2nd Nov 2006 07:01
Mapeley Limited02 November 2006 Press Release2 November 2006 MAPELEY LIMITED Unaudited Interim results for the nine months ended 30 September 2006 Mapeley Limited (LSE: MAY), a market leader in property investment andoutsourcing, announces today its interim results for the nine months ended 30September 2006. Operational highlights - Dividends paid for the third quarter of 43 pence per share up 30.3%, equating to £11.4 million; - increased from 33 pence per share for the third quarter ended 30 September 2005; - increased 4.9% from 41 pence per share for the second quarter ended 30 June 2006; - increased 10.3% from 39 pence per share for the first quarter ended 31 March 2006 - FFO (see note 18) up 114.3% to £36.0 million, equating to 138 pence per share* (30 September 2005: £16.8 million, equating to 93 pence per share)- EBITDA (see note 17) increased by 58.3% to £77.4 million (30 September 2005: £48.9 million)- Investment property acquisitions in the period of £306.2 million (30 September 2005: £296.7 million) Financial highlights - Revenue up 13.7% to £278.8 million (30 September 2005: £245.2 million)- Profit before tax of £42.1 million (30 September 2005: loss before tax of £70.8 million)- Total asset value up 11.4% to £2,164.4 million (31 December 2005: £1,800.1 million) Commenting on the results, Jamie Hopkins, Chief Executive of Mapeley said: "Mapeley has continued its excellent performance through the third quarter of2006. We have seen strong growth across all areas of the business. We announceda dividend of 43 pence for the third quarter of 2006, a 30.3% increase on thedividend for the same period in 2005, and a 43% increase since IPO. Importantlywe have continued to grow the dividend on a regular basis as intended. I am confident that the combination of good organic growth from our existingportfolio and our ability to source and acquire assets efficiently will resultin Mapeley delivering strong results for the full year. Looking further forward,a continued strong performance and our pipeline of real estate outsourcingopportunities should allow us to continue to create long term value forshareholders." Conference call Mapeley management will host a results conference call on Thursday 2 November 2006 at 10.00am London time. All interested parties are welcome to participate on the live call. You can access the conference call by dialling 0800 6942 586 (from within the UK) or +44 (0) 1452 567 098 (from outside the UK) ten minutes prior to the scheduled start of the call; please reference "Mapeley Third Quarter 2006 Results Call." A replay of the conference call will be available until 10.00am London time on Thursday 16 November 2006 by dialling 0800 953 1533 (from within the UK) or +44 (0) 1452 550 000 (from outside the UK); please reference access number "9736414#". For further information, please contact:Emma Parr, Investor RelationsMapeleyTel: +44(0)20 7788 1742Email: [email protected] Tim McCallMJ2 Business CommunicationsTel: +44(0)20 7491 7776 / +44(0)7753 561 862Email: [email protected] / [email protected] * based on weighted average number of shares in issue for the period on an undiluted basis Chief Executive's Statement Performance We have delivered strong results in the third quarter of 2006, and continue toperform ahead of our expectations. Mapeley has generated further organic growthfrom its portfolio and successfully executed its acquisition plan. We have continued to pay a stable and growing dividend to our shareholders. At the end of September we announced a further increase in our dividend to 43 pencefor the third quarter; an increase of 5% over the dividend for the previousquarter and a cumulative increase of 43% since IPO. We reported FFO of £36.0 million for the nine months to 30 September 2006 (2005: £16.8 million) an increase of 114.3% over the period. EBITDA was £77.4 million for the nine months to 30 September 2006, an increase of 58.3% over the same period in 2005. We also launched a further equity issue on 28 September which completed in thecurrent period. We received excellent support from both new and existingshareholders, and in total raised £93.5 million. Outsourcing Contracts In the second quarter we reported good organic growth across our portfolio and this trend has continued in the third quarter. The drivers of organic growth in the third quarter have been consistent with the first half of the year where we have continued to grow our revenues faster than our expenses. Specifically we realised cost-saving benefits from reduced financing costs, our facilities management services contract with Alfred McAlpine and through expert management of our leasehold portfolio. As anticipated at the half year, the third quarter has seen a smaller contribution from asset management receipts due to the phasing of these opportunities being weighted more in the second quarter than the third quarter. In addition we have begun to realise returns from our latest government outsourcing contract with the Identity and Passport Service which we closed in March. In June we were short-listed as one of four bidders for the Workplace 2010project for the outsourcing of the Northern Ireland Civil Service estate.Throughout the third quarter we have continued to evaluate this and a number ofother real estate outsourcing opportunities in the public and private sectors. Direct Property Investments In the nine months to 30 September 2006 we acquired 21 office properties at anaggregate cost of £306.2 million and an average net initial yield of 6.6%. Wecontinue to make acquisitions at yield spreads consistent with our dividendstrategy and remain confident of achieving our £400.0 million acquisition targetfor 2006. On 28 September 2006, we announced the purchase of the Pearl Centre inPeterborough for £65.0 million. This brings the total number of properties inPeterborough which we own or manage to 15. I believe this purchase is a greatexample of where our in depth local market knowledge and operational capabilitygives us a tangible competitive advantage. Mapeley's extensive regional network throughout the UK enables us to source andacquire assets more efficiently than our competitors and furthermore, building aconcentrated presence in certain regions provides Mapeley with excellent localmarket intelligence. Our proprietary database continues to enable us to makedirect approaches to the landlords of properties which meet our acquisitioncriteria and has proven to be very powerful. There remains a solid pipeline of acquisition opportunities for Mapeley toevaluate and we continue to be very active. Outlook We believe that with the capability of our operating platform, we will continueto be able to acquire new properties at attractive yields as well as explorefurther real estate outsourcing opportunities in both the public and privatesectors. This, coupled with the strength of the organic growth derived from ourcurrent portfolio leaves us very confident both for Mapeley's full yearperformance as well as the continued creation of long term value forshareholders. 