Final Results

27th Apr 2006 07:02

Raven Mount plc27 April 2006 27 April 2006 RAVEN MOUNT PLC ("Raven Mount" or the "Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 HIGHLIGHTS • Group profit before tax was £2.3 million (2004: loss £7.4 million) on turnover of £72.7 million (2004: £83.0 million). • Established new Property Fund Management business, through our contract with Raven Russia who raised £153 million in July 2005 and a further £310 million in April 2006. • Assisted Living business has 6 new sites as at the year end with a total number of approximately 600 individual units, subject to planning. • 13 old Swan Hill developments were completed during the year, with a further 8 principal sites remaining to be completed. • Raven Property Holdings plc, acquired in December 2004 from Anton Bilton and Bim Sandhu, paid a dividend of £9.0 million to Raven Mount from profits generated during the year. • Final Dividend of 0.75p per Ordinary share in addition to the Interim Dividend of 0.5p per Ordinary share. • Pension deficit under FRS 17 decreased to £8.7 million pre-tax (2004: £16.3 million). • Adjusted diluted shareholders' funds per Ordinary share of 77.1p (2004: 74.3p). • Significant cash generation, £15.5 million net cash as at 31 March 2006. Commenting on the results, Anton Bilton, Executive Chairman, said: "We have established ourselves in two new, niche sectors, Property FundManagement and Assisted Living. Our challenge now is to exploit the significantgrowth opportunities that exist in these and other business areas, for thebenefit of our shareholders." Bim Sandhu, Chief Executive, said: "This is the first full year of reporting following the acquisition of the RavenProperty Holdings group in December 2004 and has seen Raven Mount returning toprofitability. Although the Group is in a transitional phase, I am excited aboutour medium to long term prospects as we have the platform for creating somegreat businesses." Enquiries:Raven Mount plc 020 7235 0422Anton Bilton, Executive ChairmanBim Sandhu, Chief Executive Chairman's Statement This is the first full year of "reinvention" for your Company and I am delightedto report that it has been highly eventful. We have continued a policy of selling our residential interests both at theretail and site level and this was particularly noticeable with the sale of ourinterest in the High Royds Hospital site in September for £10.4 millionincluding loan repayments. As mentioned in previous statements, we remainbearish of the UK residential market and are being highly selective in acquiringany further sites in this regard. Our existing property teams have been refocused into specialist divisions andare now fully integrated in their new roles. Firstly, our Assisted Living business has gone from strength to strength withthe acquisition of 6 new sites with a total number of approximately 600individual units, once planning is granted. We are one of the early leaders inthis market and remain very excited about its prospects as the demographicscontinue to work in our favour and the public become increasingly aware of thequality of our service and product as an alternative to traditional nursinghomes. Given the amount of attractive opportunities currently being appraised by ourland-buying team, we expect to make further acquisitions of appropriatedevelopment projects over the forthcoming year in order to build our brand,Audley Court, and benefit from this first-to-market advantage. Secondly, we have been successful in launching our new Property Fund Managementbusiness with the £153 million fundraising and simultaneous flotation of RavenRussia Limited on AIM in July and a secondary fundraising of £310 million inApril this year. The Group has a contract to advise the board of Raven Russiaon its acquisition of warehouse properties in Russia and is paid a managementfee based on 2 per cent. of gross assets of that company and a performance feebased on achieving a minimum 12 per cent. annualised return to shareholders. Sofar, Raven Russia has committed to purchasing in excess of $260 million ofproperty and has many more properties in lawyers' hands. We expect to see significant growth in this area with the further expansion ofRaven Russia and possibly the launch of other funds in Russia as we hope tocapitalise on this interesting market which has dynamic growth prospects. It has been a year of enormous change for the Company and, in that regard, Iwould like to take this opportunity of thanking my two fellow executivedirectors, Bim Sandhu and Glyn Hirsch, for their supreme efforts in implementingthese strategies and all the Company's employees for diligently carrying themout. I also warmly welcome Mark Kirkland to the Board as Finance Director. I look forward to an interesting year ahead as we continue to build ourindividual businesses and I remain confident that adherence to our five year "reinvention" plan will lead to a highly successful outcome for all shareholderswho supported us from the outset. Anton Bilton Executive Chairman 27 April 2006 Chief Executive's Report 2005 has been a year of significant progress for our Company. The three principal areas of focus as at the end of the year were Property FundManagement, the Development and Operation of Assisted Living facilities andResidential Development. The first two of these areas of operation are new, or effectively new in 2005.During the course of the year we made excellent progress in establishingourselves as a Property Fund Manager (for Raven Russia Limited, the separatelyquoted AIM company). We also restructured our fledgling Assisted Living JointVenture, Raven Audley Court plc, in order to provide a platform with the aim ofbecoming one of the leading players in that sector. Good progress was made in the third main area, Residential Development, thefocus of both the old Swan Hill and the acquired Raven Property Holdingsbusinesses. Results The Company returned to profitability during the year with pre-tax profits forthe year of £2.3 million compared to pre-tax losses of £7.4 million in 2004.Net assets increased by £23.2 million to £89.0 million from £65.8 million on arestated basis. Our performance, however, has been nowhere near as good as thatnet asset increase would suggest! The 2004 stated net assets of £95.1 million have been reduced by £11.4 millionto incorporate the pension fund deficit as now required by FRS 17 and by afurther £18.0 million as FRS 25 now requires contingent consideration, in theform of shares to be treated as a liability rather than a credit to (i.e.increase in) reserves. Whilst the incorporation of pension fund deficits ontobalance sheets is a long overdue change, the requirement of FRS 25 is, in myopinion, misleading at best. This year we have included £7.3 million ofcontingent consideration in creditors rather than in reserves. The inclusion ofthis amount appears to be inconsistent as either that amount will not need to bepaid, in which case it will be written back and increase perceived net assets orwill be issued in shares, in which case it will also increase perceived netassets! The diluted shareholders' funds as stated per Ordinary share is 81.6 pencecompared to the 2004 restated figure of 79.4 pence per Ordinary share.,. Iwould emphasise, as I have done in previous statements that the carrying valueof the stock acquired from Raven Property Holdings plc (RPH) does not includethe deferred tax liability that would arise if the RPH assets, at the year end,were sold at those carrying values. This too is potentially misleading and theaccounting reasons for this are set out in the 2004 Report and Accounts (seePage 13 - The accounting for the purchase of The Raven Group). As at 31 December2005, the unaccounted for liability was £7.6 million (2004: £5.4 million) whichwould be the reduction in net asset value if deferred tax had been accounted foron the acquisition of RPH (as will be required when the Company reports underInternational Financial Reporting Standards). A table showing what I consider to be our adjusted shareholders' funds isincluded in the Finance Director's Report. The Company generated significant cash flow in 2005 and subsequently we have netcash balances, as at 31 March 2006, of £15.5 million. I am pleased to announce that we propose to pay a Final dividend of 0.75 penceper Ordinary share, giving a total of 1.25 pence per Ordinary share for theyear. Property Fund Management The Company contributed £10 million towards a total fund raising of £153 millionfor Raven Russia Limited, a Guernsey based company listed on AIM, in July 2005.The fundraising was predominantly backed by large City institutionalshareholders, including some of our own existing major shareholders. RavenMount shareholders have recently been sent details of the secondary fundraisingof £310 million in April this year which has now been approved by Raven Russiashareholders. Further details are set out in the Finance Director's Report. Raven Russia was formed at our instigation as a conduit for, initially,institutions and subsequently, through the secondary market, privateshareholders to invest in the Russian property market with an initial focus onthe Warehouse market in the Moscow and St Petersburg regions. We are optimistic as to the medium to long term Russian macro-economicenvironment and the potential returns that can be achieved, relative to the UK,whilst recognising the significant inherent macro and micro risks associatedwith transacting in Russia. We have demonstrated our commitment not only bypurchasing £10 million of Raven Russia stock and by accepting the majority ofour performance fees in Raven Russia shares, but more importantly our Companyhas committed the majority of the time of the Executive Directors to thistransaction, the opportunity cost of which is arguably more significant. The market currently seems to share our views on Russia, as the share price ofRaven Russia has remained significantly ahead of its float price of 100 penceand Raven Russia has managed to raise an additional £310 million of equity. Thevalue of our shares in Raven Russia based on the price as at 31 December 2005 of118.0 pence per share is £11.8 million, compared to our cost of £10 million. Inaddition, the value of the 7.65 million warrants over Raven Russia shares, ifexercised, would be £9.0 million at that price compared to the £7.65 millionthat we would have to pay for them. We are therefore sitting on an unrealised(and unrecognised in our balance sheet) gain of approximately £3.2 million inthis stock. The increase in the share price of Raven Russia has also enabled theCompany to earn a performance fee of £3.5 million for the year to 31 December2005 on top of the small core management fee income of approximately £146,000. Russia is a very hard place to conduct business for all number of reasons and itis only because of the significant amount of time that has already been spent bymanagement over a number of years investigating the market and waiting for themarket to mature and the opportunity to arise that we are here today. Led byAnton and Glyn, we are building a capable and diverse team, made up of both ourown employees and external advisers, with