2nd Aug 2007 07:02
Mapeley Limited02 August 2007 Press Release - Not for release before 07:00 02 August 2007 MAPELEY LIMITED Unaudited interim results for the six months ended 30 June 2007 Mapeley Limited (LSE: MAY), the Guernsey based market leading property company,today announces its unaudited interim results for the six months ended 30 June2007. Mapeley owns and manages a commercial property portfolio of over £2.2billion, covering some 2.3 million square metres throughout the UK. Highlights • Dividends up 17.5% to 94 pence per share (2006: 80 pence per share) • FFO (see note 17) up 11.8% to £27.5 million, equating to 94 pence per share* (30 June 2006: £24.6 million, equating to 95 pence per share) • EBITDA (see note 16) increased by 24.2% to £61.1 million (30 June 2006: £49.2 million) • Investment property acquisitions in the period of £180.1 million (30 June 2006: £190.3 million) • Revenue up 15.2% to £205.9 million (30 June 2006: £178.8 million) • Profit before tax of £30.2 million (30 June 2006: £26.8 million) • Total asset value up 9.9% to £2,453.5 million (31 December 2006: £2,232.2 million) Commenting on the results, Jamie Hopkins, Chief Executive Officer of Mapeley, said: "The first half of 2007 has been another successful and operationally activeperiod for Mapeley, with the second quarter continuing the trends of the first,which we reported on in May. We have generated further growth both through theoperation of our outsourcing contracts and the continued addition ofcomplementary assets to our portfolio. Our forward pipeline of direct property investment acquisitions looks promising,and whilst higher interest costs have generally resulted in pressure on netincome spreads, we are continuing to identify opportunities that are accretiveto earnings and in line with our acquisition strategy. Our ability toconsistently drive good organic returns from the business and acquire assets atattractive yields gives us confidence of a good performance for 2007." Conference call Mapeley management will hold a results conference call on Thursday 2 August 2007at 2 pm London time (9 am New York time). All interested parties are welcome toparticipate on the live call. You can access the conference call by dialling0800 6941 503 (from within the UK), 1866 223 0615 (from within the US) or +44(0) 1452 586 513 (from outside the UK) ten minutes prior to the scheduled startof the call; please reference "Mapeley Q2 2007 Results Call". A webcast of the conference call will be available to the public on a listen-only basis at www.mapeley.com. Please allow extra time prior to the call tovisit the site and download the necessary software required to listen to theinternet broadcast. A replay of the webcast will be available for three monthsfollowing the call. A replay of the conference call will be available until 10 am London time onThursday 16 August 2007 by dialling 0800 953 1533 (from within the UK), 1866 2474222 (from within the US) or +44 (0) 1452 550 000 (from outside the UK); pleasereference access number "6443514#". For further information, please contact: Emma Parr, Investor Relations Tim McCallMapeley MJ2 Business CommunicationsTel: +44(0)20 7788 1742 Tel: +44(0)20 7491 7776 / +44(0)7753 561862Email:[email protected] Email: [email protected] / [email protected] * based on weighted average number of shares in issue for the period on anundiluted basis Chief Executive's Statement Highlights The first half of 2007 has been another successful and operationally activeperiod for Mapeley, with the second quarter continuing the trends of the first,which we reported on in May. We have generated further growth both through theoperation of our outsourcing contracts and the continued addition ofcomplementary assets to our portfolio. FFO for the first half of the year increased by 11.8% to £27.5 million (2006:£24.6 million) and EBITDA increased by 24.2% to £61.1 million (2006: £49.2million), both in line with our expectations. We were also pleased to have addeda further £180.1 million of acquisitions to our Direct Property Investments(DPI) Portfolio. We are maintaining the dividend at 47 pence for the secondquarter which compares with 41 pence for the second quarter of 2006, an increaseof 14.6%. This brings dividends for the first half of 2007 to 94 