11th Feb 2008 07:01
St. Modwen Properties PLC11 February 2008 St. Modwen Properties PLC Preliminary results for the year ended 30th November 2007 St. Modwen Properties PLC, the UK's leading regeneration specialist, announcesrecord results for the fifteenth successive year. Highlights • Profit before tax increased by 3% to £100.1m (2006: £96.9m) • Earnings per share up 19% to 73.3p (2006: 61.6p) • Net assets per share increased by 20% to 387p since 30th November 2006 (323p) and by 7% in the second half of the year (31st May 2007: 361p) • Proposed final dividend of 7.8p per share (2006: 6.8p) increasing total dividends for the year by 15% to 11.7p (2006: 10.2p) • All banking facilities secured through to 2011 • Strong progress in marshalling projects for future delivery Anthony Glossop, Chairman, comments: "The success in achieving a significant increase in realised property profitsand valuation uplifts arising from asset management and planning activities morethan compensated for the valuation reductions arising from the correction ininvestment property yields which we suffered in the second half. "There will undoubtedly be some further deterioration in the market value ofinvestment properties, particularly in the first half of 2008, and we cannot beimmune from the effects of that. However, we are planning that overall the yearwill see growth in the company's net asset value, albeit at a lower level thanin the recent past, and we would expect to maintain our recent pattern ofdividend growth." 11th February 2008 ENQUIRIES: St. Modwen Properties PLC www.stmodwen.co.ukAnthony Glossop, Chairman On 11 February - 020 7457 2020Bill Oliver, Chief Executive thereafter - 0121 222 9400Tim Haywood, Finance Director College Hill www.collegehill.comGareth David 020 7457 2020 A presentation for analysts and investors will be held at 9.30am today atCollege Hill, The Registry, Royal Mint Court, London EC3N 4QN CHAIRMAN'S STATEMENT Results I am pleased to report on a 15th successive year of record results. The successin achieving a significant increase in realised property profits and valuationuplifts arising from asset management and planning activities more thancompensated for the valuation reductions arising from the correction ininvestment property yields which we suffered in the second half. Net assets per share increased by 20% to 387p (2006: 323p). Profit before taxincreased by 3% to £100.1m (2006: £96.9m). Earnings per share grew by 19% to73.3p (2006: 61.6p). Our key performance measurement of return on equity (now calculated after tax)was 21.9% (2006: 21.3%). Dividend Your board is recommending a final dividend of 7.8p (2006: 6.8p) per ordinaryshare, making a total distribution for the year of 11.7p (2006: 10.2p), anincrease of 15%. This final dividend will be paid on 4th April 2008 toshareholders on the register on 14th March 2008. Strategy Your company's strategy, being essentially long-term, is not altered because ofthe current weakness in the investment market, although its short-termimplementation is obviously affected by market considerations. This market weakness, in fact serves to highlight the differentiation of yourcompany from many of its peers which I referred to in last year's report.Growth through realised profits and revaluations based on actually adding value,has always been at the heart of our strategy and should stand us in good steadin this more difficult climate. Also our exposure to a broad range of marketsectors and geographic areas through seven regional offices gives us the abilityto take advantage of whatever opportunities there are. We are now regarded as the UK's leading regeneration specialist which isevidenced by our selection by BP as the developer of the Coed Darcy site and byWest Lancashire District Council and English Partnerships as their partner forthe redevelopment of Skelmersdale town centre. In both these cases, our skills as a master developer which have been honed overthe past two decades on schemes such as Hilton, Derbyshire (joint venture withMoD); Trentham Lakes, Stoke-on-Trent (joint venture with Stoke-on-Trent CityCouncil); Longbridge, Birmingham and Llanwern, Newport proved attractive to theselecting organisations. With the acknowledged need for major regenerationinitiatives, the recognition of our skills in this important area should help tounderwrite your company's future prosperity. Two key elements of the strategy are the continued acquisition of well-locatedopportunities to top up the hopper and their marshalling through the planningand development process to ultimate delivery. In both areas, this year hasseen continued success as is set out in the business review. Availability of finance is a critical success factor for a property business. Wehave always operated a policy of reviewing our funding requirements on a regularbasis and currently have all our facilities secured through to 2011 with arealistic degree of headroom and at competitive margins. Sustainability We remain committed to managing our affairs with the highest standards ofintegrity and to ensuring that communities and the environment are respected inour developments. In the CSR review included in the Annual Report, we set outhow we go about achieving these commitments. Directors and Employees Achieving the results for the year in the current climate is a tribute to thequality and strength of the team at all levels in the organisation. My thanks goto everyone for the efforts they have put in to bring about another successfulyear. We have been recruiting extensively to cope with the challenges of growth andthe sheer scale of the hopper and I have been delighted with the quality of ournew colleagues. At the same time, it has been a real pleasure to see how so manyof our existing team have risen to the challenge and developed their own skillsto take more responsibility within the organisation. By way of example, Rupert Wood, who has been with us less than two years, hasbeen promoted to head the new Northern Home Counties region and Rupert Joselandand Stephen Prosser who formed the new South West and Yorkshire offices threeyears ago, have been promoted to regional director. The increased strength in depth in the company enables my own role to continueto evolve. I am now becoming non-executive. I will continue to give support toBill Oliver and the executive in maintaining the company's standing in themarket as well as undertaking the normal role of a non-executive chairman. Prospects There will undoubtedly be some further deterioration in the market value ofinvestment properties, particularly in the first half of 2008, and we cannot beimmune from the effects of that. However, we are planning that overall the yearwill see growth in the company's net asset value, albeit at a lower level thanin the recent past, and we would expect to maintain our recent pattern ofdividend growth. The company has a well-founded development and marshallingprogramme and we are achieving a regular flow of occupational transactions. Our ambition remains to double net asset value per share on a 5-year basis. Inthe short-term, however, growing at that rate is clearly unrealistic whilsttoday's market conditions prevail, and we will not be tempted to try to forcethe pace of growth faster than prudent market judgments will allow. Our confidence in the longer-term is undiminished. We are continuing, therefore,to invest in people, regional offices and acquisitions for the hopper so that wewill be in good shape when the market stabilises. ANTHONY GLOSSOPChairman 11 February 2008 BUSINESS REVIEW Our Market We are the country's leading regeneration specialist, operating within allsectors of the UK property market. The property investment market peaked in the first half of 2007, since whenprices for investment properties have fallen. There is limited transactionalevidence to support the