3rd May 2007 07:01
Mapeley Limited03 May 2007 Press Release - Not for release before 07:00 03 May 2007 MAPELEY LIMITED Unaudited first quarter results for the three months ended 31 March 2007 Mapeley Limited (LSE: MAY), the Guernsey based market leading property company,today announces its unaudited first quarter results for the three months ended31 March 2007. Mapeley owns and manages a commercial property portfolio of over£2.1 billion, covering some 2.3 million square metres throughout the UK. Highlights • Dividends declared for the first quarter of 47 pence per share, equating to £13.8 million: - an increase of 4.4% from 45 pence per share for the fourth quarter ended 31 December 2006: - an increase of 20.5% from 39 pence per share for the first quarter ended 31 March 2006 • FFO (see note 17) up 35.3% to £13.8 million, equating to 47 pence per share* (31 March 2006: £10.2 million, equating to 40 pence per share) • EBITDA (see note 16) increased by 61.9% to £32.7 million (31 March 2006: £20.2 million) • Investment property acquisitions in the period of £104.4 million (31 March 2006: £90.2 million) • Revenue up 19.7% to £104.3 million (31 March 2006: £87.1 million) • Profit before tax of £11.4 million (31 March 2006: £14.7 million) • Total asset value up 5.7% to £2,359.0 million (31 December 2006: £2,232.2 million) Commenting on the results, Jamie Hopkins, Chief Executive Officer of Mapeley, said: "We have made a strong start to 2007. During the first quarter FFO has increasedby 35% to £13.8 million, EBITDA has increased by 62% and for the eighthsuccessive period we have increased our dividend. The business continues togenerate strong organic returns and we have also completed £104.4 million ofproperty acquisitions in the first quarter. We remain positive on the outlook for acquisitions, and at this early stage inthe year feel confident for a good performance in 2007." Conference call Mapeley management will hold a results conference call on Thursday 3 May 2007 at2 pm London time (9 am New York time). All interested parties are welcome toparticipate on the live call. You can access the conference call by dialling0800 6942 586 (from within the UK), 1866 966 9446 (from within the US) or +44(0) 1452 567 098 (from outside the UK) ten minutes prior to the scheduled startof the call; please reference "Mapeley Q1 2007 Results Call". A webcast of the conference call will be available to the public on alisten-only basis at www.mapeley.com. A replay of the webcast will be availablefor three months following the call. A replay of the conference call will be available until 10 am London time onThursday 10 May 2007 by dialling 0800 953 1533 (from within the UK), 1866 2474222 (from within the US) or +44 (0) 1452 550 000 (from outside the UK); pleasereference access number "5735751#". For further information, please contact: Emma Parr, Investor Relations Tim McCallMapeley MJ2 Business CommunicationsTel: +44(0)20 7788 1742 Tel: +44(0)20 7491 7776 / +44(0)7753 561862Email:[email protected] Email: [email protected] / [email protected] * based on weighted average number of shares in issue for the period on an undiluted basis Chief Executive's Statement Overview We have made a strong start to 2007. FFO has increased 35.3% to £13.8 million(2006: £10.2 million) and we have increased our first quarter dividend to 47pence per share, an increase of 21% over 2006 (2006: 39 pence). We have acquired£104.4 million of investment properties which puts us firmly on track for ourannual target of £400 million of direct acquisitions. Our outsourcing contractshave also continued to perform well. Hard work, expertise and our operating capability have been key in achievingthese results. We have continued to leverage our regional operating platform bythe addition of new assets and through the active management of our estate.Furthermore, we continue to see good opportunities to grow through bothoperating and winning outsourcing contracts and acquiring new assets. Organic growth Mapeley produced £11.5 million of organic FFO in the first quarter of 2007,representing 83% of total FFO and an increase of 71.6% over 2006 (2006: £6.7million). Mapeley also generated strong EBITDA growth of 62% in the firstquarter. This strong performance arose as a result of an increased contributionfrom our growing direct property investment portfolio ("DPI Portfolio"),increased contractual revenue from our outsourcing clients, a contribution fromour latest outsourcing contract with the Identity and Passport Service, andlower property management costs across the whole portfolio. This growth in FFOwas generated notwithstanding the predicted decrease in asset managementreceipts. Focussed and expert property management are key to driving Mapeley's organicgrowth. The knowledge and experience we gain from operating our extensive estateand from our unique position of acting as landlord and tenant benefits the wholeof our business. This expertise is demonstrated by the superior returns achievedby our property team in managing the leaseholds we operate on behalf of ouroutsourcing clients. To the extent we can maintain our rental costs lower thanthe charges we receive from our outsourcing clients, we produce organic growthfor the business. We recently asked IPD to review our operational performance onrent reviews relative to how the market performs. We are pleased to report thatfor 2005 rent review events where we acted as tenant, we beat the IPD benchmarkof 2.9% per annum by paying only 1.2% rental growth per annum. We will continueto work with IPD and provide further data in respect of our 2006 performance aswe progress in 2007. Also in this quarter we completed an interesting transaction which involved thedisposal of a surface car park relating to one of our freehold assets in Glasgowoccupied by Abbey. The disposal resulted in a net cash payment to Mapeley ofapproximately £2.5 million, whilst not impacting the occupation or value of theasset. Mapeley had encouraged its tenant Abbey, to agree to the disposal of thecar park to a developer and the proceeds of sale were split between Abbey andMapeley. Abbey's car parking provision has been maintained through analternative solution. This deal is an excellent example of Mapeley's in-houseasset management expertise and our ability to explore and crystallise what werefer to as the optionality in the estate to create value both for our tenantsand for Mapeley. There are many other opportunities like this across Mapeley'sestate. Acquisitions During the first quarter we acquired approximately £104.4 million of singleassets for our DPI Portfolio at an average net initial yield of 5.9% (6.8%excluding Cardiff). We have seen yields stabilise over the last six months and,although pressure has increased on financing costs, we continue to be able tocreate value by acquiring good quality assets at yields higher than our cost ofcapital. Mapeley's dynamic operating platform and our unique position of acting as bothlandlord and tenant in every major town and city in the UK enabled us to sourceand complete these deals and beat any competition for these assets. In February we acquired an asset in Cardiff for £62 million, let to BT until2020. This is an attractive asset let to a high credit quality tenant withannual fixed rental increases built into the lease and hence perfectly matchedto our acquisition criteria. Although the net initial yield on this asset wasrelatively low, given the covenant of the tenant and the lease length andstructure, we were able to acquire this investment at our targeted return