Final Results

2nd Apr 2009 07:00



Hansteen Holdings PLC

("Hansteen" or "the Group" or "the Company")

Final Results

Hansteen Holdings PLC (AIM: HSTN), the investor in continental European real estate, announces final results for the twelve months ended 31 December 2008

Highlights

Net asset value fall of 7 per cent to 128 pence per share (FY07: 138 pence)*

Normalised profit increased by 20 per cent to £11.8 million (FY07: £9.8 million)** 

Strong and secure financing - net debt to value of 51 per cent (measured using free cash balances and total debt) (FY07: 37 per cent)

A maintained dividend of 3.2 pence per share (FY07: 3.2 pence per share)

Annualised net rental income of £41.5 million (FY07: £29.7 million)

Portfolio initial yield 8.4 per cent (FY07: 7.25 per cent)

*Diluted EPRA basis

**Pre-tax profit excluding gains and losses on investment properties, sale of subsidiaries, foreign currency and interest rate derivatives hedge valuations

Hansteen Chairman, James Hambro commented: "We believe that Hansteen's portfolio is both robust and defensive with a high yield, a spread of properties across four countries, with 675 tenants in a broad spectrum of industries, and importantly, the capital values of our investments are substantially below replacement cost.

"Our task during this global recession is to protect its capital base, retain liquidity and, so long as it is prudent, to continue to pay a dividend. This approach will provide a secure foundation for us to exploit some of the extraordinary opportunities which we believe will arise over the next year or two, in both the UK and Continental Europe."

Morgan Jones/Ian Watson	David Davies; Matt Goode	Jeremy Carey
Hansteen Holdings plc	KBC Peel Hunt	Tavistock Communications
Tel: 020 7016 8820	Tel: 020 7418 8900	Tel: 020 7920 3150

CHAIRMAN'S STATEMENT

We are pleased to report a solid set of financial results for the year ending 31 December 2008 in a difficult market environment. 

RESULTS

The Group's Net Asset value fell by 7 per cent to 128 pence per share (using diluted EPRA NAV measurement) reflecting a decrease in value of our properties over the year. However, during 2008 both income and occupancy remained robust and normalised profit increased for the third consecutive year. At 31 December 2008, the Group's financial position was strong with net debt to value of 51 per cent (measured using free cash balances and total debt).

The Board's continuing belief in the quality of the portfolio and conservative nature of Hansteen's financing is reflected in the recommendation to hold the dividend at 3.2 pence (2007: 3.2 pence).

Normalised profit before tax for the year to 31 December 2008 was £11.8 million compared to £9.8 million in 2007 and £6.3 million in 2006. As noted in the interim statement, the normalised profit is the traditional measure of profit akin to that which would have been reported under the Historic Cost Accounting regime. We set out below a pro-forma profit and loss account reflecting this approach.

NORMALISED PROFIT & LOSS ACCOUNT

	2008 £m		2007 £m
Turnover	34.9		18.4
Cost of sales	(8.2)		(1.7)
Admin costs	(3.9)		(4.1)
Interest	(11.0)		(2.8)
Normalised profit before tax	11.8		9.8

In accordance with IFRS Hansteen showed a £60.9 million pre-tax accounting loss for the year (2007: profit £20.4 million). In the Board's view this loss does not reflect the real returns of the Group's business as it includes a £45 million charge for closing out a currency hedging contract and a deduction of £41.7 million arising from the fall in the value of the portfolio over the year. Both of these items are fully reflected in the Net Asset Value of the Group.

Net Asset Value per share (diluted EPRA NAV basis) fell to 128 pence from 138 pence in the previous year. In the current economic environment the property values which underpin this NAV may fall further. However, in addition to producing a high initial yield, the Group's portfolio provides an Estimated Rental Value of €48.6 million per annum which equates to a reversionary yield of 9.5 per cent. The gap between current borrowing costs and these yields is unprecedented in recent years and in the Board's view any further value falls will reflect the illiquidity in the market due to financing problems rather than any reflection of fundamental value.

DIVIDEND

The dividend of 3.2 pence per share will be paid on 15 May 2009 to shareholders on the register at close of business on 17 April 2009. This dividend will be charged to the 2009 financial statements.

FINANCIAL 

In the current difficult banking environment the Board is determined to ensure the Group's borrowing levels are well within their covenants. Since inception, Hansteen has maintained a conservative approach to debt levels.

In June 2008 the Group arranged a new €130 million five year facility with FGHbank secured on the Dutch portfolio. Under the terms of this loan there are no specific loan to value tests but there is an interest cover covenant of 1.55. The current cover is over 2.5 times.

The Group also has an existing revolving facility with HBOS secured on the German and French properties committed until July 2011. As at 31 December 2008 €141 million had been drawn out of a facility of €200 million. This facility contains both income and loan to value covenants. The test in relation to value is that the loan should not exceed 70 per cent of the value of the secured properties. As at 31 December the loan represented 59 per cent of the value of the secured properties, and further unsecured properties are in the course of being secured which will reduce this ratio to 55 per cent. The interest cover requirement is 1.75 times and the current cover is 3.57 times.

Additionally, the Group has a number of property specific loans in Belgium totalling around €18.8 million secured against a portfolio of properties valued at 31 December at €47.6 million. There are no specific covenants associated with these loans.

PROPERTY PORTFOLIO

2008 was a year of consolidation and improvement with a focus on sales of selected properties with limited growth prospects and purchases of several properties with substantial opportunities to add value over time. In total, the Group sold €31.8 million of properties with a rent roll of €1.9 million per annum and acquired €36.2 million of properties with a rent roll of €3.3 million per annum and a potential rent if fully let of €5.1 million per annum. The Board expects to continue this policy during the current year, with selective sales and purchases in Continental Europe. However, the first priority will be to maximise net occupancy and our rent roll.

At 31 December 2008 the portfolio comprises 942,000 sqm of property with a value of €512 million producing an annual rent roll of €42.9 million, representing an initial yield of 8.4 per cent and including 134,000 sqm of lettable vacant space, 117 acres of development land and a small residential portfolio.

CURRENCY HEDGING

As reported in December, owing to the rapid devaluation of Sterling, the currency hedging contract which the Group entered into in 2006 started to present an unacceptable potential cash drain on the business. The Group acted swiftly to effectively close the contract at a one-off cash cost of €57.6 million, which is due to be settled in July 2009. This cost was exceeded by the appreciation in the Sterling value of the Group's property portfolio and as a result there was no negative effect on net asset value. Furthermore the net gearing figure referred to earlier of 51 per cent takes full account of the cost of terminating the currency hedging arrangements.