various projections being discussed in the market. Theconsensus, if there is one, is that prices will fall during 2008 by 10-15%,caused by a yield shift of up to 1/2% on average. What is ignored is the basefrom which the fall is taking place. Prudent appraisals and valuations, which webelieve have always been our hallmark, are obviously less vulnerable thanaspirational ones. The owner of a property without asset management or development opportunities isat the mercy of the market. However our portfolio was created on the principlethat we should not hold any property to which we could not add significant valueby our own efforts. That puts us in a significantly better position than many ofour peers. The occupational market remains variable, as it has been for a considerabletime, but it still offers good opportunities for an active developer,particularly one who has exposure to a broad range of sectors and geographicareas. The retail market is undoubtedly tougher, but the level of interest inour major mixed use town centre schemes remains encouraging. The business parkmarket has remained difficult, but we have continued to do well in the smalloffice unit market. The industrial market remains solid, with a number of largebespoke requirements supplementing a steady stream of owner-occupier demand forsmaller units. Residential land is an important market for us. There is undoubtedly a morecautious approach to this market, but we continue to see good levels of interestfor our product of remediated, fully serviced land with all necessary consentsin place. Our long-term strategy mitigates the effect of a difficult market on St Modwen.Apart from the prudent approach to appraisals, the emphasis on adding value, andthe diversity of our exposure to both different property sectors and geographicareas, we also benefit from:- • The size and diversity of the hopper, providing the range of opportunity to enable us to align our development activities to market needs and prevailing conditions• A strong balance sheet with confirmed banking facilities for all our commitments with significant headroom for further activity• A strong and experienced management, development and construction team Competitive and Regulatory Environment The UK property market is normally extremely competitive. Natural barriers toentry are generally low. Finance is usually readily available (although therecent credit crunch is likely to see a flight to quality by lenders) andadvantages of scale, although they do exist, are limited. It is rare,therefore, for the company not to be in serious competition whether it isseeking to make an acquisition, to achieve selection as preferred developer, orto secure an occupier. By contrast, the regulatory environment is restrictive and becoming increasinglymore so. Numerous attempts to simplify and speed up the planning process havenot worked and the cost and timescale involved in obtaining planning permissioncontinue to escalate with every new initiative, guidance and regulation. However, to a considerable extent, the above regulatory challenges create anenvironment in which a developer such as St Modwen with appropriate skills anddetermination, a strong balance sheet and a willingness to take the long termview, can continue to succeed. Business Model and Strategy The underlying purpose of all St. Modwen's activity is to add value to theproperties it controls. The aim is that no property should be acquired orretained unless it is believed that significant value can be added to thatproperty by the company's own efforts - asset management, refurbishment orredevelopment - over a five to fifteen year horizon. In a declining market, such as the one we are currently facing, the challenge iseven greater. We seek to meet this challenge by a strategy which emphasisesvalue creation, cost control and local market knowledge. Through a network ofregional offices, supported by a strong central construction management team, wecreate a broadly-based programme of activity, pulling out of the hopper theprojects for which there is a current market opportunity. In December 2007 wewere pleased to announce the expansion of this network to seven offices by thecreation of a Northern Home Counties region to service our existing schemes inthe area such as at Bedford, Cranfield, Hatfield, and Thurleigh, and to seek outnew opportunities. The key to our strategy remains the continuing acquisition of well locatedopportunities to top-up the hopper. The hopper is a bank of development opportunities. It is:- • long term - We seldom source properties for short-term realisation. The normal development horizon is five years or more;• broadly based - St. Modwen is not a sectoral specialist. We can successfully deliver a wide range of outputs and can, therefore, adjust the mix of our development programme to match market conditions;• geographically spread - Operating through its regional offices, St. Modwen combines the strength of a local developer with the power of a national company;• focused upon regeneration - St. Modwen goes where it is needed, rather than where it is fashionable, undertaking town centre regeneration, partnering industry in its restructuring, brownfield land renewal, and heritage restoration:• acquired in its rawest state - Most added value and more flexibility can be achieved if a developer tackles property and risk from the outset of the regeneration process. The hopper comprises more than 5,000 acres of developable land, excluding CoedDarcy, a 1,000 acre site for which we were selected as the preferred developerin 2007. The purchase of this site is forecast to complete in 2008. This business model requires hands on management, a skilled committed team and aflexible medium-term programme of marshalling projects from the hopper throughto the shorter-term development programme. The consistency of future performancedepends on the successful interaction of these elements. Another important aspect of our business model is long-term partnerships withthe public sector and other major landowners, having more such arrangements thanany other comparable company. All development and property management activity is undertaken by the regionaloffices, supported and supplemented by a strong central team, providingconstruction, planning, financial, and commercial expertise. Employees One of the major challenges for the company is to recruit and retain a teamcapable of handling the range and complexity of projects which we undertake.Many of our key staff have been with us for a number years, but that core needsregular replenishment with recruits of as good, if not better, quality. One of the pre-requisites of staff retention is the provision of careerdevelopment opportunities. Our growing size now enables (and, indeed, requires)us to put in place more structured career paths than previously. This isevidenced by the promotions in the year to Regional Director of Rupert Joselandand Stephen Prosser, and of Rupert Wood to Regional Manager in our new NorthernHome Counties office. We now have sufficient critical mass to embark on a more structured peopledevelopment programme, and have recruited a people development manager toinitiate such a programme in early 2008. This will help us grow talented peoplewho will be the drivers of the company's future expansion. We encourageemployees to improve their skills by obtaining additional relevantqualifications, and support them by appropriate paid time-off for study and bypayment for courses and course materials. We have also strengthened the central services team to support the growth of theregional teams, with the recruitment in the year of a company secretary,financial controller, internal auditor, and a further regional financialcontroller. This has enabled the regions to expand their operational activities,whilst a strong central framework of procedures