28th Oct 2005 07:01
Mapeley Limited28 October 2005 PRESS RELEASENot for release before 0700, 28 October 2005 MAPELEY LIMITED INCREASES INTERIM DIVIDEND FOR THIRD QUARTER AND ANNOUNCES INTERIM RESULTS FORTHIRD QUARTER AND THE NINE MONTHS ENDED 30 SEPTEMBER 2005 Mapeley Limited (LSE: MAY), a market leader in property investment and outsourcing, announces today its interim results for the nine months ended 30 September 2005. Third quarter 2005 highlights- EBITDA for the quarter increased by 3.8% to £16.2 million (30 June 2005: £15.6 million)- Funds from operations for the quarter increased by 38.9% to £7.5 million, equating to 33 pence per share (30 June 2005: £5.4 million)- Dividends proposed for the quarter increased by 10.0% to 33 pence per share- Investment property acquisitions of £89.0 million for the quarter Year to date 2005 highlights- Revenue up 4.4% to £245.2 million (30 September 2004: £234.8 million)- EBITDA increased by 16.4% to £48.9 million (30 September 2004: £42.0 million)- Funds from operations for the nine month period increased by 78.7% to £16.8 million, equating to 93 pence per share (30 September 2004: £9.4 million)- Dividends paid and proposed of £17.1 million equating to 93 pence per share based on the weighted average number of shares in issue for the period- Total assets stand at £1,569.9 million- Investment property acquisitions in the period of £296.7 million with an average yield of 7.3%- Initial public share offer completed in June 2005, raising net proceeds of £132.4 million- Completion of £630.0 million debt refinancing resulting in a reduction in the interest rate payable per annum by 130 basis points and a one-off exceptional charge of £72.7 million Conference call Management will host an earnings conference call on Friday, 28 October 2005 to review the Company's financial results for the nine month ended 30 September 2005. The conference call is scheduled for 3:00 p.m. London time (10:00 a.m. New York time). All interested parties are welcome to participate on the live call. You can access the conference call by dialling +1-866-323-3742 (from within the U.S.) or +1-706-643-0550 (from outside the U.S.) ten minutes prior to the scheduled start of the call; please reference "Mapeley Q3 Earnings". Attached is the interim report for the nine months ended 30 September 2005. Replay of the conference call will be available until 11:59 p.m. New York timeon Wednesday, 11 November 2005 by dialing +1-800-642-1687 (from within the U.S.)or +1-706-645-9291 (from outside the U.S.); please reference access code"1786715". For further information, please contact:Tim McCallMJ2 Business CommunicationsTel: +44(0)20 7491 7776 / +44(0)7753 561862Email: [email protected] / [email protected] Introduction Mapeley is a market leader in property investment and outsourcing, owning £1.4billion of real estate in the UK. Mapeley owns and manages a diverse portfolioof over 1,700 properties, primarily let to strong credit quality tenants whomthe Company believes will remain in occupation on a long-term basis. It seekstenants with large property portfolio management needs such as central and localgovernment and large corporate organisations. The Company's registered office is located at Suite 6, Borough House, Rue dePre, St Peter Port, Guernsey GY1 3RH. Chairman's Statement Third Quarter ReviewMapeley Limited (LSE: MAY) reported EBITDA for the third quarter ended 30September 2005 of £16.2 million and funds from operations (FFO) of £7.5 million.As of 30 September 2005, the total book value of the Company's stockholders'equity increased to £446.5 million or £19.88 per share from £18.87 per share at30 June 2005. During the third quarter, performance from our two major outsourcing contractscontinues to perform in line with expectations. Mapeley remains active incommercial property investment market. Also in the third quarter, we acquired 8properties, the majority of these utilising our direct approach to owners. Third Quarter DividendConsistent with Mapeley's intention to pay stable and growing quarterlydividends to its shareholders, the Board of Directors declared a dividend of£0.33 per share for the quarter ended 30 September 2005, an increase of 10% pershare from the prior quarter. The record date for this dividend will be 4November 2005 and payment date will be on 18 November 2005. Investment ActivityThe 8 office properties we acquired are 100 per cent let under fully repairingand insuring leases to central and local government and major corporate tenants.The average remaining lease term is 9 years. SummaryWe are encouraged by the pipeline of additional investment opportunitiescurrently under review and will be on target to invest a total of £400 millionin the current year to 31 December 2005. We are pleased with our first quarteras a public company and will continue to focus on creating long-term shareholdervalue. Wesley R EdensChairman Operating review Group restructuringMapeley Limited (the "Company") was incorporated in Guernsey, Channel Islands on26 April 2005. On 2 June 2005, the Company acquired the total issued sharecapital of Mapeley U.K. Co. Limited ("MUKCO") from Mapeley Holding CompanyLimited in a share for share exchange. This restructuring has been accounted forusing the principles of merger accounting and hence the comparative figurespresented for the consolidated Mapeley Limited group ("Mapeley" or the "Group")have been prepared as if the Company had always been the holding company for theGroup. Initial public offeringOn 21 June 2005, the Company's shares were admitted to the Official List of theLondon Stock Exchange under the symbol MAY. The Company was originally listed atan offer price of £23 per share and raised £132.4 million net proceeds. Share performance dataClosing share price on 30 September 2005 £27.90 per shareDividend declared for the nine months ended 30 September 2005 (Note 1) £0.93 pershare Property investmentsDuring the first nine months of the year, the Group successfully pursued itsstrategy of acquiring individual properties or portfolios of office properties.The Group focused on purchasing property primarily with strong credit qualitytenants, who are expected to stay in the properties over the long-term. In the nine months to 30 September 2005, the Group purchased investment propertyat a cost of £296.7 million with an average initial yield of 7.3% (including thecost of purchase) and identified a significant target pool of properties it mayconsider acquiring in the future. Debt financeThe Group's financial strategy is to maintain an optimal gearing ratio (Note 2)to ensure that shareholders benefit from maximum leveraged returns. At 30September 2005, the Group had a gearing ratio of 180.5% (31 December 2004:168.0%). As well as having the right level of debt in the business, it is alsoimportant to ensure that the Group has flexible debt that can support thebusiness strategy on a long term basis. Throughout the year to date, the Group has continued to seek attractiveinvestment property to add to its property portfolio. Initially, theseacquisitions were funded by a 3 year, £200.0 million acquisition facility. Afterthe Company's listing, this acquisition facility was replaced by a 10 year,£175.0 million investment facility at LIBOR plus 75 basis points. At 30September 2005, £170.9 million was drawn down and LIBOR was fixed at an averagerate of 4.96% per annum through an interest rate swap, for 10 years. The Group also refinanced parts of its existing borrowings, replacing an 18year, £465.0 million loan, with a 7 year, £455.0 million loan with a matchinginterest rate swap for 15 years so as to give an interest rate of 4.65%. Thisnew loan resulted in a reduction in the rate of interest payable, which fellfrom an average of 6.80% per annum to 5.45% per annum (allowing the Group toavoid aggregate payments of some £102.0 million otherwise expected to have beenpayable over the 15 years that remained under the former swap agreement). Therefinancing also resulted in a one-off exceptional charge of £72.7 millionincluding £63.9 million to close interest rate swaps. To support the continued acquisition of investment property, the Group also putin place an additional 3 year, £200.0 million revolving acquisition facility ofwhich £75.9 million was drawn down at 30 September 2005. The Group also procureda £25.0 million working capital facility in the period. Note 1: Per share calculations are based on the weighted average number of ordinary shares in issue for the nine months ended 30 September 2005 