Interim Results

11th Aug 2008 07:00



Press Release - not for release before 07:00 11 August 2008

MAPELEY LIMITED

Unaudited half year report for the six months ended 30 June 2008

Mapeley Limited (LSE: MAY), the Guernsey based market leader in property investment and outsourcing, announces today its unaudited half year report for the six months ended 30 June 2008. Mapeley owns and manages a commercial property portfolio of over £2.0 billion covering over 2.3 million square metres throughout the UK.

Highlights

 

Commenting on the results, Jamie Hopkins, Chief Executive of Mapeley, said:

"Our solid performance reported at the end of the first quarter has continued throughout the first half of the financial year. We have seen a strong operational performance on the outsourcing contracts and the Direct Property Investments Portfolio and this has left us in a good cash position at the end of the first half. We are declaring a dividend of 47 pence per share for the half year."

Conference call

Mapeley management will hold a results conference call on Monday 11 August 2008 at 2 pm London time (9 am New York time). Analysts and investors are welcome to participate on the live call. You can access the conference call by dialling +44 (0) 1452 555 566 ten minutes prior to the scheduled start of the call; please reference "Mapeley 2008 Half Year Results Call".

A webcast of the conference call will be available to the public on a listen-only basis at .

Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast.

A replay of the webcast will be available for three months following the call. A replay of the conference call will be available until 10 am London time on Monday 18 August 2008 by dialling +44 (0) 1452 55 00 00; please reference access number "56933348#"

For further information, please contact:

Fiona Laffan/Pavla Shaw

Brunswick

Tel: +44(0) 20 7404 5959

Email: [email protected]

* see note 18 to the accounts for definition of FFO 

** based on weighted average number of shares in issue for the period on an undiluted basis

Key financial information

Three months ended 30 June

Key Performance Measures

Six months ended 30 June

Year ended 31 December

2008		2007		2008		2007		2007
Unaudited		Unaudited		Unaudited		Unaudited		Audited
£m		£m		£m		£m		£m
18.1		13.8	Funds from operations (FFO) (refer to note 18)	63.1		27.5		56.4
13.9		13.8	Dividends declared during period	13.9		27.6		55.2
47p		47p	Dividend per share (pence/share)*	47p		94p		188p
61p		47p	FFO per share (pence/share) ** (refer to note 18)	214p		94p		192p
			Income Statement
104.1		101.4	Revenue	203.7		205.5		417.4
24.1		28.4	EBITDA (refer to note 17)	59.7		61.1		115.4
(26.4)		18.9	(Loss)/profit before tax	(53.8)		30.2		(129.0)
			Balance Sheet	As at 30 June 2008		As at 30 June 2007		As at 31  December 2007
				£m		£m		£m
			Property assets***	2,010.0		2,232.8		2,116.8
			Net assets (refer to note 20)	478.0		745.4		547.8
			Bank loans excluding finance costs	1,446.5		1,455.3		1,496.0

 

* The dividend per share calculation represents the declared coupon for the period. For the 6 months ended 30 June 2008 and the year ended 31 December 2007 the dividend per share calculation aggregates the coupon rates declared for the periods. 

** FFO per share calculations are based on the weighted average number of ordinary shares in issue for the three months ended 30 June 2008 of 29,565,416, for the six months ended 30 June 2008 of 29,491,254 (three months ended 30 June 2007: 29,420,437; six months ended 30 June 2007: 29,416,662; year ended 31 December 2007: 29,417,876).

*** Property assets are defined as total non-current assets plus non-current assets held for sale, less non-current trade and other receivables, financial instruments, deferred tax assets and plant and equipment held within property, plant and equipment (30 June 2008: £1.0 million; 30 June 2007: £0.2 million; 31 December 2007: £1.1 million). 

Notes to Editors

Mapeley is a market leading property investment and outsourcing company.  Mapeley focuses on the acquisition, ownership and management of a diverse portfolio of commercial properties, primarily let to government and strong credit quality tenants. It currently owns and actively manages a property portfolio of over £2.0 billion covering over 2.3 million square metres throughout the UK.

The size and diversity of Mapeley's property portfolio has enabled Mapeley to develop significant property management expertise, first hand knowledge of regional markets, relationships and contacts with local owners, brokers and tenants and an understanding of the needs and behaviour of public sector and corporate tenants.

Chief Executive's statement

Overview

The solid performance we reported at the end of the first quarter has continued throughout the first half of the financial year. We have seen strong operational performance on the outsourcing contracts and the Direct Property Investments Portfolio, including a high level of receipts from asset management activities across the portfolio.

Total FFO for the half year was £63.1m (214 pence per share) compared to £27.5m (94 pence per share) for the corresponding period last year. Excluding the exceptional asset management receipt during the first quarter of £30.9 million (105 pence per share), FFO was £32.2 million (109 pence per share) for the half year compared to £27.5 million (94 pence per share). 

In the quarter to 30 June 2008, FFO was £18.1 million (61 pence per share) compared to £13.8 million (47 pence per share) for the same quarter last year, due principally to the continued strength of asset management receipts and disposals.

The property market as a whole has seen reductions in capital values over the first six months of 2008. The mark to market reduction in the value of the Group's portfolio over the period has been 4.7% on a like for like basis and over the second quarter was 2.3%. 

Operational Performance

Our operations team comprising both property asset management and facilities management professionals has continued to deliver excellent results, demonstrating the depth of expertise in the Mapeley management platform.

Highlights include

Disposals of surplus assets amounting to £13.6 million, the gains on which were shared with our clients

Lettings were successfully achieved on 13 vacant properties

Ongoing rent review and lease renewal activity continues at a high level, both where Mapeley is a landlord and where it is tenant

Overall we continue to increase the spread between our income, much of which is indexed, and our outgoings.

Dividend

We gave guidance at the time of the first quarter results that dividends would be paid half yearly, rather than quarterly, at a revised payout ratio. We will therefore be declaring a dividend of 47 pence per share for the half year.

At the Extraordinary General Meeting on 13 June 2008, shareholders approved a resolution to authorise the Company to buy back up to 15% of its issued share capital. The Board believes that the current share price reflects a substantial discount to the value of the Group's assets having regard to the security of income and long term growth prospects of the business. The Board will continue to give consideration to whether cash should be used for share purchases.

Outlook

Our business is underpinned by strong income streams and long term relationships with our clients. 92% of our income is from government and investment grade corporates and our average lease length is 10 years. Our portfolios continue to offer opportunities to create value, even in challenging markets.

Regarding financing, the balance sheet of the Group is in good shape. Our average bank debt maturity is 6.8 years and interest rates are fixed on 96% of the debt at an average rate of 5.48%.

Market conditions remain challenging, but we expect the Mapeley business model to continue to perform robustly. 

