20th Sep 2005 07:03
Development Securities PLC20 September 2005 DEVELOPMENT SECURITIES PLC - INTERIM RESULTS FOR THE SIX MONTHS ENDING JUNE 2005 In line with expectations, Development Securities PLC, the leading propertydevelopment and investment company, today announces a pre-tax loss of £1.3million for the six months to 30th June 2005 compared to a restated profit of£0.5 million in the first six months of the previous year. During the second half of the current financial year, investment propertydisposals have already realised profits of £2.5m and there are a number of otherproperties currently under offer which are expected to realise additional gainsif completion occurs in the next few months. Shareholders' funds declined marginally to £170.6 million, equivalent to 465pence per share, from the restated £173.2 million or 472 pence per share at 31stDecember 2004. These figures compare to shareholders' funds of £171.0 million or466 pence per share which were originally reported in March of this year. Theinterim dividend will be 2.12 pence per share, an increase of six per cent overthe equivalent dividend paid in 2004. Financial highlights 30th June 30th June 2004 30th June 2004 2005 (restated under (original under IFRS) UK GAAP)(Loss) /profit before (£1.3 million) £0.5 million £0.4 milliontax(Loss) /earnings per (3.0 pence) 2.8 pence 2.5 penceshareDividend per share 2.12 pence 2.0 pence 2.0 pence 30th June 31st Dec 2004 31st Dec 2004 2005 (restated under (original under IFRS) UK GAAP)Shareholders' funds £170.6 million £173.2 million £171.0 million NAV per share 465 pence 472 pence 466 penceNet gearing 40% 18% 18% Roy Dantzic, Chairman, Development Securities PLC, commented, "The relatively modest loss over the six month period should be seen in thecontext of investment property disposals that have already realised profits of£2.5m in the second half of the year. Additionally, the 5.9 per cent increase incapital growth in the Investment Property Databank Index to August this yearprovides us with some confidence that our 2005 year-end investment propertyrevaluation surplus will again prove firmly positive. A favourable decision onthe retail and residential planning applications at our Broughton sites wouldalso clearly be beneficial." Enquiries: Michael MarxDevelopment Securities PLC 020 7828 4777 Alison HowardThe Communication Group plc 07970 719 060 www.developmentsecurities.com Overview PaddingtonCentral A revised masterplan for future phases, comprising four office buildingstotalling 800,000 sq. ft net and a two hundred-room hotel, has been agreed withour development partner, Morley Fund Management, with estimated completion ofphase two by the end of 2007. Construction of the Crossrail works on the sitecommenced in January 2005 and is on schedule for practical completion in Spring2006. CityPark, ManchesterCityPark has an outline planning consent for a 94,000 sq. ft hotel and 177,000sq. ft of office accommodation, together with associated car parking. Weanticipate being in a position to submit a detailed planning application toManchester City Council in the near future. Broughton Much work has been undertaken in connection with the impact of proposed retailand residential developments. We anticipate that both the planning applicationsfor retail and residential schemes will be presented to the members' committeeof Flintshire County Council before the end of this financial year. Colindale, London, NW9In June, we acquired the freehold interest in an existing 100,000 sq. ft retailscheme for £26.4m. The 7.5-acre site, currently known as Oriental City, has thecapacity to accommodate a significantly more dense mixed-use development. Wehave begun work on preparing a detailed planning application. Property portfolio So far this year we have been cautious on acquisitions, whilst taking advantageof market conditions to sell those assets where we believe the market hasoverpriced the quality and potential offered. Most importantly, we have remainedfocused on maximising value from the assets we own. Aside from the recent saleof Milton House, Sheffield for £15.5 million, our disposals have focused onsmaller assets, thereby further rationalising the portfolio. We plan anacceleration of the sales programme towards the end of the year, especially ifthe investment market shows further signs of flattening out. Stead & SimpsonEarlier this year Clearwater Corporate Finance PLC conducted a strategic reviewof a range of exit options for some of Stead & Simpson's shareholders, includingourselves. Clearwater then initiated the presentation of the business to a widerange of interested parties embracing the venture capital, trade and bankingsectors. A shortlist of preferred bidders have undertaken due diligence and itis anticipated that Clearwater will shortly be able to recommend one of thebidders as a suitable investor to support and further the growth of thebusiness. Notwithstanding an inclement April and May this year and a generally perceivedslowdown in retail activity, sales at Stead & Simpson so far this year have beenmaintained slightly ahead of last year, on a like for like basis. Chairman's statement The results for the six months to 30th June 2005, our first reported under newlyadopted International Financial Reporting Standards, are in line with ourexpectations at the commencement of the year. We recorded a loss before taxationof £1.3 million, compared to a restated profit of £0.5 million in the first sixmonths of the previous year. Shareholders' funds declined marginally to £170.6million, equivalent to 465 pence per share, from the restated £173.2 million or472 pence per share at 31st December 2004. These figures compare toshareholders' funds of £171.0 million or 466 pence per share which we originallyreported in March of this year. Shareholders will be aware that over recent years our substantial profits aroselargely from the realisation of development gains on significant projects inwhich we were involved in the previous property development cycle. Shareholderswill equally be aware that development activity in Central London, our coremarket, has been very subdued since the peak of the last cycle in 2000 and hencethere are no development surpluses to report in the period now under review. We have now adopted the new International Financial Reporting Standards and, asyou will see from the attached financial statements, they have had only amarginal impact on the figures we have previously reported. The balance sheet remains strong, with shareholders' funds very close to theirall time high. Net gearing* is currently at a modest 40 per cent. Accordingly,your Board has declared an interim dividend of 2.12 pence per share, an increaseof six per cent over the equivalent dividend paid in 2004, to be paid on 27thOctober to shareholders on the register on 30th September 2005. The United Kingdom economy is likely to require a period of consolidation beforeit moves forward again. Economic growth has decelerated to an annual rate of 1.7per cent in the first half of 2005 as domestic demand slowed sharply. Theconsensus view is that UK GDP growth will decline significantly from 3.2 percent in 2004 to circa 2.0 per cent per annum in 2005 and 2006. Whilst we have been active in identifying and bidding for developmentopportunities in Central London, we