19th Sep 2006 07:04
Development Securities PLC19 September 2006 DEVELOPMENT SECURITIES PLC - INTERIM RESULTS FOR THE SIX MONTHS ENDING JUNE 2006 Development Securities PLC, the leading property development and investmentcompany, today announces a pre-tax profit of £8.4 million for the six months to30th June 2006 compared to a restated profit of £4.8 million in the first sixmonths of the previous year. Shareholders' funds increased to £191.3 million, equivalent to 521 pence pershare, from the restated £187.5 million or 510 pence per share at 31st December2005. The interim dividend will be 2.25 pence per share, an increase of six percent over the equivalent dividend paid in 2005. Financial highlights 30th June 2006 30th June 2005 (restated)Profit before tax £8.4 million £4.8 millionEarnings per share 14.2 pence 13.6 penceDividend per share 2.25 pence 2.12 pence 30th June 2006 31st Dec 2005 (restated)Shareholders' funds £191.3 million £187.5 millionNAV per share 521 pence 510 penceNet gearing 15% 17% Roy Dantzic, Chairman, Development Securities PLC, commented, "The continuing strength of our investment property portfolio performance isreflected in our Interim results since we have now included the significantuplift generated by the revaluation of the investment portfolio at 30th June2006. "That aside, with phase two of Paddington having started in April, thedevelopment at Huyton coming to what appears to be a successful conclusion andpromising early activity at the Southampton scheme, our development activity isnow gaining traction. "In addition, we continue to pursue a number of interesting and substantialdevelopment schemes both in London and the main provincial cities in conjunctionwith regional joint-venture partners or directly on our own." Enquiries: Michael MarxDevelopment Securities PLC 020 7828 4777 Alison HowardThe Communication Group plc 07970 719 060/020 7630 1411 www.developmentsecurities.com Development overview PaddingtonCentral In April 2006, we received the green light to proceed with construction of thesecond phase, which will incorporate a 250,000 sq. ft. office building and a206-room Accor hotel. The office building, for which completion is anticipatedin January 2008, is jointly funded by our development partners, Morley FundManagement and DIFA Deutsche Immobilien. This development should benefit fromthe current strength of the West End market as well as some of the recentlettings achieved in the immediate vicinity. CityPark, Manchester Outline planning exists for 94,000 sq. ft. of hotel accommodation and 177,000sq. ft. of offices for this mixed-use development site acquired in October 2004.Terms have been agreed to forward sell the hotel accommodation. Cavendish Walk, Huyton A conditional contract was exchanged in August for the sale of this 110,000 sq.ft. town centre retail scheme which has been under development over the last 12months. We anticipate that a substantial gain will be generated from thedisposal price of approximately £24 million. Cambourne Business Park In July 2006, Global Graphics Software leased 14,500 sq. ft. at CambourneBusiness Park, leaving only 30,000 sq. ft. available to let on the second phaseof this 750,000 sq. ft. business park development. Broughton In April 2006, Flintshire County Council resolved to grant planning consent forthe 170,800 sq. ft. extension to the Broughton Retail Park. Realisation andquantification of any profit potential from this phase will await the conclusionof discussions with British Land. We anticipate that our own residentialplanning application for the adjacent 19 acres of developable land will besubmitted to the local council in the next few months for its consideration. Colindale, London NW9 We submitted a planning application in June 2006 to the London Borough of Brentfor the redevelopment of Oriental City, 399 Edgware Road, Colindale. Theproposal for a 1.2 million sq. ft. mixed-use development includes a landmarkbuilding and commercial, residential and community space, including 300,000 sq.ft. of retail and 340,000 sq. ft. of private and affordable housing, along withassociated retail and residential car parking. Hartfield Road, Wimbledon, London SW19 In February 2006, in a joint-venture with Foinavon Limited, conditionalcontracts were exchanged to acquire the 1.25-acre development site at HartfieldRoad. A planning application has been submitted for a 159,000 sq. ft. scheme tocomprise 63,000 sq. ft. of residential accommodation, a 30,000 sq. ft. hotel and66,000 sq. ft. of retail space together with car parking for 220 vehicles.Subject to planning, practical completion is targeted for 2008. West Quay Road, Southampton We have signed an Agreement to Lease with Carnival PLC to develop their new150,000 sq ft. UK headquarters building at West Quay Road for which planningconsent is awaited. A planning application will be made this year for thesecond phase of this mixed use, urban development which is intended to be ofequal size and will comprise 50,000 sq. ft. of office accommodation, a 20,000sq. ft. casino, 75,000 sq. ft. of residential and 5,000 sq. ft. of retailaccommodation. Practical completion of both phases is targeted by 2009. The Royals Business Park In June 2006, we secured the first letting at Building 1000, the 252,000 sq. ft.new grade A office accommodation completed speculatively in 2004 by StandardLife Investments, the London Development Agency and ourselves. The letting of10,347 sq. ft. on a ten-year term was to Kelway Limited (UK), the IT solutionsprovider. Luneside, Lancaster A detailed planning application for the first phase, together with the landremediation strategy, is