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 portfolioAs at 30 September 2006, the HMRC portfolio (see note 8) had a value of £567.4million (31 December 2005: £566.6 million). It comprised 140 freehold or longleasehold properties (31 December 2005: 144) and 386 rack rented leaseholdproperties (31 December 2005: 401). Portfolio occupancy (based on area) was98.8% at 30 September 2006 (31 December 2005: 98.5%). Mapeley awarded a contract to Alfred McAlpine Business Services ("AMBS"), asubsidiary of Alfred McAlpine Plc, to manage and deliver facilities managementservices to the HMRC portfolio and other properties on 3 February 2006. Thiscontract will run until Spring 2021 matching our contractual obligations with HMRC. The Abbey portfolioAs at 30 September 2006, the Abbey portfolio (see note 9) had a value of £569.3million (31 December 2005: £546.5 million). It comprised 367 freehold or longleasehold properties (31 December 2005: 367) and 713 rack rented leaseholdproperties (31 December 2005: 732). Portfolio occupancy (based on area) was91.8% at 30 September 2006 (31 December 2005: 91.6%). Identity and Passport Service ("IPS") Interview Centre Outsourcing ContractMapeley has recently signed a contract for a term of 3 years, with an option toextend for a further 2 years with IPS. Mapeley will acquire and fit outapproximately 17,500 sqm of office space during 2006 and 2007 in a phasedroll-out programme. Thereafter, Mapeley will provide fully servicedaccommodation, which will be used by IPS to interview first-time passportapplicants as part of their continuing efforts to reduce identity fraud. Investment property Direct property investment ("DPI") portfolioDuring the first nine 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 nine months to 30 September 2006, the Group purchased investment propertyat an aggregate cost of £306.2 million with an average net initial yield of 6.6%(6.9% excluding Pearl Centre, Peterborough) and continued to identify asignificant target pool of properties it may consider acquiring in the future. Included in this total was the acquisition of the Pearl Centre, Peterborough for£65.0 million at a net initial yield of 6.1%. The Pearl Centre is let toDiligenta Limited, a UK-based subsidiary of Tata Consultancy Services, for 12 years with annual RPI rental uplifts such that the running yield in year 12 will be a minimum of 7.6%. Mapeley has taken out an interest rate swap that matches the cost of debt to the income profile. As at 30 September 2006, the DPI portfolio (see note 9) comprised 59 properties(31 December 2005: 38) with a value of £841.0 million (31 December 2005: £529.2million). The net initial yield on this portfolio as at 30 September 2006 was6.9% (31 December 2005: 7.2%). The properties were 98.5% let on fully repairingand insuring leases to central and local government and major corporate tenants(31 December 2005: 98%) with an average unexpired lease length of 8 years (31December 2005: 9 years). 2) Property Management LettingsDuring the first nine months of 2006 the Group let 36 vacant units (30 September2005: 20) with an annual rent role of £1.3 million (30 September 2005: £0.6million). Rent reviews and lease renewals - As landlordDuring the first nine months of 2006 the Group settled 38 rent reviews (30September 2005: 49) on rack rented properties in its portfolios with an annualrent roll of £1.3 million (30 September 2005: £6.6 million). The averageincrease was 1.6% per annum. During the same period the Group also completed lease renewals for 6 properties(30 September 2005: 8) with an annual rent roll of £0.2 million (30 September2005: £0.2 million). The average annual increase was 3.0%. Rent reviews and lease renewals - As tenantDuring the first nine months of 2006 the Group settled 153 rent reviews (30September 2005: 186) on rack rented properties in its portfolios with an annualrent roll of £25.6 million (30 September 2005: £27.1 million). The averageincrease was 1.1% per annum. During the same period the Group also completed lease renewals for 35 properties(30 September 2005: 18) with an annual rent roll of £3.0 million (30 September2005: £1.5 million). The average annual increase was 1.1%. 3) Financing Equity fund raisingOn 25 January 2006, Mapeley Limited (the "Company") issued 4,036,697 ordinaryshares at a price of £27.25 per share and raised proceeds of £106.4 million, netof issue costs. On 11 October 2006 the Company issued 2,876,923 ordinary shares at a priceof £32.50 per a share and raised proceeds of £90.4 million, net of costs. In each case the proceeds were used to repay a portion of the revolvingacquisition facility, resulting in a reduction in interest costs and enablingthe Group to draw new funds under its revolving acquisition facility for futureacquisitions. Share performance dataClosing share price on 30 September 2006 £ 33.83 per shareDividends proposed and declared for the quarter ended 30 September 2006 £ 0.43 per share Debt finance Conversion of Beta revolving acquisition facility to Beta term facilityIn January 2006, at the time of the equity fund raising, the Group converted the£300.0 million revolving acquisition facility into a 10 year, £208.6 millionterm facility with a fixed interest rate of 4.53% plus a margin of 0.85%. Therate of interest payable was determined by the weighted average rate payableunder the Group's matching swap contracts which were terminated on the samedate. New revolving facilityHaving paid down the previous revolving acquisition facility (with the new termfacility and equity, as described above), the Group also arranged a new 2 year,£300.0 million revolving loan facility (the "Gamma acquisition facility") tofinance the future acquisition of investment property. The interest rate payableon the facility is LIBOR plus a margin of between 1.0% and 1.5%, plus mandatorycosts (if any). The Group has also put in place two 10 year swaps, a £200.0million swap with an interest rate of 4.37% and a £52.0 million swap with aninitial interest rate of 4.0% rising to 5.8% at maturity, to fix its anticipatedlong term exposure to interest rate risk on these property acquisitions. As at 30 September 2006 the balance drawn down on this facility was £297.9million. STEPS refinancingThe Group successfully completed the refinancing of the loan facility enteredinto by Mapeley STEPS Limited and Mapeley STEPS Contractor Limited in 2001. Thisinvolved the repayment of the current 20 year, £174.9 million loan and replacingit with a new 15 year, £178.0 million term facility, of which £176.0 million hasbeen utilised. As a result, the Group has incurred an exceptional charge of£17.8 million comprising of £4.4 million resulting from a change in the timingof repayment of the original loan and £13.4 million relating to swaptermination. The refinancing has resulted in a reduction in the rate of interestpayable, which fell from an average of 6.65% per annum to 5.25% per annum(realising an annual cost saving of approximately £2.4 million per annum). Conversion of Gamma Acquisition facility to Gamma Term facilityFollowing the successful issue of 2,876,923 ordinary shares in October 2006, theGroup intends to convert the Gamma Acquisition facility into a new term facilityand simultaneously to arrange a new revolving acquisition facility (the DeltaAcquisition facility). 