the ability to develop our activitiesin Russia. In this respect the Directors would in particular like to thankAdrian Baker, Alan Pereira and Richard Hough for all their efforts inestablishing this business; having recently had to endure temperatures as low asminus 40 degrees on their visits to Russia, this is no easy task! We very much see this as the starting point for our Property Fund Managementbusiness and are very excited by the opportunities available to us, particularlyin Russia. Assisted Living Assisted Living, as we are introducing the format, is the provision of care forthe elderly in homes and buildings which we have developed for them to own. Itis important for shareholders to appreciate that these facilities are a worldaway from the provision for the elderly in traditional care homes or nursinghomes. Our residents will typically buy their own apartment or house which isin or near the tranquil settings of beautiful listed buildings in maturepark-like grounds, usually with the central provision of facilities such asrestaurant, bar, swimming pool, gymnasium, library etc. Our residents can runcompletely independent lives if they wish, but, if the need arises, have theability to call for anything up to 24 hour care within their own home. Why are we excited by this sector? One just has to look at the economics anddemographics driving the retirement market - we have set some of these out inour Report and Accounts. Marrying these statistics with RPH's traditionalexpertise in the development of listed buildings makes us excited by theprospects for this business. Shareholders may recall that as part of the acquisition of RPH the Companyacquired a fledgling Joint Venture in this area, namely Raven Audley Court plc(RAC) which was 50 per cent. owned by RPH and 50 per cent. owned by NickSanderson and one to which RPH had committed seed funding. We have restructured this Joint Venture in the second half of the year so thatin return for increasing RPH's equity stake to 75 per cent. and obtaining boardcontrol, the Company has committed to provide £25 million of mezzanine fundingat a rate of 12.5 per cent. per annum. The remaining 25 per cent. of the equityis currently held by the 3 executive directors of that business, namely NickSanderson as CEO, Giles Rabbetts as Land Director and Ben Krauze as PlanningDirector. Giles and Ben have been involved with RPH for a number of years andbring enormous expertise to RAC in their respective areas. Including those sites currently owned directly by the Company, the AssistedLiving business has purchased during 2005 two sites on which we are currentlyprogressing planning for 229 units; exchanged, on a subject to planning basis,on a further three sites, comprising potentially another 265 units and is inlegals on a sixth site (105 units). In total we therefore already haveapproximately 600 units under our control with an end gross development value ofapproximately £200 million. Nick and I would like to thank Giles, Ben and theirland and planning teams for their hard work and the rapid progress made in sucha short period of time. We are now in the vagaries of the planning process as tothe timing of these developments. In addition, RAC is managing RPH's Flete, Devon development which will comprise30 units on completion as well as managing two completed Assisted Livingfacilities developed, part owned and previously managed by Nick Sanderson. Residential Development The residential market remained weak throughout the year and this, as in theprior year, influenced our view in respect of both the Swan Hill and RPH sites.Generally, we took the view that where we could dispose of sites at realisticvalues we would do so. We have also taken a prudent view on any new potentialsite acquisitions. There seems to be some signals that the market is improvingin certain areas (writing reports sitting in London at the height of the annualCity bonus season can colour your judgement!) but I think it is too early totell whether this is a temporary sign or something more permanent. Raven Property Holdings plc ("RPH") This is the first full year of the incorporation of RPH into Raven Mount plc andas such I feel it appropriate to report on the progress of the assets separatelyfrom those of the Swan Hill assets. RPH has obtained full planning permission on all the major sites set out in theAcquisition Agreement and valued by DTZ at the time of the Acquisition (andfurther details of which are included in last year's financial statements). The most significant transaction during the year was the sale of RPH's 50 percent. interest in Raven Country & Metropolitan Limited, which was undertakingthe High Royds, Leeds development, to our joint venture partner. The New England Quarter, Brighton Station development (City Point) commencedduring 2005 with the first sales expected during this summer. Under the termsof the Acquisition Agreement this development, the construction of which is(principally) being undertaken, managed and funded by our partner, Barratt, isunlikely to generate any development profit on a Group basis (albeit asignificant profit at the Company level), but will release over the next twoyears £5.5 million of net working capital currently included in stock. RPH is currently considering its options on the 484 residential units comprisingPhases 1 & 2, Kelham Riverside, Sheffield. Whilst RPH has received planningpermission on the 339 units comprising Phase 2, we await the completion of thepurchase as the vendor has yet to provide vacant possession of the site, whichit has until September 2008 to do. With respect to the smaller sites, we have just commenced development of theBaxters' Former Print Works, Lewes site with the first sales expected towardsthe end of 2006. The value of sales on our Flete development continue to exceedour original expectations, albeit at a slower rate of sales. We disposed of theClifton Hall, Nottingham development during the second half of the year at bookvalue. I am very pleased to report that the performance of these RPH assets enabled itto pay a dividend of £9.0 million to Raven Mount from profits generated duringthe year; a significant return on Raven Mount's investment. Shareholders will recall that, under the terms of the RPH Acquisition Agreement,Raven Mount acquired a number of other assets at various stages of theconceptualisation, planning and/or purchase process. I would briefly like torefer to three of those assets. We have entered into a Limited Liability Partnership with Yoo Limited to developa 400 acre site in Lechlade, in the Cotswolds, for 160 second homes and a 100suite hotel. Formal planning permission is expected shortly. After a long consultation process we have submitted a planning application for86 assisted living units, on our Mote House site, in Maidstone. Followingreceipt of planning, which is expected in the second half of the year, it isanticipated that RAC will take over the development and subsequent management ofMote House. Slow progress continues to be made in our attempts to push forward our resortbased development plans in Croatia. We continue to remain hopeful that we willundertake a significant transaction in this country and will work towards thatobjective for the foreseeable future. The former Swan Hill Group plc (now renamed "Raven Property Group plc") I have outlined in previous reports the substantial issues on the former SwanHill developments which have resulted in them, as a whole, being economicallyloss making to the Group. I do not propose detailing the issues again in thisreport and would instead refer shareholders to my commentary in previousReports. During the year 13 Swan Hill developments were completed with a further eightprincipal sites remaining to be completed. The most significant transactionduring the period was the disposal of the last element of the Yaxley site whichgenerated a land profit of £6.9 million. With respect to the three major ongoing developments we have substantiallycompleted the Clifton, Bristol development and up to the 31 March 2006 we havecompleted the sale of 26 of the 70 units (£7.3 million of £19.1 million byvalue) on this site. All sales should be completed before the end of the summeras we have exchanged on all of the apartments. The final seven houses atLockestone, Weybridge will also be build completed this summer. We areconfident that, should the pickup in the housing market at the beginning of thisyear continue, the sale of these houses will be completed in 2006 releasing £6.4million of working capital. Lastly, construction work is progressing on the 200apartment residential scheme at Swindon and we have progressed fitting out ofthe units, the first phase of which should be completed at the end of 2006. Wewill begin marketing on this site in earnest in the second half of the year. The Swan Hill Pension Scheme As with all pension funds these days - where does one begin? Firstly, the length of my tome does not reflect the severity of the issue forus, but is more a reflection of the topicality of the issue and the desire toprovide shareholders with a detailed assessment of the issue which was largelyresponsible for the failure to sell the business in the first half of 2004. I said to Anton, only half jokingly, as we completed the sale of our RPHbusiness to Raven Mount in December 2004 that it was arguable as to whether thetransaction was a good one for us as vendors or a good one for the then existingshareholders (which probably suggests that it was seen at the time as a fairtransaction for both parties), but the one thing that was unarguable was that itwas a very good transaction for members of the Swan Hill Pension Scheme. I saidthis as we were adding up to £40 million (the maximum value to be paid for RPH)of mine and Anton's personal assets to the enlarged group and therefore theGroup is that much stronger and the size of the deficit smaller relative to thesize of the combined group. So, good news for our current and future pensioners- what about the Company and its shareholders? Since taking management control of the Company in December 2003 the ExecutiveDirectors together with James Hyslop, who is also Chairman of the Trustees, haveprobably spent more management time in addressing this issue than any othersingle issue bar Raven Russia. This says something about the seriousness withwhich we have taken the issue and also its intractable nature. We have,however, been able to look at the deficit relatively dispassionately (Anton andGlyn are also Trustees), as none of the directors are beneficiaries of the SwanHill Pension Scheme. There is very little that we can do about the two main negative factors that inmy mind are affecting the actual and perceived size of pension fund deficits -namely rising life expectancy, because payments to pensioners will go on formuch longer than expected, and the price of gilts, which are used to calculatepension fund deficits. As a society we can only be happy about increasing longevity rates, as it meansthat we are all living longer. Increasing life expectancy, however, results inan actual increase in the size of pension fund deficits as pensions have to bepaid for a longer period of