19th Sep 2007 07:02
Development Securities PLC19 September 2007 DEVELOPMENT SECURITIES PLC - INTERIM RESULTS FOR THE SIX MONTHS ENDING 30th JUNE 2007 Development Securities PLC, the leading property development and investmentcompany, today announces a pre-tax profit of £0.5 million for the six months to30th June 2007. This represents a reduction of £7.9 million from the £8.4million profit achieved on a comparable basis in the same period of 2006,primarily due to a lower level of revaluation surplus in the current year. Shareholder equity rose to £231.7 million, equivalent to 566 pence per sharefrom £231.4 million or 568 pence per share at 31st December 2006. The interimdividend will be 2.40 pence per share or nearly seven per cent over theequivalent dividend in 2006 and is payable on 26th October 2007 to shareholderson the register on 28th September 2007. Financial highlightsunaudited for the six months ended 30th June 2007 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited £ million £ million £ million Profit before taxation 0.5 8.4 22.8Net assets 231.7 191.3 231.4 Earnings per share (pence) 3.2 14.2 63.4Net assets per share* (pence) 566 521 568Dividends per share declared* (pence) 2.40 2.25 6.75 David Jenkins, Chairman of Development Securities PLC, commented: "The reduction in earnings compared to the previous financial year reflects thesignificant slow down in total returns achieved in the investment propertymarket. However, we continue to believe that attractive returns are available inthe property development business. "In line with this, our development activity is making good progress with thefirst substantial office letting in place at One Kingdom Street,PaddingtonCentral, the sale of the hotel site and the forward sale of the officecomponent at CityPark in Manchester, the contracted disposal of the Colindaledevelopment and the acquisition with funding partners and subject to planning,of a 1.5-acre site in Hammersmith, West London. "Notwithstanding the current uncertainties concerning global banking and moneymarket liquidity, we remain cautiously optimistic about our further developmentactivity within the current property cycle." * Refer note 11 Property development highlights PaddingtonCentral • On course for practical completion of One Kingdom Street in the firstquarter of 2008 • 73,000 sq. ft. of office space is now the subject of an agreement tolease with Misys PLC on terms which indicate that the balance of the buildingwill be let at rents at or exceeding £55 per sq. ft. • Planning permission for the next phase, Two Kingdom Street, an officebuilding of some 250,000 sq. ft. net has been received, with start on siteanticipated early next year Colindale, London NW • Planning permission was received for our mixed-use scheme including300,000 sq. ft. gross retail space and 340,000 sq. ft. of private and affordablehousing, together with a new 80,000 sq. ft. primary school • In response to unsolicited strong demand for consented development sites,we have contracted to sell our interest in the site to a private propertycompany • Upon completion of this disposal in November 2007, we anticipate a gainin excess of £16 million CityPark, Manchester • This mixed-use site benefits from a planning consent for a 250-room hoteland a 147,000 sq. ft. office building • The hotel element of the site was sold in June this year • Conditional on the imminent expiry of the judicial review process on 27thSeptember, the office component has been forward sold to a private investor forpart owner-occupation, with commencement of this development expected in thenext few months • We anticipate the generation of £6 million profit from the overall salesand development at this site Curzon Park, Birmingham • Outline planning application for this proposed 1.4 million sq. ft.mixed-use project has now been submitted jointly with Grainger PLC • This £350 million scheme will comprise approximately 800,000 sq. ft. ofoffice, 400,000 sq. ft. of residential accommodation and a 180-bed hotel. Hammersmith Grove, London W6 • Together with our funding partners, we have exchanged contracts withLondon Underground Limited for the acquisition of this 1.5-acre site, locatednext to the Hammersmith and City Line underground station • The acquisition is subject to planning and an application has beensubmitted for a 360,000 sq. ft. office-led, mixed-use scheme which will have anestimated end value of circa £250 million Enquiries: Michael MarxDevelopment Securities PLC 020 7828 4777 Mallika BasuThe Communication Group plc 07939 521 708/ 020 7630 1411 www.developmentsecurities.com Chairman's statement Profit before taxation for the first six months of 2007 amounted to £0.5million. This represents a reduction of £7.9 million from the £8.4 millionprofit achieved on a comparable basis in the same period of 2006, primarily dueto a lower level of revaluation surplus in the current year. Shareholder equity rose to £231.7 million, equivalent to 566 pence per