and similar income 13,013 10,936 21,604
Revenue from property trading activities - 1,731 5,225
Cost of sales of property trading activities - (1,346) (4,170)
Service charge and similar income 1,710 2,329 4,172
Service charge expense and similar charges (2,277) (2,710) (4,703)
Net rental and trading income 2 12,446 10,940 22,128
Revenue from asset management activities 7,227 6,353 22,423
Cost of sales of asset management activities (6,217) (4,124) (12,215)
Net income from asset management activities 2 1,010 2,229 10,208
Administrative expenses (1,334) (1,713) (3,757)
Property expenses (2,220) (2,045) (3,778)
Operating profit before net gains on investments 2 9,902 9,411 24,801
Net (loss) / gain from fair value adjustments on
investment properties (11,410) 8,169 11,198
Net (loss) / gain from fair value adjustment on
investments (1,277) 13,230 14,124
Profit on sale of investment properties 4 6,306 1,738 1,751
Profit on sale of finance lease assets 133 - -
Profit on sale of investments 5 - 28 987
Operating profit 3,654 32,576 52,861
Finance income 6 3,695 3,281 8,185
Finance expense 7 (9,451) (7,129) (21,460)
Change in fair value of derivative financial
instruments 513 710 1,011
Share of associates' post tax profits - 19 -
Share of joint ventures' post tax (losses) /
profits 13 (6,148) 13,069 27,157
(Loss) / profit before income tax (7,737) 42,526 67,754
Taxation - current 8 979 (3,617) (5,182)
Taxation - deferred 8 798 98 17,787
REIT conversion charge - - (10,917)
(Loss) / profit for the period (5,960) 39,007 69,442
Attributable to:
Equity holders (5,960) 39,004 69,425
Minority interests - 3 17
p p p
Basic (losses) / earnings per share 10 (10.67) 73.28 129.26
Fully diluted (losses) / earnings per share 10 (10.52) 72.33 127.69
UNAUDITED CONSOLIDATED BALANCE SHEET
------------------------------------
Notes Unaudited Unaudited Audited
At At At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
ASSETS
Non-current assets
Goodwill 11 11,279 11,205 11,279
Investment properties 12 482,586 305,768 437,832
Properties under the course of development 12 24,896 14,414 19,658
Plant and equipment 550 527 539
Investments in joint ventures 13 145,420 132,798 151,568
Investments in funds 14 119,465 115,766 120,622
Investments in listed and unlisted shares 15 13,140 21,406 13,260
Investments in associates 16 24 155 24
Net investment in finance leases 3,761 - 5,283
Deferred income tax assets 17 553 383 1,343
Derivative financial assets 1,144 - 810
Trade and other receivables 16 97 33
802,834 602,519 762,251
Current assets
Inventories - 9,819 -
Net investment in finance leases 9 - 9
Trade and other receivables 36,109 24,417 29,754
Current income tax assets - 358 384
Cash and cash equivalents 25,187 30,813 34,333
61,305 65,407 64,480
Total assets 864,139 667,926 826,731
LIABILITIES
Non-current liabilities
Borrowings, including finance leases (300,162) (223,203) (286,725)
Trade and other payables (12,197) - (14,238)
Derivative financial liabilities (317) (720) (451)
Deferred income tax liabilities 17 (10,931) (29,274) (11,814)
Retirement benefit obligations 3 (201) (556) (378)
Provisions for other liabilities and charges 18 (3,306) (8,829) (5,334)
(327,114) (262,582) (318,940)
Current liabilities
Borrowings, including finance leases (88,109) (417) (25,803)
Trade and other payables (27,046) (17,410) (46,754)
Current income tax liabilities (939) - -
(116,094) (17,827) (72,557)
Total liabilities (443,208) (280,409) (391,497)
Net assets 420,931 387,517 435,234
EQUITY
Capital and reserves attributable to the
Company's equity holders
Share capital 20 2,806 2,675 2,805
Reserves 20 416,668 382,413 430,661
Investment in own shares 20 (1,051) (908) (740)
Equity shareholders' funds 418,423 384,180 432,726
Minority interest 23 2,508 3,337 2,508
Total equity 420,931 387,517 435,234
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
-----------------------------------------------------------------
For the six months ended 30 September 2007
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
(Loss) / profit for the period attributable to equity
shareholders (5,960) 39,004 69,425
Actuarial profits / ( losses) on retirement benefit
obligations 134 (109) 22
Deferred tax arising on retirement benefit obligations (53) 23 (31)
Total recognised income and expense for the period (5,879) 38,918 69,416
UNAUDITED STATEMENT OF CHANGES IN EQUITY
----------------------------------------
For the six months ended 30 September 2007
Unaudited Audited
6 months Unaudited Year
ended 6 months ended ended
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Opening equity in shareholders' funds 432,726 350,586 350,586
Shares issued 1 - 130
Share premium on shares issued 82 - 21,311
Acquisition of investment in own shares (330) (341) (386)
Disposal of investment in own shares 19 359 572
Cost of share based payments 72 - 1,004
Deferred tax arising on share based payments (652) - 784
Acquisition of treasury shares (1,454) - -
430,464 350,604 374,001
Total recognised income and expense for the period (5,879) 38,918 69,416
Dividend paid in period (6,162) (5,342) (10,691)
Closing equity shareholders funds 418,423 384,180 432,726
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
------------------------------------------
For the six months ended 30 September 2007
Notes Unaudited Unaudited Audited
