Final Results Part 2

31st May 2006 07:04

Quintain Estates & Development PLC31 May 2006 Quintain Estates and Development PLC Preliminary Results for the year ended 31 March 2006 Part 2 Consolidated Income Statement for the year ended 31 March 2006 Notes 2006 2005 £000 £000 ______ _______ _______ Revenue from continuing operations 4 42,051 48,403 Cost of sales in respect of continuing operations 4 (15,295) (14,095) _______ _______Gross profit from continuing operations 26,756 34,308 Administrative expenses 6 (22,660) (16,477) _______ _______Operating profit before recognition of results from non-current asset property sales and revaluation 4,096 17,831Profit from sale of properties held as non-current 14,188 5,068assetsGains on revaluation of investment properties 23,911 24,083Deficits on revaluation of investment properties (1,777) (3,315)Deficits on revaluation of development properties (1,834) (1,232)Reversal of deficits on revaluation of development 3,598 -properties _______ _______Net operating profit before net finance expenses 42,182 42,435Interest payable (9,041) (17,294)Change in fair value of derivative financial (2,994) -instruments _______ _______Finance expenses (12,035) (17,294)Finance income 1,549 1,454 _______ _______Net finance expenses 7 (10,486) (15,840)Share of profit from joint ventures 14i 32,864 7,363Share of profit from associates 14ii 393 962 _______ _______Profit before tax 64,953 34,920 Current tax (3,033) (1,490)Deferred tax (2,429) 6,667 _______ _______Tax (charge) credit for the year 8 (5,462) 5,177 _______ _______Profit after tax but before results from discontinued operations 59,491 40,097(Loss) profit from discontinued operations, net of tax 9 (2,829) 1,637 _______ _______Profit for the financial year 56,662 41,734 ====== ====== Attributable to: Equity shareholders of the parent 56,662 41,644 Minority shareholders - 90 _______ _______Profit for the financial year 56,662 41,734 ====== ====== Earnings per share before discontinued operations 10i(a)(pence): - basic 46.1 31.0 ====== ====== - diluted 45.2 30.4 ====== ====== Earnings per share after discontinued operations 10i(b)(pence): - basic 43.9 32.3 ====== ====== - diluted 43.0 31.7 ====== ====== Dividends per share (pence): 11 - interim (paid) 3.25 2.75 - final (proposed) 7.25 6.75 _______ _______ Total 10.50 9.50 ====== ====== In accordance with IAS 10, 'Events after the Balance Sheet Date', these resultsreflect dividends which have been declared or paid in the year. Proposeddividends are shown for information purposes only. Consolidated Statement of Recognised Income and Expense for the year ended 31 March 2006 Notes 2006 2005 £000 £000 ______ _______ _______ Foreign currency translation differences 278 127Gains on revaluation of development properties 100,798 93,261Effective portion of changes in fair value ofcash flow hedges, net of recycling (1,676) -Share of recognised income and expenses injoint ventures, net of tax 14i (102) -Tax on income and expenses recognised directly in 8 (31,435) (22,884)equity _______ _______Net income recognised directly in equity 67,863 70,504Profit for the financial year 56,662 41,734 _______ _______Total recognised income and expense for the financial 124,525 112,238year Effect of adoption of IAS 32, 'Financial Instruments: Disclosure and Presentation', and IAS 39, 'Financial Instruments: Recognition and Measurement', net of tax, on 1 April 2005 in relation to: Convertible loan stock reserve 20i 786 - Cash flow hedge reserve 20i (3,533) - Retained earnings 20i (2,701) - _______ _______ 119,077 112,238 ====== ====== The total recognised income and expense for the financial year is attributable to: Equity shareholders of the parent 124,525 112,148 Minority shareholders - 90 _______ _______Total recognised income and expense for the financial 124,525 112,238year ====== ====== Consolidated Balance Sheet as at 31 March 2006 Notes 2006 2005 £000 £000 ______ _______ _______Non-current assets Investment properties 12 290,088 290,202Development properties 12 599,455 463,893Owner-occupied properties, plant and equipment 13 942 10,416Investment in joint ventures 14i 120,076 64,137Investment in associates 14ii 1,677 1,284Other non-current investments 14iii 2,716 188 _______ _______Total non-current assets 1,014,954 830,120 _______ _______Current assets Trading properties 6,814 4,724Trade and other receivables 15 72,312 29,271Current investments 16 7 19Cash and cash equivalents 20ii 7,954 11,090 _______ _______Total current assets 87,087 45,104 _______ _______Total assets 1,102,041 875,224 ======= ======Current liabilitiesBank loans and other borrowings 18 (4,432) (88)Trade and other payables 17 (49,104) (31,049)Current tax liability (1,521) (5,562) _______ _______ Total current liabilities (55,057) (36,699) _______ _______Non-current liabilitiesBank loans and other borrowings (including 18 (246,626) (174,890)convertible debt)Deferred tax liability 8 (106,800) (74,870)Obligations under finance leases 19 (12,213) (12,750)Other payables (4,670) (4,674) _______ _______Total non-current liabilities (370,309) (267,184) _______ _______Total liabilities (425,366) (303,883) ====== ======Net assets 676,675 571,341 ====== ======Equity Issued capital 23 32,324 32,298Share premium account 22 47,265 46,575Revaluation reserve 22 248,836 180,102Other capital reserves 22 113,227 112,436Cash flow hedge reserve 22 (4,808) -Translation reserve 22 405 127Retained earnings 22 242,920 201,102Investment in own shares 22 (3,494) (1,539) _______ _______Equity shareholders' funds 676,675 571,101Minority shareholders - 240 _______ _______Total equity 676,675 571,341 ====== ======Net asset value per share (pence): - basic 10ii 526 443 ===== ===== - diluted 10ii 516 436 ===== ===== Approved by the Board of Directors and signed on its behalf N G Ellis DirectorA R Wyatt Director31 May 2006 Consolidated Cash Flow Statement for the year ended 31 March 2006 Notes 2006 2005 £000 £000 ______ _______ _______Operating activities Profit for the financial year 56,662 41,734Adjustments for:Short leasehold amortisation 408 389Other property amortisation - 197Depreciation of plant and equipment 441 441Costs relating to share-based payment schemes 1,180 721Net finance expenses 10,486 15,840Profit on termination of hedging arrangement - 722Profit on sale of properties held as fixed assets (14,188) (5,068)Gains on revaluation of investment properties (23,911) (24,083)Deficits on revaluation of investment properties 1,777 3,315Deficits on revaluation of development properties 1,834 1,232Reversal of deficits on revaluation of development (3,598) -propertiesShare of profit from joint ventures (32,864) (7,363)Share of profit from associates (393) (962)Loss from sale of plant and equipment 30 -Impairment of other investments 632 -Tax on continuing operations 5,462 (5,177)Tax on discontinued operations (1,213) 701 ________ ________ 2,745 22,639Decrease in trade and other receivables 7,830 4,050Increase (decrease) in trade and other payables 430 (4,676)Decrease (increase) in trading properties 3,313 (2,962) ________ ________Cash generated from operations 14,318 19,051Interest paid (15,395) (19,737)Interest received 1,526 1,106Tax paid (231) (100) ________ ________Net cash from operating activities 218 320 ======= =======Investing activitiesPurchase and development of property assets (112,058) (110,615)Purchase of owner-occupied properties, plant and (2,365) (9,007)equipmentProceeds from property sales 88,390 287,486Tax paid on property sales (5,486) (1,460)Proceeds from sale of current investments 12 -Acquisition of subsidiary companies 27 (7,335) (15,155)Acquisition of investment in joint ventures (553) (1)Loans to joint ventures and associates (24,474) (18,648)Distributions received from joint ventures 3,002 2,165Acquisition of other investments (3,160) - ________ ________Net cash from investing activities (64,027) 134,765 ======= =======Financing activitiesIssue of shares 247 534Purchase of own shares for cancellation (108) (2,243)Investment in own shares (1,955) (1,539)Proceeds from new borrowings 281,004 358,822Repayment of borrowings (205,150) (507,814)Payment of loan issue costs (400) (2,858)Payment of finance lease liabilities (190) (1,663)Equity dividends paid (12,867) (11,318) ________ ________Net cash from financing activities 60,581 (168,079) ======= =======Net decrease in cash and cash equivalents (3,228) (32,994)Cash and cash equivalents at start of year 11,090 43,886Effect of exchange rate fluctuations on cash held 92 198 ________ ________Cash and cash equivalents at end of year 7,954 11,090 ======= =======Net cash flow from discontinued operationsincluded in net cash from operating activities 9 (2,374) 1,637 ======= ======= Quintain Estates and Development PLC Notes to the Accounts for the year ended 31 March 2006 1. Accounting policies i) Basis of preparation Quintain Estates and Development PLC is a company incorporated in the UnitedKingdom. The group financial statements consolidate those of the Company andits subsidiaries, together referred to as the Group, and equity account theGroup's interest in joint ventures and associates. The parent company financialstatements present information about the Company as a separate entity and notabout its group. The group financial statements have been prepared and approved by the Board inaccordance with International Financial Reporting Standards as adopted by theEuropean Union ('Adopted IFRSs'). The Company has elected to prepare itscompany financial statements in accordance with UK GAAP. The accounting policies set out below have, unless otherwise stated, beenapplied consistently to all periods presented in the group financial statementsand in preparing an opening IFRS balance sheet as at 1 April 2004 for thepurposes of the transition to Adopted IFRSs. The principal exception is that,as more fully explained in note 20 below, financial instruments are accountedfor on different bases in the current year and the comparative year owing to thetransitional provisions of IAS 32, 'Financial Instruments: Disclosure andPresentation' and IAS 39, 'Financial Instruments: Recognition and Measurement'. The preparation of financial statements in conformity with Adopted IFRSsrequires the Board to make judgements, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets andliabilities, income and expenses. The estimates and associated assumptions arebased on historical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis ofmaking the judgements about the carrying values of assets and liabilities thatare not readily apparent from other sources. Actual results may differ fromthese estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised, if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current andfuture periods. IFRS 7, 'Financial Instruments: Disclosure', which has been adopted by theEuropean Union and available for early application, has not been applied by theGroup in these financial statements. ii) Transition to Adopted IFRSs The Group has prepared its financial statements