sharefrom £231.4 million or 568 pence per share at 31st December 2006. The reduction in earnings compared to the previous financial year reflects thesignificant slow down in total returns achieved in the investment propertymarket. As we presaged in our 2006 Annual Report earlier this year, themomentum of the investment market proved unsustainable. However, we continue tobelieve that attractive returns are available in the property developmentbusiness. The emphasis of our earnings profile in the next few years willundoubtedly shift from investment returns to gains generated from our activedevelopment programme. Our balance sheet at 30th June 2007 continues to reflect our near record levelof shareholders' funds, with net borrowings (refer note 7(a) and 11) of £53.5million, reflecting a net gearing of 23 percent compared to six per cent at 31stDecember 2006. Accordingly, your Board has declared a dividend of 2.40 penceper share or nearly seven per cent over the equivalent dividend paid in 2006, tobe paid on 26th October 2007 to shareholders on the register on 28th September2007. Even with the current global credit market difficulties, there has been anoverall upward movement in interest rates in 2007, both at the short and longend of the curve. Notwithstanding these fluctuations and the currentuncertainties concerning global banking and money market liquidity, we arecautiously optimistic that the underlying fundamentals remain intact for furtherdevelopment activity within the current property cycle. Good progress is beingmade within our own existing development pipeline, but we nevertheless remainselective before committing further shareholder funds into new projects. Development PaddingtonCentral We remain on course for practical completion of One Kingdom Street in the firstquarter of 2008. This phase, green lighted by our development partners MorleyFund Management and Union Investments in April 2006, consists of a 252,000 sq.ft. office building and a 206-room Accor hotel. Even at this early stage, theletting programme is gathering momentum, reflecting the significant improvementof this location as well as the shortage of high quality, large floor platebuildings elsewhere in the West End market. 73,000 sq. ft. of office space isnow the subject of an agreement to lease with Misys PLC on terms which indicatethat the balance of the building will be let at rents at or exceeding £55 persq. ft. On 3rd August 2007, we obtained planning permission for the next phase,Two Kingdom Street, an office building of some 250,000 sq. ft. net. It isscheduled for completion at the end of 2009, with a start on site anticipatedearly next year. Colindale, London NW On 14th June, we obtained planning permission for our mixed-use scheme including300,000 sq. ft. of gross retail space and 340,000 sq. ft. of private andaffordable housing, together with a new 80,000 sq. ft. primary school. We arepleased to report that, in response to unsolicited strong demand for consenteddevelopment sites, we have contracted to sell our interest in the site to aprivately owned property company. Upon completion of this disposal in November2007, we anticipate a net gain in excess of £16 million. Whilst our originalcommitment and plans were to redevelop the site ourselves over the next fewyears, it was, in our view, undoubtedly in our shareholders' interests torealise the significant added value component that we have achieved to date andrecycle the equity released into our growing development programme. CityPark, Manchester This mixed-use site benefits from a planning consent for a 250-room hotel and a147,000 sq. ft. office building. The hotel element of the site was sold in Junethis year. Conditional on the imminent expiry of the judicial review process,the office component has been forward sold to a private investor for part-owneroccupation, with commencement of this development expected in the next fewmonths and practical completion is scheduled for mid-2009. We anticipate thegeneration of a profit from the development of £6 million overall. Curzon Park, Birmingham In August, an outline planning application for this proposed 1.4 million sq. ft.mixed-use project was submitted jointly by ourselves and Grainger PLC. This£350 million scheme will comprise approximately 800,000 sq. ft. of offices,400,000 sq. ft. of residential accommodation and a 180-bed hotel. Hammersmith Grove, London W6 Earlier this month, we announced the exchange of contracts with LondonUnderground Limited for the acquisition of this 1.5-acre site, located next tothe Hammersmith and City Line underground station. The acquisition is subjectto planning and an application has been submitted for a 360,000 sq. ft.office-led, mixed-use scheme which will have an estimated end value of circa£250 million. Construction is anticipated to commence early next year, withcompletion in the second quarter 2010. Our joint funding partners, taking themajority of the equity commitment, are The Royal London Mutual