Operating review

PORTFOLIO REVIEW Mapeley Limited and its subsidiaries' ("Mapeley" or the "Group") real estate portfolio is split into two distinct segments - Outsourcing Contracts and the Direct Property Investments Portfolio. Each portfolio has been revalued at the end of the quarter by external valuers. The overall valuation at 30 June 2008 shows a reduction compared to the value at 31 December 2007 representing a like for like adverse yield shift of 47 basis points across the portfolios.  1. Outsourcing Contracts The HMRC Portfolio At 30 June 2008, the HMRC Portfolio had a value of £526.8 million (31 December 2007: £563.4 million). This reduction in value of £36.6 million is due to disposals of £13.5 million and a reduction in value of £23.1 million due to a like for like adverse yield shift of 52 basis points across the portfolio. The portfolio at 30 June 2008 comprised 134 freehold or long leasehold properties (31 December 2007: 136) and 366 rack rented leasehold properties (31 December 2007: 371). Portfolio occupancy (based on area) was 97.5% at 30 June 2008 (31 December 2007: 98.1%). The current yield on this portfolio at 30 June 2008 was 8.8% (3 December 2007: 8.2%). In the quarter to 30 June 2008, the like for like adverse yield shift on the portfolio was 32 basis points. The Abbey Portfolio At 30 June 2008, the Abbey Portfolio (see note 9) had a value of £536.8 million (31 December 2007: £556.2 million). The reduction in value of £19.4 million compared to 31 December 2007 was the result of an adverse yield shift of 48 basis points across the portfolio. The portfolio at 30 June 2008 comprised 367 freehold or long leasehold properties (31 December 2007: 367) and 643 rack rented leasehold properties (31 December 2007: 664). Portfolio occupancy (based on area) was 89.7% at 30 June 2008 (31 December 2007: 89.7 %). The current yield on this portfolio at 30 June 2008 was 6.9% (31 December 2007: 6.6%). In the quarter to 30 June 2008, the adverse yield shift on the portfolio was 15 basis points. Identity and Passport Service ("IPS") Interview Centre Outsourcing Contract The phased roll out programme has been completed. There are 68 rack rented leasehold assets in this portfolio spread throughout the UK.

2. Direct Property Investments Direct Property Investments ("DPI") Portfolio At 30 June 2008, the DPI Portfolio (see note 9) comprised 92 properties (31 December 2007: 92) with a value of £940.8 million (31 December 2007: £996.5 million). The reduction in value of £55.7 million is the result of an adverse yield shift of 45 basis points across the portfolio. The properties were 97.5% let on fully repairing and insuring leases to central and local government and major corporate tenants (31 December 2007: 98.5%) with an average unexpired lease length of 7.8 years (31 December 2007: 8.2 years). The current yield on this portfolio as at 30 June 2008 was 8.1% (31 December 2007: 7.7%). In the quarter to 30 June 2008, the adverse yield shift on the portfolio was 19 basis points. PROPERTY MANAGEMENT Lettings During the first six months of 2008 the Group let 13 vacant units (30 June 2007: 14) with an annual rent roll of £1.3 million (30 June 2007: £1.2 million).

Rent reviews and lease renewals - As landlord During the first six months of 2008 the Group settled 35 rent reviews (30 June 2007: 32) on rack rented properties in its portfolios with an annual rent roll of £6.9 million (30 June 2007: £5.6 million). The average annual increase was 0.14% per annum. During the same period the Group also completed lease renewals for 13 properties (30 June 2007: 14) with an annual rent roll of £0.2 million (30 June 2007: £0.2 million). The average annual increase was 2.8%. Rent reviews and lease renewals - As tenant During the first six months of 2008 the Group settled 90 rent reviews (30 June 2007: 96) on rack rented properties in its portfolios with an annual rent roll of £14.3 million (30 June 2007: £25.1 million). The average increase was 1.39% per annum. During the same period the Group also completed lease renewals for 35 properties (30 June 2007: 12) with an annual rent roll of £2.5 million (30 June 2007: £0.3 million). The average annual increase was 3.3%.

Financial review

During the period the Group has again been impacted by conditions generally in the property market and is reporting reductions in property values causing a loss before tax for the period. The operating performance of the underlying business has remained strong.

Funds from operations (FFO)

FFO is a non-GAAP financial management measure used to demonstrate the underlying operating performance of real estate businesses. It provides investors with information regarding the Group's ability to service debt and make capital expenditure. It is derived by eliminating from EBITDA items that are non-cash in nature and including cash receipts from asset management activities. Further information on FFO is set out in note 18.

FFO was £63.1 million for the six months ended 30 June 2008, compared with £27.5 million for the six months ended 30 June 2007. Excluding exceptional asset management receipts in the period of £30.9 million, FFO has increased from £27.5 million to £32.2 million. The increase of £4.7 million is primarily due to an increase in cash proceeds from asset management receipts and disposals of £7.0 million plus an additional £2.7 million at operating level, offset by an increase in net finance costs of £5.0 million. 

In pence per share, FFO was 214 pence per share compared to 94 pence per share for the same period in the prior year. Excluding exceptional asset management receipts, FFO was 109 pence per share compared to 94 pence per share for the same period in the prior year. 

Revenue

Group revenue for the six months ended 30 June 2008 was £203.7 million, a decrease of £1.8 million (0.9%) over the same period in the prior year. 

Revenue from Outsourcing Contracts has decreased by a net £5.3 million. This is due to a reduction of £11.2 million of fit out revenue, following completion of the fit out phase, on the IPS contract offset by increases in the ongoing facility income on IPS of £1.4 million, additional third party income of £2.5 million on the HMRC and Abbey portfolios and additional rent, facilities management and cost recoveries of £2.0 million under the HMRC contract.

Revenue from Direct Property Investments has increased by £3.5 million compared to the period ended 30 June 2007. This is due to the full six month contribution of properties acquired in the prior year. 

Property operating expenses

Property operating expenses of the Group in the six months ended 30 June 2008 were £138.8 million compared to £140.1 million for the same period in the prior year, a decrease of £1.3 million (0.9%).

Within property operating expenses, rental expense increased by £5.2 million to £88.3 million. This is due to the recognition, in line with the Group's accounting policy, of provision for potential costs in connection with properties which outsourcing clients, in accordance with their contracts, have indicated they intend to vacate within the next twelve months. 

Other property operating expenses have reduced by £6.5 million to £50.5 million. This is due to the reduction of £9.9 million of fit out costs, following completion of the fit phase, on the IPS contract offset by increases in facilities management, lifecycle and vacant costs. 

Administrative and other expenses

Administrative and other expenses were £10.7 million for the six months ended 30 June 2008 compared to £9.9 million for the six months ended 30 June 2007, an increase of 8.1%. This increase is due to the full six month impact of accommodation and staffing changes implemented during 2007 plus business development costs. 

EBITDA

EBITDA overall for the period decreased by 2.3% for the period from £61.1 million for the six months ended 30 June 2007 to £59.7 million for the six months ended 30 June 2008 (see note 17) as a result of the factors noted above.

Finance costs and finance income

Net interest costs in the six months ended 30 June 2008 were £35.3 million (30 June 2007: £32.2 million). This increase of £3.1 million is due to additional financing costs of £5.0 million as a result of the financing of the Delta Portfolio for a full six months and increased amortisation of loan finance fees of £0.5 million, partially offset by £2.3 million of higher gains from a combination of mark to market revaluations and termination of interest swaps.

Financial review (continued)

Taxation

Certain Group companies are resident in Bermuda and classified as non-UK resident landlords for tax purposes. Taxable profits in these companies are subject to UK income tax and exempt from local Bermuda taxes.

During the period the Group and its subsidiaries have recognised a current corporation tax charge of £0.2 million in respect of UK taxation (six months ended 30 June 2007: £nil).

The Group has recorded a deferred tax credit in the period of £1.9 million (six months ended 30 June 2007 charge of £1.7 million). This is due to the recognition of a deferred tax asset in respect of losses arising in the period. As a result the deferred tax asset has increased from £15.1 million at 31 December 2007 to £17.0 million at 30 June 2008. 

