28th Mar 2006 07:03
Marylebone Warwick Balfour Grp PLC28 March 2006 FOR IMMEDIATE RELEASE 28th March 2006 MARYLEBONE WARWICK BALFOUR GROUP PLC INTERIM RESULTS FOR SIX MONTHS ENDED 31st DECEMBER 2005 HIGHLIGHTS GROUP • Dramatic turnaround in profitability - pre-tax profits of £2.7m against losses of £6.6m for the same period last year. • Earnings per share rise to 1.0p compared to losses per share of 4.9p last time. • Adjusted Equity Shareholders' Funds, reflecting unrealised surplus over book value of AIM listed subsidiaries, amounts to £188m or 172p per share. • Equity Shareholders' Funds increase by 23% to 124p a share at 31st December 2005, up from 101p at June 2005 and 82p this time last year. • Net assets stand at £189m, up from £160m at 30th June 2005. • Gross property assets amount to £517m at 31st December 2005. "We believe that the prospects for each of our three dynamic businesses are veryencouraging; they are all well managed and well funded, and we consider theirfuture to be exciting as they continue to deliver shareholder value." EricSanderson, Chairman, MWB Group MALMAISON AND HOTEL DU VIN • Successful raising of £105m of equity and debt capital to fund expansion. • Total half-year revenue rose 15% to £36.0m against £31.2m for the comparable period last year. • Substantial uplift in EBITDA by 37% to £11.1m compared to £8.1m this time last year. • Occupancy firm at 81% for the period across the Malmaison group for the period despite expanded portfolio. • Average room rates increase to £105 for the period against less than £100 for the same period last year. • Food and Beverage performed strongly advancing by 16% to £15.5m for the six months ended December 2005, in comparison to £13.3m for the same period last year. • A 40% surge in on-line bookings through Malmaison and Hotel du Vin web sites. • New award-winning Malmaison Hotel opened in Oxford - well received by media and public. • Oxford awarded Retailers' Retailer Award for Best UK Venue 2006. • Two further Malmaison hotels under development - Liverpool and Reading. • Two new sites acquired for Hotel du Vin - Cambridge and York. "There has been a strong performance across the group with healthy uplifts inrevenue and EBITDA, as the impact of stable occupancy levels combined with anincrease in average room rates and synergies achieved from combining the twobusinesses has flowed through to the income statement" Robert B. Cook, ChiefExecutive, Malmaison Group. MWB BUSINESS EXCHANGE PLC • Successful AIM listing - raised £15m before costs through placing of 18.75m new shares. • Cash used to eliminate debt and finance planned expansion. • Revenue per available workstation (REVPAW) for the month of December 2005 rose 22% to £6,980 from £5,700 for December 2004. Average REVPAW for the quarter to December 2005 was £7,210. • Revenue per occupied workstation (REVPOW) for the month of December 2005 rose 13% to £8,435 from £7,450 for December 2004. Average REVPOW for the quarter to 31st December 2005 was £8,580. • Meeting and Conference Rooms revenue advanced 36% over the comparable six month period to 31st December 2004 • 25% increase in revenue for the period to £35.9m against £28.6m for the six months ended 31st December 2004. • Dramatic improvement in EBITDA to £2.7m, compared to £1.9m for the full year to 30th June 2005. • Pre-tax profits were £2.2m, against a loss of £4.1m for the year ended 30th June 2005. "We aim to continue growing the business in a controlled and sustainable waywith the focus on revenue and profit generation for our shareholders. Ourobjective is not to be the biggest per se but we do want to be the best at whatwe do for the benefit of all stakeholders. This is being achieved throughcontinued focus on our clients and the enhancement of our services," JohnSpencer, Chief Executive, MWB Business Exchange Plc. LIBERTY PLC • First half store sales level with same time last year at £19.7m, despite difficult trading environment. • Pre-Christmas trading produced record 5.4% sales increase while last full week before Christmas saw a 20.4% uplift in store sales. • Autumn launch of Liberty of London luxury brand - enthusiastic reception by both fashion media and customers alike. • Pre-tax profits of £0.4m compared to losses of £2.5m this time last year. • Potential for Liberty to become major global luxury brand. • Focused retailing activities into Tudor House as Regent Street premises now vacated. "The first half of the year has, considering last Summer's difficultcircumstances, been pleasing and reflects the solid foundations which have beenlaid for Liberty's future profitability. The success of our Liberty of Londonluxury brand to date gives us confidence that, over the medium term, we cancreate an important London retailing landmark capable of generating profits andshareholder value, together with a globally distributed luxury brand." IainRenwick, Chief Executive, Liberty Plc. Contact: Marylebone Warwick Balfour Group Plc Tel: 020 7706 2121 Richard Balfour-Lynn, Chief Executive Andrew Blurton, Joint Finance Director Baron Phillips Associates Tel: 020 7920 3161 Baron Phillips CHAIRMAN'S STATEMENT This has been a period of further significant progress as many of thefoundations laid over the past few years are coming to fruition. As a result itis satisfying to be able to report on positive performances from all theconstituent parts of the Group with the net effect of a profit for the Group asa whole. As shareholders will see from the attached Chief Executive Reviews, each of thethree main operating companies within the Group: MWB Business Exchange Plc,Liberty Plc and the Malmaison Group, have been active on the corporate front.MWB Business Exchange Plc successfully completed its AIM listing in December,raising new capital in the process, Malmaison raised £105m of equity and debt tofund its planned expansion, while Liberty Plc launched its new Liberty of Londonluxury brand and completed a major property sale, becoming debt free in theprocess. Our stated corporate objective is to deliver shareholder value, and perhapsnothing reflects this better than last December's flotation of our servicedoffice division, MWB Business Exchange Plc. Through a Placing of 18.75m newshares we raised £15m of new capital for the company, which is being used tofund MWB Business Exchange's planned expansion. At the time of the listing, MWB Business Exchange Plc was valued by the StockMarket at £55m. We have retained a 68% interest in this company and its valuecompares very favourably with its Equity Shareholders' Funds of £3.5m at 31stDecember 2005. Since then, the shares have risen further and today our stake inMWB Business Exchange Plc is valued at approximately £52m. Shortly afterflotation, we took the opportunity to pay down the remaining debt within MWBBusiness Exchange Plc, and this listed subsidiary is therefore now totally debtfree. At Malmaison, the UK's leading boutique lifestyle hotel business, its impliedvalue as a result of The Royal Bank of Scotland's £30m equity investment in July2005 is significantly higher than the net asset value of our retained interestin this business. We believe this is further underpinned by the continuinggrowth being achieved by the Malmaison management. At Liberty Plc, where we have a 68% stake in this West End emporium, tremendousadvances have been achieved against a difficult retail trading environment,although further progress is still to be made. Following the sale of RegentHouse and Lasenby House for £66.5m last Spring, Liberty Plc became debt freewith the resultant positive impact on its operating profit. We have now vacatedthe Regent Street premises in line with our plans stated at the time of sale.In addition, the very successful repositioning of the retail business is helpingLiberty Plc buck the retail trend through a better product mix and the launch ofthe highly acclaimed Liberty of London luxury brand. The Group results for the six months ended 31st December 2005 have been preparedin accordance with International Financial Reporting Standards ("IFRS"). Theadoption of IFRS has no effect on the underlying operations of the Group, itsstrategy and management, nor on the cash flows derived from the Group's businessoperations. These standards do, however, affect the way in which suchactivities are presented in the Group accounts. We have also adjusted the comparative figures in the attached results for thesix months ended 31st December 2004 and for the year ended 30th June 2005, inorder that they too are presented on the same IFRS basis and I refer to theserestated figures in my commentary below. Note 15 in the interim statement setsout how