being progressed with a view to starting on site in thefirst half of 2007. The development will comprise 350 new homes, 90,000 sq. ft.of new offices and a hotel. Investment Property Portfolio The property revaluation review at 30th June 2006 generated a more thansatisfactory surplus of £10.4 million, equivalent to capital growth of 9 percent, some 28 per cent above the equivalent IPD growth of 7 per cent. Chairman's statement I am pleased to report profit before taxation of £8.4 million for the first sixmonths of 2006, a significant increase over the £4.8 million achieved on acomparable basis for the same period in 2005. Shareholders' funds increased to £191.3 million, equivalent to 521 pence pershare, from £187.5 million or 510 pence per share at 31 December 2005. This year is the first in which we have incorporated an investment propertyvaluation review into our Interim Report. Accordingly, we have restated thecomparative figures for 2005 on a similar basis. Our balance sheet exhibits continuing strength, with shareholders' funds onlyjust below their record level. Net borrowings at 30th June 2006 were £29.2million, with net gearing* a modest 15.3 per cent compared to 16.9 per cent at31st December 2005. Unutilised bank facilities are in excess of £40 million.Accordingly, your Board has declared an interim dividend of 2.25 pence pershare, an increase of 6 per cent over the equivalent dividend paid in 2005, tobe paid on 26th October to shareholders on the register on 29th September 2006. *See Glossary, refer note 11. Annual GDP growth in the UK has picked up from the below trend performance of1.9 per cent in 2005 and is now provisionally estimated to be running at anannual rate of 2.6 per cent in 2006, with service sector growth a notablecontributor. Even though this economic performance comfortably exceededeconomists' consensus expectations of a year ago, core inflation remainssubdued. This favourable economic scenario was reflected in the IPD AllProperty Rental Index which reached an annualised growth rate of 3 per cent inJune, a level not seen since October 2001. Against this strengthening backdrop,our investment property portfolio again out-performed and our own developmentactivity has begun to gain traction not only at PaddingtonCentral but also inprovincial and outer London markets. PaddingtonCentral In April 2006, we received the green light to proceed with construction of thesecond phase, which will incorporate a 250,000 sq. ft. office building and a206-room Accor hotel. The office building, for which completion is anticipatedin January 2008, is jointly funded by our development partners, Morley FundManagement and DIFA Deutsche Immobilien. Construction work on the £30 million 'Crossrail Deck' was completed in March 2006, followed a few months later by thereopening of Bishops Bridge Road which has been widened from two to five lanes,providing direct vehicular access into PaddingtonCentral. This developmentshould benefit from the current strength of the West End market as well as bysome of the lettings achieved in the immediate vicinity. CityPark, Manchester This mixed-use development site was acquired for £3 million in October 2004.Outline planning exists for 94,000 sq. ft. of hotel accommodation and 177,000sq. ft. of offices. We are pleased to report that terms have been agreed toforward sell the hotel accommodation. The strength of the occupational andinvestment markets is encouraging us to believe that the office element, whichwill require an amended planning consent, will also be forward funded prior tothe commencement of construction. Cavendish Walk, Huyton An excellent result is in prospect at Cavendish Walk Shopping Centre in Huyton,Liverpool. A conditional contract was exchanged in August for the sale of this110,000 sq. ft. Town Centre retail scheme which has been under development overthe last 12 months. We anticipate that a substantial gain will be generatedfrom the eventual disposal price of approximately £24 million, generating a morethan satisfactory return on equity. This out-turn, which we expect to detailmore fully in our results for the full year, reflects not only market yieldcompression, but also the benefit of our focused application of development andinvestment expertise in a challenging retail environment. Cambourne Business Park In July 2006, Global Graphics Software leased 14,500 sq. ft. at CambourneBusiness Park, leaving only 30,000 sq. ft. available to let on the second phaseof this 750,000 sq. ft. business park development. Located 9 miles fromCambridge City Centre, Cambourne Business Park is an integral part of the newCambourne settlement, a 1,040-acre scheme of 3,300 houses with town centre,hotel, retail and leisure facilities. Broughton In April 2006, Flintshire County Council resolved to grant planning consent forboth the 170,800 sq. ft. extension to the Broughton Retail Park and the relatedhighway interchange link from the A55. This welcome decision followed severalyears of consultation with the Local Authority, the Welsh Assembly, The WelshDevelopment Agency and the Countryside Council for Wales in respect of a jointplanning application by Development Securities and British Land. Realisation andquantification of any profit potential from this phase will await the conclusionof discussions with British Land PLC. We anticipate that our own residential planning application for the adjacent 19acres of developable land will be submitted to the Local Authority in the nextfew months for its consideration. Colindale, London We submitted a planning application in June 2006 to the London Borough of Brentfor the redevelopment