time. What we should be less happy about is that Financial Reporting Standard 17 (FRS17) requires a pension scheme to calculate the future returns on its assets asif the scheme was entirely invested in gilts, even though it inevitably is not.As at the year end, we were 39.7 per cent. in equities, 51.9 per cent. in bondsand the balance in other assets. Furthermore, pension fund Trustees are beingencouraged, if not pressurised, to buy these types of assets because they aredeemed to be the best match for a pension fund's liabilities irrespective of theprice that needs to be paid to acquire these assets (a price inevitably beingpaid by the sponsoring company where a scheme has a deficit). The situation isbeing exacerbated by the fact that the levy to the Pension Protection Fund ("PPF") is being determined by the level of pension deficits. The fact that companiesare now having to incorporate pension fund deficits on to their balance sheetsmeans that if gilt yields fall deficits grow larger (because falling interestrates push up the net present value of liabilities - but arguably not the longterm cost) and pension funds have to buy more gilts which pushes up prices andwhich therefore reduces yields further, which increases deficits and so on. Avicious downward spiral. (Of course, if real interest rates were to rise, thenperceived liabilities would fall). What, in my mind, is important to appreciate is that, having closed the scheme(see below), the level of payments that the pension scheme is required to maketo pensioners (its liabilities) will be determined by how long people live(which we can do nothing about), the return that the scheme manages to achieveon its assets, the rate of inflation (which we can do nothing about) and theamount of money that we put into the fund to cover the deficit (which is thebalancing figure). What is therefore critical from our perspective is that thescheme invests in assets, whatever they may be (equities, gilts, property, cashetc) that generate the greatest returns. On the equities side the Trustees have granted an Absolute Return mandate to themanager, Schroders Investment Management Limited. This means that the manageris being judged and rewarded on the absolute returns that he generates for thescheme rather than how well he does relative to his peers. We think this is agood thing. The current bubble in gilt values however makes it highly questionable as towhether one should invest in more and more bonds as the actuaries would want, asthe increasing maturity of our Scheme would suggest, as they are unlikely togenerate the highest returns in the long run. (The latest Barclays Equity GiltStudy notes that the real return (i.e. after inflation) has averaged 3 per cent.over the last 250 years, whereas gilts are currently priced at less than 1 percent. - the 50 year gilt having fallen as low as 0.5 per cent. earlier thisyear. Compare this with the real return on equities over the last century of5.1 per cent.). I am very much reminded of an experience in a former workinglife when interest rates were 15 per cent. and a former client of mine wasforced by their regulator to fix, at the height of the interest rate cycle, theinterest rate on a very large loan they were taking out because it was perceivedto reduce risk. The result - they went bust within the year! The moral -buying something at the top of the market does not reduce risk for the personthat has to pay for it. Fortunately, after the inevitable initial scepticism following our managementtakeover, we have established a good working relationship with the independentTrustees of the Scheme. This has been helped by our willingness to start makingsignificant additional contributions into the Scheme prior to receiving theactuarial valuation, by paying the entire current year's contribution up frontrather than the monthly payments agreed and indicating that it is the Company'sintent to close the remaining deficit even quicker should profits, in particulartaxable profits, cash flow and working capital requirements allow. (We may,however, be hampered in this desire by the perverse tax rules that do not allowfull and immediate corporate tax relief for making large one off payments). Eventhough we do not agree on everything, we both recognise that we have a symbioticrelationship - the health of the Company is important to the Scheme and thehealth of the Scheme is important to the Company. In consultation with the Trustees, we have taken a number of small steps tomitigate the problem, perhaps the most significant of which was to cease on 31December 2005 the Scheme to future accrual for existing employees i.e. theScheme is now closed to any future contributions. What then has been the effect of the changes that we have implemented and themovement in markets on the Scheme's deficit? Under FRS 17 'Retirement Benefits', the deficit disclosed in respect of theScheme decreased by £7.6 million from £16.3 million to £8.7 million pre-tax (£11.4 million to £6.1 million on a post tax basis). There were a number ofpluses and minuses which together contributed to the overall £7.6 millionvariance - the main pluses which helped to reduce the deficit included £1.8million of additional contributions paid during the year, £4.2 million gains onasset values within the fund and £2.5 million as a result of experience gains onliabilities. The main factor which increased the deficit was a £1.3 million lossas a result of changing the financial and demographic assumptions. The FRS 17 deficit is just one measure of the Swan Hill Pension Fund deficit. Another measure is the actuarial deficit. The triennial actuarial valuation ofthe Scheme was undertaken as at 5 April 2005, and as previously reported withthe half year figures, this resulted in a deficit of £9.3 million compared to adeficit of £3.8 million when the last actuarial valuation was undertaken as at 5April 2002. We have agreed with the Trustees to reduce this deficit by making atotal additional contribution of £1.83 million in 2005 solely in respect of thedeficit and to fund the remaining deficit over the next six years by increasingthe annual deficit contributions to £1.57 million (the entire payment for 2006was made as a single lump sum payment on 3 January 2006) and, other things beingequal, we have to make a further 5 years payments to neutralise the deficitcompared to the 10 years required by the PPF. In addition we have agreed to paya further £0.2 million per annum to the Scheme to cover its administrationcosts. The third measure of the deficit is the one which would be calculated if wedecided to close the Scheme altogether in which case we would have to contributea cash amount so that the accrued benefits could be fully met by purchasingannuities from an insurance company. This leads to a much larger number thanthe other two (partly because the market is currently dominated by a duopoly ofinsurers and therefore extremely uncompetitive) and is an option that we wouldnot and do not even need to consider. In interpreting any of these pension fund deficit (or surplus) calculations itshould be noted that small change in actuarial assumptions over a long period oftime can have a relatively large impact on the end result. So what does it all mean? There are a range of numbers one could choose fromfor the size of the deficit and they are extremely sensitive to small changes inassumptions. Having said that, overall the year has been a good one for tryingto reduce our net liabilities to our current and future pensioners. From ashareholder perspective a good way to look at it is that our FRS 17 deficit isapproximately 6.4 per cent. of our net assets excluding the deficit itself - amanageable position for the Company. In the medium term we await with interest developments in the insurance industrywhich may come up with products whereby the risk and the volatility can bepassed on to third parties with stronger balance sheets than ours. This willobviously come at a price; we do not as yet know what that price will be, but itis fair to say that we will look at this option seriously, should it becomeavailable. There is no doubt a price exists at which we and other companieswould be prepared to remove the volatility that attaches to FRS 17 deficits. Finally, I promise that I will not deal with this matter in such length infuture years. This should not be a problem as I feel that there will be farmore exciting, and positive matters to write about in coming years. Prospects The income from the fund management business will continue to grow as moreassets come under management. Furthermore, our growing presence and credibilityin the local Russian market will lead to opportunities in other business areas. The Assisted Living business is expected to generate pre-tax losses for the nexttwo years, possibly longer if we expand more quickly than currently planned.However, we are and will continue creating real value, which although it willnot be reflected in the balance sheet (stock cannot be revalued), will comethrough in increased profitability thereafter. I am very pleased by the progress that we have made in these two areas and Iexpect it to continue. Our international presence has led to us looking at a number of resort-basedresidential/hotel development opportunities around the world. We shall only bepursuing these opportunities if the rewards merit the extra risk of developingoverseas. I would hope that one or two of these come to fruition in theforeseeable future. Unfortunately, the overall profitability of the Company will be hampered thisyear and next not only by the losses generated by the Assisted Living business,but also by the poor performance of the remaining Swan Hill development sitesand the fact that any uplift in the value created through planning gains on theprojects being undertaken by RPH at the time of the takeover, will be to thebenefit of the former RPH shareholders (Anton and I) in the form of additionaldeferred consideration (subject to a maximum). The additional margin generatedby RPH through planning gains will therefore only accrue to Raven Mount on thoseprojects which are identified following the takeover and on which planningpermission is subsequently obtained. Nevertheless, profits created through thedevelopment of projects will all accrue to the Company. That said, our Company has a solid balance sheet with a good cash position andunutilised banking facilities. I am excited about our medium to long termprospects as we have the platform for creating some great businesses. Bim Sandhu Chief Executive 27 April 2006 Finance Director's Report This report outlines the results of the Group for the year to 31 December 2005. Results The Group achieved total turnover of £72.7 million (2004: £83.0 million,excluding share of turnover from joint ventures). Turnover from the sale ofresidential units decreased to £49.9 million (118 units sold, average sellingprice £404,000) compared to £71.2 million for 2004 (200 units sold, averageselling price £356,000). Land sales totalled £17.9 million (2004: £10.3million) including the sale of land at Yaxley for £7.5 million. Income from newProperty Fund Management activities totalled £3.7 million (2004: NIL). Profit before taxation was £2.3 million (2004: Loss £7.4 million) includingexceptional costs of £0.2 million (2004: £0.9 million). Residential overview During 2005, the Group completed sales of final units at 13 of the old Swan Hilldevelopments, leaving eight principal sites ongoing at the year end. As aresult, stock from the Swan Hill developments fell by £25.4 million to £38.5million (2004: £63.9 million). It must be noted that despite gross profit of£3.3 million from these developments, they are overall loss making whenassociated central costs and cost of capital are included. At the year end, thelargest developments held in terms of stock are Clifton, Bristol (£12.5million), Paramount, Swindon (£9.1 million) and Weybridge (£6.4 million). Wehave exchanged on all of the units at the Clifton, Bristol development withcompletion expected on these units throughout the first half of 2006.Paramount, Swindon remains the longest tail development with expected salescontinuing until 2008. We remain nervous as to this particular development asdemand will only become visible when the site is further progressed and havetherefore maintained the specific provision made at the Interims against thisdevelopment. Weybridge has seven units available at the year end which areexpected to complete during 2006. Stock in relation to RPH increased by £9.8 million to £31.4 million (2004: £21.6million), predominantly as a result of the issue of shares following valuationuplifts on specific sites as per the RPH Acquisition Agreement. In addition,investments in Joint Ventures were realised totalling £8.6 million and loanrepayment totalling £1.8 million, following the sale of the Group's interest inRaven Country & Metropolitan plc ("RC&M"), the High Royds Hospital developmentand Clifton Hall, Nottingham. At the year end, the major stock items includeBrighton (£12.2 million), Sheffield I and II (£8.6 million), Lewes (£3.8million) and Flete (£3.2 million). Raven Audley Court ("RAC") RAC is an early stage business, which following the restructuring of our JointVenture during the year has a pipeline of projects that are not anticipated todeliver a profit until 2008. As at the year end, total Group Assisted Livingstock was £13.0 million, made up predominantly by sites acquired at Darley Dale,Derbyshire and Inglewood, Berkshire and the Flete, Devon site acquired as partof the RPH Acquisition. Raven Russia Limited ("Raven Russia") The £10.0 million invested by the Group in Raven Russia is held at cost as acurrent asset on the balance sheet as we regard it as a stock item. Inaddition, the Group has warrants over 7.65 million Raven Russia shares at theinitial price of 100 pence per share, which are not included on the balancesheet. In Q4 2005, the Group received management fees of approximately £146,000following the commitment by Raven Russia to invest in assets totallingapproximately $150 million. The Raven Russia share price as at 31 December 2005was 118 pence per share. Raven Mount's subsidiary, Raven Russia Property Management Limited, acts as theproperty adviser to Raven Russia. Following the post year end secondaryfundraising, the main terms of the revised Property Advisory Agreement withRaven Russia are as follows: 1. Property Advisory Agreement extended until 31 December 2015; 2. Annual advisory fees equating to 2 per cent. of the ongoing gross assetvalue, excluding cash; 3. An annual performance fee, which is calculated by reference to the totalreturn achieved for Raven Russia shareholders for the previous accounting period(i.e. the benchmark is reset annually); 4. Warrants for Raven Mount to subscribe for 7,650,000 Ordinary Shares at£1 each before the fifth anniversary of admission; 5. The Raven Mount Employee Benefit Trust has an option to acquire up toapproximately 7.5 per cent. of the issued share capital in three annualtranches, exercisable upon the achievement of certain performance criteria. Acquisition of Raven Property Holdings plc ("RPH") Under the terms of the Acquisition Agreement the maximum consideration, allpayable in shares, for RPH was £39.9 million. An initial consideration of £10.8million was paid on completion of the acquisition in December 2004 with thebalance being payable on the successful outcome (largely the obtaining ofplanning permission) on various assets provided that the asset value wasrealised or created prior to the third anniversary of acquisition. This hasresulted in the payment of a further £6.1 million in March 2005 and £14.0million in September 2005 making a total consideration paid to date of £32.6million. This compares to an estimated Fair Value of the assets to be acquiredof £31.5 million as set out in the 2004 Report and Accounts. Given thecloseness of the Acquisition to the 2004 year end the Directors estimated FairValues on a provisional basis. The Directors are now of the view that theestimates were too prudent and that the maximum consideration of £39.9 millionis likely to be paid and have increased the estimated shares to be issued by£7.3 million. Under FRS 25, the deferred shares of £7.3 million are required tobe disclosed as a liability as opposed to being included as equity. Acorresponding adjustment of £18 million has been made to 2004's balance sheet. The total of 28,280,448 Ordinary shares issued during 2005 under the AcquisitionAgreement were predominantly in relation to sites at Sheffield (phases I andII), Flete (Devon), Brighton, Lewes and High Royds (Leeds) (the Group's interestwas subsequently sold during the year). It should be noted that ongoing, one adverse effect of the acquisition will bean artificially high effective tax rate in the consolidated profit and lossaccount when this stock is realised. This is simply an effect of the aboveaccounting treatment and does not reflect actual, higher tax payments by theCompany (as those additional tax payments have been effectively paid by thevendors in calculating the consideration received by them). Financial Review Shareholders' funds at the year end increased to £89.3 million (2004: £65.8million restated). This movement is primarily due to £20.7 million of sharesissued under the RPH Acquisition and a £5.3 million reduction in the net pensiondeficit. Previously reported net assets of £95.1 million as at 31 December 2004have been reduced following new accounting standards requiring the net pensiondeficit of £11.4 million to be recognised and the reclassification of £18.0million deferred consideration on the RPH Acquisition included on the balancesheet. Taking into account the comments made in the Chief Executive's report, ouradjusted net assets as we would view them are as follows: 2005 2004 £m £mShareholders' funds (as previously reported) 95.1Prior year adjustments : Adoption of FRS 17 (11.7) Change of dividend presentation under FRS 21 0.4 RPH deferred consideration restated as a creditor under FRS 25 (18.0)Shareholders' funds 89.3 65.8Mark to market Raven Russia shares and warrants (net of tax @ 30%) 2.3 0.0RPH acquisition deferred consideration add-back 7.3 18.0RPH acquisition stock deferred tax liability (7.6) (5.4)Adjusted shareholders' funds 91.3 78.4Adjusted diluted shareholders' funds per Ordinary share 77.1p 74.3p Net cash as at the year end was £11.9 million, a positive movement of £5.7million (2004: net cash £6.2 million). Strong positive cash movements during the year resulted from the sale of theGroup's interest in RC&M, strategic land sales and the net cash inflow from thehousing operations. The interest receivable for the year was consequently £0.2million (2004: charge of £1.1 million). The level of committed facilities fromour bankers (excluding specific loans on assets held in SPV's) was maintained at£25.0 million, which together with £15.0 million of overdraft, provide totalbank facilities of £40.0 million. Turnover for the year was £72.7 million (2004: £83.0 million, excluding share ofturnover from joint ventures), which included £49.7 million from housing (2004:£71.2 million), £17.9 million (2004: £10.3 million) from land sales and £3.7million (2004: £NIL) from Property Fund Management activities. Group operatingprofits were £2.1 million (2004: loss £5.7 million), after exceptional items of£0.2 million (2004: £0.9 million), with a profit before tax of £2.3 million(2004: loss £7.4 million). The tax charge for the year of £2.6 million relates almost entirely to therelease of part of the brought forward deferred tax assets. There is nomainstream UK corporation tax for 2005, due to utilisation of brought forwardlosses. A final dividend of 0.75 pence per Ordinary share is proposed in addition to the0.5 pence dividend announced at the Interims, totalling 1.25 pence for the year. Accounting policies The Report and Accounts reflect the adoption of new accounting standards whichapply for the first time. 1. FRS 17 (Pension schemes). The Group has brought the deficit of £6.1million net of deferred tax on the defined benefit pension scheme onto thebalance sheet. The 2004 balance sheet has been adjusted accordingly by £11.4million. 2. FRS 21 (Dividends). Dividends have been recognised when paid (forInterim dividends) and when approved by shareholders in a general meeting (forFinal dividends). The 2004 financial statements have been restated accordingly,increasing brought forward net assets by £0.4 million, representing the 2004Final dividend approved at the AGM in 2005. 3. FRS 25 (Financial instruments). Contingent consideration, payable inthe form of Ordinary shares, to be issued in respect of the RPH Acquisition isto be presented as a liability of the Group rather than equity. Accordingly,£7.3 million contingent consideration is included in creditors and the prioryear creditors has been restated to include the £18.0 million shares to beissued, previously included as equity. Pension Fund Under FRS 17 'Retirement Benefits', the deficit disclosed in respect of thefinal salary pension scheme has decreased during the year from £16.3 million to£8.7 million as at the end of 2005. Under FRS17, the total market value of thepension scheme's assets as at 31 December 2005 were £59.2 million and thepresent value of its liabilities were £67.9 million. Following the actuarial valuation of the pension scheme as at 5 April 2005, theactuary recommended additional annual contributions of £1.8 million, including£0.2 million per annum towards administrative costs, over the next six years. Mark Kirkland Finance Director 27 April 2006 Group profit and loss accountFor the year ended 31 December 2005 Restated 2005 2004 Note £'000 £'000 Turnover (including share of trading joint 1 72,815 105,972ventures)Less: Share of turnover of trading joint ventures (123) (22,966)Group turnover 72,692 83,006Cost of sales (60,841) (78,198)Gross profit 11,851 4,808Administrative expensesExceptional administrative expenses 5 (b) (221) (918)Other administrative expenses (9,020) (10,716) (9,241) (11,634)Group operating profit/(loss) 5 (a) 2,610 (6,826)Share of operating (loss)/profit in trading joint (500) 1,138venturesTotal operating profit/(loss): Group and share oftrading joint ventures 1 2,110 (5,688)Loss on closure of operations 5 (c) 0 (550)Profit/(loss) on ordinary activities before 1 