of 18,052,687 shares (30 September 2004: 15,100,000 shares). Per share calculations for the quarter ended 30 September 2005 are based on the weighted average number of shares in the quarter of 22,465,147.Note 2: Gearing is defined as net debt (total debt less cash and short term deposits) as a proportion of total equity Quarterly key financial information Income Statement Quarter ended Quarter ended Quarter ended 30 September 2005 30 June 2005 31 March 2005 £million £million £million Revenue 84.2 81.9 79.1EBITDA 16.2 15.6 17.1Funds from operations (FFO) (see page 6) 7.5 5.2 4.1Interim dividend declared 7.4 5.0 4.6Dividend per share (pence / share) (Note 3) 33p 30p 30pFFO per share (pence / share) (Note 3) 33p 33p 27p Balance Sheet As at As at As at 30 September 2005 30 June 2005 31 March 2005 £million £million £million Non-current assets 1,408.6 1,306.3 1,220.1Net assets 446.5 423.9 358.1 Year to date key financial information Income Statement Nine months ended Nine months ended 30 September 2005 30 September 2004 £million £million Revenue 245.2 234.8Property operating expenses (193.3) (191.8)Administrative and other expenses (13.6) (12.1)EBITDA 48.9 42.0Finance costs (Note 3) (111.3) (36.8)(Loss) / profit for the period (70.8) 32.4Funds from operations (FFO) 16.8 9.4Interim dividend declared 17.1 -Dividend per share (pence / share) (Note 4) 93p -FFO per share (pence / share) (Note 4) 93p 62p Balance Sheet As at As at 30 September 2005 31 December 2004 £million £million Non-current assets 1,408.6 1,104.6Bank loans before loan finance costs and amortisation 880.1 670.0Net assets 446.5 354.2Gearing (Note 5) 180.5% 168.0% Note 3: Finance costs include a £72.7 million one-off exceptional charge resulting from the refinancingNote 4: Per share calculations for the nine months ended 30 September 2005 are based on the weighted average number of ordinary shares in issue during the period of 18,052,687 shares (30 September 2004: 15,100,000 shares). Per share calculations for the quarter ended 30 September 2005 are based on the weighted average number of shares in issue during the quarter of 22,465,147. Per share calculations for the quarter ended 30 June 2005 are based on the weighted average number of shares in issue during the quarter of 15,809,890. Per share calculations for the quarter ended 31 March 2005 are based on the weighted average number of shares in issue during the quarter of 15,322,600.Note 5: Gearing is defined as net debt (total debt less cash and short term deposits) as a proportion of total equity. Financial review RevenueGroup turnover for the nine months ended 30 September 2005 was £245.2 million,an increase of 4.4% over the same period last year. The increase was largely dueto the following factors: rental income of £8.9 million from the investmentproperty the Group has acquired since 30 September 2004; a net increase inincome of £3.3 million in accordance with the terms of the Group's outsourcingcontracts; and a fall in other income of £1.7 million. Property operating expensesThe property operating expenses of the Group in the nine months ended 30September 2005 were £193.3 million compared to £191.8 million for the sameperiod in the previous year, an increase of 0.8%. The net increase was primarily due to additional costs of £0.9 million incurredon property management resulting from increased activity in rent and leaserenewals, and an increase of £0.6 million in facilities management costs due toindexation in the facilities management providers' contracts. Administrative and other expensesAdministrative and other expenses were £13.6 million for the nine months ended30 September 2005 compared to £12.1 million for the same period in the prioryear. The net increase of £1.5 million was largely driven by an increase instaff costs of £0.7 million and a share benefit expense of £0.8 million forshares offered to employees and non-executive directors under the Group'sEmployee Share Plan. EBITDAEBITDA (Note 6) was £48.9 million for the nine months ended 30 September 2005compared to £42.0 million for the nine months ended 30 September 2004. The netincrease of £6.9 million was mainly due to the additional revenue generated bythe investment property portfolio which the Group acquired principally duringthe nine month period ended 30 September 2005. Quarter ended Nine months ended Nine months ended 30 September 2005 30 September 2005 30 September 2004 Unaudited Unaudited Unaudited £ million £ million £ million Profit before tax and finance costs 17.2 37.4 66.7Add back: Depreciation and Amortisation 3.3 10.0 10.9 Loss on disposal of subsidiaries - 0.6 - Net valuation (surplus) / deficit on investment Properties (4.3) 0.9 (35.6) ------------ ------------ ------------EBITDA 16.2 48.9 42.0 ------------ ------------ ------------ Finance costsFinance costs increased in the nine months ended 30 September 2005 by £74.5million to £111.3 million compared with £36.8 million in the nine months ended30 September 2004. However, after excluding the one-off costs of refinancing theGroup's principal debt facilities, finance costs rose by only £1.8 million,largely due to the acquisition of new investment property. The one-offrefinancing costs of £72.7 million comprised swap breakage costs of £63.9million, loan termination costs of £2.0 million and the expensing of relatedunamortised loan issue costs of £6.8 million. The refinancing resulted in areduction in the rate of interest payable, which fell from an average of 6.80%per annum to 5.45% per annum (realising an annualised cost saving ofapproximately £6.8 million). Note 6: EBITDA is defined by the Group as profit before tax; finance costs; depreciation and amortisation; and valuation surplus / deficit on investment and non-investment property. Funds from operations (FFO)FFO is a management measure used to demonstrate the underlying operatingperformance of real estate companies because it provides investors withinformation regarding the Group's ability to service debt and make capitalexpenditure. FFO (Note 7) does not represent cash generated from operatingactivities in accordance with IFRS, therefore it should not be considered analternative to cash flow as a measure of liquidity, and is not necessarilyindicative of cash funds available. This calculation of FFO may be differentfrom the calculation used by other companies and, therefore, comparability maybe limited. Funds from operations increased by £7.4 million to £16.8 million in the ninemonths ended 30 September 2005 (30 September 2004: £9.4 million) of which £7.5million was generated in the current quarter. The increase in FFO is principally attributable to an increase in EBITDA of £6.9million and a lower level of life cycle expenditure following a reduction of£6.5 million as outsourcing contracts are now entering a more stable phase. Thiswas offset by a decrease in asset management receipts of £7.0 million in linewith the Board's expectation, and a £2.6 million increase in net finance costsdriven largely by the acquisition of new investment property. The investment property portfolio which the Group acquired principally duringthe nine month period accounted for £2.9 million of the funds from operationsfor the year to date, of which £2.8 million related to the current quarter. Reconciliation from EBITDA to FFO Quarter ended Nine months ended Nine months ended 30 September 2005 30 September 2005 30 September 2004 Unaudited Unaudited Unaudited £million £million £million EBITDA 16.2 48.9 42.0Net finance costs (Note 8) (10.7) (33.4) (30.8)Movement in onerous lease provision 1.0 (2.1) (4.9)Life cycle expenditure (Note 9) (2.1) (5.4) (11.9)Asset management 2.7 8.0 15.0Employee shares 0.4 0.8 - ------------ ------------ ------------FFO 7.5 16.8 9.4 ============ ============ ============ Note 7: The Group defines FFO as net earnings after tax, capital expenditure and debt service, but excludes depreciation, amortisation and movement in provisions.Note 8: Net finance costs are stated after eliminating the effects of amortisation of loan finance fees, loss on interest rate swaps, loan termination costs and unwinding of discounts on provisions, and include finance income.Note 9: Life cycle expenditure is the total cash expenditure incurred in the period less amounts recognised in EBITDA. Life cycle costs arise under Group service contracts, the accounting treatment of which is set out in the accounting policies.Note 10: Asset management receipts are the total cash receipts in the period less amounts recognised in EBITDA. The accounting