of Oriental City, 399 Edgware Road, Colindale. Theproposal for a 1.2 million sq. ft. mixed-use development will include a landmarkbuilding and commercial, residential and community space, including 300,000 sq.ft. of retail and 340,000 sq. ft. of private and affordable housing, along withassociated retail and residential car parking. In addition, we plan to includean 80,000 sq. ft. primary school for 420 pupils. We are cautiously optimisticthat we will receive a favourable outcome to our planning application by the endof this year. This 7.5-acre property, currently comprising 100,000 sq. ft. of retailaccommodation with 750 car park spaces was acquired in June last year for £26.4million, at a yield in excess of 6 per cent. Hartfield Road, Wimbledon, London In February 2006, in a joint-venture with Foinavon Limited, conditionalcontracts were exchanged to acquire the 1.25-acre development site at HartfieldRoad. A planning application has been submitted for a 159,000 sq. ft. scheme tocomprise 63,000 sq. ft. of residential accommodation, a 30,000 sq. ft. hotel and66,000 sq. ft. of retail space together with car parking for 220 vehicles.Practical completion is targeted for 2008. West Quay Road, Southampton We are pleased to have signed an Agreement to Lease with Carnival PLC to developtheir new 150,000 sq. ft. UK headquarters building at West Quay Road for whichplanning consent is awaited. A planning application will be made this year forthe second phase of this mixed-use, urban development which is intended to be ofequal size and will comprise 50,000 sq. ft. of office accommodation, a 20,000sq. ft. casino, 75,000 sq. ft. of residential and 5,000 sq. ft. of retailaccommodation. Practical completion of both phases is targeted by 2009. The Royals Business Park In June 2006, we secured the first letting at Building 1000, the 252,000 sq. ft.new grade A office accommodation completed speculatively in 2004 by StandardLife Investments, the London Development Agency and ourselves. The letting of10,347 sq. ft. on a ten-year term was to Kelway Limited (UK), the IT solutionsprovider. We continue to be cautiously optimistic that discussions with partiesinterested in some of the remaining accommodation will be successful. Luneside, Lancaster A Compulsory Purchase Order has now been confirmed in respect of this 17.5-acreurban regeneration project. Accordingly, we are now progressing a detailedplanning application for the first phase, together with a land remediationstrategy, with a view to starting on site in the first half of 2007. Thedevelopment will comprise 350 new homes, 90,000 sq. ft. of new offices and ahotel. Investment Property Portfolio The property revaluation review at 30th June 2006 generated a more thansatisfactory surplus of £10.4 million, equivalent to capital growth of 9 percent, some 28 per cent above the equivalent IPD growth of 7 per cent. Whilst this was an excellent interim result, the pace of yield compression inthe property investment market is beginning to slacken, with the long awaitedrebalancing of the market now possibly emerging. Certain occupational markets,most notably prime West End offices, are experiencing levels of rental growthrequired to support today's demanding investment yields, but this is far from auniform picture across all sectors. Such rebalancing will undoubtedly taketime, with the market exhibiting sufficient momentum to ensure that 2006generates further attractive property returns. Now, more than ever, with therisk of yields softening, stock selection, stock rotation and the successfulimplementation of asset management initiatives will be the key drivers toincreasing values and delivering shareholder returns. Whilst we have been cautious on acquisitions so far this year, we have executeda disposal programme focused on those assets where we believe the market hasoverpriced the quality and potential offered. We have to date this year soldfive properties for £39 million producing a surplus over year-end values of £0.9million. Rather than pursue assets with seemingly ever declining yields, our acquisitionstrategy has increasingly focused on marginally higher risk assets that do notdepend on strengthening market momentum to deliver the returns we seek. Theacquisition this year and the subsequent refurbishment of Stone Cross, Wigan, a148,000 sq. ft. vacant warehouse unit, is a good illustration of this strategy.Initial letting interest has been positive and we anticipate an attractivevaluation uplift, once a letting has been secured. Our success in redevelopment and other asset initiatives within our portfoliohas encouraged us to take an increasingly longer term view, by acquiring assetswhich not only have an existing investment focus, but which, over the mediumterm, may offer us significant opportunities. To date this year, we haveacquired three such properties and anticipate interim value generation by theend of this financial year. Such extended term projects should allow theportfolio to maintain its long-term performance. We have continued to implement asset management initiatives at our shoppingcentre properties, including the acquisition of adjoining land holdings tofacilitate further growth in size and quality. At The Furlong Centre, Ringwood,focused investment and development skills have enabled us to treble rentalvalues as well as attract major convenience and fashion brands such as Cafe Neroand Fat Face to what is essentially a market town. Having generated a surfeit of retail demand over existing capacity, we willshortly be submitting a planning application for a 30,000 sq. ft. extension tothis centre. Similar asset management