IFRS has affected the way in which we are now required to report theresults and financial position of the Group. Most of these new standards have affected the presentation of the Group'sresults in some way. The most significant impact for MWB has been that ourshort leasehold properties are now being recorded at cost rather than atvaluation. As a result of the adoption of IFRS, some £49m, representing 44p pershare, has been deducted from our previously reported Equity Shareholders' Fundsat 30th June 2005. Our results for the six months to 31st December 2005 reflect the positivetrading performances of all the Group companies. I am pleased to be able toreport that we produced a Group pre-tax profit for the period of £2.7m comparedto a loss of £6.6m for the six months ended 31st December 2004. This hasresulted in earnings per share of 1.0p against a loss of 4.9p a share in thecorresponding period and Equity Shareholders' Funds per share of 124p, up from82p at 31st December 2004 and 101p a share at the June 2005 year end. The Group's two listed subsidiaries, MWB Business Exchange Plc and Liberty Plc,continue to be consolidated in our accounts. Both of these subsidiaries arelisted on the Alternative Investment Market of the London Stock Exchange and,therefore, a market value for the Group's shareholding in each of the twocompanies is readily available. In order that shareholders are kept fullyinformed of the Group's underlying value, we have also evaluated the AdjustedEquity Shareholders' Funds of the Group in the Accounts Review that forms partof the interim statement. This includes the surplus of the Stock Market valueat 31st December 2005 of these two investments over the net asset value at whichthey are recorded in the accounts. I am pleased to report that the Adjusted Equity Shareholders' Funds of the Groupat 31st December 2005 amounts to £188m or 172p per MWB share. This is some 16pper share higher than the Company's share price of 156p per share at the date ofthis statement, confirming a strong underlying value for the Company's shareprice. It is this value of 172p per share which is the benchmark used by theBoard to value the Group and from which we plan to continue to demonstratecontinuing increases in shareholder value. In addition to this, shareholders should be aware that the Adjusted EquityShareholders' Funds of 172p per share above does not include any increase invalue for the Malmaison business, as this is not currently a separately listedcompany for which a market value can be readily demonstrated. However, theBoard is confident that the value of the Group's share in this business issignificantly higher than the £76.2m or 70p per share for this business, withinEquity Shareholders' Funds, thus further demonstrating the underlying equityvalue of the Group. Our gross debt levels and resultant gearing have continued to be reduced, thusunderpinning an increased value for shareholders both now and in the future. At31st December 2005, net debt amounted to £302m, a substantial reduction from thefigure of £382m at 30th June 2005. If we had continued to report as previouslyunder UK GAAP, and therefore not under the new requirements of IFRS, thisreduction in debt would have shown a reduction in gearing from the previouslyreported 179% to approximately 125% at this period end. After adopting IFRS,our gross debt level remains the same at £302m, and the reported gearing figurehas been reduced to 160%. Outside our main operational activities we continue to own two key Londonhotels: the Park Lane Marriott and the West India Quay Marriott. As announcedin November 2005, we sold the five-star Radisson SAS hotel in Argyle Street,Glasgow for £52.5m, some 18 months ahead of plan and higher than the June 2005valuation. This enabled us to repay £34m of debt secured on the hotel and tooktotal asset sales over the past two years to more than £275m. The performance of our three main operating businesses has been very positiveand gives us great confidence for the future. We believe that the prospects foreach of our three dynamic businesses are very encouraging; they are all wellmanaged and well funded, and we consider their future to be exciting as theycontinue to deliver shareholder value. Eric SandersonChairman 28th March 2006 MALMAISON AND HOTEL DU VIN - CHIEF EXECUTIVE'S REVIEW Once again this has been an extremely successful period for the Malmaison andHotel du Vin group, with results continuing to exceed expectations as we reapthe rewards of the management strategies started two years ago. There has beena strong performance across the group with healthy uplifts in revenue andEBITDA, as the impact of stable occupancy levels combined with an increase inaverage room rates and synergies achieved from combining the two businesses hasflowed through to the income statement. The main corporate feature of the half-year was the successful raising of £105mof equity and debt to enable the UK's leading boutique lifestyle hotels group tolay the foundations of our planned expansion. The Royal Bank of Scotland ("RBS") provided £30m of equity, taking a 17.5% shareholding, while Bank ofScotland and RBS underwrote the senior debt funding. The finance is being usedto expand the Malmaison Group from its present 16 operating hotels to at least25 over the next three years. We successfully launched a new Malmaison in Oxford last November. The 94-roomhotel has been created from the former Oxford prison, reflecting the group'sstrategy of breathing new life into historic iconic buildings with characterwhere "we create dynamic hotels for dynamic cities". The Oxford site has beenwell received by the press and public alike and I am pleased to report that thenew hotel was awarded the Retailers' Retailer Award for Best UK Venue 2006. We currently have two further hotels under development and two additional siteshave been acquired. These include a new-build Malmaison in Liverpool's PrincesDock which is due for completion at the end of 2006 and will provide 130 rooms.Also included is Reading, where we are refurbishing the former Great Westernstation hotel in the town centre for a 75 room Malmaison, incorporating oursuccessful high street concept 'Cafe Mal', which we anticipate opening duringthe first half of 2007. Elsewhere we have announced that two new sites have been acquired for Hotel duVin in Cambridge and York, both of which will offer 42 rooms. The Yorkdevelopment reflects our strategy of expanding the HdV portfolio across England,as we seek more northern properties to complement our successful Harrogatehotel. These hotels are due to be completed in the second and third quarters of2007 respectively. We anticipate that by the end of 2007 we will have taken the total number ofhotels to at least 20 and we will be well on our way to achieving our mediumterm objective of 25 properties. We plan to acquire a second Malmaison site inLondon and have examined a number of potential properties on the western part ofthe capital to complement our Charterhouse Square operation in the City. Results for the six months ended 31st December 2005 reflect our stated strategyof ensuring that the Malmaison Group is pre-eminent in its market sector. Totalrevenue for the period advanced by some 15% to £36.0m against £31.2m forMalmaison and Hotel du Vin for the comparable period in 2004. Importantly EBITDArose substantially by 37% to £11.1m compared to £8.1m this time last year. Overall occupancy remained firm at just over 81% for the period despiteadditional rooms coming on stream at HdV Henley and Malmaison Oxford, togetherwith extra accommodation becoming available following the completion ofrefurbishment programmes at HdV Winchester, HdV Tunbridge Wells and MalmaisonGlasgow. Equally important is that we have been able to increase average roomrates across the Group over the period to £105 against less than £100 for thesame period last year. There was also a pleasing uplift of 16% in our Food and Beverage revenue duringthe period to £15.5m, from £13.3m for the same period last year, reflecting thepopularity of our brasserie and bistro operations within the two brands. It isalso worth noting that direct room expenditure of £1.7m for the six months endedDecember 2005 had remained virtually unchanged from the position a year ago,despite the higher number of rooms available in this half, thereby enhancingshareholder return. Our improved performance also reflects our more cost-effective approach to thegroup, a component being the new central reservations system, enabling us tohave greater control over both bookings and pricing, as well as directlycontrolling third party transaction costs. Interestingly, the