The Board has decided to remain unhedged for the time being although it will continue to monitor the position closely and may enter into further hedges at a future date. 

OUTLOOK

The Board believes that Hansteen's portfolio is both robust and defensive with a high yield, a spread of properties across four countries, with 675 tenants in a broad spectrum of industries and importantly the capital values of the Group's investments are substantially below replacement cost.

The outlook for the European economy, particularly Germany, is uncertain. However, the task for the Group during this global recession is to protect its capital base, retain liquidity and, so long as it is prudent, to continue to pay a dividend. This approach will provide a secure foundation for the Group to exploit some of the extraordinary opportunities which the Board believes will arise over the next year or two, in both the UK and Continental Europe.

James Hambro

Chairman

1 April 2009

JOINT CHIEF EXECUTIVE'S REVIEW

During 2008 the global credit crisis and economic downturn affected all businesses including Hansteen. However, compared to most, the effect on Hansteen was limited due to value falls for industrial property in Western Continental Europe being less pronounced than in the UK or other parts of Europe such as Mediterranean countries and Eastern Europe. Occupancy and letting income improved whilst financing costs reduced. 

The focus in 2009 will be on maintaining and, so far as possible, improving occupancy, income and the finances for our existing business. Secondly, to exploit the downturn by seeking ways of acquiring assets at low values in the UK or Europe by using our limited resources, alongside other investors capital, or through corporate acquisition.

THE PORTFOLIO

At 31 December 2008 the portfolio comprised 942,367 sqm of property with an annualised rent roll of €42.9 million per annum and a value of €512 million. In 2008 we added to the portfolio with properties that had high vacancies presenting opportunities for us to add value through marketing and letting space. In addition to the 8.4 per cent yield on the portfolio there is 134,000 sqm of vacant non-income producing but lettable space. In addition, we have 117 acres of development land. During 2008 net occupancy improved by 10,278 sqm on the portfolio, representing 1 per cent of the whole portfolio and 11 per cent of the vacancies at the start of the year.

During the year we completed the purchase of eight properties totalling €36.2 million and sold five properties with a total value of €31.8 million. 

The average capital cost of the built portfolio is €540 per sqm. The current yield of 8.4 per cent is substantially higher than the average cost of borrowing which is approximately 4.7 per cent.

The average capital value per square metre of our properties is materially less than the replacement cost and our average rent per square metre is less than that one would need to charge for a new build. Put another way, our portfolio valued at €512 million has an insurance rebuilding cost of approximately €850 million. Further fundamental strength comes from the vacant and reversionary properties which, if let at the market rent, could add a potential €5.7 million to the rent roll.

As at 31 December 2008 the portfolio, including investment and trading properties, was valued at £495.1 million analysed as follows:

EUROS	No. of Properties	Area SqM	Annualised Rent €m	Valuation €m
Netherlands	34	373,257	16.8	200.1
Germany	50	431,186	19.5	230.8
Belgium	13	49,973	3.8	47.6
France	4	79,042	2.3	24.2
Other assets	5	8,909	0.5	9.3
	106	942,367	42.9	512.0
STERLING	No. of Properties	Area SqM	Annualised Rent €m	Valuation €m
Netherlands	34	373,257	16.2	193.4
Germany	50	431,186	18.9	223.2
Belgium	13	49,973	3.7	46.1
France	4	79,042	2.2	23.4
Other assets	5	8,909	0.5	9.0
	106	942,367	41.5	495.1

Since the year end, we have completed two further acquisitions and concluded one property sale.

One acquisition was a distribution warehouse unit of 7,900 sqm, built for chilled food distribution, at Gross-Rohrheim in Germany. The current rent is €378,000 per annum and at a total acquisition cost of €3.3 million it provides a high yielding and low capital cost property. The tenant, Dachser, is on a short lease although they have occupied the property since 1994.

The other acquisition, Friedberg, also in Germany, is a multi let property of 11,370 sqm, with an annual rent of €669,000 per annum at a total purchase price of €4.4 million. Again, the tenants mainly occupy on short term leases.

The sale was of a property in Freising, in south Germany, which we had acquired in 2008. The sale price was €4.5 million which is above the year-end valuation and significantly above initial acquisition cost. 

The effect of these transactions is to increase the running yield on our portfolio to 8.5 per cent. We set out below a geographical breakdown of activities during 2008.

Germany

We started 2008 with 46 different blocks of commercial property with a total value of €228.2 million and a rent roll of €17.2 million per annum. During the year we acquired a further six properties for €21.6 million and sold our residential properties in Wiesbaden and a block of vacant property in Freising, which was part of the portfolio we acquired in late 2007, for a total of €22.9 million. The net result of these transactions, together with valuation movements on the existing portfolio, was that at the year-end our portfolio in Germany had a total value of €237 million with an annual rent roll of €20 million, an E.R.V. of €24 million and 26.8 acres of developable land.

Details of all the purchases have been announced and are available on the Hansteen website but we set out some specific updates in relation to a number of our German properties:

 

We will continue to selectively buy and sell in Germany but, for the foreseeable future, we expect the focus of our activities to be on maintaining net occupancy and minimising rental arrears. In 2008 we again improved net occupancy in Germany, however, we expect to see a materially more difficult property market in 2009 with pressure on both tenants and rents.

Netherlands

At 31 December 2008 our portfolio in the Netherlands comprised 373,257 sqm of industrial and distribution space valued at €200 million and showing an initial yield of 8.4 per cent. There were two property acquisitions and two property disposals during the year and net occupancy improved by a net 8,000 sqm which represents over 20 per cent of the vacant space.

The two acquisitions were of properties with long leases and both were negotiated over an extended period. At Raamsdonkveer we acquired a 14,600 sqm warehouse let to Bouwgros B.V. on a ten year lease. This was a sale and leaseback for a business which distributes tiles. The second property, at Roosendaal, is a new distribution warehouse let on a 12 year lease to Adexpo B.V. The rent roll from these two properties is €1.1 million per annum and total acquisition costs were €14.7 million.

The two properties which were sold are examples of assets where we undertook some management initiatives and then realized the results through sales. At Drachten, we acquired 4,417 sqm of vacant space in 2007. During 2008 we let this to Odis B.V. as a motor parts distribution centre and sold the subsequent investment. The property was acquired for €1.6 million and sold for €1.8 million.