byutilising a swap to match the debt costs of the asset to the income profile ofthe lease. We were obviously disappointed to hear that we had not been selected for thenext stage of the Workplace 2010 contract in respect of the outsourcing of theNorthern Ireland Civil Service Estate. However, we remain confident of winningother new acquisition opportunities, both outsourcing and direct investments, atattractive prices to deliver full value for our shareholders. Outlook We are particularly encouraged both by the pipeline of good quality assets forour DPI portfolio and seeing initial steps being taken by local authorities tooutsource their real estate requirements. We believe that we are well placed toexploit these opportunities as and when they arise. There is mixed commentary as to the immediate outlook for the real estatesector, driven mostly by concerns over rental growth forecasts. At Mapeley, webelieve our business model is robust and defensive, as we are not dependent onstrong rental growth to deliver our targeted results. We have made a good startto 2007, in line with our expectations. At this early stage in the year we feelconfident for a good performance in 2007. Jamie HopkinsChief Executive Officer Operating Review 1) Portfolio Review Mapeley Limited and its subsidiaries' ("Mapeley" or the "Group") real estateportfolio is split into two distinct segments - outsourcing contracts andinvestment property. Outsourcing Contracts The HMRC portfolio As at 31 March 2007, the HMRC portfolio (see note 8) had a value of £563.9million (31 December 2006: £560.1 million). It comprised 138 freehold or longleasehold properties (31 December 2006: 138) and 380 rack rented leaseholdproperties (31 December 2006: 381). Portfolio occupancy (based on area) was98.7% at 31 March 2007 (31 December 2006: 98.9%). The Abbey portfolio As at 31 March 2007, the Abbey portfolio (see note 9) had a value of £577.9million (31 December 2006: £575.7 million). It comprised 367 freehold or longleasehold properties (31 December 2006: 367) and 689 rack rented leaseholdproperties (31 December 2006: 698). Portfolio occupancy (based on area) was90.2% at 31 March 2007 (31 December 2006: 90.3%). Identity and Passport Service ("IPS") Interview Centre Outsourcing Contract The phased roll out programme has continued with a further 13 sites acquired inthe first quarter of 2007. Investment property Direct Property Investments ("DPI") portfolio During the first three months of the year, the Group successfully continued topursue its strategy of acquiring individual properties or portfolios of regionaloffice properties. The Group focused on purchasing property primarily let tostrong credit quality tenants, who are expected to stay in the properties overthe long-term. In the three months to 31 March 2007, the Group purchased investment property atan aggregate cost of £104.4 million with an average net initial yield of 5.9%(6.8% excluding Elinia House, Cardiff) and continued to identify a significanttarget pool of properties it may consider acquiring in the future. Elinia House, Cardiff was acquired during the period for £62 million, let to BTuntil 2020. The net initial yield on the property is 5.4% but is subject tofixed increases throughout the lease increasing to 7.4%. Simultaneously a swapwas taken out on the allocated loan amount for this property which locks in theinterest rate to match the fixed rental uplifts and ensures a smoothing of theleveraged yield at 9.0%. As at 31 March 2007, the DPI portfolio (see note 9) comprised 78 properties (31December 2006: 69) with a value of £1,003.8 million (31 December 2006: £903.7million). The net initial yield on this portfolio was 6.9% (31 December 2006:7.0%). The properties were 98.1% let on fully repairing and insuring leases tocentral and local government and major corporate tenants (31 December 2006:97.9%) with an average unexpired lease length of 7.8 years (31 December 2006:7.8 years). 2) Property Management Lettings During the first three months of 2007 the Group let 7 vacant units (31 March2006: 13) with an annual rent roll of £0.2 million (31 March 2006: £1.1million). Rent reviews and lease renewals - As landlord During the first three months of 2007 the Group settled 22 rent reviews (31March 2006: 27) on rack rented properties in its portfolios with an annual rentroll of £2.5 million (31 March 2006: £0.7 million). The average increase was0.7% per annum. During the same period the Group also completed lease renewals for 6 properties(31 March 2006: 3) with an annual rent roll of £0.1 million (31 March 2006: £0.2million). The average annual increase was 2.4%. Rent reviews and lease renewals - As tenant During the first three months of 2007 the Group settled 60 rent reviews (31March 2006: 58) on rack rented properties in its portfolios with an annual rentroll of £17.5 million (31 March 2006: £4.0 million). The average increase was0.4% per annum. During the same period the Group also completed lease renewals for 6 properties(31 March 2006: 3) with an annual rent roll of £0.2 million (31 March 2006: £0.2million). The average annual decrease was 1.3%. 3) Financing Share performance data Closing share price on 30 March 2007 £ 38.90 per share Dividends proposed and declared for the quarter ended 31 March 2007 £ 0.47 per share Debt finance The Group has continued to finance the acquisition of direct propertyinvestments using its three year £300.0 million revolving facility (the DeltaAcquisition facility). At 31 March 2007 £137.9 million was drawn down on thisfacility (31 December 2006 £36.4 million). 4) Dividend proposed and declared At a Board meeting held on 2 May 2007, the Board of the Company declared aninterim dividend for the quarter of £13.8 million, equating to £0.47 per share(quarter ended 31 December 2006: £13.2 million, equating to £0.45 per share),based on the number of shares in issue on an undiluted basis during the period. The record date for this dividend is 11 May 2007 and the payment date is 25 May2007. Key Financial Information Key Performance Measures Three months Three months Year ended ended 31 March ended 31 March 31 December 2007 2006 2006 £m £m £m Funds from operations (FFO) (refer to note 17) 13.8 10.2 45.7Dividends declared during period 13.8 10.3 45.8Dividend per share (pence / share)* 47 39 168FFO per share (pence / share) ** (refer to note 17) 47 40 170 Income Statement Revenue 104.3 87.1 387.0Property operating expenses (69.1) (65.3) (285.4)Net valuation (deficit) / surplus on investment property (2.0) 10.6 40.8Reversal of impairment of non-investment property 0.1 0.1 0.8Gain on disposal of non-investment property - - 3.2Administrative and other expenses (4.8) (4.6) (20.7)EBITDA (refer to note 16) 32.7 20.2 93.6Finance costs (refer to note 4) (18.6) (20.8) (89.6)Finance income (refer to note 4) 1.5 7.6 6.8 Gain on interest rate swap included in finance income (refer to note 4) 0.5 6.7 2.8 Exceptional finance charge included in finance costs (refer to note 4) - (4.4) (19.8)Profit before tax 11.4 14.7 42.9Tax (charge) / credit - (0.1) 10.9Profit for the period 11.4 14.6 53.8 Balance Sheet As at As at As at 31 March 2007 31 March 2006 31 December 2006 £m £m £m Property assets*** 2,148.5 1,756.9 2,044.4Total non-current assets 2,194.1 1,772.7 2,078.6Financial instrument assets included in total non-current assets 29.1 10.7 20.2Bank loans excluding loan finance costs 1,379.4 1,092.0 1,278.3Financial instrument liabilities included in current liabilities - 16.9 -Net assets (refer to note 19) 725.5 598.8 712.2Gearing (refer to note 18) 180% 167% 169% * The