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Cash flows from operating activities
Cash (outflows) / inflows from operations 21 (10,283) (6,240) 6,105
Interest paid (9,228) (6,445) (21,601)
Interest received 1,008 186 2,330
UK Corporation tax received / (paid) 2,282 (9,400) (11,249)
Net cash outflow from operating activities (16,221) (21,899) (24,415)
Cash flows from investing activities
Purchase of investment properties and related (106,526) (12,771) (15,336)
capital expenditure
Sale of investment properties 46,136 48,289 51,812
Purchase of plant and equipment (103) (134) (225)
Purchase of investments in listed shares - (209) (209)
Sale of investments in listed shares - - 5,242
Sale of investments in funds - 438 500
Purchase of investments in unlisted shares - - (5,000)
Net cash acquired from purchase of shares in - 137 (82,984)
subsidiary company
Purchase of shares in joint ventures - (11,072) (11,062)
Loans to joint ventures - (6,724) (13,299)
Loans repaid by joint ventures - - 1,883
Dividends received from listed investments - 79 123
Dividends received from unlisted investments - - 87
Dividends received from funds 2,750 3,153 6,340
Dividends received from joint ventures - 1,274 1,274
Dividends received from associates - 373 373
Net cash (outflow) / inflow from investing activities (57,743) 22,833 (60,481)
Cash flows from financing activities
Issue of shares 83 - 21,441
Purchase of own shares for AESOP scheme (330) (341) (386)
Disposal of own shares for share option scheme - 352 456
Purchase of treasury shares (1,454) - -
Dividends paid (6,162) (5,342) (10,691)
Purchase of derivative financial instruments - - (882)
Increase in bank loans 7,429 1,548 3,549
Repayment of bank loans (14,431) (5,339) (71,200)
Repayment of mortgages and other loans - - (384)
Net cash outflow from financing activities (14,865) (9,122) (58,097)
Net decrease in cash and cash equivalents* (88,829) (8,188) (142,993)
Cash and cash equivalents at beginning of period (220,665) (77,672) (77,672)
Cash and cash equivalents at end of period (309,494) (85,860) (220,665)
* Includes overdraft facility balances shown in borrowings
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS
-------------------------------------------
1. ACCOUNTING POLICIES
Basis of preparation
The unaudited interim consolidated financial statements of the Group for the six
months to 30 September 2007 have been prepared in accordance with Disclosure and
Transparency Rules of the Financial Services Authority and with IAS 34 Interim
Financial Reporting, as adopted by the EU, and on the basis of accounting
policies set out in the Group's Annual Report and Accounts for the year ended 31
March 2007.
These Interim Financial Statements do not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985.
The statutory accounts for the year ended 31 March 2007 have been delivered to
the Registrar of Companies and include an audit report which was unqualified and
did not contain a statement under either Section 237(2) or 237(3) of the
Companies Act 1985.
2. SEGMENTAL REPORTING
business segments
For management purposes the Group is organised into two operating divisions,
Property Investment and Asset Management:
Property Asset Management Unallocated and Total
Investment other activities
#000 #000 #000 #000
Six months to 30 September 2007 (unaudited)
Revenue 14,723 7,227 - 21,950
Rental and similar income 13,013 - - 13,013
Service charge and similar income 1,710 - - 1,710
Service charge expense and similar charges (2,277) - - (2,277)
Net rental and trading income 12,446 - - 12,446
Turnover from asset management activities - -
Management fee income - 7,227 - 7,227
Performance fee income - - - -
- 7,227 - 7,227
Asset management expenses - (6,217) - (6,217)
Administrative expenses - - (1,334) (1,334)
Property management expenses (2,220) - - (2,220)
Operating profit / (loss) before net gain on
investments 10,226 1,010 (1,334) 9,902
Net loss from fair value adjustments on investment
properties (11,410) - - (11,410)
Net loss from fair value adjustments on investments - - (1,277) (1,277)
Profit on sale of investment properties 6,306 - - 6,306
Profit on sale of finance lease assets 133 - - 133
Operating profit / (loss) 5,255 1,010 (2,611) 3,654
Total assets 531,599 23,149 309,391 864,139
Liabilities net of borrowings (28,026) (6,775) (20,136) (54,937)
Borrowing, including finance leases (3,735) - (384,536) (388,271)
Net assets / (liabilities) 499,838 16,374 (95,281) 420,931
Other segment items:
Capital expenditure 7,845 - - 7,845
Depreciation 16 65 11 92
Property Asset Management Unallocated and Total
Investment other activities
#000 #000 #000 #000
Six months to 30 September 2006 (unaudited)
Revenue 14,996 6,353 - 21,349
Rental and similar income 10,936 - - 10,936
Turnover from property trading activities 1,731 - - 1,731
Cost of sales of property trading activities (1,346) - - (1,346)
Service charge and similar income 2,329 - - 2,329
Service charge expense and similar charges (2,710) - - (2,710)
Net rental and trading income 10,940 - - 10,940
Turnover from asset management activities
Management fee income - 6,353 - 6,353
Performance fee income - - - -
- 6,353 - 6,353
Asset management expenses - (4,124) - (4,124)
Administrative expenses (restated)i - - (1,713) (1,713)
Property management expenses (2,045) - - (2,045)
Operating profit / (loss) before net gain on
investments 8,895 2,229 (1,713) 9,411