2,110 (6,238)interest and taxNet interest receivable/(payable) and similarcharges- Group 2 189 (791)- Joint ventures 2 6 (326)Profit/(loss) on ordinary activities before tax 2,305 (7,355)Tax on profit/(loss) from ordinary activities 3 (2,600) 1,938(Loss) on ordinary activities after tax (295) (5,417)Minority interest 23 117 0(Loss) for the financial period 21 (178) (5,417) Basic (loss) per Ordinary share 8 (0.2) p (8.6) pDiluted shareholders' funds per Ordinary share 8 81.6 p 79.4 p All amounts in the current and prior periods relate to continuingactivities. Statement of total Group recognised gains and losses For the year ended 31 December 2005 Restated 2005 2004 £'000 £'000 (Loss) for the financial period (178) (5,417)Pension scheme actuarial gain/(loss) net of deferred tax charge of£1,670,000 (2004: credit of £1,650,000) 3,830 (3,850)Total recognised gains and losses in the period 3,652 (9,267)Prior year adjustmentsRemoval of SSAP 24 pension prepayment following adoption of FRS 17 (362)Adoption of pension deficit under FRS 17 (11,400)Total gains and losses recognised since last annual report (8,110) Balance sheetsAs at 31 December 2005 Restated Restated Group Group Company Company 2005 2004 2005 2004 Note £'000 £'000 £'000 £'000Fixed assetsIntangible assets 9 (132) (1,513) 0 0Tangible assets 10 334 438 0 0Fixed asset investments Investments in trading joint ventures: Share of gross assets 336 12,886 0 0 Less: Share of gross liabilities (283) (2,973) 0 0 11 53 9,913 0 0 Investment in associates 49 49 0 0 Investment in subsidiary companies 11 0 0 88,444 78,391 102 9,962 88,444 78,391 304 8,887 88,444 78,391Current assetsStocks 12 89,958 87,846 0 0Debtors: Amounts falling due within one 13 7,037 7,320 24,833 17,676yearDebtors: Amounts falling due after more than 13 0 897 0 0one year 7,037 8,217 24,833 17,676Investments 14 10,000 0 0 0Cash at bank 15,113 8,040 10 2 122,108 104,103 24,843 17,678Creditors: Amounts falling due within one 16 (18,873) (31,790) (8,061) (19,511)yearNet current assets/(liabilities) 103,235 72,313 16,782 (1,833)Total assets less current liabilities 103,539 81,200 105,226 76,558 Creditors: Amounts falling due after more thanone year Bank loans 17 (c) (6,627) (2,188) 0 0Provisions for liabilities and charges 18 (1,857) (1,789) 0 0Net assets before pension deficit 95,055 77,223 105,226 76,558Pension deficit 7 (6,100) (11,400) 0 0Net assets 88,955 65,823 105,226 76,558 Restated Restated Group Group Company Company Note 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Capital and reservesCalled up Ordinary share capital 19 106 78 106 78Share premium account 21 (a) 1,998 1,998 1,998 1,998Other reserves 21 (b) 93,639 72,869 79,337 58,640Profit and loss account 21 (a) (6,427) (9,122) 23,785 15,842Shareholders' funds 22 89,316 65,823 105,226 76,558Minority interests 23 (361) 0 0 0 88,955 65,823 105,226 76,558 The financial statements were approved by the Board of Directors and authorisedfor issue on 27 April 2006. ........................ ........................ A J G Bilton B S SandhuExecutive Chairman Chief Executive Group cash flow statementFor the year ended 31 December 2005 2005 2005 2004 2004 Note £'000 £'000 £'000 £'000 Net cash inflow from operating activities 26 (a) 4,647 33,751Dividends received from trading joint ventures 250 0Returns on investments and servicing of financeInterest received 728 79Interest paid (89) (963)Net cash inflow/(outflow) from returns on investment and servicing of finance 639 (884)Tax received 75 0 Capital expenditure and financial investmentPurchase of current asset investment (10,000) 0Purchase of tangible fixed assets (62) (112)Disposal of tangible fixed assets 24 19Net cash outflow from capital expenditure and financial investment (10,038) (93) Acquisitions and disposalsAcquisitions of subsidiaries (1,963) (319)RPH acquisition - net overdrafts 0 (562)Disposals of trading joint ventures 11 (c) 8,582 0Net cash inflow/(outflow) from acquisitions and 6,619 (881)disposals Equity dividends paid to shareholders (957) (621)Cash inflow before financing 1,235 31,272 FinancingIssue of shares 0 104Redemption of preference shares 0 (50)Addition/(repayment) of debt due in more than one 4,439 (66)yearNet cash inflow/(outflow) from financing 4,439 (12)Increase in net cash 26 (c) 5,674 31,260 Notes to the financial statements 1. Segmental analysis Restated 2005 2004 £'000 £'000 Turnover - by principal activity Residential and other property (including joint ventures) - United Kingdom 69,169 105,972 Property Fund Management - Russia 3,646 0 72,815 105,972 For 2004, turnover from commercial property of £24,425,000 is included in Residential and other property. Operating profit/(loss) - by principal activity Residential and other property - United Kingdom 341 (5,688) Property Fund Management - Russia 1,769 0 Total operating profit/(loss): Group and share of joint ventures 2,110 (5,688) Loss on closure of operations 0 (550) Profit/(loss) on ordinary activities before interest and tax 2,110 (6,238) For 2005, Residential and other property includes operating losses of £500,000 from joint ventures (2004: profits of £1,138,000). Net assets - by principal activity Residential and other property - United 79,232 79,777 Kingdom Property Fund Management - Russia 11,769 0 Operating assets 91,001 79,777 Other net funds (2,046) (13,954) Net assets 88,955 65,823 The geographical analysis of turnover by destination is not materially different from the analysis by geographical origin shown above. Operating profits and net assets for 2004 have been restated for the effects of adopting FRS 17, FRS 21 and FRS 25, as described in note 22. 2. Net interest receivable/(payable) and similar charges 2005 2004 £'000 £'000 Interest receivable - Group 699 86 - Joint ventures 29 28 728 114 Interest payable and similar charges - Group (156) (864) - Joint ventures (23) (354) - Unwinding of discount in lease provision 0 (13) - Net return on amount charged to pension scheme (354) 0 (533) (1,231) Net interest receivable/(payable) and similar charges - Group 189 (791) - Joint ventures 6 (326) 195 (1,117) 3. Tax on profit/(loss) from ordinary activities Restated 2005 2004 £'000 £'000(a) The tax charge/(credit) on the profit/(loss) from ordinary activities comprises: Current tax UK corporation tax charge/(credit) at the rate of 30 per cent. (30 per cent.) based on the taxable result for the 0 (5) period Under/(over) provision in respect of prior 4 (349) periods Tax payable on profits of joint ventures 0 279 4 (75) Overseas tax - Current 105 0 109 (75) Deferred tax (note 15) Reversal/(origination) of timing differences 1,861 (1,863) Pension charge deferred tax movement 630 0 2,600 (1,938) (b) The tax charge/(credit) for the period is lower than the standard rate of corporation tax in the UK (30%) due to: Profit/(loss) before tax 2,305 (7,355) Expected tax charge/(credit) at 30% 692 (2,207) Under/(over) provision in respect of prior 4 (349) periods Tax (recoverable)/payable on profits of 0 (19) joint ventures Overseas tax including foreign exchange 58 (139) movements Items not deductible for tax purposes 43 440 Capital allowances in excess of depreciation (61) (69) Trading losses not utilised in period 1,231 2,619 Utilisation of deferred tax asset created in prior (1,861) 0 years Impairment of goodwill 112 (51) Timing differences recognised in deferred (109) (300) tax 109 (75) 4. Dividends Restated 2005 2004 £'000 £'000 On Ordinary shares of Raven Mount plc - Special paid 1.0p per share 0 621 - Final paid for 2004 0.5p per share 428 0 - Interim paid for 2005 0.5p per share 529 0 957 621 5. Profit/(loss) on ordinary activities before tax Restated 2005 2004 £'000 £'000(a) Group operating profit/(loss) is stated after crediting: Operating rent receivable (net of outgoings) 305 681 and after charging: Depreciation of fixed assets 163 264 Auditors' - Audit services 133 128 remuneration - Taxation and other services 116 75 Operating lease - Other assets 961 1,449 rentals Directors' emoluments (excluding pension 1,231 465 contributions) Audit fees payable by Raven Mount plc total £40,000 (2004: £38,000). In 2004, fees of £126,000 were also charged to the Company by its auditors in respect of advice relating to the acquisition of RPH and have been included in the cost of investment. (b) Exceptional administrative expenses: Office reorganisation costs 221 238 Provisions against loans to trading joint 0 637 ventures Continuing property and pension costs related to Swan Hill's past construction 0 43 activities 221 918(c) Loss on closure of operations: Closure of Swan Hill Homes Horsham office 0 196 Closure of Swan Hill France Paris office 0 304 Residual costs in respect of the disposal of Swan Hill's construction activities 0 50 0 550 6. Employee information (a) The average number of persons employed by the Group during the period was 85 (2004: 111). The total number of employees of the Group at 31 December 2005 was 83 (2004: 88). There are no employees of the Company other than the 3 executive directors (2004: 3). 2005 2004 £'000 £'000(b) Group employment costs including executive directors: Gross salaries and wages 4,866 4,763 Employer's national insurance contributions or foreign 530 513 equivalents Employer's pension costs (22) 815 5,374 6,091 The pension credit arises due to a curtailment gain on the defined benefit pension scheme of £761,000. (c) Directors' emoluments were: Remuneration 1,231 465 Pension contributions 133 13 1,364 478 7. Pensions The Group has adopted FRS 17 'Retirement Benefits' in full for the firsttime this year. Last year, the Group accounted for retirement benefitsunder SSAP 24 and gave disclosures under the FRS 17 transitional arrangements. The comparative figures shown below are those under FRS 17. Theeffects on the opening reserves of applying FRS 17 are included in note 22. During the period the Group operated a final salary pension scheme coveringeligible employees. The Group pays contributions to the fund in order toprovide security for existing pensions and the accrued benefits of currentand former employees. With effect from 31 December 2005, benefits accrualsceased and current employees' benefits are based on salaries at that date. Group contributions to the scheme for the period totalled £2.4 million(2004: £1.3 million). Following an actuarial valuation as at 5 April 2005,the Group's contributions have increased to £1.8 million per annum (including £0.2 million towards administrative expenses) for six years from 1January 2006, after which they are expected to reduce to those required tomeet the scheme's administration expenses. The charge to the profit and loss account for the scheme was £0.2 million(2004: £0.8 million) of which £0.6 million (2004: £0.8 million) has beencharged against operating profit, £0.8 million (2004: nil) has been creditedto operating profit in respect of a curtailment gain and £0.4 million (2004:nil) has been charged to other finance income. As at 31 December 2005, thescheme had an FRS 17 deficit of £8.7 million (2004: £16.3 million), leadingto the inclusion in the balance sheet of a net pension liability of £6.1 million (2004: £11.4 million) after deferred tax. The total actuarial