At Hoogoveen we owned a 7,200 sqm warehouse with two tenants, one of which was on a short lease. We renegotiated terms on a new lease and then sold the investment for €3.2 million. 

Net occupancy improved across the portfolio with significant lettings achieved during the year at our properties in Amersfoort, Venlo and Tiel. However, many of the lettings achieved were of a short term nature and we will need to continue marketing the properties strongly to maintain occupancy in 2009.

Belgium

At 31 December 2008 the portfolio in Belgium comprised 49,973 sqm of offices and industrial properties. The value of the portfolio was €47.6 million and produced an 8 per cent initial yield. Our experience in Belgium is that it is more of a local market which has been slightly less affected in terms of property prices than in other regions. 

There was one change to the portfolio during the year being the sale of a property at Lozenberg-Zaventem. This property was a partially occupied office building which we had acquired as part of a large portfolio and needed considerable work to be brought up to a lettable standard. The property was sold to a special purchaser seeking to occupy the building and refurbish it to their own requirements. The property was held in a single purpose company and, as is usual in Belgium, the company was sold to the purchaser rather than the asset. The sale was concluded at marginally below our book cost.

Occupancy in Belgium was broadly positive with net improvement during the year of 1,400 sqm which represents approximately 25 per cent of the vacant property in Belgium.

France

There were no changes to our ownership in France which comprises four properties totalling 79,000 sqm. The annualized rent during the year was €2.3 million per annum and strong performance through rental indexation along with the drop in valuations means that the portfolio is yielding over 9 per cent. Low capital values place us in a good position in a market categorised by weak occupancy demand and weak investor demand.

FINANCE

Net asset value

As at 31 December 2008 the balance sheet shows shareholder funds of £212.5 million (2007: £231.2 million). There are currently 178.4 million shares in issue and therefore the basic NAV in accordance with International Financial Reporting Standards amounts to 119.1 pence per share. This is a fall of 8.1 per cent from the 2007 figure of 129.6 pence per share. The diluted EPRA NAV which takes into consideration the dilution through any share options and adding back deferred tax on the valuation of investment properties is 128 pence per share compared with the 2007 figure of 138 pence per share, a fall of 7 per cent.

The key factors behind this drop in the NAV is approximately a 10 per cent fall in the value of the properties from 2007 and the dividend paid during the year of 3.2 pence per share. These items are ameliorated by the income profit generated by the business and a slight improvement due to currency exchange rate gains.

Currency

During 2008, the Euro strengthened against the pound from €1.36 to the pound to €1.03 to the pound, a strengthening of 24 per cent over the 12 months. As a business which reports in Sterling, Hansteen took the view at flotation that it was important to hedge the potential risk of fluctuating exchange rates. All of our borrowings are denominated in Euros and until 11 December 2008 we hedged the equity investments of the Group through hedging instruments. The Group had three forward currency contracts to acquire Sterling on 27 July 2009. These forward currency contracts isolated the Group from the effects of currency fluctuations and, given the strength of the Euro, meant we did not benefit from the increased value of our properties resulting from Sterling's decline. Due to the rapid and extreme movement in the exchange rate the Group was required to provide increasing cash collateral against the hedging contracts. With no certainty as to whether or when the weakness of Sterling would abate, maintaining the contracts would have left the Group exposed to unquantifiable cash commitments. Accordingly, the Group terminated its hedging with a one-off cash cost of €57.6 million, which is due to be settled in July 2009.

In the event, the Euro continued to strengthen through to the year ending 31 December 2008 and we were able to benefit from that strengthening. The Group is currently unhedged in relation to the equity element of its investments in Europe which is approximately 45 per cent of its holdings. The Board continues to monitor the position in relation to currency risk and may enter into further hedges at a future date.

Share Capital

On 19 March 2008 Hansteen announced the reduction of its share premium account by the sum of £60 million. This change, which was approved by the Shareholders, was undertaken to ensure there were sufficient distributable reserves for ongoing dividend payments, although to date all dividends paid have been more than covered by normalised profits earned.

Borrowings

At 31 December 2008 there were bank borrowings and finance lease obligations of £286 million (2007: £173 million) which, along with the retained cash, resulted in net gearing for the Group of 96.7 per cent or a loan to value of approximately 41.5 per cent. However, part of the cash balances are restricted and a true net gearing position would be 119.2 per cent gearing (2007: 66.4 per cent) or loan to value of 51.2 per cent (2007: 37.3 per cent).

Our property portfolio and business model is strongly cash generative. As at 31 December 2008 the properties generated an annual income of approximately 8.4 per cent on carrying value, whereas our debt which is approximately half the amount of the properties has an average cost of 4.7 per cent per annum.

Our borrowings fall into three broad categories:

The Board has analysed the loan facilities in the light of the difficult economic environment and falling property values. Due to the high yielding nature of the portfolio and the low interest rate environment along with the interest hedging instruments described further below there is a very significant safety margin in relation to the income covenants required by our banking facilities. The issue of loan to value is relevant only in relation to the HBOS loan. Hansteen will seek to maintain headroom with this facility through individual property sales and debt reduction. However, even without such sales, values would need to fall by over 20 per cent before approaching the loan to value default level. The loan to value position may tighten over the next 12 months but the Directors believe there is sufficient headroom to meet projections.

Our funding policy, where borrowing is used, is to utilise prudent interest rate hedging which includes an element of short term fixed interest rates and interest caps. At 31 December 2008 the average gross cost of borrowing for Hansteen was 5 per cent and £716,000 financing costs were amortised in the period. The Group has 4 interest rate caps covering total borrowings of €150 million. The interest rate caps are set at 4 per cent, 4.5 per cent, 4.95 per cent and 5 per cent. The interest rate caps originally cost £592,000 and were revalued at 31 December 2008 balance sheet at £329,000.

In addition, our hedging includes €100 million of interest rate swaps. At 31 December 2008 there was €25 million swapped at 4.16 per cent, €25 million swapped at 4.29 per cent and €50 million swapped at 4.46 per cent.

Outlook

We start 2009 with a robust balance sheet and solid financing. The Group is in a good place to weather any further value falls and, just as importantly, has a team to take advantage of opportunities which arise in a depressed market. There are a significant number of industrial property portfolios and investment companies which are currently over geared and could provide some unprecedented opportunities for us to develop the business.