4) Dividend proposed and declared At a Board meeting held on 28 September 2006, the Board of the Company declareda dividend for the quarter of £11.4 million, equating to £0.43 per share(quarter ended 30 September 2005: £7.4 million, equating to £0.33 per share),(quarters ended 30 June 2006: £10.9 million, equating to £0.41 per share and 31March 2006: £10.3 million, equating to £0.39 per share) based on the number ofshares in issue on an undiluted basis during the period. The record date for this dividend was 6 October 2006 and the payment date was 20October 2006. For the nine months ended 30 September 2006, the dividends paid and proposedamounted to £32.6 million (nine months ended 30 September 2005: £17.0 million). Key financial information Year endedThree months ended 30 Key Performance Measures Nine months ended 30 September 31 December September 2006 2005 2006 2005 2005 £m £m £m £m £m 11.4 7.5 Funds from operations (FFO) (refer to note 18) 36.0 16.8 25.4 11.4 7.4 Dividends declared during period 11.4 7.4 25.4 43p 33p Dividend per share (pence / share)* 123p 93p 130p 43p 33p FFO per share (pence / share) ** (refer to note 18) 138p 93p 130p Income Statement 100.0 84.2 Revenue 278.8 245.2 339.4 (70.1) (67.0) Property operating expenses (197.1) (193.3) (268.3) Net valuation surplus / (deficit) on 10.7 4.2 investment property 29.4 (0.9) 18.0 1.8 - Profit on disposal of non-investment property 3.0 - - (6.2) (4.2) Administrative and other expenses (15.2) (13.5) (19.7) 28.2 16.2 EBITDA (refer to note 17) 77.4 48.9 64.8 (20.5) (12.5) Finance costs (refer to note 4) (70.0) (111.4) (129.7) (1.1) 0.8 Finance income (refer to note 4) 12.5 3.1 3.8 -------- -------- --------- --------- --------- (Loss)/Gain on interest rate swap (2.2) - included in finance income (refer to note 4) 9.6 - - Exceptional finance charge included in (2.5) - finance costs (refer to note 4) (17.8) (72.7) (72.7) -------- -------- --------- --------- --------- 15.3 5.5 Profit / (loss) for the period 42.0 (70.8) (56.5) As at As at As at 30 30 31 September September December Balance Sheet 2006 2005 2005 £m £m £m Portfolio value 1,979.2 1,407.9 1,643.2 Total non-current assets 2,005.7 1,415.5 1,650.1 Financial instrument assets included in total non-current assets 20.3 - - Bank loans excluding loan finance costs 1,308.3 880.1 1,086.6 Financial instrument liabilities - 21.5 28.0 Net assets (refer to note 20) 623.8 446.6 456.9 Gearing (refer to note 19) 196% 180% 220% * Dividend per share calculations are based on the number of shares in issue on an undiluted basis during the period. ** Undiluted per share calculations for the nine months ended 30 September 2006 are based on the weighted average number of ordinary shares in issue during the period of 26,104,021 shares. Undiluted 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. Undiluted per share calculations for the year ended 31 December 2005 are based on the weighted average number of ordinary shares in issue during the period of 19,510,770 shares 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 18. FFO was £36.0 million in the nine months ended 30 September 2006, compared with£16.8 million in the nine months ended 30 September 2005. The increase in FFO of£19.2 million was primarily driven by income generated by investment propertiesacquired in the period and stronger performance from the Group's existingoutsourcing contracts driven by lower operating costs and higher assetmanagement receipts. Dividends On 28 September 2006, the Board of Directors declared a dividend of £0.43 pershare for the quarter ended 30 September 2006 (quarters ended 30 June 2006:£0.41 and 31 March 2006: £0.39 per share), an increase of 4.9% per share on theprior quarter, reflecting the Company's policy of paying stable and growingdividends. Revenue Group revenue for the nine months ended 30 September 2006 was £278.8 million, anincrease of £33.6 million (13.7%) over the same period last year. The increasewas driven by additional rental income of £26.1 million from the Direct PropertyInvestment ("DPI") portfolio. There was an increase, net of vacations, of £9.2million in contractual income from outsourcing contracts principally arising from the impact of the first full quarter of revenues from the Identity Passport Service ("IPS") contract offset by a reduction in revenue from property trading of £1.7 million. Property operating expenses The property operating expenses of the Group in the nine months ended 30September 2006 were £197.1 million (of which £123.7 million was rentals payable)compared to £193.3 million (£125.9 million rentals payable) for the same periodin the previous year, an increase of 3.6%. The increase was primarily driven byan increase in rental payments of £2.2 million and costs associated with the IPS contract. Administrative and other expenses Administrative and other expenses were £15.2 million for the nine months ended30 September 2006 compared to £13.5 million for the nine months ended 30September 2005, an increase of 12.5%. The increase was driven largely by bidcosts and an increase in staffing costs. EBITDA EBITDA (see note 17) was £77.4 million for the nine months ended 30 September2006, compared to £48.9 million for the nine months ended 30 September 2005, anincrease of 58.3%. This was a direct result of revenue growth of 15.0%outstripping total cost growth of 4.2%. Finance costs and finance income Finance costs in the nine months ended 30 September 2006 were £70.0 million (30September 2005: £111.4 million). The finance costs for the nine months ended 30September 2006 included exceptional break costs of £17.8 million (30 September2005: £72.7 million) relating to the refinancing of the HMRC portfolio facility.Exceptional break costs comprise a finance charge of £4.4 million resulting fromthe change in the estimate of the timing of the repayment of the original loanand £13.4 million relating to swap termination fees as a consequence of therefinancing. Excluding exceptional break costs, finance costs have increased by£13.5 million during the period due to higher interest costs on the increasedborrowings required for new investments. Finance income has benefited from unrealised gains on interest rate swaps in2006 of £9.6 million. The gain on the interest rate swap of £9.6 million hasarisen as a result of a favourable movement in long term interest ratesapplicable to the £200.0 million swap taken out in January 2006 on the Gammaacquisition facility. The swap fixed the Group's anticipated long term exposureto interest rate risk on certain property acquisitions. Taxation The Group has made a tax provision of £0.1 million in respect of the nine monthperiod to 30 September 2006. Certain Group companies are resident in Bermuda andare classified as UK Non-resident Landlords for tax purposes. Taxable profits inthese companies are subject to UK Income Tax and are exempt from local Bermudataxes. The Group has significant tax losses available for carry forward to future yearsbut in many cases these losses are only available to offset against futuretaxable profits in the entity in which the losses arose. The Group and itssubsidiaries did not pay income or corporation tax in 2005 in any of thejurisdictions in which they operated due to their tax residence status, currentyear losses and the availability of losses brought forward from prior years. Non-current assets Non-current assets, comprising investment property, property plant andequipment, premiums paid for operating leases, non-current trade and otherreceivables and financial instruments, increased by £355.6 million between 31December 2005 and 30 September 2006. Investment property (see note 9) increased to £1,413.8 million from £1,077.4million at 31 December 2005. This reflects the acquisition of new investmentproperty in the nine months to 30 September 2006 of £306.2 million plus avaluation surplus recognised in the period of £29.4 million and transfers frominventories of £0.8 million. Over the same period, property, plant and equipment (see note 8) increased to£529.6 million from £527.9 million at 31 December 2005, 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 30 September 2006, £1,308.3 million had been drawn under theGroup's loan facilities (31 December 2005: £1,086.6 million). The Group drewdown funds of £513.5 million in the