in accordance with Adopted IFRSsfor the first time and consequently has applied IFRS 1, 'First-time Adoption ofInternational Financial Reporting Standards'. An explanation of how thetransition to Adopted IFRSs has affected the reported financial performance andfinancial position is provided in notes 2 and 3 below. IFRS 1 also requires anexplanation of major adjustments to cash flows under IFRS. However, while theformat of the IFRS cash flow statement differs from that under UK GAAP, thereare no material changes to cash flows from operations, investment or financing. The Group has taken advantage of the exemption permitted in IFRS 1 to setcumulative translation differences from foreign operations to nil from thecommencement of the transition year. iii) Measurement convention The financial statements have been prepared on an historical cost basis exceptthat investment and development properties and derivative financial instrumentshave been stated at fair value. The measurement of fair value constitutes themain area of judgement exercised by the Board in respect of the Group's results. In relation to the Group's investment and development properties, the Board hasrelied upon the external valuations carried out by professionally qualifiedvaluers in accordance with the Appraisal and Valuation Standards of the RoyalInstitution of Chartered Surveyors. Copies of the valuation reports of SavillsCommercial Limited and Jones Lang LaSalle Limited, which together account forthe valuation of 98.5% of these categories of non-current assets are containedin the annual report. In respect of financial instruments, the Board has reliedon the valuation carried out by JC Rathbone Associates Limited, financial riskconsultants, and the basis for this exercise is discussed below in section xviiiof this note and in note 21. Other areas of judgement, risk and uncertaintywhich are relevant to an understanding of these results and the Group'sfinancial position are referred to in the Operating and Financial Review. iv) Basis of consolidation Subsidiaries are entities controlled by the Group. Control exists when theGroup has the power, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain benefits from its activities.In assessing control, potential voting rights that are currently exercisable orconvertible are taken into account. The financial statements of subsidiariesare included in the consolidated financial statements from the date that controlcommences until the date that control ceases. A joint venture is an undertaking in which the Group has a long term interestand over which it exercises joint control. An associate is an entity in whichthe Group has significant influence but not control over financial and operatingpolicies. The Group equity accounts for its share of net profit after tax ofjoint ventures and associates, together with its share of fair value adjustmentsto their investment and development properties, through the income statement.The effective portion of changes in the fair value of cash flow hedges withinjoint ventures less any related tax is recognised directly in equity. All otherchanges are recognised in the income statement. The Group's interest in the netassets of joint ventures and associates is included in the consolidated balancesheet. v) Foreign currency Assets and liabilities of foreign operations are translated into Sterling atexchange rates ruling at the balance sheet date. Operating income and expensesare translated at average exchange rates. The year end and average rates usedfor these purposes were as follows: Year end Year end Average Average 2006 2005 2006 2005 France £1 = • 1.44 • 1.46 • 1.47 • 1.47United States £1 = $ 1.74 $ 1.88 $ 1.79 $ 1.85 Exchange differences arising from the translation of the net investment inforeign operations are reflected in the translation reserve and released to theincome statement upon disposal of the foreign operation. vi) Revenue and cost of sales Revenue is stated net of VAT and comprises rental income, proceeds from sales oftrading properties, income from leisure operations, fees, commissions and otherincome. Rental income from investment and development properties leased out underoperating leases is recognised in the income statement on a straight-line basisover the term of the lease. Contingent rents such as turnover rents and indexedrents are recognised as income in the periods in which they are earned. Rentreviews are recognised when such reviews have been agreed with tenants. Lease incentives are recognised as an integral part of the net consideration forthe use of the property and amortised on a straight-line basis over the term ofthe lease, or the period to the first tenant break, if shorter. Property operating costs are expensed as incurred including any element ofservice charge expenditure not recovered from tenants. Sales of trading properties are recognised on the unconditional exchange ofcontracts by the balance sheet date. vii) Disposal of properties held as non-current assets Sales of properties are recognised in the accounts if an unconditional contractis exchanged by the balance sheet date. Profits or losses arising on disposalare calculated by reference to the carrying value of the asset at the beginningof the year, adjusted for subsequent capital expenditure. viii) Impairment The Group's assets are reviewed at each reporting date to determine whetherthere is any indication of impairment. If such indication becomes evident, theasset's recoverable amount is estimated and an impairment loss recognisedwhenever the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset is the greater of its net selling price andits value-in-use. The value-in-use is determined as the net present value ofthe future cash flows expected to be derived from the asset, discounted using apre-tax discount rate that reflects current market assessments of the time valueof money and the risks specific to the asset. Any impairment of financialassets is based on the original effective interest rate attributable to thefinancial asset on acquisition. An impairment loss is reversed if there has been a change in the estimates usedto determine the recoverable amount. An impairment loss is reversed only to theextent that the asset's carrying amount after the reversal does not exceed theamount that would have been determined, net of applicable depreciation, if noimpairment loss had been recognised. ix) Employee benefits Pensions Contributions to employees' personal plans are charged to the income statementas incurred. Share-based payment schemes The fair value of equity rights is estimated using the Black Scholes andbinomial models at the date of grant to directors and staff and is dependent onfactors such as the exercise price, expected volatility, option price and riskfree interest rate. The fair value is then amortised through the incomestatement on a straight-line basis over the vesting period. Expected volatilityis determined based on the historic share price volatility (market price) forthe Company on the grant date over a period matched to the expected life of theawards. x) Capitalisation of borrowing costs Net borrowing costs in respect of capital expenditure on properties underdevelopment or undergoing refurbishment are capitalised. Interest is capitalisedusing the Group's weighted average cost of borrowing from the commencement ofdevelopment work until the date of practical completion. The capitalisation offinance costs is suspended if there are prolonged periods when developmentactivity is interrupted. All other borrowing costs are recognised in the income statement in the periodin which they are incurred. xi) Tax Tax is included in the income statement except to the extent that it relates toitems recognised directly in equity, in which case the related tax is recognisedin equity. Current tax is the expected tax payable on the taxable income forthe year using tax rates applicable at the balance sheet date. Tax payable uponthe realisation of revaluation gains recognised in prior periods is recorded asa current tax charge with a release of the associated deferred taxation. Deferred tax is provided on all temporary differences, except in respect ofinvestments in subsidiaries and joint ventures where the timing of the reversalof the temporary difference is controlled by the Group and it is probable thatthe temporary difference will not reverse in the foreseeable future. Deferred tax is provided using the balance sheet liability method in respect oftemporary differences between the carrying amount of assets and liabilities forfinancial reporting purposes and the amount used for taxation purposes. The amount of deferred tax provided is based on the expected manner ofrealisation or settlement of the carrying amount of assets and liabilities,using tax rates applicable at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. xii) Discontinued operations In accordance with IFRS 5, 'Non-current Assets Held for Sale and DiscontinuedOperations', the loss from these discontinued operations is shown in the incomestatement, net of tax. xiii) Investment properties Investment properties are properties owned or leased by the Group which are heldeither for long term rental growth or for capital appreciation or both.Investment property is initially recognised at cost including relatedtransaction costs and valued annually by professionally qualified externalvaluers. Additions to investment properties consist of costs of a capital nature and inthe case of investment properties under development, capitalised interest. Investment properties are independently valued by external valuers at marketvalue. The valuations are prepared by considering the aggregate of the netannual rents receivable from the properties and where relevant, associatedcosts. A yield which reflects the specific risks inherent in the net cash flowsis then applied to the net annual rentals to arrive at the property valuation. Gains or losses arising from changes in the fair value of investment propertyare included in the income statement of the period in which they arise. When the Group redevelops an existing investment property for continued futureuse as an investment property, the property remains an investment property andis not reclassified. xiv) Development properties Properties acquired with the intention of redevelopment are classified asdevelopment properties and stated at fair value in accordance with IAS 16, 'Property, Plant and Equipment'. Changes in fair value are recognised throughequity in the revaluation reserve. However, a deficit on revaluation of adevelopment property is recognised in the income statement to the extent itexceeds any surplus held in the revaluation reserve relating to a previousrevaluation of that property. Similarly, a surplus on revaluation is creditedto the income statement to the extent of a deficit previously charged. All costs directly associated with the purchase and construction of adevelopment property are capitalised. When developments are completed, they