Assurance SocietyLimited and The National Bank of Dubai. We believe the timing is appropriatefor a speculative office development in the heart of Hammersmith where we shalldeliver West End quality accommodation to occupiers seeking a prestige locationin the west of London. Cambourne Business Park Discussions are continuing with the institutional market for the forward-fundingof the next 50,000 sq. ft. phase on this 750,000 sq. ft. business parkdevelopment located nine miles from Cambridge. Broughton We are pleased to advise that an Inspector has been appointed to undertake thefinal stages of review before the emerging Unitary Development Plan (UDP) can beconfirmed. In October last year, the Local Authority ratified the status of our19-acre site as allocated for residential purposes in the emerging UDP andadoption of our site in the plan is anticipated in 2008. Planning consent in respect of the 171,000 sq. ft. extension to the existingBroughton Retail Park was issued in March this year, following Flintshire CountyCouncil's approval of the Resolution to Grant planning in April 2006.Discussions with our potential joint venture partner, British Land PLC, theowner of the majority of the land required for this retail scheme have notprogressed this year whilst they consider a number of related issues. In orderto retain our options and flexibility in the event that this extension to theexisting retail park does not proceed, we are preparing two separate planningapplications in respect of land directly within our ownership for the provisionof 80,000 sq. ft. of retail accommodation and related car parking. We havealready acquired the land necessary to construct the road interchange that willprovide enhanced access to the expanded retail facilities and also the 10 acresof land required to construct a reservation for the existing, protected localpopulation of greater crested newts. Hartfield Road, Wimbledon, London The recently submitted planning application made by ourselves and our jointventure partner Foinavon Limited was refused by the Local Authority largely inrespect of the height and bulk of our proposals. We plan shortly to submitfresh proposals to accommodate these concerns. West Quay, Southampton In March, we contracted with Lime Property Fund Limited Partnership to fund thesite acquisition and development of the new 150,000 sq. ft. office headquartersfor Carnival PLC at West Quay III, Southampton. Upon completion, the letting toCarnival PLC will be for a term of 20 years. Practical completion of this £75million project is scheduled for the end of 2008. Negotiations are ongoing toacquire the adjacent site with regard to a potential second phase of similarsize. Luneside, Lancaster Following a Compulsory Purchase Order, the Local Authority now has full controlof this 17.5-acre urban regeneration project. Land remediation is scheduled tocommence in the second half of this year. The development will comprise aminimum of 350 new homes, 90,000 sq. ft. of new offices and a hotel.Negotiations are now in hand with regard to the selection of our preferredresidential development partner. The Royals Business Park In July this year, Building 1000, the 252,000 sq. ft. initial phase, owned byour development partner Standard Life Investments, was sold to the LondonBorough of Newham for £75 million. This disposal opens the way for thedevelopment of further phases and we are presently in discussion with the LondonDevelopment Agency to review the current masterplan so that a genuinelymixed-use scheme can be adopted for the remainder of this 52-acre site.Currently, the Royals Business Park has outline planning consent permitting thedevelopment of 1.6 million sq. ft. of office accommodation. St Bride Street, London EC4 In June this year, we received planning consent to provide 55,000 sq. ft. ofoffices and leisure accommodation. This, the only development in the City ofLondon with which we are currently involved, is a speculative scheme and isentirely funded by the Luxembourg-based fund, Sireo Immobilien Fonds.Construction work is expected to commence shortly, with completion scheduled forthe end of 2009. Kirkby In April, the company acquired this town centre retail asset for a cost inexcess of £60 million. Clearly, this acquisition was the significant factor inthe recent increase to 23 per cent in our level of net gearing. We believe thisasset will allow us to implement our full range of asset management anddevelopment skills. In the short term, we are working to improve tenant mix andrental levels. In the medium term, the asset has significant developmentpotential and we are working with the Local Authority and our professional teamto maximise the role that our asset can play in the sustainable regeneration ofthe town centre. Investment The reappraisal of risk in investment markets has featured notably so far thisyear. Quite justifiably, the real estate market has not avoided thisre-evaluation and there is now clear evidence that the