Our focus for 2009 therefore will be on maintaining the occupancy and high income surplus from the existing portfolio prudently managing our finances and seeking ways of taking advantage of the current down turn in the property cycle. 

Ian Watson and Morgan Jones

Joint Chief Executives

1 April 2009

Consolidated income statement

for the year ended 31 December 2008

	Note		2008 £'000	2007 £'000
Revenue			34,884	18,400
Cost of sales			(8,174)	(1,751)
Gross profit			26,710	16,649
Administrative expenses			(3,934)	(4,159)
Operating profit before losses and gains on investment properties and before gain on sale of subsidiary			22,776	12,490
(Losses)/gains on investment properties	5		(41,655)	19,614
Gain on sale of subsidiary	17		161	-
Operating (loss)/profit			(18,718)	32,104
Losses on forward currency contracts			(45,006)	(11,014)
Finance income			2,111	1,649
Finance costs			(13,050)	(4,549)
Change in fair value of interest rate derivatives			(4,579)	238
Foreign exchange gains			18,299	1,946
(Loss)/profit before tax			(60,943)	20,374
Tax	6		1,388	(6,799)
(Loss)/profit for the year			(59,555)	13,575
Attributable to:
Equity holders of the parent			(59,571)	13,472
Minority interests			16	103
(Loss)/profit for the year			(59,555)	13,575
Earnings per share
Basic	7		(33.4)p	8.1p
Diluted	7		(33.4)p	8.1p

All results derive from continuing operations

Consolidated balance sheet

31 December 2008

	Note			2008 £'000	2007 £'000
Non-current assets
Goodwill				2,241	2,252
Property, plant and equipment				32	31
Investment property	8			492,357	391,242
Investment property held for sale	8			-	15,417
Deferred tax asset	16			-	2,885
Derivative financial instruments	9			273	379
				494,903	412,206
Current assets
Trading properties	10			2,750	5,260
Trade and other receivables	11			5,831	3,781
Cash and cash equivalents	12			80,240	19,562
Derivative financial instruments	9			13,747	-
				102,568	28,603
Total assets				597,471	440,809
Current liabilities
Trade and other payables	15			(9,919)	(6,916)
Current tax liabilities				(4,907)	(2,563)
Borrowings	13			(926)	(2,579)
Obligations under finance leases	14			(372)	(279)
Derivative financial instruments	9			(68,407)	-
				(84,531)	(12,337)
Non-current liabilities
Borrowings	13			(280,318)	(166,957)
Obligations under finance leases	14			(4,071)	(3,218)
Derivative financial instruments	9			(4,509)	(9,710)
Deferred tax liabilities	16			(10,678)	(17,194)
				(299,576)	(197,079)
Total liabilities				(384,107)	(209,416)
Net assets				213,364	231,393
Equity
Share capital				17,843	17,843
Share premium account				114,312	174,312
Translation reserve				60,483	13,287
Retained earnings				19,907	25,772
Equity attributable to equity holders of the parent				212,545	231,214
Minority interest				819	179
Total equity				213,364	231,393

These financial statements were approved by the Board of Directors on 1 April 2009.

  

Consolidated statement of changes in equity

for the year ended 31 December 2008

2008		Share capital £'000	Share premium £'000	Translation reserves £'000	Retained earnings £'000	Total £'000
Exchange differences arising on translation of overseas operations		-	-	45,710	-	45,710
Tax credit on items taken directly to equity		-	-	1,275	-	1,275
Translation differences recognised on sale of subsidiary		-	-	211	-	211
Net gain recognised directly in equity		-	-	47,196	-	47,196
Loss for the year		-	-	-	(59,571)	(59,571)
Total recognised income and expense for the year		-	-	47,196	(59,571)	(12,375)
Reduction of share premium account		-	(60,000)	-	60,000	-
Costs of reduction of share premium account		-		-	(22)	(22)
Share-based payments		-	-	-	(562)	(562)
Dividends paid		-	-	-	(5,710)	(5,710)
Equity shareholders' funds at  1 January 2008		17,843	174,312	13,287	25,772	231,214
Equity shareholders' funds at  31 December 2008		17,843	114,312	60,483	19,907	212,545
2007
Exchange differences arising on translation of overseas operations		-	-	16,143	-	16,143
Tax on items taken directly to equity		-	-	(1,714)	-	(1,714)
Net gain recognised directly in equity		-	-	14,429	-	14,429
Profit for the year		-	-	-	13,472	13,472
Total recognised income and expense for the year		-	-	14,429	13,472	27,901
Ordinary shares issued at a premium		5,343	64,657	-	-	70,000
Cost of issue of shares at a premium		-	(1,478)	-	-	(1,478)
Share-based payments		-	-	-	669	669
Dividends paid		-	-	-	(3,750)	(3,750)
Equity shareholders' funds at  1 January 2007		12,500	111,133	(1,142)	15,381	137,872
Equity shareholders' funds at  31 December 2007		17,843	174,312	13,287	25,772	231,214

Consolidated cash flow statement

for the year ended 31 December 2008

	Note		2008 £'000	2007 £'000
Net cash inflow from operating activities	18		17,925	8,475
Investing activities
Interest received			2,111	1,649
Additions to property, plant and equipment			(25)	(19)
Additions to investment properties			(30,461)	(193,367)
Proceeds on sale of investment properties			22,659	460
Acquisition of subsidiaries			-	(12,339)
Disposal of subsidiaries	17		531	-
Net cash used in investing activities			(5,649)	(203,687)
Financing activities
Dividend paid			(5,710)	(3,750)
Proceeds from issue of shares at a premium net of expenses			-	68,522
Costs of reduction of share premium account			(22)	-
Repayments of obligations under finance leases			(138)	(30)
New bank loans raised (net of expenses)			165,839	132,800
Bank loans repaid			(114,566)	-
(Reduction)/increase in bank overdrafts			(2,041)	1,826
Additions to derivative financial instruments			(464)	(71)
Capital contribution from minority shareholders			493	69
Dividend paid to minority shareholders			(14)	-
Net cash from financing activities			43,841	199,437
Net increase in cash and cash equivalents			56,117	4,225
Cash and cash equivalents at beginning of year			19,562	14,395
Effect of foreign exchange rates			4,561	942
Cash and cash equivalents at end of year			80,240	19,562

Notes to the Financial Statements

1. General information for the year ended 31 December 2008

Hansteen Holdings PLC was incorporated in the United Kingdom under the Companies Act 1985 on 27 October 2005. The address of the registered office is 1 Berkeley Street, London W1J 8DJ.