gainrecognised in the statement of total recognised gains and losses is £3.8million (2004: loss of £3.9 million) after deferred tax. These amounts andthose set out below have been determined on the advice of qualified actuaries,who are employees of Watson Wyatt Limited, based on the most recent fullactuarial valuation at 5 April 2005 updated to 31 December 2005. Themortality assumptions adopted were in line with standard tables PMA92/PFA92calendar year 2005, treating members as one year older than their actual ages. An allowance was made for possible future mortality improvements equivalentfinancially to a reduction in the discount rate of 0.25 per cent. per annum.This is broadly equivalent to an increase in life expectancy of one year every ten years. The financial assumptions used for FRS 17 purposes were: 2005 2004 2003 % per % per % per annum annum annum Price inflation 2.8 2.8 2.75 General salary and wage inflation N/A 4.8 4.75 Pension increases 2.8 2.8 2.75 Discount rate 4.8 5.3 5.4 The scheme's assets (excluding money purchase assets) and the expected rates of return are: 2005 2005 2004 2004 2003 2003 Market Market Market Expected Expected Expected rate of value rate of value rate of value return return return % per £m % per annum £m % per annum £m annum Equities 9.0 22.9 8.1 20.5 8.4 22.8 Bonds 4.3 30.7 4.6 29.1 4.8 24.6 Property 6.4 1.5 6.5 1.4 6.7 1.2 Cash 4.3 4.1 3.8 1.4 3.8 1.0 Total 59.2 52.4 49.6 The position of the scheme (excluding money purchase assets and liabilities) can be summarised as follows: 2005 2004 2003 £m £m £m Total market value of the scheme's assets 59.2 52.4 49.6 Present value of the scheme's (67.9) (68.7) (60.9) liabilities Resulting deficit (8.7) (16.3) (11.3) Deferred tax asset 2.6 4.9 3.4 Net pension liability (6.1) (11.4) (7.9) The following amounts are included in the financial statements: 2005 2004 £m £m Analysis of the amount charged to operating profit Current service cost (0.6) (0.8) Past service cost 0.0 0.0 Total operating charge (0.6) (0.8) Analysis of other amounts credited to profit and loss account Gain on curtailment 0.8 0.0 Total other gains 0.8 0.0 2005 2004 £m £m Analysis of the amount charged to other finance income Expected return on scheme assets 3.2 3.2 Interest on scheme liabilities (3.6) (3.2) Net return (0.4) 0.0 Net charge for the period (0.2) (0.8) Analysis of the gain/(loss) recognised in statement of total recognised gains and losses (STRGL) Actual return less expected return on scheme 4.2 1.6 assets Experience gains arising on scheme liabilities 2.5 0.1 Changes in assumptions underlying the present value of scheme (1.3) (7.2) liabilities Actuarial gain/(loss) 5.4 (5.5) Deferred tax (1.6) 1.6 Net actuarial gain/(loss) recognised in STRGL 3.8 (3.9) Experience gains and losses 2005 2004 2003 2002 Difference between the expected and actual return on scheme assets £4.2 m £1.6 m £3.0 m £(5.9) m Percentage of scheme assets 7.1 % 3.0 % 6.0 % 13.1 % Experience gains/(losses) on scheme liabilities £2.5 m £0.1 m £(0.2) m £0.1 m Percentage of scheme liabilities 3.7 % 0.2 % 0.3 % 0.2 % Total actuarial gain/(loss) recognised in STRGL £5.4 m £(5.5) m £(3.1) m £(8.5) m Percentage of scheme liabilities 8.0 % 8.0 % 5.1 % 15.8 % 2005 2004 £m £m Movement in scheme deficit during the period At 1 January 2005 (16.3) (11.3) Movement in period: Current service cost (0.6) (0.8) Contributions paid 2.4 1.3 Curtailment gain 0.8 0.0 Other finance income (0.4) 0.0 Actuarial gain/(loss) 5.4 (5.5) At 31 December 2005 (8.7) (16.3) Adopting FRS 17 has had an effect on both the Group's profit and loss account and its net assets. The pension deficit net of tax is now included in arriving at net assets. In the profit and loss account a credit of £761,000 arises due to a curtailment gain. The 2004 comparative profit and loss account has been restated resulting in an increased charge of £500,000. In addition, the actuarial gain on the Scheme is shown in the STRGL. The Group also operates a defined contribution plan based on a stakeholder pension contract and contributes to certain personal pension schemes. The Group's contributions to these are charged to the profit and loss account in the period in which they are payable and amounted to £152,000 (2004: £68,000). 8. Loss and shareholders' funds per Ordinary share The basic loss per Ordinary share is calculated in accordance with FRS 22 on the loss for the period (before dividends on Ordinary shares) of £178,000 (2004: £5,417,000) and 89.1 million shares (2004: 62.9 million), being the weighted average number of Ordinary shares in issue excluding those owned by the Employee Share Trust. Since none of the Company's potential Ordinary shares are dilutive, there is no difference between basic and diluted loss per share. Shareholders' funds per Ordinary share are 84.1 pence (2004: 84.4 pence). The calculation is based on shareholders' funds as at the period end of £89.3 million (2004: £65.8 million) divided by the number of shares in issue at the period end amounting to 106.3 million (2004: 78.0 million). Diluted shareholders' funds per share are 81.6 pence (2004: 79.4 pence) based on the diluted shareholders' funds and diluted Ordinary shares shown below. 2005 2004 £'000 £'000 Shareholders' funds per balance sheet 89,316 65,823 Convertible Ordinary £1 shares 6 6 Deferred consideration payable in Ordinary 7,286 17,959 shares Diluted shareholders' funds 96,608 83,788 '000 '000 Ordinary shares in issue at 31 December 2005 106,261 77,980 Shares issuable as deferred consideration at 31 December 2005 share price of 74.5 pence (2004: 71.5 9,780 25,117 pence) Shares issuable on conversion of Convertible Ordinary shares 2,376 2,376 Diluted Ordinary shares as at 31 December 2005 118,417 105,473 9. Intangible Assets Total £'000 Negative goodwill arising on the acquisition of RPH (see note 11(d)) Cost and net book value At 1 January 2005 (1,513) Additions 1,381 At 31 December 2005 (132) Additions arise following re-assessment of the fair value of the assets acquired within RPH in 2004. Negative goodwill will be released to profit and loss in proportion to sales of the developments to which it relates, as described in note 11(d). 10. Tangible assets Equipment, fixtures and fittings £'000 Group Cost At 1 January 2005 1,317 Additions 62 Disposals (27) At 31 December 2005 1,352 Depreciation At 1 January 2005 879 Charge for the year 163 Disposals (24) At 31 December 2005 1,018 Net book value At 31 December 2005 334 At 31 December 2004 438 11. Fixed asset investments Investments in trading joint ventures £'000 (a) Group Cost At 1 January 2005 9,324 Disposals (8,907) Reclassified as subsidiaries (417) At 31 December 2005 0 Share of retained profits At 1 January 2005 589 Losses for the period (546) Dividends received (1,000) Disposals 436 Reclassified as subsidiaries 574 At 31 December 2005 53 Net book value At 31 December 2005 53 At 31 December 2004 9,913 Subsidiary companies £'000 (b) Company At 1 January 2005 78,391 Additions - Deferred consideration relating to the RPH 10,053 acquisition At 31 December 2005 88,444 The following are the main operating subsidiary companies of Raven Mount plc at 31 December 2005. Those companies marked with an asterisk (*) are owned directly by Raven Mount plc and the remainder by subsidiaries. All companies are incorporated and operate in Great Britain, and are 100 per cent. wholly owned (except where indicated). Residential and other property Raven Property Holdings plc* ("RPH") Swan Hill Homes Limited Swan Hill Property Holdings Limited Swan Hill Developments Limited Raven Property Group plc* (formerly Swan Hill Group plc) Asset Management Raven Russia Investments Limited* Raven Russia Property Advisors Limited (operates partially in Russia)* Raven Russia Property Management Limited* Assisted Living Raven Audley Court plc (75% owned) Raven St Elphins Limited Raven Devon Limited (c) Investments in trading joint ventures The Group's investment in trading joint ventures relates to: Wellington Square Development Company Limited ("WSDC"), a company incorporated and operating in Great Britain. The total issued Ordinary share capital of this company is £100 of which 50 per cent. is owned by a subsidiary. WSDC is the joint venture company established to develop the retail town centre scheme in Stockton-on-Tees. The scheme was sold during 2004. Three trading joint ventures were also acquired as part of the RPH acquisition, details of which are given below: Raven Country & Metropolitan Limited (RC&M), was a 50:50 joint venture with Country & Metropolitan Homes plc (C&MH) for the development of a redundant hospital site occupying approximately 212 acres outside Leeds. During the period, the Group sold its interest in RC&M to the JV partner C&MH, for a consideration of £8,582,000 generating a profit before tax of £111,000. Raven Clifton Limited, a company in which the Group owned 49% of the issued share capital, the balance being held by a third party investor, AJT Ventures Limited. On 7 February 2005, the Group assumed control of 100 per cent. of Raven Clifton, following the repayment of a loan due to AJT Ventures Limited. The major asset of the Company was sold during the year. Raven Audley Court plc was a 50:50 joint venture with Nicholas Sanderson, established to develop and manage a portfolio of assisted living centres in return for a Group funding commitment. On 1 October 2005, the Group acquired for £5,000 an additional 25 per cent. of Raven Audley Court plc, taking the Group's share to 75 per cent. Goodwill amounting to £249,000 arose on the acquisition of the additional 25 per cent. and has been written off to the profit and loss account. The Group's share of the assets and liabilities of its trading joint ventures was as follows: 2005 2005 2004 2004 £'000 £'000 £'000 £'000 Share of assets Current assets: Residential developments 81 11,116 Amounts due from joint venture parties 0 750 Debtors 19 92 Cash at bank 236 938 336 12,896 Share of liabilities Creditors: Amounts falling due within one year (283) (2,983) 53 9,913 The Group's share of turnover from WSDC in 2004 amounted to £22,966,000. The Group's share of operating profits before exceptional items from WSDC in 2004 amounted to £1,138,000, and profit before tax amounted to £819,000. The balances with joint ventures are shown in notes 13 and 16. Acquisition of Raven Property Holdings plc ("RPH") and subsidiaries (d) On 20 December 2004 the Group acquired 100% of the issued share capital of RPH. In originally calculating the goodwill arising on acquisition, the fair value of net assets of RPH and subsidiaries were provisionally assessed and adjustments from book value were made where necessary. Provisional fair value adjustments related to the originally assessed replacement cost of the development sites acquired, including the Group's share of those held in its joint venture companies. During the period, adjustments have been made to the provisional fair values that relate to the re-assessment of development sites acquired. As at 31 December 2005, consideration of £32,614,000 has been settled to the former shareholders of RPH (the fair value of which was £31,507,000), in the form of Ordinary shares in