treatment of asset management receipts is set out in the accounting policies. DividendsOn 27 October 2005, the Board of Directors declared a dividend of £0.33 pershare for the quarter ended 30 September 2005 (30 June 2005: £0.30), an increaseof 10% per share from the prior quarter reflecting the Company's policy ofpaying stable and growing dividends. Non-current assetsNon-current assets comprising investment property, property plant and equipmentand premiums paid for operating leases increased by £304.0 million between 31December 2004 and 30 September 2005. Investment property increased to £845.1 million from £549.3 million at 31December 2004. This reflects the acquisition of new investment property in theperiod to 30 September 2005 of £296.7 million, of which £89.0 million wasacquired in the current quarter. This was offset by a write down of theacquisition costs incurred on those new properties acquired in 2005. Over the same period, property, plant and equipment increased by £11.3 millionto £524.2 million at 30 September 2005 (31 December 2004: £512.9 million),principally due to the revaluation of certain of the Group's freehold and longleasehold properties. Capitalised premiums paid for operating leases decreased by £3.1 million from£42.4 million at 31 December 2004 to £39.3 million at 30 September 2005 as aresult of amortisation. Independent review report to Mapeley Limitedon the interim IFRS financial information for the nine months ended 30 September2005 Introduction We have been instructed by the Company to review the financial information forthe nine months ended 30 September 2005 which comprises the Consolidated IncomeStatement, Consolidated Statement of Changes in Equity, Consolidated BalanceSheet, Consolidated Cash Flow Statement, and the related notes 1 to 14. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board in the United Kingdom. To the fullest extent permittedby law, we do not accept or assume responsibility to anyone other than theCompany, for our work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority in the United Kingdom. The next annual financial statements of the Group will be prepared in accordancewith those IFRSs adopted for use by the European Union. The financialinformation for the nine months ended 30 September 2005 has been prepared on thebasis of the accounting policies which the Directors intend to use in the nextfinancial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof Group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies have been applied. A review excludes audit proceduressuch as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom or International Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress an audit opinion on the financial information. Review conclusion On the basis of our review, we are not aware of any material modifications thatshould be made to the financial information as presented for the nine monthsended 30 September 2005 and the quarter ended 30 September 2005. Ernst & Young LLP London27 October 2005 Consolidated income statementFor the nine months ended 30 September 2005 Nine months ended Nine months ended Year ended Notes 30 September 2005 30 September 2004 31 December 2004 Unaudited Unaudited Audited £000 £000 £000 Revenue 3 245,211 234,765 314,093Property operating expenses (193,345) (191,773) (260,222) ------------ ------------ ----------- Net contract, rental & related income 51,866 42,992 53,871 Net valuation (deficit) / surplus on investment property 10 (854) 35,602 48,072Profit on disposal of investmentproperty - 205 204Impairment reversal of non-investment property 10 - 4,645 Administrative and other expenses (13,565) (12,051) (17,601) ------------ ------------ ----------- Profit before tax and finance costs 37,457 66,748 89,191 Finance costs 7 (111,344) (36,823) (49,393)Finance income 3,099 2,512 3,496 ------------ ------------ ----------- (Loss) / profit before tax (70,788) 32,437 43,294 Income tax expense - UK 8 - - - - Overseas - - - ------------ ------------ -----------(Loss) / profit for the periodattributable to shareholders (70,788) 32,437 43,294 ============ ============ =========== Dividends- paid 6 9,638 - -- proposed 6 7,414 - - ============ ============ =========== (Loss) / earnings per share £/share £/share £/share restated- basic 4 (3.9) 2.1 2.9- diluted (3.9) 2.1 2.8 ============ ============ =========== Consolidated statement of changes in equityat 30 September 2004 and 31 December 2004 Issued Share Net Retained Asset Other Total capital premium unrealised earnings revaluation reserves equity losses £000 £000 £000 £000 £000 £000 £000 ------ -------- ------- -------- -------- ------- --------At 31 December 2003 (Audited) - - (56,023) (50,950) 277,247 119,437 289,711 Revaluation deficit - - - - (2,459) - (2,459)Depreciation written back on revaluation of non-investment property - - - - 4,814 - 4,814Transfer of excess revaluation depreciation - - - 4,302 (4,302) - -Net gain on cash flow hedges - - 10,456 - - - 10,456 ------ -------- ------- -------- -------- ------- --------Total profit / (loss) for the period recognised directly in equity - - 10,456 4,302 (1,947) - 12,811 Profit for the period - - - 32,437 - - 32,437 ------ -------- ------- -------- -------- ------- --------Total income / (expense) for the period - - 10,456 36,739 (1,947) - 45,248 ------ -------- ------- -------- -------- ------- --------At 30 September 2004 (Unaudited) - - (45,567) (14,211) 275,300 119,437 334,959 ------ -------- ------- -------- -------- ------- -------- Revaluation surplus - - - - 23,227 - 23,227Depreciation written back on revaluation of non-investment property - - - - 1,830 - 1,830Transfer of excess revaluation depreciation - - - 1,443 (1,443) - -Net loss on cash flow hedges - - (18,056) - - - (18,056)Total (loss) / profit for the period recognised directly in equity - - (18,056) 1,443 23,614 - 7,001Profit for the period - - - 10,857 - - 10,857 ------ -------- ------- -------- -------- ------- --------Total (expense) / income for the period - - (18,056) 12,300 23,614 - 17,858Surplus contributed in the period - - - - - 280 280Contributed surplus repaid in the period - - - - - (146) (146)Investment in own shares - - - - - 1,237 1,237 ------ -------- ------- -------- -------- ------- --------At 31 December 2004 (Audited) - - (63,623) (1,911) 298,914 120,808 354,188 ------ -------- ------- -------- -------- ------- -------- Consolidated statement of changes in equityat 30 September 2005 Issued Share Net Retained Asset Other Total capital premium unrealised earnings revaluation reserves equity losses £000 £000 £000 £000 £000 £000 £000 ------ -------- ------- -------- -------- ------- --------At 31 December 2004 (Audited) - - (63,623) (1,911) 298,914 120,808 354,188 Revaluation surplus - - - - 12,288 - 12,288Depreciation written back on revaluation of non-investment property - - - - 5,489 - 5,489Transfer of excess revaluation - - - 4,980 (4,980) - - depreciationNet gains on cash flow hedges - - 42,115 - - - 42,115 ------ -------- ------- -------- -------- ------- --------Total income for the period recognised directly in equity - - 42,115 4,980 12,797 - 59,892Loss for the period - - - (70,788) - - (70,788) ------ -------- ------- -------- -------- ------- --------Total income / (expense) for the period - - 42,115 (65,808) 12,797 - (10,896)Capitalised shareholder loans - - - - - 8,086 8,086Repaid contributed surplus - - - - - (29,000) (29,000)Issue of ordinary shares on listing of the Company - 140,800 - - - - 140,800Cost related to issue of ordinary shares on listing of the Company - (8,411) - - - - (8,411)Issue of shares to Non-executive Directors - - - - - 345 345Issue of shares to employees under the Employee Share Plan - - - - - 471 471Write back of loss on disposal of subsidiaries - - - 599 - - 599Equity dividends - - - (9,638) - - (9,638) ------ -------- ------- -------- -------- ------- --------At 30 September 2005 (Unaudited) - 132,389 (21,508) (76,758) 311,711 100,710 446,544 ====== ======== ======= ======== ======== ======= ======== Consolidated balance sheet - at 30 September 2005 30 September 2005 30 September 2004 31 December 2004 Unaudited Unaudited Audited Notes £000 £000 £000ASSETSNon-current assetsProperty, plant and equipment 9 524,199 485,381 512,923Investment property 10 845,133 512,717 549,324Premiums for operating leases 39,261 43,551 42,391 ------------ ----------- -----------Total non-current assets 1,408,593 1,041,649 1,104,638 ------------ ----------- -----------Current assetsInventories 