arereclassified as investment properties and any accumulated balance on revaluationis transferred to retained earnings. Development properties which areindependently valued annually by external professional valuers are stated atestimated market value on completion less estimated costs to complete. xv) Leases The Group as lessor Leases are classified according to the substance of the transaction. A leasethat transfers substantially all the risks and rewards of ownership to thelessee is classified as a finance lease. All other leases are classified asoperating leases. The Board has exercised judgement in considering the potential transfer of risksand rewards of ownership in accordance with IAS 17, 'Leases', for all properties leased to tenants and have determined thatall such leases are operating leases. Accordingly, all the Group's leaseholdproperties are classified as investment or development properties, asappropriate, and included in the balance sheet at fair value. The Group as lessee The obligation to the freeholder or superior leaseholder for the buildingselement of the leasehold is included in the balance sheet at the present valueof the minimum lease payments at inception. Payments to the Group's landlordsare apportioned between a finance charge and a reduction of the outstandingliability. The finance charge is allocated to each period during the lease termso as to produce a constant periodic rate of interest on the remaining balanceof the liability. Rent reviews are charged as an expense in the period in which they are incurred. xvi) Owner-occupied properties, plant and equipment Fixtures, fittings and equipment are carried at cost less accumulateddepreciation. Depreciation is provided on a straight-line basis over the usefullife of these assets estimated at between three to five years. xvii) Trading properties Trading properties are shown at the lower of cost and net realisable value. Thecost of trading properties is determined on the basis of specific identificationof their individual costs. Net realisable value is the estimated selling pricein the ordinary course of business less estimated costs to completion and theestimated costs necessary to make the sale. xviii) Financial instruments Other non-current investments Other non-current investments are non-derivative investments that are designatedas available for sale. As these are unquoted investments, they are held at costless any provision for impairment. Trade and other receivables Trade and other receivables are recognised at invoiced values less provisionsfor impairment. A provision for impairment of trade receivables is establishedwhere there is objective evidence that the Group will not be able to collect allamounts due according to the agreed terms of the receivables concerned. Cash and cash equivalents Cash and cash equivalents consist of cash in hand, deposits with banks and othershort term, highly liquid investments with original maturities of three monthsor less. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value lessattributable transaction costs. Borrowings are subsequently stated at amortisedcost with any difference between the amount initially recognised and theredemption value being recognised in the income statement over the period of theborrowings on an effective interest rate basis. Trade and other payables Trade and other payables are non-interest bearing and are recognised at invoicedamount. Derivative financial instruments The Group uses interest rate swaps to help manage its interest rate risk. Thesederivative financial instruments are recognised initially at fair value andsubsequently re-measured. The gain or loss on re-measurement to fair value isrecognised immediately in the income statement, unless the derivatives qualifyfor hedge accounting in which case the effective element of the gain or loss isrecognised directly through equity in a hedging reserve. The fair value of interest rate swaps is the estimated amount that the Groupwould receive or pay to terminate the swap at the balance sheet date, takingaccount of current interest rates and the current creditworthiness of the swapcounterparties. The Group's interest rate swaps are shown in these accounts at fair value asderived by JC Rathbone Associates Limited, financial risk consultants, based onmarket prices, estimated future cash flows and forward rates as appropriate. The Group has taken advantage of the transitional arrangements of IFRS 1 not torestate corresponding amounts in accordance with IAS 32 and IAS 39. Thecorresponding amounts for the year ended 31 March 2005 are presented anddisclosed in accordance with the requirements of the Companies Act 1985 and FRS4, 'Capital Instruments'. Property index-linked total return swap The Group enters into property derivatives to mitigate or enhance its exposureto a particular class or a spectrum of property assets. Such instruments areaccounted for initially in the balance sheet at fair value with subsequentre-measurement being reflected through the income statement. The swap was valued as at the year end by JC Rathbone Associates Limited atmarket value. xix) Own shares held by ESOP trust Transactions of the Group-sponsored ESOP trust are included in the Group'sfinancial statements. In particular, the trust's purchases of shares in theCompany are debited directly to equity. 2. Reconciliation of profit reported under UK GAAP to profit under IFRS Notes 2005 £000 _______ _______ Profit for the financial year as previously reported 13,409IFRS adjustments: Cost of employee share-based payment schemes i (109) Reallocation of rent free periods ii 235 Treatment of leasehold interests as finance leases iii 516 Capitalised interest on jointly administered property iv (184) Gains on revaluation of investment properties in: v Group 20,259 Joint ventures 6,400 Associates 226 Reversal of impairment on investment property vi 425 Reversal of short leasehold amortisation on investment properties vii 61 Deficits on revaluation of development properties viii (1,232) Tax effect of differences 1,728 _______Profit for the financial year under IFRS 41,734 ====== Notes: i) Under IFRS 2, 'Share-based Payment', the cost of all employee share-basedpayment schemes is recognised in the income statement. ii) Under SIC 15, 'Operating Leases: Incentives', rent free periods areallocated over the whole lease term or to tenant break if shorter, rather thanthe period to the first rent review as is the case under UK GAAP. iii) Under IAS 40, 'Investment Property', certain operating leases can bedeemed finance leases. The liability under these leases is recognised as thepresent value of the minimum lease payments at the date of inception oracquisition of the lease. Part of the rent payable under the lease is treatedas a finance charge based on the discount rate used in this calculation. iv) Under IAS 31, 'Interest in Joint Ventures', the Group accounts for jointlyadministered arrangements as joint ventures. As a result, interest capitalisedunder UK GAAP on the Group's share of the cost of development properties hasbeen reversed. The effect of this has been to reduce the cost of disposal inrespect of units sold, giving rise to a net positive adjustment in the currentyear and a net negative one in the comparative year. v) Under IAS 40, changes in the fair value of investment properties arerecognised separately in the income statement. vi) As revaluation deficits on investment properties are included in the incomestatement, these deficits would also reflect any impairment charge previouslyrecognised in property related costs under UK GAAP. vii) Under IAS 40, revaluation surpluses and deficits on investment propertiesare recognised in the income statement, thus measuring the amortisation in thevalue of the Group's short leasehold investment properties. viii) Under IAS 16, 'Property, Plant and Equipment', when the carryingamount of a development property is decreased as a result of a revaluation, thedecrease should be recognised as an expense. However, a revaluation decrease ischarged directly against any related revaluation surplus to the extent that thedecrease does not exceed the amount held in the revaluation surplus in respectof the same asset. 3. Reconciliation of equity reported under UK GAAP to equity under IFRS Notes As at As at 31 March 1 April 2005 2004 £000 £000 _______ _______ _______ Equity shareholders' funds under UK GAAP 638,261 523,513IFRS adjustments: Obligations under finance leases i 12,750 18,776 Leasehold property interests i (12,750) (18,776) Deferred tax on revaluation gains ii (75,453) (58,249) Interest capitalised on jointly administered property iii (407) (223) Exclusion of proposed dividend iv 8,700 7,757 _______ _______Equity shareholders' funds under IFRS 571,101 472,798 ====== ====== Notes: i) Interests in leasehold properties are accounted for as finance leases underIAS 40, 'Investment Property', and the obligation to the lessor is includedwithin non-current liabilities, calculated as the present value of the minimumlease payments at the inception of the lease. Investment and developmentproperties are valued net of this obligation, so an amount equivalent to theobligation is included in the balance sheet as a non-current asset. An elementof the rent payable is treated as interest and a part repayment of theobligation to the lessor. ii) Under IAS 12, 'Income Taxes', a deferred tax provision is made for the taxthat would potentially be payable on the sale of investment and developmentproperties and other assets where the carrying value is different from theircost for tax purposes. UK GAAP requires that this potential liability isdisclosed in contingent tax but not provided for in the balance sheet. iii) Under IAS 31, 'Interests in Joint Ventures', jointly administeredarrangements are accounted for as joint ventures. Accordingly, interestpreviously capitalised on development expenditure under the proportional basisof accounting adopted under UK GAAP has been reversed. iv) Under IAS 10, 'Events after the Balance Sheet Date', unapproved dividendsare not provided for. Under UK GAAP prevailing as at 1 April 2004 and 31 March 2005, proposed dividends were shown as a liability inthe balance sheet. 