and control is maintained. Financial Objectives and Key Performance Indicators The company has a financial model with an ambition to double net asset value pershare every five years. This has been achieved for over a decade, and stillremains the company's key long-term target. It should be emphasised that this isa five-year target and does not assume a straight-line progression of 15% perannum compound. In volatile periods, such as the present, annual progressionwill undershoot the average, but this will hopefully be balanced byoutperformance in more favourable years. Our key performance indicator for return on equity has been amended toincorporate the effect of tax, and as such a post tax return of 17.5%(equivalent to the previous pre-tax target of 25%) is now targeted. Year Net assets Return on per share Equity(2) Growth(1) 2007 20.0% 21.9%2006 20.3% 21.3%2005 22.0% 22.9%2004 25.2% 21.3%2003 15.4% 19.1%Cumulative 154% Average 21.3%Target 100% 17.5% (1) Net asset figures prior to 30th November 2004 are restated on an IFRS basis, but do not reflect the reclassification of certain work in progress assets and their subsequent revaluation(2) Return on equity = profit after tax as a percentage of average equity The company's other key performance indicator is to replace opportunities usedin the year by new acquisitions at a rate of 120%. In the past year, this kpiwas not achieved; land used amounted to 224 acres and developable land acquired,totalled 211 acres. However, significant progress was made on negotiations onthe Coed Darcy opportunity which, on completion, would add a further 420developable acres. Development and Performance of the Business The Hopper - assembly and acquisition 2007 was another active year with 28 acquisitions; including 12 new sites and 16for land assembly exercises at our mixed use town centre projects. Our total expenditure on acquisitions (including 100% of joint ventures) duringthe year was £56m. As a result, the hopper (including 100% of joint ventures)now stands at 7,621 acres, of which 5,045 is developable. 349 of thesedevelopable acres have an intended future retail/ leisure use; 2,358 acres foremployment; 1,165 acres for residential; and 1,173 acres for as yet unspecifieduses. Significant acquisitions during the period included: • Whitley - The acquisition of 53 acres of surplus land near Coventry, from Jaguar and the City Council opens the way for the creation of a high-class business park, for which outline planning consent already exists. • Eccles - a 36-acre chemical works in Salford, Manchester. The site was purchased from Akcros Chemicals Ltd which has taken two occupational leases of 30 years and 6 years. It adjoins Eccles town centre, and has medium-term opportunities for mixed use development. • Worcester - 20 acres, strategically located between M5 Junctions 6 and 7. The City of Worcester Local Plan identifies the land as being a potential relocation site for Worcester City Football Club, with whom a development agreement has been exchanged. • Widnes - The acquisition of 14 acres from Croda and the adjoining 20 acre council site, has assembled a major employment site in Widnes Waterfront Many of the assets in our hopper are not acquired outright, with control beingobtained through development agreements. This trend continued during 2007 withour selection as preferred developer for a number of important projects,including:- • Medway - the company has been chosen as Medway Council's preferred 'investment partner' to deliver long-term investment to transform Medway into the new city of the Thames Gateway. • Walthamstow - selected by Waltham Forest Council for the Arcade site in respect of which a development agreement has now been exchanged Marshalling We have continued to make good progress in marshalling projects for futuredelivery, as evidenced by the quantity and quality of planning permissionsobtained in the year, as detailed in the table below. Planning permissions obtained in this year # Sq Ft UnitsResidential 18 7,806Retail 14 1,087,000Commercial 29 5,587,000Office 10 933,000 In particular, we obtained planning consent on the following major schemes: • Llanwern - outline planning consent was obtained for this major mixed use development which is described in greater detail in the case study section of the Annual Report • Rugby - Planning consent has been obtained for the mixed use redevelopment by Key Property Investments ("KPI", our joint venture with Salhia Real Estate ksc) of 100 acres of the former GEC industrial estates in Rugby, including a new campus for Warwickshire College, 100,000 sq ft of employment accommodation and 770 dwellings. • Great Homer Street, Liverpool - outline planning consent was obtained for this major mixed use development which is described in greater detail in the case study section • Vulcan Works, Newton le Willows - Part of the KPI Alstom portfolio and also a joint venture with Ashtenne Ltd on our combined sites. The successful outcome of the calling in enquiry resulted in planning permission for 630 homes on the overall 64 acre site. Work on the initial infrastructure has begun. Elsewhere we continue to move forward the planning position on major sites: • Yalding - a planning application has been submitted for the mixed use redevelopment of this former Syngenta site, comprising 315,000 sq ft of employment space and 350 residential units. • Longbridge - a preferred option has been identified from the consultation process on the Area Action Plan. This crystallises the shape of the site's future development for an employment-led mixed use scheme, and should be adopted by late 2008. Significant achievements on our major town centre projects include: • Wythenshawe - the latest phase of the £130m regeneration of the town centre has been launched with the opening of a new £20m Asda food store. Planning applications have been submitted for a further 55,000 sq ft of retail, leisure and office development. • Hatfield - the £100m mixed use regeneration scheme was further advanced by the exchange of a key agreement with the Royal Mail, and the grant of the CPO. • Basingstoke - an 87,000 sq ft anchor store has been sold on a long lease to Primark. • Farnborough - the £80 million redevelopment of the town centre, including a 50,000 sq ft foodstore pre-sold to Sainsbury's, began in May and the current phases should be completed in 2008 / 2009. Our substantial construction programme continues to deliver new schemes forfuture years: • Longbridge Technology Park - the 45,000 sq ft Innovation Centre has been completed and is being let to a range of technology-based businesses, with more than 50% now occupied. • Edmonton Green - the leisure centre at the heart of this £100m mixed use scheme is now open. The residential units have been handed over to our Housing Association partners, four months ahead of programme. Work on the next phase, the construction of a 66,000 sq ft ASDA foodstore and additional retail units, is well underway. • Quedgeley, Gloucestershire - 30,445 sq ft of the second phase of distribution / industrial units now under construction has been pre-let, while a further 91,000 sq ft will be available by the Spring. It is in the nature of our business that occasional setbacks are encountered,and not all of the progress in this period has therefore been positive. However,the diversity and range of the hopper is a key strength of the company, meaningthat no individual project is critical to our overall success. Two such eventsthat arose during this period were: • St Matthew's Quarter, Walsall - We were saddened that the listed Shannon's Mill building, which was to form the centre-piece of our £40m retail and residential regeneration scheme, was lost to an arson attack in August. Although this event will delay and may alter the ultimate development, we were fully insured and