Net gain from fair value adjustments on investment
properties 8,169 - - 8,169
Net gain from fair value adjustments on investments
(restated)ii - - 13,230 13,230
Profit on sale of investment properties 1,738 - - 1,738
Profit on sale of investments - 28 - 28
Operating profit 18,802 2,257 11,517 32,576
Total assets 349,643 263,346 54,937 667,926
Total liabilities (28,897) (20,019) (7,873) (56,789)
Borrowing, including finance leases (1,501) - (222,119) (223,620)
Net assets / (liabilities) 319,245 243,327 (175,055) 387,517
Other segment items:
Capital expenditure 2,244 - - 2,244
Depreciation - - 72 72
Property Asset Management Unallocated and Total
Investment other activities
#000 #000 #000 #000
Year ended 31 March 2007 (audited)
Revenue 31,001 22,423 - 53,424
Rental and similar income 21,604 - - 21,604
Turnover from property trading activities 5,225 - - 5,225
Cost of sales of property trading activities (4,170) - - (4,170)
Service charge and similar income 4,172 - - 4,172
Service charge expense and similar charges (4,703) - - (4,703)
Net rental and trading income 22,128 - - 22,128
Turnover from asset management activities
Management fee income - 13,939 - 13,939
Performance fee income - 8,484 - 8,484
- 22,423 - 22,423
Asset management expenses - (12,215) - (12,215)
Administrative expenses (restated)i - - (3,757) (3,757)
Property management expenses (3,778) - - (3,778)
Operating profit / (loss) before net gain on
investments 18,350 10,208 (3,757) 24,801
Net gain from fair value adjustments on investment
properties 11,198 - - 11,198
Net gain from fair value adjustments on investments - - 14,124 14,124
Profit on sale of investment properties 1,751 - - 1,751
Profit on sale of investments - - 987 987
Operating profit 31,299 10,208 11,354 52,861
Total assets 469,078 20,617 337,036 826,731
Total liabilities (29,817) (1,620) (47,532) (78,969)
Borrowing, including finance leases (1,500) - (311,028) (312,528)
Net assets / (liabilities) 437,761 18,997 (21,524) 435,234
Other segment items:
Capital expenditure 7,988 - - 7,988
Depreciation - - 151 151
All turnover and operating profit has arisen from continuing operations.
As the property investment and asset management segments have developed, the
following adjustments are required:
i. Administrative expenses have been reallocated from property investment
to unallocated and other activities.
ii. Net gain from fair value adjustments on investments have been
reallocated from asset management to unallocated and other activities.
3. RETIREMENT BENEFIT OBLIGATIONS
The Group operates and contributes to pension schemes for certain Directors and
employees and makes some discretionary allowances. The costs charged to the
income statement for the six months to 30 September 2007 in respect of these
amounted to #457,000 (September 2006: #386,000; March 2007: #762,000).
Pension premiums paid in advance were #66,000 (September 2006: #306,000; March
2007: #181,000).
The Group operated a defined benefit scheme in the UK, The Warner Estate Group
Retirement Benefits Scheme. The costs charged to the income statement for the
six months to 30 September 2007 in respect of these amounted to #31,000
(September 2006: #32,000; March 2007: #62,000). A full valuation was carried
out at 1 April 2005. The values at 30 September 2007, 30 September 2006, and 31
March 2007 were updates of the 1 April 2005 valuation carried out by a qualified
independent actuary.
It has been agreed with the Trustees that the Group contributes 26.8% of
pensionable salary plus #68,000 per annum.
The value of the assets and liabilities of the Scheme were as follows:
Unaudited Unaudited Audited
At At At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Total market value of assets 5,816 5,791 5,845
Present value of scheme liabilities (6,017) (6,347) (6,223)
Retirement benefit obligations (201) (556) (378)
Analysis of amount charged to operating profit:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Current service cost 31 32 62
4. PROFIT ON SALE OF INVESTMENT PROPERTIES
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Surplus over carrying value:
Investment properties 6,306 1,738 1,751
5. PROFIT ON SALE OF INVESTMENTS
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Surplus over carrying value:
Listed investments - - 959
Unlisted investments - 28 28
- 28 987
6. FINANCE INCOME
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Income from investments
Dividends from listed investments - 79 123
Dividends from unlisted investments - - 87
Distributions from funds (see note 14) 2,877 2,505 5,989
2,877 2,584 6,199
Interest receivable and similar income:
From joint ventures 271 530 1,466
Other interest 538 161 506
Other finance income
Expected return on pension scheme assets 173 157 316
Interest on pension scheme liabilities (164) (151) (302)
9 6 14
3,695 3,281 8,185
7. FINANCE EXPENSE
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Interest payable on loans and overdrafts 9,974 7,309 14,002
Charges in respect of cost of raising finance 266 310 8,626
10,240 7,619 22,628
Less: Interest capitalised (860) (551) (1,300)
9,380 7,068 21,328
Interest payable under finance leases 71 61 132
9,451 7,129 21,460
8. TAXATION
The taxation credit / (charge) for the period has been estimated from the
expected taxable profits of the Group after taking account of capital allowances
available.