are reluctant to commit our resources andmanagement time to projects which do not enable us to generate adequate returnsfor our shareholders. The weight of money in the market and keen appetite ofinvestors and competitors has seemingly raised the cost of entry for manyprojects to levels that we believe are unjustified. On the more positive side,inflation remains low, with expectations that the low interest rate environmentwill continue into the medium-term. However, strong tenant demand, which wouldlead to firm rental growth, remains elusive and it is this indicator, possiblymore than anything else, which has determined our cautious approach during 2005. Accordingly, as shareholders will be aware from my previous report, we haverefocused our current endeavours into the key provincial cities in the UnitedKingdom and into the London suburbs. The number of projects which we have eitherwon or with which we are still actively associated outside Central London issignificant. Current low interest rates together with the relative lack ofdistressed sellers of real estate preclude any reduction in acquisition pricesin the near future. * see glossary (refer note 15) PaddingtonCentral A revised masterplan for future phases, comprising four office buildingstotalling 800,000 sq.ft. net and a 200-room hotel, has been agreed with ourdevelopment partner, Morley Fund Management. Whilst certain aspects of thismasterplan remain subject to planning approval, particularly the inclusion ofthe hotel, a decision was made in August of this year to seek tenders for theconstruction of our next phase, namely the 250,000 sq. ft. office building forwhich detailed planning consent already exists. Consideration is being given tothe implications of extending this phase to incorporate the hotel building. Weexpect to place the main construction contract within a few months and stillanticipate practical completion to be at the end of 2007. Construction of theCrossrail works on the site commenced in January 2005 and is on schedule forpractical completion in Spring 2006. These works will enable the Crossrailproject to proceed at its own pace by providing a horizontal separation betweenthe planned Crossrail work area and future phases of the PaddingtonCentraldevelopment. It is also pleasing to report that the project to widen theadjacent Bishops Bridge Road from two to five lanes will be completed in April2006, providing the new main road access to our development, directly oppositethe proposed new entrance to Paddington station. The new bridge and theCrossrail works are significant components in the realisation of ourregeneration vision for PaddingtonCentral. CityPark, Manchester Located in Central Manchester immediately to the north east of Victoria station,CityPark has an outline planning consent for a 94,000 sq. ft. hotel and 177,000sq. ft. of office accommodation, together with associated car parking. Sinceacquisition of this site in the final quarter of 2004, we have been working upfeasibility studies on the variation and enlargement of the existing planningconsent as well as engaging in negotiation with a number of potential hoteloperators. We anticipate being in a position to submit a detailed planningapplication to Manchester City Council in the near future. Cambourne Business Park In July this year, we signed an agreement to let 20,000 sq. ft. of officeaccommodation to a subsidiary of TTP Communications plc, a cellular telephonesystems provider. Only one building therefore remains to be let on Phase 2 ofour development and we are currently reviewing the sub-division of this 45,000sq. ft. building in the light of current tenant interest. Located nine miles from Cambridge City Centre and close to the M11 motorway,this 750,000 sq. ft. business park is an integral part of the Cambournesettlement; a 1,040 - acre scheme of 3,300 houses with town centre, hotel,retail and leisure facilities. Broughton Park Since the summer of 2004, when planning applications were submitted for both theproposed retail and residential developments, much work has been undertaken inconnection with the impact of those proposals on the existing transportinfrastructure as well as a retail impact assessment. The environmental impacthas also been carefully considered and agreement reached with the relevantenvironmental agencies. The planning application for the extension to the existing retail scheme isintended to embrace a 90,000 sq. ft. Marks & Spencer store, an additional 26,000sq. ft. for Tesco and 54,000 sq. ft. of speculative retail space. We stillanticipate that the planning application will be presented to the members'committee of Flintshire County Council before the end of this financial year. Very soon thereafter, we anticipate that the residential planning application inrespect of our nearby 27.7-acre site will be presented to the committee,hopefully also before the end of this financial year. This site is close to theretail park, the British Aerospace facility and within a reasonable walkingdistance of the proposed new 1 million sq. ft. business and leisure park to bedeveloped by the Welsh Development Agency at Warren Hall, for which planningapproval was obtained in July of this year. Colindale, London, NW9 In June, we acquired the freehold interest in an existing 100,000 sq. ft. retailscheme which was developed in the late 1980's, for £26.4 million, yielding 6.5per cent. Currently known as Oriental City, the retail activity presentlyembraces a broad range of specialist oriental food retailers and other products.The 7.5-acre site has the capacity to accommodate a significantly more densemixed-use development, which we believe will embrace an enlarged retail offernot restricted to oriental foods and merchandise, as well as a substantialresidential component. We have begun work on preparing a detailed planningapplication and have already engaged Brent Borough Council in early discussions. Property portfolio The continued dislocation between property investment and occupational marketsremains difficult to fully justify. There is little doubt that property is seenin a new light by investors as part of a diversified investment portfolio andthis has fuelled demand for property investments and in turn led tounprecedented price increases. Meanwhile, occupational markets, impacted by asoft domestic and global economic environment, have stalled. Rental growth isthe critical long-term factor in providing investment returns. Yield shifts atbest can be one-off, and at worst often are transitory. However, we now feel that the indiscriminate rise in property values is comingto an end and continued implementation of our stock selection and assetmanagement initiatives will be the key drivers to increasing values anddelivering shareholder returns from our investment portfolio. We have remained committed to our three key principles, namely, sector rotation,stock selection and proactive management. As a result, so far this year we havebeen cautious on acquisitions, whilst taking advantage of market conditions tosell those assets where we believe the market has overpriced the quality andpotential offered. Most importantly, we have remained focused on maximisingvalue from the assets we own. Our investment acquisition strategy remains focused on marginally higher riskassets that do not depend