In addition the deferred tax liability arising from the revaluation of interest rate swaps increased from £3.8 million at 31 December 2007 to £7.6 million at 30 June 2008 due to revaluation of the swaps in the six month period. This movement of £3.8 million has been recognised directly in equity. 

The Group has additional tax losses available for carry forward to future years and these losses are available for offset against future taxable profits in the entity in which the losses arose. The Group has not recognised a deferred income tax asset in respect of these losses and certain deductions due to the degree of uncertainty over both the amount and timing of utilisation. 

Non-current assets

Non-current assets, comprising investment property, property, plant and equipment, premiums paid for operating leases, non-current trade and other receivables, financial instruments and deferred tax assets decreased by £77.6 million between 31 December 2007 and 30 June 2008. 

The Abbey Portfolio and the Direct Property Investments Portfolio are shown in investment property. The HMRC Portfolio is shown in property, plant and equipment.

Investment property (see note 9) decreased by £75.1 million from £1,558.0 million at 31 December 2007 to £1,482.9 million at 30 June 2008. This is due to a reduction in mark to market values of £19.4 million on the Abbey Portfolio and £55.7 million on the Direct Property Investments Portfolio. 

Over the same period, property, plant and equipment (see note 8) has decreased by £21.9 million from £518.6 million at 31 December 2007 to £496.7 million at 30 June 2008. This is due to a reduction in mark to market values of £21.7 million on the HMRC Portfolio and depreciation of £0.2 million. 

Bank loans

The Group seeks to finance its property investments with long-term debt facilities on which the interest rates have been fixed by utilising a mixture of fixed rate debt and floating rate debt with matching interest rate swap agreements. At 30 June 2008, £1,446.5 million had been drawn under the Group's loan facilities (31 December 2007: £1,496.0 million). During the period the Group completed the refinancing of the £257.6 million Delta acquisition revolving facility. 

The weighted average term of Mapeley's debt facilities to maturity is 6.8 years and the weighted average interest rate across the Group is 5.7%. Of this 96% is fixed at average rates of 5.48%

Dividend

At a Board meeting held on 8 August 2008 the Board of the Company declared an interim dividend of £13.9 million equating to £0.47 per share (31 December 2007: £13.8 million, equating to £0.47 per share; 30 June 2007: £13.8 million, equating to £0.47 per share). The record date for this dividend is 22 August 2008 and the payment date is 5 September 2008.

Principal risks and uncertainties for the remaining six months of the financial year.

The risks facing the Group for the remaining six months of the financial year remain the same as those outlined in the annual report for the year ended 31 December 2007. 

Responsibility statement

The Directors confirm that to the best of their knowledge:

the condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union, and gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and

the Chief Executive's statement, the operating review and the financial review include a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

By order of the Board

Roger Carey

Non-Executive Director

8 August 2008

Independent review report to Mapeley Limited 

on the half year IFRS financial information for the six months ended 30 June 2008

Introduction 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Consolidated Income Statement, Consolidated Statement of Changes in Equity, Consolidated Balance Sheet, Consolidated Cash Flow Statement and the related notes 1 to 20. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union. 

Our Responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

Ernst & Young LLP

London

8 August 2008 

Consolidated income statement

For the six months ended 30 June 2008

Three months ended 30 June

Six months ended 30 June

Year ended 31 December

2008		2007		Notes	2008		2007		2007
Unaudited		Unaudited			Unaudited		Unaudited		Audited
£m		£m			£m		£m		£m
104.1		101.4	Revenue	3	203.7		205.5		417.4
(78.8)		(71.2)	Property operating expenses	3	(138.8)		(140.1)		(288.4)
25.3		30.2	Net contract, rental & related income	3	64.9		65.4		129.0
(5.1)		(5.2)	Administrative and other expenses		(10.7)		(9.9)		(20.2)
(35.9)		7.8	Net valuation (deficit)/surplus on investment property		(75.1)		5.8		(148.6)
-		-	Reversal of impairment/(impairment) of non-investment property		-		0.1		(0.4)
2.4		1.1	Gain on disposal of non-investment property		2.4		1.0		0.3
(13.3)		33.9	Operating (loss)/profit		(18.5)		62.4		(39.9)
(22.2)		(20.4)	Finance costs	4	(53.2)		(39.0)		(98.4)
9.1		5.4	Finance income	4	17.9		6.8		9.3
(26.4)		18.9	(Loss)/profit before tax		(53.8)		30.2		(129.0)
0.8		(1.7)	Income tax credit/(expense)	5	1.7		(1.7)		4.1
(25.6)		17.2	(Loss)/profit for the period		(52.1)		28.5		(124.9)
			attributable to equity holders of Mapeley Limited
£m		£m	Dividends		£m		£m		£m
13.8		13.8	- paid	6	13.8		27.0		54.6
13.9		13.8	- proposed and declared	6	13.9		27.6		55.2
pence/share		pence/share	Dividends per share		pence/share		pence/share		pence/share
47		47	- paid	6	47		92		186
47		47	- proposed and declared	6	47		94		188
pence/share		pence/share	(Loss)/earnings per share		pence/share		pence/share		pence/share
(87)		58	- basic	7	(177)		97		(424)
(87)		58	- diluted	7	(177)		97		(424)

Consolidated statement of changes in equity

For the six months ended 30 June 2008 and 30 June 2007

	Issued capital	Share premium	Net unrealised gains/(losses)	Retained losses	Asset revaluation reserve	Other reserves	Total equity
	£m	£m	£m	£m	£m	£m	£m
At 31 December 2007 (Audited)	-	328.9	12.4	(220.7)	321.9	105.3	547.8
Revaluation deficit	-	-	-	-	(21.7)	-	(21.7)
Depreciation written back on revaluation of non-investment property	-	-	-	-	1.5	-	1.5
Transfer of excess revaluation depreciation	-	-	-	1.5	(1.5)	-	-
Transfer of revaluation surplus on asset disposals	-	-	-	5.8	(5.8)	-	-
Net gain on cash flow hedges	-	-	19.4	-	-	-	19.4
Tax on items taken directly to equity	-	-	(3.8)	-	-	-	(3.8)
Total income/(expense) for the period recognised directly in equity	-	-	15.6	7.3	(27.5)	-	(4.6)
Loss for the period	-	-	-	(52.1)	-	-	(52.1)
Total expense for the period	-	-	15.6	(44.8)	(27.5)	-	(56.7)
Issue of shares to employees under the Employee Share Plan	-	-	-	-	-	0.7	0.7
Equity dividends	-	-	-	(13.8)	-	-	(13.8)
At 30 June 2008 (Unaudited)	-	328.9	28.0	(279.3)	294.4	106.0	478.0
At 31 December 2006 (Audited)	-	329.2	14.7	(49.9)	315.2	103.5	712.7
Revaluation surplus	-	-	-	-	6.9	-	6.9
Depreciation written back on revaluation of non-investment property	-	-	-	-	2.9	-	2.9
Transfer of excess revaluation depreciation	-	-	-	2.7	(2.7)	-
Net gain on cash flow hedges	-	-	26.6	-	-	-	26.6
Tax on items taken directly to equity		-	(5.9)				(5.9)
Total income for the period recognised directly in equity	-	-	20.7	2.7	7.1	-	30.5
Profit for the period	-	-	-	28.5	-	-	28.5
Total income for the period	-	-	20.7	31.2	7.1	-	59.0
Cost related to issue of ordinary shares	-	(0.3)	-	-	-	-	(0.3)
Issue of shares to Non-executive Directors	-	-	-	-	-	0.1	0.1
Issue of shares to employees under the Employee Share Plan	-	-	-	-	-	0.9	0.9
Equity dividends	-	-	-	(27.0)	-	-	(27.0)
At 30 June 2007 (Unaudited)	-	328.9	35.4	(45.7)	322.3	104.5	745.4