The Company was listed on AIM on 29 November 2005.

The Group's principal activities are those of a property group investing mainly in industrial properties in Continental Europe.

These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates. Foreign operations are included in accordance with the policies set out in note 3.

The financial information for the years ended 31 December 2008 and 31 December 2007 does not constitute the statutory accounts as defined in section 240 of the Companies Act 1985 but is derived from those accounts. Statutory accounts for the period ended 31 December 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's annual general meeting. The auditors have reported on these accounts; their reports were unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis of matter and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985.

2. Adoption of new and revised standards

Standards, amendments and interpretations that became effective in 2008 but have no effect on the Group's operations:

IFRIC 11	IFRS2 Group and Treasury Share Transactions
IFRIC 12	Service concession arrangements
IFRIC 13	Customer loyalty programmes
IFRIC 14	IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group:

IFRS 1 (amended)	Cost of an Investment in a Subsidiary, Jointly-Controlled Entity or Associate
IFRS 2 (amended)	Share-based Payment - Vesting Conditions and Cancellations
IFRS 3 (revised 2008)	Business Combinations
IFRS 8	Operating Segments
IAS 1 (revised 2007)	Presentation of Financial Statements
IAS 23 (revised 2007)	Borrowing Costs
IAS 27 (revised 2008)	Consolidated and Separate Financial Statements
IAS 32 (amended)	Financial instruments: Presentation
IAS 39 (amended)/ IFRS 7 (amended)	Reclassification of Financial Instruments/Reclassification of Financial Assets: Effective Date and Transition.
IAS 39 (amended)	Financial Instruments: Recognition and Measurement - Eligible Hedged Items
IFRIC 15	Agreements for the Construction of Real Estate
IFRIC 16	Hedges of a Net Investment in a Foreign Operation
IFRIC 17	Distributions of Non-cash assets to Owners
IFRIC 18	Transfer of Assets from Customers

The Directors anticipate that the adoption of the standards and interpretations in future periods will have no material impact on the financial statements of the Group except for potential additional segment disclosures when IFRS 8 comes into effect for periods commencing on or after 1 January 2009.

3.  Significant accounting policies 

Basis of preparation. Whilst the preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use by the European Union and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Group will publish full financial statements that comply with IFRS in the near future. The financial statements have been prepared under the historical cost convention as modified by the revaluation of investment property and certain financial instruments.

Basis of consolidation. The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority's share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. 

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations. The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

Non-current assets held for sale. Non-current assets (and disposal groups) classified as held for sale, except investment properties, are measured at the lower of carrying amount and fair value less costs to sell.

Investment properties classified as held for sale are carried at fair value in accordance with IAS 40 'Investment Properties'.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Goodwill. Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly-controlled entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, associate or jointly-controlled entity, the attributable amount of goodwill is included in the determination of profit or loss on disposal.

Revenue recognition. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Rental income is recognised on an accruals basis. Where a lease incentive is granted, which does not enhance the value of the property, or a rent-free period is granted, the effective cost is amortised on a straight-line basis over the period from the date of lease commencement to the earliest termination date. 

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Revenue from the sale of trading and investment properties is recognised when the significant risks and returns have been transferred to the buyer. This is generally on unconditional exchange of contracts. The profit on disposal of trading and investment properties is determined as the difference between the sales proceeds and the carrying amount of the asset at the commencement of the accounting period plus additions in the period.

Leasing. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Where a property is held under a head lease it is initially recognised as an asset as the sum of the premium paid on acquisition and the present value of minimum ground rent payments. The corresponding rent liability to the head leaseholder is included in the balance sheet as a finance lease obligation. Where only the buildings element of a property lease is classified as a finance lease, the ground rent payments for the land element are shown within operating leases. Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease.

Foreign currencies. The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period in which they arise except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's foreign currency translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

Share-based payments. The fair value of equity-settled share-based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period based on the Company's estimate of options that will eventually vest. Fair value is measured by use of a binomial model for the Employee Share Option Scheme. The expected life used in the model has been adjusted based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The fair value of the shares to be awarded under the Long-Term Incentive Plan is determined at the measurement date by reference to the current share price at that date less the discounted value of estimated future dividends.

Taxation. The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured on a non-discounted basis.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Property, plant and equipment. This comprises computer and office equipment. Computers and office equipment are stated at cost less accumulated depreciation and any recognised impairment loss. 

Depreciation is charged so as to write off the cost or valuation of computers and office equipment, over their estimated useful lives, using the straight-line method, on the following bases:

Computers	3 years
Office equipment	3 years

Investment properties. Investment properties, which comprises freehold and leasehold property held to earn rentals and/or for capital appreciation, are treated as acquired when the Group assumes the significant risks and rewards of ownership. Acquisitions of investment properties including related transaction costs and subsequent additions of a capital nature are initially recognised in the accounts at cost. At each reporting date the investment properties are re-valued to their fair values based on a professional valuation at the balance sheet date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

Investments in subsidiary undertakings. Investments in subsidiary undertakings are stated at cost less provisions for impairment. 

Trading properties. Trading properties are included in the balance sheet at the lower of cost and net realisable value and are treated as acquired when the Group assumes the significant risks and rewards of ownership. Cost includes development costs specifically attributable to properties in the course of development. Net realisable value represents the estimated selling price less further costs expected to be incurred to completion and disposal. 

Financial instruments. 

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial Assets. All financial assets are recognised and derecognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. 

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), 'held-to-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL.

Financial assets at FVTPL. Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future; or

it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or 

it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or 

the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the Group is provided internally on that basis; or

it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL; or

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.

Loans and receivables. Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assets. Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or

default or delinquency in interest or principal payments; or

it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the normal average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. 

Cash and cash equivalents. Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

De-recognition of financial assets. The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities and equity. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. 

Equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Financial guarantee contract liabilities. Financial guarantee contract liabilities are measured initially at their fair values and are subsequently measured at the higher of:

the amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and

the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition policies set out above.

Financial liabilities. Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.

Financial liabilities at FVTPL. Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if:

it has been incurred principally for the purpose of disposal in the near future; or

it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or 

it is a derivative that is not designated and effective as a hedging instrument. 

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or 

the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the Group is provided internally on that basis; or

it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities. Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

De-recognition of financial liabilities. The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

Derivative financial instruments. The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts and interest rate swaps and foreign currency options.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately.