period and repaid loans of £291.8 million,further described in the "Operating Review". Gearing The Group's financial strategy is to maintain an optimal gearing ratio (see note19) 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 ("LTV")using long-term debt with a lower interest rate, with the balance being fundedby new equity raised. At 30 September 2006, the Group had a gearing ratio of 196% (31 December 2005:220%). The decrease in gearing was primarily driven by an increase in equityfollowing the Group's secondary issue of shares in January 2006 and the use ofthe proceeds raised to partially repay the £300.0 million revolving acquisitionfacility. Consolidated income statementFor the nine months ended 30 September 2006 Three months ended 30 Nine months ended 30 Year ended September September 31 December 2006 2005 Notes 2006 2005 2005Unaudited Unaudited Unaudited Unaudited Audited £m £m £m £m £m 100.0 84.2 Revenue 3 278.8 245.2 339.4 (70.1) (67.0) Property operating expenses 3 (197.1) (193.3) (268.3)------- ------- --------- --------- --------- 29.9 17.2 Net contract, rental & related income 3 81.7 51.9 71.1 Net valuation surplus / (deficit) on 10.7 4.2 investment property 9 29.4 (0.9) 18.0 Reversal of impairment of non-investment 0.7 - property 8 0.7 - - - - Impairment of non-investment property - - (0.6) Profit on disposal of non-investment 1.8 - property 8,11 3.0 - - - - Gain on disposal of subsidiaries - - 0.6 (6.2) (4.2) Administrative and other expenses (15.2) (13.5) (19.7)------- ------- --------- --------- --------- 36.9 17.2 Operating profit 99.6 37.5 69.4 (20.5) (12.5) Finance costs 4 (70.0) (111.4) (129.7) (1.1) 0.8 Finance income 4 12.5 3.1 3.8------- ------- --------- --------- --------- 15.3 5.5 Profit / (loss) before tax 42.1 (70.8) (56.5) - - Income tax expense - Guernsey 5 - - - - - - UK 5 (0.1) - - - - - Overseas 5 - - -------- ------- --------- --------- --------- 15.3 5.5 Profit / (loss) for the period 42.0 (70.8) (56.5)======= ======= attributable to equity holders of ========= ========= ========= Mapeley Limited Dividends 10.9 0.7 - paid 6 29.5 9.6 17.0 11.4 7.4 - proposed and declared 6 11.4 7.4 8.3======= ======= ========= ========= ========= £/share £/share Dividends per share £/share £/share £/share 0.41 0.03 - paid 6 1.17 0.60 0.93 0.43 0.33 - proposed and declared 6 0.43 0.33 0.37======= ======= ========= ========= ========= Earnings / (loss) per share 0.59 0.25 - basic 7 1.61 (3.9) (2.89) 0.59 0.25 - diluted 7 1.61 (3.9) (2.89)======= ======= ========= ========= ========= Consolidated statement of changes in equityFor the period ended 30 September 2006 and 30 September 2005 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 surplus - - - - 3.0 - 3.0Depreciation written back on revaluation of non-investment property - - - - 4.9 - 4.9Transfer of excess revaluation depreciation - - - 4.5 (4.5) - -Net gain on cash flow hedges - - 27.9 - - - 27.9Realised loss on cash flow hedge - - 10.9 - - - 10.9 ----------------------------------------------------------------------------Total income for the period recognised directly in equity - - 38.8 4.5 3.4 - 46.7Profit for the period - - - 42.0 - - 42.0 ----------------------------------------------------------------------------Total income for the period - - 38.8 46.5 3.4 - 88.7Issue of ordinary shares - 110.0 - - - - 110.0Cost related to issue of ordinary shares - (3.8) - - - - (3.8)Issue of shares to Non-executive Directors - - - - - 0.5 0.5Issue of shares to employees under the Employee Share Plan - - - - - 1.0 1.0Equity dividends - - - (29.5) - - (29.5) ----------------------------------------------------------------------------At 30 September 2006 (Unaudited) - 238.6 12.2 (52.1) 322.0 103.1 623.8 ============================================================================ At 31 December 2004 (Audited) - - (63.6) (1.9) 298.9 120.8 354.2Revaluation surplus - - - - 12.3 - 12.3Reversal of impairment of non-investment property - - - - - - -Depreciation written back on revaluation of non-investment property - - - - 5.5 - 5.5Transfer of excess revaluation depreciation - - - 4.9 (4.9) - -Net gains on cash flow hedges - - (21.8) - - - (21.8)Realised loss on cash flow hedge - - 63.9 - - - 63.9Total income for the period recognised directly in equity - - 42.1 4.9 12.9 - 59.9Loss for the period - - - (70.8) - - (70.8) ----------------------------------------------------------------------------Total income / (expense) for the period - - 42.1 (65.9) 12.9 - (10.9)Capitalised shareholder loans - - - - - 8.1 8.1Repaid other reserves - - - - - (29.0) (29.0)Issue of ordinary shares on listing of Company - 140.8 - - - - 140.8Costs related to issue of ordinary shares on listing of Company - (8.4) - - - - (8.4)Issue of shares to Non-executive Directors - - - - - 0.3 0.3Issue of shares to employees under the Employee Share Plan - - - - - 0.5 0.5Write back of loss on disposal of subsidiary - - - 0.6 - - 0.6Equity dividends - - - (9.6) - - (9.6) ----------------------------------------------------------------------------At 30 September 2005 (Unaudited) - 132.4 (21.5) (76.8) 311.8 100.7 446.6 ============================================================================ Consolidated statement of changes in equityFor the year ended 31 December 2005 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 2004 (Audited) - - (63.6) (1.9) 298.9 120.8 354.2 Impairment of non-investment property reclassified to non-current assets held for sale - - - - (0.3) - (0.3)Revaluation surplus - - - - 19.4 - 19.4Depreciation written back on revaluation of non-investment property - - - - 6.9 - 6.9Transfer of excess revaluation Depreciation - - - 6.3 (6.3) - -Loss on cash flow hedges - - (26.9) - - - (26.9)Realised loss on cash flow hedge - - 63.9 - - - 63.9 ----------------------------------------------------------------------------Total income for the year recognised directly in equity - - 37.0 6.3 19.7 - 63.0Loss for the year - - - (56.5) - - (56.5) ----------------------------------------------------------------------------Total income /(expense) for the year - - 37.0 (50.2) 19.7 - 6.5Capitalised shareholder loans - - - - - 8.1 8.1Repaid other reserves - - - - - (29.0) (29.0)Issue of ordinary shares on listing of Company - 140.8 - - - - 140.8Cost related to issue of ordinary shares on listing of Company - (8.4) - - - - (8.4)Issue of shares to Non-executive Directors - - - - - 0.8 0.8Issue of shares to employees under the Employee Share Plan - - - - - 0.9 0.9Equity dividends - - - (17.0) - - (17.0) ----------------------------------------------------------------------------At 31 December 2005 (Audited) - 132.4 (26.6) (69.1) 318.6 101.6 456.9 ============================================================================ Consolidated balance sheet - at 30 September 2006 30 September 2006 30 September 2005 31 December 2005 Unaudited Unaudited Audited Notes £m £m £mASSETSNon-current assetsProperty, plant and equipment 8 529.6 524.2 527.9Investment property 9 1,413.8 845.1 1,077.4Premiums on operating leases 36.1 39.3 38.4Trade and other receivables 5.9 6.9 6.4Financial instruments 14 20.3 - - -------- -------- --------Total non-current assets 2,005.7 1,415.5 1,650.1 -------- -------- --------Current assetsInventories 10 18.1 21.8 18.5Trade and other receivables 57.2 58.3 48.9Cash and short-term deposits - in controlled accounts 15.6 18.8 25.7 - for operational purposes 67.4 55.4 55.5 -------- -------- --------Total current assets 158.3 154.3 148.6 -------- -------- -------- Non-current assets held for sale 11 0.4 - 1.4 -------- -------- -------- TOTAL