9. DIVIDENDS
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
On Ordinary 5p shares
Final 11.0p at 31 March 2007 paid 21 September 2007 6,162 - -
Final 10.0p at 31 March 2006 paid 15 September 2006 - 5,343 5,343
Interim 10.0p at 30 September 2006 paid 23 February 2007 - - 5,348
6,162 5,343 10,691
10. EARNINGS PER SHARE
Basic losses per share of 10.67p (half year to 30 September 2006: earnings
73.28p; year to 31 March 2007: earnings 129.26p) are calculated on the loss for
the period of #5,960,000 (half year to 30 September 2006: profit #39,004,000;
year to 31 March 2007: profit #69,425,000) and the weighted average of
55,840,016 (half year to 30 September 2006: 53,224,590; year to 31 March 2007:
53,709,342) shares in issue throughout the period.
Fully diluted losses per share of 10.52p (half year to 30 September 2006:
earnings 72.33p; year to 31 March 2007: earnings 127.69p) are based on the loss
for the period as above divided by the weighted average number of shares in
issue, being 56,678,166 (half year to 30 September 2006: 53,926,052; year to 31
March 2007: 54,369,516) after the dilutive impact of share options granted.
A reconciliation of the weighted average number of shares used to calculate
earnings per share and to that used to calculate diluted earnings per share is
shown below:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2007 2006 2007
Earnings per share: weighted average number of shares 55,840,016 53,224,590 53,709,342
Weighted average ordinary shares to be issued under
employee incentive arrangements 838,150 701,462 660,174
Diluted earnings per share: weighted average number of 56,678,166 53,926,052 54,369,516
shares
11. goodwill
#000
Cost
At 31 March 2007 (audited) and 30 September 2007 (unaudited) 11,279
Impairments
At 31 March 2007 (audited) and 30 September 2007 (unaudited) -
Net book value at 31 March 2007 (audited) and 30 September 2007
(unaudited) 11,279
Goodwill is not amortised but is subject to an annual impairment test. Goodwill
of #11,205,000 is allocated to the cash generating unit ("CGU") defined as the
fund management business owned by Industrial Funds Limited. The remaining
goodwill of #74,000 is allocated to the CGU defined as the property investment
business owned by JS Real Estate Limited. The recoverable amount of the CGU has
been calculated based on the value-in-use calculations. These calculations use
cash flow projections based on financial projections approved by management
covering a five year period.
12. investment properties and properties under the course of development
Freehold Leasehold
with over Total Properties Under
50 years Investment the Course of
unexpired Properties Development
#000 #000 #000 #000
At 1 April 2007 (audited) 397,206 40,626 437,832 19,658
Acquisitions 25,010 75,200 100,210 -
Capital expenditure 2,534 73 2,607 5,238
Disposals (46,751) (14) (46,765) -
Exchange differences 112 - 112 -
Net loss from fair value adjustments on
investment property (7,432) (3,978) (11,410) -
At 30 September 2007 (unaudited) 370,679 111,907 482,586 24,896
13. JOINT VENTURES
Unaudited At Unaudited At Audited At
30 September 30 September 31 March 2007
2007 2006
#000 #000 #000
Share of joint ventures
At 1 April 151,568 103,372 103,372
Share of (loss) / profit for the period (6,148) 13,069 27,157
Net equity movements - 9,633 39,910
Net loan movements - 6,724 (18,871)
At 30 September / 31 March 145,420 132,798 151,568
Unlisted shares at cost less amounts written off 72,834 37,798 72,834
Group's share of post acquisition retained profits and
reserves 53,646 50,465 59,794
126,480 88,263 132,628
Amounts owed by joint ventures 18,940 44,535 18,940
145,420 132,798 151,568
Included in share of joint ventures' gross assets and liabilities are:
Agora Radial Agora Max Greater Others Total
Shopping Distribution Limited London
Limited Offices
Centres Limited
(a) (b) (d) (e) (f)
#000 #000 #000 #000 #000 #000
Period to 30 September 2007 (unaudited)
Group share of results Revenue 4,209 4,304 5,711 1,559 - 15,783
Operating profit before net gains on
investments 2,421 4,038 3,371 1,274 6 11,110
Net (loss) / gain from fair value
adjustments on investment properties (1,050) (4,548) (5,535) 1,636 - (9,497)
Operating profit / (loss) 1,371 (510) (2,164) 2,910 6 1,613