A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

4. Business and geographical segments

Business segments

The Group's primary reporting segments are the classification of its properties based on whether they are held for investment or trading. The secondary reporting segments are the classification of its properties based on geographic location.

a) Totals by business segment

	2008			2007
	Trading properties £'000	Investment properties £'000	Total £'000	Trading properties £'000	Investment properties £'000	Total £'000
Property rental income	-	34,884	34,884	-	18,400	18,400
Revenue	-	34,884	34,884	-	18,400	18,400
Direct property operating expenses	(65)	(5,307)	(5,372)	(62)	(1,696)	(1,758)
Impairment of trading properties	(2,802)	-	(2,802)	-	-	-
Cost of sales of trading properties	-	-	-	7	-	7
Administrative expenses	(52)	(3,750)	(3,802)	(59)	(2,954)	(3,013)
Operating (loss)/profit before (losses)/gains on investment properties and sale of subsidiary	(2,919)	25,827	22,908	(114)	13,750	13,636
(Losses)/gains on investment properties	-	(41,655)	(41,655)	-	19,614	19,614
Gain on disposal of subsidiary	-	161	161	-	-	-
Segment result	(2,919)	(15,667)	(18,586)	(114)	33,364	33,250
Unallocated corporate expenses			(132)			(1,146)
Operating (loss)/profit			(18,718)			32,104
Losses on forward currency contract			(45,006)			(11,014)
Net finance income/(costs)			2,781			(716)
(Loss)/profit before tax			(60,943)			20,374
Tax			1,388			(6,799)
(Loss)/profit for the year			(59,555)			13,575

Balance sheet

	2008			2007
	Trading Properties £'000	Investment Properties £'000	Total £'000	Trading Properties £'000	Investment Properties £'000	Total £'000
Goodwill	-	2,241	2,241	-	2,252	2,252
Property assets	2,750	492,357	495,107	5,260	406,659	411,919
Other assets	58	30,124	30,182	2	9,487	9,489
Segment assets	2,808	524,722	527,530	5,262	418,398	423,660
Unallocated corporate assets			69,941			17,149
Consolidated total assets			597,471			440,809
Segment liabilities	(164)	(16,530)	(16,694)	(11)	(9,105)	(9,116)
Unallocated corporate liabilities			(367,413)			(200,300)
Consolidated total liabilities			(384,107)			(209,416)
Additions to properties	292	30,461	30,753	109	218,880	218,989

b) Totals by geographic segment

The Group's property operations are located in Belgium, France, Germany, the Netherlands and the United Kingdom. The following table provides an analysis of the Group's revenue by geographical market:

			2008 £'000	2007 £'000
Belgium			3,495	946
France			1,863	1,145
Germany			16,212	7,960
Netherlands			13,314	8,349
			34,884	18,400

The following is an analysis of the carrying amount of segment assets and additions to properties analysed by the geographical area in which the assets are located:

	2008		2007
	Carrying  amount of segment  assets £'000	Additions to properties £'000	Carrying  amount of segment  assets £'000	Additions to properties £'000
Belgium	51,146	26	44,093	36,880
France	24,599	-	21,144	3,757
Germany	248,914	18,217	192,777	106,965
Netherlands	200,063	12,218	160,384	71,278
United Kingdom	2,808	292	5,262	109
	527,530	30,753	423,660	218,989

5. (Losses)/gains on investment properties

			2008 £'000	2007 £'000
(Decrease)/increase in fair value of investment properties			(41,989)	19,595
Profit on disposal of investment properties			334	19
			(41,655)	19,614

6. Tax

			2008 £'000	2007 £'000
UK current tax
On net income of the current year			6,444	1,024
Charge in respect of prior years			1,629	-
			8,073	1,024
Foreign current tax
On net income of the current year			1,368	1,242
Credit in respect of prior years			(2,300)	-
			(932)	1,242
Total current tax			7,141	2,266
Deferred tax (see note 16)			(8,529)	4,533
Total tax (credit)/charge			(1,388)	6,799

UK Corporation tax is calculated at 28.5% (2007: 30%) of the estimated assessable profit for the period.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The tax (credit)/charge for the year can be reconciled to the (loss)/profit per the income statement as follows:

			2008 £'000	2007 £'000
(Loss)/profit before tax			(60,943)	20,374
Tax at the UK corporation tax rate of 28.5% (2007: 30%)			(17,369)	6,112
Tax effect of :
Gain on investment properties caused by movement in exchange rates			14,812	-
Reduction in liabilities due to strengthening of euro exchange rate			(2,221)	-
Deferred tax assets not recognised			2,111	-
Effect of different tax rates in overseas subsidiaries			458	576
Indexation relief			(393)	-
Expenses that are not deductible in determining taxable profit			268	68
Effect on deferred tax balances due to the change in UK tax rate from 30% to 28% effective from 1 April 2008			320	335
Short-term timing differences			72	1
Prior year tax charge/(credit)			554	(293)
			(1,388)	6,799

In addition to the amount credited to the income statement in the year to 31 December 2008, tax amounting to £1,275,000 relating to realised exchange gains on loans to overseas operations has been credited directly to translation reserves (2007: £1,714,000 tax charge on unrealised exchange gains).

7. Earnings per share and net asset value per share

The calculations for earnings per share, based on the weighted average number of shares, are shown in the table below.

The European Public Real Estate Association ('EPRA') has issued recommended bases for the calculation of certain per share information and these are included in the following tables:

	2008			2007
	Earnings £'000	Weighted average number of shares 000's	Earnings  per share p	Earnings £'000	Weighted average number of shares 000's	Earnings  per share p
Basic EPS	(59,571)	178,435	(33.4)	13,472	166,430	8.1
Dilutive share options	-	-	-	-	67	-
Diluted EPS	(59,571)	178,435	(33.4)	13,472	166,497	8.1
Adjustments:
Revaluation losses/(gains) on investment properties	41,989			(19,595)
Profit on the sale of investment properties	(334)			(19)
Profit on the sale of subsidiary undertaking	(161)			-
Tax on the sale of investment properties	456			6
Change in fair value of financial instruments	49,585			10,776
Deferred tax on the above items	(10,200)			4,419
Diluted EPRA EPS	21,764		12.2	9,059		5.4

The calculations for net asset value ("NAV") per share are shown in the table below:

	2008			2007
	Equity shareholders' funds  £'000	Number of shares 000's	Net asset value per share p	Equity shareholders' funds  £'000	Number of shares 000's	Net asset value per share p
Basic NAV	212,545	178,435	119.1	231,214	178,435	129.6
Unexercised share options	-	-	n/a	428	400	n/a
Diluted NAV	212,545	178,435	119.1	231,642	178,835	129.5
Adjustments:
Goodwill	(2,241)			(2,252)
Fair value of trading properties	-			740
Fair value of interest rate derivatives	4,180			(379)
Deferred tax	13,193			17,378
Diluted EPRA NAV	227,673		127.6	247,129		138.2

8. Investment property

		2008 £'000	2007 £'000
At 1 January		391,242	139,593
Additions - property purchases		29,758	196,705
- capital expenditure		562	689
Acquisition of subsidiaries		-	36,847
Revaluations included in income statement		(41,956)	19,595
Disposal of subsidiary		(2,668)	-
Disposals		(4,979)	(440)
Transfer to investment property held for sale		-	(15,417)
Exchange adjustment		120,398	13,670
At 31 December		492,357	391,242

		2008 £'000	2007 £'000
Investment property held for sale
At 1 January		15,417	-
Additions - capital expenditure		141	-
Transfer from investment property		-	15,417
Revaluations included in income statement		(33)	-
Disposals		(17,345)	-
Exchange adjustment		1,820
At 31 December		-	15,417

All investment properties are stated at market value as at 31 December 2008 and have been valued by independent professionally qualified external valuers, King Sturge LLP. The valuations have been prepared in accordance with the Valuation Standards (6th Edition) published by The Royal Institute of Chartered Surveyors and with IVA1 of the International Valuation Standards.

9. Derivative financial instruments

Derivative financial instruments are included in the balance sheet as follows: 

			2008 £'000	2007 £'000
Financial assets and liabilities held for trading
Non-current assets			273	379
Current assets			13,747	-
Current liabilities			(68,407)	-
Non-current Liabilities			(4,509)	(9,710)
			(58,896)	(9,331)

The movements on derivative financial instruments are as follows: 

	Forward currency contract £'000	Interest rate caps £'000	Interest rate swaps £'000	Total £'000
Financial assets and liabilities held for trading
Fair value at 1 January 2008	(9,710)	235	144	(9,331)
Additions at cost	-	464	-	464
Revaluations included in income statement	(45,006)	(396)	(4,183)	(49,585)
Exchange difference	-	26	(470)	(444)
Fair value at 31 December 2008	(54,716)	329	(4,509)	(58,896)

10. Trading properties

		2008 £'000	2007 £'000
Land and related costs		2,750	5,260

At 31 December 2008 an impairment of £2,802,000 (2007: £nil) has been charged to the income statement to write the carrying value of the trading properties down to net realisable value.

11. Trade and other receivables

			2008 £'000	2007 £'000
Trade receivables			2,226	1,749
Other receivables			1,258	484
Prepayments and accrued income			2,347	1,548
			5,831	3,781

12. Cash and cash equivalents

			2008 £'000	2007 £'000
Cash and cash equivalents			80,240	19,562

Included in cash and cash equivalents held by the Company is an amount of £47,874,000 held on interest-bearing deposit at Merrill Lynch International Bank Limited as collateral security for forward currency contracts due to mature on 27 July 2009. 

13. Borrowings

			2008 £'000	2007 £'000
Secured at amortised cost
Bank overdrafts			-	1,825
Bank loans			283,329	169,088
Unamortised borrowing costs			(2,085)	(1,377)
			281,244	169,536
Total borrowings
Amount due for settlement within 12 months			926	2,579
Amount due for settlement after 12 months			280,318	166,957
Bank loans			281,244	169,536

On 25 July 2006 Hansteen Holdings PLC and certain of its subsidiary undertakings entered into a five year Euros 230,000,000 revolving bank loan facility with an expiry date of 25 July 2011. On 29 May 2008 following the re-financing of the Dutch portfolio of investment properties this facility was reduced to Euros 200,000,000. The loan is secured on the shares of the borrowing subsidiaries and their investment properties and is guaranteed by Hansteen Holdings PLC and the borrowing subsidiaries. Interest on the amounts drawn under the loan facility is charged at EURIBOR plus 0.8%. The Group has drawn down Euros 141,000,000 under this facility at 31 December 2008 (2007: Euros 149,000,000). 

On 25 May 2008 Hansteen Netherlands B.V. and Hansteen Ormix B.V., both Dutch subsidiaries, entered into a five year Euros 130,000,000 bank loan facility with an expiry date of 1 June 2013. The Euros 130,000,000 drawn down under the facility was used to repay existing borrowings of the Dutch subsidiaries. The loan is secured on the properties of Hansteen Netherlands B.V. and Hansteen Ormix B.V. The net sales proceeds arising from sales of investment properties are required to be used to reduce the bank loan unless re-invested in investment properties. Interest on the amounts drawn under the loan facility is charged at EURIBOR plus 1.55%. At 31 December 2008 the Group has drawn down Euros 130,000,000 under this facility. (2007: Euros nil)

The Belgian subsidiaries have a number of facilities secured on the Belgian investment properties with expiry dates ranging from 1 January 2010 to 31 March 2026 and interest charged at EURIBOR plus 0.75% to 1.5%. The aggregate amount outstanding at 31 December 2008 in respect of these bank loans is Euros 22,019,000 (2007: Euros 22,881,000).

Security for secured borrowings at 31 December 2008 is provided by charges on property with an aggregate carrying value of £462,000,000 (2007: £318,213,000)

			2008 £'000	2007 £'000
Maturity
The bank loans are repayable as follows:
Within one year or on demand			926	753
Between one and two years			2,958	45,152
In the third to fifth years inclusive			267,952	114,079
Over five years			11,493	9,104
			283,329	169,088
Undrawn committed facilities
Expiring after more than two years			57,049	59,475
		Floating rate borrowings
	%	2008 £'000	%	2007 £'000
Interest rate and currency profile
Euros	4.71	283,329	5.31	169,088

A number of interest rate caps and swaps have been entered into in respect of the amounts drawn under the loan facilities at 31 December 2008 to hedge Euro borrowings at an average rate of 4.53% (2007:4.39%)

14. Obligations under finance leases

	Minimum lease payments		Present value of  lease payments
	2008 £	2007 £	2008 £	2007 £
Amounts payable under finance leases:
Within one year	372	279	168	126
In the second to fifth years inclusive	1,490	1,131	739	553
After five years	4,734	3,877	3,536	2,818
	6,596	5,287	4,443	3,497
Less: future finance charges	(2,153)	(1,790)	n/a	n/a
Present value of lease obligations	4,443	3,497	4,443	3,497
Less: amount due for settlement within 12 months (shown under current liabilities)			(372)	(279)
Amount due for settlement after 12 months			4,071	3,218

The lease is held in I.P.I. Nossegem NV, a Belgian subsidiary and is denominated in Euros. The lease term outstanding at 31 December 2008 is 15 years (2007: 16 years). For the year ended 31 December 2008, the interest rate implicit in the lease was 5.045% (2007: 5.228%). Interest rates are fixed every five years and interest rate and capital repayments adjusted to reflect this. 