initiatives are underway at our Thatchamand Swanley shopping centres. Currently, our investment portfolio sector allocation comprises 76 per centretail, 9 per cent office, 14 per cent industrial and 1 per cent residential. The advent of Real Estate Investment Trusts into the market next year will bringchanges to the profile of the UK property industry which we will watch withinterest. From our perspective, we are most unlikely to convert your company toREIT status since we believe it will prove a restrictive environment for abusiness with such a significant development programme relative to our assetbase. In this respect, we continue to pursue a number of interesting andsubstantial development schemes both in London and the main provincial citieseither on our own or in conjunction with regional joint-venture partners. R M DantzicChairman19th September 2006 Consolidated income statementunaudited for the six months ended 30th June 2006 Six months to Six months to Year ended 30th June 2006 30th June 2005 31st Dec 2005 restated restated unaudited unaudited audited Notes £ million £ million £ million------------------------------------------------------------------------------------------------------------------------Revenue 2 7.2 7.9 25.5Direct costs 2 (3.8) (3.6) (15.2)------------------------------------------------------------------------------------------------------------------------Gross profit 2 3.4 4.3 10.3Operating costs 2 (4.1) (3.7) (10.5)Profit on disposal of investment properties 2 0.9 0.1 3.7Net gain on revaluation of investmentproperties 2 10.4 6.1 17.8------------------------------------------------------------------------------------------------------------------------Operating profit 2 10.6 6.8 21.3Share of results of associate 2 - 0.5 1.5Income from other fixed asset investments 2 - 0.2 0.1------------------------------------------------------------------------------------------------------------------------Profit on disposal of investments 2 - - 5.8Profit before interest and taxation 2 10.6 7.5 28.7Finance income 1.6 1.2 2.3Finance costs (3.8) (3.9) (7.7)------------------------------------------------------------------------------------------------------------------------Profit before taxation 8.4 4.8 23.3Taxation 3 (3.2) 0.2 (3.2)------------------------------------------------------------------------------------------------------------------------Profit for the period attributable toequity holders of the company 5.2 5.0 20.1------------------------------------------------------------------------------------------------------------------------ Basic earnings per share (pence) 5 14.2p 13.6p 54.8pDiluted earnings per share (pence) 5 14.1p 13.6p 54.5p------------------------------------------------------------------------------------------------------------------------ Dividends per share (pence) 11 2.25p 2.12p 6.37p------------------------------------------------------------------------------------------------------------------------ Consolidated balance sheetunaudited as at 30th June 2006 30th June 2006 30th June 2005 31st Dec 2005 unaudited unaudited audited restated restated Notes £ million £ million £ million-------------------------------------------------------------------------------------------------------------Non-current assetsProperty, plant and equipment- Operating properties 9.1 9.1 9.0- Other non-current assets 8.7 3.7 3.8Investment properties 6 136.0 167.6 160.2Investments 1.7 7.0 1.9Deferred tax asset 2.3 0.4 4.3------------------------------------------------------------------------------------------------------------- 157.8 187.8 179.2Current assetsInventory - land, developments and trading properties 73.9 55.0 56.5Trade and other receivables 12.4 15.6 10.4Cash and short-term deposits 61.4 26.0 72.0------------------------------------------------------------------------------------------------------------- 147.7 96.6 138.9 Current liabilitiesTrade and other payables (13.7) (14.5) (17.9)Borrowings 7 (5.1) (0.2) (5.1)------------------------------------------------------------------------------------------------------------- (18.8) (14.7) (23.0) -------------------------------------------------------------------------------------------------------------Net current assets 128.9 81.9 115.9------------------------------------------------------------------------------------------------------------- Total assets less current liabilities 286.7 269.7 295.1 Non-current liabilitiesBorrowings 7 (85.5) (93.9) (98.6)Deferred tax liabilities (9.9) (0.4) (9.0)-------------------------------------------------------------------------------------------------------------Net assets 191.3 175.4 187.5------------------------------------------------------------------------------------------------------------- Financed byCapital and reservesCalled up share capital 8 18.4 18.3 18.4Other reserves 9 133.9 133.1 133.7Retained earnings 9 39.0 24.0 35.4-------------------------------------------------------------------------------------------------------------Total equity 191.3 175.4 187.5------------------------------------------------------------------------------------------------------------- Basic net assets per share 11 521p 478p 510p-------------------------------------------------------------------------------------------------------------Diluted net assets per share 11 518p 475p 507p------------------------------------------------------------------------------------------------------------- Consolidated statement of recognised income and expenseunaudited as at 30th June 2006 Six months to Six months to Year ended 30th June 2006 30th June 2005 