4. Revenue, cost of sales and gross profit 2006 2006 2006 2005 2005 2005 Revenue Cost of Gross Revenue Cost of Gross sales profit sales profit £000 £000 £000 £000 £000 £000 ______ _______ ______ ______ ______ ______ Rental income 29,075 (7,580) 21,495 36,394 (6,597) 29,797Income from sales of trading properties 4,065 (3,687) 378 6,336 (5,122) 1,214Income from leisure operations 1,686 (833) 853 1,420 (326) 1,094Fees, commissions and other income 7,225 (3,195) 4,030 4,253 (2,050) 2,203 ______ _______ ______ ______ ______ ______Continuing operations 42,051 (15,295) 26,756 48,403 (14,095) 34,308 Discontinued operations (note 9) 5,848 (6,738) (890) 10,692 (5,545) 5,147 ______ ______ ______ ______ _______ ______ 47,899 (22,033) 25,866 59,095 (19,640) 39,455 ===== ====== ===== ===== ====== ===== The cost of sales in relation to rental income comprised: 2006 2005 £000 £000 _____ _____ Service charge expenditure 3,998 4,759Service charge recovery (2,489) (3,154) _____ _____Irrecoverable service charges 1,509 1,605 Rents payable 243 17Property management fees 547 587Legal and professional fees 787 804Short leasehold amortisation 408 389Other property costs 4,086 3,195 ______ ______ 7,580 6,597 ===== ===== 5. Segmental analysis i) Business segmental analysis The analysis of the Group's results by business segment, which are discussed inthe Operating and Financial Review, was as follows: 2006 2005 2006 2005 2006 2005 2006 2005 Gross Gross Gross Gross Share of Share of Profit Profit revenue revenue profit profit profit profit before before from from tax tax joint joint ventures ventures and and associates associates £000 £000 £000 £000 £000 £000 £000 £000 ______ ______ ______ ______ ______ ______ ______ ______ Investment portfolio 23,720 31,100 17,155 25,958 - - 46,840 46,514Special projects 13,644 14,036 6,287 6,489 542 1,996 10,350 13,305Fund management 4,687 3,267 3,314 1,861 32,715 6,329 40,909 7,418 ______ ______ ______ ______ ______ ______ ______ ______ 42,051 48,403 26,756 34,308 33,257 8,325 98,099 67,237 Administrative expenses (22,660) (16,477)Net finance expenses (10,486) (15,840) ______ ______Profit before tax fromcontinuing operations 64,953 34,920 (Loss) profit before tax from discontinued operations (note 9): Special projects (4,042) 2,338 ______ ______ 60,911 37,258 ===== ===== 2006 2006 2006 2006 2005 2005 2005 2005 Investment Development Joint Total Investment Development Joint Total properties properties ventures revaluation properties properties ventures revaluation at at and uplift at at and uplift valuation valuation associates valuation valuation associates £000 £000 £000 £000 £000 £000 £000 £000 ______ ______ ______ ______ ______ _______ ______ _____ Investment 219,588 19,040 - 17,176 271,102 23,881 - 18,274portfolioSpecial 42,100 575,415 30,409 102,259 - 436,012 21,214 93,885projectsFund management 28,400 5,000 91,344 35,126 19,100 4,000 44,207 7,264 ______ ______ ______ _______ _______ ______ _______ _______ 290,088 599,455 121,753 154,561 290,202 463,893 65,421 119,423 ====== ====== ====== ====== ====== ====== ====== ====== Capital expenditure 2006 2005 £000 £000 _____ _____ Investment portfolio 42,775 80,322Special projects 68,468 26,535Fund management 5,839 4,317 _______ _______ 117,082 111,174 ====== ====== ii) Geographical segmental analysis The geographical split of the Group's business was as follows: 2006 2005 2006 2005 2006 2005 Gross Gross Gross Gross Profit Profit revenue revenue profit profit before before tax tax £000 £000 £000 £000 £000 £000 ______ ______ ______ ______ ______ ______ United Kingdom and Channel Islands 40,388 46,079 25,864 32,703 63,341 34,010France 1,628 1,509 857 918 1,612 1,778United States 35 815 35 687 - (868) ______ ______ ______ ______ ______ ______ 42,051 48,403 26,756 34,308 64,953 34,920 (Loss) profit before tax from discontinued operations (note 9): United Kingdom (4,042) 2,338 ______ ______ 60,911 37,258 ===== ===== All joint ventures and associates are located in the United Kingdom and ChannelIslands. 2006 2006 2005 2005 Net assets Capital Net assets Capital expenditure expenditure £000 £000 £000 £000 _____ ______ ______ ______ United Kingdom and Channel Islands 906,122 116,731 724,927 111,174France 13,657 351 10,062 - ______ ______ ______ ______ 919,779 117,082 734,989 111,174 ====== ====== Cash and cash equivalents 7,954 11,090Current liabilities: bank loans (4,432) (88)Non-current liabilities: bank loans (246,626) (174,890) ______ ______ 676,675 571,101 ====== ====== The Group's profit from the sale of non-current assets all arose in the UnitedKingdom. iii) Sector analysis The analysis of the Group's results by sector was as follows: 2006 2005 2006 2005 2006 2005 2006 2005 Gross Gross Gross Gross Share of Share of Profit Profit revenue revenue profit profit profit profit before before from joint from joint tax tax ventures ventures and and associates associates £000 £000 £000 £000 £000 £000 £000 £000 ______ ______ ______ ______ ______ ______ ______ _____ Healthcare 4,625 2,779 3,251 1,740 32,322 5,367 39,365 7,747Hotels 2,013 2,076 1,991 2,032 - - 5,120 1,232Industrial 8,643 8,956 5,676 5,663 - - 11,670 12,257Land 3,355 3,712 725 1,321 542 1,996 1,291 5,410Leisure 847 1,187 497 508 - 736 596 660Offices 16,727 18,144 13,553 14,055 - - 36,368 28,640Retail 3,715 11,429 263 10,029 - - 2,047 12,166Other 2,126 120 800 (1,040) 393 226 1,642 (875) ______ ______ ______ ______ ______ ______ ______ ______ 42,051 48,403 26,756 34,308 33,257 8,325 98,099 67,237 ===== ===== ===== ===== ===== ===== Administrative expenses (22,660) (16,477)Net finance expenses (10,486) (15,840) ______ ______Profit before tax from continuing operations 64,953 34,920 (Loss) profit beforetax from discontinuedoperations (note 9): Leisure (4,042) 2,338 _______ ______ 60,911 37,258 ====== ===== 2006 2006 2006 2006 2005 2005 2005 2005 Investment Development Joint Total Investment Development Joint Total properties properties ventures revaluation properties properties ventures revaluation at at and uplift at at and uplift valuation valuation associates valuation valuation associates £000 £000 £000 £000 £000 £000 £000 £000 ______ _______ ______ ______ ______ _______ ______ _____ Healthcare 22,300 - 89,667 33,264 18,300 - 42,923 7,342Hotels 4,698 22,742 - 7,285 16,947 16,492 - (944)Industrial 43,558 71,785 - 23,230 52,860 23,200 - 7,507Land 75 421,866 30,409 74,302 375 336,583 21,214 86,705Leisure 42,150 8,500 - 63 865 20,400 - (465)Offices 160,204 52,581 - 16,388 154,498 49,537 - 17,245Retail 15,653 16,981 - (1,319) 45,307 13,681 - 2,061Other 1,450 5,000 1,677 1,348 1,050 4,000 1,284 (28) _______ _______ _______ ________ _______ _______ _______ _______ 290,088 599,455 121,753 154,561 290,202 463,893 65,421 119,423 ====== ====== ====== ======= ====== ====== ====== ====== Capital expenditure 2006 2005 £000 £000 _____ _____ Healthcare 151 14Hotels 433 144Industrial 12,265 16,145Land 65,589 18,624Leisure 22 31Offices 33,685 55,364Retail 4,735 16,549Other 202 4,303 _______ _______ 117,082 111,174 ====== ====== 6. Administrative expenses 2006 2005 £000 £000 _____ _____ Directors' remuneration 4,148 2,853Staff costs 13,857 9,936Cost relating to share-based payment schemes 1,180 721 ______ ______Total staff costs 19,185 13,510 Reorganisation provision for discontinued operations 650 -Legal and other professional fees 1,817 2,258Office costs 2,817 2,477Loss on sale of plant and equipment 30 -Depreciation of tangible fixed assets 441 441Operating lease payments 480 302General expenses 392 298 _______ _______Total administrative expenses 25,812 19,286 ====== ====== Continuing operations 22,660 16,477Discontinued operations (note 9) 3,152 2,809 _______ _______ 25,812 19,286 ====== ====== In addition to the depreciation charge disclosed above, short leaseholdamortisation of £408,000 (2005: £389,000) is charged under cost of sales andshown in note 4. i) Fees paid to auditors and their affiliates 2006 2005 £000 £000 _____ _____ Audit: Statutory audit: Group (including parent company) 260 238 ====== ======Parent company only 32 30 ====== ====== Audit related regulatory reporting 25 22 ====== ====== Non-audit: Tax compliance 36 21 Tax advisory 8 47 Other 27 - _______ _______ 71 68 ====== ====== Fees paid to other accountancy firms amounted to £270,000 (2005: £538,000) ofwhich £162,000 (2005: £376,000) was capitalised. These fees related mainly totax advisory services. ii) Staff costs 2006 2005 £000 £000 _____ _____ Wages and salaries 14,390 10,072Cost relating to Executive Directors' Performance Share Plan 566 380Cost relating to other share-based payment schemes 614 341Provision for national insurance on unexercised share options and 408 408rightsSocial security costs 2,051 1,310Pension costs 806 689Other employment costs 350 310 _______ _______ 19,185 13,510 ====== ====== Details of directors' emoluments, pensions and entitlements to share options andrights are contained in the Remuneration Report. Details of directors' interests in the share capital of the Company arecontained in the Report of the Directors. iii) Staff numbers The average number of persons employed by the Group during the year was asfollows: 2006 2005 _____ _____ Property portfolio management and administration 72 61Leisure operations 113 119 _______ _______ 185 180 ====== ====== 7. Net finance expenses 2006 2005 £000 £000 _____ _____ Interest payable on bank loans and overdrafts 15,328 18,472Interest payable on other loans 1,307 3,092Interest on obligations under finance leases 230 1,147 _______ _______ 16,865 22,711Profit on termination of swap arrangements - (722)Interest capitalised (7,824) (4,695) _______ _______Interest payable 9,041 17,294Change in fair value of ineffective interest rate swaps 2,994 -Finance income (1,549) (1,454) _______ _______ 10,486 15,840 ====== ====== Interest payable on other loans in 2005 included an amount of £1,890,000written-off in respect of previously capitalised borrowing costs. These loanfacilities were terminated following their replacement by a new £475 millionSyndicated facility. Of the interest capitalised in the year, the amount capitalised to developmentproperties was £7,506,000 (2005: £4,060,000), investment properties £318,000 (2005: £nil) and trading properties £nil (2005:£635,000). Cumulative capitalised interest included within trading properties as at 31March 2006 was £nil (2005: £434,000). The cumulative amount of capitalisedinterest included within investment and development properties at the year endis shown in note 12. In accordance with IAS 39, 'Financial Instruments: Recognition and Measurement',the Group has reviewed its interest rate hedges in existence as at 31 March 2006along with those in its joint ventures. As assessed by JC Rathbone AssociatesLimited, financial risk consultants, movements in fair value since 31 March 2005of the elements of those viewed as effective have been recognised throughequity while all other movements, including those relating to the ineffectiveelements of effective hedges, are reflected in the income statement. 