Consolidated statement of changes in equity

For the year ended 31 December 2007

	Issued capital	Share premium	Net  unrealised (losses)/gains	Retained losses	Asset revaluation reserve	Other reserves	Equity
	£m	£m	£m	£m	£m	£m	£m
At 31 December 2006 (Audited)	-	329.2	14.7	(49.9)	315.2	103.5	712.7
Revaluation surplus	-	-	-	-	12.2	-	12.2
Depreciation written back on revaluation of non-investment property	-	-	-	-	3.0	-	3.0
Transfer of excess revaluation depreciation	-	-	-	2.9	(2.9)	-	-
Transfer of revaluation surplus on asset disposals	-	-	-	5.8	(5.8)	-	-
Loss on cash flow hedges	-	-	(2.9)	-	-	-	(2.9)
Tax on items taken directly to equity	-	-	0.6	-	0.2	-	0.8
Total (expense)/income for the year recognised directly in equity	-	-	(2.3)	8.7	6.7	-	13.1
Loss for the year	-	-	-	(124.9)	-	-	(124.9)
Total income (expense)/income for the year	-	-	(2.3)	(116.2)	6.7	-	(111.8)
Cost related to issue of new ordinary shares		(0.3)	-	-	-	-	(0.3)
Issue of shares to Non-executive Directors	-	-	-	-	-	0.1	0.1
Issue of shares to employees under the Employee Share Plan	-	-	-	-	-	1.7	1.7
Equity dividends	-	-	-	(54.6)	-	-	(54.6)
At 31 December 2007 (Audited)	-	328.9	12.4	(220.7)	321.9	105.3	547.8

Consolidated balance sheet - at 30 June 2008

		30 June 2008		30 June 2007		31 December 2007
		Unaudited		Unaudited		Audited
	Notes	£m		£m		£m
ASSETS
Non-current assets
Property, plant and equipment	8	496.7		530.0		518.6
Investment property	9	1,482.9		1,669.0		1,558.0
Premiums on operating leases		30.8		33.7		32.2
Trade and other receivables		5.7		5.8		5.6
Derivative financial instruments		35.8		51.7		17.0
Deferred tax asset		17.0		9.2		15.1
Total non-current assets		2,068.9		2,299.4		2,146.5
Current assets
Trade and other receivables		90.6		78.6		71.2
Cash and short-term deposits
- in controlled accounts	11	21.8		25.7		29.1
- for operational purposes	11	52.9		50.0		61.7
Total current assets		165.3		154.3		162.0
Non-current assets held for sale	10	0.6		0.3		9.1
TOTAL ASSETS		2,234.8		2,454.0		2,317.6
EQUITY AND LIABILITIES
Equity attributable to equity holders of Mapeley Limited
Issued capital (net of treasury shares)	12	-		-		-
Share premium		328.9		328.9		328.9
Net unrealised gains/losses		28.0		35.4		12.4
Retained losses		(279.3)		(45.7)		(220.7)
Asset revaluation reserve		294.4		322.3		321.9
Other reserves		106.0		104.5		105.3
Total equity		478.0		745.4		547.8
Non-current liabilities
Trade and other payables		3.9		5.5		6.0
Interest & non-interest bearing loans and borrowings	13	1,380.4		1,233.8		1,233.0
Provisions		37.9		32.1		34.3
Deferred asset management receipts	14	109.0		77.2		81.1
Deferred tax liability		7.6		10.5		3.8
Total non-current liabilities		1,538.8		1,359.1		1,358.2
Current liabilities
Trade and other payables		130.5		116.4		124.4
Interest & non-interest bearing loans and borrowings	13	59.3		213.2		257.7
Provisions		19.0		14.0		15.2
Derivative financial instruments		-		-		7.8
Deferred asset management receipts	14	9.2		5.9		6.5
Total current liabilities		218.0		349.5		411.6
Total liabilities		1,756.8		1,708.6		1,769.8
TOTAL EQUITY AND LIABILITIES		2,234.8		2,454.0		2,317.6

Consolidated cash flow statement

For the six months ended 30 June 2008

Three months ended 30 June		Three months ended 30 June			Six months ended 30 June		Six months ended 30 June		Year ended 31 December
2008		2007			2008		2007		2007
Unaudited		Unaudited		Notes	Unaudited		Unaudited		Audited
£m		£m	Cash flows from operating activities		£m		£m		£m
(26.4)		18.9	(Loss)/profit before tax		(53.8)		30.2		(129.0)
			Adjustment for:
13.1		15.0	Net finance costs		35.3		32.2		89.1
-		-	(Reversal)/impairment of non-investment property		-		(0.1)		0.4
35.9		(7.8)	Net valuation deficit/(surplus) on investment property		75.1		(5.8)		148.6
1.5		2.3	Depreciation and amortisation		3.1		4.6		6.3
(2.4)		(1.1)	Gain on disposal of assets		(2.4)		(1.0)		(0.3)
0.2		0.5	Share benefit expense		0.7		1.0		1.8
21.9		27.8	Operating profit before changes in working capital		58.0		61.1		116.9
(1.9)		(5.0)	(Increase)/decrease in trade & other receivables		(19.0)		(4.8)		2.9
7.2		1.5	Increase in trade & other payables		4.0		3.2		10.2
9.1		3.2	Increase/(decrease) in provisions		6.2		(0.1)		2.1
(0.6)		(0.2)	Increase/(decrease) in deferred asset management receipts		30.5		(1.7)		2.9
35.7		27.3	Cash generated from operations		79.7		57.7		135.0
(0.1)		-	Tax paid		(0.1)		-		-
(18.1)		(17.1)	Interest paid		(42.1)		(33.5)		(74.0)
0.9		0.9	Interest received		2.0		2.0		4.4
18.4		11.1	Net cash flows from operating activities		39.5		26.2		65.4
			Cash flows from investing activities
-		-	Proceeds on disposal of investment property		-		-		4.1
-		1.6	Proceeds on disposal of non investment property		-		4.0		-
10.9		-	Proceeds from disposal of property, plant and equipment		10.9		-		7.5
-		-	Purchase of property, plant and equipment		-		(0.1)		(1.1)
-		(74.8)	Purchase of investment property		-		(179.2)		(222.3)
10.9		(73.2)	Net cash flows used in investing activities		10.9		(175.3)		(211.8)
			Cash flows from financing activities
(0.7)		(0.2)	Costs of raising finance		(2.9)		(1.0)		(1.3)
(0.1)		(0.3)	Payment of finance lease liabilities		(0.3)		(0.3)		(0.7)
-		75.8	Receipt of new bank loans		212.0		177.2		221.0
(3.3)		-	Repayment of bank loans		(261.5)		(0.2)		(3.3)
-		(0.1)	Costs related to issue of ordinary shares		-		(0.3)		(0.3)
(13.8)		(13.8)	Dividend paid to equity holders	6	(13.8)		(27.0)		(54.6)
(17.9)		61.4	Net cash flows from financing activities		(66.5)		148.4		160.8
11.4		(0.7)	Net (decrease)/increase in cash and short-term  deposits		(16.1)		(0.7)		14.4
63.3		76.4	Cash and cash equivalents at start of period	11	90.8		76.4		76.4
74.7		75.7	Cash and cash equivalents at end of period	11	74.7		75.7		90.8

Notes to the unaudited half year report

at 30 June 2008

1. General information

The consolidated condensed financial statements of the Group for the six months ended 30 June 2008 comprise the Company and its subsidiaries and were authorised by the Board for issue on 8 August 2008. The Company's registered office is located at Regency Court, Glategny Esplanade, St Peter Port, Guernsey GY1 1WW. 