31st Dec 2005 restated restated unaudited unaudited audited £ million £ million £ million Gains on revaluation of operating properties - - 0.3-------------------------------------------------------------------------------------------------------------Net income recognised directly in equity - - 0.3Profit for the period 5.2 5.0 20.1-------------------------------------------------------------------------------------------------------------Total recognised income for the periodattributable to equity shareholders of the parentcompany 5.2 5.0 20.4------------------------------------------------------------------------------------------------------------- Consolidated cash flow statementunaudited for the six months ended 30th June 2006 Six months to Six months to Year ended 30th June 2006 30th June 2005 31st Dec 2005 restated restated unaudited unaudited audited Notes £ million £ million £ million-------------------------------------------------------------------------------------------------------------Net cash from operating activities 10 (28.8) (35.3) (32.2)-------------------------------------------------------------------------------------------------------------Investing activities:Interest received 1.2 1.1 2.1Dividends received from associated undertaking - 0.2 0.1Proceeds from sale of shares inassociated undertaking - 0.3 13.4Proceeds from redemption of preference sharesheld in associated undertaking - 1.5 1.5Proceeds on disposal of investment properties 38.5 3.4 30.1Purchase of property, plant and equipment (0.5) (0.3) (0.9)Purchase of investment properties (2.9) (8.2) (11.8)Purchase of financial assets (5.0) - -Purchase of investments - - (1.2)-------------------------------------------------------------------------------------------------------------Net cash from/(used in) investing activities 31.3 (2.0) 33.3Financing activities:Dividends paid - - (2.2)Issue of new shares 0.1 - 0.2Repayments of borrowings (13.2) (5.1) (5.2)New bank loans raised - 16.1 25.8-------------------------------------------------------------------------------------------------------------Net cash (used in)/from financing activities (13.1) 11.0 18.6-------------------------------------------------------------------------------------------------------------Net (decrease)/increase in cash and short-termdeposits (10.6) (26.3) 19.7Cash and cash equivalents at the beginning of theperiod 72.0 52.3 52.3-------------------------------------------------------------------------------------------------------------Cash and cash equivalents at the end of theperiod 61.4 26.0 72.0------------------------------------------------------------------------------------------------------------- Analysed as:Cash and short-term deposits at the end of the period 46.6 13.8 48.4Pledged cash held as security against borrowings 15.8 12.8 24.7Bank overdrafts (1.0) (0.6) (1.1)-------------------------------------------------------------------------------------------------------------Cash and cash equivalents at the end of theperiod 61.4 26.0 72.0------------------------------------------------------------------------------------------------------------- Notes to the interim financial informationunaudited for the six months ended 30th June 2006 1. BASIS OF PREPARATION AND ACCOUNTING POLICIES General information The consolidated interim financial statements of the Group for the six monthsended 30th June 2006 comprise the results of the Company and its subsidiariesand were authorised by the Board for issue on 19th September 2006. Basis of preparation The accounting policies applied in these interim consolidated financialstatements are consistent with those reported in the Group's annual financialstatements for the year ended 31st December 2005. The interim consolidated financial statements do not include all theinformation and disclosures required in the annual financial statements, andshould be read in conjunction with the Group's annual financial statements as at31st December 2005. The interim report is unaudited and does not constitute statutory accounts within the meaning of S240 of the Companies Act 1985. The statutory accountsfor 2005, which were prepared in accordance with International Financial Reporting Standards, as endorsed by the European Union ("IFRS"), and withthose parts of the Companies Act 1985 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies. The auditors' opinion on these accounts was unqualified and did not contain astatement made under S237(2) or S237(3) of the Companies Act 1985. The Directors have made the following revisions to the prior period figures in respect of the following items: The financial statements for the six months ended 30th June 2005 have beenrestated to include the effect of revaluation of the investment and operatingproperties at that date, as the Group now revalues its real estate at theinterim and year end. The valuation at 30th June 2005 has been calculated by theDirectors based principally on the movement in the IPD Capital Growth Index between 31st December 2004 and 30th June 2005, applied to the valuation ofthose properties held at 30th June 2005. The financial effect of this restatement is to increase by £6.1 million the Net gain on the revaluation ofinvestment properties, Profit for the period attributable to equity holders ofthe company and the value of the investment property portfolio. No adjustmentwas required to the value of Operating properties. Comparative figures for the periods ended 30th June 2005 and 31st December 2005 have now been restated to more accurately adopt IFRS requirements in respect of certain leasehold properties. The financial