expect to suffer no financial loss. • Elephant & Castle - We were disappointed not to be selected by Southwark Borough Council for its proposed £2bn redevelopment. However, as we are the owners of a key part of the site, we will work with the selected developers and Southwark to maximise the value of our holdings. All bid costs had been written off as they were incurred Delivery The year saw more than 100 transactions completed. Residential land sales from our brownfield land renewal programme have againfigured prominently in the year with disposals at: • RAF Eastcote - the first disposal from the MoDEL portfolio, a 19 acre residential land sale to Taylor Wimpey for £60m • RAF West Ruislip - also from the MoDEL portfolio, a 21 acre residential land sale to Cala Homes for £81m, after obtaining planning consent for 415 homes and an 80 unit retirement home. • Guiseley - 7 acres of residential land, acquired as part of the Invensys portfolio in 2002, sold to Bellway for £12m after obtaining planning consent and site remediation. • Boughton Road, Rugby - 10 acres of residential land, part of a former factory site acquired by KPI from Marconi in 2002. The site was sold to Taylor Wimpey for £15m, following the granting of outline planning consent for 270 homes. Development and lettings in the industrial/distribution sector have also beensignificant. During the year we completed 1,100,000 sq ft of new buildings and450,000 sq ft of refurbishments, including:- • Trafford Park, Manchester - A pre-let of a 430,000 sq ft distribution centre to adidas for its UK headquarters forward sold by KPI to NFU Mutual for £33m. The building was completed in November. • Barton Business Park, Burton upon Trent - A 150,000 sq ft distribution unit sold by Barton Business Park Limited (a joint venture with Prologis) to Close Brothers for £9.5m. • Trentham Lakes and Centre 500 - construction and sale of a number of speculatively built employment buildings totalling 140,000 sq ft • Longbridge - sale of a 21,000 sq ft existing unit at Cofton Centre, and commencement of construction of two speculative units totalling 75,000 sq ft, an early phase of the wider Longbridge regeneration programme. In order to fund this construction and remediation programme, it has been aconsistent policy of the company to recycle its capital resources by sellingcompleted developments and any assets where it is no longer possible for us toadd further significant value. To this end, we disposed of Junction 7 BusinessPark, Accrington to GE Capital for £25m. This 50 acre managed estate, acquiredby KPI in 2001 as part of the Marconi portfolio, had been successfully assetmanaged and 4 acres have been retained for new speculative development. We have also ended our 18-year association with horse racing with the sale ofNorthern Racing PLC. The amount realised for the group's 27.2% shareholding was£17.7m, an uplift of £6.7m on our carrying value - a very successful conclusionto the earliest of our property related operating activities. Our construction team, at the end of the year were on site with 50 schemesincluding 5 major town centre regeneration projects; ground remediation works atLlanwern, Longbridge, Goodyear, Etruria Valley and Goodyear; and the provisionof 1,700,000 sq ft of employment space; This extensive construction activity will form the backbone of our developmentprogramme for 2008 and will ensure that we have available product in all sectorsand all regions. This will be initiated in stages depending on the success ofprevious phases, levels of interest, and market requirements. We continue to devote considerable resources to improving both the value andincome of the property we own through a variety of asset management activities.During the year ended 30th November 2007, our in-house team undertook:- • 86 lease renewals, securing rent roll of £1.5m• 144 rent reviews, achieving an uplift in rents of £0.7m (12%) and• 310 new lettings, producing additional rent roll of £7.8m, which more than offset the 305 vacations (rent roll £7.4m). At Trentham, despite very poor summer weather, the gardens attracted 150,000visitors (2006: 133,000) and, with a total of 2.2m visitors to the site (2006:2.1m), and the completion of the second phase of the retail scheme, a tradingprofit before interest of £0.9m (2006: £0.3m) was achieved. Extensive workscontinued on this heritage restoration scheme, with the completion of the120-bedroom hotel that has been pre-let to Golden Tulip (subsequently acquiredby Whitbread). (For further details of projects referred to in this business review, and otherprojects, see our website www.stmodwen.co.uk) Financial Review Profit before tax The principal factors behind the increase in profit before tax in the year areshown in the table below: PROFIT BEFORE TAX £m*Year ended 30th November 2006 96.9Net rental income rose 1.7Property profits increased by 3.2We disposed of our interest in Northern Racing 6.7Valuation gains increased by 7.2Administrative expenses rose (0.8)Finance charges** increased by (8.1)Amortisation of deferred consideration increased by (6.1)Other items (0.6)Year ended 30th November 2007 100.1 * The variances identified above include the company's share of joint ventureactivities ** Excluding amortisation of deferred consideration Throughout this financial review certain numbers are quoted which include thegroup's share of joint ventures, as detailed in note 7. Net rental income Net rental income for the year, including our share of rent from joint ventures,increased by 5% to £34.9m (2006: £33.2m). The impact of disposals andacquisitions on net rental income in the year was an increase in net rent of£0.5m. Additionally, we have a number of longer-term multi-phase projects, wherenew lettable space is not sold on a piecemeal basis, but retained until thecompletion of the wider development (examples include Trentham Gardens, EdmontonGreen and Longbridge Innovation Centre). The retention of these assets hasresulted in an increase in net rental income of £0.5m At 30th November 2007, the gross rent roll, including our share of rent fromjoint ventures, had increased to £41.2m (2006 - £35.3m). This increase reflectsboth the development of new space referred to previously, and also a number ofnotable successes from our asset management activities. Consequently, during the year under review, our overall voids fell to 15.2%(2006:18.5%), which is consistent with our development strategy for theportfolio. The recent Government announcement of the imposition of businessrates on vacant properties represents an unnecessary additional financial burdento businesses like ours, and a potential annual cost in excess of £3m. We have aprogramme established to mitigate this cost, aimed at reducing our level of voidproperties. Property profits Property profits, including our share of joint ventures, increased by 22% to£54.5m (2006: £44.6m). More than 100 individual property disposals werecompleted in the period, of which 11 contributed profits over £1m. Included inthese numbers is a gain of £6.7m from the disposal in the year of ourshareholding in Northern Racing PLC. Valuation gains All of our investment properties (including land) are valued every six months byKing Sturge and Co. at market value. The valuation of our investment properties reflects both market movements andthe value added by the company's activities. The latter includes the achievementof marshalling milestones in the planning process (including allocations inlocal plans, obtaining planning permissions, and resolution of Section 106agreements). The calculation of this added value incorporates the present valueof future cash flows, based on existing land prices and the current bestestimate of costs (incorporating appropriate contingencies) to be incurred, butalso deducting an allowance for a developer's profit to be realised at the