8. Tax i) Tax charge on profit 2006 2005 £000 £000 _____ _____ UK current tax at 30% (2005: 30%) 1,892 1,117Adjustments to prior years' UK Corporation tax 900 287 _______ _______ 2,792 1,404Overseas tax 241 86 _______ _______Total current tax charge 3,033 1,490 _______ _______Deferred tax: On investment properties 3,052 (7,101) On derivative financial instruments (898) - On other temporary differences 275 434 _______ _______Total deferred tax charge (credit) 2,429 (6,667) _______ _______Tax charge (credit) 5,462 (5,177) ====== ====== ii) Tax charge reconciliation 2006 2005 £000 £000 _____ _____ Profit before tax 64,953 34,920 ====== ====== Tax applied at UK corporation tax rate of 30% 19,486 10,476Locked-in capital allowances (3,551) (3,801)ACT offset against chargeable gains - (9,498)Use of losses and differing tax rates in respect of overseas results (231) 351Use of tax losses - (797)Indexation relief on UK investment properties (1,703) (1,607)Adjustments to prior years' current and deferred tax (534) 320Tax charge taken to share of income from joint ventures and (9,205) (3,494)associatesOther movements 1,200 2,873 _______ _______Tax charge (credit) 5,462 (5,177) ====== ====== iii) Tax recognised directly in equity 2006 2005 £000 £000 _____ _____ Deferred tax charge on revaluation of development properties 31,938 22,884Deferred tax credit on effective element of interest rate swaps (503) - _______ _______ 31,435 22,884 ====== ====== iv) Deferred tax movements 1 April Adjustment Acquired Recognised Recognised 31 March 2005 for IAS 39 balance in income in equity 2006 (note 27) £000 £000 £000 £000 £000 £000 ______ _______ ______ ______ ______ ______ Capital gains less capital losses 69,718 - 549 3,052 31,938 105,257Capital allowances 5,606 - - 170 - 5,776Derivative financial instruments - (2,483) - - (503) (2,986)Other temporary differences 1,966 - - (793) - 1,173Revenue tax losses (2,420) - - - - (2,420) ______ ______ ______ ______ ______ ______Deferred tax provision 74,870 (2,483) 549 2,429 31,435 106,800 ===== ===== ===== ===== ===== ====== Deferred tax assets estimated at £21,360,000 (2005: £21,360,000) have not beenrecognised due to a degree of uncertainty over both the amount and timing of theutilisation of the underlying tax losses and deductions. Under current taxlegislation, there is no expiry date associated with the unprovided deferred taxassets. v) Total tax charge The tax charge for the year recognised in these financial statements was asfollows: 2006 2005 £000 £000 _____ _____ Tax charge (credit) on profit as above 5,462 (5,177)Tax (credit) charge on discontinued operations (note 9) (1,213) 701Tax charge on share of profit in joint ventures (note 14i) 1,625 5,055Tax charge on share of profit in associates 57 -Tax charge on income and expenses recognised directly in equity 31,435 22,884Tax charge on share of income and expenses in joint ventures recognised directly in equity (44) - _______ _______ 37,322 23,463 ====== ====== 9. Discontinued operations The results from the Arena, Conference Hall and Exhibition Centres at Wembleyhave been classified in these financial statements as discontinued. Thebreakdown of the numbers disclosed in the income statement in relation to theseactivities was as follows: 2006 2005 £000 £000 _____ _____ Revenue 5,848 10,692Cost of sales (6,738) (5,545) _____ _____Gross (loss) profit (890) 5,147Administrative expenses (3,152) (2,809) _____ _____(Loss) profit before tax on discontinued operations (4,042) 2,338Tax credit (charge) 1,213 (701) _____ _____ (2,829) 1,637 ===== ===== At the end of the current financial year, Wembley Arena which had previouslybeen operated by the Group as an entertainment venue was leased to a thirdparty, Live Nation. Throughout the year, to prepare for this transition, theArena was closed for refurbishment but in order to preserve the goodwillassociated with its business, was replaced by a temporary structure, known asthe Pavilion. The decision taken by the Board to cease to be involved in thebusiness of operating the Arena as well as to terminate its conference andexhibition activities at Wembley has led to the classification of the resultsfrom these operations, which together constitute the most significant part ofthe Group's leisure activities, as discontinued. In the Group's balance sheet,the Arena has been reclassified as an investment property while the sitescurrently occupied by the Conference Hall and the Exhibition Centres will revertto development land. The net cash flow from discontinued operations included in net cash fromoperating activities is based on the numbers disclosed above, adjusted in thecurrent year for the reorganisation provision, less related tax, referred to innote 6 above. There were no other cash flows from investing and financingactivities in relation to discontinued operations. The basic and diluted loss per share for discontinued operations was 2.2 pence(2005: earnings per share of 1.3 pence). 10. Earnings per share and net asset value per share i) Earnings per share a) Before discontinued operations 2006 2006 2006 2005 2005 2005 Profit after Weighted Earnings Profit after Weighted Earnings tax and average per share tax and average per share before number before number discontinued of shares discontinued of shares operations operations £000 000 pence £000 000 pence ______ _______ ______ ______ _______ ______ Basic 59,491 128,937 46.1 40,097 129,349 31.0 ===== =====Adjustments: Interest on 8% Convertible unsecured loan stock 235 2,000 168 2,000 Employee share-based payment schemes - 1,237 - 1,031 ______ _______ ______ ______Diluted 59,726 132,174 45.2 40,265 132,380 30.4 ===== ====== ===== ===== ====== ===== b) After discontinued operations 2006 2006 2006 2005 2005 2005 Profit after Weighted Earnings Profit after Weighted Earnings tax and average per share tax and average per share after number after number discontinued of shares discontinued of shares operations operations £000 000 pence £000 000 pence ______ _______ ______ ______ _______ ______ Basic 56,662 128,937 43.9 41,734 129,349 32.3 ===== =====Adjustments: Interest on 8% Convertible unsecured loan stock 235 2,000 168 2,000 Employee share-based payment schemes - 1,237 - 1,031 ______ ______ ______ ______Diluted 56,897 132,174 43.0 41,902 132,380 31.7 ===== ====== ===== ===== ====== ===== The weighted average number of shares excludes the weighted average number ofshares held in the Quintain Group Employee Benefit Trust, which have beentreated as cancelled. ii) Net asset value per share 2006 2006 2006 2005 2005 2005 Equity Number Net asset Equity Number Net asset shareholders' of shares value shareholders' of shares value funds per share funds per share £000 000 pence £000 000 pence ______ _______ ______ ______ _______ ______ Basic 676,675 128,635 526 571,101 128,891 443 ===== =====Adjustments: 8% Convertible unsecured loan stock 2,893 2,000 3,000 2,000 Employee share-based payment schemes 9,766 2,925 9,310 2,919 ______ ______ ______ ______Diluted 689,334 133,560 516 583,411 133,810 436 ====== ====== ===== ====== ====== ===== The number of shares in issue has been adjusted for the 659,596 (2005: 300,000)shares held by the Quintain Group Employee Benefit Trust. Although not required under International Financing Reporting Standards, netasset value per share is considered a key performance indicator in the sector inwhich the Group operates. Entitlements under the Executive Directors' Performance Share Plan have beenexcluded from the calculation in both i) and ii) above as the commitments relateto contingently issuable shares where the conditions had not been met at thebalance sheet date. 11. Dividends The proposed final dividend of 7.25 pence per share (2005: 6.75 pence per share)was approved by the Board on 31 May 2006 and is payable on 8 September 2006 toshareholders on the register at the close of business on 4 August 2006. Thedividend has not been included as a liability as at 31 March 2006. The totaldividend for the year ended 31 March 2006 amounts to 10.50 pence per share(2005: 9.50 pence per share). The dividend of £12,867,000 included in theReconciliation of movements in equity in note 22 comprises the 2005 finaldividend of £8,700,000, which was paid on 8 September 2005, together with theinterim dividend of £4,167,000 paid on 18 January 2006. 12. Investment and development properties The movements in investment and development properties were as follows: Investment Investment Investment Investment Development Development Development Development properties properties properties properties properties properties properties properties Freehold Long Short Total Freehold Long Short Total leasehold leasehold leasehold leasehold £000 £000 £000 £000 £000 £000 £000 £000 ______ _______ ______ ______ ______ _______ ______ _____ Cost or valuation:Balance 1 April 257,280 140,906 13,227 411,413 357,379 36,171 4,194 397,7442004Transfer to (900) - - (900) - - - -trading properties Transfer to other - - - - 3,408 (3,408) - -categoriesForeign exchange 68 - - 68 - - - -movementAdditions 49,893 22,887 - 72,780 29,351 7,302 1,740 38,393Interest - - - - 3,982 78 - 4,060capitalisedDisposals (126,535) (83,316) (4,076) (213,927) (67,747) - - (67,747)Short leasehold amortisation - - - - - - (389) (389)Other propertyamortisation - - - - (197) - - (197)Revaluationsurplus(deficit) 12,857 6,992 919 20,768 93,742 (1,105) (608) 92,029 ______ _______ ______ ______ ______ _______ ______ _______Balance 31 March 192,663 87,469 10,070 290,202 419,918 39,038 4,937 463,8932005 Transfer to other categories 47,060 (4,960) - 42,100 (39,635) (2,465) - (42,100)Foreign exchange 164 - - 164 - - - -movementAdditions 31,879 11,531 - 43,410 65,414 4,831 62 70,307Interest 318 - - 318 7,074 432 - 7,506capitalisedDisposals (91,448) (15,843) (949) (108,240) (2,305) - - (2,305)Short leaseholdamortisation - - - - - - (408) (408)Revaluation 10,224 10,968 942 22,134 93,871 7,353 1,338 102,562surplus ______ _______ ______ _______ _______ ______ _______ _______Balance 31 March 190,860 89,165 10,063 290,088 544,337 49,189 5,929 599,4552006 ====== ====== ===== ====== ====== ===== ====== ====== Of the additions shown above, £41,437,000 (2005: £85,774,000) related toacquisitions. The historical cost of the Group's investment and development properties as at31 March 2006 was £496,786,000 (2005: £531,278,000) and included capitalisedinterest of £16,729,000 (2005: £9,533,000). All of the Group's properties were externally valued as at 31 March 2006 on thebasis of market value by professionally qualified valuers in accordance with theAppraisal and Valuation Standards of the Royal Institution of CharteredSurveyors. The Group's land holdings in Greenwich and the Wembley Complex have been valuedby Savills Commercial Limited. The discount rates which have been applied tofuture cash flows in relation to these developments were 10.5% and 9.5%respectively. Other properties in the United Kingdom have been valued by Jones Lang LaSalleLimited and Christie & Co. Properties in the Channel Islands have been valued byGuy B Gothard and in France by Savills. A reconciliation of the valuations carried out by the external valuers to thecarrying values shown in the balance sheet was as follows: 2006 2005 £000 £000 _____ _____ Investment and development properties at market value as determined by valuers 878,295 743,518Adjustment in respect of rent-free periods and other tenant incentives (965) (972)Adjustment in respect of minimum payments under head leases separately included as a liability in the balance sheet 12,213 11,549 _______ _______As shown in the balance sheet 889,543 754,095 ====== ====== In addition to the commitment under head leases in respect of investment anddevelopment properties shown above, the comparative number in the Group'sbalance sheet as at 31 March 2005 includes £1,201,000 in respect of the longleasehold property which is shown under note 13 and was sold during the year. The proportion of investment and development properties valued by each valuerwas as follows: 2006 2005 £000 % £000 % _______ _______ _______ _______ Savills Commercial Limited 542,500 61.8 376,150 50.6Jones Lang LaSalle Limited 321,935 36.7 342,600 46.1Other valuers 13,860 1.5 24,768 3.3 _______ _______ _______ _______ 878,295 100.0 743,518 100.0 ====== ====== ====== ====== Copies of the valuation reports of Jones Lang LaSalle Limited and SavillsCommercial Limited are included in the annual report. The figures quoted in thereports of Savills and Jones Lang LaSalle are different from those disclosedabove because they represent 100 percent of the external valuation of properties of which the Group owns ashare as well as those held in associate undertakings. Savills, Jones Lang LaSalle and Christie & Co provide other professional andagency services to the Group. These organisations have confirmed that the totalfees paid by the Group represent less than five percent of their total feeincome in any year and that they adopted policies for the regular rotation ofsuitably qualified personnel to perform these valuations. 