dividend per share calculation represents the declared coupon for the period. For the year ended 31 December 2006 the dividend per share calculation aggregates the coupon rates declared for the year. ** FFO per share calculations are based on the weighted average number of ordinary shares in issue during the period of 29,412,844 (three months ended 31 March 2006: 25,290,653, year ended 31 December 2006: 26,887,700). *** Property assets are defined as total non-current assets plus non-current assets held for sale, less non-current trade and other receivables, financial instruments, deferred tax assets and plant and equipment held within property, plant and equipment (31 March 2007 £0.2 million, 31 March 2006 £0.5 million, 31 December 2006 £0.2 million). Financial Review Funds from operations ("FFO") FFO is a non-GAAP financial management measure used to demonstrate theunderlying operating performance of real estate businesses. It providesinvestors with information regarding the Group's ability to service debt andmake capital expenditure. Further information on FFO is set out in note 17. FFO was £13.8 million in the three months ended 31 March 2007, compared with£10.2 million in the three months ended 31 March 2006. The increase in FFO of£3.6 million was primarily driven by increases in income as a result ofinvestment properties acquired since the equivalent period in the prior year. Inaddition the Group realised a profit of £2.5 million on the part disposal of aproperty asset in the period. The Group has separately disclosed organic FFO, which is defined as the FFOgenerated following the first anniversary of the acquisition of a property assetor commencement of an outsourcing contract. Organic FFO for the period was £11.5million compared to £6.7 million for the period ended 31 March 2006, an increaseof 71.6%. The key driver of this increase has been a strong performance from theexisting outsourcing contracts and the impact of prior year direct propertyacquisitions, which are now included within the organic FFO result. Dividends On 2 May 2007, the Board of Directors declared a dividend of £0.47 per share forthe quarter ended 31 March 2007 (quarter ended 31 March 2006: £0.39 per share;quarter ended 31 December 2006: £0.45 per share), an increase of 4.4% comparedto the prior quarter dividend of £0.45 per share, reflecting the Company'spolicy of paying stable and growing dividends. Revenue Group revenue for the three months ended 31 March 2007 was £104.3 million, anincrease of £17.2 million (19.7%) over the same period last year. The increaseis due to additional rental income of £6.0 million from the Direct PropertyInvestments ("DPI") portfolio. In addition there has been an increase of £11.1million from outsourcing contracts. Of this increase, £8.9 million results fromthe first quarter contribution from the Identity and Passport Service ("IPS")contract. Property operating expenses The property operating expenses of the Group in the three months ended 31 March2007 were £69.1 million (of which £38.0 million was rentals payable) compared to£65.3 million (£43.3 million rentals payable) for the same period in theprevious year, an increase of 5.8%. The increase was primarily driven by anincrease in costs of £8.1 million associated with the IPS contract, offset byunwinding of the onerous lease provision. Administrative and other expenses Administrative and other expenses were £4.8 million for the three months ended31 March 2007 compared to £4.6 million for the three months ended 31 March 2006,an increase of 4.3%. This was due to increases in staff costs, accommodation andconsultancy costs. EBITDA EBITDA (see note 16) was £32.7 million for the three months ended 31 March 2007,compared to £20.2 million for the three months ended 31 March 2006, an increaseof 61.9%. This was a direct result of revenue growth of 19.7% outstripping totalcost growth of 5.7%. Finance costs and finance income Finance costs in the three months ended 31 March 2007 were £18.6 million (31March 2006: £20.8 million). The movement is due to a decrease of £4.4 millionrelating to exceptional finance costs incurred in the period ended 31 March2006. This is offset by an increase of £2.6 million due to higher interest costson the increased borrowings required for new investments and a reduction of £0.3million on the recognition of loan financing fees over the life of the relevantfacilities. Finance income has decreased from £7.6 million in the three months ended 31March 2007 to £1.5 million in the three months ended 31 March 2006. This is dueto swap gains of £6.7 million in the period ended 31 March 2006 compared togains of £0.5 million in the period ended 31 March 2007. Taxation Certain Group companies are resident in Bermuda and are classified as UKnon-resident landlords for tax purposes. Taxable profits in these companies aresubject to UK income tax and are exempt from local Bermuda taxes. The Group and its subsidiaries have not paid income or corporation tax in theperiod due to their tax residence and the availability of current and prior yeartax losses and other tax deductible allowances. The Group has also re-evaluatedits forecasts of future profits of Group companies and has concluded that therecognition of a deferred tax asset of £10.9 million remains appropriate. The Group has additional tax losses available for carry forward to future yearsbut these losses are only available to offset against future taxable profits inthe entity in which the losses arose. The Group has not recognised a deferredincome tax asset in respect of these losses and deductions due to the degree ofuncertainty over both the amount and timing of utilisation. Non-current assets Non-current assets, comprising investment property, property plant andequipment, premiums paid for operating leases, non-current trade and otherreceivables, financial instruments and deferred tax assets increased by £115.5million between 31 December 2006 and 31 March 2007. Investment property (see note 9) increased to £1,585.5 million from £1,483.1million at 31 December 2006. This reflects the acquisition of new investmentproperty in the three months to 31 March 2007 of £104.4 million and revaluationgains of £2.2 million on the Abbey portfolio and £0.7 million on the DPIportfolio offset by purchase costs on DPI acquisitions of £4.9 million. Over the same period, property, plant and equipment (see note 8) increased to£528.2 million from £523.3 million at 31 December 2006, principally due to therevaluation of certain of the Group's freehold and long leasehold properties. Bank loans The Group seeks to finance its property investments with long-term debtfacilities on which the interest rates have been fixed by utilising a mixture offixed rate debt and floating rate debt with matching interest rate swapagreements. At 31 March 2007, £1,379.4 million had been drawn under the Group'sloan facilities (31 December 2006: £1,278.3 million). Gearing The Group's financial strategy is to maintain an optimal gearing ratio (see note18) to ensure that shareholders benefit from maximum leveraged returns. TheGroup purchases investment property in accordance with its strategy. Investmentproperty is initially funded using short term revolving facilities. Thesefacilities are subsequently refinanced at a 70 - 75% loan to value ratio usinglong-term debt with a lower interest rate, with the balance being funded by newequity raised. At 31 March 2007, the Group had a gearing ratio of 180% (31 December 2006:169%). The increase in gearing was primarily driven by the increase in debtresulting