15. Trade and other payables

			2008 £'000	2007 £'000
Trade payables			1,882	1,388
Other payables			1,440	929
Accruals			3,145	2,742
Deferred income			3,452	1,857
			9,919	6,916

16. Deferred tax

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

			2008 £'000	2007 £'000
Deferred tax assets			-	2,885
Deferred tax liabilities			(10,678)	(17,194)
			(10,678)	(14,309)

The following are the major deferred tax liabilities and assets recognised and movements thereon during the reporting period.

	Revaluation of  investment properties £'000	Depreciation of investment properties £'000	Exchange Gains on Investment properties £,000	Indexation on investment properties £'000	Currency contracts and interest rate derivatives £'000	UK tax on retained earnings in overseas subsidiaries £'000	Losses £'000	Short-term timing differences £'000	Total £'000
At 1 January 2008	(16,065)	(1,208)	-	-	2,658	(320)	947	(321)	(14,309)
Disposed (see note 17)	321	31	-	-		-	(22)	327	657
Credit/(charge) to income	11,230	(1,265)	(14,601)	1,299	13,545	(1,176)	(5)	(490)	8,529
Exchange differences	(2,815)	(600)	(2,595)	231	83	-	276	(143)	(5,555)
At 31 December 2008	(7,329)	(3,042)	(17,196)	1,530	16,286	(1,496)	1,196	(627)	(10,678)

At 31 December 2008 the Group has unutilised tax losses amounting to £11,709,000 (2007: £2,796,000) available for offset against future profits. A deferred tax asset has been recognised in respect of £3,528,000 (2007: £2,796,000) of such losses. No deferred tax asset has been recognised in respect of the remaining £8,181,000 (2007: £nil) due to the unpredictability of future profit streams. Included in unrecognised tax losses are losses of £7,383,000 (2007: £nil) that will expire in 2017. Other losses may be carried forward indefinitely.

At 31 December 2008 full provision of £1,196,000 (2007: £320,000) has been made for temporary differences associated with undistributed earnings of overseas subsidiaries.

17. Disposal of subsidiary

On 31 October 2008 the Group disposed of 100% of the issued share capital of Erangra NV, a company incorporated and registered in Belgium for cash consideration of £1,333,000 net of disposal expenses. The company was originally acquired on 31 August 2007 and engaged in property investment and management in Belgium. The net assets of Erangra NV at the date of disposal and at 31 December 2007 were as follows:

		31 October 2008 £'000	31 December 2007 £'000
Investment properties		2,668	2,739
Trade and other receivables		27	56
Cash and cash equivalents		802	776
Trade and other payables		(81)	(119)
Bank loans		(1,387)	(1,395)
Deferred tax liabilities		(657)	(679)
Attributable goodwill		11	11
Translation differences on net assets		(211)	(113)
		1,172	1,276
Gain on disposal		161
Total consideration		1,333
Satisfied by:
Cash		1,400
Less disposal expenses		67
		1,333
Net cash inflow arising on disposal:
Cash consideration net of disposal expenses		1,333
Cash and cash equivalents disposed of		(802)
		531

18. Notes to the consolidated cash flow statement

			2008 £'000	2007 £'000
(Loss)/profit for the year			(59,555)	13,575
Adjustments for:
Share-based employee remuneration			(562)	669
Depreciation of property, plant and equipment			24	16
Impairment of trading properties			2,802	-
Losses/(gains) on investment properties			41,655	(19,614)
Gain on sale of subsidiary			(161)	-
Losses on forward currency contracts			45,006	11,014
Dividends from subsidiaries			-	-
Net finance income/(costs)			6,678	1,720
Tax			(1,388)	6,799
Operating cash inflows/(outflows) before movements in working capital			34,499	14,179
Increase in trading properties			(292)	(109)
Increase in receivables			(305)	(1,107)
Increase in payables			764	2,908
Cash generated by/(used in) operations			34,666	15,870
Income taxes paid			(4,339)	(3,559)
Interest paid			(12,402)	(3,837)
Net cash inflow/(outflow) from operating activities			17,925	8,475

19. Gearing ratio

The gearing ratio at the year end is as follows:

	2008 £'000	2007 £'000
Debt	285,687	173,033
Cash and cash equivalents excluding deposits given as collateral for known liabilities	(32,367)	(19,562)
Net debt	253,320	153,471
Equity	212,545	231,214
Net debt to equity ratio	119.2%	66.4%
Carrying value of investment and trading properties	495,107	411,919
Net debt to value ratio	51.2%	37.3%

Debt is defined as borrowings and obligations under finance leases, as detailed in notes 13 and 14. 

20. Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position as well as the financial position of the Group, its cash flows, liquidity position and the borrowing facilities are described in the Joint Chief Executives' Report on pages 9 to 10. In addition note 34 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. 

The Group has a good debt maturity profile with long term funding in place. The current economic conditions have created further uncertainty as to the principal risks and uncertainties facing the Group as noted above. In light of these risks the Group has considered its forecast cash flows and forecast covenant compliance taking into account:

The impact on the various loan covenants of further reductions in the property valuations, decline in rental income and increase in interest rates:

The potential impacts of the current economic uncertainty over the Group's operating cash flow generation, including tenancy failures and increased vacancies.

These forecasts show that the Group has sufficient headroom and available finance to manage its business risks successfully despite the current uncertain economic outlook. Based on this assessment, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the annual report and accounts.

21. Events after the balance sheet date

On 1 April 2009 the Board declared that an interim dividend of 3.2 pence per ordinary share will be paid on 15 May 2009 to shareholders on the register at the close of business on 17 April 2009.

ENDFR UAAKRKRRSRAR

---

Related Shares:

HSTN.L