pence, comparedto 80 pence for the same period last year, an increase of 17.5%. Organic growth Organic growth is generated by the efficient operation of our outsourcingcontracts and of those assets in our DPI Portfolio we have owned for more than ayear. Organic growth generated through our outsourcing contracts arises as a directresult of income growth and effective cost management. Our diversely skilledteam of property, facilities management, projects and life cycle experts arefocused on major cost areas and are critical to enhancing shareholder value. At the last quarterly results, we reported our 2005 performance against the IPDbenchmark in managing rents in our leasehold estate (where we act as tenant). Wehave received further analysis in respect of 2005 rent reviews and are pleasedto report that we have continued to beat the IPD benchmark of 2.9% by holdingdown our annual rental inflation to only 1.1%. Organic profit growth resultsdirectly from the spread between this level of cost inflation and thecontractual annual increases in income that we receive from both HMRC and Abbey. As predicted, overall FFO growth is lower when compared to last year due to thehigh level of asset management receipts generated in the first half of 2006. Wehave however produced total asset management receipts and disposal proceeds ofover £5m in the first half of 2007 and are on track to deliver additionalreceipts throughout the rest of the year. Acquisitions During the second quarter we completed £75.7 million of single assetacquisitions into our DPI Portfolio with an average net initial yield of 7.1%.These acquisitions fulfil our acquisition criteria of good quality propertieslet to government and strong credit corporate clients who we believe arecommitted to the buildings. The average lease length of these assets is 10.6years in line with the total DPI Portfolio average of 7.9 years. Our proprietary database of target assets throughout the UK continues to growand now stands at over 4,500 properties. This continues to prove to be a verypowerful tool in identifying potential purchases and provides us with a realcompetitive advantage. Outlook Conditions remain favourable in the real estate outsourcing market as initialsteps have been made by several local authorities to outsource theiraccommodation requirements. These deals vary in size and are often part oflarger infrastructure outsourcing deals. Other smaller private sectoroutsourcing deals are also under review. Our forward pipeline of direct property investment acquisitions looks promising,and whilst higher interest costs have generally resulted in pressure on netincome spreads, we are continuing to identify opportunities that are accretiveto earnings and in line with our acquisition strategy. Since 30 June we haveacquired a further £23.7 million of assets and are on track for reaching ourtarget of £400 million for 2007. Our ability to consistently drive good organic returns from the business andacquire assets at attractive yields gives us confidence of a good performancefor 2007. Operating Review 1) Portfolio Review Mapeley Limited and its subsidiaries' ("Mapeley" or the "Group") real estateportfolio is split into two distinct segments - outsourcing contracts and theDirect Property Investments Portfolio. Outsourcing Contracts The HMRC portfolio As at 30 June 2007, the HMRC portfolio had a value of £565.3 million (31December 2006: £560.1 million). It comprised 138 freehold or long leaseholdproperties (31 December 2006: 138) and 377 rack rented leasehold properties (31December 2006: 381). Portfolio occupancy (based on area) was 97.9% at 30 June2007 (31 December 2006: 98.9%). The Abbey portfolio As at 30 June 2007, the Abbey portfolio (see note 9) had a value of £585.2million (31 December 2006: £575.7 million). It comprised 367 freehold or longleasehold properties (31 December 2006: 367) and 664 rack rented leaseholdproperties (31 December 2006: 698). Portfolio occupancy (based on area) was89.7% at 30 June 2007 (31 December 2006: 90.3%). Identity and Passport Service ("IPS") Interview Centre Outsourcing Contract The phased roll out programme has continued with a further 13 sites acquired inthe second quarter of 2007 adding to the 13 acquired in the first quarter,totalling 26 sites for the half year. This