The half year consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest million (£m) except where otherwise indicated. The functional currency of the Company is pounds sterling. 

2. Basis of preparation and accounting policies

The financial information comprises the consolidated balance sheets, consolidated statements of income, cash flow and changes in equity and the related notes for the periods then ended. The financial information contained in this report is unaudited. The annual report and accounts for the year ended 31 December 2007, which were prepared under IFRS as adopted by the European Union, received an unqualified auditors' report. The unaudited financial information has been prepared in accordance with the Listing Rules of the Financial Services Authority. 

The financial information included in this announcement has been prepared in accordance with IAS 34 "Interim Financial Reporting". The accounting policies adopted in the preparation of the half year consolidated financial statements are consistent with those as reported in the Group's annual report for the year ended 31 December 2007. 

The following new standards and interpretations that will be applicable to Mapeley Limited have been issued but are not effective for the financial year ending 31 December 2008, and have not been adopted early: IFRS 8 "Operating segments", IAS 1 "Presentation of Financial Statements", IAS 23 "Borrowing costs", IFRS 3 "Business Combinations", IAS 27 "Consolidated and Separate Financial Statements", Amendment to IFRS 2 "Share-based payments Vesting Conditions and Cancellations", Amendments to IFRS1 and IAS 27 - "Cost of an investment in a subsidiary, jointly controlled entity or associate" and Improvements to IFRS resulting from the May 2008 Annual Improvements to IFRS.

The financial statements of the Group for the year ending 31 December 2008 will be prepared in accordance with IFRS as adopted for use by the European Union at 31 December 2008. The half year consolidated financial statements should be read in conjunction with the Group's annual financial statements as at 31 December 2007.

Work in progress

During 2007 the Directors reconsidered the treatment for work in progress since the annual report for the year ended 31 December 2006. It was concluded that it was more appropriate to treat this item as accrued income under the terms of IAS 18 - Revenue. The impact of this on the half year 2008 financial information is as follows:

- Work in Progress of £15.7 million as at 30 June 2007 has been reclassified in the balance sheet as "Unbilled Revenue" which is included in trade and other receivables and the amounts recorded increased by £0.5 million at 30 June 2007.

- In the period to 30 June 2007 Revenue has decreased by £0.4 million and Property Operating expenses have decreased by £0.4 million. Consequently profit has not been affected in the six months ended 30 June 2007. Retained earnings brought forward at 31 December 2006 have been adjusted by £0.5 million.

- References to Work in Progress in 'Funds from operations' in note 18 have been changed to Unbilled Revenue. 

3. Revenue and segmental information

For management purposes, the Group is currently organised into two segments in line with the Group's business model - Outsourcing Contracts and Direct Property Investments. These divisions are the basis on which the Group reports its primary segment information. The segments are described below:

Outsourcing Contracts

This segment consists of activities arising from the purchase and subsequent leaseback of the HMRC and Abbey property portfolios and the fit-out and delivery of serviced accommodation under the IPS contract. The main characteristics of these arrangements are listed below:

Direct Property Investments

The Group has an investment portfolio of office properties focussed primarily on assets let to strong credit quality tenants, who are likely to stay in the properties for a minimum term of 5 years. 

The Group has a single geographical segment, being the UK commercial property market.

Three months ended

30 June 2008 (Unaudited)

30 June 2007 (Unaudited)

Business segments	Direct Property Investments	Outsourcing Contracts	Total operations		Direct Property Investments	Outsourcing Contracts	Total operations
	£m	£m	£m		£m	£m	£m
Rental revenue	18.3	7.5	25.8		17.3	7.0	24.3
Other income	0.3	0.8	1.1		-	0.1	0.1
Facility unitary charge	-	55.2	55.2		-	56.9	56.9
Contractual rents	-	22.0	22.0		-	20.1	20.1
Contractual revenue	-	77.2	77.2		-	77.0	77.0
Segment revenue	18.6	85.5	104.1		17.3	84.1	101.4
Rentals payable	(0.1)	(49.6)	(49.7)		(0.2)	(44.9)	(45.1)
Other direct property and contract expenditure *	(0.7)	(28.4)	(29.1)		(0.3)	(25.8)	(26.1)
Net contract, rental & related income	17.8	7.5	25.3		16.8	13.4	30.2
Net valuation (deficit)/surplus on investment property	(24.9)	(11.0)	(35.9)		-	7.8	7.8
Gain on disposal of non-investment property	-	2.4	2.4		-	1.1	1.1
Segment result	(7.1)	(1.1)	(8.2)		16.8	22.3	39.1
Unallocated expenses			(5.1)				(5.2)
Operating (loss)/profit			(13.3)				33.9
Net finance costs			(13.1)				(15.0)
Income tax			0.8				(1.7)
(Loss)/profit for the period			(25.6)				17.2

* Other direct property and contract expenditure includes depreciation.

3. Revenue and segmental information (continued)

Six months ended

30 June 2008 (Unaudited)

30 June 2007 (Unaudited)

Business segments	Direct Property Investments	Outsourcing Contracts	Total operations		Direct Property Investments	Outsourcing Contracts	Total operations
	£m	£m	£m		£m	£m	£m
Rental revenue	36.6	15.2	51.8		33.3	13.8	47.1
Other income	0.3	0.9	1.2		0.1	0.2	0.3
Facility unitary charge	-	108.7	108.7		-	117.2	117.2
Contractual rents	-	42.0	42.0		-	40.9	40.9
Contractual revenue	-	150.7	150.7		-	158.1	158.1
Segment revenue	36.9	166.8	203.7		33.4	172.1	205.5
Rentals payable	(0.2)	(88.1)	(88.3)		(0.4)	(82.7)	(83.1)
Other direct property and contract expenditure *	(1.0)	(49.5)	(50.5)		(1.3)	(55.7)	(57.0)
Net contract, rental & related income	35.7	29.2	64.9		31.7	33.7	65.4
Reversal of impairment of non-investment property	-	-	-		-	0.1	0.1
Net valuation (deficit)/surplus on investment property	(55.7)	(19.4)	(75.1)		(4.2)	10.0	5.8
Gain on disposal of non investment property	-	2.4	2.4		-	1.0	1.0
Segment result	(20.0)	12.2	(7.8)		27.5	44.8	72.3
Unallocated expenses			(10.7)				(9.9)
Operating (loss)/profit			(18.5)				62.4
Net finance costs			(35.3)				(32.2)
Income tax			1.7				(1.7)
(Loss)/profit for the period			(52.1)				28.5

Year ended 31 December 2007 (Audited)

Business segments		Direct Property Investments	Outsourcing contracts	Total  operations
		£m	£m	£m
Rental revenue		69.5	28.3	97.8
Other income		0.1	1.4	1.5
	Facility unitary charge	-	232.6	232.6
	Contractual rents	-	85.5	85.5
Contractual revenue		-	318.1	318.1
Segment revenue		69.6	347.8	417.4
Rentals payable		(0.7)	(170.6)	(171.3)
Other direct property and contract expenditure *		(3.7)	(113.4)	(117.1)
Net contract, rental & related income		65.2	63.8	129.0
Reversal of impairment of non-investment property		-	(0.4)	(0.4)
Net valuation surplus on investment property		(129.6)	(19.0)	(148.6)
Gain on disposal of non-investment property		-	0.3	0.3
Segment result		(64.4)	44.7	(19.7)
Unallocated expenses				(20.2)
Operating profit				(39.9)
Net finance costs				(89.1)
Income tax credit				4.1
Loss for the year				(124.9)

* Other direct property and contract expenditure includes depreciation.