effectof the restatement at 30th June 2005 is a reduction in Operating properties andOther reserves of £1.3 million. For the periods ended 30th June 2005 and 31st December 2005, Profit before tax and Retained profits have increased by£0.4 million as the depreciation charge arising from the Operating propertyassets has been released. The financial effect at 31st December 2005 is areduction in the value of Operating properties and Other reserves of £1.4million. The Directors have corrected an error in the computation of deferred taxin respect of the revaluation gain of an operating property and certain otheritems at 31st December 2005. Accordingly, the 31st December 2005 balance sheethas been restated to increase deferred tax and other liabilities by £2.9million with a corresponding reduction in retained reserves of £2.9 million. The Directors have also made the following amendments to the presentation of thefinancial statements: Current deferred tax liabilities have been reclassified to Non-current liabilities. The financial effect of this reclassification is to reduceCurrent liabilities by £0.3 million and increase Non-current liabilities by£0.3 million as at 31st December 2005. Deferred tax assets and deferred liabilities are now presented gross. The financial effect at 30th June 2005 isan increase in Non-current assets and deferred tax liabilities of £0.4 million. At 31st December 2005, the financial effect was an increase in Non-currentassets and deferred tax liabilities of £4.3 million. The presentation of the cash flow statements at 30th June 2005 and 31stDecember 2005 has been reviewed to conform with the presentation adopted for30th June 2006. Bank overdrafts are now included within Cash and short-term deposit balances and not as part of Trade and Other payables. Thefinancial effect is to decrease Current assets and Current liabilities by£0.6 million and £1.1 million at 30th June 2005 and 31st December 2005respectively. 2. SEGMENTAL ANALYSIS For management purposes, the Group is currently organised into three operatingdivisions - Investment; Trading and Development; and Operating. Thesedivisions are the basis on which the Group reports its primary segmentalinformation. 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 licence fee income. Six months to 30th June 2006 (unaudited) Trading and Investment development Operating Total £ million £ million £ million £ million----------------------------------------------- ------------- --------------- --------------- ---------------Revenue 4.5 0.4 2.3 7.2Direct costs (0.7) (0.6) (2.5) (3.8)----------------------------------------------- ------------- --------------- --------------- ---------------Gross profit/(loss) 3.8 (0.2) (0.2) 3.4Operating costs (4.1)Profit on disposal of investment properties 0.9 - - 0.9Net gain on revaluation of investment properties 10.4 - - 10.4----------------------------------------------- ------------- --------------- --------------- ---------------Operating profit 10.6----------------------------------------------- ------------- --------------- --------------- --------------- Profit before interest and taxation 10.6----------------------------------------------- ------------- --------------- --------------- --------------- Six months to 30th June 2005 restated (unaudited) Trading and Investment development Operating 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 4.3Operating costs (3.7)Profit on disposal of investment properties 0.1 - - 0.1Net gain on revaluation of investment properties 6.1 - - 6.1----------------------------------------------- ------------- --------------- --------------- ---------------Operating profit 6.8Share of results of associate 0.5Income from other fixed asset investments 0.2----------------------------------------------- ------------- --------------- --------------- ---------------Profit before interest and taxation 7.5----------------------------------------------- ------------- --------------- --------------- --------------- Year ended 31st December 2005 restated (audited) Trading and Investment development Operating Total £ million £ million £ million £ million---------------------------------------------- -------------- --------------- --------------- ---------------Revenue 10.6 9.7 5.2 25.5Direct costs (2.0) (8.4) (4.8) (15.2)---------------------------------------------- -------------- --------------- --------------- ---------------Gross profit 8.6 1.3 0.4 10.3Operating costs (10.5)Profit on disposal of investment properties 3.7 - - 3.7Net gain on revaluation of investment properties 18.0 - (0.2) 17.8---------------------------------------------- -------------- --------------- --------------- ---------------Operating profit 21.3Share of results of associate 1.5Income from other fixed asset investments 0.1Profit on disposal of investments 5.8---------------------------------------------- -------------- --------------- --------------- --------------- Profit before interest and taxation 28.7---------------------------------------------- -------------- --------------- --------------- --------------- 3. TAXATION Corporation tax for the interim period is charged at 30 per cent (30th Juneand 31st December 2005: 30 per cent). The effective tax rate of 34% for theperiod is high due to chargeable gains arising from disposals of investment properties during the period. Six months to Six months to Year ended 30th June 2006 30th June 2005 31st Dec 2005 restated restated unaudited unaudited audited £ million £ million £ million-------------------------------------------------------------------------------------------------------------UK corporation