brings the total number of sitesacquired to 60 as at 30 June 2007, leaving 9 to be completed in 2007. Investment property Direct Property Investments ("DPI") portfolio During the first six months of the year, the Group successfully continued topursue its strategy of acquiring individual properties or portfolios of regionaloffice properties. The Group focused on purchasing property let to strong creditquality tenants, who are expected to stay in the properties over the long-term. In the six months to 30 June 2007, the Group purchased investment property at anaggregate cost of £180.1 million with an average net initial yield of 6.4% (7.0%excluding Elinia House, Cardiff) and continued to identify a significant targetpool of properties it may consider acquiring in the future. Elinia House, Cardiff is let to BT until 2020 and was acquired during the periodfor £62 million,. The net initial yield on the property is 5.4% but is subjectto fixed increases throughout the lease resulting in an average yield of 7.0%.Simultaneously a swap was taken out on the allocated loan amount for thisproperty which locks in the interest rate to match the fixed rental uplifts andensures a smoothing of the leveraged yield at 9.0%. As at 30 June 2007, the DPI Portfolio (see note 9) comprised of 87 properties(31 December 2006: 69) with a value of £1,078.7 million (31 December 2006:£903.7 million). The net initial yield on this portfolio was 6.9% (31 December2006: 7.0%). The properties were 98.7% let on fully repairing and insuringleases to central and local government and major corporate tenants (31 December2006: 97.9%) with an average unexpired lease length of 7.9 years (31 December2006: 7.8 years). 2) Property Management Lettings During the first six months of 2007 the Group let 14 vacant units (30 June 2006:28) with an annual rent roll of £1.2 million (30 June 2006: £1.0 million). Rent reviews and lease renewals - As landlord During the first six months of 2007 the Group settled 32 rent reviews (30 June2006: 19) on rack rented properties in its portfolios with an annual rent rollof £5.6 million (30 June 2006: £0.8 million). The average increase was 1.0% per annum. During the same period the Group also completed lease renewals for 14 properties(30 June 2006: 3) with an annual rent roll of £0.2 million (30 June 2006: £0.1million). The average annual increase was 2.3%. Rent reviews and lease renewals - As tenant During the first six months of 2007 the Group settled 96 rent reviews (30 June2006: 105) on rack rented properties in its portfolios with an annual rent rollof £25.1 million (30 June 2006: £20.2 million). The average increase was 0.8% per annum. During the same period the Group also completed lease renewals for 12 properties(30 June 2006: 24) with an annual rent roll of £0.3 million (30 June 2006: £2.4million). The average annual increase was 0.2%. 3) Financing Share performance data Closing share price on 29 June 2007 £ 28.35 per share Dividends proposed and declared for the quarter ended 30 June 2007 £ 0.47 per share Debt finance The Group has continued to finance the acquisition of direct propertyinvestments using its three year £300.0 million revolving facility (the DeltaAcquisition facility). At 30 June 2007 £213.1 million was drawn down on thisfacility (31 December 2006: £36.4 million). 4) Dividend proposed and declared At a Board meeting held on 1 August 2007, the Board of the Company declared aninterim dividend for the quarter of £13.8 million, equating to £0.47 per share(quarter ended 30 June 2006: £10.9 million, equating to £0.41 per share),(quarter ended 31 March 2007: £13.8 million, equating to £0.47 per share) basedon the number of shares in issue on an undiluted basis during the period. The record date for this dividend is 10 August 2007 and the payment date is 24August 2007. Key financial information Three months ended 30 June Key Performance Measures Six months ended 30 June Year ended 31 December 2007 2006 2007 2006 2006 Unaudited Unaudited Unaudited Unaudited Audited £m £m £m £m £m 13.8 14.4 Funds from operations (FFO) (refer to 27.5 24.6 45.7 note 17) 13.8 10.9 Dividends attributable to the period 27.6 21.2 45.8 47p 41p Dividend per share (pence / share)* 94p 80p 168p 47p 56p FFO per share (pence / share) ** (refer 94p 95p 170p to