ASSETS 2,164.4 1,569.8 1,800.1 ======== ======== ======== EQUITY AND LIABILITIESEquity attributable to equity holders of Mapeley LimitedIssued capital (net of treasury shares) 12 - - -Share premium 238.6 132.4 132.4Net unrealised gains / (losses) 12.2 (21.5) (26.6)Retained earnings (52.1) (76.8) (69.1)Asset revaluation reserve 322.0 311.8 318.6Other reserves 103.1 100.7 101.6 -------- -------- --------Total equity 623.8 446.6 456.9 -------- -------- --------Non-current liabilitiesTrade and other payables 5.6 5.3 5.4Interest & non-interest bearing loans and borrowings 13 1,299.6 872.3 797.8Provisions 30.7 29.6 28.2Financial instruments 14 - 21.5 26.6Deferred asset management receipts 80.4 71.1 74.0 Current liabilitiesTrade and other payables 112.4 107.7 108.8Interest & non-interest bearing loans and borrowings 13 0.1 2.1 285.4Provisions 5.9 8.7 10.4Financial instruments 14 - - 1.4Deferred asset management receipts 5.9 4.9 5.2 -------- -------- --------Total liabilities 1,540.6 1,123.2 1,343.2 -------- -------- -------- TOTAL EQUITY AND LIABILITIES 2,164.4 1,569.8 1,800.1 ======== ======== ======== Approved by the Board of Directors on 1 November 2006 and signed on its behalf by J P Hopkins, Director Consolidated cash flow statementfor the nine months ended 30 September 2006 Three months ended 30 September Nine months ended 30 September Year ended 31 December 2006 2005 2006 2005 2005Unaudited Unaudited Notes Unaudited Unaudited Audited £m £m Cash flows from operating activities £m £m £m 36.9 17.2 Operating profit 99.6 37.5 69.4 Adjustment for: Reversal of impairment of non-investment (0.7) - property (0.7) - - - (0.1) Impairment of non-investment property - - 0.6 Net valuation (surplus) / deficit on (10.7) (4.2) investment property 9 (29.4) 0.8 (18.0) 2.7 3.3 Depreciation and amortisation 7.9 10.0 13.4 (1.8) - Profit on disposal of assets held for sale 8,11 (3.0) - - - - (Profit) / loss on disposal of subsidiaries - 0.6 (0.6) 0.3 0.4 Share benefit expense 1.4 0.8 1.7 ------- ------- ------- ------- ------- Operating profit before changes in working 26.7 16.6 capital 75.8 49.7 66.5 (0.1) (2.1) Increase in inventories (0.4) (4.5) (1.2) (Increase) / decrease in trade & other 9.9 (6.7) receivables (7.8) 10.7 21.2 (Decrease) / increase in trade & other 6.4 (3.5) payables 4.0 5.2 5.5 (1.5) 1.0 Decrease in provisions (3.5) (2.1) (2.2) 0.2 2.6 Increase in deferred asset management receipts 7.1 7.9 11.1 ------- ------- ------- ------- ------- 41.6 7.9 Cash generated from operations 75.2 66.9 100.9 (17.8) (2.0) Interest paid (48.5) (33.8) (48.8) 1.1 0.8 Interest received 2.9 3.1 3.8 ------- ------- ------- ------- ------- 24.9 6.7 Net cash flows from operating activities 29.6 36.2 55.9 ------- ------- ------- ------- ------- Cash flows from investing activities 4.3 - Proceeds from of assets held for sale 5.2 - - - (0.1) Purchase of property, plant and equipment (0.1) (0.4) (0.3) (115.9) (89.0) Purchase of investment property 9 (306.2) (296.7) (507.2) ------- ------- ------- ------- ------- (111.6) (89.1) Net cash flows used in investing activities (301.1) (297.1) (507.5) ------- ------- ------- ------- ------- Cash flows from financing activities (8.9) (1.0) Costs of raising finance (11.3) (7.3) (8.2) (0.2) - Payment of finance lease liabilities (0.4) (0.1) (0.6) - - Receipt of shareholder loans - 0.7 0.7 (13.4) - Swap and loan termination fees 4 (13.4) (65.9) (65.9) 292.6 87.7 Receipt of new bank loans 13 688.5 701.8 1,059.6 (176.0) - Repayment of bank loans 13 (466.8) (491.7) (642.9) - - Receipt of other reserves - 29.0 29.0 - - Repayment of other reserves - (29.0) (29.0) - - Proceeds from issue of ordinary shares 110.0 140.8 140.8 (0.2) (0.8) Costs related to issue of ordinary shares (3.8) (8.4) (8.4) (10.8) (0.7) Dividend paid to equity holders 6 (29.5) (9.6) (17.1) ------- ------- ------- ------- ------- 83.1 85.2 Net cash flows from financing activities 273.3 260.3 458.0 ------- ------- Net increase / (decrease) in cash and (3.6) 2.8 short-term deposits 1.8 (0.6) 6.4 86.6 71.4 Cash and cash equivalents at start of period 81.2 74.8 74.8 ------- ------- ------- ------- ------- 83.0 74.2 Cash and cash equivalents at end of period 83.0 74.2 81.2 ======= ======= ======= ======= ======= Notes to the unaudited interim resultsat 30 September 2006 1. General information The consolidated interim financial statements of the Group for the nine monthsended 30 September 2006 comprise the Company and its subsidiaries and wereauthorised by the Board for issue on 1 November 2006. The Company's registeredoffice is located at Regency Court, Glategny Esplanade, St Peter Port, GuernseyGY1 1WW. 2. Basis of preparation and accounting policies The accounting policies adopted in the preparation of the interim consolidatedfinancial statements are consistent with those as reported in the Group's annualreport for the year ended 31 December 2005 except where such policies have beenrevised to reflect amendments to International Accounting Standards ("IAS") andthe adoption of new International Financial Reporting Standards ("IFRS") whichbecame effective from 1 January 2006. Accordingly IAS39 Amendments to IAS39Financial Instruments: Recognition and Measurement The Fair Value option, whichbecame effective from 1 January 2006, has been adopted by the Group in preparingthese interim financial statements. The financial statements of the Group for the year ending 31 December 2006 willbe prepared in accordance with IFRS as adopted for use by the European Union at31 December 2006. The interim consolidated financial statements should be read in conjunction withthe Group's annual financial statements as at 31 December 2005. The interim consolidated financial statements are presented in pounds sterlingand all values are rounded to the nearest million (£m) except where otherwiseindicated. The functional currency of the Group is pounds sterling. Prior year comparatives Certain comparative figures for the nine months ended 30 September 2005 havebeen adjusted or extended to conform to the presentation adopted in respect ofthe nine months ended 30 September 2006 and the year ended 31 December 2005. Theadjustments are explained below: - Trade and other receivables and trade and other payables have been reclassified between current and non-current assets and liabilities respectively. The impact of this reclassification has increased non-current assets by £6.9 million (current assets reduced by the same amount) and increased non-current liabilities by £5.3 million (current liabilities reduced by the same amount); - Provisions have been reclassified between current and non-current liabilities. The impact of this reclassification has increased current liabilities by £8.7 million (non-current liabilities reduced by the same amount); - Financial derivatives have been reclassified between current and non-current liabilities. The impact of this reclassification has increased non-current liabilities by £21.5 million (current liabilities reduced by the same amount). 