remarkable growth incapital values achieved over the last five years has left all but the very bestof assets at pricing levels that did not reflect their specific inherent risks. The first half of the year has seen falling capital values for those assetswhich cannot demonstrate real growth. Since property assets are sensitive tointerest rate fluctuations, it is not easy to predict with certainty how farvalues may fall, given current stresses in the capital markets. Whilst a hardlanding cannot be ruled out, a more moderate decline seems likely at least whilethere remains uninvested money awaiting value readjustments. Now more than ever,stock selection, sector rotation and the successful implementation of assetmanagement initiatives will be the key drivers to increasing values anddelivering shareholder returns. In this context, the investment property revaluation review at June 2007generated a satisfactory gain of £2.8 million or 2 per cent. Given that we holda significant proportion of our portfolio in the retail sector and not in thehighly performing Central London office sector, this is a creditableperformance. By comparison, the All Property IPD capital return for the firstsix months of 2007 was 1.9 per cent and 0.6 per cent for the retail sector. Activity on the transactional side was muted whilst we assessed the impact ofchanging sentiment towards the property sector. The majority of the company'sremaining secondary assets were sold during the last few years and therefore weare relatively sanguine regarding this increased uncertainty. This is reflectedin the half-year valuations where there were limited and specific write downsagainst an overall tone of rising values. We have remained focused on implementing asset management initiatives at ourShopping Centre assets including the continued acquisition of adjoining landholdings to facilitate further growth in size and quality. At Thatcham, weobtained planning consent for an extension to the scheme on land acquired overthe course of the last two years and we are now preparing our detaileddevelopment plans. At Ringwood, the premier asset in the portfolio, we hope shortly to complete theletting of a unit at yet another sizable step-up in rental levels. In thecurrent retail climate, to have received firm expressions of interest in theunit from more than 10 retailers, demonstrates the success of this scheme.Further added value should ensue from the next phase of development at Ringwood,for which a planning application has now been made. With negotiations in handfor possible pre-lets, a start on site should be expected next year. Joint Ventures We continue to expand our joint venture relationships, and over the course ofthe first half of the year have made substantial progress both in terms of newrelationships and progress on existing projects. In mid-2007, we entered into a £15 million revolving five-year funding agreementwith Fiducia Group PLC. Trading through its two main subsidiaries, HenryDavidson Developments Limited and Eden Park Developments Limited, this group isa leading developer of neighbourhood shopping parades. It has an extensivepipeline of projects derived from a close relationship with major house buildingcompanies and Local Authorities. We look forward to an active and profitablerelationship with this rapidly growing business in a sector of the market withwhich we have traditionally not been so closely involved. Good progress so far this year has been made at all of our joint ventures. AtWinchester, we completed the land assembly and obtained detailed planning for amixed-use scheme anchored by a food store; at Crawley, we obtained planningconsent for a 312-unit residential scheme; at Wells we have now been selected asthe preferred developer, for a retail scheme, by the Local Authority; andfinally, Staines, where planning consent for a 300,000 sq. ft. office buildingwas obtained and the site subsequently sold in July this year. Management In March 2007, Paul Willis retired as an Executive Director, due to familyreasons. An Executive Director for three years, having been previously aNon-executive Director of your company for a seven-year period to 2002, we muchregret his retirement and wish him well for the future. In September 2007, wewelcomed Paul Redstone to Development Securities as Head of Retail, a seniormanagement appointment. Paul, having spent the last 10 years with CBRE/HillierParker, will be bringing to bear a wealth of experience in the retail investmentand development arena. D S JenkinsChairman19th September 2007 Portfolio analysis Tenant profile1 FTSE 100 1%2 Government 2%3 PLC/Nationals 52%4 Regional Multiples 4%5 Local Businesses 41% Lease profile1 0-5 years 30%2 5-10 years 27%3 10-15 years 20%4 15-20 years 8%5 20 years + 15% Location profile1 London 8%2 South East 45%3 Midlands 3%4 North 42%5 South West 2% Analysis by sector1 Retail 74%2 Office 12%3 Industrial 12%4 Residential 2% Income generating properties as at 31st July 2007 Oriental