4. Finance costs and finance income

Three months ended 30 June						Six months ended 30 June				Year ended 31 December
2008		2007				2008		2007		2007
Unaudited		Unaudited				Unaudited		Unaudited		Audited
£m		£m				£m		£m		£m
				Finance costs
21.6		19.6		Bank loans and overdrafts		43.0		37.5		82.5
0.2		0.2		Finance charges payable  under finance leases		0.3		0.3		0.6
-		-		Loss on interest swap		8.7		-		12.9
-		-		Loan termination costs		0.1		-		-
0.4		0.6		Unwinding of discount on  provisions		1.1		1.2		2.4
22.2		20.4				53.2		39.0		98.4
				Finance income
1.0		1.0		Bank interest receivable		2.0		1.9		4.4
8.1		4.4		Gain on interest swap		15.9		4.9		4.9
9.1		5.4				17.9		6.8		9.3

Bank loans and overdraft charges include a charge of £1.5 million (six months ended 30 June 2007: £1.0 million; year ended 31 December 2007: £4.1 million) relating to loan finance fees recognised under the effective interest method. For the three months ended 30 June 2008 bank loans and overdraft charges include a charge of £0.8 million (three months ended 30 June 2007: £0.6 million) relating to loan finance fees.

5. Income tax expense

a)Tax on profit on ordinary activities

Current taxation

During the period the Group incurred a current tax charge of £0.2 million in respect of UK taxation (six months ended 30 June 2007: £nil; year ended 31 December 2007: £0.1 million). 

Deferred taxation

A tax credit of £1.9 million (six months ended 30 June 2007: charge of £1.7 million; year ended 31 December 2007: credit of £4.2 million) has been recognised in the income statement in relation to the movement in the deferred tax asset balance arising as a result of the recognition of losses in the period. 

A tax charge of £3.8 million charge (six months ended 30 June 2007: charge of £5.9 million; year ended 31 December 2007: credit of £0.6 million) has been recognised directly in equity in relation to the movement in the deferred tax liability on the revaluation of interest rate swaps to fair value. 

b)Deferred income tax

The Group has re-evaluated its forecasts of future profits of Group companies and has concluded that the recognition of a deferred tax asset remains appropriate. The deferred tax asset has increased to £17.0 million (31 December 2007: £15.1 million) and arises in respect of losses not utilised. The Group has additional tax losses available for carry forward to future years but in many cases these losses are available to offset against future taxable profits in the entity in which the losses arose. The Group has not recognised a deferred income tax asset in respect of these losses and deductions due to the degree of uncertainty over both the amount and timing of utilisation.

The deferred tax liability has increased during the period to £7.6 million (31 December 2007: £3.8 million) as a result of the revaluation of interest rate swaps to fair value during the period. This has given rise to a tax charge of £3.8 million which has been recognised directly in equity. 

6. Dividends

Six months ended 30 June

Year ended 31 December

	2008		2007		2007
	Unaudited		Unaudited		Audited
	£m		£m		£m
Declared and paid during the period:
Equity dividends on ordinary shares:
Fourth interim dividend for 2006: £0.45 per share	-		13.2		13.2
First interim dividend for 2007: £0.47 per share	-		13.8		13.8
Second interim dividend for 2007: £0.47 per share	-		-		13.8
Third interim dividend for 2007: £0.47 per share	-		-		13.8
Fourth interim dividend for 2007: £0.47 per share	13.8		-		-
	13.8		27.0		54.6
Declared after the period
Equity dividends on ordinary:
First interim dividend for 2008 : £0.47 per share (30 June 2007: second interim dividend for 2007:£0.47 per share; 31 December 2007: fourth interim dividend for 2007: £0.47 per share)	13.9		13.8		13.8

7. (Loss)/earnings per share

The calculation of basic and diluted earnings per share figures is based on the following:

 

There is no difference between the number of shares used to determine basic and diluted earnings per share.

 

8. Property, plant and equipment

	Freehold  property £m		Property acquired under finance leases  £m		Plant and equipment £m		Total  £m
Cost or valuation:
At 1 January 2008 (Audited)	473.9		46.1		17.3		537.3
Revaluations	(22.6)		0.9		-		(21.7)
At 30 June 2008 (Unaudited)	451.3		47.0		17.3		515.6
Accumulated depreciation:
At 1 January 2008 (Audited)	-		(2.5)		(16.2)		(18.7)
Provided during the period	(1.4)		(0.2)		(0.1)		(1.7)
Written back on Revaluation	1.4		0.1		-		1.5
At 30 June 2008 (Unaudited)	-		(2.6)		(16.3)		(18.9)
Net book value:
At 30 June 2008 (Unaudited)	451.3		44.4		1.0		496.7
At 31 December 2007 (Audited)	473.9		43.6		1.1		518.6

Freehold property and property acquired under finance leases where the Group provides significant ancillary services to tenants, is included in property, plant and equipment and is carried at fair value.

Freehold property held at 30 June 2008 of £451.3 million (31 December 2007: £473.9 million) and the majority of the property acquired under finance leases at 30 June 2008 of £42.4 million (31 December 2007: £41.5 million) were valued at 30 June 2008 by CB Richard Ellis Limited ("CBRE"), a valuer external to the Group as part of the valuation of all the properties held by the Group under the HMRC contract. The valuations at 30 June 2008 and 31 December 2007 have been carried out in accordance with The Royal Institution of Chartered Surveyors' ("RICS") Valuation Standards, Sixth Edition (the "Red Book").

Certain other properties held under finance leases and included within Property, Plant and Equipment were valued in accordance with the Red Book by the directors at a market value of £2.1 million (31 December 2007: £2.1 million) having taken advice from a suitably qualified employee (a member of The Royal Institution of Chartered Surveyors). 

9. Investment property

At valuation:	Freehold  property £m		Property acquired under finance leases  £m		Total  £m
At 1 January 2008 (Audited)	1,530.1		27.9		1,558.0
Revaluations	(75.9)		0.8		(75.1)
At 30 June 2008 (Unaudited)	1,454.2		28.7		1,482.9

Investment property is shown at fair value in accordance with IAS 40 "Investment Property". Investment property was valued at 30 June 2008 by CB Richard Ellis Limited ("CBRE") and Knight Frank LLP ("Knight Frank"), valuers external to the Group both of whom have consented to the use of their names in these financial statements.