pointof development. As has been widely documented, 2007 saw the end of a long period of yieldcompression for investment property. In the first half of the year, yields wereflat and the second half saw the beginning of a reversal (yield expansion). Theproperties within our portfolio are not immune to such market movements, and theresults for the year include a yield expansion on average (all in the secondhalf) of 0.25%, resulting in valuation decreases of £24.1m. Additionally, thediscount factor used to calculate future cashflows included in the year endvaluations was increased from 6% to 7% to reflect the increased cost ofborrowing: the impact of this change was a further reduction in the valuation of£8.1m. Notwithstanding these significant adverse movements, we nevertheless achievednet valuation gains in the second half of £14.2m and in the full year of £62.8m(2006: £55.6m) (including our share of joint ventures). These were obtainedthrough achieving marshalling milestones (such as those at Llanwern, Rugby,Goodyear, Stoke and Newton-le-Willows described previously), and the value addedby our re-development and asset management activities (at Longbridge, Edmontonand Trentham Gardens amongst others). VALUATION GAINS (£m) Total 1st Half 2nd Half Marshalling milestones 62.3 40.8 21.5Asset management and development 32.7 7.8 24.9Market yield movement (24.1) (24.1) (24.1)Discount rate movement (8.1) - (8.1) Total 62.8 48.6 14.2 Administrative expenses Administrative expenses (including our share of joint ventures) have increasedduring the year by £0.8m to £16.5m, due to the continuing programme ofrecruitment and the regional expansion needed to match our increased activity.Offsetting these additional costs was a substantial (£3.1m) fall in the cost ofemployee share options following a period where the share price has fallensignificantly (in line with the quoted real estate sector as a whole). During the year we recruited extensively to strengthen our development, financeand construction teams. We now have 131 employees in our seven regional officesand head office, with a further 59 undertaking site management and 98 in ouroperating ventures. Joint ventures and associates Our share of the post tax results of joint ventures and associates is shown onthe income statement as one net figure. A full analysis of the underlyingdetails is disclosed in note 7. The principal joint venture in which the groupis involved is Key Property Investments Limited, from which our post-tax returnwas £11.1m (2006: £9.3m). Our 27.2% interest in the post tax results of ourassociate, Northern Racing PLC, is also included under this heading in thecomparative figures for 2006. Finance costs and income Net finance charges (including our share of joint ventures) have increased to£35.3m (2006: £21.1m). During the year average group borrowings increased by £113m to £348m, andaverage LIBOR (upon which our borrowing costs are based) increased by 114 basispoints. The impact of these changes was in part offset by a combination ofsuccessful hedging and renegotiation of facilities. As a result, underlyinggroup bank interest costs increased by £3.9m and the hedged average rate ofinterest payable as at 30th November 2007 increased to 6.5% (2006: 6.0%). The revaluation of our interest rate swap contracts to market value at year endresulted in a charge to the Income Statement of £0.7m (2006: £2.0m credit),recognising the decreasing value of such contracts in the prevailing climate offalling interest rates. Net finance charges also includes a full year's charge of £9.9m (2006: £3.8m forfour months) for the amortisation of the discounted deferred considerationpayable to the MoD in respect of Project MoDEL. During 2007 the group has continued to expense all interest as it has arisen,and has not capitalised any interest on its developments or its investments. Taxation The effective rate of tax for the year, including our share of joint ventures,and with full provision for deferred taxation, has fallen to 8.9% (2006: 23.8%). This rate is substantially lower than the 30% standard rate of UK CorporationTax due primarily to the benefits of approved tax planning activities and theimpact of Budget changes (mainly re-basing the deferred tax provision to 28%,and the release of previous provisions for the clawback of balancingallowances.) TAX RATE %Standard Rate 30.0Approved tax planning activites (9.7)Re-basing of deferred tax provisions (6.0)Release of clawback provisions (4.2)Other (1.2) Total 8.9 It is anticipated that, with the continued utilisation of indexation and landremediation allowances and the benefit in future years of approved tax planningactivities, the effective rate of tax will revert to a higher level than 2007,but will still remain below the standard rate of UK Corporation Tax. Benefit from tax planning activities is only recognised when the outcome isreasonably certain. Cash Flow and Financing The company continues to produce a strong cash flow, based on recurring netrental income of £35m (including our share of joint ventures) and an ongoingprogramme of asset disposals, which generated £136m in the year. This, togetherwith new bank facilities put in place during the year, enabled us to meet ouradministrative expenses, dividends and interest, and to invest in a £168mdevelopment programme and in property acquisitions and capital expenditure of£107m. In the uncertain times following the recent credit crunch, it is clear thatavailability of finance will be a critical success factor for many propertybusinesses. Our finance strategy has for many years been to maintain anappropriate gearing level to ensure that a good operational performance isconverted into excellent shareholder returns. To this end, we target a preferredgearing range of 75% to 125%. Despite an extensive programme of investmentduring the year, our current gearing level of 86% remains well within the targetrange. Interest cover has fallen from 7.9 times in 2006 to 6.6 times. Excludingrevaluation gains (a more realistic measure of the company's ability to serviceits debt), adjusted interest cover is still 3.2 times (2006: 4.4 times). Thisunderlines our ability to continue to invest in a development programmeappropriate for market conditions. We also have in place a financial structure that is both cost effective andflexible. The group is financed by shareholders' funds and bank debt of varyingmaturity profiles, which is appropriate to the needs of the group and reflectsthe type of assets in which it invests. The majority of the bank debt isprovided through bilateral revolving credit facilities, providing us with theflexibility to draw and repay loans, and sell and acquire assets asopportunities arise. During the year we undertook a substantial re-financing programme, including;the re-financing of our principal joint venture, Key Property Investments, via afive year £200m facility (with Bank of Scotland, HBOS and Bank of Ireland); a£45m extension to our existing HBOS facility; a new £50m facility with LloydsTSB; and a £46m development facility with Fortis Bank for our Sowcrest jointventure's activities at Wembley. As a result of this, the group's banking facilities have increased to £569m(30th November 2006: £458m), with a weighted average maturity of 5 years (2006:5 years). Current net debt is £402m (2006: £253m), giving us a gearing of 86%(2006: 65%). Including joint ventures, total banking facilities are £815m (2006:£659m), net debt is £580m (2006: £439m) and gearing 105% (2006: 88%) We now have undrawn, but committed, facilities of £167m (2006: £205m) availableto finance future expansion (of which £40m is ring-fenced for Project MoDELexpenditure within VSM). Moreover, the terms of these facilities have also beenimproved, with a weighted average margin of 81 basis points (2006: 100 b.p.)over LIBOR. Terms have also been agreed