City, Colindale is excluded from the analysis above. The property iscontracted for sale in November 2007. Principal properties Retail Kingsland Shopping Centre, Thatcham, Berkshire 131 The Broadway, Bexleyheath, Kent The Furlong Centre, Ringwood, Hampshire Swanley Shopping Centre, Swanley, Kent Kirkby Shopping Centre, Kirkby, Merseyside Offices The Genesis Centre, Birchwood, Warrington, Cheshire Industrial Great West Trading Estate, Great West Road, Brentford, Middlesex Consolidated income statementunaudited for the six months ended 30th June 2007 Six months to Six months to Year ended 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited Notes £ million £ million £ million Revenue 2 11.6 7.2 48.7Direct costs 2 (7.0) (3.8) (32.8)Gross profit 2 4.6 3.4 15.9Operating costs 2 (4.3) (4.1) (10.2)Gain/(loss) on disposal of investment properties 2 0.1 0.9 (0.1)Gain on revaluation of property portfolio 2 2.8 10.4 21.8Deficit on revaluation of operating properties 2 (0.8) - (0.5)Operating profit 2 2.4 10.6 26.9Share of results of associates and joint ventures 2 (0.1) - 0.2Income from financial assets 2 - - 0.1Profit before interest and taxation 2 2.3 10.6 27.2Finance income 2.1 1.6 2.9Finance costs (3.9) (3.8) (7.3)Profit before taxation 0.5 8.4 22.8Taxation 3 0.8 (3.2) 0.8Profit after taxation for the period attributable 1.3 5.2 23.6to equity shareholders of the parentBasic earnings per share (pence) 5 3.2p 14.2p 63.4pDiluted earnings per share (pence) 5 3.2p 14.1p 63.0p Consolidated balance sheetunaudited as at 30th June 2007 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited restated* Notes £ million £ million £ millionNon-current assetsProperty, plant and equipment- Operating properties 7.1 9.1 8.1- Other non-current assets 3.4 3.7 3.6Investment properties 6 144.6 135.3 139.4Financial assets 6.1 5.8 5.9Investments in joint ventures 8.7 0.2 20.5Investments in associates 0.7 0.7 0.7Trade and other receivables 1.5 - 1.5Deferred tax asset 5.2 2.3 5.6 177.3 157.1 185.3 Investment property - held for sale - - 5.3 Current assetsInventory - land, developments and trading properties 156.2 73.9 74.7Financial assets 11.0 - -Trade and other receivables 18.2 13.1 10.0Cash and short-term deposits 7 89.0 62.4 88.5 274.4 149.4 173.2 Total assets 451.7 306.5 363.8 Current liabilitiesTrade and other payables (65.7) (13.7) (16.8)Financial liabilities 7 (33.5) (6.1) (15.5) (99.2) (19.8) (32.3) Non-current liabilitiesFinancial liabilities 7 (109.0) (85.5) (87.4)Deferred tax liabilities (10.3) (9.9) (11.6)Provisions (1.5) - (1.1) (120.8) (95.4) (100.1) Total liabilities (220.0) (115.2) (132.4) Net assets 231.7 191.3 231.4 Equity Share capital 8 20.5 18.4 20.4Other reserves 9 156.2 133.9 155.4Retained earnings 9 55.0 39.0 55.6 Equity attributable to equity shareholdersof the parent 231.7 191.3 231.4 Basic net assets per share 5 566p 521p 568p Diluted net assets per share 5 565p 518p 565p * refer note 1(c) Consolidated statement of recognised income and expenseunaudited as at 30th June 2007 Six months to Six months to Year ended 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited £ million £ million £ millionGains on revaluation of operating properties - - 0.5Deferred tax - - (1.0)Net income recognised directly in equity - - (0.5)Profit for the period 1.3 5.2 23.6Total recognised income for the periodattributable to equity shareholders of the parent 1.3 5.2 23.1 Consolidated cash flow statementunaudited for the six months ended 30th June 2007 Six months to Six months to Year ended 30th June 2007 30th June 2006 31st Dec 2006 restated* restated* unaudited unaudited audited Notes £ million £ million £ millionNet cash flow from operating activities 10 (45.2) (28.8) (18.0)Investing activities:Interest received 2.1 1.2 3.1Proceeds on disposal of investment properties 5.8 38.5 45.1Proceeds from refinancing of joint ventures 11.7 - -Purchase of property, plant and equipment (0.1) (0.5) (1.6)Investment in financial assets (11.3) (5.0) (5.0)Purchase of investment properties (2.8) (2.9) (6.9)Purchase of investments - - (20.2)Net cash flow from investing activities 5.4 31.3 14.5Financing activities:Dividends paid - - (2.4)Issue of new shares 0.8 0.1 23.2Repayments of borrowings (0.1) (13.2) (18.7)New bank loans raised 44.7 - 12.0Net cash flow from financing activities 45.4 (13.1) 14.1 Increase/(decrease) in cash and cash equivalents 5.6 (10.6) 10.6 Cash and cash equivalents at the beginning of the period 82.6 72.0 72.0Cash and cash equivalents at the end of the period 88.2 61.4 82.6 Cash and cash equivalents comprise:Cash excluding pledged cash 7 5.8 1.4 8.1Short term deposits 42.8 45.2 73.5Pledged cash held as security against financial liabilities 7 40.4 15.8 6.9Bank overdrafts (0.8) (1.0) (5.9)Cash and cash equivalents at the end of the period 88.2 61.4 82.6 * refer note 1(c) Notes to the interim financial statementsunaudited for the six months ended 30th June 2007 1. BASIS OF PREPARATION AND ACCOUNTING POLICIES a) General information