21,833 13,774 17,273Trade and other receivables 65,202 97,713 104,872Cash and short-term deposits - in controlled accounts 18,795 56,158 57,438 - for operational purposes 55,439 10,604 17,406 ------------ ----------- -----------Total current assets 161,269 178,249 196,989 ------------ ----------- ----------- ------------ ----------- -----------TOTAL ASSETS 1,569,862 1,219,898 1,301,627 ============ =========== =========== EQUITY AND LIABILITIESEquity attributable to equity holders of Mapeley LimitedShare capital - - -Share premium 132,389 - -Net unrealised gains reserve (21,508) (45,567) (63,623)Retained earnings (76,758) (14,211) (1,911)Asset revaluation reserve - Property, plant & equipment 311,711 275,300 298,914Other reserves 100,710 119,437 120,808 ------------ ----------- -----------Total equity 446,544 334,959 354,188 ------------ ----------- -----------Non-current liabilitiesInterest-bearing loans and borrowings 11 872,328 644,578 668,411Provisions 38,256 38,739 38,852Interest rate swap 2,869 - -Deferred asset management receipts 71,165 57,734 64,016 Current liabilitiesTrade and other payables 113,030 90,701 104,965Interest-bearing loans and borrowings 11 2,128 4,024 3,472Interest rate swap 18,640 45,567 63,652Deferred asset management receipts 4,902 3,596 4,071 ------------ ----------- -----------Total liabilities 1,123,318 884,939 947,439 ------------ ----------- ----------- ------------ ----------- -----------TOTAL EQUITY AND LIABILITIES 1,569,862 1,219,898 1,301,627 ============ =========== =========== Approved by the Board of Directors on 27 October 2005 and signed on its behalfby: J P Hopkins, Director Consolidated cash flow statementfor the nine months ended 30 September 2005 Nine months Nine months Year ended ended ended 30 September 30 September 31 December 2005 2004 2004 Unaudited Unaudited Audited £000 £000 £000Cash flows from operating activitiesProfit before tax and finance cost 37,457 66,748 89,191Adjustment for:Impairment reversal of non-investment property (10) - (4,645)Fair value adjustments on investment property 854 (35,602) (48,072)Depreciation and amortisation 10,017 10,905 14,712Profit on disposal of investment property - - (204)Loss on disposal of subsidiaries 599 - -Share benefit expense 816 - - ----------- ------------ ----------Operating profit before changes in working capital 49,733 42,051 50,982Increase in inventory (4,560) (11,081) (14,580)Decrease / (increase) in trade & other receivables 10,672 (14,169) (21,328)Increase in trade & other payables 5,191 697 18,601Decrease in provisions (2,079) (2,354) (5,830)Increase in deferred asset management receipts 7,978 14,988 21,745 ----------- ------------ ----------Cash generated from operations 66,935 30,132 49,590Interest paid (33,787) (33,002) (44,626)Interest received 3,099 2,512 3,496Costs of raising finance (7,319) - (1,015) ----------- ------------ ----------Net cash flows from operating activities 28,928 (358) 7,445 ----------- ------------ ---------- Cash flows from investing activitiesProceeds from disposal of investment property - 889 1,193Purchase of property, plant and equipment (377) (442) (817)Purchase of investment property (296,663) (56) (24,406) ----------- ------------ ----------Net cash flows used in investing activities (297,040) 391 (24,030) ----------- ------------ ---------- Cash flows from financing activitiesPayment of finance lease liabilities (130) (117) (159)Receipt of shareholder loans 675 1,000 1,000Swap and loan termination fees (65,902) - -Receipt of new bank loans 701,785 - 25,694Repayment of bank loans (491,677) (921) (1,873)Receipt of capital contribution 29,000 - -Repayment of contributed surplus (29,000) - -Proceeds of issue of ordinary shares 140,800 - -Cost related to issue of ordinary shares on IPO (8,411) - -Dividend paid to equity holders (9,638) - - ----------- ------------ ----------Net cash flows from financing activities 267,502 (38) 24,662 ----------- ------------ ---------- Net (decrease) / increase in cash and cash equivalents (610) (5) 8,077Cash and cash equivalents at start of period 74,844 66,767 66,767 ----------- ------------ ----------Cash and cash equivalents at end of period 74,234 66,762 74,844 =========== ============ ========== Notes to the unaudited interim resultsat 30 September 2005 1. General information Mapeley Limited was registered in Guernsey on 26 April 2005 under the provisionsof the Companies (Guernsey) Law, 1994. On 2 June 2005, the Company issued16,037,100 shares to the shareholders of MUKCO to acquire its issued sharecapital. On 21 June 2005, through its initial public offering, the Companyissued 6,121,739 ordinary shares to investors at a price of £23 each. At thesame time, the Company issued 291,308 ordinary shares under the share scheme foremployees and 5,000 ordinary shares each to J W Harris, R W Carey and C N KParkinson in their capacity as Non-executive Directors of the Company. Theshares issued to the employee share scheme and to the Non-executive Directorswere issued for £nil consideration. The consolidated financial statements of the Group for the nine months ended 30September 2005 comprise the Company and its subsidiaries and were authorised forissue on 27 October 2005. The address of the Company's registered office and theprincipal activities of the Group are set out in the Introduction. 2. Summary of significant accounting policies The consolidated financial statements of Mapeley Limited have been prepared inaccordance with International Financial Reporting Standards ("IFRS"). Inpreparing interim financial statements, the accounting principles appliedreflect the amendments to IAS and the adoption of the new IFRS which becameeffective from 1 January 2005. The interim statements also reflect those IFRSand International Financial Reporting Interpretations Committee ("IFRIC")determinations which the Directors expect to be in force at the time the Companyprepares its financial statements for the year ending 31 December 2005. Otherthan in respect of these changes, explained further below, the interim financialstatements have been prepared under the same accounting principles and methodsof computation as in the special purpose conversion financial statementsprepared under IFRS for the year ended 31 December 2004 from which thecomparative figures for the year ended 31 December 2004 have been extracted. IFRS 2 Share-based Payment IFRS 2 Share-based Payment was effective from 1 January 2005 and has beenapplied to the preparation of these financial statements. It requires an expenseto be recognised where the Group buys goods or services in exchange for sharesor rights over shares ("equity-settled transactions"), or in exchange for otherassets equivalent in value to a given number of shares or rights over shares("cash-settled transactions"). The main impact of IFRS 2 on the Group is theexpensing of employees' and directors' deferred shares and other share basedincentives. Straight line recognition of rental income under IAS 17 The Directors have followed the latest IFRIC announcement, in line with emergingbest practice, clarifying the income and expense recognition profile of anoperating lease in which the payments rise by a fixed annual percentage over thelife of the lease. Certain of the Group's outsourcing contracts provide for pre-determined upliftsin rental income. The components of rents not contingent on future events havebeen recognised on a straight line basis over the life of the contracts. Othercomponents of rental income are recognised on a receivable basis. Certain comparative figures have been adjusted or extended to conform to thepresentation adopted in respect of the nine months ended 30 September 2005. Basis of preparation The consolidated financial statements have been prepared on the historical costbasis, except for investment properties, land and buildings, derivativefinancial instruments and available for sale financial assets that have been measured at fair value. Costs related to the issue of ordinary shares are charged against share premium. Basis of consolidation The consolidated financial statements comprise the financial statements ofMapeley Limited and its subsidiaries for the nine months ended 30 September 2005. Subsidiaries are consolidated from the date on which control is transferred tothe Group and cease to be consolidated from the date on which control istransferred from the Group. The restructuring of the Group during the period involved a share for shareexchange, which introduced a new holding company, Mapeley Limited. The