on market momentum to deliver returns. We areencouraged by increasing confidence in both our stock selection skills andrecognition that we possess the required in-house development skills to generateattractive shareholder returns. Earlier this year, we completed the development funding of Cavendish WalkShopping Centre in Huyton, Liverpool. Construction of this centre has justcommenced and will be undertaken by our development partner CTP over the courseof the next nine months to provide circa 100,000 sq. ft. of town centre retailaccommodation. At the time of our acquisition, the anchor unit was pre-let toWilkinson Hardware Stores Limited and it is our clear task to lease theremainder of the scheme. Whilst the evidence from the high street indicates aslowdown in consumer spending, there are still a number of retailers withtargeted expansion plans and we are pleased to report that serious discussionsare in hand for over 60 per cent of the accommodation. On completion and whenfully let, we would expect the scheme to reflect an attractive uplift in value.We intend to target further acquisitions of this nature where we undertakequantifiable letting risk, which we can price, whilst leaving the constructioncost risk with our specialist development partners. We continue to implement asset management initiatives at our other shoppingcentre assets, including the acquisition of adjoining land holdings tofacilitate further phases of development and tenant upgrades. For example, inRingwood we have taken back possession of several units and have this year,amongst others, welcomed Hobbs, AGA and Phase 8 to the scheme. Having created arefreshed and unique shopping experience on the south coast, we intend tocapitalise on this with further phases of development of the scheme, targetingother aspirational retail brands. Accordingly, we have acquired a key adjacentland holding to facilitate this extension and are in discussion with the LocalAuthority to obtain the required planning permission. Aside from the recent sale of Milton House, Sheffield for £15.5 million, ourdisposals have focused on smaller assets, thereby further rationalising theportfolio. We plan an acceleration of the sales programme towards the end of theyear, especially if the investment market shows further signs of flattening out. Our exposure to retail property has served us well over recent years, but as theretail sector bears the brunt of the economic slowdown, we expect the disparitybetween sectoral returns to reduce. We will continue to balance the overallportfolio positioning against our stock specific investment strategy. In June, we were pleased to receive a prestigious property investment award forthe highest three year returns in the category of Balanced Pooled Funds andTraditional Institutions £50 million to £200 million. Following recent transactions our property portfolio sector allocation by valuecomprises 76 per cent retail, 11 per cent office and 13 per cent industrial. Stead & Simpson Following on from their appointment by Stead & Simpson in March 2005, ClearwaterCorporate Finance PLC conducted a strategic review of a range of exit optionsfor some of Stead & Simpson's current shareholders, including ourselves.Following the review, Clearwater initiated the presentation of the business to awide range of interested parties embracing the venture capital, trade andbanking sectors. Since then, a shortlist of preferred bidders have undertakendue diligence, including meetings with the executive management of Stead &Simpson. It is anticipated that Clearwater will shortly be able to recommend oneof the bidders as a suitable investor to support and further the growth of thebusiness. Notwithstanding an inclement April and May this year and a generally perceivedslowdown in retail activity, sales at Stead & Simpson so far this year have beenmaintained slightly ahead of last year, on a like for like basis. Conclusion I am pleased to report that in the second half of the current financial year,investment property disposals have already realised profits of £2.5m. We have anumber of other properties currently under offer which we hope will realiseadditional gains upon completion in the next few months. All realised gains willbe accounted for within the income statement for the year to 31st December 2005together with, under the new accounting standards, the impact of the normalyear-end property revaluations. The Investment Property Databank capital growthindex to August this year increased by 5.9 per cent, providing us with someconfidence that our 2005 year-end revaluation surplus will again prove firmlypositive. R M DantzicChairman20th September 2005 Consolidated income statementunaudited for the six months ended 30th June 2005 Six months Six months Year to to ended 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited restated restated Note £'million £'million £'million---------------------- ------ --------- --- --------- --- -------- Revenue 7.9 10.0 23.7Direct costs (3.6) (5.3) (14.0)---------------------- ------ --------- --- --------- --- --------Gross profit 3 4.3 4.7 9.7 Operating costs (3.7) (3.4) (8.4)---------------------- ------ --------- --- --------- --- --------Operating profit 0.6 1.3 1.3 Share of results ofassociate 0.5 0.7 3.6Income from other fixedasset investments 0.2 0.1 0.1Gain on revaluation ofinvestment properties - - 14.7Profit on disposal ofinvestment properties 0.1 0.6 4.0-------------------------- --------- --- --------- --- -------- Profit before interestand taxation 1.4 2.7 23.7 Finance income 1.2 1.2 2.6Finance costs (3.9) (3.4) (7.4)---------------------- ------ --------- --- --------- --- -------- (Loss)/profit beforetaxation (1.3) 0.5 18.9 Taxation 4 0.2 0.3 (0.3)---------------------- ------ --------- --- --------- --- -------- (Loss)/profit for theperiod (1.1) 0.8 18.6---------------------- ------ --------- --- --------- --- -------- Basic (loss)/earningsper share 6 (3.0)p 2.8p 54.5pDiluted (loss)/earningsper share 6 (3.0)p 2.8p 54.4p---------------------- ------ --------- --- --------- --- -------- Consolidated balance sheetunaudited as at 30th June 2005 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited restated restated Note £'million £'million £'million---------------------- ------ --------- ---- --------- --- -------- Non-current assetsProperty, plant andequipment- Operating properties 10.4 8.2 10.6- Other non-current assets 3.7 4.0 3.8Investment properties 7 161.5 134.3 156.6Investments 7.0 5.2 8.4---------------------- ------ --------- ---- --------- --- -------- 182.6 151.7 179.4 Current assetsLand, developments andtrading properties 55.0 21.7 21.2Trade and other receivables 15.6 16.3 18.0Cash and cash equivalents 26.6 43.5 53.8---------------------- ------ --------- ---- --------- --- -------- 97.2 81.5 93.0 Current liabilitiesTrade and other payables (15.3) (16.0) (16.4)---------------------- ------ --------- ---- --------- --- --------Net current assets 81.9 65.5 76.6---------------------- ------ --------- ---- --------- --- -------- Total assets less currentliabilities 264.5 217.2 256.0 Non-current liabilitiesBorrowings (93.9) (90.0) (82.8)---------------------- ------ --------- ---- --------- --- --------Net assets 170.6 127.2 173.2---------------------- ------ --------- ---- --------- --- -------- Financed by: Capital and reservesCalled up share capital 9 18.3 14.1 18.3Reserves 10 134.8 110.2 134.8Retained earnings 10 17.5 2.9 20.1---------------------- ------ --------- ---- --------- --- --------Total equity shareholders'funds 170.6 127.2 173.2---------------------- ------ --------- ---- --------- --- -------- Net assets per share 465p 451p 472p---------------------- ------ --------- ---- --------- --- --------Diluted net assets per share 462p 447p 469p---------------------- ------ --------- ---- --------- --- -------- Consolidated statement of recognised income and expenseunaudited as at 30th June 2005 Six Six Year months to months to ended 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited restated restated £'million £'million £'million----------------------- ------ ---------- --- --------- --- --------- Gains on revaluation ofowner occupiedproperties - - 0.1 (Loss)/profit for theperiod (1.1) 0.8 18.6----------------------- ------ ---------- --- --------- --- --------- Total recognised incomeand expense fortheperiod attributable toequity shareholders of the parent company (1.1) 0.8 18.7-------------------------- ---------- --- --------- --- --------- Consolidated statement of changes in equityunaudited as at 30th June 2005 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited restated restated £'million £'million £'million----------------------- ------ --------- ----- --------- --- --------- Opening shareholders' funds- as previously reported 125.1 125.1- effect of adoptingIFRS (note 13) 2.3 2.3----------------------- ------ --------- ----- --------- --- --------- Opening shareholders'funds - restated 173.2 127.4 127.4Issue of shares - - 28.6Adjustment forshare-based payments - - 0.1----------------------- ------ --------- ----- --------- --- --------- 173.2 127.4 156.1Total recognised incomeand expense for theperiod (1.1) 0.8 18.7 Dividends (note 5) (1.5) (1.0) (1.6)----------------------- ------ --------- ----- --------- --- ---------Closing shareholders'funds 170.6 127.2 173.2----------------------- ------ --------- ----- --------- --- --------- Consolidated cash flow statementunaudited for the six months ended 30th June 2005 Six months Six months Year to to ended 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited restated restated Note £'million £'million £'million------------------------- ------ --------- ---- --------- ---- --------- Net cash from operatingactivities 11 (35.3) (11.7) (15.8)------------------------- ------ --------- ---- --------- ---- ---------Investing activities:Interest received 1.2 1.3 2.5Dividends received fromassociatedundertaking 0.2 - -Proceeds from sale ofshares in associatedundertaking 0.3 - -Proceeds from redemptionof preference sharesheld in associatedundertaking 1.5 - -Issue of new shares - - 28.6Proceeds on disposal ofproperty, plant andequipment - 0.1 0.1Proceeds on disposal ofinvestment properties 3.4 5.9 26.3Purchases of property,plant and equipment (0.3) (0.7) (0.9)Purchases of investmentproperties (8.3) (23.2) (50.7)Purchase of investments - (0.3) (0.4)------------------------- ------ --------- ---- --------- ---- ---------Net cash used ininvesting activities (2.0) (16.9) 5.5 Financing activities:Dividends paid - - (1.6)Repayments of borrowings (5.1) (0.1) (7.2)New bank loans raised 16.1 15.2 15.2(Decrease)/increase inbank overdrafts (0.8) 0.6 1.4Decrease/(increase) inpledged cash 6.3 3.8 (10.2)------------------------- ------ --------- ---- --------- ---- ---------Net cash from/(used in)financing activities 16.5 19.5 (2.4) Net decrease in cash andcash equivalents (20.8) (9.1) (12.7)------------------------- ------ --------- ---- --------- ---- --------- Cash and cashequivalents at thebeginning of the year 34.6 47.4 47.4------------------------- ------ --------- ---- --------- ---- ---------Cash and cashequivalents at the endof the year 13.8 38.3 34.7------------------------- ------ --------- ---- --------- ---- --------- Pledged cash held assecurity againstborrowings 12.8 5.2 19.1------------------------- ------ --------- ---- --------- ---- ---------Cash and cashequivalents as disclosedin the consolidatedbalance sheet 26.6 43.5 53.8------------------------- ------ --------- ---- --------- ---- --------- Notes to the interim financial informationunaudited for the six months ended 30th June 2005 1 The restated results presented for the year ended 31stDecember 2004 are not statutory accounts within the meaning of s240, CompaniesAct 1985. Statutory accounts for that period were prepared and filed with theRegistrar of Companies and received an unqualified audit report. The results forthe six months to 30th June 2005 and 2004 are unaudited and do not constitutethe Group's statutory accounts within the meaning of s240 of the Companies Act1985. The income statement and balance sheet have been prepared in accordance withapplicable International Accounting Standards (IAS) and International FinancialReporting Standards (IFRS) issued by the International Accounting StandardsBoard (IASB) and on the basis that all such standards will be endorsed by theEuropean Union (EU). These standards are also collectively referred to as"IFRS". 2 Transition to IFRS All listed companies in the EU are required to present their consolidatedfinancial statements for accounting periods beginning on or after 1st January2005 in accordance with IFRS as adopted by the EU. Therefore, the Group'sconsolidated financial statements for the year ending 31st December 2005 will bepresented on this basis with IFRS comparative figures. These interim financialstatements have been prepared on the basis of the IFRS accounting policiesexpected to be adopted in the year-end consolidated financial statements. The Group's transition date for adoption of IFRS is 1st January 2004. IAS 32 andIAS 39, dealing with financial instruments, have been adopted from 1st January2005. The provisions of IFRS 2 "Share-Based Payments" have been applied inrespect of grants of equity instruments after 7th November 2002. IFRS 3"Business Combinations" has been applied prospectively from 1st January 2004.These transition dates have been selected in accordance with IFRS 1, "First timeadoption of International Financial Reporting Standards". Prior to the adoption of IFRS, the financial statements of DevelopmentSecurities PLC had been prepared in accordance with United Kingdom accountingstandards (UK GAAP). UK GAAP differs in certain respects from IFRS and certainaccounting, valuation and consolidation methods have been amended, whenpreparing these financial statements, to comply with IFRS. The comparativefigures in respect of 2004 have been restated to reflect these amendments.Reconciliation and description of the effect of the transition from UK GAAP toIFRS on the Group's reported financial position, financial performance and cashflows is set out in notes 13 and 14. 3 Segmental analysis For management purposes, the Group is currently organised into three operatingdivisions - Investment, Trading and Development and Operating. These divisionsare the basis on which the Group reports its primary segment information.