13. Owner-occupied properties, plant and equipment Long Short Fixtures, Total leasehold leasehold fittings & equipment £000 £000 £000 £000 _______ _______ _______ _______ Cost:Balance 1 April 2004 - 825 1,093 1,918Additions 10,039 12 157 10,208 _______ _______ _______ _______Balance 31 March 2005 10,039 837 1,250 12,126 Additions 1,341 - 1,024 2,365Disposals (11,380) (566) (528) (12,474) _______ _______ _______ _______Balance 31 March 2006 - 271 1,746 2,017 ====== ====== ====== ====== Depreciation:Balance 1 April 2004 - (640) (629) (1,269)Charge for year - (183) (258) (441) _______ _______ _______ _______Balance 31 March 2005 - (823) (887) (1,710) Charge for year - (2) (439) (441)Disposals - 554 522 1,076 _______ _______ _______ _______Balance 31 March 2006 - (271) (804) (1,075) ====== ====== ====== ======Net book value:31 March 2006 - - 942 942 ====== ====== ====== ======31 March 2005 10,039 14 363 10,416 ====== ====== ====== ======1 April 2004 - 185 464 649 ====== ====== ====== ====== 14. Non-current investments i) Investment in joint ventures a) The movement in investment in joint ventures was as follows: Share of Advances Total net assets £000 £000 £000 _______ _______ _______ Balance 1 April 2004 7,740 30,000 37,740Transfer from associates 1,293 - 1,293Additions 1 - 1Disposals (53) - (53)Amounts advanced - 23,121 23,121Distributions (3,117) (2,211) (5,328)Share of profit 7,363 - 7,363 _______ _______ _______Balance 31 March 2005 13,227 50,910 64,137 Restatement for IAS 39, net of tax (32) - (32) _______ _______ _______ 13,195 50,910 64,105 Additions 553 - 553Acquisition of interest in joint venture 2,812 - 2,812Acquisition of related deferred tax liability (note 27) (318) - (318)Amounts advanced - 24,474 24,474Distributions (4,312) - (4,312)Share of profit 32,864 - 32,864Share of effective portion of changes in fair value of cash flow (102) - (102)hedges, net of tax _______ _______ _______Balance 31 March 2006 44,692 75,384 120,076 ====== ====== ====== b) The Group's interest in its principal joint ventures was as follows: % of share Country of Joint venture capital held incorporation partner _________ __________ __________ Meridian Delta Limited 49 United Kingdom Lend Lease Europe Limited Meridian Delta Dome Limited 49 United Kingdom Lend Lease Europe Limited Quercus Healthcare Property Unit Trust 28.31 Channel Islands Norwich Union Life & Pensions Limited Countryside Properties (Merton Abbey Mills) 50 United Kingdom CountrysideLimited Properties PLC Bioregional Quintain Limited 49 United Kingdom Bioregional Properties Limited South East Properties (Redhill) Limited 50 United Kingdom South East Properties Limited c) The Group's share of the results of its principal joint venture operationswas as follows: Quercus Meridian Merton Other Group share Delta Abbey joint in joint Mills ventures ventures £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ Summarised income statements Rents receivable 7,838 - - - 7,838Profit (loss) from sale of trading - - 1,469 (142) 1,327propertiesAdministrative expenses (1,031) (216) (122) (130) (1,499) _______ _______ _______ _______ _______Operating profit (loss) 6,807 (216) 1,347 (272) 7,666 Share of gain on revaluation of 29,415 - - - 29,415investment propertiesLoss on sale of investment properties (39) - - - (39) _______ _______ _______ _______ _______Profit (loss) before net finance expenses 36,183 (216) 1,347 (272) 37,042and taxation Finance expenses (2,519) (16) (21) (20) (2,576)Finance income - - 23 - 23 _______ _______ _______ _______ _______Profit (loss) before taxation 33,664 (232) 1,349 (292) 34,489 Taxation (1,342) - (283) - (1,625) _______ _______ _______ _______ _______Profit (loss) after taxation 32,322 (232) 1,066 (292) 32,864 ====== ====== ====== ====== ====== Summarised balance sheets Investment properties at valuation 147,831 - - - 147,831Trading properties - 20,772 2,513 - 23,285Other assets 4,873 1,288 2,790 5,379 14,330 _______ _______ _______ _______ _______Gross assets 152,704 22,060 5,303 5,379 185,446 Current tax liability (1,100) - (115) - (1,215)Non-current liabilities: bank loans (51,479) - - - (51,479)Deferred tax liability (5,345) - - (318) (5,663)Other liabilities (5,113) (1,135) - (765) (7,013) _______ _______ _______ _______ _______Net external assets 89,667 20,925 5,188 4,296 120,076 ====== ====== ====== ====== ======Represented by: Joint venture partner's capital 37,803 1,056 3,050 2,783 44,692Joint venture partner's loans 51,864 19,869 2,138 1,513 75,384 _______ _______ _______ _______ _______Total investment 89,667 20,925 5,188 4,296 120,076 ====== ====== ====== ====== ====== Bank loans within Quercus are at floating rates and details of interest rateswaps entered into by the joint venture are given in note 21 below. The valuation of investment properties held within Quercus as at 31 March 2006has been based on the exercise carried out by Christie & Co, CharteredSurveyors, as external valuers, on the basis of market value and in accordancewith the Appraisal and Valuation Standards of the Royal Institution of CharteredSurveyors. The Quercus joint venture has an accounting period ending on 31 December. TheGroup's share of its results for the remainder of the financial year has beenbased on its management accounts. d) The summarised financial statements of the Group's principal joint ventureoperations were as follows: 2006 2006 2006 2005 2005 2005 Quercus Meridian Merton Quercus Meridian Merton Delta Abbey Delta Abbey Mills Mills £000 £000 £000 £000 £000 £000 ______ _______ ______ ______ _______ ______ Income statements Revenue 135,750 - 48,842 48,583 - 45,435 Expenses (18,130) (474) (46,658) (26,415) - (40,793) ______ ______ ______ ______ ______ ______Profit (loss) before taxation 117,620 (474) 2,184 22,168 - 4,642 ====== ===== ===== ===== ====== =====Balance sheets Non-current assets 522,187 2,628 - 311,177 - -Current assets 17,214 42,392 10,606 15,234 30,778 31,980 ______ ______ ______ ______ ______ ______Total assets 539,401 45,020 10,606 326,411 30,778 31,980 Current liabilities (21,946) (2,316) (230) (16,140) (2,486) (17,432)Non-current liabilities (200,721) - - (148,298) - - _______ ______ ______ _______ ______ ______Net assets 316,734 42,704 10,376 161,973 28,292 14,548 ====== ===== ===== ====== ====== ===== ii) Investment in associates £000 _______ Balance 1 April 2004 4,951Transfer to joint ventures (1,293)Disposals (1,074)Loan repayments (2,262)Share of profit 962 _______Balance 31 March 2005 1,284Share of profit 393 _______Balance 31 March 2006 1,677 ====== The Group's interest in its principal associate was as follows: % of equity Other held member _____ _____ Aqua Trust 50 Norwich Union Annuity Limited iii) Other non-current investments Available for sale investments £000 ______Unquoted investments:Balance 1 April 2004 and 2005 188Additions 3,160Impairment (632) _______Balance 31 March 2006 2,716 ====== The Group has an investment in equity and loans in Cassel Hotel (Cambridge)Limited, a tenant, which operates an hotel on a ground lease from the Group. In the current year, the Group invested in convertible loan stock in SerrastoneSA, a company based in France, which is researching and developing a substitutefor natural stone for building purposes. The loan stock carries a coupon of 10%and is convertible into equity between 31 December 2008 and 31 December 2010 onthe basis of the company's valuation at the conversion dates. During the year, the carrying value of the investment has been reviewed and animpairment charge as shown above recognised. 15. Trade and other receivables 2006 2005 £000 £000 _____ _____ Trade receivables 9,166 10,755Amounts due under contracts for sale 54,635 8,419Other receivables 5,424 4,747Prepayments and accrued income 3,087 5,350 _______ _______ 72,312 29,271 ====== ====== 16. Current investments 2006 2005 £000 £000 _____ _____ Treasury stock 7 19 ====== ====== The nominal value of the Treasury stock as at 31 March 2006 was £7,000 (2005:£16,000). 17. Trade and other payables 2006 2005 £000 £000 _____ _____ Trade payables 8,802 4,469Other payables 3,503 8,525Accruals 23,854 18,055Interest rate swaps 12,945 - _______ _______ 49,104 31,049 ====== ====== 18. Bank loans and other borrowings 2006 2005 £000 £000 _____ _____ Current liabilities:Bank and other loans (secured) 4,432 88 ===== ===== Non-current liabilities:Bank and other loans (secured) 238,863 167,0208% Convertible unsecured loan stock 2,893 3,00010% First mortgage debenture stock 2011 (secured) 4,870 4,870 _______ _______ 246,626 174,890 ====== ====== Total borrowings 251,058 174,978 ====== ====== The loans are secured by floating charges over assets owned by subsidiaryundertakings. The unlisted 8% Convertible unsecured loan stock is repayable on 1 April 2007.The loan stock is convertible at any time at the option of the holder intoordinary shares of the Company at a conversion price of 150 pence per share. The 10% First mortgage debenture stock 2011 issued by Estates PropertyInvestment Company Limited is secured by fixed and floating charges over theassets of the subsidiary undertaking and has a redemption value of £4,617,000.The premium over par arising from fair valuing the debenture on acquisition isamortised over its remaining life. 19. Obligations under finance leases Finance lease obligations in respect of rents payable on leasehold propertieswere payable as follows: 2006 2006 2006 2005 2005 2005 Principal Interest Present Principal Interest Present minimum value minimum value lease of minimum lease of minimum payments lease payments lease payments payments £000 £000 £000 £000 £000 £000 _____ _____ _____ _____ _____ _____ Within one year 863 (855) 8 815 (808) 7From two to five years 3,452 (3,410) 42 3,264 (3,226) 38From five to 25 years 17,165 (16,772) 393 16,232 (15,860) 372After 25 years 48,188 (36,418) 11,770 44,438 (32,105) 