relativerights of the former shareholders of MUKCO were not altered and thisrestructuring has been accounted for using the merger method of accounting.Although Mapeley Limited was only formed on 26 April 2005, the accountinginformation has been prepared as if the Group had always been in existence inits current form and prior period comparatives are presented accordingly. Allintra-group transactions are eliminated as part of the consolidation process. RevenueRevenue represents amounts receivable in respect of contractual income, propertyrental income and other property and trading activity earned in the normalcourse of business, net of VAT and other sales-related taxes. Contractual revenueThe Group's gross contractual revenue comprises income earned by its propertyoutsourcing businesses, rentals and service charges received from tenants. Contracts entered into under the UK government's private finance initiative("PFI") scheme are unbundled, either at inception or on a reassessment of thearrangement. Income from the embedded leases is distinguished from income fromthe other contract elements. Amounts receivable under PFI contracts in respectof the provision of property to customers are treated in accordance with theprovisions of IAS 17 Leases (with the minimum lease payments being spread on astraight line basis over the life of the lease). However, the cost and revenueprofiles of the portion of the contract concerned with the provision of propertyrelated services are treated as arising from service contracts in accordancewith IAS 18 Revenue. Income from service contracts is recognised and accounted for according to thestage reached in the contract by reference to the value of work completed. Anappropriate estimate of the profit attributable to the work undertaken isrecognised once the outcome of the contract can be assessed with reasonablecertainty. The costs of service contracts not yet taken to the income statement,less any foreseeable losses and payments on account, are shown in work inprogress. Incentives for lessees to enter into lease agreements are spread evenly over thenon-cancellable period of the lease, even if the payments are not made on such abasis. In addition to service charges, as part of the property outsourcing contract,the Group is also responsible for procuring certain additional goods andservices supplied to its customers. The direct costs of supplying these goodsare invoiced to the Group and recharged to customers in full. As the Groupreceives a pre-determined fee for managing such activity on behalf of itscustomers and the risks in relation to the provisions of these goods andservices are primarily borne by the Group's customers, revenue for this activityrecorded by the Group comprises the net income earned by the Group from thisactivity in each financial reporting period. Property trading and other incomeIncome earned from property trading consists of proceeds from the sale oftrading properties. Sales are recognised on completion of contracts. Rentals payable under operating leasesRentals under operating leases are charged on a straight-line basis over thelease term, even if the payments are not made on such a basis. Incentives givenby lessors to enter into lease agreements, including asset management receipts,are spread evenly over the lease term as a reduction of rental expense, even ifthe payments are not made on such a basis. Investment propertyFreehold property held to earn rent or for capital appreciation or both isclassified as investment property in accordance with IAS 40 Investment Property.Property held under finance leases for similar purposes is also classified asinvestment property. Investment property is held at fair value. The surplus or deficit on revaluationis reported in the income statement. No depreciation is provided in respect ofinvestment property. Non-investment propertyWhere the Group provides significant levels of ancillary services to theoccupiers of its property, this property is not classified as investmentproperty. Such freehold property and property held under finance leases arerevalued annually and depreciated in accordance with IAS 16 Property, Plant andEquipment. Surpluses or deficits on individual properties are transferred to therevaluation reserve, except that deficits below historical cost are taken to theincome statement. Premiums for operating leasesPremiums paid for operating leases are stated at cost less amortisation and anyadditional provision for impairment which may be required. Depreciation and amortisationDepreciation is provided at rates calculated to write off the cost or valuation,less the estimated residual value, of each asset on a straight line basis overits expected useful life.- Buildings are classified according to condition and date of construction, and are depreciated over periods between 20 and 50 years according to the classification. Buildings held under finance leases are depreciated over the term of the lease if shorter.- Premiums paid for operating leases are amortised over the remaining lease term.- Plant and equipment, excluding information systems equipment, are depreciated over four years.- Information systems equipment, including computer equipment, major business systems software and telecommunications apparatus is depreciated over two to four years.- No depreciation charge is applied to land. Trading propertyProperty, which is held with the intention of being sold, is included ininventories at the lower of cost and net realisable value. Asset management receiptsAsset management receipts, which represent premiums given by lessors in returnfor the Group extending its existing lease terms or removing break clauses fromexisting leases, are deferred and released as a credit to operating costs evenlyover the lease term, even if payments are not made on such a basis. Onerous leasesProvision is made for vacant leasehold properties or those sublet at a levelwhich renders the properties loss-making over the length of the lease. The cashflows for each lease are discounted back to the balance sheet date representingthe Group's best estimate of the impact of the time value of money and the risksinherent in its obligations. Any increase or decrease in the provision is takento the income statement each financial period. The unwinding of the discount inthe provision is charged to the income statement each year within finance costs.The basis of the provision and amounts provided are reviewed bi-annually. Share-based paymentsThe cost of equity-settled transactions with employees is measured by referenceto the fair value at the date at which shares are granted. The cost ofequity-settled transactions is recognised (together with acorresponding reduction in retained earnings) over the period in which theshares vest. The cumulative expense recognised for equity-settled transactionsat each reporting date until the vesting date reflects the extent to which thevesting periods have expired. Shares issued to directors and employees which vest upon issue are charged inthe income statement at the date of issue at their fair value at that date. Financial instruments Interest-bearing loans and borrowingsAll loans and borrowings are initially recognised at cost, being the fair valueof the consideration received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings aresubsequently measured at amortised cost using the effective interest method.Amortised cost is calculated by taking into account any issue costs, and anydiscount or premium on settlement. Borrowing costs are recognised in the income statement using the effectiveinterest rate method. Gains and losses are recognised in the income statement when the liabilities arederecognised or impaired, as well as through the amortisation process. Derivative financial instrumentsThe Group uses derivative financial instruments, such as interest rate swaps, tohedge its risks associated with interest rate fluctuations. Such derivativefinancial instruments are stated at fair value. Fair value for a swap is market value, as determined by a break cost quote by anexperienced, independent broker, which is estimated by applying current yieldsto anticipated future cash flows. For the purpose of hedge accounting, interest rate swaps are designated as cashflow hedges where they hedge exposure to variability in cash flows that iseither attributable to a particular risk associated with a recognised asset orliability or a forecast transaction. For derivatives that do not qualify for hedge accounting, any gains or lossesarising from changes in fair value are taken directly to the income statementfor the year. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated or exercised, or no longer qualifies for hedge accounting. At thatpoint in time, any cumulative gain or loss on the hedging instrument recognisedin equity is kept in equity until the forecast transaction occurs. If a hedgedtransaction is no longer expected to occur, the net cumulative gain or lossrecognised in equity is transferred to the income statement for the year. TaxationThe Company is a limited company registered in Guernsey, Channel Islands and isnot subject to local taxation. Certain Group undertakings are subject to foreigntaxes in respect of foreign source income, including UK income tax on rentalincome within UK Group undertakings. Deferred taxationDeferred income tax is provided, using the liability method, on all temporarydifferences at the balance sheet date between the tax bases of assets andliabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporarydifferences. Deferred income tax assets are recognised for all deductible temporarydifferences, carry-forward of unused tax assets and unused tax losses, to theextent that it is probable that taxable profit will be available against whichthe deductible temporary differences, and the carry-forward of unused tax assetsand unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balancesheet date and reduced to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the deferredincome tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates thatare expected to apply to the year when the asset is realised or the liability issettled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised inequity and not in the income statement. 3. Revenue and segmental informationThe Directors continue to keep under review the accounting polices andpresentation of the financial statements as required by IAS 8 Accountingpolicies, changes in accounting estimates and errors. Since presenting thefinancial statements for the year ended 31 December 2004, the Directors haverefined the definition of their business segments in accordance with thestrategy of acquiring outsourcing contracts and investment property as follows: Outsourcing contractsThis segment consists of activities arising from the sale and subsequentleaseback of HMRC and Abbey property portfolios. The main characteristics ofthese arrangements are listed below: - long term contracts (both contracts run over a period of 20 years);- agreements are tailored in accordance with the client's accommodation requirements (from simple purchase and lease back to fully serviced accommodation);- the agreements allow HMRC and Abbey to exercise flexibility to vacate properties within defined parameters; and- the revenue earned is subject to annual increases. Investment propertyThe Group has embarked on a successful strategy of acquiring individual andportfolios of office properties on a direct basis, rather than under outsourcingarrangements, and intends to acquire new assets that are accretive to earnings.The Group will focus on purchasing property primarily let to strong creditquality tenants, who are likely to stay in the properties long-term. Theseinvestment properties are let with commercial lease arrangements and rents aresubject to market reviews. Changes in the definition of segments resulted in the investment property fromthe Abbey property portfolio being included within the Outsourcing contractssegment in the nine months ended 30 September 2005. They were previously shownwithin the Investment property segment. The effect of redefining business segments resulted in revenue derived from theOutsourcing contracts segment increasing by £93.0 million, segment resultincreasing by £80.3 million, segment assets increasing by £591.1 million andsegment liabilities increasing by £686.0 million, with a corresponding impact onthe Investment property segment. Accordingly, segmental information presented in the financial statements inrespect of the year ended 31 December 2004 has been restated to ensure it iscomparable with the presentation of the current period. Nine months ended 30 September 2005 (Unaudited) Business segments Investment Outsourcing Total property contracts operations £000 £000 £000 Rental revenue 8,877 - 8,877Property trading and other revenue 234 2,014 2,248 Facility unitary charge - 153,583 153,583 Contractual rents - 60,624 60,624 Third party rents - 19,879 19,879 Contractual revenue - 234,086 234,086 Segment revenue 9,111 236,100 245,211Rents payable (288) (125,616) (125,904)Other direct property and contract expenditure (Note 11) (245) (67,196) (67,441) ---------- ---------- ---------Net contract, rental & related revenue 8,578 43,288 51,866Impairment reversal of non-investment property - 10 10Net valuation (deficit) / surplus on investment property (6,049) 5,195 (854) ---------- ---------- --------- Segment result 2,529 48,493 51,022 ========== ========== Unallocated expenses (13,565) ---------Profit from operations before finance costs 37,457Net finance costs (108,245) ---------Loss for the period (70,788) ========= Assets and liabilitiesSegment assets 319,941 1,202,187 1,522,128 ========== ==========Unallocated assets 47,734 ---------Total assets 1,569,862 ========= Segment liabilities 3,579 210,103 213,682 ========== ==========Unallocated liabilities 909,636 ---------Total liabilities 1,123,318 =========Other segment informationDepreciation and amortisation - (9,352) (9,352)Expenditure on purchase of investment property 296,663 - 296,663 ========== ========== ========= Note 11: Other direct property and contract expenditure includes depreciation. Nine months ended 30 September 2004 (Unaudited) Business segments Investment Outsourcing Total property contracts operations £000 £000 £000 Rental revenue - - -Property trading and other revenue - 3,213 3,213 Facility unitary charge - 150,485 150,485 Contractual rents - 59,321 59,321 Third party rents - 21,746 21,746 Contractual revenue - 231,552 231,552 Segment revenue - 234,765 234,765Rents payable - (126,451) (126,451)Other direct property and contract expenditure (Note 11) - (65,322) (65,322) ---------- ----------- ---------Net contract, rental & related revenue - 42,992 42,992Net valuation surplus on investment property - 35,602 35,602Profit on disposal of investment property / fixed asset - 205 205 ---------- ----------- --------- Segment result - 78,799 78,799 ========== =========== Unallocated expenses (12,051) ---------Profit from operations before finance costs 66,748Net finance costs (34,311) ---------Profit for the period 32,437 ========= Assets and liabilitiesSegment assets - 1,152,072 1,152,072 ========== ===========Unallocated assets 67,826 ---------Total assets 1,219,898 ========= Segment liabilities - 195,198 195,198 ========== ===========Unallocated liabilities 689,741 ---------Total liabilities 884,939 =========Other segment informationDepreciation and amortisation - (9,682) (9,682) ========== =========== ========= Year ended 31 December 2004 (Restated) Business segments Investment Outsourcing Total property contracts operations £000 £000 £000 Rental revenue 182 - 182Property trading and other revenue - 3,950 3,950 Facility unitary charge - 201,512 201,512 Contractual rents - 79,697 79,697 Third party rents - 28,752 28,752 Contractual revenue - 309,961 309,961 Segment revenue 182 313,911 314,093Rents payable - (174,577) (174,577)Other direct property and contract expenditure (Note 8) (343) (85,302) (85,645) --------- ---------- ---------Net contract, rental & related revenue (161) 54,032 53,871Impairment reversal of non-investment property - 4,645 4,645Net valuation surplus on investment property - 48,072 48,072Profit on disposal of investment property / fixed asset - 204 204 --------- ---------- ---------Segment result (161) 106,953 106,792 ========= ========== Unallocated expenses (17,601) ---------Profit from operations before finance costs 89,191Net finance costs (45,897) ---------Profit for the year 43,294 ========= Assets and liabilitiesSegment assets 24,813 1,212,133 1,236,946 ========= ==========Unallocated assets 64,681 ---------Total assets 1,301,627 ========= Segment liabilities 1,004 206,378 207,382 ========= ==========Unallocated liabilities 740,057 ---------Total liabilities 947,439 =========Other segment informationDepreciation and amortisation - (13,183) (13,183)Expenditure on purchase of investment property 24,406 - 24,406 ========= ========== ========= Note 11: Other direct property and contract expenditure includes depreciation. 