the Company. In accordance with the Acquisition Agreement, up to a maximum of a further £7,286,000 may be paid up to 31 December 2007, taking the total consideration up to the maximum possible of £39,900,000, the fair value of which is £40,000,000. This maximum excludes acquisition costs. Following the fair value exercise, negative goodwill arises as FRS 19 'Deferred Tax' does not permit recognition of deferred tax liabilities on an increase in stock values resulting from fair value adjustments. The negative goodwill will be released to the profit and loss account to match the ultimate disposal of the sites pro-rata to the unprovided deferred tax. Following the re-assessment of fair values, negative goodwill has fallen from £1,513,000 to £132,000 as shown in note 9. The adjustments arising from the fair value exercise are summarised as follows: Provisional Provisional Final Final Book fair value fair value fair value fair value value adjustments to the Group adjustments to the Group £'000 £'000 £'000 £'000 £'000 Investment in trading joint ventures Share of gross assets 2,057 9,312 11,369 0 11,369 Share of gross liabilities (2,471) 0 (2,471) 0 (2,471) (414) 9,312 8,898 0 8,898 Current assets Stock 6,456 17,229 23,685 8,670 32,355 Debtors 2,653 0 2,653 0 2,653 Cash at bank 373 0 373 0 373 9,482 17,229 26,711 8,670 35,381 Creditors: Amounts falling due within one year (1,893) 0 (1,893) 0 (1,893) Net current assets 7,589 17,229 24,818 8,670 33,488 Total assets less current liabilities 7,175 26,541 33,716 8,670 42,386 Creditors: Amounts falling due after more than one year (2,254) 0 (2,254) 0 (2,254) Net assets 4,921 26,541 31,462 8,670 40,132 Fair value £'000 Shares issued at acquisition 10,782 Shares issued in the period 20,725 Shares to be issued - Contingent consideration 7,286 (note 19) Acquisition expenses 1,207 Fair value of consideration 40,000 Fair value of net assets acquired (40,132) Negative goodwill arising on acquisition (note (132) 9) 12. Stocks Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Properties under development 89,958 87,846 0 0 13. Debtors Restated Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Amounts falling due within one year Trade debtors 326 259 0 0 Amounts owed by Group companies 0 0 24,831 17,658 Amounts owed by trading joint ventures 20 2,417 0 0 Tax recoverable 0 381 0 0 Deferred tax asset (note 15) 1,270 2,234 0 0 Other debtors 623 582 0 0 Prepayments and accrued income 4,798 1,447 2 18 7,037 7,320 24,833 17,676 Amounts falling due after more than one year Deferred tax asset (note 15) 0 897 0 0 Total 7,037 8,217 24,833 17,676 14. Investments Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Listed shares - Traded on AIM 10,000 0 0 0 Investments comprise amounts invested in Raven Russia Limited. The nature of the Group's relationship with Raven Russia is set out in note 25 under Related Party Transactions. The market value of the shares at 31 December 2005 was £11.8 million. In addition the Group hold warrants to subscribe for 7,650,000 Ordinary shares in Raven Russia Limited at £1 each. The warrants are exercisable at any time during the five year period commencing July 2005, the date of Raven Russian Limited's admission to AIM. 15. Deferred tax Restated Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Accelerated capital allowances 0 265 0 0 Trading losses 1,270 2,970 0 0 Other timing differences 0 (104) 0 0 Deferred tax asset included in debtors (note 13) 1,270 3,131 0 0 Pension scheme deferred tax asset 2,600 4,900 0 0 3,870 8,031 0 0 Movement in deferred tax asset comprises: At 1 January 2005 8,031 Charge to profit and loss account (2,491) Charge to statement of total recognised gains and (1,670) losses At 31 December 2005 3,870 16. Creditors: Amounts falling due within one year Restated Restated Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Bank loans and overdrafts (note 17) 3,240 1,841 0 0 Deferred income 953 1,060 0 0 Trade creditors 3,916 5,889 0 737 Loan from trading joint venture 0 750 0 0 Corporation tax 209 435 0 0 Social security and other taxation 186 491 0 0 Accruals and other creditors 3,077 3,359 769 809 Convertible Ordinary £1 shares (note 19) 6 6 6 6 Deferred consideration (note 19) 7,286 17,959 7,286 17,959 18,873 31,790 8,061 19,511 17. Financial instruments (a) The Group finances its operations through a mixture of shareholders' funds and bank borrowings. It maintains sufficient borrowing facilities for this purpose using financial instruments to manage the interest rate and currency risks that arise from those operations and from its sources of finance. The overall objectives and strategy are to maintain flexibility with drawings of limited duration. The Board regularly reviews the amount drawn down under the borrowing facilities to ensure that gearing levels are appropriate to prevailing market conditions. Short-term debtors and creditors have been excluded from the disclosures below.(b) Borrowing facilities 2005 2004 £'000 £'000 The Group has borrowing facilities as follows: Overdraft facilities 15,000 15,000 Committed facilities 25,000 25,000 Bank loan facilities 18,319 19,225 58,319 59,225 Amounts drawn (9,867) (4,028) Amounts undrawn 48,452 55,197 The overdrafts and committed facilities are unsecured. The bank loan facilities were assumed as part of the acquisition of RPH. These facilities are secured over the assets held by the relevant companies to which the loans have been provided. (c) Profile of net financial assets The net financial assets at 31 December 2005 were as follows: 2005 2004 £'000 £'000 Current asset investments 10,000 0 Cash at bank 15,113 8,040 Bank loans and overdrafts (3,240) (1,841) Bank loans due after more than one year (6,627) (2,188) 15,246 4,011 The above balances are all denominated in Sterling with the exception of Euro cash at bank balances of £33,000 (2004: £948,000) and Euro bank overdrafts in 2004 of £904,000. The Sterling drawings are on a short-term basis and some are offset by cash balances. At each drawdown the interest rate is fixed for the period of drawing at the prevailing current rate. The weighted average interest rate for the period for Sterling borrowings was 6.1 per cent. No interest is received and there is no maturity date on the current asset investments held by the Group. The bank loans due after more than one year are repayable in 2007. The Group sought to mitigate the effect of currency exposures on its investment in France. During the period, these exposures were reduced and are no longer material. The Group did not use any other financial derivatives during the year. The fair value of the current asset listed investments held by the Group was £11.8 million (2004: £nil). In the opinion of the Directors there is no significant difference between the fair values and the book values of the other financial assets and liabilities. 18. Provisions for liabilities and charges Dilapidations and Provisions for onerous maintenance leases Total £'000 £'000 £'000 Group At 1 January 2005 1,719 70 1,789 Charged to profit and loss account 839 130 969 Utilised in the period (701) (200) (901) At 31 December 2005 1,857 0 1,857 19. Called up share capital Allotted called up Authorised and fully paid 2005 2005 2005 2005 No'000 £'000 No'000 £'000 Ordinary shares of 0.1 pence 244,000 244 106,261 106 In addition to the above, the Company has authorised 50,000 £1 redeemable preference shares, none of which have been allotted. On allotment these shares will be classified as a liability in accordance with FRS 25. Also, the Company has 6,000 £1 Convertible Ordinary shares, included in accordance with FRS 25 as creditors. The Convertible Ordinary shares carry, in proportion to the number of Ordinary shares they convert into, the same rights to dividends, voting and return of capital as the Ordinary shares. They are convertible at the option of the holders according to a pre-determined formula at any time in the five years from the Company's admission to AIM or, to the extent not converted in that period, at the rate of 396 Ordinary shares for each Convertible Ordinary share held at the fifth anniversary of Admission. The movements in issued share capital during the period were as follows: Ordinary shares of 0.1pence each No. '000 £'000 At 1 January 2005 77,980 78 Issued during the period 28,281 28 At 31 December 2005 106,261 106 The Ordinary shares issued during the period comprise 7,628,000 issued in March 2005 and 20,653,000 issued in October 2005 in relation to the deferred consideration payable for the acquisition of RPH. Shares to be issued - Deferred consideration The movements in Shares to be issued - Deferred consideration during the period were as follows: Acquisition of Acquisition Swan Hill of RPH Total £'000 £'000 £'000 At 1 January 2005 (as previously reported) 1,737 17,959 19,696 Restatement of opening balances (note 22) (1,737) (17,959) (19,696) At 1 January 2005 (restated) 0 0 0 Ordinary shares issued 0 (2,766) (2.766) Adjustment to estimate of fair value of shares to be issued in connection with the acquisition of RPH 0 10,052 10,052 Classified under FRS 25 as Creditors: Amounts falling due within one year (see note 16) 0 (7,286) (7,286) At 31 December 2005 0 0 0 During the period, the Directors reclassified shares to be issued in relation to the Convertible Ordinary shares of the Company, making a corresponding adjustment to the Reverse Acquisition Reserve. This has had no effect on profits or net assets. Based on the Company's share price at 31 December 2005, the above deferred consideration of £7,286,000 (included under FRS 25 in Creditors: Amounts falling due within one year) would be settled by the issue of 9,780,000 Ordinary shares in respect of the RPH acquisition. 