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; Operating - serviced office operations and retail activities. Revenue is principally received from short-term license fee income. Six months to 30th June 2005 -------------------------------------------------- Trading and Investment Development Operating Group Total £'million £'million £'million £'million --------- ---------- --------- ---------- Revenue 5.2 0.4 2.3 7.9Direct costs (0.8) (0.6) (2.2) (3.6) --------- ---------- --------- ----------Gross profit/(loss) 4.4 (0.2) 0.1 4.3 Unallocated operatingcosts (3.7) ----------Operating profit 0.6Share of results ofassociate 0.5Income from otherfixed asset investments 0.2Profit on disposal ofinvestment properties 0.1 ----------Profit before interestand taxation 1.4Finance income 1.2Finance costs (3.9) ---------- Loss before taxation (1.3)Taxation 0.2 ----------Loss for the period (1.1) ---------- Six months to 30th June 2004 --------------------------------------------------- Trading and Investment Development Operating Group Total £'million £'million £'million £'million ----------- ----------- --------- --------- Revenue 4.6 3.2 2.2 10.0Direct costs (0.7) (2.2) (2.4) (5.3) ----------- ----------- --------- ---------Gross profit/(loss) 3.9 1.0 (0.2) 4.7 Unallocated operatingcosts (3.4) ---------Operating profit 1.3Share of results ofassociate 0.7Income from otherfixed 0.1asset investmentsProfit on disposal ofinvestment properties 0.6 ---------Profit beforeinterest and taxation 2.7Finance income 1.2Finance costs (3.4) --------- Profit before taxation 0.5Taxation 0.3 ---------Profit for the period 0.8 --------- Year ended 31st December 2004 ------------------------------------------------------ Trading and Investment Development Operating Group Total £'million £'million £'million £'million ---------- ----------- --------- --------- Revenue 9.2 9.4 5.1 23.7Direct costs (1.5) (7.7) (4.8) (14.0) ---------- ----------- --------- ---------Gross profit 7.7 1.7 0.3 9.7 Unallocated operatingcosts (8.4) ---------Operating profit 1.3Share of results ofassociate 3.6Income from other fixedasset investments 0.1Gain on revaluation ofinvestment properties 14.7Profit on disposal ofinvestment properties 4.0 ---------Profit before interestand taxation 23.7Finance income 2.6Finance costs (7.4) --------- Profit before taxation 18.9Taxation (0.3) ---------Profit for the year 18.6 --------- 4 Taxation Corporation tax for the interim period is charged at 30 per cent (30th June and31st December 2004: 30 per cent). The tax credit for the period represents theestimated deferred tax asset arising from the operating loss for the period. 5 Dividends Six months Six months Year to to ended 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited restated restated £'million £'million £'million ---------- ---------- --------- Amounts recognised asdistributions to equityholders in the period: 1.5 1.0 1.6 ---------- ---------- --------- Proposed interim dividendfor the year ended 31stDecember 2005 0.8 ---------- Pence Pence Pence Interim dividend per share 2.12 2.00 2.00 Final dividend per share - - 4.00 ---------- ---------- --------- The interim dividend was approved by the Board on 20th September 2005 and hasnot been included as a liability as at 30th June 2005. The interim dividend ispayable on 27th October 2005 to Ordinary shareholders on the register at theclose of business on 30th September 2005. 6 Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: Six Six Year months to months to ended 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited restated restated £'million £'million £'million---------------------- --------- --- --------- --------- (Loss)/earnings per share(Loss)/earnings for thepurposes of basic anddiluted earnings pershare (1.1) 0.8 18.6 Number of sharesWeighted average numberof ordinary shares forthe purposes of basicearnings per share 36.7 28.2 34.1---------------------- --------- --- --------- --------- Effect of dilutive potentialordinary shares:- Share options - 0.1 0.1---------------------- --------- --- --------- ---------Weighted average numberof ordinary shares forthe purpose of dilutedearnings per share 36.7 28.3 34.2---------------------- --------- --- --------- --------- Basic (loss)/earningsper share (pence) (3.0) 2.8 54.5Diluted (loss)/earningsper share (pence) (3.0) 2.8 54.4 7 Investment Properties Investment properties at 30th June 2005 are stated at the valuationsincorporated within the financial statements for the year ended 31st December2004 or at cost where acquired subsequently. The movement in investmentproperties for the six month period ended 30th June 2005 was: Long Freehold leasehold Total £'million £'million £'million---------------------- -------- -------- -------- At 1st January 2005 151.8 4.8 156.6Additions 8.2 - 8.2Disposals (1.4) (1.9) (3.3)---------------------- -------- -------- -------- At 30th June 2005 158.6 2.9 161.5---------------------- -------- -------- -------- Interest of £0.1 million was capitalised in the six months ended 30th June 2005(30th June 2004: £0.3 million, 31st December 2004: £0.5m). 8 Borrowings The Group repaid £5.1 million of debt during the period (30th June 2004: £0.1million, 31st December 2004: £7.2 million). New facilities were drawn during theperiod in the amount of £16.1 million (30th June 2004: £15.2 million, 31stDecember 2004: £15.2 million). At 30th June 2005, an external valuation, undertaken by J C Rathbone AssociatesLimited, appraised the market value of the Group's fixed rate debt on areplacement 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 £15.3 million before tax (30th June 2004: £11.7 million, 31stDecember 2004: £14.2 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 2005 and isnot recognised in the balance sheet. 9 Share capital 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited £'million £'million £'million ---------- ---------- --------- Authorised:50,000,000Ordinary shares of 50 pence(30th June 2004: 37,000,000Ordinary shares of 50 pence,31st December 2004:50,000,000 Ordinary shares of 50 pence) 25.0 18.5 25.0 ---------- ---------- ---------Issued, called up and fullypaid:36,674,869 Ordinaryshares of 50 pence (30thJune 2004: 28,188,876Ordinary shares of 50 pence,31st December 2004:36,667,308 Ordinary shares of 50 pence) 18.3 14.1 18.3 ---------- ---------- ---------10 Reserves Share Property Other Total premium revaluation Reserves reserve £'million £'million £'million £'million --------- ---------- -------- -------- As at 1stJanuary 2005(restated) and30th June 2005 87.4 1.7 45.7 134.8 --------- ---------- -------- -------- Retained earnings £'million --------As at 1stJanuary 2005(restated) 20.1Loss for theperiod (1.1)Final dividendfor the yearended 31stDecember 2004 (1.5) -------- As at 30thJune 2005 17.5 11 Notes to the cash flow statement Six months Six months Year to to ended 30th June 30th June 31st Dec 2005 2004 2004 unaudited unaudited audited restated restated £'million £'million £'million------------------------ --------- --------- -------- Operating profit 0.6 1.3 1.3Adjustments for:Depreciation of property, plantand equipment 0.5 0.5 1.0------------------------ --------- --------- --------Operating cash flows beforemovements in working capital 1.1 1.8 2.3Increase in developments andtrading properties (33.8) (6.5) (5.7)Decrease/(increase) inreceivables 2.8 (4.0) (4.6)(Decrease)/increase in payables (1.7) 0.4 (1.2)------------------------ --------- --------- --------Cash generated by operations (31.6) (8.3) (9.2)Income taxes received 0.1 0.2 