period saw a 40%surge in bookings through the Malmaison and HdV websites, bringing furtherevidence of the synergies we outlined at the time of our acquisition of HdV inOctober 2004. The second half of the year has started well and I am confident that the year'soutturn will show further advances on the previous year. Our next focus ofattention in growing the two brands is the human resource element. The Group'sHR development strategy, outlined at the time of last summer's fund-raising, isproving very successful with a robust succession plan for our existingemployees, while at the same time creating new talent from within the group toallow us to grow in line with our stated plans. Therefore I am extremelyconfident that we will continue to expand and develop the group at a sustainablelevel and to that end I view the future with great confidence. Robert B. CookChief ExecutiveMalmaison Group 28th March 2006 MALMAISON AND HOTEL DU VIN OPERATING REVIEW Malmaison has continued to expand organically during the six months ended 31stDecember 2005. The key performance indicators for the division, together with its tradingperformance in recent periods, are summarised below:- ________________________________________________________________________________________________________________________ Six months Year ended ended 31st December 30th June 2005 2005*Malmaison---------Total turnover £'000 21,700 38,723Average occupancy for period 78% 78%Average room rate for period £103 £101EBITDA £'000 7,646 11,953Number of operating hotels at period end 9 8 Hotel du Vin------------Total turnover £'000 14,257 18,382Average occupancy for period 87% 82%Average room rate for period £111 £110EBITDA £'000 3,428 4,230Number of operating hotels 7 7 Combined Malmaison and Hotel du Vin----------------------------------- £'000 £'000EBITDA 11,074 16,183Pre-tax profit 2,379 333Total recognised income and expense 7,522 23,639Property assets 272,328 251,855Debt (184,931) (169,494)MWB Equity Shareholders' Funds in Malmaison and Hotel du Vin 76,223 81,248 MWB Equity Shareholders' Funds in pence per share 70p 74p________________________________________________________________________________________________________________________*Restated to reflect IFRS reporting requirements. MWB BUSINESS EXCHANGE PLC - CHIEF EXECUTIVE'S REVIEW Clearly the highlight of the period was the company's successful listing on AIMat the end of last year, which raised £15m before costs through a placing of18.75m new shares. As we stated at the time, the money has been used to reducedebt and finance the planned expansion of MWB Business Exchange Plc. Part ofthis was used to finance the acquisition of two leasehold business centres inLeeds and, since the year-end, a new centre in Cannon Street, in the heart ofthe City. The performance of MWB Business Exchange Plc over the period has producedconsistent occupancy levels with increasing income streams. Average occupancyfor the six months to 31st December 2005 was a little over 80%, a near 10%increase over the comparable period a year ago. Since the year-end, I ampleased to report that occupancy levels have been maintained at a minimum of 80%and we have implemented valuable rate increases resulting in higher revenue peroccupied workstation. The strengthening of demand witnessed during the second quarter of the periodhas continued as office markets generally, and Central London in particular, hasbecome firmer. In London's West End, office rents have continued their upwardtrend as a shortage of grade A space becomes apparent. This is having apositive knock-on effect in the flexible office market, with our lead flowincreasing some 42% in the first quarter of 2006 compared to the same period ayear ago. Our results for the six month period reflect both better and more stable marketconditions, as well as a number of successful marketing initiatives aimed atproviding customers with a more integrated offering. This has produced a 25%increase in revenue to £35.9m compared to £28.6m for the six months ended 31stDecember 2004, while operating EBITDA has improved to a positive £2.7m against anegative £0.3m in the same period a year ago. This has resulted in pre-taxprofits of £2.2m, which continues the strong improvement and compares to pre-taxlosses of £2.6m for the six months ended 31st December 2005. As we stated at the time of the listing, our aim is to drive up revenue perworkstation and over the past year we have achieved some significant gains.Revenue per available workstation ("REVPAW") has risen 22% to £6,980 for themonth of December 2005 against £5,700 for December 2004. At the same time,revenue per occupied workstation ("REVPOW") showed a 13% increase at £8,435compared to £7,450 for December 2004. These December figures take into accountnormal seasonality; average REVPAW and REVPOW for the quarter ended 31stDecember 2005 were £7,210 and £8,580 respectively, demonstrating the continuedgrowth of our business. A key feature of our strategy has been to develop initiatives aimed atmaximising revenue and contribution, enhancing client service quality anddeveloping other profitable income streams that complement MWB BusinessExchange's current offer. One of the period's undoubted successes was ourMeeting and Conference Rooms division, which we have been developing over thepast year or so. The concept here is to satisfy the growing demand foroutsourced meeting and conference rooms within a professional and business-likeenvironment from external clients, in addition to demand from existing clients.This is proving highly successful and revenue generated from this source grew by36% over the comparable six month period to 31st December 2004. On an annualbasis to 31st December 2005 this increased by 44% and is attributable to theflexibility we offer businesses looking for meeting or conference rooms on ashort term basis. We are continually seeking to expand this division and we now have approximately200 meeting and conference rooms able to serve both our existing clients and thewider business market. Our approach is perhaps best illustrated by the latestacquisition in Cannon Street, London EC4 where we are dedicating an entire floorin the 34,000 sq ft office building to meeting and conference rooms providing anextremely flexible offering to the business market. Another area of undoubted success has been the development of MWB BusinessExchange's Corporate Real Estate Partnerships. This division focuses on theprovision and delivery of flexible property solutions to corporate end users,property owners and landlords. Our approach here is illustrated by two deals in Leeds in July 2005 and two inSheffield in January 2006. In Leeds we sourced serviced office space for theNHS and Centrica plc in two separate buildings, totalling 37,000 sq ft, providedon licences which matched MWB Business Exchange's leases either directly orthrough break clauses, thus eliminating any contingent property risk to MWBBusiness Exchange Plc or to our clients. In Sheffield we have secured a 10-year agreement to manage 35,000 sq ft offlexible office space across two buildings on behalf of the owners. Thebuildings have been re-branded and are operated as part of our City ExecutiveCentres division. Both these transactions reflect MWB Business Exchange's ability to combine ourexcellent property skills with our management and marketing expertise, enablingus to source and convert space into flexible accommodation for landlords, ownersor occupiers. We believe that demand for our Corporate Real Estate Partnerships will growstrongly over the medium term as occupiers find the concept of flexibleshort-term accommodation increasingly attractive and landlords harness ourskills to provide income generation from appropriate unlet buildings. Theadoption of International Financial Reporting Standards by UK listed companiesduring 2005 and the current year, may also present us with the opportunity toprovide clients with flexible licences and property solutions, thus removingtheir exposure to these newly recorded accounting liabilities. Over the past 12 months we have made great strides in changing perceptions ofthe flexible office market. Our strategy has been to reduce property risk bypursuing an expansion strategy through operating and management agreements,other management agreements and back-to-back leases, which reduce operationalrisk by balancing our property portfolio. We have also dramatically reduced ourdependence on clients who occupy over 15% of a centre's available space. Todaythese major space users occupy only 17% of total workstations in our leasedportfolio, thus eliminating much of the