from the drawdown of £101.4 million to fund new acquisitions under theDPI portfolio in addition to the drawdown of £15.0 million on the Group'sworking capital facility as at 31 March 2007. Consolidated income statementFor the three months ended 31 March 2007 Three months Three months Year ended 31 ended 31 March ended 31 March December Notes 2007 2006 2006 Unaudited Unaudited Audited £m £m £m Revenue 3 104.3 87.1 387.0Property operating expenses 3 (69.1) (65.3) (285.4) Net contract, rental and related income 3 35.2 21.8 101.6 Net valuation (deficit) / surplus on 9 (2.0) 10.6 40.8 investment propertyReversal of impairment of non-investment property 8 0.1 0.1 0.8Gain on disposal of non-investment property - - 3.2Administrative and other expenses (4.8) (4.6) (20.7) Operating profit 28.5 27.9 125.7 Finance costs 4 (18.6) (20.8) (89.6)Finance income 4 1.5 7.6 6.8 Profit before tax 11.4 14.7 42.9 Income tax expense - Guernsey 5 - - - - UK 5 - (0.1) 10.9 - Overseas 5 - - - Profit / (loss) for the period attributable to equity holders ofMapeley Limited 11.4 14.6 53.8 Dividends- paid 6 13.2 8.3 40.9- proposed and declared 6 13.8 10.3 13.2 Dividends per share £ / share £ / share £ / share- paid 6 0.45 0.37 1.60- proposed and declared 6 0.47 0.39 1.68Earnings per share- basic 7 0.39 0.57 2.0- diluted 7 0.39 0.57 2.0 Consolidated income statement of changes in equityFor the period ended 31 March 2007 and 31 March 2006 Issued Share Net Retained Asset Other Total capital premium unrealised earnings revaluation reserves equity (losses) / reserve gains £m £m £m £m £m £m £m At 31 December 2006 (Audited) - 329.2 14.7 (50.4) 315.2 103.5 712.2 Revaluation surplus - - - - 4.8 - 4.8Depreciation written back on revaluation of non-investment property - - - - 1.5 - 1.5Transfer of excess revaluation depreciation - - - 1.4 (1.4) - -Net gain on cash flow hedges - - 8.5 - - - 8.5 Total income for the period recognised directly in Equity - - 8.5 1.4 4.9 - 14.8Profit for the period - - - 11.4 - - 11.4 Total income for the period - - 8.5 12.8 4.9 - 26.2Cost related to issue of new ordinary shares - (0.2) - - - - (0.2)Issue of shares to Non-executive Directors - - - - - 0.1 0.1Issue of shares to employees under the Employee - - - - - 0.4 0.4Share PlanEquity dividends - - - (13.2) - - (13.2) At 31 March 2007 (Unaudited) - 329.0 23.2 (50.8) 320.1 104.0 725.5 At 31 December 2005 (Audited) - 132.4 (26.6) (69.1) 318.6 101.6 456.9Revaluation surplus - - - - 11.4 - 11.4Depreciation written back on revaluation of non-investment property - - - - 1.8 - 1.8Transfer of excess revaluation depreciation - - - 1.7 (1.7) - -Net gains on cash flow hedges - - 15.2 - - - 15.2 Total income for the period recognised directly in equity - - 15.2 1.7 11.5 - 28.4Profit for the period - - - 14.6 - - 14.6 Total income for the period - - 15.2 16.3 11.5 - 43.0Issue of ordinary shares on listing of Company - 110.0 - - - - 110.0Costs related to issue of new ordinary shares - (3.5) - - - - (3.5)Issue of shares to Non-executive Directors - - - - - 0.3 0.3Issue of shares to employees under the Employee - - - - - 0.4 0.4Share PlanEquity dividends - - - (8.3) - - (8.3) At 31 March 2006 (Unaudited) - 238.9 (11.4) (61.1) 330.1 102.3 598.8 Consolidated statement of changes in equityFor the year ended 31 December 2006 Issued Share Net Retained Asset Other Total capital premium unrealised earnings revaluation reserves Equity (losses) / reserve gains £m £m £m £m £m £m £m At 31 December 2005 (Audited) - 132.4 (26.6) (69.1) 318.6 101.6 456.9 Revaluation deficit - - - - (2.8) - (2.8)Depreciation written back on revaluation of non-investment property - - - - 5.6 - 5.6Transfer of excess revaluation depreciation - - - 5.2 (5.2) - -Transfer of revaluation surplus on asset - - - 0.6 (0.6) - -disposalsGain on cash flow hedges - - 34.6 - - - 34.6Realised gain on cash flow hedge - - 10.9 - - - 10.9Tax on items taken directly to equity - - (4.2) - (0.4) - (4.6) Total income for the year recognised directly in equity - - 41.3 5.8 (3.4) - 43.7Loss for the year - - - 53.8 - - 53.8 Total income / (expense) for the year - - 41.3 59.6 (3.4) - 97.5Issue of new ordinary shares - 203.5 - - - - 203.5Cost related to issue of new ordinary shares - (6.7) - - - - (6.7)Issue of shares to Non-executive Directors - - - - - 0.5 0.5Issue of shares to employees under the Employee Share Plan - - - - - 1.4 1.4Equity dividends - - - (40.9) - - (40.9) At 31 December 2006 (Audited) - 329.2 14.7 (50.4) 315.2 103.5 712.2 Consolidated balance sheetAt 31 March 2007 31 March 31 March 31 December 2007 2006 2006 Unaudited Unaudited Audited Notes £m £m £mASSETSNon-current assetsProperty, plant and equipment 8 528.2 539.4 523.3Investment property 9 1,585.5 1,179.1 1,483.1Premiums on operating leases 34.5 37.5 35.2Trade and other receivables 5.9 6.0 5.9Financial instruments 29.1 10.7 20.2Deferred tax asset 10.9 - 10.9 Total non-current assets 2,194.1 1,772.7 2,078.6Current assetsInventories 15.7 17.8 15.7Trade and other receivables 57.3 61.3 57.6Cash and short-term deposits - in controlled accounts 11 20.4 26.8 22.7 - for operational purposes 11 71.0 63.2 54.6 Total current assets 164.4 169.1 150.6 Non-current assets held for sale 10 0.5 1.4 3.0 TOTAL ASSETS 2,359.0 1,943.2 2,232.2 EQUITY AND LIABILITIES Equity attributable to equity holders of Mapeley LimitedIssued capital (net of treasury shares) 12 - - -Share premium 329.0 238.9 329.2Net unrealised gains / (losses) 23.2 (11.4) 14.7Retained earnings (50.8) (61.1) (50.4)Asset revaluation reserve 320.1 330.1 315.2Other reserves 104.0 102.3 103.5 Total equity 725.5 598.8 712.2 Non-current liabilitiesTrade and other payables 5.2 5.4 5.2Interest and non-interest bearing loans and borrowings 13 1,369.5 914.6 1,268.7Provisions 28.8 28.9 31.5Financial instruments - - -Deferred asset management receipts 77.4 76.5 78.9Deferred tax liability 4.6 - 4.6 Total non-current liabilities 1,485.5 1,025.4 1,388.9 Current liabilitiesTrade and other payables 113.5 107.9 110.5Interest and non-interest bearing loans and borrowings 13 15.1 177.4 1.2Provisions 13.5 11.4 13.5Financial instruments - 16.9 -Deferred asset management receipts 5.9 5.4 5.9 Total current liabilities 148.0 319.0 131.1 Total liabilities 1,633.5 1,344.4 1,520.0 TOTAL EQUITY AND LIABILITIES 2,359.0 1,943.2 2,232.2 Approved by the Board of Directors on 2 May 2007 and signed on its behalf by J P Hopkins, Director C Parkinson, Director Consolidated cash flow statementFor the three months ended 31 March 2007 Three Three months months ended 31 ended 31 Year ended March March 31 December 2007 2006 2006 Notes Unaudited Unaudited Audited £m £m £m Cash flows from operating activitiesOperating profit 28.5 27.9 125.7Adjustment for:Reversal of impairment of non-investment property (0.1) (0.1) (0.8)Impairment of non-investment property - - -Net valuation deficit / (surplus) on investment property 9 2.0 (10.6) (40.8)Depreciation and amortisation 2.3 2.9 9.5Gain on disposal of non-investment property - - (3.2) Share benefit expense 0.5 0.7 1.9Operating profit before changes in working capital 33.2 20.8 92.3Decrease / (increase) in inventories 0.1 (0.1) 2.0Decrease / (increase) in trade and other receivables 0.2 (11.9) (8.2)Increase in trade and other payables 1.8 1.0 0.9(Decrease) / increase in provisions (3.3) 1.1 4.5(Decrease) / increase in deferred asset management receipts (1.5) 2.6 5.6 Cash generated from operations 30.5 13.5 97.1Interest paid (16.4) (17.0) (65.4)Interest received 1.0 0.9 4.0 Net cash flows from operating activities 15.1 (2.6) 35.7 Cash flows from investing activitiesProceeds from