The Consolidated interim financial statements of the Group for the six monthsended 30th June 2007 comprise the results of the Company and its subsidiariesand were authorised by the Board for issue on 19th September 2007. b) Basis of preparation The accounting policies applied in these Consolidated interim financialstatements are consistent with those reported in the Group's annual financialstatements for the year ended 31st December 2006. The Consolidated interim financial statements do not include all the informationand disclosures required in the annual financial statements, and should be readin conjunction with the Group's annual financial statements as at 31st December2006. The interim report is unaudited and does not constitute statutory accountswithin the meaning of S240 of the Companies Act 1985. The statutory accounts for2006, which were prepared in accordance with International Financial ReportingStandards, as endorsed by the European Union ("IFRS"), and with those parts ofthe Companies Act 1985 applicable to companies reporting under IFRS, have beendelivered to the Registrar of Companies. The auditors' opinion on these accountswas unqualified and did not contain a statement made under S237(2) or S237(3) ofthe Companies Act 1985. c) Prior year restatement The Directors have reclassified the following balances at 30th June 2006 to morefully comply with IFRS requirements, with no impact on net assets at that date: Lease incentives, previously included within Investment property balances, arenow separately identified within Prepayments and accrued income. The financialeffect is a reduction in Investment properties of £0.7 million and an increasein Prepayments and accrued income of the corresponding amount (refer note 6). An investment in the loan notes of an associate, amounting to £0.8 million,previously classified as part of an Investment in joint venture, wasreclassified to Financial assets. The financial effect of this adjustment is areduction in Investment in joint ventures of £0.8 million and an increase inFinancial assets of the corresponding amount. In addition, an amount of £5.0million, previously classified as part of Other non-current assets, relating toa participating loan, has been reclassified as a Financial asset at 30th June2006. The financial effect of the reclassification is a reduction in Othernon-current assets of £5.0 million and an increase in Financial assets of £5.0million. Investments amounting to £0.9 million as at 30th June 2007 have been furtheranalysed as Investments in joint ventures of £0.2 million and Investments inassociates of £0.7 million. Bank overdrafts are now included in Financial liabilities. The financial effectis to increase Cash and short-term deposits by £1.0 million and increaseFinancial liabilities by £1.0 million at 30th June 2006. The presentation of the Cash flow statements at 30th June 2006 and 31st December2006 has been revised to conform with the presentation adopted at 30th June2007. 2. SEGMENTAL ANALYSIS For management purposes, the Group is currently organised into three operatingdivisions, whose principal activities are as follows: Investment -management of the Group's investment property portfolio, generating rental income and valuation surpluses from property management;Trading and Development -managing the Group's development projects. Revenue is received from project management fees and development profits; andOperating -serviced office operations and retail activities. Revenue is principally received from short-term licence fee income. These divisions are the basis on which the Group reports its primary segmentalinformation. All operations occur and all assets are located in the UnitedKingdom, except assets of £1.3 million (30th June 2006: £1.9 million, 31stDecember 2006: £1.4 million), which are located in France and The Netherlands.Accordingly, no secondary segmental information is shown. All revenue arisesfrom continuing operations. Six months to 30th June 2007 (unaudited) Trading and Investment Development Operating Total £ million £ million £ million £ millionSegment revenue 4.0 5.4 2.2 11.6Direct costs (1.4) (3.0) (2.6) (7.0)Segment result 2.6 2.4 (0.4) 4.6Unallocated operating costs (4.3)Profit on disposal of investment properties 0.1 - - 0.1Net gain/(deficit) on revaluation of property portfolio 2.8 - (0.8) 2.0 Operating profit 2.4Share of results of associates and joint ventures (0.1) Profit before interest and taxation 2.3 Six months to 30th June 2006 (unaudited) Trading and Investment Development Operating Total £ million £ million £ million £ millionSegment revenue 4.5 0.4 2.3 7.2Direct costs (0.7) (0.6) (2.5) (3.8)Segment result 3.8 (0.2) (0.2) 3.4Unallocated operating costs (4.1)Profit on disposal of investment properties 0.9 - - 0.9Net gain on revaluation of property portfolio 10.4 - - 10.4 Operating profit 10.6 Profit before interest and taxation 10.6 Year ended 31st December 2006 (audited) Trading and Investment Development