Net finance (expense) / income (2,104) (3,508) (3,588) (1,242) 7 (10,435)
Change in fair value of derivative
financial instruments (408) (267) 1,492 (96) - 721
(Loss) / profit before income tax (1,141) (4,285) (4,260) 1,572 13 (8,101)
Taxation - current 22 - - - (5) 17
Taxation - deferred 141 95 2,150 (452) - 1,934
(Loss) / profit after income tax (978) (4,190) (2,110) 1,120 8 (6,150)
Minority interests - - 2 - - 2
(Loss) / profit for the period (978) (4,190) (2,108) 1,120 8 (6,148)
Amounts received and receivable by Group
Asset management fees 157 277 477 33 - 944
Performance fees - - - - - -
Interest receivable - - - 271 - 271
Group share of
Non-current assets
Investment properties 133,808 140,326 173,879 51,200 - 499,213
Investments in unlisted shares - - - - 25 25
Finance lease assets - 3,282 - - - 3,282
Derivative financial assets 749 934 8,046 615 - 10,344
Other non-current assets 850 - - - - 850
135,407 144,542 181,925 51,815 25 513,714
Current assets
Finance lease assets - 249 - - - 249
Other current assets 3,797 4,954 4,413 1,350 1,585 16,099
3,797 5,203 4,413 1,350 1,585 16,348
Total assets 139,204 149,745 186,338 53,165 1,610 530,062
Greater
Agora Radial Agora Max London
Shopping Distribution Limited Offices
Centres Limited Limited Others Total
(a) (b) (d) (e) (f)
Non-current liabilities
Deferred income tax liabilities (225) (280) (4,753) (776) - (6,034)
Borrowings, including finance
leases (4,515) (107,728) (132,005) (39,425) - (283,673)
Other non-current liabilities (960) (1,137) - - - (2,097)
(5,700) (109,145) (136,758) (40,201) - (291,804)
Current liabilities
Borrowings, including finance
leases (74,806) - - - - (74,806)
Other current liabilities (6,072) (4,162) (24,378) (1,560) (800) (36,972)
(80,878) (4,162) (24,378) (1,560) (800) (111,778)
Total liabilities (86,578) (113,307) (161,136) (41,761) (800) (403,582)
Share of net assets 52,626 36,438 25,202 11,404 810 126,480
Agora Radial Bareway Agora Max Greater Others Total
Shopping Distribution Industrial Limited London
Limited Properties Offices
Centres Limited Limited
(a) (b) (c) (d) (e) (f)
#000 #000 #000 #000 #000 #000 #000
Period to 30 September 2006
(unaudited)
Group share of results
Revenue 4,332 2,802 - 5,464 - - 12,598
Operating profit / (loss) before
net gains on investments 2,643 2,568 (6) 3,825 - 4 9,034
Net gain from fair value
adjustments on investment
properties 4,966 5,711 - 5,675 - - 16,352
Operating profit / (loss) 7,609 8,279 (6) 9,500 - 4 25,386
Net finance (expense) / income (2,398) (2,563) - (3,535) - 21 (8,475)
Change in fair value of
derivative financial instruments 234 534 - 1,877 (648) - 1,997
Profit / (loss) before income tax 5,445 6,250 (6) 7,842 (648) 25 18,908
Taxation - current (2) (17) - - - (6) (25)
Taxation - deferred (1,668) (2,054) - (2,283) 194 - (5,811)
Profit / (loss) after income tax 3,775 4,179 (6) 5,559 (454) 19 13,072
Minority interests - - - (3) - - (3)
Profit / (loss) for the period 3,775 4,179 (6) 5,556 (454) 19 13,069
Agora Radial Bareway Agora Max Greater Others Total
Shopping Distribution Industrial Limited London
Limited Properties Offices
Centres Limited Limited
(a) (b) (c) (d) (e) (f)
#000 #000 #000 #000 #000 #000 #000
Amounts received and
receivable by Group
Asset management fees 300 302 - 432 - - 1,034
Performance fees - - - - - - -
Interest receivable 272 258 - - - - 530
Group share of
Non-current assets
Investment properties 130,338 118,203 - 177,542 48,792 - 474,875
Investments in unlisted shares - - - - - 25 25
Finance lease assets - 3,954 - - - - 3,954
Deferred income tax assets - - - - 194 - 194
Derivative financial assets 1,381 245 - 1,928 - - 3,554
Other non-current assets 418 - - - - - 418
132,137 122,402 - 179,470 48,986 25 483,020
Current assets
Finance lease assets - 257 - - - - 257
Other current assets 23,109 3,116 - 5,171 946 3,854 36,196
23,109 3,373 - 5,171 946 3,854 36,453
Total assets 155,246 125,775 - 184,641 49,932 3,879 519,473
Non-current liabilities
Deferred income tax liabilities (9,755) (5,486) - (4,462) - - (19,703)
Borrowings, including finance
leases (86,669) (103,583) - (131,489) (39,392) - (361,133)
Derivative financial
liabilities - - - - (648) - (648)
(96,424) (109,069) - (135,951) (40,040) - (381,484)
Current liabilities
Borrowings, including finance
leases (4,860) - - (7) - - (4,867)