Investment property comprises the Group's Abbey Portfolio and its Direct Property Investments. CBRE's valuation of the Abbey Portfolio of properties was £536.8 million (31 December 2007: £556.2 million). 

  9. Investment property (continued)

CBRE and Knight Frank both carried out valuations of the Group's other properties held within investment property, which were valued as at 30 June 2008 at £867.8 million (31 December 2007: £918.6 million), and at £73.0 million (31 December 2007: £77.9 million) respectively. 

The remaining properties held under Property acquired under finance leases were valued by the Directors at a market value of £5.3 million (31 December 2007: £5.3 million), having taken advice from a suitably qualified employee (a member of The Royal Institution of Chartered Surveyors). 

These valuations are summarised below:

	As at 30 June 2008  Unaudited £m		As at 30 June 2007  Unaudited £m		As at 31 December 2007 Audited £m
Valuation of Abbey Portfolio by CBRE	536.8		585.2		556.2
Valuation of direct property investments by Knight Frank	73.0		90.0		77.9
Valuation of direct property investments by CBRE	867.8		988.7		918.6
Valuation of certain finance leases by the Directors	5.3		5.1		5.3
	1,482.9		1,669.0		1,558.0

The valuations at 30 June 2008 and 31 December 2007 have been carried out in accordance with The Royal Institution of Chartered Surveyors' ("RICS") Valuation Standards, Sixth Edition (the "Red Book").

10. Non-current assets held for sale

		As at 30 June 2008 Unaudited		As at 31 December 2007 Audited
At valuation		£m		£m
At start of the period		9.1		3.0
Transfers		-		9.1
Disposals		(8.5)		(3.0)
At end of the period		0.6		9.1

As at 31 December 2007 the Group held four properties within non-current assets held for sale. During the period two properties were disposed of and gains of £2.4 million were recorded in the income statement. The two remaining properties continue to be actively marketed. All non-current assets held for sale had previously been recorded within property, plant and equipment and carried at fair value.

11. Cash and short-term deposits

Cash and short-term deposits earn interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash and short-term deposits at 30 June 2008 was £74.7 million (31 December 2007: £90.8 million).

For the purposes of the consolidated cash flow statement, cash and short-term deposits comprise the following:

		As at 30 June 2008 Unaudited		As at 30 June 2007 Unaudited		As at 31 December 2007 Audited
		£m		£m		£m
Cash at bank
- in controlled accounts		21.8		25.7		29.1
- for operational purposes		52.9		50.0		61.7
Cash and short-term deposits		74.7		75.7		90.8

The amounts held in controlled accounts comprise tenant deposits, property sale proceeds and other capital receipts which will be held in controlled accounts until the next interest payment date in accordance with the terms of the relevant loan facility agreements. 

12. Issued capital

As at 30 June 2008

Authorised		No. of ordinary shares		£m
Ordinary shares at par value of £nil		Unlimited		-
Issued		No. of shares		£m
At 1 January 2008 (net of 19,686 shares held by the Employee Share Trust) (audited)		29,417,140		-
Issued on 3 April 2008 under the Employee Share Plan		145,315
Transfer of shares to Employee Share Trust		(39)		-
At 30 June 2008 (net of 19,725 shares held by the Employee Share Trust) (unaudited)		29,562,416		-

13. Interest and non-interest bearing loans and borrowings

The table below sets out the Group's interest and non-interest bearing loans and borrowings as at 30 June 2008 and 31 December 2007:

	Effective interest rate %		Maturity		As at 30 June 2008 Unaudited		As at 31 December 2007 Audited
					£m		£m
Non-current
Obligations under finance leases	8.1%		2012-2977		8.0		8.1
Bank loans:
Term loan under the HMRC Portfolio facility	6.4%		Apr 2021		162.7		165.8
Term loan under the Abbey Portfolio facility	5.6%		Jun 2012		452.0		451.8
Acquisition term loan	5.8%		Jul 2015		170.1		170.0
Term loan under the Beta Portfolio facility	5.4%		Apr 2016		207.7		207.6
Term loan under the Gamma Portfolio  facility	5.0%		Jan 2017		229.8		229.7
Delta term loan	6.7%		Mar 2015		150.1		-
					1,380.4		1,233.0
Current
Obligations under finance leases	8.1%		2009		0.1		0.1
Bank loans:
Delta facility	10.7%		Apr 2009		59.2		-
Revolving Delta acquisition facility	5.9%		Apr 2008		-		257.6
					59.3		257.7

All of the Group's properties, as valued by CBRE and Knight Frank, have been secured against the Group's loan facilities. The loan balances above represent the amounts outstanding at 30 June 2008 and 31 December 2007 on the following facilities, net of costs of raising finance:

Term loan under the HMRC Portfolio facility

The HMRC Portfolio is financed by a 15 year, £176.0 million fixed rate loan secured on properties held in the HMRC Portfolio. The interest rate payable on this facility is a fixed rate of 4.5% plus a margin of 0.65% for the first 7 years of the loan increasing to 2.25% for the remainder of the loan, plus mandatory costs (if any).

Term loan under the Abbey Portfolio facility

The Abbey Portfolio is financed by a £455.0 million, 7 year loan which is secured against all investment property held in the Abbey Portfolio and by a charge over the investments of Mapeley Columbus Holdings Limited. The loan is repayable in 2012. Interest on the loan is paid quarterly at a rate of LIBOR plus 0.95% plus mandatory costs (if any). The borrowers have entered into separate interest rate agreements to fix the interest payable. 

Acquisition term loan 

Mapeley's Direct Property Investments Portfolio is partly financed with a 10 year, £170.9 million term loan. At inception the loan had a loan to value ratio of 70%. There is no amortisation during its term and the loan is repayable in July 2015. The interest payable on this loan is fixed at 4.95% plus a 0.75% margin. 

13. Interest and non-interest bearing loans and borrowings (continued)

Beta acquisition term loan 

Mapeley's Direct Property Investments Portfolio is further financed with a 10 year, £208.6 million term loan. At inception the loan had a loan to value ratio of 75%. There is no amortisation during its term and the loan is repayable in April 2016. The interest payable on this loan is fixed at 4.53% plus a 0.85% margin. 

Gamma acquisition term loan 

Mapeley's Direct Property Investments Portfolio is further financed with a 10 year, £231.3 million term loan. At inception the loan had a loan to value ratio of 75%. There is no amortisation during its term and the loan is repayable in January 2017. The interest payable on this loan is currently fixed at 4.28% plus a 0.67% margin; however a £52.0 million tranche incorporates 0.20% increases in the margin over the term. 

Revolving Delta acquisition facility

As at 31 December 2007 the Group had a 3 year, £400.0 million revolving acquisition facility to finance further property investments of which £257.6 million was drawn down. The facility was repayable in April 2008. The interest rate payable on the facility was LIBOR plus a margin of between 1.0% and 1.15 % plus mandatory costs (if any). The Group had also put in place ten swap agreements totalling £257.6 million to fix its anticipated long term exposure to interest rate risk on this facility. On 13 March 2008 the revolving Delta acquisition facility was refinanced with a combination of cash and two new loan facilities which incorporated a proportion of the existing swap arrangements. The remaining swaps have been extinguished.