disposal of non-investment property 2.5 - 6.6Purchase of property, plant and equipment (0.1) (0.1) (0.1)Purchase of investment property 9 (104.4) (90.2) (366.4) Net cash flows used in investing activities (102.0) (90.3) (359.9) Cash flows from financing activitiesCosts of raising finance (0.8) (1.7) (14.2)Payment of finance lease liabilities (0.1) (0.1) (0.6)Swap and loan termination fees - - (13.4)Receipt of new bank loans 101.4 294.9 956.3Repayment of bank loans (0.2) (289.5) (764.6)Receipt of other reserves - - -Repayment of other reserves - - -Proceeds from issue of ordinary shares - 110.0 203.5Costs related to issue of ordinary shares (0.2) (3.5) (6.7)Dividend paid to equity holders 6 (13.2) (8.3) (40.9) Net cash flows from financing activities 86.9 101.8 319.4 Net increase / (decrease) in cash and short-term deposits - 8.9 (4.8)Cash and cash equivalents at start of period 76.4 81.1 81.2 Cash and cash equivalents at end of period 76.4 90.0 76.4 Notes to the unaudited first quarter resultsat 31 March 2007 1. General information The consolidated first quarter financial statements of the Group for the threemonths ended 31 March 2007 comprise the Company and its subsidiaries and wereauthorised by the Board for issue on 2 May 2007. The Company's registered officeis located at Regency Court, Glategny Esplanade, St Peter Port, Guernsey GY11WW. 2. Basis of preparation and accounting policies The first quarter financial information comprises the consolidated balancesheets, consolidated statements of income, cash flow and changes in equity andthe related notes for the periods then ended. The first quarter financialinformation contained in this report is unaudited and does not constitutestatutory accounts within the meaning of The Companies (Guernsey) Law, 1994. Theannual report and accounts for the year ended 31 December 2006, which wereprepared under IFRS as adopted by the European Union, received an unqualifiedauditors' report. The unaudited financial information has been prepared inaccordance with the Listing Rules of the Financial Services Authority. The accounting policies adopted in the preparation of the first quarterconsolidated financial statements are consistent with those as reported in theGroup's annual report for the year ended 31 December 2006 except where suchpolicies have been revised to reflect amendments to International AccountingStandards ("IAS") and the adoption of new International Financial ReportingStandards ("IFRS") which became effective from 1 January 2007. Accordingly IAS 1(para 124A - 124C) "Presentation of Financial Statements", IFRS 7 "FinancialInstruments: Disclosures", IFRIC 8 "Scope of IFRS 2", IFRIC 9 "Reassessment ofembedded derivatives" and IFRIC 10 "Interim Financial Reporting and Impairment"have been adopted by the Group in preparing these first quarter financialstatements. The adoption of these standards has had no material impact on theGroup's financial statements. The following new standards and interpretations have been issued but are noteffective for the financial year ending 31 December 2007, and have not beenadopted early IFRS 8 "Operating segments", IFRIC 11 "IFRS 2 - Group and treasuryshare transactions" and IFRIC 12 "Service concession arrangements". The financial statements of the Group for the year ending 31 December 2007 willbe prepared in accordance with IFRS as adopted for use by the European Union at31 December 2007. The first quarter consolidated financial statements should beread in conjunction with the Group's annual financial statements as at 31December 2006. The first quarter consolidated financial statements are presented in poundssterling and all values are rounded to the nearest million (£m) except whereotherwise indicated. The functional currency of the Group is pounds sterling. Prior year comparatives Certain comparative figures for the three months ended 31 March 2006 have beenadjusted to conform to the presentation in respect of the three months ended 31March 2007. Swap gains of £6.7 million have been reclassified from finance coststo finance income. This reclassification has no impact on net assets or profitfor the period. 3. Revenue and segmental information For management purposes, the Group is currently organised into two segments inline with the Group's business model - Outsourcing Contracts and Direct PropertyInvestments. These divisions are the basis on which the Group reports itsprimary segment information. The segments are described below: Outsourcing Contracts This segment consists of activities arising from the purchase and subsequentleaseback of the HMRC and Abbey property portfolios and the fit-out and deliveryof serviced accommodation under the IPS contract. The main characteristics ofthese arrangements are listed below: • long-term contracts (the contracts run over periods from 3 to 20 years); • agreements are tailored in accordance with the client's accommodation requirements (from simple purchase and lease back to fully serviced accommodation); • the HMRC and Abbey agreements allow them to exercise flexibility to vacate properties within defined parameters; and • under the HMRC and Abbey agreements the revenue earned is subject to annual increases. Direct Property Investments The segment previously known as "Investment property" has been renamed "DirectProperty Investments". The Group has embarked on a separate strategy of acquiring individual andportfolios of office property. The Group's activities within this segment willfocus on purchasing property primarily let to strong credit quality tenants, whoare likely to stay in the properties for a minimum term of 5 years. The Group has a single geographical segment, being the UK commercial propertymarket. Notes to the unaudited first quarter results At 31 March 2007Three months ended 31 March 2007 (Unaudited) 31 March 2006 (Unaudited)Business segments Direct Outsourcing Total Direct Outsourcing Total Property Contracts operations Property Contracts operations Investments Investments £m £m £m £m £m £m Rental revenue 16.0 - 16.0 10.0 - 10.0Property trading and other income 0.1 0.1 0.2 - 0.1 0.1 Facility unitary charge - 60.5 60.5 - 50.9 50.9 Contractual rents - 20.8 20.8 - 19.5 19.5 Third party rents - 6.8 6.8 - 6.6 6.6Contractual revenue - 88.1 88.1 - 77.0 77.0 Segment revenue 16.1 88.2 104.3 10.0 77.1 87.1 Rentals payable (0.2) (37.8) (38.0) - (43.3) (43.3)Other direct property and contract expenditure * (1.0) (30.1) (31.1) (0.2) (21.8) (22.0) Net contract, rental & related income 14.9 20.3 35.2 9.8 12.0 21.8 Reversal of impairment of non-investment property - 0.1 0.1 - 0.1 0.1Net valuation (deficit) / surplus on investment property (4.2) 2.2 (2.0) 5.8 4.8 10.6 Segment result 10.7 22.6 33.3 15.6 16.9 32.5Unallocated expenses (4.6) (4.8)Operating profit 28.5 27.9Net finance costs (17.1) (13.2)Income tax - (0.1) Profit for the period 11.4 14.6 Year ended 31 December 2006 (Audited)Business segments Direct Outsourcing Property contracts Total Investments operations £m £m £m Rental revenue 50.3 - 50.3Property trading and other income - 0.8 0.8 Facility unitary charge - 219.7 219.7 Contractual rents - 88.3 88.3 Third party rents - 27.9 27.9 Contractual revenue - 335.9 335.9Segment revenue 50.3 336.7 387.0Rentals payable (0.3) (173.6) (173.9)Other direct property and contract expenditure * (1.2) (110.3) (111.5) Net contract, rental & related income 48.8 52.8 101.6Impairment of non-investment property - 0.8 0.8Net valuation surplus on investment property 8.1 32.7 40.8Gain on disposal of non-investment property - 3.2 3.2 Segment result 56.9 89.5 146.4 