3. Revenue and segmental information Three months ended 30 September 2006 (Unaudited) 30 September 2005 (Unaudited)Business segments Investment Outsourcing Total Investment Outsourcing Total property contracts operations property contracts operations £m £m £m £m £m £mRental revenue 13.5 - 13.5 5.0 - 5.0Property trading - (0.5) (0.5) 0.1 0.1 0.2 -------- -------- -------- -------- -------- -------- Facility unitary charge - 54.0 54.0 - 51.6 51.6 Contractual rents - 26.0 26.0 - 20.5 20.5 Third party rents - 7.0 7.0 - 6.9 6.9 -------- -------- -------- -------- -------- --------Contractual revenue - 87.0 87.0 - 79.0 79.0 Segment revenue 13.5 86.5 100.0 5.1 79.1 84.2 Rentals payable (0.3) (40.7) (41.0) (0.3) (44.1) (44.4)Other direct property and contract expenditure * (0.5) (28.6) (29.1) (0.1) (22.5) (22.6) --------------------------------------------------------------------------------Net contract, rental & related income 12.7 17.2 29.9 4.7 12.5 17.2Reversal of impairment of non-investment property - 0.7 0.7 - - -Net valuation surplus on investment property (1.8) 12.5 10.7 (1.0) 5.2 4.2Profit on disposal of assets held for sale - 1.8 1.8 - - - --------------------------------------------------------------------------------Segment result 10.9 32.2 43.1 3.7 17.7 21.4 ===================== =====================Unallocated expenses (6.2) (4.2) -------- --------Operating profit 36.9 17.2Net finance costs (21.6) (11.7)Income tax - - -------- --------Profit for the period 15.3 5.5 ======== ======== Nine months ended 30 September 2006 (Unaudited) 30 September 2005 (Unaudited)Business segments Investment Outsourcing Total Investment Outsourcing Total property contracts operations property contracts operations £m £m £m £m £m £mRental revenue 35.0 - 35.0 8.9 - 8.9Property trading - 0.5 0.5 0.2 2.0 2.2 -------- -------- -------- -------- -------- -------- Facility unitary charge - 157.0 157.0 - 153.6 153.6 Contractual rents - 65.4 65.4 - 60.6 60.6 Third party rents - 20.9 20.9 - 19.9 19.9 -------- -------- -------- -------- -------- --------Contractual revenue - 243.3 243.3 - 234.1 234.1 Segment revenue 35.0 243.8 278.8 9.1 236.1 245.2 Rentals payable (0.4) (123.3) (123.7) (0.3) (125.6) (125.9)Other direct property and contract expenditure * (1.0) (72.4) (73.4) (0.2) (67.2) (67.4) --------------------------------------------------------------------------------Net contract, rental & related income 33.6 48.1 81.7 8.6 43.3 51.9Reversal of impairment of non-investment property - 0.7 0.7 - - -Net valuation surplus on investment property 5.6 23.8 29.4 (6.1) 5.2 (0.9)Profit on disposal of assets held for sale - 3.0 3.0 - - - --------------------------------------------------------------------------------Segment result 39.2 75.6 114.8 2.5 48.5 51.0 ===================== =====================Unallocated expenses (15.2) (13.5) -------- --------Operating profit 99.6 37.5Net finance costs (57.5) (108.3)Income tax (0.1) - -------- --------Profit /(Loss)for the period 42.0 (70.8) ======== ======== Year ended 31 December 2005 (Audited)Business segments Investment Outsourcing Total property contracts operations £m £m £mRental revenue 15.9 - 15.9 Property trading 0.3 2.2 2.5 -------- -------- -------- Facility unitary charge - 213.8 213.8 Contractual rents - 81.1 81.1 Third party rents - 26.1 26.1 -------- -------- -------- Contractual revenue - 321.0 321.0Segment revenue 16.2 323.2 339.4Rentals payable - (167.7) (167.7)Other direct property and contract expenditure * (0.4) (100.2) (100.6) ----------------------------------Net contract, rental & related income 15.8 55.3 71.1Impairment of non-investment property - (0.6) (0.6)Net valuation (deficit) /surplus on investment property (2.3) 20.3 18.0 ----------------------------------Segment result 13.5 75.0 88.5 =====================Gain on disposal of subsidiaries 0.6Unallocated expenses (19.7) --------Operating profit 69.4Net finance costs (125.9) --------Loss for the year (56.5) ========* Other direct property and contract expenditure includes depreciation. 4. Finance costs and finance income Year endedThree months ended 30 September Nine months ended 30 September 31 December 2006 2005 2006 2005 2005Unaudited Unaudited Unaudited Unaudited Audited £m £m £m £m £m Finance costs 17.4 11.9 Bank loans and overdrafts 54.8 43.7 60.0 - - Shareholder interest payable - - - Finance charges payable 0.1 0.1 under finance leases 0.3 0.3 0.4 - - Loss on interest swap - - 1.4 2.5 - Loss on breaking interest rate swap 13.4 63.9 63.9 - - Loan termination costs - 2.0 2.0 0.5 0.5 Unwinding of discount on provisions 1.5 1.5 2.0 -------- -------- -------- -------- -------- 20.5 12.5 70.0 111.4 129.7 ======== ======== ======== ======== ======== Finance income 1.1 0.8 Bank interest receivable 2.9 3.1 3.8 (2.2) - (Loss)/Gain on interest swap 9.6 - - -------- -------- -------- -------- ------- (1.1) 0.8 12.5 3.1 3.8 ======= ======== ======== ======== ======= Bank loans and overdraft charges include a charge of £6.2 million (Nine months ended 30 September 2005: £7.5 million; year ended 31 December 2005: £8.8 million) relating to loan finance fees recognized under the effective interest method. Of this amount £4.4 million (Nine months ended 30 September 2005: £6.8 million; year ended 31 December 2005: £6.8 million) relates to exceptional charges as outlined below. In total the Group incurred an exceptional charge of £17.8 million for the period (Nine months ended 30 September 2005: £72.7 million; year ended 31 December 2005: £72.7 million) relating to the refinancing of certain Group borrowings in 2006. The exceptional charge comprises, a finance charge of £4.4 million resulting from a change in the timing of repayment of the original loan and £13.4 million relating to swap termination fees, as a consequence of the refinancing. 5. Income tax expense a) Tax on profit on ordinary activities The charge during the nine months ended 30 September 2006 of £0.1 millionrelates to UK income tax. There has been no income tax or deferred tax chargedin prior periods. b) Deferred income tax The Group also had deferred tax liabilities of £3.1 million at 30 September 2006(31 December 2005: £0.3 million), which have been netted against its deferredtax assets of £56.7 million at 30 September 2006 (31 December 2005: £64.6million). The net deferred tax asset of £53.6 million (31 December 2005: £64.3million) was unrecognized. The movement during the period was due to theutilization of losses and changes in the swap valuations. During the period theGroup has reassessed the basis on which deferred tax is provided on deferredasset management receipts. The deferred tax assets for the prior periods are nowalso stated on that basis. 6. Dividends Year ended Nine months ended 30 September 31 December 2006 2005 2005 Unaudited Unaudited Audited £m £m £mDeclared and paid during the period:Equity dividends on ordinary shares: First interim dividend for 2005: £0.30 per share - 4.6 4.6 Second interim dividend for 2005: £0.27 per share - 4.3 4.3 Third interim dividend for 2005: £0.03 per share - 0.7 0.7 Fourth interim dividend for 2005: £0.33 per share - - 7.4 Fifth interim dividend for 2005: £0.37 per share, paid 5 January 2006 8.3 - - First interim dividend for 2006: £0.39 per share 10.3 - - Second interim dividend for 2006: £0.41 per share 10.9 - - ---------- ---------- ---------- 29.5 9.6 17.0 ========== ========== ==========Proposed and approved at the Board meeting on28 September 2006Equity dividends on ordinary shares: Third interim dividend for 2006: £0.43 per share; (30 September 2005: £0.33 per share; 31 December 2005: £0.37 per share) 11.4 7.4 8.3 ========== ========== ========== 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 30 September 2006 of £15.3 million (three months ended 30 September 2005: £5.5 million) - Net profit attributable to equity holders of the Company for the nine months ended 30 September 2006 of £42.0 million (nine months ended 30 September 2005: loss of £70.8 million; year ended 31 December 2005: loss of £56.5 million) - Weighted average number of ordinary shares for the three months ended 30 September 2006 for basic