20. Share schemes Share Options In December 2005, the Company adopted an unapproved share option plan and an approved Company share option plan which provide for the issue of options over Ordinary shares in the Company. The total number of Ordinary shares over which Option Shares may be granted on a 10 year rolling basis is limited to 10 per cent. of the total number of issued Ordinary shares of the Company. Unapproved share option plan ("Unapproved Plan") Option Shares under the Unapproved Plan are exercisable in 3 equal parts. For each part, exercise will be on or after the third, fourth and fifth anniversaries of the Date of Grant at the earliest and the Performance Condition shall first be tested for each one third part on these anniversaries. Unexercised options may be reviewed against the Performance Condition in subsequent periods broadly every 6 months, but always from the Date of Grant. Options lapse if not exercised within 7 years and 3 months from the Date of Grant. The Performance Condition states that the share price increase must exceed the RPI plus 3 per cent. per annum and exceed the increase in the FTSE Small Cap Index for the relevant period. Option Shares were issued under the Unapproved Plan on 8 December 2005 over 6,665,000 Ordinary shares in the Company at an exercise price of 80.0 pence, being the average share price for the month of November 2005. Approved Company share option plan ("CSOP") Employees and full-time directors of the Group may be offered Option Shares subject to a maximum value at any one time per employee of £30,000 (being the Inland Revenue limit for CSOP's). Option Shares cannot usually be exercised until 3 years after grant and are subject to a Performance Condition that the share price increase must exceed the RPI plus 3 per cent. per annum. This is first measured on the third anniversary, thereafter half yearly based on the prior December or June. The total value of Option Shares under the CSOP is not currently expected to exceed £1.3 million and is subject to an exercise price calculated as the closing price for the day prior to the issue of the Option Shares. It is anticipated that £30,000 of Option Shares under the CSOP will be offered to each of the Executive Directors, in addition to the Unapproved Plan. No Option Shares under the CSOP had been issued at 31 December 2005 as Inland Revenue approval had not been received by the year end. 21a. Reserves Share Capital Reserve Reverse Profit premium redemption for own acquisition Merger and loss account reserves shares reserve reserve account £'000 £'000 £'000 £'000 £'000 £'000 Group At 1 January 2005 (as previously reported) 1,998 50 (150) 60,467 10,765 2,212 Restatement of opening 0 0 0 1,737 0 (11,334) balances At 1 January 2005 1,998 50 (150) 62,204 10,765 (9,122) (restated) Arising on the acquisition of RPH - issue of deferred 0 0 0 0 20,697 0 consideration Adjustment to fair value of deferred consideration on acquisition of Swan Hill Group plc 0 0 0 73 0 0 Dividend payments 0 0 0 0 0 (957) Actuarial gains net of deferred taxation on pension 0 0 0 0 0 3,830 scheme Loss for the period 0 0 0 0 0 (178) At 31 December 2005 1,998 50 (150) 62,277 31,462 (6,427) Company At 1 January 2005 (as previously reported) 1,998 50 0 0 58,590 15,414 Restatement of opening 0 0 0 0 0 428 balances At 1 January 2005 1,998 50 0 0 58,590 15,842 (restated) Arising on the acquisition of RPH 0 0 0 0 20,697 0 Dividend payments 0 0 0 0 0 (957) Profit for the period 0 0 0 0 0 8,900 At 31 December 2005 1,998 50 0 0 79,287 23,785 The restatement of opening balances for the profit and loss account are explained in note 22. The profit and loss account includes £6,100,000 (2004: £11,400,000) relating to the defined benefit pension deficit. 21b. Other Reserves Restated Restated Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Capital redemption reserve 50 50 50 50 Reserve for own shares (150) (150) 0 0 Reverse acquisition reserve 62,277 62,204 0 0 Merger reserve 31,462 10,765 79,287 58,590 93,639 72,869 79,337 58,640 22. Reconciliation of movements in shareholders' funds Restated Restated Group Group Company Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 (Loss)/profit on ordinary activities after tax (295) (5,417) 8,900 16,513 Loss attributable to minority interest 117 0 0 0 Dividends paid (957) (621) (957) (621) Retained (loss)/profit (1,135) (6,038) 7,943 15,892 Issue of Ordinary shares 28 23 28 2,082 Merger reserve arising on acquisition of RPH 20,697 10,765 20,697 10,765 Merger reserve arising on reverse acquisition of Swan Hill Group plc 0 0 0 47,825 Premium arising on exercise of share options in Swan Hill Group plc 0 97 0 0 Redemption of preference shares 0 (50) 0 0 Reduction in value of shares to be issued on 0 reverse acquisition of Swan Hill Group plc 73 (170) 0 0 Actuarial gains net of deferred taxation on pension 3,830 (3,500) 0 0 scheme Net addition to/(reduction of) shareholders' funds 23,493 1,127 28,668 76,564 Opening shareholders' funds as previously reported 95,122 72,464 94,095 0 Opening prior period adjustments (29,299) (7,768) (17,537) (6) Opening shareholders' funds restated 65,823 64,696 76,558 0 Closing shareholders' funds 89,316 65,823 105,226 76,558 Effect of prior period adjustments Inclusion of the pension deficit liability under (11,400) (7,900) 0 0 FRS 17 Removal of SSAP 24 prepayment and accruals upon adoption of FRS 17 (362) 138 0 0 Change of dividend policy under FRS 21 428 0 428 0 Effect on opening profit and loss account (note (11,334) (7,762) 428 0 21) Reclassification of deferred consideration shares as Creditors: Amounts falling due within one year under FRS 25 (17,959) 0 (17,959) 0 Reclassification of Convertible shares as Creditors: Amounts falling due within one year under FRS 25 (6) (6) (6) (6) Total opening prior period adjustments (29,299) (7,768) (17,537) (6) 23. Minority Interest £'000 At 1 January 2005 0 Arising during the period on reclassification of Raven Audley Court plc as a subsidiary (244) Minority share of loss for the period (117) At 31 December 2005 (361) 24. Commitments Commitments contracted for at 31 December 2005 but not provided for in these accounts were £nil (2004: £nil). As at 31 December 2005, the Group had annual commitments under non-cancellable operating leases as set out below: Land and buildings Other 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Operating leases which expire: - Within one year 0 0 53 11 - Between two and five years 91 85 53 278 - After five years 836 836 0 0 927 921 106 289 As at 31 December 2005, Raven Property Holdings plc had committed to provide up to £25.0 million to a subsidiary, Raven Audley Court plc, of which £11.3 million had been advanced as at that date. 25. Related party transactions a) On 20 December 2004, Raven Mount plc completed the acquisition of RPH for an initial consideration of 22,362,500 Ordinary shares and an additional potential deferred consideration of up to £22,010,125 in the period until 31 December 2007 subject to the satisfaction of certain criteria as per the Acquisition Agreement. All of the consideration payable will be satisfied by the issue of Ordinary shares. As at 31 December 2005, 43,905,000 shares had been issued and up to a maximum of £7,286,000 of deferred consideration may be payable. RPH was the holding company of the residential property assets previously controlled, either directly or indirectly, by Anton Bilton and Bim Sandhu. Anton Bilton and Bim Sandhu are both directors of the Company and in light of their interest in RPH, the acquisition constituted a related party transaction for the purposes of the AIM Rules. Details of the fair value of the consideration payable and the net assets acquired are included in note 11 to the accounts. During the period Raven Russia Limited (Raven Russia) was floated on AIM. At flotation the Group purchased £10.0 million of shares in the company and entered into a 5 year property advisory agreement to provide property advisory, management and development monitoring services to Raven Russia. Subsequent to the year end the agreement has been extended to 31 December 2015. b) The Group will receive a fee of 2 per cent. of the gross asset value, excluding cash, of Raven Russia in consideration for its services. In addition, the Group is entitled to a performance fee which is calculated by reference to excess returns achieved by the shareholders of Raven Russia. Fees to the Group would range from 20 per cent. to 35 per cent. based on shareholder returns in excess of 12 per cent. to 25 per cent. per annum. Raven Russia has reimbursed the Group £500,000 during the period in respect of the Group's time, costs and expenses in connection with the flotation of Raven Russia. Raven Russia Property Management Limited, a subsidiary of the Company, has been granted the right to subscribe for 7,650,000 Ordinary shares in Raven Russia at the placing price of 100 pence per share, exercisable until 25 July 2010. Raven Russia has granted various options to Raven Mount Employee Benefit Trust, to acquire up to 7.5 per cent. of the issued ordinary share capital of Raven Russia, on behalf of Raven Mount employees, including its directors. The options are performance related and exercisable between 3 and 12 years from the date of grant. Options are exercisable if compound shareholder returns exceed 12 per cent. per annum over the respective 3 year vesting periods; no options are exercisable if compound returns do not exceed 9 per cent. per annum over the vesting period. Glyn Hirsch, a director of the Company, is a director of Raven Russia Limited. On 11 July 2005, Raven Mount made a loan of $1,230,000 to Aldama (Overseas) Limited to acquire land in Moscow for the purposes of building a warehouse on behalf of Raven Russia. The loan was repaid during the period and its rights in respect of the transaction assigned to Raven Russia. During the period, Santon Management Limited, a company controlled by Anton Bilton and Bim Sandhu, rented space from the Group and was provided with office services, on an arm's length basis. Total amounts charged to Santon in the period were £51,000. Santon Management Limited also charged the Group a total of £56,000 for office costs incurred on the Group's behalf. c) d) During the period prior to its acquisition as a subsidiary, the Group charged Raven Audley Court plc £280,000 for office services, and was charged £7,000 for property selling services. The Company has taken advantage of the exemption in FRS 8 'Related Party Transactions', not to disclose transactions with 90 per cent. or more owned group companies. Other than as detailed above, there were no other related party transactions which require disclosure. Cash flow notes 26. Restated 2005 2004 £'000 £'000(a) Reconciliation of operating profit/(loss) to cash flow from operating activities Group operating profit/(loss) 2,610 (6,826) Depreciation charge 163 264 Profit on disposal of fixed assets (21) 0 Impairment of goodwill 73 (170) Write down of investment in joint venture 0 (375) Loss on closure of an operation (20) (298) Contributions to defined benefit pension scheme (2,303) (1,345) Decrease in stocks 8,433 43,252 (Increase)/decrease in debtors (3,032) 9,822 Decrease in creditors (1,324) (11,083) Increase in provisions 68 510 Net cash inflow from operating activities 4,647 33,751 (b) Reconciliation of net cash flow to movements in net funds/ (debt) 2005 2004 £'000 £ '000 Increase in net cash 5,674 31,260 (Increase)/decrease in debt due in more than one (4,439) 66 year Change in net debt resulting from cash flows 1,235 31,326 Cash and bank loans acquired on acquisitions 0 (2,254) Net funds/(debt) at 1 January 2005 4,011 (25,061) Net funds at 31 December 2005 5,246 4,011 (c) Analysis of changes in net funds/(debt) At 1 Jan At 31 Dec 2005 Cash flows 2005 £'000 £'000 £'000 Cash at bank 8,040 7,073 15,113 Bank overdrafts (1,841) (1,399) (3,240) 6,199 5,674 11,873 Bank loans due in more than one year (2,188) (4,439) (6,627) 4,011 1,235 5,246 27. Contingent liabilities There were no significant contingent liabilities at 31 December 2005 (2004: Nil). The financial information set out above does not constitute the Company's statutory accounts within the meaning of section 240 of the Companies Act 1985 for the years ended 31 December 2005 or 2004, but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Registrar of Companies and those for 2005 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under the Companies Act 1985, s 237 (2) or (3). This information is provided by RNS The company news service from the London Stock Exchange

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