Unallocated expenses (20.7)Operating profit 125.7Net finance costs (82.8)Income tax credit 10.9 Profit for the year 53.8 * Other direct property and contract expenditure includes depreciation 4. Finance costs and finance income Three months Three months Year ended ended 31 ended 31 31 March March December 2007 2006 2006 Unaudited Unaudited Audited £m £m £m Finance costs Bank loans and overdrafts 17.9 20.2 73.7 Finance charges payable under finance leases 0.1 0.1 0.6 Loss on breaking interest rate swap - - 13.4 Unwinding of discount on provisions 0.6 0.5 1.9 18.6 20.8 89.6 Finance income Bank interest receivable 1.0 0.9 4.0 Gain on interest swap 0.5 6.7 2.8 1.5 7.6 6.8 Bank loans and overdraft charges include a charge of £0.3 million (three monthsended 31 March 2006: £5.0 million; year ended 31 December 2006: £7.7 million)relating to loan finance fees recognised under the effective interest method. Ofthis amount £nil (three months ended 31 March 2006: £4.4 million; year ended 31December 2006: £6.4 million) relates to exceptional charges resulting from achange in the timing of the repayment of the original loan as a consequence ofrefinancing. 5. Income tax expense a) Tax on profit on ordinary activities No income tax is chargeable to the income statement or the statement of changesin equity in the current year in respect of Guernsey, UK or other overseastaxation. The charge during the three months ended 31 March 2006 of £0.1 millionrelated to UK income tax. b) Reconciliation of income tax charge The weighted average income tax rate for the period of 2.7% (period ended 31March 2006: 5.1%; year ended 31 December 2006: 10.8%) is based on the weightedaverage tax rate applicable across the Group's operations. This has beencalculated by dividing (1) Group companies' profits before tax multiplied by thetax rate applicable for each Group company by (2) the Group's profit before tax. c) Deferred income tax The Group has re-evaluated its forecasts of future profits of Group companiesand has concluded that the recognition of a deferred tax asset of £10.9 millionremains appropriate. The Group has additional tax losses available for carryforward to future years but in many cases these losses are only available tooffset against future taxable profits in the entity in which the losses arose.The Group has not recognised a deferred income tax asset in respect of theselosses and deductions due to the degree of uncertainty over both the amount andtiming of utilisation. 6. Dividends Three months Three months Year ended ended 31 March ended 31 March 31 December 2007 2006 2006 Unaudited Unaudited AuditedDeclared and paid during the period: £m £m £mEquity dividends on ordinary shares:Fifth interim dividend for 2005: £0.37 per share, paid 5 January - 8.3 8.32006First interim dividend for 2006: £0.39 per share - - 10.3Second interim dividend for 2006: £0.41 per share - - 10.9Third interim dividend for 2006: £0.43 per share - - 11.4Fourth interim dividend for 2006: £0.45 per share 13.2 - - 13.2 8.3 40.9 Proposed and approved at the Board meeting on 2 May 2007Equity dividends on ordinary shares:First interim dividend for 2007: £0.47 per share (31 March 2006: first interim dividend for 2006: £0.37 per share; 31December 2006: fourth interim dividend for 2006: £0.45 per share) 13.8 10.3 13.2 7. Earnings / (loss) per share The calculation of basic and diluted earnings per share figures is based on thefollowing: - Net profit attributable to equity holders of the Company for the three months ended 31 March 2007 of £11.4 million (three months ended 31 March 2006: £14.6 million; 31 December 2006: £53.8 million) - Weighted average number of ordinary shares for the three months ended 31 March 2007 for basic earnings per share 29,412,844 (three months ended 31 March 2006: 25,290,653; year ended 31 December 2006 26,887,700) - Weighted average number of ordinary shares for diluted earnings per share 29,431,878 (three months ended 31 March 2006: 25,315,333; year ended 31 December 2006: 26,903,833) The difference between the number of shares used for the basic and dilutedearnings per share calculation represents the weighted average number of sharesawarded but not yet issued to Non-executive directors of 19,034. 8. Property, plant and equipment Property Freehold acquired under Plant and property finance leases equipment Total £m £m £m £m Cost or valuation:At 1 January 2007 479.2 46.3 16.4 541.9Additions - - 0.1 0.1Revaluations 3.3 1.6 - 4.9 At 31 March 2007 482.5 47.9 16.5 546.9 Accumulated depreciation:At 1 January 2007 - (2.4) (16.2) (18.6)Provided during the period (1.4) (0.1) (0.1) (1.6)Written back on Revaluation 1.4 0.1 - 1.5 At 31 March 2007 - (2.4) (16.3) (18.7) Net book value:At 31 March 2007 482.5 45.5 0.2 528.2 At 31 December 2006 479.2 43.9 0.2 523.3 Freehold property and property acquired under finance leases are included inproperty, plant and equipment where the Group provides significant ancillaryservices to tenants, and is carried at fair value. Freehold property held at 31 March 2007 of £482.5 million (31 December 2006:£479.2 million) and the majority of the property acquired under finance leasesat 31 March 2007 of £43.3 million (31 December 2006: £41.7 million) were valuedat 31 March 2007 by Savills Commercial Limited ("Savills"), a valuer external tothe Group as part of the valuation of all the valuable properties held by theGroup under the HMRC contract. The valuations at 31 March 2007 and 31 December2006 have been carried out in accordance with The Royal Institution of CharteredSurveyors' ("RICS") Appraisal and Valuation Standards published in February 2003(the "Red Book") and the CESR Guidance on property valuations. 9. Investment property At valuation: Property acquired Freehold under finance property leases Total £m £m £m At 1 January 2007 (Audited) 1,457.0 26.1 1,483.1Additions 104.4 - 104.4Revaluations (2.2) 0.2 (2.0) At 31 March 2007 (Unaudited) 1,559.2 26.3 1,585.5 It is the Group's policy to carry investment property at fair value inaccordance with IAS 40 "Investment Property". Investment property was valued at31 March 2007 by CB Richard Ellis Limited ("CBRE") and Savills, valuersexternal to the Group. These valuations have been incorporated into the first quarter financialstatements. Both Savills and CBRE have consented to the use of their names inthese financial statements. Investment property comprises the Group's Abbey portfolio and its directproperty investments. CBRE's valuation of the Abbey portfolio of properties was£577.9 million (31 December 2006: £575.7 million). As at 31 March 2007 oneproperty valued at £0.5 million has been identified for sale within the next 12months and is included within non-current assets held for sale. This propertyhas been included within the assets valued by CBRE. As at 31 December 2006 twoproperties with a valuation of £3.0 million were identified for sale and heldwithin non-current assets held for sale. Of these assets £2.5 million had beenvalued by the Directors and has subsequently been sold and the remaining£0.5million was included within the assets valued by CBRE. Savills and CBRE both carried out valuations of the Group's other propertiesheld within investment property, which were valued as at 31 March 2007 at £85.5million (31 December 2006: £53.1 million), and at £918.3 million (31 December2006: £850.6 million) respectively as at 31 March 2007. The remaining properties held under Property acquired under finance leases werevalued by the Directors at a market value of £4.3 million (31 December 2006:£4.2 million), having taken advice from a suitably qualified employee (a memberof The Royal Institution of Chartered Surveyors). These valuations are summarised below: As at As at 31 March 2007 31 December 2006 Unaudited Audited £m £m Valuation of Abbey portfolio by CBRE 577.9 575.7Valuation of asset held for sale by CBRE (0.5) -Valuation of asset held for sale by the Directors - 2.5Transfer to non-current assets held for sale - (3.0) 577.4 575.2 Valuation of direct property investments by Savills 85.5 53.1Valuation of direct property investments by CBRE 918.3 850.6Valuation of certain finance leases by the Directors 4.3 4.2 1,585.5 1,483.1 The valuations at 31 March 2007 and 31 December 2006 have been carried out inaccordance with The Royal Institution of Chartered Surveyors' ("RICS") Appraisaland Valuation Standards published in February 2003 (the Red Book) and the CESRGuidance on property valuations. 