earnings per share 26,491,676 (three months ended 30 September 2005: 22,465,147) - Weighted average number of ordinary shares for the nine months ended 30 September 2006 for basic earnings per share 26,104,021 (nine months ended 30 September 2005: 18,052,687; year ended 31 December 2005: 19,510,770) - Weighted average number of ordinary shares for diluted earnings per share 26,117,191 (nine months ended 30 September 2005: 18,052,687; year ended 31 December 2005: 19,527,249) 8. Property, plant and equipment The HMRC portfolio has been valued at 30 September 2006 at £567.4 million (31December 2005: £566.6 million). Of this amount £529.6 million (31 December 2005:£527.9 million) is attributable to assets held within property, plant andequipment. The remaining assets in this category consist of properties held atDirectors' valuation of £2.3 million (31 December 2005: £2.4 million) and assetsheld at depreciated historical cost of £nil (31 December 2005: £1.0 million). The valuation by Savills resulted in a valuation surplus for the nine monthperiod of £3.0 million (31 December 2005: surplus £19.4 million). Under thiscontract the overall cost of services across the whole estate reduced, with thereduction on the short leasehold properties more than compensating for theincreased costs attributable to the freehold and long leasehold properties. During 2006 assets with a book value of £2.0 million were disposed of during theperiod to 30 September 2006 (31 December 2005: £nil), resulting in a net gain ondisposal of £0.2 million (nine months ended 30 September 2005: £nil). Inaddition impairment losses of £0.7 million (2004: £nil) previously recognised inprior periods were reversed. 9. Investment property Freehold Property acquired property under finance leases TotalAt valuation: £m £m £mAt 1 January 2006 (Audited) 1,054.3 23.1 1,077.4Additions 306.2 - 306.2Transfers from inventories 0.4 0.4 0.8Revaluations 27.8 1.6 29.4At 30 September 2006 (Unaudited) 1,388.7 25.1 1,413.8 ========== ========== ========== During the period ended 30 September 2006, 5 properties were transferred frominventories to investment property as the Group intends to hold these propertieson a long term basis. It is the Group's policy to carry investment property at fair value in accordance with IAS 40 "Investment Property". Investment property was valued at30 September 2006 by CB Richard Ellis Limited ("CBRE") and Savills, valuersexternal to the Group. These valuations have been incorporated into the interim financial statements.Both Savills and CBRE have consented to the use of their names in thesefinancial statements. Investment property comprises the Group's Abbey portfolio and its directproperty investments. CBRE's valuation of the Abbey portfolio of properties was£569.3 million (31 December 2005: £546.5 million). Certain properties with avaluation of £nil (31 December 2005: £1.8 million) included within thisvaluation are being marketed for sale and as such are classified as tradingproperties within inventories. These are carried at the lower of cost and netrealisable value in the financial statements. Savills and CBRE both carried out valuations of the Group's other propertiesheld within investment property, which were valued as at 30 September 2006 at£40.5 million (31 December 2005: £24.8 million), and at £800.5 million (31December 2005: £504.4 million) respectively as at 30 September 2006. The remaining properties held under Property acquired under finance leases werevalued by the Directors at a Market Value of £3.5 million (31 December 2005:£3.5 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 30 September 2006 31 December 2005 Unaudited Audited £m £m Valuation of Abbey portfolio by CBRE 569.3 546.5Less properties valued by CBRE held in inventories at lower of cost or net realisable value - (1.8) ------------ ------------ 569.3 544.7Valuation of direct property investments by Savills 40.5 24.8 Valuation of direct property investments by CBRE 800.5 504.4 Valuation of certain finance leases by the Directors 3.5 3.5 ------------ ------------ 1,413.8 1,077.4 ============ ============ The valuations at 30 September 2006 and 31 December 2005 have been carried outin accordance with The Royal Institution of Chartered Surveyors' ("RICS")Appraisal and Valuation Standards published in February 2003 (the "Red Book")and the CESR Guidance on property valuations. 10. Inventories As at As at 30 September 2006 31 December 2005 Unaudited Audited £m £mTrading properties 0.8 0.8Transfer to investment property (0.8) - ------------ ------------Trading properties - 0.8Work in progress (at cost) 18.1 17.7 ------------ ------------ 18.1 18.5 ============ ============ During the period, trading properties were transferred to investment property(refer to note 9). Work in progress represents costs on long term contracts notyet taken to the income statement less any foreseeable losses and payments onaccount. 11. Non-current assets held for sale Assets with a book value of £0.8 million were disposed of during the period to30 September 2006 (31 December 2005: £nil), resulting in a net gain on disposalof £2.8 million (nine months ended 30 September 2005: £nil). 12. Issued capital As at 30 September 2006Authorised No. of ordinary shares £mOrdinary shares at par value of £nil Unlimited - ============ ====== Issued No. of shares £mAt 1 January 2006 (net of 1,460 treasury shares) 22,463,687 -Issued on 25 January 2006 4,036,697 -Issued on 17 March 2006 under the Employeeshare plan 13,059 -Issued on 17 March 2006 to the Non-executive Directors 5,000 -Issued on 26 September 2006 to the Non-executive Directors 20,000 -Treasury shares (46,767) - ----------- ------At 30 September 2006 (net of treasury shares) 26,491,676 - =========== ====== On 25 January 2006, through an additional public offering, the Company issued afurther 4,036,697 ordinary shares to investors at a price of £27.25 each. TheCompany also issued 13,059 ordinary shares under the share plan for employeesand 25,000 ordinary shares to the Non-executive Directors during the period. Theordinary shares issued to the Employee Share Plan and to the Non-executiveDirectors were issued for £nil consideration. 13. Interest and non-interest bearing loans and borrowings Revolving acquisition facility A 10 year, £208.6 million fixed rate facility was arranged during the period torefinance the Group's £300.0 million revolving acquisition facility secured oncertain of the Group's properties. The interest rate payable on the facility isfixed at 4.53% plus a margin of 0.85%. When the assets funded by the facilitywere initially purchased, the Directors entered into swap arrangements to fixthe rate of interest payable. Once all assets had been purchased, theacquisition facility and related swap arrangements were terminated and the ratepayable under the investment facility which replaced it, determined by theweighted average rate payable under the Group's matching swap contracts. Eachborrower under this facility has granted security over all its assets in favourof the lender. The loan is partly repaid when properties within the portfolioare sold. Any unpaid loan balance outstanding at expiry will be repaid in fullat that time. Revolving Gamma acquisition facility During the period the Group also arranged a 2 year, £300.0 million RevolvingGamma acquisition facility to finance the future acquisition of investmentproperty. The interest rate payable on the facility is LIBOR plus a margin ofbetween 1.0% and 1.5% plus mandatory costs (if any). The Group has also put inplace a 10 year, 4.37% £200.0 million swap to fix its anticipated long termexposure to interest rate risk on these property acquisitions. STEPS fixed rate facility During the period the Group arranged a 15 year, £178.0 million term facilitysecured on properties held under The HMRC portfolio. The interest rate payableon this 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). 