Operating Total £ million £ million £ million £ million Segment revenue 9.0 34.6 5.1 48.7Direct costs (1.6) (26.2) (5.0) (32.8)Segment result 7.4 8.4 0.1 15.9Unallocated operating costs (10.2)Loss on disposal of investment properties (0.1) - - (0.1)Net gain/(deficit) on revaluation of propertyportfolio 21.8 - (0.5) 21.3 Operating profit 26.9Share of results of associates and joint ventures 0.2 Income from financial assets 0.1 Profit before interest and taxation 27.2 3. TAXATION Corporation tax for the interim period is charged at 30 per cent (30th June and31st December 2006: 30 per cent). Six months to Six months to Year ended 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited £ million £ million £ millionUK corporation tax:Adjustments in respect of prior years - 0.3 0.2Deferred tax (credit)/expense (0.8) 2.9 (1.0) (0.8) 3.2 (0.8) Analysis of tax charge:Current tax:Continuing operations - 0.3 0.2Deferred tax (credit)/expense (0.8) 2.9 0.5Deferred tax (sale of investment property) - - (1.5) (0.8) 3.2 (0.8) 4. DIVIDENDS Six months to Six months to Year ended 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited £ million £ million £ millionAmounts recognised as distributionsto equity holders in the period 1.8 1.6 2.4 Proposed dividend 0.9 0.8 1.8 Pence Pence PenceInterim dividend per share 2.40 2.25 2.25Final dividend per share - - 4.50 4. DIVIDENDS The interim dividend was approved by the Board on 18th September 2007 and hasnot been included as a liability or deducted from retained earnings as at 30thJune 2007. The interim dividend is payable on 26th October 2007 to Ordinaryshareholders on the register at the close of business on 28th September 2007 andwill be recorded in the financial statements for the year ending 31st December2007. 5. EARNINGS PER SHARE AND NET ASSETS PER SHARE The calculation of the basic and diluted earnings per share is based on thefollowing data: Six months to Six months to Year ended 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited £ million £ million £ millionEarnings for the purposes of basic and dilutedearnings per share (£ million) 1.3 5.2 23.6Number of shares (million)Weighted average number of Ordinary shares for the purposes 40.8 36.7 37.1of basic earnings per shareEffect of dilutive potential Ordinary shares:- Share options 0.1 0.2 0.3Weighted average number of Ordinary shares for the purpose of 40.9 36.9 37.4diluted earnings per shareBasic earnings per share (pence) 3.2 14.2 63.4Diluted earnings per share (pence) 3.2 14.1 63.0 Net assets per share and diluted net assets per share have been calculated asfollows: Six months to Six months to Year ended 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited auditedNet assets (£ million):Basic net assets 231.7 191.3 231.4Effect of dilutive potential Ordinary shares 1.3 2.8 2.1Diluted net assets 233.0 194.1 233.5 Number of shares (million):Number of shares in issue at the balance sheet date 40.9 36.8 40.7Effect of dilutive potential Ordinary shares 0.3 0.7 0.5Diluted number of shares in issue at the balance sheet date 41.2 37.5 41.2 Basic net assets per share (pence) 566 521 568Diluted net assets per share (pence) 565 518 565 6. INVESTMENT PROPERTIES The movement in investment properties for the period ended 30th June 2007 was: Long Freehold leasehold Total £ million £ million £ millionAt valuation 1st January 2006 157.3 2.9 160.2Prior year restatement in respect of lease incentives(refer note 1(c)) (0.7) - (0.7)As restated at 1st January 2006 156.6 2.9 159.5Additions: - acquisitions 1.5 0.3 1.8 - capital expenditure 1.1 - 1.1Disposals (34.8) (2.7) (37.5)Surplus on revaluation 10.4 - 10.4At valuation 30th June 2006 (restated) 134.8 0.5 135.3Additions - acquisitions 1.8 1.9 3.7 - capital expenditure 0.4 - 0.4Transfer from operating properties 1.5 - 1.5Transfer to investment property - held for sale (5.3) - (5.3)Disposals (7.6) - (7.6)Surplus on revaluation 11.4 - 11.4At valuation 31st December 2006 137.0 2.4 139.4Additions - acquisitions 0.4 - 0.4 - capital expenditure 2.4 - 2.4Disposals (0.4) - (0.4)Surplus on revaluation 2.8 - 2.8At valuation 30th June 2007 142.2 2.4 144.6 No interest was capitalised in respect of investment properties in the sixmonths ended 30th June 2007 (30th June 2006: £0.1million, 31st December 2006:£0.7 million). Certain investment properties were independently valued at 30th June 2007 by DTZDebenham Tie Leung, Chartered Surveyors and Colliers CRE, Chartered Surveyors.The valuations at 30th June 2006, 31st December 2006 and 30th June 2007 havebeen carried out in accordance with The Royal Institute of Chartered Surveyors'(RICS) Appraisal and Valuation Standards published in February 2003 ("The RedBook"). The remaining Investment properties in the sum of £62.5 million (30thJune 2006: £15.4 million, 31st December 2006: £60.2 million) were valued by theDirectors. Of these assets, £44.6 million (30th June 2006: £41.5 million, 31stDecember 2006: £42.7 million) were also valued by the Group's independentvaluers. 