1.1Interest paid (3.8) (3.6) (7.7)------------------------ --------- --------- --------Net cash from operatingactivities (35.3) (11.7) (15.8)------------------------ --------- --------- -------- 12 Transition to International Financial Reporting Standards Summary of significant accounting policies under IFRS Prior to the introduction of IFRS, the Group had prepared its financialstatements under United Kingdom accounting standards (UK GAAP). As a result ofadopting IFRS it has been necessary to change many of the Group's accountingpolicies. A summary of the Group's significant accounting policies is shownbelow. Basis of accounting The financial statements have been prepared under the historical cost conventionas modified by the revaluation of certain items. Basis of consolidation The consolidated financial statements of the Group include the financialstatements of Development Securities PLC ("the Company") its subsidiaries andthe Group's share of profits and losses and net assets of joint ventures andassociate undertakings made up to 30th June 2005. Where necessary, adjustments are made to the financials statements ofsubsidiaries to bring the accounting policies used into line with those used byother members of the Group. Intra-group balances and any unrealised gains and losses arising fromintra-group transactions are eliminated in preparing the consolidated financialstatements. RevenueRevenue, which excludes value added tax, is recognised in the period in whichthe Group earns the right to consideration and represents: i) rental income;ii) development profits;iii) the sales proceeds of trading properties, undeveloped land and building units sold during the year;iv) project management fee income; andv) trading income from operating properties. Associates and jointly controlled entities An associated company is defined as an undertaking other than a subsidiary orjointly controlled entity in which the Group holds a long-term interest and hassignificant influence. The Group's investment in associates are accounted for inthe consolidated financial statements using the net equity method. The Group'sshare of the profits and losses of associated undertakings is shown in theconsolidated income statement while the Group's share of the net assets ofassociated undertakings is shown in the consolidated balance sheet.The Group does not equity account for losses from investments in associatedcompanies where the investment is held at nil value after provisions forimpairment. A jointly controlled entity is defined as an undertaking other than a subsidiaryor associated undertaking in which the Group has significant influence and whichis jointly controlled by two or more venturers. The Group's share of thepost-acquisition results of jointly controlled entities is shown in theconsolidated income statement. Investments in material jointly controlledentities are included in the consolidated balance sheet at cost plus theappropriate share of post-acquisition results and reserves less provision forany impairment. Investment properties Investment properties are those properties that are held either to earn rentalincome or for capital appreciation or both. Investment properties may befreehold properties or leasehold properties. For leasehold properties that areclassified as investment properties, the associated leasehold obligations areaccounted for as finance lease obligations. Investment properties are revalued each year by independent professional valuerson the basis of Market Value. Investment properties are not valued at theinterim period. Surpluses and deficits arising in the period are included in theincome statement. Profits and losses on disposal of investment properties are calculated byreference to carrying value. In the light of the policy on revaluations nodepreciation or amortisation is provided in respect of freehold investmentproperties and leasehold investment properties with over 20 years to run. Thistreatment, as regards certain of the Group's investment properties, may be adeparture from the requirements of the Companies Act 1985 concerningdepreciation of fixed assets. However, these properties are not held forconsumption but for investment and the Directors consider that systematic annualdepreciation would be inappropriate. The accounting policy adopted is thereforenecessary for the accounts to give a true and fair view. Depreciation oramortisation is only one of many factors reflected in the annual valuation andthe amount which might otherwise have been shown cannot be separately identifiedor quantified. Investment properties in the course of development are accounted for asinvestment properties. Property, plant and equipment Operating properties are those properties classified as being held for businesspurposes rather than for investment. These properties are revalued each year byindependent, professional valuers on the basis of Existing Use Value. Surplusesand deficits in the period are included in a revaluation reserve, except wherevalue is below depreciated cost, in which case surpluses and deficits areincluded in the income statement. Depreciation is provided so as to write offthe value of the properties over their expected useful lives.Other fixed assets are held at cost less accumulated depreciation and anyprovision for impairment. Depreciation is provided so as to write off the costless estimated residual value of fixed assets over their expected useful lives.The principal annual rates used for this purpose are as follows: Operating properties - 4%Fixtures and fittings - 10% to 33% on costMotor vehicles - 20% Leases Rental payments under operating leases are charged on a straight-line basis overthe lease term even if the payments are not made on such a basis Land, developments in progress and trading properties Land, developments in progress and properties held as trading assets, are valuedat the lower of cost and estimated net realisable value. The cost of propertydevelopments includes net outgoings and attributable interest, up to the date ofcompletion, where the development period exceeds one year, or where financingcosts represent a substantial element of the eventual cost of sale. No profit onlong-term developments is recognised until the outcome of the development can bedetermined with reasonable certainty. Full provision is made for foreseeablelosses as soon as such losses are identified. Taxation Income tax expense represents the sum of the tax currently payable and deferredtax. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax basis used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets are not recognised if the temporary differencesarise from goodwill (or negative goodwill) or from the initial recognition(other than in a business combinations) of other assets and liabilities in atransaction that affects neither the tax profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is not longer probable that sufficienttaxable profit will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxeslevied by the same taxation authority and the group is entitled to settle itscurrent tax assets and liabilities on a net basis. Financial instruments Trade and other receivables are recognised initially at fair value. A provisionfor estimated irrecoverable amounts of trade receivables is established wherethere is objective evidence that the Group will not be able to collect allamounts due according to the original terms of the receivables concerned. Cash and cash equivalents comprise cash balances, deposits held at call withbanks and other short-term highly liquid investments with original maturities ofthree months or less and insignificant risk of changes in value. Bank overdraftsthat are repayable on demand and which form an integral part of the Group's cashmanagement are included as a component of cash and cash equivalents for thepurpose of the statement of cash flows. Trade and other payables are stated atfair value. Debt is stated at fair value on initial recognition and thereafterat amortised historic cost. As from 1st January 2005, the Group recognises thefair value of its derivatives including interest rate hedges and currency swapson the balance sheet and movements in those values within the income statement. Borrowing costs Gross borrowing costs relating to direct expenditure on properties underdevelopment or undergoing major refurbishment are capitalised. The interestcapitalised is calculated using the Group's weighted average cost of borrowings.Interest is capitalised from the commencement of the development work until thedate of practical completion. The capitalisation of finance costs is suspendedif there are prolonged periods when development activity is interrupted. All other borrowing costs are recognised in the Group income statement in theperiod in which they are incurred. Foreign currencies Pension schemes The Group operates a defined contribution scheme. The charge to the incomestatement in the period represents the actual amount paid to the scheme.Differences between contributions payable in the year and contributions paid areshown as either accruals or prepayments in the balance sheet. Transactions denominated in foreign currencies are translated into sterling atthe rates ruling at the dates of the transactions. Monetary assets andliabilities denominated in foreign currencies at the balance sheet date aretranslated at the rates ruling at that date. Exchange movements are dealt within the income statement. Share-based payments The cost of granting share options and other share-based remuneration toemployees and Directors is recognised through the income statement. The Grouphas used the Black-Scholes option valuation model and the resulting value isamortised through the income statement over the vesting period of the options.The charge is reversed if it appears likely that the performance criteria willnot be met. Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liabilityin the Group's financial statements in the period in which the dividends aredeclared. 13 Explanation of transition to International Financial Reporting Standards This is the Group's first interim report prepared in accordance with IFRS. Thereconciliations of balance sheets and equity at 1st January 2004 (date oftransition to IFRS), 31st December 2004 (date of last UK GAAP financialstatements) and 30th June 2004, and the reconciliation of profit for the periodto 30th June 2004 and year to 31st December 2004, are included below to enablecomparison of the 2005 published interim figures with those published for thecorresponding period of the previous financial year and the last full financialyear. All UK GAAP figures have been reclassified to IFRS format. Consolidated balance sheet As at 1st January 2004 (date of transition) ----------------------------------------- UK GAAP Effect of IFRS (opening transition to balance sheet) IFRS £'million £'million £'million ----------- ------------ -----------Non-current assetsProperty, plant andequipment:- Operatingproperties 7.0 - 7.0- Othernon-currentassets 3.7 - 3.7Investmentproperties 115.4 - 115.4Investments 3.1 1.3 4.4 ----------- ------------ ----------- 129.2 1.3 130.5 ----------- ------------ -----------Current assetsLand,developmentsand tradingproperties 15.3 - 15.3Trade andotherreceivables 13.9 - 13.9Cash and cashequivalents 56.3 - 56.3 ----------- ------------ ----------- 85.5 - 85.5 ----------- ------------ -----------Current liabilitiesTrade andother payables (14.7) 1.0 (13.7) ----------- ------------ -----------Net currentassets 70.8 1.0 71.8 ----------- ------------ -----------Total assetsless currentliabilities 200.0 2.3 202.3 ----------- ------------ ----------- Non-current liabilities:Borrowings (74.9) - (74.9) ----------- ------------ -----------Net assets 125.1 2.3 127.4 ----------- ------------ ----------- Financed by:Capital and reservesCalled upshare capital 14.1 - 14.1Other reserves 114.7 (4.5) 110.2Retainedearnings (3.7) 6.8 3.1 ----------- ------------ -----------Total equityshareholders'funds 125.1 2.3 127.4 ----------- ------------ ----------- Consolidated balance sheet As at 30th June 2004 -------------------------------- UK GAAP Effect of IFRS transition to IFRS £'million £'million £'million -------- --------- ---------Non-current assetsProperty, plant and equipment:- Operating properties 8.2 - 8.2- Other non-current assets 4.0 - 4.0Investment properties 133.9 0.4 134.3Investments 4.2 1.0 5.2 -------- --------- --------- 150.3 1.4 151.7 -------- --------- ---------Current assetsLand, developments andtrading properties 21.7 - 21.7Trade and other receivables 16.3 - 16.3Cash at bank and in hand 43.5 - 43.5 -------- --------- --------- 81.5 - 81.5 -------- --------- ---------Current liabilitiesTrade and other payables (16.6) 0.6 (16.0) -------- --------- ---------Net current assets 64.9 0.6 65.5 -------- --------- --------- Total assets less currentliabilities 215.2 2.0 217.2 -------- --------- --------- Non-current liabilities:Borrowings (90.0) - (90.0) -------- --------- ---------Net assets 125.2 2.0 127.2 -------- --------- --------- Financed by:Capital and reservesCalled up share capital 14.1 - 14.1Other reserves 114.4 (4.2) 110.2Retained earnings (3.3) 6.2 2.9 -------- --------- ---------Total equity shareholders'funds 125.2 2.0 127.2 -------- --------- --------- Consolidated balance sheet As at 31st December 2004 (last period presented) ----------------------------------- UK GAAP Effect of IFRS transition to IFRS £'million £'million £'million --------- --------- ---------Non-current assetsProperty, plant and equipment- Operating properties 10.6 - 10.6- Other non-current assets 3.8 - 3.8Investment properties 156.6 - 156.6Investments 7.7 0.7 8.4 --------- --------- --------- 178.7 0.7 179.4 --------- --------- ---------Current assetsLand, developments andtrading properties 21.2 - 21.2Trade and other receivables 18.0 - 18.0Cash at bank and in hand 53.8 - 53.8 --------- --------- --------- 93.0 - 93.0 --------- --------- ---------Current liabilitiesTrade and other payables (17.9) 1.5 (16.4) --------- --------- ---------Net current assets 75.1 1.5 76.6 --------- --------- --------- Total assets less currentliabilities 253.8 2.2 256.0 --------- --------- --------- Non-current liabilities:Borrowings (82.8) - (82.8) --------- --------- ---------Net assets 171.0 2.2 173.2 --------- --------- --------- Financed by:Capital and reservesCalled up share capital 18.3 - 18.3Other reserves 155.6 (20.8) 134.8Retained earnings (2.9) 23.0 20.1 --------- --------- ---------Total equity shareholders'funds 171.0 2.2 173.2 --------- --------- --------- Reconciliation of equity Note 31st Dec 30th June 1st January 2004 2004 2004 £'million £'million £'million ---- --------- --- -------- ---- ---------- Total equityUK GAAP 171.0 125.2 125.1 Capitalisationandamortisationof directlease costs 2 - 0.1 -Longeramortisationperiod forleaseincentives 2 0.4 0.3 0.2Longeramortisationperiod forleaseincentives -adjustment ofproperty value 2 (0.4) - (0.2)Dividend notrecognised asliabilityuntil approved 3 1.5 0.6 1.0Negativegoodwillreleased atdate oftransition 4 0.7 1.0 1.3 ---- --------- --- -------- ---- ----------Totaladjustment toequity 2.2 2.0 2.3 ---- --------- --- -------- ---- ----------Total equityIFRS 173.2 127.2 127.4 ---- --------- --- -------- ---- ---------- Notes to the reconciliation of equity 1. As required by IAS 40 "Investment Property", gains and losses arising on revaluation of investment properties are recorded as operating income in the income statement. For the year ended 31st December 2004, this includes gains previously reported in the revaluation reserve of £14.7 million on the Group's investment properties. 