14. Financial Instruments The fair value of the Group's outstanding interest rate swaps has beendetermined by the swap counterparty and JC Rathbone Associates, based on thepresent value of future cash flows, using appropriate market discount rates. The positive changes in the valuations of the Group's floating to fixed interestrate swaps arose as a result of an increase in long term interest rates duringthe period. 15. Related party transactions On 24 May 2006, the Group entered into a secondment agreement with EurocastleInvestment Limited, a company affiliated with Fortress Investment. Pursuant tothis arrangement, the Group had seconded an employee to Eurocastle InvestmentLimited. This secondment has now ended. This arrangement is considered by theDirectors to be on normal commercial terms and is not material to the Group andits operations. During 2006, the Group provided project management and quantity surveyingservices to affiliates of Fortress Investment, in connection with the fit-out ofits new offices in London. The Group received a fee of approximately £0.1million for the provision of these services. This arrangement is considered bythe Directors to be on normal commercial terms and is not material to the Groupand its operations. During 2006 the Company issued 25,000 (see note 12) ordinary shares to theNon-executive Directors as follows: M Fascitelli 10,000R Carey 5,000C Parkinson 5,000J Harris 5,000 The Company also issued 9,328 shares under the share plan for employees with afair value of £26.80 each to certain key management personnel. 16. Subsequent events Since 30 September 2006, the Group has exchanged and completed contracts toacquire 2 properties for a consideration of £8.3 million. These properties havebeen funded by the revolving Gamma acquisition facility. The Board of the Company proposed and declared a dividend of £11.4 million (31December 2005: £8.3 million; 30 September 2005: £7.4 million) at a Board meetingheld on 28 September 2006. The dividend payment date is 20 October 2006. On 11 October 2006 Mapeley Limited (the "Company") issued 2,876,923 ordinaryshares at a price of £32.50 per a share and raised proceeds of £90.4 million,net of costs. On 3 October the Group put in place a 10 year, £52.0 million swap with aninitial interest rate of 4.0% rising to 5.8% at maturity, to fix the Group'sinterest rate exposure on property acquisitions. 17. 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: Year endedThree months ended 30 September Nine months ended 30 September 31 December 2006 2005 2006 2005 2005 Unaudited Unaudited Unaudited Unaudited Audited £m £m £m £m £m 15.3 5.5 Profit / (loss) before tax 42.1 (70.8) (56.5) 21.6 11.7 Add back: Finance cost net of finance income 57.5 108.2 125.9 2.7 3.3 Depreciation and amortisation 7.9 10.0 13.4 Net valuation (surplus) / deficit on (10.7) (4.3) investment property (29.4) 0.9 (18.0) Reversal of impairment of non - investment (0.7) - property (0.7) - - - - Impairment of non - investment property - - 0.6 - - Gain on disposal of subsidiaries - 0.6 (0.6) -------- -------- -------- -------- -------- 28.2 16.2 EBITDA 77.4 48.9 64.8 ======== ======== ======== ======== ======== 18. Funds from operations Funds from operations or "FFO" is a 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. FFO 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. The Group defines "FFO" as Group "EBITDA" less "net finance costs" less the"movement in the onerous lease provision" less the "movement in work inprogress" plus the movement in "net asset management receipts" plus the chargein respect of "employee shares". More detailed definitions of these adjustmentsto 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. The "Movement in the onerous lease provision" - This is the net release (orcharge) to the Group income statement as a result of the change in the Grouponerous lease provisions, excluding interest charged on the unwinding of theprovision. Although these amounts offset rental costs in the income statement,they do not represent cash movements and are therefore excluded from thecomputation of FFO. The "Movement in work in progress"- This is the period on period change in Groupwork in progress or if negative, accrued cost. The amount represents theincrease or decrease in lifecycle costs deferred by the Group so as to matchcosts with revenue. "Net asset management receipts" - These are the total cash receipts in theperiod less amounts amortised in the financial period. "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. Year ended Three months ended 30 September Nine months ended 30 September 31 December 2006 2005 2006 2005 2005Unaudited Unaudited Unaudited Unaudited Audited £m £m £m £m £m 28.2 16.2 EBITDA 77.4 48.9 64.8 (15.7) (10.7) Net finance costs (46.0) 33.3) (47.8) (1.5) 1.0 Movement in the onerous lease provision (3.5) (2.1) (2.2) (0.1) (2.1) Movement in work in progress (0.4) (5.4) (2.2) 0.1 2.7 Asset management receipts 7.1 7.9 11.1 0.4 0.4 Share benefit expense 1.4 0.8 1.7 -------- -------- -------- -------- -------- 11.4 7.5 FFO 36.0 16.8 25.4 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- 43 pence 33 pence FFO per share 138 pence 93 pence 130 pence ======== ======== ======== ======== ======== The calculation of FFO per share is based on the following: - FFO for the three months ended 30 September 2006 of £11.4 million (three months ended 30 September 2005: £7.5 million) - FFO for the nine months ended 30 September 2006 of £36.0 million (nine months ended 30 September 2005: £16.8 million; year ended 31 December 2005: £25.4 million) - Weighted average number of ordinary shares for the three months ended 30 September 2006 of 26,491,676 (three months ended 30 September 2005: 22,465,147) - Weighted average number of ordinary shares for the nine months ended 30 September 2006 of 26,104,021 (nine months ended 30 September 2005: 18,052,687; year ended 31 December 2005: 19,510,770) 19. 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 30 September 2006 30 September 2005 31 December 2005 Unaudited Unaudited Audited £m £m £m"Total debt" 1,308.3 880.1 1,086.6Less: Cash and short-term deposits (83.0) (74.2) (81.2) ----------- ----------- -------------Net debt 1,225.3 805.9 1,005.4 =========== =========== ============= Equity 623.8 446.6 456.9 =========== =========== =============Gearing ratio 196% 180% 220% =========== =========== ============= 20. Net assets per share As at As at As at 30 September 2006 30 September 2005 31 December 2005 Unaudited Unaudited Audited Basic net assets per share 23.55 19.88 £20.34 =========== =========== ============Diluted net assets per share 23.53 19.88 £20.34 =========== =========== ============ 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 30 September 2006 of £623.8 million (30 September 2005: net assets of £446.6 million; 31 December 2005: net assets of £456.9 million) - Number of ordinary shares for basic net asset value per share 26,491,676 (30 September 2005: 22,465,147; 31 December 2005: 22,463,687) - Number of ordinary shares for diluted net asset value per share 26,511,676 (30 September 2005: 22,476,466; 31 December 2005: 22,480,166) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Mayflower (wi)