Other current liabilities (14,802) (4,140) - (22,682) (861) (2,374) (44,859)
(19,662) (4,140) - (22,689) (861) (2,374) (49,726)
Total liabilities (116,086) (113,209) - (158,640) (40,901) (2,374) (431,210)
Share of net assets 39,160 12,566 - 26,001 9,031 1,505 88,263
Agora Radial Bareway Agora Max Greater Others Total
Shopping Distribution Industrial Limited London
Limited Properties Offices
Centres Limited Limited
(a) (b) (c) (d) (e) (f)
#000 #000 #000 #000 #000 #000 #000
Year to 31 March 2007 (audited)
Group share of results
Revenue 8,497 7,017 - 11,307 1,454 - 28,275
Operating profit / (loss) 3,626 6,312 (5) 5,330 1,179 16 16,458
before net gains on investments
Net gain from fair value 3,621 7,155 - 6,558 373 - 17,707
adjustments on investment
properties
Profit on sale of - 374 - - - - 374
investment properties
Operating profit / (loss) 7,247 13,841 (5) 11,888 1,552 16 34,539
Net finance (expense) / (4,967) (6,354) - (7,049) (1,247) 92 (19,525)
income
Change in fair value of 10 1,490 - 6,502 711 - 8,713
derivative financial
instruments
Profit / (loss) before income 2,290 8,977 (5) 11,341 1,016 108 23,727
tax
Taxation - current 567 8 - - - (92) 483
Taxation - deferred 7,722 3,053 - (4,722) (325) - 5,728
Profit / (loss) after income tax 10,579 12,038 (5) 6,619 691 16 29,938
REIT conversion charge (1,281) (1,515) - - - - (2,796)
Minority interests - - - 15 - - 15
Profit / (loss) for the year 9,298 10,523 (5) 6,634 691 16 27,157
Amounts received and
receivable by Group
Asset management fees 692 758 - 974 34 - 2,458
Performance fees 2,986 - - 3,722 - - 6,708
Interest receivable 543 649 - - 274 - 1,466
Group share of
Non-current assets
Investment properties 132,143 143,742 - 179,029 49,445 - 504,359
Investments in unlisted shares - - - - - 25 25
Finance lease assets - 3,408 - - - - 3,408
Derivative financial assets 1,157 1,200 - 6,554 711 - 9,622
Other non-current assets 402 - - - - - 402
133,702 148,350 - 185,583 50,156 25 517,816
Current assets
Finance lease assets - 243 - - - - 243
Other current assets 5,244 7,337 - 4,845 1,222 3,048 21,696
5,244 7,580 - 4,845 1,222 3,048 21,939
Total assets 138,946 155,930 - 190,428 51,378 3,073 539,755
Agora Radial Bareway Agora Max Greater Others Total
Shopping Distribution Industrial Limited London
Limited Properties Offices
Centres Limited Limited
(a) (b) (c) (d) (e) (f)
#000 #000 #000 #000 #000 #000 #000
Non-current liabilities
Deferred income tax liabilities (366) (378) - (6,902) (324) - (7,970)
Borrowings, including finance
leases (4,515) (109,975) - (131,907) (39,391) - (285,788)
Derivative financial liabilities (1,121) (1,326) - - - - (2,447)
(6,002) (111,679) - (138,809) (39,715) - (296,205)
Current liabilities
Borrowings, including finance
leases (72,861) - - - - - (72,861)
Other current liabilities (6,140) (3,626) - (24,538) (1,486) (2,271) (38,061)
(79,001) (3,626) - (24,538) (1,486) (2,271) (110,922)
Total liabilities (85,003) (115,305) - (163,347) (41,201) (2,271) (407,127)
Share of net assets 53,943 40,625 - 27,081 10,177 802 132,628
(a) Agora Shopping Centres was set up on 5 March 2003 and subsequently
acquired the Pyramids, Birkenhead on 25 June 2003 and The Grange, Birkenhead
on 30 September 2004. On 7 March 2006, The Pyramids, Birkenhead and
The Grange, Birkenhead were disposed of into the Agora Max joint venture
group.
(b) Fairway Industrial Limited was set up on 29 August 2003 and changed its
name to Radial Distribution Limited on 14 October 2004.
(c) Bareway Industrial Properties Limited was set up on 29 August 2003. In
November 2005, the properties were disposed of into the Ashtenne Industrial
Fund. On 11 September 2006 the Group acquired the remaining 50% interest of
Bareway Industrial Properties Limited.
(d) Agora Max Limited was set up on 16 September 2005 and subsequently acquired
The Pallasades, Birmingham on 25 October 2005. The Pyramids and The
Grange, both in Birkenhead, were acquired from Agora Shopping Centres on
7 March 2006.
(e) Greater London Offices Limited was set up and subsequently acquired Old
Broad Street and Central House, London on 28 September 2006.
(f) Net assets relate to a #25k investment in the general partner of Apia
Regional Office Fund and net assets of #785k which is the investment in
smaller joint ventures acquired through Ashtenne.