for a further £135m of new facilitieswhich will be put in place early in 2008 to enable the company to action itsprojected development programme and to capitalise on the expected buyingopportunities presented by current market conditions. It is reassuring in the current uncertain credit environment that all of ourexisting facilities are in place until 2011/12, and are with banks with whom wehave longstanding relationships The interest cost of 68% of our debt is fixed byhedging contracts (2006: 62%). The weighted average fixed interest payable underthese hedges is 5.0 %, which compared very favourably to three month LIBOR of6.6% as at 30th November 2007. Our strategy is to hedge two thirds of all borrowings, with the maturity of bothhedges and facilities being aligned with individual schemes where applicable, orover a maximum of 5 years for revolving facilities. Financial Statistics 2007 2006Net Borrowings £402m £253mGearing 86% 65%Gearing, inc share of JV debt 105% 88%Average debt maturity 5 years 5 years% debt hedged 68% 62%Interest cover, excluding valuation gains 3.2 4.4Undrawn committed facilities £167m £202mReturn on equity 21.9% 21.3% Balance Sheet Net assets At the year end, net asset value per share was 387p, an increase of 64p (20%).In common with other property companies, we also use the diluted EPRA NAVmeasure of net assets which analysts also use in comparing the relativeperformance of such companies. The adjustments required to arrive at ouradjusted net assets measure are shown in the table below. Adjusted net assets per share were 430p at 30th November 2007, an increase of70p (19 %) in the year. Net Assets 2007 (£m) 2006 (£m)Net assets beginning of year 389.8 324.0Profit after tax 93.7 75.9Dividends paid (13.5) (11.5)Others (2.3) 1.4Net assets, end of year 467.7 389.8Deferred tax on capital allowances 2.8 7.3Deferred tax on revaluation surpluses 48.4 39.2Mark to market of interest rate swaps 0.7 (2.0) Diluted EPRA NAV - total 519.6 434.3 - per share 430p 360p Investment properties The total value of investment properties under our control, including 100% ofjoint ventures, increased by £98m during the year to £1,134m. The independent valuation at 30th November 2007 resulted in an uplift in thevalue of our portfolio including our share of joint ventures of 6.8% (£62.8m),compared with the previous year end. Our properties are currently valued at thefollowing weighted average equivalent yields:- Retail 6.7%Industrial 8.0%Office 7.6% Inventories Inventories have increased in the year from £66m to £209m reflecting theextensive development programme (including £60m relating to Project MoDEL).Assets held in inventories principally comprise development projects that are onsite and under construction and have not been pre-sold, and other assets thatare held for resale at the period end. Assets held in inventories are not included in the annual valuation. Investments in associates - our 27.2% stake in Northern Racing PLC, anAIM-listed company, was sold during the year, generating a profit of £6.7m. THE FUTURE The company's hopper (details of which are set out above) is an underlyingstrength which should provide a stream of future profitability. The key issues determining the company's future performance are: • Whether we can continue to acquire sufficient opportunities to top up and expand the hopper • How we marshal projects through land assembly, planning and construction to create annual development programmes • Whether the occupational market across the various sectors will be sufficiently strong to support those programmes and • Whether there is a reasonable investment / owner-occupier market to purchase the output from those programmes We have strategies in place to address each of these issues: • The experienced teams within our network of regional offices and the long-term relationships that they build, give us a good prospect of identifying and securing the right opportunities • Regular detailed reviews of all live projects mean that issues associated with marshalling schemes can be identified and addressed in a timely manner • By operating across a wide range of property sectors, we spread the risk of an occupational downturn in any particular sector • Our headroom in existing facilities gives us some scope, if necessary, to hold income-generating properties until the market conditions are right for sale The future prospects for the company are good, and the net asset value shouldcontinue to improve, even in today's market conditions. BILL OLIVER TIM HAYWOODChief Executive Finance Director 11th February 2008 St. Modwen Properties PLCGroup income statementFor the year ended 30th November 2007 2006 Notes £m £m Revenue 1 127.5 128.1 Net rental income 1 26.3 24.3 Development profit 1 32.4 14.6 Gains on disposal of investments/ investment properties 11.4 27.2 Investment property revaluation gains 5 60.3 49.0 Other net income 1 2.4 2.4 Joint ventures and associates (post tax) 7 12.6 11.0 Administrative expenses (16.4) (15.6) Profit before interest and tax 129.0 112.9 Finance cost 2 (32.5) (20.0) Finance income 2 3.6 4.0 Profit before tax 100.1 96.9 Taxation 3 (6.4) (21.0) Profit for the year 93.7 75.9 Attributable to: Equity shareholders of the company 12 88.4 74.4 Minority interests 13 5.3 1.5 93.7 75.9 Notes 2007 2006 pence pence Basic earnings per share 4 73.3 61.6 Diluted earnings per share 4 72.4 61.6 Proposed final dividend per share 7.8 6.8 Interim dividend paid 3.9 3.4 Total dividend 11.7 10.2 St. Modwen Properties PLCGroup balance sheetAs at 30th November 2007 2006 Notes £m £m Non-current assets Investment property 5 846.9 736.4 Operating property, plant and equipment 6 3.9 3.8 Investments in joint ventures, associates and 7 75.4 77.9other investments Trade and other receivables 8 8.9 4.0 935.1 822.1 Current assets Inventories 9 209.3 65.9 Trade and other receivables 8 31.6 58.4 Cash and cash equivalents 17.9 7.0 258.8 131.3 Current liabilities Trade and other payables 10 (127.3) (109.3) Borrowings 11 (0.4) (49.2) Tax payables 3 (12.3) (3.7) (140.0) (162.2) Non-current liabilities Trade and other payables 10 (128.0) (143.7) Borrowings 11 (419.4) (210.7) Deferred tax 3 (38.8) (47.0) (586.2) (401.4) Net assets 467.7 389.8 Capital and reserves Share capital 12.1 12.1 Share premium account 12 9.1 9.1 Capital redemption reserve 12 0.3 0.3 Retained earnings 12 437.4 364.3 Own shares 12 (0.7) (0.8) Shareholders' equity 458.2 385.0 Minority interests 13 9.5 4.8 Total equity 467.7 389.8 St. Modwen Properties PLCGroup cash flow statementFor the year ended 30th November 2007 2006 Notes £m £m Operating activities Profit before interest and tax 129.0 112.9 Gains on investment property disposals (11.4) (27.2) Share of profit of joint ventures and associates (post-tax) 7 (12.6) (11.0) Investment property revaluation gains 5 (60.3) (49.0) Depreciation 6 0.6 0.9 Increase in inventories (109.2) (24.8) Decrease in trade and other receivables 19.1 1.4 Decrease/(increase) in trade and other payables 1.2 (6.1) Share options and share awards 0.1 0.3 Pension funding (0.2) (0.7) Tax received/(paid) 3 (c) 1.8 (7.5) Net cash (outflow) from operating activities (41.9) (10.8) Investing activities Investment property disposals 44.4 87.5 Investment property additions (124.2) (95.5) Property, plant and equipment additions (0.7) (0.7) Interest received 1.8 0.1 Dividends received 4.0 1.6 Net cash (outflow) from investing activities (74.7) (7.0) Financing activities Dividends paid (12.9) (11.2) Dividends paid to minorities 13 (0.6) (0.3) Interest paid (18.1) (14.6) Purchase of own shares (0.8) (1.2) New borrowings drawn 159.9 73.1 Repayment of borrowings - (19.2) Net cash inflow from financing activities 127.5 26.6 Increase in cash and cash equivalents 10.9 8.8 Cash and cash equivalents at start of year 7.0 (1.8) Cash being cash and cash equivalents at end of year 17.9 