tax:Adjustments in respect of prior years (0.3) 0.2 -Deferred tax expense (2.9) - (3.5)------------------------------------------------------------------------------------------------------------- (3.2) 0.2 (3.5)Restatement in respect of prior year - - 0.3------------------------------------------------------------------------------------------------------------- (3.2) 0.2 (3.2)------------------------------------------------------------------------------------------------------------- Analysis of tax charge:Current tax:Continuing operations (0.3) 0.2 -Deferred tax (2.9) - (3.2)------------------------------------------------------------------------------------------------------------- (3.2) 0.2 (3.2)------------------------------------------------------------------------------------------------------------- 4. DIVIDENDS Six months to Six months to Year ended 30th June 2006 30th June 2005 31st Dec 2005 unaudited unaudited audited £ million £ million £ million-------------------------------------------------------------------------------------------------------------Amounts recognised as distributionsto equity holders in the period 1.6 1.5 2.3------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------Proposed dividend 0.8 0.8 1.6 Pence Pence Pence-------------------------------------------------------------------------------------------------------------Interim dividend per share 2.25 2.12 2.12-------------------------------------------------------------------------------------------------------------Final dividend per share - - 4.25------------------------------------------------------------------------------------------------------------- The interim dividend was approved by the Board on 14th September 2006 andhas not been included as a liability as at 30th June 2006. The interim dividend is payable on 26th October 2006 to Ordinary shareholders on theregister at the close of business on 27th September 2006 and will be recordedin the financial statements for the year ending 31st December 2006. 5. EARNINGS PER SHARE The calculation of basic and diluted earnings per share is based on the following data: Six months to Six months to Year ended 30th June 2006 30th June 2005 31st Dec 2005 restated restated unaudited unaudited audited-------------------------------------------------------------------------------------------------------------Earnings for the purposes of basic and dilutedearnings per share (£ million) 5.2 5.0 20.1-------------------------------------------------------------------------------------------------------------Number of sharesWeighted average number of Ordinary sharesfor the purposesof basic earnings per share (million) 36.7 36.7 36.7Dilutive effect of potential Ordinary shares:- Share options (million) 0.2 - 0.2-------------------------------------------------------------------------------------------------------------Weighted average number of Ordinaryshares for the purposeof diluted earnings per share (million) 36.9 36.7 36.9-------------------------------------------------------------------------------------------------------------Basic earnings per share (pence) 14.2 13.6 54.8-------------------------------------------------------------------------------------------------------------Diluted earnings per share (pence) 14.1 13.6 54.5------------------------------------------------------------------------------------------------------------- 6. INVESTMENT PROPERTIES The movement in investment properties for the period ended 30th June 2006 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)Net surplus on revaluation of investment properties (restated (refer note 1)) 6.1 - 6.1-------------------------------------------------------- ---- --------------- --------------- ---------------At 30th June 2005 (restated) 164.7 2.9 167.6Additions 3.6 - 3.6Disposals (22.9) - (22.9)Net surplus on revaluation of investment properties (restated (refer note 1)) 11.9 - 11.9-------------------------------------------------------- ---- --------------- --------------- ---------------At 31st December 2005 (restated) 157.3 2.9 160.2Additions 2.6 0.3 2.9Disposals (34.8) (2.7) (37.5)Net surplus on revaluation of investment properties 10.4 - 10.4-------------------------------------------------------- ---- --------------- --------------- ---------------At 30th June 2006 135.5 0.5 136.0-------------------------------------------------------- ---- --------------- --------------- --------------- Interest of £0.1 million was capitalised in the six months ended 30th June2006 (30th June 2005: £0.1 million, 31st December 2005: £0.1 million). Therestatement of the surplus on revaluation of investment properties isexplained in note 1. Certain investment properties were independently valued at 30th June 2006by DTZ Debenham Tie Leung, Chartered Surveyors. The valuations at 31st December 2005 and 30th June 2006 have been carried out in accordance with TheRoyal Institute of Chartered Surveyors' (RICS) Appraisal and Valuation Standards published in February 2003 ("The Red Book") and the CESR Guidance onproperty valuations. The remaining investment properties in the sum of £15.4million (30th June 2005: £167.6 million, 31st December 2005: £15.1 million) werevalued by the Directors. 