10. Non-current assets held for sale As at As at 31 March 2007 31 December 2006 Unaudited AuditedAt valuation £m £m At 1 January 2006 3.0 1.4Reclassifications from Investment Property - 3.0Disposals (2.5) (1.4) At 31 December 2006 0.5 3.0 As at 31 December 2006 the Group had decided to dispose of two investmentproperties. During the three months to 31 March 2007 one of these properties hasbeen sold. The remaining property is being actively marketed and it isanticipated that this disposal will take place in the near future. Inaccordance with the provisions of IFRS 5, this property has been transferredfrom investment property and is held at the lower of carrying value and fairvalue less estimated costs of realisation. All non-current assets held for salerelate to the Group's "Outsourcing Contracts" segment. 11. Cash and short-term deposits Cash and short-term deposits earn interest at floating rates based on daily bankdeposit rates. Short-term deposits are made for varying periods of between oneday and one month depending on the immediate cash requirements of the Group, andearn interest at the respective short-term deposit rates. The fair value of cashand short term deposits at 31 March 2007 was £91.4 million (31 December 2006£77.3 million). For the purposes of the consolidated cash flow statement, cash and short-termdeposits comprise the following at 31 December: As at As at 31 March 2007 31 December 2006 Unaudited Audited £m £m Cash at bank- in controlled accounts 20.4 22.7- for operational purposes 71.0 54.6 Cash and short-term deposits 91.4 77.3 Bank overdrafts (note 13) - (0.9)Working capital facility (note 13) (15.0) - Total cash and short-term deposits net of bank overdrafts 76.4 76.4 The amounts held in controlled accounts comprise property sale proceeds andother capital receipts which will be held in controlled accounts until the nextinterest payment date in accordance with the terms of the relevant loan facilityagreements. This cash can be accessed within 24 hours of any request by theGroup. 12. Issued capital As at 31 March 2007Authorised No. of ordinary shares £mOrdinary shares at par value of £nil Unlimited - Issued No. of shares £mAt 1 January 2007 (net of 698 treasury shares) 29,416,128 -Movement in shares held by the Employee Share Trust (8,658) - At 31 March 2007 (net of treasury shares) 29,407,470 - 13. Interest and non-interest bearing loans and borrowings The table below sets out the Group's interest and non-interest bearing loans andborrowings as at 31 December 2006 and 31 March 2007: Effective As at As at interest rate % Maturity 31 March 2007 31 December 2006 Unaudited Audited £m £mNon-currentObligations under finance leases 8.2% 2007-2021 6.9 7.0Bank loans: Term loan under the HMRC portfolio facility 5.8% Mar 2021 166.2 166.5 Term loan under the Abbey portfolio facility 5.6% Jul 2012 451.8 451.7 Aquisition term loan 5.8% Jul 2015 170.1 170.0 Term loan under the Beta portfolio facility 5.4% Apr 2016 207.6 207.5 Term loan under the Gamma portfolio facility 5.0% Jan 2017 229.6 229.6 Revolving Delta acquisition facility 6.4% Apr 2008 137.3 36.4 1,369.5 1,268.7CurrentObligations under finance leases 8.2% 2007 0.1 0.1Bank loans: Overdraft 2007 - 0.9 Working capital facility 2007 15.0 - Term loan under the HMRC portfolio facility 5.8% 2007 - 0.2 Revolving acquisition facility 6.0% 2007 - - 15.1 1.2 All of the Group's properties, as valued by Savills and CBRE have been securedagainst the Group's loan facilities The loan balances above represent theamounts outstanding at 31 March 2007 and 31 December 2006 on the followingfacilities: Term loan under the HMRC portfolio facility The HMRC portfolio is financed by a 15 year, £176.0 million fixed rate loansecured on properties held in the HMRC portfolio. The interest rate payable onthis facility is a fixed rate of 4.5% plus a margin of 0.75% for the first 7years of the loan increasing to 2.25% for the remainder of the loan, plusmandatory costs (if any). Term loan under the Abbey portfolio facility The Abbey portfolio is financed by a £455.0 million, 7 year loan which issecured against all investment property held in the Abbey portfolio and by acharge over the investments of Mapeley Columbus Holdings Limited. The loan isrepayable in 2012. Interest on the loan is paid quarterly at a rate of LIBORplus 0.95% plus mandatory costs (if any). The borrowers have entered intoseparate interest rate agreements to fix the interest payable. Acquisition term loan Mapeley's direct investment portfolio is partly financed with a 10 year, £170.9million term loan. At inception the loan had a loan to value ratio of 70%. Thereis no amortisation during its term and the loan is repayable in July 2015. Theinterest payable on this loan is fixed at 4.95% plus a 0.75% margin. Beta Acquisition term loan Mapeley's direct investment portfolio is further financed with a 10 year, £208.6million term loan. At inception the loan had a loan to value ratio of 75%. Thereis no amortisation during its term and the loan is repayable in April 2016. Theinterest payable on this loan is fixed at 4.53% plus a 0.85% margin. Gamma Acquisition term loan Mapeley's direct investment portfolio is further financed with another 10 year,£231.3 million term loan. At inception the loan had a loan to value ratio of75%. There is no amortisation during its term and the loan is repayable inJanuary 2017. The interest payable on this loan is currently fixed at 4.28% plusa 0.67% margin, however the interest payable increases by 0.20% each year untilthe end of the loan. Revolving Delta Acquisition facility The Group has a 3 year, £300.0 million revolving acquisition facility to financefurther property investments. Acquisitions under this facility are initiallyfully debt financed and will be refinanced using a mix of long-term debt andequity at a later date. The facility is repayable in April 2008. The interestrate payable on the facility is LIBOR plus a margin of between 1.0% and 1.15 %plus mandatory costs (if any). The Group has also put in place a 10 year, 4.37%£20.7 million swap to fix part of its anticipated long-term exposure to interestrate risk on these property acquisitions. Working capital facility The Group has a £25.0 million working capital facility which ends in June 2007with an option to extend the term for one year until June 2008. At 31 March2007, £15.0 million was drawn down. The interest rate payable on the facility isLIBOR plus 2.0% plus mandatory costs (if any). The loan is guaranteed byMapeley Limited. 