Delta term loan

The Delta Investment Portfolio has been refinanced during the period with a new seven year £152 million term loan. At inception the loan had a loan to value ratio of 70%. Amortisation of £0.4 million per quarter is payable from April 2009 and the loan is repayable in March 2015. The interest payable on this loan is fixed at 5.30% plus a 1.35% margin which incorporates four existing swaps from the previous Revolving Delta acquisition facility. 

Delta facility

The second new facility is a £60 million corporate loan guaranteed by Mapeley Limited repayable in April 2009. The interest payable on this loan is at 3 month LIBOR plus a 5.0% margin. 

14. Deferred asset management receipts

		£m
At 31 December 2007(audited)
- current		6.5
- non-current		81.1
Total deferred asset management receipts		87.6
Movement in period
Received in period		34.7
Released to income statement in period		(4.1)
At 30 June 2008(unaudited)
- current		9.2
- non-current		109.0
Total deferred asset management receipts		118.2

Asset management receipts, which represent premiums given by lessors in return for the Group extending its existing lease terms or removing break clauses from existing leases, are deferred and released as a credit to property operating expenses evenly over the lease term. 

15. Subsequent events

At a Board meeting held on 8 August 2008 the Board of the Company declared an interim dividend of £13.9 million equating to £0.47 per share (31 December 2007: £13.8 million, equating to £0.47 per share; 30 June 2007: £13.8 million, equating to £0.47 per share). The dividend payment date is 5 September 2008.

16. Related party transactions

There have been no material related party transactions in the period ended 30 June 2008. In the period ended 30 June 2007 the Group provided property management services in respect of 135 property interests owned by Pinnacle Towers Limited, a company in which Fortress Investment Group LLC held a significant interest. During 2007 this interest was sold and therefore in 2008 this is no longer considered to be a related party transaction. The Group received £50,000 in the period ended 30 June 2007 of which £16,667 was outstanding as at 30 June 2007. 

17. Earnings before interest, tax, depreciation and amortisation 

Earnings before interest, tax, depreciation and amortisation or "EBITDA" is a key performance measure of the Group defined by the Group as profit before tax, finance costs, depreciation and amortisation, valuation surplus/deficit on investment property, gain on disposal of subsidiaries and impairment/impairment reversal of non-investment property. EBITDA for the period is computed as follows:

Three months ended 30 June

Six months ended 30 June

Year ended 31 December

2008		2007		2008		2007		2007
Unaudited		Unaudited		Unaudited		Unaudited		Audited
£m		£m		£m		£m		£m
(26.4)		18.9	(Loss)/profit before tax	(53.8)		30.2		(129.0)
13.1		15.0	Add back: Finance cost net of finance income	35.3		32.2		89.1
1.5		2.3	Depreciation and amortisation	3.1		4.6		6.3
35.9		(7.8)	Net valuation deficit/(surplus) on investment property	75.1		(5.8)		148.6
-		-	(Reversal)/impairment of non - investment property	-		(0.1)		0.4
24.1		28.4	EBITDA	59.7		61.1		115.4

18. Funds from operations

Funds from operations or "FFO" is a management measure used to demonstrate the underlying operating performance of real estate businesses such as the Group. It provides investors with information regarding the Group's ability to service debt and make capital expenditure. FFO does not represent cash generated from operating activities in accordance with IFRS, therefore it should not be considered an alternative to cash flow as a measure of liquidity, and is not necessarily indicative of cash funds available. This calculation of FFO may be different from the calculation used by other companies and, therefore, comparability may be limited. 

The Group defines "FFO" as Group "EBITDA" less "net finance costs" less the "movement in the onerous lease provision" less the "movement in unbilled revenue" plus the movement in "net asset management receipts" plus the charge in respect of "employee shares" plus realised revaluation gains. More detailed definitions of these adjustments to EBITDA are given below.

"Net finance costs" comprise finance costs less finance income as set out in the Group income statement, adjusted to exclude amortisation of loan finance fees, gains or losses on interest rate swaps, loan termination costs and the unwinding of discounts on provisions. 

"Movement in the onerous lease provision" is the net release (or charge) to the Group income statement as a result of the change in the Group onerous lease provisions, excluding interest charged on the unwinding of the provision. Although these amounts offset rental costs in the income statement, they do not represent cash movements and are therefore excluded from the computation of FFO.

"Movement in unbilled revenue" is the year on year change in Group accrued income. The amount represents the increase of decrease in life cycle revenue accrued by the Group so as to allocate revenue in the period in which work is performed. This caption has been renamed from "movement in work in progress" (see note 2). 

 

"Net asset management receipts" are the total cash receipts in the year less amounts amortised in the financial period. The accounting treatment of asset management receipts is set out in the accounting policies.

"Employee shares" - Under IFRS 2, costs are charged to the Group income statement when share based payments are made. This is a non cash expense and is therefore excluded from the measure.

"Realised profit on disposal for FFO" is defined as the difference between the profit on disposal as per the income statement and the profit on disposal calculated based upon the historical cost of the asset.

18. Funds from operations (continued)

Three months ended 30 June 2008		Three months ended 30 June 2007		Six months ended 30 June 2008		Six months ended 30 June 2007		Year ended 31 December 2007
Unaudited		Unaudited		Unaudited		Unaudited		Audited
£m		£m		£m		£m		£m
24.1		28.4	EBITDA	59.7		61.1		115.4
(20.0)		(18.3)	Net finance costs	(39.9)		(34.9)		(74.5)
9.1		3.2	Movement in the onerous lease provision	6.2		(0.1)		2.1
(0.2)		0.2	Movement in unbilled revenue	(0.3)		-		1.5
(0.4)		(0.2)	Movement in long-term accrued costs	0.3		(0.6)		(1.1)
(0.5)		(0.2)	Net asset management receipts	30.6		(1.7)		2.9
0.2		0.5	Share benefit expense	0.7		1.0		1.8
5.8		0.2	Realised profit on disposal for FFO	5.8		2.7		8.3
18.1		13.8	FFO	63.1		27.5		56.4
61 pence		47 pence	FFO per share	214 pence		94 pence		192 pence

The calculation of FFO per share is based on the following:

There is no difference between FFO per share calculated on a diluted or undiluted basis.

19. Gearing ratio

Gearing is defined as Group net debt (total debt less cash and short-term deposits) as a proportion of total consolidated equity attributable to the equity holders of the parent. "Total debt" is defined as actual current and non-current loan balances together with any overdrafts owed to lenders and excludes any unamortised finance costs or adjustments to apply the effective interest rate method. Equity is as set out in the consolidated balance sheet. Gearing is computed as follows:

		As at 30 June 2008 Unaudited		As at  30 June 2007 Unaudited		As at 31 December 2007  Audited
		£m		£m		£m
"Total debt"		1,446.5		1,455.3		1,496.0
Less: Cash and short-term deposits		(74.7)		(75.7)		(90.8)
Net debt		1,371.8		1,379.6		1,405.2
Equity		478.0		745.4		547.8
Gearing ratio		287%		185%		257%

  20. Net assets per share

		As at 30 June 2008 Unaudited		As at 30 June 2007 Unaudited		As at 31 December 2007  Audited
Basic net assets per share		£16.17		£25.32		£18.62
Diluted net assets per share		£16.17		£25.32		£18.62

The calculation of basic and diluted net asset value per share figures is based on the following: 

 

There is no difference between the net assets per share calculated on a diluted or undiluted basis.

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ENDIR PMMMTMMBBTBP

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Related Shares:

Mayflower (wi)