7. BORROWINGS The Group repaid £13.2 million of debt during the period (30th June 2005: £5.1 million, 31st December 2005: £5.2 million). No new facilities weredrawn during the period (30th June 2005: £16.1 million, 31st December 2005: £25.8 million). At 30th June 2006, an external valuation, undertaken by J C Rathbone Associates Limited, appraised the market value of the Group's fixed rate debton a replacement basis, taking into account the difference between fixedinterest rates for the Group's borrowings and the market value and prevailing interest rates of appropriate debt instruments, resulting in an excess of fairvalue over book value of £12.4 million before tax (30th June 2005: £15.3million, 31st December 2005: £15.1 million) at that date. The valuation, whichis subject to daily fluctuations in line with money market movements, is onlyan indication of the notional effect on the net asset value of the Group at30th June 2006 and is not recognised in the balance sheet. 8. SHARE CAPITAL 30th June 2006 30th June 2005 31st Dec 2005 unaudited unaudited audited £ million £ million £ million-------------------------------------------------------------------------------------------------------------Authorised:50,000,000 Ordinary shares of 50 pence(30th June 2005: 50,000,000 Ordinary sharesof 50 pence, 31st December 2005: 50,000,000Ordinary shares of 50 pence) 25.0 25.0 25.0-------------------------------------------------------------------------------------------------------------Issued, called up and fully paid:36,792,688 Ordinary shares of 50 pence(30th June 2005: 36,674,869 Ordinary sharesof 50 pence, 31st December 2005: 36,722,286Ordinary shares of 50 pence) 18.4 18.3 18.4------------------------------------------------------------------------------------------------------------- 9. RESERVES Property Share revaluation Other premium reserve reserves Total £ million £ million £ million £ million-------------------------------------------------------------------------------------------------------------At 1st January 2005 and 30th June 2005As originally stated 87.4 1.7 45.7 134.8Restatement in respect of operating leases(refer note 1) - (1.7) - (1.7)-------------------------------------------------------------------------------------------------------------As restated at 1st January 2005 and 30th June 2005 87.4 - 45.7 133.1Net proceeds of issue of new shares 0.1 - - 0.1VAT recovered on share issue costs 0.1 - - 0.1Net surplus on revaluation of operatingproperties (restated (refer note 1)) - 0.3 - 0.3Share based payments cost - - 0.1 0.1-------------------------------------------------------------------------------------------------------------At 31st December 2005 (restated) 87.6 0.3 45.8 133.7Net proceeds of issue of new shares 0.1 - - 0.1Share based payments cost - - 0.1 0.1-------------------------------------------------------------------------------------------------------------At 30th June 2006 87.7 0.3 45.9 133.9------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Retained earnings £ million-------------------------------------------------------------------------------------------------------------At 1st January 2005 20.1Restatement in respect of operating leases (refer note 1) 0.4-------------------------------------------------------------------------------------------------------------As restated at 1st January 2005 20.5Retained profit for the period (restated (refer note 1)) 5.0Final dividend 2004 (1.5)-------------------------------------------------------------------------------------------------------------At 30th June 2005 (restated) 24.0Retained profit for the period (restated (refer note 1)) 15.1Prior year restatement in respect of tax (refer note 1) (2.9)Interim dividend 2005 (0.8)-------------------------------------------------------------------------------------------------------------At 31st December 2005 (restated) 35.4Retained profit for the period 5.2Final dividend 2005 (1.6)-------------------------------------------------------------------------------------------------------------At 30th June 2006 39.0------------------------------------------------------------------------------------------------------------- 10. NOTE TO THE CASH FLOW STATEMENT ------------------------------------------------------------------------------------------------------------- Six months to Six months to Year ended 30th June 2006 30th June 2005 31st Dec 2005 restated restated unaudited unaudited audited £ million £ million £ million-------------------------------------------------------------------------------------------------------------Operating profit 10.6 6.8 21.3Adjustments for: Gain on disposal of investment properties (0.9) (0.1) (3.7)Increase in fair value of investment properties (10.4) (6.1) (17.8)Share based payments 0.1 - 0.1Depreciation of property, plant and equipment 0.6 0.5 1.1-------------------------------------------------------------------------------------------------------------Operating cash flows before movements inworking capital 0.0 1.1 1.0Increase in developments and trading properties (17.1) (33.8) (35.2)(Increase)/decrease in receivables (1.7) 2.8 7.7(Decrease)/increase in payables (3.0) (1.7) 1.5-------------------------------------------------------------------------------------------------------------Cash generated by operations (21.8) (31.6) (25.0)Income taxes (paid)/received (1.9) 0.1 (0.9)Interest paid (5.1) (3.8) (6.5)Capitalised interest charged to direct costs - - 0.2-------------------------------------------------------------------------------------------------------------Net cash from operating activities (28.8) (35.3) (32.2)------------------------------------------------------------------------------------------------------------- 11. GLOSSARY Net borrowings: Net borrowings are defined as total debt less cash andshort-term deposits. Net gearing: Net gearing, expressed as a percentage, is measured as netborrowings divided by total equity. 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
UAI.L