4. (Loss) / earnings per share The calculation of basic and diluted earnings per share figures is based on thefollowing:- Net loss attributable to equity holders of the Company for the period of £70.8 million (nine months ended 30 September 2004: profit of £32.4 million; year ended 31 December 2004: profit of £43.3 million)- Weighted average number of ordinary shares for basic earnings per share 18,052,687 (nine months ended 30 September 2004: 15,100,000; year ended 31 December 2004: 15,100,000)- Weighted average number of ordinary shares for diluted earnings per share 18,052,687 (nine months ended 30 September 2004: 15,322,600; year ended 31 December 2004: 15,322,600) To aid comparability, the weighted average numbers of ordinary shares for thenine months ended 30 September 2004 and year ended 31 December 2004 have beenrestated to reflect the share for share exchange that took place on 2 June 2005,in which existing shareholders were offered 100 ordinary shares in the Companyfor each share held in MUKCO. 5. Employee Share Plan The Group established its Employee Share Plan (the "Plan") during the period,which replaced the Group's Leveraged Co-investment Plan and Performance OptionPlan, both of which were wound up during 2004. On the Group's admission to theOfficial List of the London Stock Exchange on 21 June 2005, 291,308 ordinaryshares were granted and issued in the names of Plan members subject to certainvesting conditions. Vesting takes place over a 5 year period from the date ofissue and is conditional on employees remaining in employment; there are noperformance conditions. During the vesting period, the participants receivedividends and the shares may be sold, but the proceeds of any sale are subjectto the same vesting terms as the shares. The total estimated cost to the Group of shares issued under the Plan during thenine months ended 30 September 2005 of £6.7 million is to be spread over therelevant vesting periods; 30% will vest on each of the third and fourthanniversaries of admission and 40% will vest on the last business day before thefifth anniversary of admission. As a result, wages and salaries include a sharebenefit expense of £471,000 for the nine months ended 30 September 2005 (30September 2004: £nil; 31 December 2004: £728,000 in respect of previousschemes). Wages and salaries also include a charge of £345,000 which relates to a sharebenefit expense for three Non-executive Directors who were each awarded 5,000ordinary shares. These shares are not conditional on a qualifying vesting periodand, accordingly, the expense has been recognised immediately in the nine monthsended 30 September 2005. 6. Dividends Nine months ended 30 September 2005 Unaudited £000Declared and paid during the period:Equity dividends on ordinary shares: First interim dividend for 2005: £0.30 per share 4,615 Second interim dividend for 2005: £0.27 per share 4,275 Third interim dividend for 2005: £0.03 per share 748 ---------------- 9,638 Proposed and approved at the Board meeting on 27 October 2005(To be deducted from retained earnings in the three months ending 31 December 2005)Equity dividends on ordinary shares: Fourth interim dividend for 2005: £0.33 per share 7,414 ================ No dividends were declared or paid during the year ended 31December 2004. 7. Finance costs Nine months ended Nine months ended Year ended 31 30 September 30 September December 2004 2005 2004 Unaudited Unaudited Audited £000 £000 £000 Bank loans and overdrafts 36,184 32,933 44,117Amortisation of loan finance fees 672 455 671Shareholder interest payable 13 58 75Finance charges payable under finance leases 289 299 399Loss on interest swap - - 29Exceptional loss on breaking interest rate swap 63,851 - -Loan termination costs 2,051 - -Accelerated amortisation of finance fees on termination of loan 6,800 - -Unwinding of discount on provisions 1,484 3,078 4,102 ---------- ---------- --------- 111,344 36,823 49,393 ========== ========== ========= Following the refinancing of certain parts of the Group's borrowings, the Groupincurred costs to exit its existing interest rate swap agreements. Since theswap arrangements were entered into, interest rates have changed andconsequently an exceptional cost of £63.9 million was incurred in breaking theseagreements which was charged to the income statement in the nine months ended 30September 2005. The Group also incurred termination costs of £2.0 million inbreaking the existing loan, which was charged in the same period. Amortisation of loan finance fees comprises accelerated amortisation charges of£6.8 million in respect of loan finance fees on certain of the Group'sborrowings. In accordance with IAS 39 Financial Instruments: Recognition andMeasurement, unamortised loan finance fees at 31 December 2004, incurred inconnection with those borrowings, have been charged over the period from 31December 2004 to the revised date of repayment of the borrowings. 8. Income tax expense (a) Tax chargeThe Group does not expect to pay income tax in respect of the nine months ended30 September 2005 or the year ending 31 December 2005 (nine months ended 30September 2004: £nil; year ended 31 December 2004: £nil), and, accordingly, noprovision for tax has been included in the income statement for the nine monthsended 30 September 2005. (b) Deferred income taxThe Group has losses arising in prior years that are available indefinitely foroffset against future taxable profits of the companies in which the lossesarose. The Group has not recognised a deferred income tax asset in this respectas the Directors of Mapeley Limited do not consider there is sufficientcertainty in the timing and quantum of future taxable profits that would allowreversal of the asset arising in the relevant Group companies. The unrecognised deferred tax asset balance at 30 September 2005 was £55.4million (30 September 2004: £58.8 million; 31 December 2004: £47.5 million). There would be no material liability if the Group's properties were to be soldat their period end values. 9. Property, plant and equipment Property acquired Freehold under finance Plant and property leases equipment Total £000 £000 £000 £000 Cost or valuation:At 31 December 2004 471,204 40,154 15,970 527,328Additions - - 377 377Revaluations 11,157 1,131 - 12,288Impairment reversal of non-investment property 10 - - 10 -------- -------- -------- --------At 30 September 2005 482,371 41,285 16,347 540,003 Accumulated depreciation:At 31 December 2004 - - (14,405) (14,405)Provided during the period (5,189) (468) (1,231) (6,888)Written back on revaluation 5,189 300 - 5,489 -------- -------- -------- -------- - (168) (15,636) (15,804) ======== ======== ======== ======== Net book value:At 30 September 2005 482,371 41,117 711 524,199 ======== ======== ======== ========At 31 December 2004 471,204 40,154 1,565 512,923 ======== ======== ======== ======== The Group carries freehold property and property acquired under finance leasesat fair value in accordance with IAS 16. This property was valued at 30 September 2005 by Savills Commercial Limited, avaluer external to the Group using the discounted cash flow method of valuation.These valuations have been incorporated into the interim financial statements. 10. Investment property Property acquired Freehold under finance property leases Total £000 £000 £000At valuation:At 31 December 2004 529,678 19,646 549,324Additions 296,663 - 296,663Revaluations (971) 117 (854) ------- ------- ------- At 30 September 2005 825,370 19,763 845,133 ======= ======= ======= It is the Group's policy to carry investment property at fair value inaccordance with IAS 40. Investment property was valued at 30 September 2005 byCB Richard Ellis Limited and Savills Commercial Limited, valuers external to theGroup, on the basis of Market Value in accordance with The Royal Institute ofChartered Surveyors' Appraisal and Valuation Standards. These valuations havebeen incorporated into the interim financial statements. 