14. Related party transactions The Group continues to provide property management services in respect of 135property interests owned by Pinnacle Towers Limited, a company in which FortressInvestment Group LLC held a significant interest. In return for the provision ofthese services, the Group receives £100,000 per annum evenly spread across theyear and receivable one month in arrears. During the period £25,000 had beenreceived of which £nil was outstanding as at 31 March 2007. 15. Subsequent events Since 31 March 2007, the Group has exchanged and completed contracts to acquire3 properties for a consideration of £33.6 million. These properties have beenfunded by the revolving Delta Acquisition facility. The Board of the Company proposed and declared an interim dividend of £13.8million (31 December 2006: £13.2 million; 31 March 2006: £10.3 million) at aBoard meeting held on 2 May 2007. The dividend payment date is 25 May 2007. 16. Earnings before interest, tax, depreciation and amortisation Earnings before interest, tax, depreciation and amortisation or "EBITDA" is akey performance measure of the Group defined by the Group as profit before tax,finance costs, depreciation and amortisation, valuation surplus / deficit oninvestment property, gain on disposal of subsidiaries and impairment /impairment reversal of non-investment property. EBITDA for the period iscomputed as follows: Three months ended Three months Year ended 31 March ended 31 March 31 December 2007 2006 2006 Unaudited Unaudited Audited £m £m £m Profit before tax 11.4 14.7 42.9Add back: Finance cost net of finance income 17.1 13.2 82.8 Depreciation and amortisation 2.3 3.0 9.5 Net valuation deficit / (surplus) on 2.0 (10.6) (40.8) investment property Impairment of non - investment property - - - Reversal of impairment of non - investment property (0.1) (0.1) (0.8) EBITDA 32.7 20.2 93.6 17. Funds from operations Funds from operations or "FFO" is a management measure used to demonstrate theunderlying operating performance of real estate businesses such as the Company.It provides investors with information regarding the Group's ability to servicedebt and make capital expenditure. FFO does not represent cash generated fromoperating activities in accordance with IFRS, therefore it should not beconsidered an alternative to cash flow as a measure of liquidity, and is notnecessarily indicative of cash funds available. This calculation of FFO may bedifferent from the calculation used by other companies and, therefore,comparability may be limited. The Group defines "FFO" as Group "EBITDA" less "net finance costs" less the "movement in the onerous lease provision" less the "movement in work in progress"plus the movement in "net asset management receipts" plus the charge in respectof "employee shares" plus realised revaluation gains. This definition has beenrefined at 31 December 2006 but this has had no impact on reported FFO for 2006.More detailed definitions of these adjustments to EBITDA are given below: "Net finance costs" comprise finance costs less finance income as set out in theGroup income statement, adjusted to exclude amortisation of loan finance fees,gains or losses on interest rate swaps, loan termination costs and the unwindingof discounts on provisions. "Movement in the onerous lease provision" is the net release (or charge) to theGroup income statement as a result of the change in the Group onerous leaseprovisions, excluding interest charged on the unwinding of the provision.Although these amounts offset rental costs in the income statement, they do notrepresent cash movements and are therefore excluded from the computation of FFO. "Movement in work in progress" or the "movement in long-term accrued costs" isthe year on year change in Group work in progress or if negative at the balancesheet date, accrued cost. The amount represents the increase or decrease in lifecycle costs deferred by the Group so as to match costs with revenue. "Net asset management receipts" are the total cash receipts in the year lessamounts amortised in the financial period. The accounting treatment of assetmanagement receipts is set out in the accounting policies. "Employee shares" - Under IFRS 2, costs are charged to the Group incomestatement when share based payments are made. This is a non cash expense and istherefore excluded from the measure. "Organic FFO" is defined as the FFO contribution from property assets orservices following the first anniversary of their acquisition or commencement ofthe contract, net of central overhead costs. "Acquisition FFO" is defined as the FFO contribution from property assets orservices in the first year of ownership in the case of property assets andcontract commencement in the case of new services. Three months ended 31 March 2007 Three months ended 31 March 2006 Organic Acquisition Total Organic Acquisition Total £m £m £m £m £m £m EBITDA 27.3 5.4 32.7 11.8 8.4 20.2Net finance costs (13.6) (3.1) (16.7) (9.5) (4.9) (14.4)Movement in the onerous lease provision (3.3) - (3.3) 1.2 - 1.2Movement in work in progress (0.1) - (0.1) (0.1) - (0.1)Movement in long term accrued costs (0.3) - (0.3) 0.1 - 0.1Asset management receipts (1.5) - (1.5) 2.5 - 2.5Share benefit expense 0.5 - 0.5 0.7 - 0.7Realised profit on disposal 2.5 - 2.5 - - - FFO 11.5 2.3 13.8 6.7 3.5 10.2 FFO per share 47 pence 40 pence Year ended 31 December 2006 Organic Acquisition Total £m £m £m EBITDA 61.7 31.9 93.6Net finance costs (43.5) (19.1) (62.6)Movement in the onerous lease provision 4.5 - 4.5Movement in work in progress 2.0 - 2.0Movement in long term accrued costs - 0.7 0.7Asset management receipts 5.6 - 5.6Share benefit expense 1.9 - 1.9 FFO 32.2 13.5 45.7 FFO per share 170 pence The calculation of FFO per share is based on the following: - FFO for the three months ended 31 March 2007 of £13.8 million (three months ended 31 March 2006: £10.2 million; year ended 31 December 2006: £45.7 million) - Weighted average number of ordinary shares for the three months ended 31 March 2007 of 29,412,844 (three months ended 31 March 2006: 25,290,653; twelve months ended 31 December 2006: 26,887,700) 18. Gearing ratio Gearing is defined as Group net debt (total debt less cash and short-termdeposits) as a proportion of total consolidated equity attributable to theequity holders of the parent. "Total debt" is defined as actual current andnon-current loan balances together with any overdrafts owed to lenders andexcludes any unamortised finance costs or adjustments to apply the effectiveinterest rate method. Equity is as set out in the consolidated balance sheet.Gearing is computed as follows: As at As at As at 31 March 2007 31 March 2006 31 December 2006 Unaudited Unaudited Audited £m £m £m"Total debt" 1,394.4 1,092.0 1,279.2Less: Cash and short-term deposits (91.4) (90.0) (77.3) Net debt 1,303.0 1,002.0 1,201.9 Equity 725.5 598.8 712.2 Gearing ratio 180% 167% 169% 19. Net assets per share As at As at As at 31 March 2007 31 March 2006 31 December 2006 Unaudited Unaudited Audited £ per share £ per share £ per share Basic net assets per share 24.67 22.58 24.21 Diluted net assets per share 24.65 22.56 24.19 The calculation of basic and diluted net asset value per share figures is basedon the following: - Consolidated net assets (equity) attributable to the equity holders of the Company as at 31 March 2007 of £725.5 million (31 March 2006: net assets of £598.8 million; 31 December 2006: net assets of £712.2 million) - Number of ordinary shares for basic net asset value per share 29,407,470 (31 March 2006: 26,517,667; 31 December 2006: 29,416,128) - Number of ordinary shares for diluted net asset value per share 29,427,470 (31 March 2006: 26,541,793; 31 December 2006: 29,436,128) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Mayflower (wi)