financial risk when those clients move.In addition, we monitor closely the level of our reliance on major industrysectors, to ensure we are not dependent on a specific sector of the economy. MWB Business Exchange Plc is the UK's second largest provider of flexible officespace. We aim to continue growing the business in a controlled and sustainableway with the focus on revenue and profit generation for our shareholders. Ourobjective is not to be the biggest per se but we do want to be the best at whatwe do for the benefit of all stakeholders. This is being achieved throughcontinued focus on our clients and the enhancement of our services. To that endwe believe the Company has an exciting and profitable future and we look forwardto the year ahead with confidence. John SpencerChief ExecutiveMWB Business Exchange Plc 28th March 2006 MWB BUSINESS EXCHANGE PLC OPERATING REVIEW Our serviced office business operates in four distinct areas; four-star MWBBusiness Exchange Plc; mid-market City Executive Centres; Corporate PropertyPartnerships; and Meeting and Conference Rooms. The key performance indicators for this division and the trading and balancesheet performance of the operations in recent periods, are summarised below:- ________________________________________________________________________________________________________________________ Six months Year ended ended 31st December 30th June* 2005 2005Operating statistics--------------------Turnover £'000 35,851 59,806Occupancy at period end 80% 80%REVPAW per month at period end £6,980 £6,781REVPOW per month at period end £8,435 £8,400EBITDA £'000 2,722 2,260Number of operating centres at period end 34 34Number of operating and management agreements at period end 17 17 Financial performance---------------------Operating pre-tax profit/(loss) £'000 2,172 (4,090)Total recognised income and expense from ordinary activities £'000 2,172 (3,877) Balance sheet composition-------------------------Property assets £'000 17,102 15,688Net cash/(net debt) £'000 7,530 (14,009)MWB Equity Shareholders' Funds in MWB B usiness Exchange £'000 3,462 (22,576)MWB Equity Shareholders' Funds in pence per share 3p (20p)________________________________________________________________________________________________________________________ *Restated to reflect IFRS reporting requirements. LIBERTY PLC - CHIEF EXECUTIVE'S REVIEW The results for Liberty Plc for the six months ended 31st December 2005 reflecta period of two distinct and contrasting quarters. The first quarter wasdramatically affected by last July's tragic events in Central London resultingin the inevitable downturn in trading but, despite the general retailingmalaise, we delivered a sales surge in the Autumn followed by an even strongerperformance in the run-up to Christmas. In the six weeks of trading before Christmas Liberty Plc recorded a 5.4% salesincrease at our West End emporium over the same period in the previous year,while in the last week before Christmas the store enjoyed one of its best everperformances with a 20.4% sales uplift. Despite the difficulties experienced over the summer months referred to above,total store sales for the six months ended 31st December 2005 were level at£19.7m. Excluding concession sales, store turnover was broadly steady at £16.3mcompared to £16.6m for the same period last year. Across the whole of LibertyPlc there was a 7% decrease in sales to £22.7m from £24.4m, mainly reflectinglower sales in the Liberty fabric wholesale business. We are addressing thistrend in wholesale and have already made improvements in this area of ourbusiness. Liberty Plc produced a pre-tax profit for the period of £0.4m against a loss of£2.5m for the comparable six months to December 2004. This profit reflects thefull impact of last April's £66.5m property sales which enabled us to eradicateLiberty's debt and, consequently, interest charges. Profitability was alsohelped by the one-off sale of a minor trademark that was not part of our coreoffering, contributing £1.7m. Excluding the sale of the trademark, underlyinglosses were reduced by £1.1m for the half year in comparison to the six monthsended 31st December 2004. One of the major events of the period was the Autumn launch of our first rangeof Liberty of London luxury goods. I am pleased to report that this initialrange was met with enthusiasm by both fashion media and customers alike,confirming our belief that Liberty Plc has the potential to become a majorglobal luxury brand. We regard the Autumn launch as a stepping stone to the creation of a long termsustainable range of Liberty luxury products occupying the store's centralatrium. Over the course of this year we will be extending the initial rangefrom leather bags and small leather products into swimwear, lingerie, nightwearand soft home furnishings. Our objective is to increase the level of Liberty ofLondon products sold through the store so that within three years the luxurybranded goods will account for between 15% - 20% of the total store merchandise. Another important feature of the Liberty of London luxury brand is its impact oncustomers' perception of the store. Liberty is attracting a different customerbase than has traditionally been the case. Increasingly our customers aredesign and fashion conscious Londoners and we are now less dependent on overseastourists than ever before. As I have commented in the past the Congestion Charge continues to be ahindrance to trade and last year's increase to £8 a day is a further irritation. I can also report that trading in the second half of the financial year hascontinued strongly, with improved margins being achieved. As we stated inSeptember, we have been refocusing our retailing activities into Tudor House onGreat Marlborough Street as we have now vacated our Regent Street premises.This has now been completed and while there may be an initial short-term declinein sales, we believe overall profitability will be enhanced with theconcentration of our luxury goods brand offer in the iconic and historicalbuilding. Finally, I would like to welcome Crispin Mardon to the Board as FinanceDirector. Crispin takes over the role from Fraser Allan who leaves the Companyat the end of March. The first half of the year has, considering last Summer's difficultcircumstances, been pleasing and reflects the solid foundations which have beenlaid for Liberty's future profitability. The success of our Liberty of Londonluxury brand to date gives us confidence that, over the medium term, we cancreate an important London retailing landmark capable of generating profits andshareholder value, together with a globally distributed luxury brand. Iain RenwickChief ExecutiveLiberty Plc 28th March 2006 LIBERTY PLC OPERATING REVIEW During the six months ended 31st December 2005, Liberty Plc continued itstransformation into a vibrant and dynamic retail destination. Liberty Plc hasonce again bucked the downturn in consumer spending over this period. The historical trading and balance sheet performance of Liberty Plc aresummarised below:- ________________________________________________________________________________________________________________________ Six months Year ended ended 31st December 30th June 2005 2005* £'000 £'000Financial performance---------------------Turnover 22,675 44,829Operating EBITDA 1,133 213Profit on disposal of minor trademark and properties 1,720 5,006Pre-tax profit/(loss) 354 (380)Total recognised income and expense 1,010 3,779 Balance sheet composition-------------------------Property assets 28,609 27,911Cash/(debt) 3,892 3,616MWB Equity Shareholders' Funds in Liberty Plc 27,680 27,492MWB Equity Shareholders' Funds per MWB share, in pence per share 25p 25p________________________________________________________________________________________________________________________*Restated to reflect IFRS reporting requirements. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ INTRODUCTION------------ The Chairman's Statement and Divisional Reviews provide information on theGroup's principal operations and the Board's expectations for the future. ThisAccounts Review covers in greater depth the more significant features of theaccounts for the six months ended 31st December 2005, which include anindependent valuation of the Group's properties at that date. All comparative information in these accounts at 31st December 2004 and 30thJune 2005, together with the financial results for the periods then ended andsupporting analyses, have been restated from the previous basis of UK GenerallyAccepted Accounting Practice ("UK GAAP"), to the basis of InternationalFinancial Reporting Standards ("IFRS"). EQUITY SHAREHOLDERS' FUNDS-------------------------- During the six months ended 31st December 2005 there has been an increase inshareholders' funds from £110.8 million (restated under IFRS) at 30th June 2005to £135.5 million at 31st December 2005. As a result, equity shareholders'funds per share have increased during the period by 23p to 124p per share. Thisis summarised as follows:- Six months ended 31st December 2005 Pence £'000 per shareEquity shareholders' funds at beginning of period prepared in accordancewith UK GAAP 159,522 145pIFRS adjustments announced on 16th February 2006 (48,720) (44p) _________ ______Equity shareholders funds' at beginning of period prepared in accordancewith IFRS 110,802 101p Revaluation surplus on Group property portfolio 13,571 12pGain on minority interests in MWB Business Exchange Plc and Malmaison 9,401 9pRetained profit for the period 1,147 1pChanges in fair value of derivative financial instruments 1,448 1pDeferred tax on properties at valuation (890) -Other movements 49 - _________ ______Equity shareholders' funds at end of the period 135,528 124p _________ ______ OTHER FINANCIAL INFORMATION--------------------------- Under IFRS, the Group's interests in its two listed subsidiaries, MWB BusinessExchange Plc and Liberty Plc, continue to be consolidated and their freehold andlong leasehold properties recorded at current valuation. These propertyvaluations reflect only the values of the properties themselves and therefore donot reflect the current market value of the Group's shareholdings in these twolisted subsidiaries. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ OTHER FINANCIAL INFORMATION (continued)---------------------------------------Both subsidiaries are listed on the Alternative Investment Market of the LondonStock Exchange and, therefore, a market value for the Group's shareholding ineach of the two companies is readily available. In order that shareholders are aware of the underlying value of the Group, theincrease in Equity Shareholders' Funds as a result of assessing these twoinvestments by reference to their market value at 31st December 2005, is set outbelow:- Pence per £'000 share Equity Shareholders' Funds prepared under IFRS, as above 135,528 124p Unrealised surplus on MWB Group 67.9% shareholding in MWB Business Exchange Plc 39,170 36p Unrealised surplus on MWB Group 68.3% shareholding in Liberty Plc 13,329 12p _______ _____Adjusted Equity Shareholders' Funds at 31st December 2005 188,027 172p _______ _____ In addition to this, shareholders should be aware that the Adjusted EquityShareholders' Funds of 172p per share above does not include any increase invalue for the Malmaison business, as this is not currently a separately listedcompany for which a market value can be readily demonstrated. However, theBoard is confident that the value of the Group's share in this business issignificantly higher than the £76.2m or 70p per share for this business withinEquity Shareholders Funds, thus further demonstrating the underlying equityvalue of the Group. NET ASSET VALUE--------------- The net assets of the Group are financed primarily by equity shareholders' fundsand minority interests. Minority interests of the Group increased during thesix months ended 31st December 2005 as a result of the sale of a 17.5% interestin the equity of Malmaison Holdings Limited in July 2005, and the Admission toAIM and placing of a 25% equity interest in MWB Business Exchange Plc, inDecember 2005. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ NET ASSET VALUE (continued)--------------------------- The sources of finance of the Group at 31st December 2005 at the previous yearend were as follows:- 31st December 30th June 2005 2005 £'000 £'000 Equity shareholders' funds 135,528 110,802Minority interests 53,390 48,890Net asset value at period end 188,918 159,692 The analysis of net assets across the Group's operations at 31st December 2005,and at the previous period ends, is as follows:- Total assets less current Equity liabilities and (Net debt) Minority shareholders' provisions /cash Net assets interests fundsAt 31st December 2005 £'000 £'000 £'000 £'000 £'000---------------------Malmaison and Hotel du Vin 266,602 (184,931) 81,671 (5,448) 76,223Hotel investments 165,965 (105,970) 59,995 (30,182) 29,813Liberty Plc 38,841 3,892 42,733 (15,053) 27,680MWB Business Exchange Plc (2,702) 7,530 4,828 (1,366) 3,462West India Quay 918 2,854 3,772 (1,257) 2,515Group debt, less cash and other assets 21,361 (25,442) (4,081) (84) (4,165) _______ ________ _______ _______ _______ 490,985 (302,067) 188,918 (53,390) 135,528 _______ ________ _______ _______ _______Equity Shareholders' Funds per share 124p ____ Total assets less current Equity liabilities and Minority shareholders' provisions (Net debt) Net assets interests fundsAt 31st December 2004* £'000 £'000 £'000 £'000 £'000---------------------Malmaison and Hotel du Vin 229,069 (163,383) 65,686 - 65,686Hotel investments 195,064 (141,553) 53,511 (14,404) 39,107Liberty Plc 93,084 (43,828) 49,256 (14,279) 34,977MWB Business Exchange Plc (8,989) (18,115) (27,104) - (27,104)West India Quay 50,128 (20,430) 29,698 (14,185) 15,513Group debt, less cash and other assets (1,161) (37,862) (39,023) (91) (39,114) _______ ________ _______ _______ _______ 557,195 (425,171) 132,024 (42,959) 89,065 _______ ________ _______ _______ _______Equity Shareholders' Funds per share 82p ___ *Restated to reflect IFRS reporting requirements. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ NET ASSET VALUE (continued)--------------------------- Total assets less current Equity liabilities and (Net debt) Minority shareholders' provisions /cash Net assets interests fundsAt 30th June 2005* £'000 £'000 £'000 £'000 £'000-----------------Malmaison and Hotel du Vin 250,742 (169,494) 81,248 - 81,248Hotel investments 218,087 (140,500) 77,587 (18,566) 59,021Liberty Plc 39,376 3,616 42,992 (15,500) 27,492MWB Business Exchange Plc (8,567) (14,009) (22,576) - (22,576)West India Quay 25,116 (132) 24,984 (14,757) 10,227Group debt, less cash and other assets 17,207 (61,750) (44,543) (67) (44,610) _______ ________ _______ _______ _______ 541,961 (382,269) 159,692 (48,890) 110,802 _______ ________ _______ _______ _______Equity Shareholders' Funds per share 101p ____ *Restated to reflect IFRS reporting requirements. 31st December 2005 30th June 2005* Pence per Pence perEquity shareholders' funds £'000 share £'000 share --------------------------Malmaison and Hotel du Vin 76,223 70p 81,248 74pHotel investments 29,813 27p 59,021 54pLiberty Plc 27,680 25p 27,492 25pMWB Business Exchange Plc 3,462 3p (22,576) (20p)West India Quay 2,515 2p 10,227 9pGroup debt, less cash and other assets (4,165) (3p) (44,610) (41p) _________ ________ _______ _______Total Equity shareholders' funds 135,528 124p 110,802 101p _________ ________ _______ _______ *Restated to reflect IFRS reporting requirements. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ REVIEW OF FIXED ASSETS---------------------- Portfolio analysis by division------------------------------The Group holds its direct property interests principally as tangible fixedassets, with smaller amounts held as properties held for resale. The Group'sproperty interests are disclosed in the consolidated balance sheet at 31stDecember 2005 as follows:- 31st December 30th June 2005 2005* £'000 £'000Tangible fixed assets 513,642 536,704Properties held for resale 3,772 4,099 _______ _______Total property interests at 31st December 2005 517,414 540,803 _______ _______ *Restated to reflect IFRS reporting requirements. The above interests are analysed as follows:- Percentage of 31st December 31st December 30th June 2005 2005 2005* £'000 % £'000Hotels------ Ten (30th June 2005: nine) Malmaison hotels 186,458 36 171,132 Eight (30th June 2005: seven) Hotel du Vin hotels 85,870 17 80,723 _______ __ _______ 272,328 53 251,855 Hotel investments at Park Lane and West India Quay (30th June 2005 includes Argyle Street, Glasgow) 193,000 37 237,796 _______ __ _______ Total hotel portfolio 465,328 90 489,651 Liberty Plc----------- Liberty store, offices and other properties 28,609 5 27,911 MWB Business Exchange Plc 17,102 3 15,688-------------------------West India Quay apartments 3,772 2 3,003--------------------------Asset management 2,603 - 4,550---------------- _______ __ _______Total property interests at 31st December 2005 517,414 100 540,803 _______ __ _______ *Restated to reflect IFRS reporting requirements. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ Portfolio analysis by division (continued)------------------------------------------ Property valuation surplus arising in the six months ended 31st December 2005----------------------------------------------------------------------------- A valuation of the Group's freehold and long leasehold interests in its fixedasset property portfolio at 31st December 2005 was undertaken by DTZ DebenhamTie Leung. This valuation was performed on the basis of Market Value for theGroup's Investment Properties and Existing Use Value for the Group's OperationalProperties. The net surplus over previous book value for the six months ended31st December 2005 before minority interests, totalled £18.0m, which has beenincluded in the accounts for the six months ended 31st December 2005. Surpluses or temporary deficits arising on valuation of the Group's operationalproperties are transferred to revaluation reserve, while impairment ofoperational properties to below their historical cost is charged directly to theincome statement. Further details of the revaluation are set out in note 8 tothe accounts. Properties held for resale are recorded at the lower of cost and net realisablevalue and are therefore not revalued in the Group accounts. The valuation surplus credited to the income statement for the six month periodof £0.3m, and the valuation surplus credited to the revaluation reserve for thesame period of £13.6m, arose as follows:- Less Net previous Less surplus Taken to Taken to Gross book Gross minority to the income revaluation valuation value surplus interests Group statement reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000Malmaison 185,417 177,092 8,325 (1,458) 6,867 305 6,562Hotel du Vin 85,595 82,702 2,893 (506) 2,387 - 2,387Hotel investments 193,000 187,059 5,941 (1,927) 4,014 - 4,014Liberty Plc 27,000 26,110 890 (282) 608 - 608MWB Business Exchange Plc 17,102 17,102 - - - - -Others 5,528 5,528 - - - - - -------- ------- ------ ------- ------ ---- ------ 513,642 495,593 18,049 (4,173) 13,876 305 13,571 -------- ------- ------ ------- ------ Minority interests 65 4,108 ---- ------ 370 17,679 ---- ------ The valuations of the Group's hotel interests include value ascribed for plant,machinery, fixtures and fittings forming part of the service installations ofthe building. They therefore represent a valuation of the total interest of theGroup in those properties and no further amount is included in the accounts inrespect of the book value of such plant and fittings. The valuations excludethe value of any goodwill that may arise from the present occupation of theproperties and this is not recorded separately in the accounts of the Group.The valuation of the Group's retail interests includes value ascribed to plant,machinery and fittings forming part of the services and installation of thebuilding, but excludes moveable shop fittings. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ REVIEW OF FUNDING AND LOAN FACILITIES------------------------------------- Net debt-------- The Group's loans, borrowings and cash are included in the consolidated balancesheet at 31st December 2005 as follows:- 31st December 30th JuneComposition at year end 2005 2005*----------------------- £'000 £'000Total loans and overdrafts in note 10 338,574 413,225Hire purchase and leasing contracts in notes 9 and 10 1,804 3,583Fair value of derivative financial instruments in note 10 2,535 4,280Long leasehold obligations in note 10 715 718 ________ _________Total loans 343,628 421,806Less cash (41,561) (39,537) ________ _________Total net debt at period end 302,067 382,269 ________ _________ *Restated to reflect IFRS reporting requirements. The Group's loans, borrowings and cash at 31st December 2005, and at theprevious year end, had the following maturity profiles:- 31st December 30th June 2005 2005* £'000 £'000Repayable:Within one year or on demand 57,001 46,069Between one and two years 32,971 124,018Between two and five years 89,496 99,530After more than five years 164,160 152,189 ________ _________Total loans 343,628 421,806Less cash (41,561) (39,537) ________ _________Total net debt at period end 302,067 382,269 ________ _________ *Restated to reflect IFRS reporting requirements. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ Movement in net debt during the period-------------------------------------- The movement in total net debt during the six month period ended 31st December2005 arose as follows:- 31st December 30th June 2005 2005* £'000 £'000Total net debt at start of the period 382,269 472,499Debt repaid on West India Quay development (3,710) (66,860)Debt drawn for acquisition of Hotel du Vin - 64,908Debt drawn on expansion of Malmaison and Hotel du Vin 20,281 4,110(Decrease)/increase in listed Unsecured Loan Stock (34,101) 33,715Net proceeds received from sales of properties (34,250) (104,405)Net cash inflow from other Group operations during the period (28,422) (21,698) _______ _______Total net debt at period end 302,067 382,269 _______ _______ *Restated to reflect IFRS reporting requirements. Net debt attributable to Equity Shareholders' Funds--------------------------------------------------- Certain elements of the Group's net debt have been drawn by subsidiaries thatare not wholly owned by the Group. These comprise the Group's Park Lane andWest India Quay hotels, and its majority interests in MWB Business Exchange Plcand Malmaison Holdings Limited. The net debt attributable to Equity Shareholders' Funds at 31st December 2005amounted to £239m (30th June 2005: £346m), calculated as follows:- 31st December 30th June 2005 2005* £'000 £'000Total net debt as above 302,067 382,269Less net debt attributable to minority interests (62,590) (36,718) ________ _______Total net debt attributable to Equity Shareholders' Funds 239,477 345,551 ________ _______ ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ Gearing------- At 31st December 2005, gearing was 160%, calculated as follows:- 31st December 30th June 2005 2005* £'000 £'000Total net debt 302,067 382,269Net assets 188,918 159,692Gearing - net debt divided by net assets 160% 239% ____ ____ *Restated to reflect IFRS reporting requirements. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ REVIEW OF EARNINGS------------------ Results------- The total recognised income and expenses of the Group attributable to EquityShareholders, are summarised below:- Six months Six months ended ended Year ended 31st December 31st December 30th June 2005 2004* 2005* £'000 £'000 £'000Income statementProfit/(loss) for the period 1,147 (5,419) (15,157)Credited to equityRevaluation reserve 13,571 20,936 54,153Gain on minority interests in Business Exchange and Malmaison 9,401 - -Change in fair value of financial derivatives 1,448 (732) (1,981)Deferred tax on properties at valuation (890) - -Actuarial gain/(loss) on defined benefit pensionschemes 29 176 (544)Write back of option costs through equity 10 9 44Other items 10 (15) (20) ______ ______ ______Total recognised gains and losses for the period 24,726 14,955 36,495 ______ ______ ______Per share, based on weighted average number of sharesin issue during the period 22.5p 13.6p 33.3p ______ ______ ______ *Restated to reflect IFRS reporting requirements. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ Summary of earnings------------------- The Board's prime measure of return used to monitor the results of the operatingdivisions is the level of earnings before interest, taxation, depreciation andamortisation, or EBITDA. The results for the six months ended 31st December2005 can be summarised as follows:- Total recognised Group Profit/(loss) income and turnover EBITDA EBIT before tax expenseSix months ended 31st December 2005 £'000 £'000 £'000 £'000 £'000 Malmaison 21,700 7,646 6,058 1,715 3,965Hotel du Vin 14,257 3,428 2,745 664 3,557Hotel investmentsOperating income 23,257 7,245 4,455 (550) 1,321Sale of Argyle Street hotel - 2,760 2,760 2,760 2,760Liberty Plc 22,675 1,133 387 354 1,010MWB Business Exchange PlcOperating results - leased properties 33,501 2,427 2,298 1,877 1,877Operating results - operating andmanagement agreements 2,350 295 295 295 295West India Quay - apartment sales 5,093 1,030 1,030 1,030 1,030Others 1,454 2,038 1,999 1,947 -Group debt less cash and other assets - - - (3,481) (3,533) _____ _____ _____ _____ _____ 124,287 28,002 22,027 6,611 12,282Head office administration - (3,808) (3,881) (3,881) 10,882 _____ _____ _____ _____ _____ 124,287 24,194 18,146 2,730 23,164 _____ _____ _____ _____ _____ ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ Summary of earnings (continued)------------------------------- Profit/(loss) Total on ordinary recognised Group activities income and turnover EBITDA* EBIT* before tax* expense*Six months ended 31st December 2004 £'000 £'000 £'000 £'000 £'000 Malmaison 21,471 6,355 4,501 1,087 6,212Hotel du Vin(3 months from October 2004) 6,310 1,747 1,421 247 2,199Hotel investmentsOperating income 22,521 7,157 4,181 (2,495) 12,474Pre-opening costs - (470) (470) (470) (470)Sale of the Howard Hotel - 7,933 7,933 7,933 7,933Liberty Plc Operating income 24,379 852 (593) (2,492) 1,778MWB Business Exchange PlcOperating results - leased properties 28,602 (258) (1,703) (2,569) (2,696)Sale of properties - (383) (383) (383) (383)West India Quay 6,520 487 487 444 92Others 962 442 530 666 797Group debt less cash and other assets 1,542 - (5,112) (2,728) _______ ________ _______ _______ _______ 112,307 23,862 15,904 (3,144) 25,208Head office administration - (3,337) (3,374) (3,493) (5,773) _______ ________ _______ _______ _______ 112,307 20,525 12,530 (6,637) 19,435 _______ ________ _______ _______ _______ *Restated to reflect IFRS reporting requirements. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ Summary of earnings (continued)------------------------------- Profit/(loss) Total on ordinary recognised Group activities income and turnover EBITDA* EBIT* before tax* expense*Year ended 30th June 2005 £'000 £'000 £'000 £'000 £'000 Malmaison 38,723 11,953 7,784 43 13,487Hotel du Vin(9 months from October 2004) 18,382 4,230 3,296 290 10,152Hotel investmentsOperating income 42,110 12,799 7,078 (5,249) 29,829Pre-opening costs - (587) (587) (587) (587)Sale of the Howard Hotel - 7,921 7,921 7,921 7,921Liberty Plc Operating income 44,829 213 (2,254) (5,386) (1,227) Sale of Lasenby and Regent House - 5,006 5,006 5,006 5,006MWB Business Exchange PlcOperating results - leased properties 58,972 2,236 (2,489) (3,435) (3,222)Operating results - operating and managementagreements 834 24 24 (272) (272)Sale of properties - (383) (383) (383) (383)West India Quay 28,550 2,659 2,659 2,659 1,331Others 1,051 252 462 580 1,061Group debt less cash and other assets 3,009 - - (9,899) (9,844) _______ ________ _______ _______ _______ 236,460 46,323 28,517 (8,712) 53,252Head office administration - (6,606) (6,748) (6,874) (6,826) _______ ________ _______ _______ _______ 236,460 39,717 21,769 (15,586) 46,426 _______ ________ _______ _______ _______ *Restated to reflect IFRS reporting requirements. Notes 1. Total recognised income and expenses are shown in the Group primary statement of the accounts. 2. EBITDA = Earnings before interest, taxation, depreciation and amortisation 3. EBIT = Earnings before interest and taxation ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ Interest payable---------------- Net interest payable by the Group during the six months ended 31st December 2005was £15.5m (six months ended 31st December 2004: £21.0m; year ended 30th June2005: £39.6m). Of this amount, £0.1m (December 2004: £1.8m, June 2005: £2.2m)was capitalised in respect of development expenditure, leaving a net charge tothe income statement of £15.4m (December 2004: £19.2m; year ended 30th June 2005£37.4m). The average cost of borrowing on the Group's loans at 31st December 2005,inclusive of margin, was 6.4% per annum in comparison to 7.2% for the year ended30th June 2005. Taxation--------The net tax charge of £0.2m for the six months ended 31st December 2005(December 2004: charge at £0.1m; June 2005: credit of £0.2m) reflects primarilythe tax incurred in the profits at the Group's operations in Japan. The tax incurred on the Liberty Japanese operations for the six months ended31st December 2005 amounted to £0.2m (December 2004: £0.2m; June 2005: £0.4m).Of this amount, 49% is incurred by the minority interest in the Japaneseoperations of Liberty Plc, who participate in the after tax profits of theseoperations. The Group has a 68% interest in Liberty Plc and thus the net costto the Group is only 33% of this tax charge, or £70,000 (December 2004: £70,000;June 2005: £145,000). Earnings per share------------------ The earnings per share shown through the income statement for the six monthsended 31st December 2005 was 1.0p per share (six months ended 31st December2004: loss of 4.9p per share; year ended 30th June 2005: loss of 13.8p pershare). After taking account of the unrealised surplus arising on the Group'sproperty portfolio, the Group produced net earnings of 22.5p per share (sixmonths ended 31st December 2004: 13.6p per share; year ended 30th June 2005:33.3p per share). Dividend--------Shareholders approved implementation of the Cash Distribution Programme andassociated cessation of annual revenue distributions at a meeting ofshareholders held in May 2002. The Board is continuing to implement the CashDistribution Programme and to direct disposal proceeds to the repayment of netdebt, which during the six months ended 31st December 2005, totalled £34.2m. Byrepaying increased levels of debt now, the Board expects to be able todistribute increased amounts to shareholders from asset sales in future years.The Directors envisage distributing further surplus funds to shareholders bymeans of buy-backs of ordinary shares, cash distributions, demergers,distributions of assets and similar value distribution programmes. ACCOUNTS REVIEWfor the six months ended 31st December 2005________________________________________________________________________________________________________________________ Cash flow--------- The consolidated cash flow statement shows the funds generated by the Group,those raised from external sources, the investments made and the effect thereofon the Group's net debt. During the six months ended 31st December 2005, the Group spent £9.5m (sixmonths ended 31st December 2004: £13m; year ended 30th June 2005: £17.6m) oncapital expenditure in the hotel division, which comprised the majority of thecapital expenditure incurred by the Group. The disposal proceeds of £52.5mduring the six months ended 31st December 2005 are represented by the sale ofthe Group's Radisson SAS operated hotel in December 2005. Net debt reduced by a further £80.2m during the six months ended 31st December2005. Further details of the Group's loans and the principal components of thisincrease are set out in the section entitled "Net debt" above. Andrew BlurtonJoint Finance Director 28th March 2006 CONSOLIDATED INCOME STATEMENT (UNAUDITED)for the six months ended 31st December 2005________________________________________________________________________________________________________________________ Six months Six months Year ended ended ended 31st December 31st December 30th June 2005 2004* 2005* Notes £'000 £'000 £'000_______________________________________________________________________________________________________________Turnover 2 124,287 112,307 236,460 Cost of sales (103,284) (101,273) (214,329)_______________________________________________________________________________________________________________Gross profit 21,003 11,034 22,131 Administrative expenses (7,571) (6,186) (12,970)_______________________________________________________________________________________________________________Operating profit before profit on disposal ofproperties 13,432 4,848 9,161Profit on disposal of properties and other fixedassets 3 4,714 7,682 12,608_______________________________________________________________________________________________________________ Net operating profit before financing expenses 18,146 12,530 21,769 Interest income 436 763 1,187Interest cost 4 (15,841) (20,446) (39,308)Change in fair value of derivative financialinstruments (11) 516 766_______________________________________________________________________________________________________________ Profit/(loss) before taxation for the period 2 2,730 (6,637) (15,586) Current taxation on ordinary activities 5 (237) (89) 171_______________________________________________________________________________________________________________ Profit/(loss) for the period 2,493 (6,726) (15,415)_______________________________________________________________________________________________________________ Attributable to:Equity shareholders of the Parent 1,147 (5,419) (15,157)Minority interests 6 1,346 (1,307) (258)_______________________________________________________________________________________________________________ Profit/(loss) for the period 2,493 (6,726) (15,415)_______________________________________________________________________________________________________________ Earnings/(loss) per share (basic and diluted) 7 1.0p (4.9p) (13.8p)_______________________________________________________________________________________________________________ All results relate to continuing operations. The accompanying notes form partof these accounts. *Restated to reflect IFRS reporting requirements. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)for the six months ended 31st December 2005 ________________________________________________________________________________________________________________________ Six months Six months Year ended ended ended 31st December 31st December 30th June 2005 2004* 2005* £'000 £'000 £'000______________________________________________________________________________________________________________Gains on property revaluations 17,679 26,646 64,636 Deferred tax (8,138) - - Net exchange translation differences and other movements (64) (24) (29) Actuarial loss on defined benefit pension schemes 42 258 (811) Net gain on increase in minority interests in MWB Business Exchange Plc and Malmaison 9,381 - - Change in fair value of derivative financial instrumentstaken directly to equity 1,756 (732) (1,981) Write back of option costs through equity 15 13 26______________________________________________________________________________________________________________ Income and expense recognised directly to equity 20,671 26,161 61,841 Profit/(loss) for the financial period 2,493 (6,726) (15,415)______________________________________________________________________________________________________________Total recognised income and expense for the period 23,164 19,435 46,426______________________________________________________________________________________________________________ Attributable to:Equity shareholders of the Parent 24,726 14,955 36,495Equity minority interests (1,562) 4,480 9,931______________________________________________________________________________________________________________Total recognised income and expense for the period 23,164 19,435 46,426______________________________________________________________________________________________________________ *Restated to reflect IFRS reporting requirements. CONSOLIDATED BALANCE SHEET (UNAUDITED)at 31st December 2005________________________________________________________________________________________________________________________ 31st December 31st December 30th June 2005 2004* 2005* Notes £'000 £'000 £'000________________________________________________________________________________________________________________Fixed assetsBrand 18,200 18,200 18,200Investment properties 8 9,260 9,466 4,540Operational properties 8 445,952 479,310 465,859Plant and equipment 8 58,430 66,696 66,305________________________________________________________________________________________________________________ 531,842 573,672 554,904________________________________________________________________________________________________________________Current assetsTrading properties 3,772 21,125 4,099Stocks 8,538 9,455 8,366Trade and other receivables 40,572 43,815 64,104Cash and cash equivalents 41,561 43,989 39,537________________________________________________________________________________________________________________ 94,443 118,384 116,106________________________________________________________________________________________________________________Total assets 626,285 692,056 671,010________________________________________________________________________________________________________________Current liabilitiesTrade and other payables 9 (59,151) (62,121) (61,623)Tax liabilities 9 (6,113) (10,520) (8,293)Borrowings including finance leases 9 (57,001) (6,921) (46,069)________________________________________________________________________________________________________________ (122,265) (79,562) (115,985)________________________________________________________________________________________________________________Non current liabilitiesBorrowings including finance leases 10 (284,092) (458,956) (371,457)Derivative financial instruments 10 (2,535) (3,281) (4,280)Deferred tax provision 10 (8,468) (324) (330)Provisions 11 (17,525) (17,863) (17,520)Other payables 10 (2,482) (46) (1,746)________________________________________________________________________________________________________________ (315,102) (480,470) (395,333)________________________________________________________________________________________________________________Total liabilities (437,367) (560,032) (511,318)________________________________________________________________________________________________________________Net assets 188,918 132,024 159,692________________________________________________________________________________________________________________EquityCalled up share capital 54,825 54,575 54,825Share premium account 12 79,514 79,364 79,514Capital redemption reserve 12 15,975 15,975 15,975Revaluation reserve 12 100,370 71,124 96,237Hedging and translation reserve 12 (1,925) (2,893) (4,157)Merger reserve 12 9,403 9,403 9,403Other reserves 12 1,783 1,553 1,783Retained earnings attributable to shareholders of the Parent 12 (124,417) (140,036) (142,778)________________________________________________________________________________________________________________Equity attributable to equity shareholders of the Parent 135,528 89,065 110,802Minority interests 13 53,390 42,959 48,890Total equity 188,918 132,024 159,692________________________________________________________________________________________________________________Equity shareholders' funds per share 14 124p 82p 101p________________________________________________________________________________________________________________ *Restated to reflect IFRS reporting requirements. CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)for the six months ended 31st December 2005 Six months Six months Year ended ended ended 31st December 31st December 30th June 2005 2004* 2005* £'000 £'000 £'000Operating profit before net profit on property disposals 13,432 4,848 9,161Adjustments for non-cash itemsDepreciation and amortisation 6,048 7,995 17,948Currency translation differences - - (22)________________________________________________________________________________________________________________Cash flows from operations before changes in working capital 19,480 12,843 27,087 Change in trade and other receivables 21,864 49,062 28,870Change in properties held for resale (293) (1,514) (423)Change in trade and other payables (3,616) 343 (13,542)________________________________________________________________________________________________________________Cash generated from operations 37,435 60,734 41,992Interest paid (15,904) (22,273) (41,502)Interest received 432 1,158 1,583Tax paid (270) (223) (808)________________________________________________________________________________________________________________Cash flows from operating activities 21,693 39,396 1,265________________________________________________________________________________________________________________Cash flows from investing activitiesDecrease in development of properties 349 2,654 19,681Sale of properties 52,500 88,071 154,578Purchase of investments and other fixed assets (12,521) (14,707) (19,924)Receipts from/(Payments to) minority interests 15,793 (247) (370)Purchase of interests in subsidiary companies - (69,298) (69,298)Cash acquired with interests in subsidiary companies - 4,390 4,390________________________________________________________________________________________________________________Cash flows from investing activities 56,121 10,863 89,057________________________________________________________________________________________________________________Cash flows from financing activitiesPurchase of own shares - (441) (41)Borrowings drawn 20,281 71,372 134,520Borrowings repaid (94,199) (124,458) (231,095)Decrease in hire purchase and leasing contracts (1,872) (1,758) (3,184)________________________________________________________________________________________________________________Cash flows from financing activities (75,790) (55,285) (99,800)________________________________________________________________________________________________________________Net increase/(decrease) in cash and cash equivalents 2,024 (5,026) (9,478)Opening cash and cash equivalents 39,537 49,015 49,015________________________________________________________________________________________________________________Closing cash and cash equivalents 41,561 43,989 39,537________________________________________________________________________________________________________________ * Restated to reflect IFRS reporting requirements This information is provided by RNS The company news service from the London Stock ExchangeMORE TO FOLLOWRelated Shares:
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