Amounts owed by / (due to) joint ventures comprise: Unaudited Unaudited Audited
At At At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Agora Shopping Centres Limited 2,600 27,085 2,940
Radial Distribution Limited 57 17,074 429
Agora Max Limited 21,447 279 21,573
Greater London Offices Limited 4,160 2,654 3,907
Others (1,074) - (1,074)
27,190 47,092 27,775
14. INVESTMENTS IN FUNDS
#000
As at 31 March 2007 (audited) 120,622
Net loss from fair value adjustments (1,157)
At 30 September 2007 (unaudited) 119,465
Fund information:
AIF Apia Others Total
(a) (b) (c)
#000 #000 #000 #000
Period to 30 September 2007 (unaudited)
Distributions receivable 854 2,023 - 2,877
Net assets at 30 September 2007 676,902 271,462 -
Percentage share at 30 September 2007 6.52% 27.43% -
Group share of net assets 44,134 74,462 869 119,465
AIF Apia Others Total
(a) (b) (c)
#000 #000 #000 #000
Period to 30 September 2006 (unaudited)
Distributions receivable 1,126 1,356 23 2,505
Net assets at 30 September 2006 658,328 251,287 -
Percentage share at 30 September 2006 6.52% 28.59% -
Group share of net assets 42,923 71,843 1,000 115,766
AIF Apia Others Total
(a) (b) (c)
#000 #000 #000 #000
Year to 31 March 2007 (audited)
Distributions receivable 2,838 3,130 21 5,989
Net assets at 31 March 2007 687,546 266,537 -
Percentage share at 31 March 2007 6.52% 28.07% -
Group share of net assets 44,828 74,817 977 120,622
(a) The Group invested #12,000,000 in the Ashtenne Industrial Fund in
August 2005. A #23,105,000 investment was acquired on the purchase of the
remaining 50% of Industrial Funds Limited.
(b) The Apia Regional Office Fund was set-up on 7 June 2005 and the Group
invested an initial #44,088,000. A further #10,000,000 was invested in
December 2005, of which #902,000 was disposed of in March 2006. A further
#472,000 was disposed of in April 2006. It is treated as an investment
rather than an associate as the Group does not exert significant influence
as a Trustee which is independent of the Group is responsible for the
strategic decisions of the unit trust and the Group's investment holding in
the unit trust will continue to reduce over the short-term.
(c) This relates to minority interest holdings in Agora Max Unit Trust, Agora
Max Birkenhead Unit Trust and The Pallasades Birmingham Unit Trust which
were acquired during the year to 31 March 2006.
15. INVESTMENTS IN LISTED AND UNLISTED SHARES
Unaudited Unaudited Audited
At At At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Listed investments 843 6,397 1,045
Unlisted investments 12,297 15,009 12,215
13,140 21,406 13,260
16. INVESTMENTS IN ASSOCIATES
Total
#000
Cost
At 31 March 2007 (audited) and 30 September 2007 (unaudited) 24
Goodwill arising on acquisition
At 31 March 2007 (audited) and 30 September 2007 (unaudited) -
Net book value at 31 March 2007 (audited) and 30 September 2007 24
(unaudited)
17. DEFERRED TAXATION
Unaudited Unaudited Audited
At At At
30 September 30 September 31 March 2007
2007 2006
#000 #000 #000
Deferred taxation assets
Deferred taxation arising from unrealised derivative 95 216 135
financial instruments valuations
Deferred taxation arising from retirement benefit 60 167 113
obligations
Deferred taxation arising from share based payments 398 - 1,095
553 383 1,343
Deferred taxation liabilities
Deferred taxation arising from the temporary differences
noted below:
Short term temporary differences (51) - (31)
Capital and industrial buildings allowances claimed on - (1,813) -
investment properties
Unrealised property and investment valuations (10,880) (27,461) (11,783)
(10,931) (29,274) (11,814)
18. PROVISIONS FOR OTHER LIABILITIES AND CHARGES
Onerous contracts
#000
At 31 March 2007 (audited) 5,334
Utilised during the period (2,028)
At 30 September 2007 (unaudited) 3,306
Provisions have been analysed between current and non-current as follows:
Unaudited Unaudited Audited
At At At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Non-current 3,306 8,829 5,334
Current - - -
3,306 8,829 5,334
The onerous lease provision is made in relation to onerous leases on properties
which are vacant or sublet at a level which renders the properties loss-making
over the remaining life of the lease. The provision represents the Directors'
estimate of the net cash flows on the properties.
19. FINANCIAL INSTRUMENTS
Financial Liabilities
The interest rate profile of the Group's financial liabilities at 30 September
2007, after taking account of interest rate instruments taken out by the Group
was:
Unaudited At Unaudited At Audited At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Floating financial rate liabilities 143,454 - 110,975
Capped rate financial liabilities 150,000 12,731 100,000
Fixed rate financial liabilities 70,852 194,153 85,643
364,306 206,884 296,618
The above balances are net of cash balances of #20,230,000 (half year to 30
September 2006: #15,657,000; year to 31 March 2007: #14,410,000) which can be
offset under the Group's borrowing arrangements.
The benchmark rate for determining interest payments for the floating rate
financial liabilities was LIBOR / base rate depending upon the facility.