7. CASH AND FINANCIAL LIABILITIES a) Cash balances shown on the Balance sheet at 30th June 2007 include £39.1million of cash received in respect of a specific property development fundingwhich cannot be utilised for other purposes. b) At 30th June 2007, an external valuation, undertaken by J C RathboneAssociates Limited, appraised the market value of the Group's fixed rate debt ona replacement basis, taking into account the difference between fixed interestrates for the Group's borrowings and the market value and prevailing interestrates of appropriate debt instruments, resulting in an excess of fair value overbook value of £8.1 million before tax (30th June 2006: £12.4 million, 31stDecember 2006: £11.9 million) at that date. The valuation, which is subject todaily fluctuations in line with money market movements, is only an indication ofthe notional effect on the net asset value of the Group at 30th June 2007 and isnot recognised in the Balance sheet. c) During the period, additional net borrowings of £44.7 million were drawn down(30th June 2006: nil, 31st December 2006: 12.0 million) and £0.1 million loansrepaid (30th June 2006: £13.2 million, 31st December 2006: £18.7 million). 8. SHARE CAPITAL 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited £ million £ million £ millionAuthorised:50,000,000 Ordinary shares of 50 pence(30th June and 31st December 2006: 50,000,000Ordinary shares of 50 pence) 25.0 25.0 25.0Issued, called up and fully paid:40,933,265 Ordinary shares of 50 pence(30th June 2006: 36,792,688 Ordinary sharesof 50 pence, 31st December 2006: 40,711,652Ordinary shares of 50 pence) 20.5 18.4 20.4 9. RESERVES Property Share revaluation Other premium reserve reserves Total £ million £ million £ million £ millionAt 1st January 2006 87.6 0.3 45.8 133.7Net proceeds of issue of new shares 0.1 - - 0.1Share based payments - - 0.1 0.1At 30th June 2006 87.7 0.3 45.9 133.9Net proceeds of issue of new shares 21.1 - - 21.1Net surplus on revaluation of operating properties - 0.5 - 0.5Share based payments - - (0.1) (0.1)At 31st December 2006 108.8 0.8 45.8 155.4Net proceeds of issue of new shares 0.7 - - 0.7Share based payments 0.2 - (0.1) 0.1 At 30th June 2007 109.7 0.8 45.7 156.2 Retained earnings £ millionAt 1st January 2006 35.4Retained profit for the period 5.2Final dividend 2005 (1.6)At 30th June 2006 39.0Retained profit for the period 18.4Net deferred tax on property revaluations (1.0)Interim dividend 2006 (0.8)At 31st December 2006 55.6Retained profit for the period 1.3Share based payments (0.1)Final dividend 2006 (1.8)At 30th June 2007 55.0 10. NOTE TO THE CASH FLOW STATEMENT Six months to Six months to Year ended 30th June 2007 30th June 2006 31st Dec 2006 unaudited unaudited audited £ million £ million £ millionOperating profit 2.4 10.6 26.9Adjustments for:(Gain)/loss on disposal of investment properties (0.1) (0.9) 0.1Net gain on revaluation of property portfolio and operating properties (2.0) (10.4) (21.3)Share based payments 0.1 0.1 0.1Depreciation of property, plant and equipment 0.6 0.6 1.2Operating cash flows before movements in working capital 1.0 0.0 7.0Increase in developments (4.7) (0.6) (3.6)Increase in trading properties (75.1) (16.5) (15.0)Increase in receivables (8.2) (1.7) (0.2)Increase/(decrease) in payables 46.3 (2.7) 1.7Decrease in provisions - (0.3) (0.4)Cash generated by operations (40.7) (21.8) (10.5)Income taxes paid (0.1) (1.9) (0.5)Interest paid (4.4) (5.1) (8.1)Capitalised interest charged to direct costs - - 1.1Net cash flow from operating activities (45.2) (28.8) (18.0) 11. GLOSSARY Net borrowings: Net borrowings are defined as total debt less cash andshort-term deposits, including pledged cash. Net gearing: Net gearing, expressed as a percentage, is measured as netborrowings divided by total equity. Basic net assets per share: Net assets per share are defined as total equity asshown in the Group's Balance sheet, divided by the number of equity shares inissue at the balance sheet date. Diluted net assets per share: Diluted net assets per share are defined as totalequity as shown in the Group's balance sheet and notional equity arising fromthe exercise of share options, divided by the number of equity shares and thetotal of equity shares under option in issue at the balance sheet date. Dividends per share: Dividends per share, expressed as an amount in pence pershare, is defined as the total dividend declared by the Directors divided by thenumber of equity shares qualifying for such dividend. 12. SUBSEQUENT EVENTS On 18th July 2007, the Group disposed of its interest in three tradingproperties with a book value of £3.9 million. The Board proposed and declared an interim dividend of 2.4 pence per share (30thJune 2006: 2.25 pence, 31st December 2006: 4.5 pence) at the Board meeting heldon 18th September 2007. The dividend will be paid on 26th October 2007 toshareholders on the register on 28th September 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
UAI.L