7.0 St. Modwen Properties PLC Group statement of recognised income and expenseFor the year ended 30th November 2007 2006 Notes £m £m Profit for the year 93.7 75.9 Pension fund: - actuarial gains and losses (3.3) 2.5 - deferred tax thereon 0.9 (0.7) Total recognised income and expense 91.3 77.7 Attributable to: - Equity shareholders of the company 13 86.0 76.2 - Minority interests 13 5.3 1.5 Total recognised income and expense 91.3 77.7 St. Modwen Properties PLC Basis of preparation The preliminary announcement was approved by the Board of Directors on 8thFebruary 2008. These accounts do not constitute the company's statutoryaccounts for the years ended 30th November 2007 or 2006 but are derived fromthose accounts. Statutory accounts for 2006 have been delivered to theRegistrar of Companies and those for 2007 will be delivered following thecompany's annual general meeting. The auditors have reported on these accounts;their reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") as adopted by the European Union. Whilstthe information included in this preliminary announcement has been computed inaccordance with IFRS, this announcement does not itself contain sufficientinformation to comply with IFRS. The Company expects to post full financialstatements that comply with IFRS to shareholders on or before 25th February2008. Details of the accounting policies applied in the year ended 30th November 2007are set out in the audited financial statements for the year ended 30th November2006. 1. Revenue and gross profit 2007 Rental Development Other Total £m £m £m £m Revenue 30.3 91.1 6.1 127.5 Cost of sales (4.0) (58.7) (3.7) (66.4) Gross profit 26.3 32.4 2.4 61.1 2006 Rental Development Other Total £m £m £m £m Revenue 29.4 92.9 5.8 128.1 Cost of sales (5.1) (78.3) (3.4) (86.8) Gross profit 24.3 14.6 2.4 41.3 The group operates exclusively in the UK and all of its revenues derive from itsportfolio of properties which the group manages as one business. Therefore, thefinancial statements and related notes represent the results and financialposition of the group's sole business segment. The group's total revenue for 2007 was £134.2m (2006: £133.3m) and in additionto the amounts above included service charge income of £4.9m (2006: £4.8m), forwhich there was a corresponding expense, and interest income of £1.8m (2006:£0.4m). Property operating expenses relating to investment properties that did notgenerate any rental income were £0.2m (2006: £0.1m). 2. Finance cost and finance income 2007 2006 £m £m Interest payable on borrowings (19.6) (14.3) Amortisation of discount on deferred payment arrangements (9.9) (3.8) Amortisation of refinancing expenses (0.6) (0.2) Head rents treated as finance leases (0.2) (0.2) Movement in market value of interest rate derivatives (0.7) - Interest on pension scheme liabilities (1.5) (1.5) Total finance cost (32.5) (20.0) Interest receivable on cash deposits 1.8 0.4 Movement in market value of interest rate derivatives - 2.0 Expected return on pension scheme assets 1.8 1.6 Total finance income 3.6 4.0 3. Taxation a. Tax on profit on ordinary activities 2007 2006 £m £mTax charged in the income statement Corporation tax charge Tax on current year profits 8.1 11.7 Adjustments in respect of previous years (0.1) (1.7) 8.0 10.0 Deferred tax (Reversal)/origination of temporary differences (11.7) 0.6 Impact of current year revaluations 11.8 9.6 Adjustments in respect of previous years (1.7) 0.8 (1.6) 11.0 Total tax charge in the income statement 6.4 21.0 Tax relating to items charged or credited to equity Deferred tax Actuarial gains and losses on pension schemes (0.9) 0.7Tax (credit)/charge in the statement of total recognised income and (0.9) 0.7expense b. Reconciliation of effective tax rate 2007 2006 Total Total tax tax £m £m Profit before tax 100.1 96.9 Less: Joint ventures and associates (12.6) (11.0) Pre-tax profit attributable to the group 87.5 85.9 Corporation tax at 30% 26.3 25.8 Permanent differences 1.6 2.2 Release of temporary differences in respect of industrial buildings (6.7) - Release of deferred tax following rate change from 30% to 28% (2.9) - Recognition of deferred tax asset for losses previously unrecognised (6.1) - Investment property revaluation gains (3.3) (5.0) Difference between chargeable gains and accounting profit (0.7) (1.1) Current year charge 8.2 21.9 Adjustments in respect of previous years (1.8) (0.9) 6.4 21.0 Effective rate of tax 7% 24% The post tax results of Joint Ventures and Associates are stated after a taxcharge of £2.8m (2006: £2.7m). The effective tax rate for the Group includingJoint Ventures and Associates is 8.9% (2006: 23.8%). The UK Government announced that balancing allowances and balancing charges onindustrial buildings were to be abolished with effect from 21st March 2007.Accordingly, temporary differences in respect of industrial buildings held forrental have been released. The UK Government announced that they would reduce the corporation tax rate forlarge companies to 28% with effect from 1st April 2008. Accordingly, deferredtax adjustments have been restated to 28% as this is the rate at which they areexpected to reverse. c. Balance sheet 2007 2006 Corporation Deferred Corporation Deferred tax tax tax tax £m £m £m £m Balance at start of the year 3.7 47.0 1.7 35.3 Charge to the income statement 8.0 (1.6) 10.0 11.0 Charge directly to equity - (0.9) - 0.7 Net refund/(payment) 1.8 - (7.5) - Other (1.2) (5.7) (0.5) - Balance at end of the year 12.3 38.8 3.7 47.0 An analysis of the deferred tax provided by the group is given below: 2007 2006 Asset Liability Net Asset Liability Net £m £m £m £m £m £m Property revaluations - 48.4 48.4 - 39.2 39.2 Capital allowances - 2.8 2.8 - 7.3 7.3 Appropriations to trading stock - 1.4 1.4 - 1.4 1.4 Other temporary differences (14.3) 0.5 (13.8) (5.4) 4.5 (0.9) (14.3) 53.1 38.8 (5.4) 52.4 47.0 There is no unprovided deferred tax. d. Factors that may affect future tax charges Based on current capital investment plans, the group expects to continue to beable to claim capital allowances in excess of depreciation in future years. The benefits of any tax planning are not recognised by the group until theoutcome is reasonably certain. 4. Earnings per share The group's share option schemes are accounted for as cash-settled share-basedpayments as it is the group's practice not to issue new shares in satisfactionof employee options. The potential dilutive effect on earnings per share on theassumption that such shares were to be issued is set out below: 2007 2006 Number of Number of shares shares Weighted number of shares in issue* 120,636,100 120,628,368 Weighted number of dilutive shares 1,506,851 76,550 122,142,951 120,704,918 2007 2006 £m £m Earnings (basic and diluted) 88.4 74.4 2007 2006 pence penceBasic earnings per share 73.3 61.6Diluted earnings per share 72.4 61.6 *Shares held by the Employee Benefit Trust are excluded from the above calculations. ** In calculating diluted earnings per share, earnings have been adjusted for changes which would haveresulted from the option being classified as equity settled. The number of shares included in thecalculation has also been adjusted accordingly. 5. Investment property Freehold Leasehold investment investment properties properties Total £m £m £mFair value At 30th November 2005 349.1 132.1 481.2 Additions - new properties 21.7 176.9 198.6 Other additions 51.3 21.7 73.0 Transfers (to)/from inventories (5.1) - (5.1) Disposals (50.6) (9.7) (60.3) Surplus on revaluation 29.1 19.9 49.0 At 30th November 2006 395.5 340.9 736.4 Additions - new properties 38.0 5.0 43.0 Other additions 32.4 31.3 63.7 Transfers (to)/from inventories (13.2) (20.9) (34.1) Disposals (21.6) (0.8) (22.4) Surplus on revaluation 42.3 18.0 60.3 At 30th November 2007 473.4 373.5 846.9 Investment properties were valued at 30th November 2007 and 2006 by King Sturge& Co, Chartered Surveyors, in accordance with the Appraisal and Valuation Manualof the Royal Institution of Chartered Surveyors, on the basis of market value. Included within leasehold investment properties are £3.9m (2006: £3.9m) ofassets held under finance leases. 