12,333 _______ _______ _______ _______ _______ _______ 69,668 (57,455) 12,213 64,749 (51,999) 12,750 ====== ====== ====== ====== ====== ====== 20. Financial assets and liabilities i) Transition to IAS 32, 'Financial Instruments: Disclosure and Presentation'and IAS 39, 'Financial Instruments: Recognition and Measurement'. The Group has taken advantage of the transitional arrangements of IFRS 1 not torestate corresponding amounts in accordance with IAS 32 and IAS 39. In the comparative period, all financial assets andliabilities were carried at cost, amortised as appropriate, less, in the case offinancial assets, provision for any permanent diminution in value. Interestdifferentials arising from interest rate swaps were recognised by adjusting netinterest payable over the period of the contract. The following adjustments necessary to implement the revised policy have beenmade as at 1 April 2005 with net adjustments to net assets, after tax,recognised directly in equity. Corresponding amounts for the year ended 31March 2005 are presented and disclosed in accordance with the requirements ofthe Companies Act 1985 and FRS 4, 'Capital Instruments'. The main differencesbetween the comparative year and the current year bases of accounting are shownand described below. The effect on the consolidated balance sheet as at 1 April 2005 was as follows: £000 _______ Investment in joint ventures (32)Trade and other payables (8,277)Current tax liability 175Non-current liabilities: bank loans and other borrowings 203Deferred tax liability 2,483 _______ (5,448) ====== Other capital reserves: Convertible loan stock reserve 786Cash flow hedge reserve (3,533)Retained earnings (2,701) _______ (5,448) ====== The nature of the main effects upon the consolidated balance sheet at 1 April2005 and upon the consolidated income statement and statement of recognisedincome and expenses in the current year was as follows: a) In the current year, hedging instruments and hedged items are accountedfor separately in the balance sheet. Gains and losses in both are included in profit for the year when they arise or, in the case of theeffective element of cash flow hedges, in equity. In prior periods, hedginginstruments were not recognised and hedged items were held at cost, amortised asappropriate, without any adjustment in respect of the hedged risk. b) Of the previous carrying value of convertible debt, a portion has beentreated as a share subscription option and has been transferred directly toequity on 1 April 2005. Thereafter, the finance cost of the debt is higher. The cash flow statement is unaffected by this change in accounting policy. ii) Financial assets As at 31 March 2006, the Group's cash and cash equivalents comprised: 2006 2005 £000 £000 _____ _____ Sterling 2,539 3,715Euros 5,119 7,109United States dollars 296 266 _______ _______ 7,954 11,090 ====== ====== Details of other financial assets are shown in the table in section iv) below. iii) Financial liabilities The Group's policy is to finance its activities with equity and long term debt,with a gearing target of 100%. The weighted average tenure of the Group'sSterling debt is five years (2005: five years) and the weighted average cost ofdebt was 6.6% (2005: 6.7%). The maturity profile of the Group's debt was as follows: 2006 2006 2006 2005 2006 2005 Bank loans Other Total debt Total debt Undrawn Undrawn and loans facilities facilities overdrafts £000 £000 £000 £000 £000 £000 ______ _______ ______ ______ _______ ______ Within one year 4,432 - 4,432 88 - -Between one and two years - 2,893 2,893 102 - -Between two and five years 238,863 - 238,863 166,389 254,000 330,000Over five years - 4,870 4,870 8,399 - - ______ ______ ______ ______ ______ ______ 243,295 7,763 251,058 174,978 254,000 330,000 ====== ===== ====== ====== ====== ====== After taking account of interest rate swap arrangements, the risk profile of theGroup's borrowings as at 31 March 2006 was as follows: 2006 2006 2006 2005 2005 2005 Fixed Floating Total debt Fixed Floating Total debt £000 £000 £000 £000 £000 £000 ______ _______ ______ ______ _______ ______ Sterling 164,770 81,856 246,626 154,877 15,630 170,507Euros 4,432 - 4,432 4,471 - 4,471 ______ ______ ______ ______ ______ ______ 169,202 81,856 251,058 159,348 15,630 174,978 ====== ===== ====== ====== ===== ====== The interest rate profile of the Group's fixed rate debt was as follows: Percent 2006 2005 £000 £000 _____ _____ 4.0 - 5.0 4,432 4,4715.0 - 6.0 157,007 147,0077.0 - 8.0 2,893 3,0009.0 - 10.0 4,870 4,870 _______ _______ 169,202 159,348 ====== ====== The weighted average rate and the weighted average period of the Group's fixedrate debt as at 31 March 2006 were as follows: 2006 2005 2006 2005 % % years years _______ _______ _______ _______ Sterling 5.5 5.6 7 9Euros 4.7 4.7 - 1 Group 5.5 5.6 7 8 iv) The fair value of the Group's financial assets and liabilities was asfollows: 2006 2006 2006 2005 2005 2005 Book value Fair value Fair value Book value Fair value Fair value adjustment adjustment £000 £000 £000 £000 £000 £000 ______ _______ ______ ______ _______ ______ Other non-current investments 2,716 2,716 - 188 188 -Trade and other receivables 72,312 72,312 - 29,271 29,271 -Current investments 7 7 - 19 19 -Cash and cash equivalents 7,954 7,954 - 11,090 11,090 - ______ ______ ______ ______ ______ ______ 82,989 82,989 - 40,568 40,568 - Current liabilities: bank (4,432) (4,432) - (88) (88) -loansTrade and other payables (49,104) (49,104) - (31,049) (31,049) -Non-current liabilities: bank (246,626) (246,878) (252) (174,890) (183,541) (8,651)loansObligations under finance (12,213) (12,213) - (12,750) (12,750) -leasesOther payables (4,670) (4,670) - (4,674) (4,674) - ________ ________ _______ ________ ________ ______Total net financial (234,056) (234,308) (252) (182,883) (191,534) (8,651)liabilities ======= ======= ====== ======= ======= ====== Fair value adjustment on a (176) (6,056)post-tax basis ===== ===== The fair values were calculated by JC Rathbone Associates Limited as at 31 March2006 and reflect the replacement values of the financial instruments used tomanage the Group's exposure as at that date. The maturity profile of the Group's share of floating rate debt held within itsjoint ventures as at 31 March 2006 was as follows: 2006 2005 £000 £000 ______ ______ Between two and five years 51,479 34,107 ====== ====== 21. Financial instruments The Group is subject to interest rate, liquidity, foreign currency and creditrisks. The Group does not speculate in treasury products but uses these only tolimit potential interest rate fluctuations. It usually borrows at floatingrates of interest based on LIBOR and uses hedging mechanisms to achieve aninterest rate profile where the majority of borrowings are fixed or capped. Asat 31 March 2006, 69.6% (2005: 97.2%) of the Group's net debt was fixed orprotected. The profile of the Group's interest swaps which were in existence as at 31 March2006 and for the purpose of these financial statements were classified aseffective cash flow hedges was as follows: Amount Maturity Swap Fair value Fair value Reflected date rate adjustment adjustment in equity 31.03.06 01.04.05 £000 % £000 £000 £000 _______ _______ _______ _______ _______ _______ 10,000 20.07.09 5.45 (186) (130) (56) 20,000 20.01.11 5.79 (845) (809) (36) 7,507 01.04.11 5.64 (280) (254) (26) 18,000 20.01.14 5.33 (665) (453) (212) 11,500 20.07.14 5.34 (467) (318) (149) 20,000 20.07.14 5.36 (833) (576) (257) 20,000 20.07.14 5.45 (963) (717) (246) 10,000 20.01.15 5.28 (393) (247) (146) 20,000 20.01.15 5.29 (797) (505) (292) 20,000 20.01.15 5.61 (1,248) (992) (256) _______ _______ _______ _______ 157,007 (6,677) (5,001) (1,676) ====== ====== ====== ====== These swaps were valued as at 31 March 2006 by JC Rathbone Associates Limited. In addition as at 31 March 2006, the Group has entered into the followingforward start swaps which do not qualify as effective cash flow hedges for thepurposes of IAS 39. These were also valued by JC Rathbone Associates Limited. Amount Start Maturity Swap Fair value Fair value Reflected in date date rate adjustment adjustment income 31.03.06 01.04.05 statement £000 % £000 £000 £000 _______ _______ _______ _______ _______ _______ _______ 10,000 20.01.15 20.01.35 5.28 (1,136) (550) (586) 20,000 20.01.15 20.01.35 5.29 (2,284) (1,111) (1,173) 20,000 20.01.15 20.01.35 5.61 (2,849) (1,614) (1,235) _______ _______ _______ _______ 50,000 (6,269) (3,275) (2,994) ====== ====== ====== ====== As at 31 March 2006, the following interest rate swaps shown at the full amount,were held within Quercus, a joint venture in which the Group has a 28.31% (2005:26.50%) interest: Amount Maturity Swap Fair value Fair value Group share date rate adjustment adjustment reflected 31.03.06 01.04.05 in equity £000 % £000 £000 £000 _______ _______ _______ _______ _______ _______ 50,000 22.10.07 5.32 (432) (373) (28) 40,000 22.01.09 4.86 (50) 187 (59) 50,000 22.10.09 4.84 (43) - (12) 25,000 25.11.09 5.02 (173) - (47) _______ _______ _______ _______ 165,000 (698) (186) (146) ====== ====== ====== ====== These swaps were valued at the year end by JC Rathbone Associates Limited andclassified as 100% effective cash flow hedges on similar grounds to those whichapplied to the Group's own cash flow hedges. The Group's policy is to minimise refinancing risk. As at 31 March 2006, thematurity profile of group debt showed an average maturity of five years (2005:five years). Subsequent to the balance sheet date, the Group's Syndicated loanfacility has been extended for a further year. Efficient treasury managementand strict credit control ensure that funds are available to meet the Group'sfinancial commitments as these fall due. The Group borrows in the same currency as the assets being financed to minimiseforeign currency risk. No currency derivatives are used. The Group's principal financial assets are cash and bank balances, trade andother receivables and investments. The Group's credit risk is primarilyattributable to its trade and other receivables. These amounts are disclosednet of allowances for doubtful debts and allowances for impairment are madewhere appropriate. The Group has no significant concentration of credit riskwith exposure spread over a number of counterparties and tenants. Creditworthiness evaluations are performed on all potential customers looking toenter into lease or pre-lease agreements with the Group. In certain cases, theGroup will require collateral to support these lease obligations. This usuallytakes the form of a rent deposit, parent company guarantee or a bank guarantee. Where the Group places short term deposits, counterparties must have a shortterm credit rating of at least A1/P1. Transactions involving derivativefinancial instruments are with counterparties with whom the Group has a signedISDA agreement as well as having good investment grade credit ratings. Giventheir high credit ratings, the Board does not expect any counterparty to fail tomeet its obligations. During the year, the Group entered into a £15 million Property Index-linkedTotal Return Swap with an amended end date of 28 February 2007 under which the Group receives a return linked to theInvestment Property Databank Annual Index and pays interest based on LIBOR plusa spread of 250 basis points. The credit risk on this instrument is limited asthe counterparty is a bank with a credit rating assigned by an internationalcredit rating agency. 