2. Under SIC 15 "Operating Lease Incentives", investment property lease rent free periods and other incentives are amortised over the non-cancellable lease term rather than the period to first open market rent review. In addition direct costs of lease negotiations are capitalised and amortised under IAS 17 "Leases". 3. Under IAS 10 "Events After The Balance Sheet Date", dividends are recognised as liabilities in the period in which they are declared. Accordingly, compared with UK GAAP, equity shareholders' funds have increased, and current liabilities have decreased. 4. Under IFRS 3 "Business Combinations", negative goodwill, being the excess of fair value of net assets acquired over consideration paid, is recognised directly to reserves. The net financial effect is a release of £1.3 million recognised in retained earnings at the transition date, and a reduction in share of result of associate of £0.3 million to 30th June 2004 and £0.6 million for the year-ended 31st December 2004. Consolidated income statement Six months ended 30th June 2004 ---------------------------------------- Note UK GAAP Effect of IFRS transition to IFRS £'million £'million £'million ------ -------- --------- --------- Revenue 5 9.9 0.1 10.0Direct costs 5 (5.6) 0.3 (5.3) ------ -------- --------- ---------Gross profit 4.3 0.4 4.7 Operating costs 6 (3.4) - (3.4) ------ -------- --------- --------- Operating profit 0.9 0.4 1.3 Share of results ofassociate 4 1.1 (0.3) 0.8Profit on disposal offixed assets 0.6 - 0.6 ------ -------- --------- --------- Profit before interestand taxation 2.6 0.1 2.7 Finance income 1.2 - 1.2Finance cost (3.4) - (3.4) ------ -------- --------- --------- Profit before taxation 0.4 0.1 0.5 Taxation 0.3 - 0.3 ------ -------- --------- --------- Profit for the period 0.7 0.1 0.8 ------ -------- --------- --------- Notes to the reconciliation of profit 5. Under IAS 17 "Leases", investment property lease rent free periods and other incentives are amortised over the full lease term rather than the period to first open market rent review. 6. In accordance with IFRS 2 "Share-Based Payments", only share-based transactions after 7th November 2002 that had not vested by 1st January 2005 have been restated, with a resulting reduction in profit before taxation of £0.1 million up to 31st December 2004. Consolidated income statement Year ended 31st December 2004 --------------------------------------------- UK GAAP Effect of IFRS transition to IFRS Note £'million £'million £'million------------------------ ------ -------- --------- ---------- Revenue 5 23.6 0.1 23.7Direct costs 5 (14.3) 0.3 (14.0)------------------------ ------ -------- --------- ----------Gross profit 9.3 0.4 9.7 Operating costs 6 (8.3) (0.1) (8.4)------------------------ ------ -------- --------- ---------- Operating profit 1.0 0.3 1.3 Share of operating profitof associate 4 4.2 (0.6) 3.6Income from other fixedasset investments 0.1 - 0.1Gain on revaluation ofinvestment properties 1 - 14.7 14.7Profit on disposal offixed assets 4.0 - 4.0------------------------ ------ -------- --------- ---------- Profit before interest andtaxation 9.3 14.4 23.7 Finance income 2.6 - 2.6Finance cost (7.4) - (7.4)------------------------ ------ -------- --------- ---------- Profit before taxation 4.5 14.4 18.9 Taxation (0.3) - (0.3)------------------------ ------ -------- --------- ---------- Profit for the year 4.2 14.4 18.6------------------------ ------ -------- --------- ---------- 14 Explanation of material adjustments to the cash flow statement for the sixmonths ended 30th June 2004 and year ended 31st December 2004 Under IFRS, the consolidated cash flow statement reconciles the movements incash and cash equivalents, whereas in the last audited UK GAAP financialstatements it reconciled the movements in cash only. Other than this, there areno material differences in the restated consolidated cash flow statement fromthat previously published. 15 Glossary Net borrowings: Net borrowings are defined as total net debt less cash and cashequivalents. Net gearing: Net gearing, expressed as a percentage, is measured as netborrowings divided by total shareholders' funds Independent review reportto Development Securities PLC IntroductionWe have been instructed by the Company to review the financial information forthe six months ended 30th June 2005 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated statement ofrecognised income and expense, the consolidated statement of changes in equity,the cash flow statement and related notes 1 to 15. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. International Financial Reporting StandardsAs disclosed in note 2, the next annual financial statements of the Group willbe prepared in accordance with International Financial Reporting Standards asadopted for use in the EU. Accordingly, the interim report has been prepared inaccordance with the recognition and measurement criteria of IFRS and thedisclosure requirements of the Listing Rules. Review work performedWe conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30th June 2005. Deloitte & Touche LLPChartered AccountantsLondon20th September 2005 Officers, committees and advisors Directors Registered OfficeR M Dantzic, Chairman* Portland HouseM H Marx, Executive Deputy Chairman Stag Placeand Finance DirectorC J Barwick, Joint Managing Director London SW1E 5DSP J Willis, Joint Managing Director Telephone: 020 7828 4777M S Weiner Facsimile: 020 7828 4999W Grant* Website: www.developmentsecurities.com P V S Manduca*V M Mitchell*M S Soames* Registered Number 1528784SecretaryS A Lanes Auditors Deloitte & Touche LLPRemuneration committee Chartered AccountantsW Grant, Chairman*V M Mitchell* Principal BankersM S Soames* Barclays Bank PLC HSBC Property FinanceAudit committee Bank of ScotlandR M Dantzic, Chairman* Norwich Union Mortgage Finance LimitedV M Mitchell*P V S Manduca* Corporate SolicitorsNomination committee Linklaters LLPR M Dantzic, Chairman*M H Marx, Executive Deputy Chairmanand Finance DirectorP V S Manduca* Financial Advisor and Corporate Stockbroker Collins Stewart Limited Registrars and Transfer Office Capita Registrars* Non-executive The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Telephone: 0870 162 3100 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
UAI.L