The weighted average interest rate on the fixed rate debt and the average
maturity of that debt was as follows:
Unaudited At Unaudited At Audited At
30 September 30 September 31 March
2007 2006 2007
% % %
Weighted average interest rate
Group 5.62 5.90 6.52
Joint Ventures 5.84 5.81 5.74
Weighted average period for which interest rate is fixed Years Years Years
Group 2.39 6.60 4.50
Joint Ventures 6.26 5.87 1.24
Maturity of financial liabilities Unaudited At Unaudited At Audited At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Group
Within one year or on demand 88,226 417 25,824
Between one and two years 441 14,214 429
Between two and five years 296,976 185,410 285,972
In five years or more - 22,500 -
385,643 222,541 312,225
Borrowing facilities
The Group has various borrowing facilities that were not fully utilised at the
period end and for which the conditions for utilising those facilities were met.
Unaudited At Unaudited At Audited At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Expiring in one year or less:
Total facilities 67,500 - -
Unutilised 9,188 - -
Expiring between two and five years:
Total facilities 286,000 123,388 263,400
Unutilised 29,861 19,120 54,383
Fair values of financial assets and liabilities
The table below sets out by category the changes to the balance sheet values on
fixed rate debt that would occur if fair values were applied.
Unaudited Unaudited Audited
At At At
30 September 30 September 31 March
2007 2006 2007
Difference Difference Difference
between book between book between book
and fair and fair values and fair values
values
#000 #000 #000
Group
Primary financial instruments
Liabilities
Long term debt (over one year) 757 (6,052) 1,011
Assets
Long term loan notes (over one year) (63) (935) (227)
Joint Ventures
Primary financial instruments
Long term loan notes 63 935 227
757 (6,052) 1,011
The effect on net assets per share of the total fair value adjustment (#757,000
less tax #227,000) would be an increase of 0.9p (half year to 30 September 2006:
decrease 8.0p; year to 31 March 2007: increase 1.3p)
The calculation of the fair values has been arrived at as follows:
Debt has been calculated by discounting cash flows at prevailing rates of
interest for instruments with a similar risk profile.
20. CAPITAL AND RESESRVES
Reserves
Non-distributable Investment
reserves in own
Share Distributable shares
Capital reserves Total
#000 #000 #000 #000 #000
At 31 March 2007 (audited) 2,805 193,109 237,552 (740) 432,726
Shares issued 1 - - - 1
Premium on shares issued - 82 - - 82
Retained loss for the period - - (5,960) - (5,960)
Realised on disposal of investment properties - (11,202) 11,202 - -
Net loss from fair value adjustment on investment
properties - (11,410) 11,410 - -
Share of joint ventures' net loss from fair value
adjustment on investment properties - (9,497) 9,497 - -
Net loss from fair value adjustment on listed
investments - (202) 202 - -
Net loss from fair value adjustment on unlisted
investments - (1,075) 1,075 - -
Change in fair value of derivative financial
instruments - 513 (513) - -
Share of change in fair value of joint ventures'
derivative financial instruments - 721 (721) - -
Acquisition of investments in own shares - - - (330) (330)
Disposal of investment in own shares - - - 19 19
Acquisition of treasury shares - - (1,454) - (1,454)
Dividends paid - - (6,162) - (6,162)
Actuarial gain on pensions scheme assets - - 134 - 134
Deferred tax movement on pension assets - - (53) - (53)
Cost of share based payments - 72 - - 72
Deferred tax movement on share based payments - (652) - - (652)
At 30 September 2007 (unaudited) 2,806 160,459 256,209 (1,051) 418,423
21. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
Unaudited Unaudited Audited
At At At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Operating profit before net gains on investments 9,902 9,411 24,801
Depreciation of plant and equipment 92 72 151
Decrease in inventories - 1,120 3,514
Decrease / (increase) in trade and other receivables 2,034 (1,163) (8,284)
Decrease in trade and other payables (22,311) (15,680) (14,077)
Cash (outflows) /inflows from operations (10,283) (6,240) 6,105
22. CONTINGENT ASSETS
Unaudited Unaudited Audited
At At At
30 September 30 September 31 March
2007 2006 2007
#000 #000 #000
Potential performance fees arising under joint venture
agreements
Agora Shopping Centres - 8,800 -
Radial Distribution - 1,800 -
- 10,600 -
These assets have not been recognised on the balance sheet.
23. MINORITY INTEREST
This represents investments held by The F15 Partnership in Balmcrest Estates
Limited.
24. RELATED PARTY TRANSACTIONS
In accordance with IAS 27 "Consolidated and Separate Financial Statements,"
transactions between the company and subsidiaries, which are related parties,
have been eliminated on consolidation and are not disclosed in this note.
Details of transactions and balances between the Group and joint ventures are
set out in note 13.
Remuneration of key management personnel:
Unaudited Six Unaudited Audited
months ended 30 Six months Year ended
September 2007 ended 30 31 March
September 2006 2007
#000 #000 #000
Short-term employee benefits 986 857 1,665
Post-employee benefits 49 277 340
Share based payments 49 67 226
1,084 1,201 2,231
25. EVENTS AFTER THE BALANCE SHEET DATE
The developments at Folkestone and Bardon (owned by Radial Distribution), which
are included in these results at cost, completed in November 2007. Any
valuation movements will be included in the results for the year ending 31 March
2008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KKLFLDFBEFBV
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