22. Reconciliation of movements in equity Share Share Revaluation Other Cash Translation Retained Investment Equity capital premium reserve capital flow reserve earnings in own shareholders' reserves hedge shares funds reserve £000 £000 £000 £000 £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ _______ _______ _______ _______Balance 1 April 2004 32,323 45,076 110,200 112,330 - - 172,869 - 472,798 Recognised - - 70,377 - - 127 41,644 - 112,148income andexpense for theyearIssue of shares less 81 1,499 - - - - (1,046) - 534costsPurchase of own (106) - - 106 - - (2,243) - (2,243) shares forcancellationPurchase of own - - - - - - - (1,539) (1,539) shares astreasury sharesCost relating to - - - - - - 721 - 721share-basedpaymentschemesShort leasehold - - (120) - - - 120 - -amortisationRealisation of - - (355) - - - 355 - -revaluationgains on saleDividends paid in year - - - - - - (11,318) - (11,318) _______ _______ _______ _______ _______ _______ _______ _______ _______Balance 31 March 2005 32,298 46,575 180,102 112,436 - 127 201,102 (1,539) 571,101 Effect of - - - 786 (3,533) - (2,701) - (5,448)adoption of IAS 39 on 1 April2005 _______ _______ _______ _______ _______ _______ _______ _______ _______ 32,298 46,575 180,102 113,222 (3,533) 127 198,401 (1,539) 565,653Recognised income andexpense for the year - - 68,860 - (1,275) 278 56,662 - 124,525Issue of shares less 31 690 - - - - (474) - 247costsPurchase of own (5) - - 5 - - (108) - (108) shares forcancellationPurchase of own - - - - - - - (1,955) (1,955) shares astreasury sharesCost relating to - - - - - - 1,180 - 1,180share-basedpaymentschemesShort leasehold - - (126) - - - 126 - -amortisationDividends paid in year - - - - - - (12,867) - (12,867) _______ _______ _______ _______ _______ _______ _______ _______ _______Balance 31 March 2006 32,324 47,265 248,836 113,227 (4,808) 405 242,920 (3,494) 676,675 ====== ====== ====== ====== ====== ====== ====== ====== ====== During the year to 31 March 2005, the Group purchased an equity minorityinterest which as at 31 March 2005 had a book value of £240,000 and as at 1April 2004, £362,000. Part of the gain on the revaluation of investment and development properties isrecognised in the income statement and part directly through equity. 2006 2005 £000 £000 _____ _____ Recognised in income statement: Gains on revaluation of investment properties in: Group 23,911 24,083 Joint ventures 29,415 6,400 Associates 450 226 Deficits on revaluation of investment properties (1,777) (3,315) Deficits on revaluation of development properties (1,834) (1,232) Reversal of deficits on revaluation of development properties 3,598 - Recognised directly in equity: Gains on revaluation of development properties 100,798 93,261 _______ _______ 154,561 119,423 ====== ====== The movements in the Group's Other capital reserves were as follows: Capital Convertible Merger Capital Total redemption loan stock reserve reserve other reserve reserve capital reserves £000 £000 £000 £000 £000 _______ ______ ______ ______ ______ Balance 1 April 2004 1,963 - 106,062 4,305 112,330Purchase of own shares for cancellation 106 - - - 106 _______ ______ ______ ______ ______Balance 31 March 2005 2,069 - 106,062 4,305 112,436Effect of adoption of IAS 39 on 1 April 2005 - 786 - - 786 _______ ______ ______ ______ ______ 2,069 786 106,062 4,305 113,222Purchase of own shares for cancellation 5 - - - 5 _______ ______ ______ ______ ______Balance 31 March 2006 2,074 786 106,062 4,305 113,227 ====== ===== ====== ===== ====== As at 31 March 2006, the Quintain Group Employee Benefit Trust held 659,596(2005: 300,000) shares in the Company which had been purchased in the market ata cost of £3,494,000 (2005: £1,539,000). The purpose of the Trust is to acquireand hold shares to be transferred to employees to meet future obligations underemployee share-based payment schemes as set out in note 23 and share-based bonusentitlements. As at 31 March 2006, these shares had a market value of£4,485,000 (2005: £1,590,000). The Trustee has waived the right to receivedividends, except for a nominal amount. 23. Share capital 2006 2005 £000 £000 _______ ______Authorised200,000,000 shares of 25p each 50,000 50,000 ====== ====== Allotted, called up and fully paidIn issue at 1 April 2005: 129,190,748 (2004: 129,291,457) ordinary shares of 25p each 32,298 32,323Issue of 124,604 (2005: 324,291) shares under share-based paymentschemes at between 155.3p and 271p. 31 81 Purchase and cancellation of 20,433 (2005: 425,000) shares at 525p (5) (106) ______ ______In issue at 31 March 2006: 129,294,919 (2005: 129,190,748) ordinary shares of 25p each 32,324 32,298 ====== ====== As at 31 March 2006, Share capital included 659,596 (2005: 300,000) shares heldby the Quintain Group Employee Benefit Trust. These shares had a nominal valueof £164,899 (2005: £75,000). As at the year end, the following commitments to issue shares to employees undervarious share-based payment schemes remained outstanding: Date of grant Number of Exercise Exercise Exercise shares price period period per share from to pence __________ ________ _________ _________ _________ Executive Directors' Performance Share Plan ('LTIP') 26.09.03 1,000,000 - 26.09.12 27.09.1212.07.05 375,000 - 12.07.14 13.07.14 ________ 1,375,000 =======1996 Approved Executive Share Option Scheme ('1996 Approved') 06.08.97 11,344 136.0 06.08.00 05.08.0722.02.99 6,040 151.5 22.02.02 21.02.0913.06.00 29,151 155.3 13.06.03 12.06.1004.09.01 1,504 199.5 04.09.04 03.09.1117.06.02 17,013 271.0 17.06.05 16.06.1220.02.03 12,809 234.2 20.02.06 19.02.1313.06.03 107,592 287.0 13.06.06 12.06.1302.02.04 8,720 344.0 02.02.07 01.02.1413.09.04 121,926 460.0 13.09.07 12.09.1412.07.05 49,298 556.3 12.07.08 11.07.1509.01.06 9,450 634.8 09.01.09 08.01.16 _________ 374,847 ======== 1996 Executive Share Option (No.2) Scheme ('1996 Unapproved') 13.06.00 220,681 155.3 13.06.03 12.06.0704.09.01 79,845 155.3 04.09.04 03.09.0804.09.01 230,575 199.5 04.09.04 03.09.0817.06.02 90,580 155.3 17.06.05 16.06.0917.06.02 10,359 199.5 17.06.05 16.06.0917.06.02 892,741 271.0 17.06.05 16.06.0920.02.03 31,946 234.2 20.02.06 19.02.1013.06.03 18,045 199.5 13.06.06 12.06.1013.06.03 19,373 271.0 13.06.06 12.06.1013.06.03 537,047 287.0 13.06.06 12.06.1013.09.04 93 460.0 13.09.07 12.09.11 _________ 2,131,285 ======== 2004 Unapproved Share Plan ('2004 Unapproved') 13.06.03 27,311 25.0 13.06.06 12.06.1002.02.04 7,450 25.0 02.02.07 01.02.1402.02.04 10,551 25.0 02.02.08 01.02.1402.02.04 11,729 25.0 02.02.09 01.02.1413.09.04 163,870 25.0 13.09.07 12.09.1412.07.05 196,471 25.0 12.07.08 11.07.1509.01.06 1,566 25.0 09.01.09 08.01.16 _________ 418,948 ======== Total 4,300,080 ======== The movement in the year in the number and weighted average exercise price ofoutstanding options was as follows: 2006 2006 2005 2005 Number Weighted Number Weighted of average of average shares exercise shares exercise price price pence pence _______ ______ _______ _______ In issue at 1 April 3,919,274 170.1 3,895,737 168.4Options granted 740,562 59.8 400,665 172.3Options exercised (124,604) (197.9) (324,291) (164.9)Options exchanged for rights - - (42,378) -Options lapsed (235,152) (70.1) (10,459) (360.1) ________ ________In issue at 31 March 4,300,080 155.8 3,919,274 170.1 ======= ======= Options granted during the current and previous year have been valued using theBlack Scholes and binomial models on the basis of the following mainassumptions: 13.09.04 12.07.05 09.01.06 Approved 1996 2004 LTIP Approved 2004 Approved 2004 Unapproved Unapproved Unapproved Unapproved ______ ______ _______ _______ _______ ______ _______ _____ Number 135,712 93 264,860 375,000 55,310 299,236 9,450 1,566Exercise price (pence) 460.0 460.0 25.0 - 556.3 25.0 634.8 25.0Term of option (years) 10 7 7 9 10 7 3 3Expected volatility 23 23 23 23 23 23 21 21(%)Expected annual 3.0 3.0 3.0 1.7 1.7 1.7 1.8 1.8dividend yield (%)Risk free rate (%) 4.9 4.8 4.9 4.3 4.3 4.3 4.2 4.2Fair value (pence) 107.0 107.0 355.0 482.0 112.0 480.0 95.0 571.0 24. Capital commitments As at 31 March 2006, the Group had capital commitments of £30,570,000 (2005:£84,410,000) in relation to its own properties and £7,786,000 (2005: £17,690,000) in relation to its joint ventures. 25. Operating lease arrangements i) As lessee As at 31 March 2006, the future minimum lease payments payable by the Groupunder non-cancellable operating leases were as follows: 2006 2005 £000 £000 _______ _______Operating leases which expire:From two to five years 545 1,177Over five years 7,791 - _______ _______ 8,336 1,177 ====== ====== ii) As lessor As at 31 March 2006, the future minimum lease payments receivable by the Groupunder non-cancellable operating leases were as follows: 2006 2005 £000 £000 _______ _______ Within one year 20,957 24,685From two to five years 50,197 69,935Over five years 119,164 167,674 _______ _______ 190,318 262,294 ====== ====== In addition, the Group's share of minimum lease payments receivable undernon-cancellable operating leases contained within the Group's joint venture,Quercus, were £296,665,000 (2005: £182,482,000). 26. Related party disclosures During the year, the Group received fees amounting to £3,143,000 (2005:£1,364,000) from Quercus Property Partnership, £42,000 (2005: £430,000) fromQuart Limited Partnership and £16,000 (2005: £nil) from Bioregional QuintainLimited in respect of services provided. These fees are included in Otherincome as shown in note 4. The Group also received interest on loan notes amounting to £1,041,000 (2005:£326,000) from Meridian Delta Limited and £22,000 (2005: £nil) from BioregionalQuintain Limited, which are included in Finance income. Amounts due from joint venture undertakings as at 31 March 2006 are shown innote 14i. 27. Acquisition of subsidiary During the year, the Company purchased the whole of the share capital ofTimberlaine Limited for a cash consideration of £7,335,000. The company had atrading property of £5,390,000 and an interest in a joint venture of £2,812,000,together with a deferred tax liability arising on these assets of £867,000, ofwhich £549,000 related to the former and £318,000 to the latter. There were nofair value adjustments as the fair value of the assets and liability acquiredwere equal to their book value and no intangible assets were identified. Nogoodwill arose from the acquisition. In the Consolidated Cash Flow Statement, the comparative amount for theacquisition of subsidiary companies relates to the final instalment in theconsideration for the purchase of the share of Wembley (London) Limited. This information is provided by RNS The company news service from the London Stock Exchange

---

Related Shares:

Quadrise