11. Interest and non-interest bearing loans and borrowings Nine months ended Nine months ended Year ended 31 30 September 30 September December 2004 2005 2004 Unaudited Unaudited Audited £000 £000 £000Non-currentObligations under finance leases 4,406 4,545 4,492Bank loans 867,922 633,775 657,661Loans from shareholders (note 12) - 6,100 6,100Interest due to shareholders (note 12) - 158 158 -------- -------- -------- 872,328 644,758 668,411 ======== ======== ======== CurrentObligations under finance leases 129 159 174Bank loans 1,999 1,942 1,999Loans from shareholders (note 12) - 1,641 1,000Interest due to shareholders (note 12) - 282 299 -------- -------- -------- 2,128 4,024 3,472 ======== ======== ======== Bank loans are stated net of unamortised loan finance costs of £10.1 million (30September 2004: £9.5 million; 31 December 2004: £10.3 million). Revolving acquisition facilityDuring the period, a 3 year, £200.0 million revolving acquisition facility wasarranged to finance the acquisition of investment property. Of this amount,£75.9 million was drawn down at 30 September 2005 (30 September 2004: £nil; 31December 2004: £nil). This facility will be drawn down as investment property isacquired. The coupon interest rate payable on the facility is LIBOR plus 1.5%plus mandatory costs (if any). As a condition precedent to drawing any advances,each borrower has granted security over all its assets in favour of a securitytrustee. The borrower's obligations are guaranteed by the Company and certainsubsidiaries. Investment facilityA 10 year, £175.0 million investment facility was arranged during the period torefinance existing financial indebtedness secured on certain properties owed bymembers of the Group. Of this amount, £170.9 million was drawn down at 30September 2005 (30 September 2004: £nil; 31 December 2004: £nil). The couponinterest rate payable on the facility is LIBOR plus 0.75% plus mandatory costs(if any). Once all assets are purchased, the Directors intend to enter into swaparrangements to fix the rate of interest payable. Each borrower under thisfacility has granted security over all its assets in favour of the lender. New term loan in relation to the Abbey portfolioThe Group refinanced its existing loan facility in relation to the Abbeyportfolio on 30 June 2005, replacing the 18 year, £465.0 million loan with a 7year, £455.0 million loan facility. The bank loan is secured against theinvestment property held in the Abbey portfolio. Interest on the loan is paidquarterly at a rate of LIBOR plus 0.95% plus mandatory costs (if any). Theborrowers have entered fixed interest rate agreements to fix the interestpayable. Working capital facilityA 1 year, £25.0 million working capital facility was arranged during the periodwith an option to extend the term for 2 years. At 30 September 2005 £nil wasdrawn down. The coupon interest rate payable on the facility is LIBOR plus 2.0%plus mandatory costs (if any). The loan is secured by a fixed charge over allthe assets of MUKCO. 12. Related party disclosuresDuring the period, MUKCO, a wholly owned subsidiary of Mapeley Limited, sold theshares of three subsidiaries, Mapeley Milton Keynes Limited, Willen Lake Limitedand Mapeley Services Limited to Mapeley Holding Company Limited, a companyoutside the Group and owned by Fortress Investment Group. The shares were soldat book value but the consideration was still unpaid at the 30 September 2005. The following table provides the total amount owed to and by related parties: Amounts owed by Amounts owed to related parties related parties (accounted within Trade & (accounted within Trade & other receivables) other payables) £000 £000Related partyMapeley Holding Company Limited Sale of Subsidiaries 2,631 2,161 ============== ============= Shareholder loans and accrued interest thereon with a book value of £8.1 millionfrom FIT Mapeley Holding Limited and Fortress UK Acquisition Company wereconverted into 655,000 ordinary shares on 27 May 2005. The Company issued 5,000 shares each to J W Harris, R W Carey and C N KParkinson in their capacity as Non-executive Directors of the Company. Themarket value of the shares at the time of issue was £23.00 per share. 13. Subsequent eventsSince 30 September 2005, the Group has exchanged and completed contracts for 4properties for a consideration of £28.5 million. The Group also exchanged on 3further properties for a total consideration of £40.1 million, of which a totalof £3.6 million has been paid in deposits. The completion of these propertypurchases are scheduled to take place in the next quarter. All these propertiesare funded by the Group's cash resources, the investment facility and therevolving acquisition facility. The Group is currently in negotiations to refinance the loan facility enteredinto by Mapeley STEPS Limited and Mapeley STEPS Contractor Limited. If thesenegotiations are concluded successfully, it is currently anticipated that thiswill involve the repayment of the current 20 year, £178.0 million loan andreplacing it with a 7 year, £200.0 million term facility. It is also currentlyanticipated that the Group would enter fixed interest rate agreements at thestart of the loan to fix the interest payable and that it would be required towrite off unamortised loan finance costs on the borrowings. If the transactionhad occurred on 30 September 2005 the loan finance costs to be written off andthe swap breakage costs would have been £4.3 million and £20.8 million,respectively. The Board of the Company declared a dividend of £7.4 million (30 September 2004:£nil; 31 December 2004: £nil) at a board meeting held on 27 October 2005. 14. Quarterly results Quarterly information for the income statement and balance sheet are set outbelow. Income Statement Quarter ended Quarter ended Quarter ended 30 September 2005 30 June 2005 31 March 2005 Unaudited Unaudited Unaudited £000 £000 £000 Revenue 84,248 81,872 79,091Property operating expenses (67,033) (64,291) (62,021) ------------ ------------ ----------- Net contract, rental & related income 17,215 17,581 17,070 Net valuation surplus / (deficit) on investment property 4,199 (2,007) (3,046)Impairment reversal / (impairment) of non-investment property 80 (70) -Administrative and other expenses (4,297) (5,513) (3,755) ------------ ------------ ----------- Profit before tax and finance costs 17,197 9,991 10,269 Finance costs (12,485) (82,146) (16,713)Finance income 803 1,210 1,086 ------------ ------------ ----------- Profit / (loss) before tax 5,515 (70,945) (5,358) Income tax expense - UK - - - - Overseas - - - ============ ============ ===========Profit / (loss) for the period attributable to shareholders 5,515 (70,945) (5,358) ============ ============ =========== Dividends- paid 748 4,275 4,615- proposed 7,414 748 - ============ ============ =========== Earnings / (loss) per share £/share £/share £/share restated- basic 0.25 (4.49) (0.35)- diluted 0.25 (4.49) (0.35) ============ ============ =========== Balance sheet 30 September 2005 30 June 2005 31 March 2005 Unaudited Unaudited Unaudited £000 £000 £000ASSETSNon-current assetsProperty, plant and equipment 524,199 514,131 512,224Investment property 845,133 752,018 666,775Premiums for operating leases 39,261 40,174 41,122 ------------ ------------ ------------Total non-current assets 1,408,593 1,306,323 1,220,121 ------------ ------------ ------------Current assetsInventories 21,833 19,680 18,617Trade and other receivables 65,202 58,438 110,980Cash and short-term deposits- in controlled accounts 18,795 19,817 67,628- for operational purposes 55,439 51,606 9,895 ------------ ------------ ------------Total current assets 161,269 149,541 207,120 ------------ ------------ ------------ ------------ ------------ ------------TOTAL ASSETS 1,569,862 1,455,864 1,427,241 ============ ============ ============ EQUITY AND LIABILITIESEquity attributable to equity holders of Mapeley LimitedShare capital - - -Share premium 132,389 133,142 -Net unrealised gains reserve (21,508) (27,460) (55,979)Retained earnings (76,758) (83,488) (5,757)Asset revaluation reserve- Property, plant & equipment 311,711 301,422 299,082Other reserves 100,710 100,310 120,808 ------------ ------------ ------------Total equity 446,544 423,926 358,154 ------------ ------------ ------------Non-current liabilitiesInterest-bearing loans and borrowings 872,328 785,223 793,331Provisions 38,256 36,740 37,133Interest rate swap 2,869 68,847 -Deferred asset management receipts 71,165 - 65,477 Current liabilitiesTrade and other payables 113,030 106,997 108,648Interest-bearing loans and borrowings 2,128 2,128 3,138Interest rate swap 18,640 27,460 57,114Deferred asset management receipts 4,902 4,543 4,246 ------------ ------------ ------------Total liabilities 1,123,318 1,031,938 1,069,087 ------------ ------------ ------------ ------------ ------------ ------------TOTAL EQUITY AND LIABILITIES 1,569,862 1,455,864 1,427,241 ============ ============ ============ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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