6. Operating property, plant and equipment Plant, machinery Operating and properties equipment Total £m £m £mCost At 30th November 2005 2.4 3.1 5.5 Additions 0.2 0.5 0.7 At 30th November 2006 2.6 3.6 6.2 Additions - 0.7 0.7 At 30th November 2007 2.6 4.3 6.9 Depreciation At 30th November 2005 0.2 1.3 1.5 Charge for the year 0.2 0.7 0.9 At 30th November 2006 0.4 2.0 Charge for the year - 0.6 0.6 At 30th November 2007 0.4 2.6 3.0 Net book value At 30th November 2005 2.2 1.8 4.0 At 30th November 2006 2.2 1.6 3.8 At 30th November 2007 2.2 1.7 3.9 Tenure of operating properties: 2007 2006 £m £m Freehold 0.3 0.3 Leasehold 1.9 1.9 2.2 2.2 7. Joint ventures, associates and other investments The group's share of the trading results for the year of its joint ventures andassociates is: 2007 2006 Key Property Key Property Other Investments Other joint Investments joint Limited ventures Total Limited ventures Total £m £m £m £m £m £mIncome statements Revenue 35.6 5.5 41.1 10.7 3.9 14.6 Net rental income 8.5 0.1 8.6 8.7 0.2 8.9 Development profit 4.3 2.0 6.3 (0.3) 1.2 0.9 Gains on disposals of investment/ investment properties 4.4 - 4.4 1.9 - 1.9 Investment propertyrevaluation gains 1.8 0.7 2.5 6.1 0.5 6.6 Administrative expenses (0.1) - (0.1) (0.1) - (0.1) Profit before interest and tax 18.9 2.8 21.7 16.3 1.9 18.2 Finance cost (5.8) (0.7) (6.5) (5.5) (0.3) (5.8) Finance income 0.1 - 0.1 0.7 - 0.7 Profit before tax 13.2 2.1 15.3 11.5 1.6 13.1 Taxation (2.1) (0.7) (2.8) (2.2) (0.5) (2.7) Profit for the year 11.1 1.4 12.5 9.3 1.1 10.4 Group's share of associate's profit (27%) 0.1 0.6 12.6 11.0 During the year ended 30th November 2007 the group disposed of its entireshareholding in Northern racing PLC, realising a profit of £6.7m. This gain isrecorded as part of "Gains on investments/investment properties." The group's share of the balance sheet of its joint ventures and associates,together with the cost of other investments is: 2007 2006 Key Property Key Property Other Investments Other joint Investments joint Limited ventures Total Limited ventures Total £m £m £m £m £m £mBalance Sheets Non-current assets 136.7 6.8 143.5 145.4 4.5 149.9 Current assets 26.2 17.7 43.9 21.0 7.8 28.8 Current liabilities (10.4) (5.5) (15.9) (5.6) (0.9) (6.5) Non-current liabilities (83.1) (13.6) (96.7) (98.5) (7.4) (105.9) Net assets 69.4 5.4 74.8 62.3 4.0 66.3 Equity at start of year 62.3 4.0 66.3 54.5 2.9 57.4 Profit for the year 11.1 1.4 12.5 9.3 1.1 10.4 Dividends paid (4.0) - (4.0) (1.5) - (1.5) Equity at end of year 69.4 5.4 74.8 62.3 4.0 66.3 Group's share of joint ventures' net assets 74.8 66.3 Group's share of associate's net assets - 11.0 Investment in Stoke on Trent Community Stadium DevelopmentCompany Limited 0.6 0.6 75.4 77.9 Joint venture companies, associates and other investments comprise: Name Status Interest Activity Key Property Investments Joint venture 50% Property investment and developmentLimited Barton Business Park Limited Joint venture 50% Property development Sowcrest Limited Joint venture 50% Property development Holaw (462) Limited Joint venture 50% Property investment Shaw Park Developments Limited Joint venture 50% Property development Stoke on Trent Community Other investment 15% StadiumStadium Development Company operatorLimited Many of the joint ventures contain change of control provisions, as is common for such arrangements. 8. Trade and other receivables 2007 2006 £m £mNon-current Other Debtors 8.9 - Derivative financial instruments - 1.2 Pension fund surplus - 2.8 8.9 4.0 Current Trade receivables 5.0 2.6 Prepayments and accrued income 1.7 2.6 Other debtors 19.7 45.0 Amounts due from joint ventures 3.2 7.6 Derivative financial instruments 2.0 0.6 31.6 58.4 9. Inventories 2007 2006 £m £m Properties held for sale 88.5 37.9 Properties under construction 100.0 10.8 Land under option 20.8 17.2 209.3 65.9 The movement in inventories during the two years ended 30thNovember 2007 is as follows: £mBalance at 30th November 2005 36.1 Additions 103.0 Transfers from investment property 5.1 Disposals (transferred to cost of sales) (78.3) Balance at 30th November 2006 65.9 Additions 168.0 Transfers from investment property 34.1 Disposals (transferred to cost of sales) (58.7) Balance at 30th November 2007 209.3 The Directors consider all inventories to be current in nature. The operationalcycle is such that a proportion of inventories will not be realised within 12months. It is not possible to determine with accuracy when specific inventorywill be realised as this will be subject to a number of issues including thestrength of the property market. As at 30th November 2007 £12.4m of inventory was pledged as security for thegroup's loan facilities. 10 Trade and other payables 2007 2006 £m £mCurrent Trade payables 5.6 4.9 Amounts due to joint ventures 4.1 0.1 Other payables and accrued expenses 45.9 43.8 Other payables on deferred terms 70.5 60.2 Derivative financial instruments 1.2 0.3 127.3 109.3 Non-current Other payables and accrued expenses 3.1 1.9 Other payables on deferred terms 121.0 138.9 Finance lease liabilities (head rents) 3.9 2.9 128.0 143.7 The payment terms of the other payables on deferred terms, all of which relate to VSMEstates (Holdings) Limited, are subject to contractual commitments which are expectedto allow for realisation of the related assets and settlement of the liability on abasis which is at least cash neutral over a mimimum period of ten years. 11. Borrowings 2007 2006 £m £mCurrent Bank loans - 48.8 Floating rate unsecured loan notes 0.4 0.4 0.4 49.2 Non-current Bank loans repayable between two and 295.4 129.4five years Bank loans repayable after more than 124.0 81.3five years 419.4 210.7 All bank borrowings are secured by a fixed charge over the group's propertyassets. Maturity profile of committed bank facilities 2007 Floating rate borrowings Interest rate swaps Drawn Undrawn Total Earliest Latest termination termination £m £m £m £m %* £m %* Less than one year 0.4 5.0 5.4 60.0 4.82 30.0 5.17 One to two years - - - 80.0 4.70 - - Two to three years 79.1 39.9 119.0 80.0 5.54 30.0 4.47 Three to four years 104.6 45.4 150.0 20.0 4.48 80.0 4.71 Four to five years 111.7 13.3 125.0 - - 80.0 5.54 More than five years 124.0 46.0 170.0 - - 20.0 4.47 Total 419.8 149.6 569.4 240.0 4.99 240.0 4.99 12. Reserves Share Capital premium redemption Retained Own account reserve earnings shares £m £m £m £m At 30th November 2005 9.1 0.3 299.3 (0.4) Profit for the year attributable to shareholders - - 74.4 - Pension fund actuarial gains and losses - - 1.8 - Net share acquisitions - - - (0.4) Dividends paid - - (11.2) - At 30th November 2006 9.1 0.3 364.3 (0.8) Profit for the year attributable to shareholders - - 88.4 - Pension fund actuarial gains and losses - - (2.4) - Net share disposals - - - 0.1 Dividends paid - - (12.9) - At 30th November 2007 9.1 0.3 437.4 (0.7) 'Own shares' represents the cost of 137,854 (2006: 167,306) shares held by theEmployee Benefit Trust. The open market value of the shares held at 30thNovember 2007 was £584,501 (2006: £951,971). 13. Reconciliation of movement in equity 2007 2006 Equity Minority Total Equity Minority Total shareholders interests shareholders interests £m £m £m £m £m £m Total recognised income and expense 86.0 5.3 91.3 76.2 1.5 77.7 Dividends paid (12.9) (0.6) (13.5) (11.2) (0.3) (11.5) Net disposal/(purchase) of own shares 0.1 (0.4) (0.4) Equity at start of year 385.0 4.8 389.8 320.4 3.6 324.0 Equity at end of year 458.2 9.5 467.7 385.0 4.8 389.8 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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