note 17) Income Statement 101.6 91.7 Revenue 205.9 178.8 387.0 (71.4) (61.7) Property operating expenses (140.5) (127.0) (285.4) 7.8 8.1 Net valuation surplus on investment 5.8 18.7 40.8 property - (0.1) (Impairment)/Reversal of impairment of 0.1 - 0.8 non-investment property 1.1 1.2 Profit on disposal of non-investment 1.0 1.2 3.2 property (5.2) (4.4) Administrative and other expenses (9.9) (9.0) (20.7) 28.4 29.0 EBITDA (refer to note 16) 61.1 49.2 93.6 (20.4) (35.4) Finance costs (refer to note 4) (39.0) (49.5) (89.6) 5.4 12.7 Finance income (refer to note 4) 6.8 13.6 6.8 4.4 11.7 Gain on interest rate swap included in 4.9 11.7 2.8 finance income (refer to note 4) - (10.9) Exceptional finance charge included in - (15.3) (19.8) finance costs (refer to note 4) 18.9 12.1 Profit before tax 30.2 26.8 42.9 (1.7) - Tax (charge) / credit (1.7) (0.1) 10.9 17.2 12.1 Profit for the period 28.5 26.7 53.8 Balance Sheet As at As at As at 31 30 June 30 June December 2007 2006 2006 £m £m £m Property assets*** 2,232.8 1,839.6 2,044.4 Total non-current assets 2,299.4 1,872.8 2,078.6 Financial instrument assets included in 51.7 28.0 20.2 total non-current assets Bank loans excluding loan 1,455.3 1,191.8 1,278.3 finance costs Financial instrument liabilities - 10.9 - Net assets 744.9 607.0 712.2 Gearing (refer to note 18) 185% 182% 169% * The dividend per share calculation represents the declared coupon forthe period. For the 6 months ended 30 June 2007, 30 June 2006 and the yearended 31 December 2006 the dividend per share calculation aggregates thecoupon rates declared for the periods. ** FFO per share calculations are based on the weighted average number ofordinary shares in issue for the three months ended 30 June 2007 of 29,420,437,for the six months ended 30 June 2007 of 29,416,662 (three months ended 30 June2006: 25,919,221 six months ended 30 June 2006: 25,919,221 year ended 31December 2006: 26,887,700). *** Property assets are defined as total non-current assets plus non-currentassets held for sale, less non-current trade and other receivables, financialinstruments, deferred tax assets and plant and equipment held within property,plant and equipment (30 June 2007: £0.2 million, 30 June 2006: £0.4 million, 31December 2006: £0.2 million). Financial Review Funds from operations ("FFO") FFO is a non-GAAP financial management measure used to demonstrate theunderlying operating performance of real estate businesses. It providesinvestors with information regarding the Group's ability to service debt andmake capital expenditure. Further information on FFO is set out in note 17. FFO was £27.5 million for the six months ended 30 June 2007, compared with £24.6million for the six months ended 30 June 2006. The increase in FFO of £2.9million was primarily driven by the increase in income as a result of investmentproperties acquired since the equivalent period in the prior year and therealised profit on the disposal of non-current assets held for sale. Theseincreases are offset by decreases in asset management receipts for the halfyear. The Group has separately disclosed organic FFO, which is defined as the FFOgenerated following the first anniversary of the acquisition of a property assetor commencement of an outsourcing contract. Organic FFO for the period was £22.8million compared to £19.0 million for the period ended 30 June 2006, an increaseof 20%. Dividends On 1 August 2007, the Board of Directors declared a dividend of £0.47 per sharefor the quarter ended 30 June 2007 (quarter ended 31 March 2007: £0.47 pershare; quarter ended 31 December 2006: £0.45 per share). This brings dividendsdeclared in the period to 30 June 2007 to £0.94 per share (2006: £0.80 pershare) representing an increase of 18%. Revenue Group revenue for the six months ended 30 June 2007 was £205.9 million, anincrease of £27.1 million (15.2%) over the same period last year. The increaseis due to additional rental income of £11.9 million from the Direct PropertyInvestments (DPI) portfolio. In addition there has been an increase of £15.9million from outsourcing contracts. Of this increase, £14.2 million results fromthe contribution from the Identity and Passport Service (IPS) contract for thefirst six months of the year. Property operating expenses The property operating expenses of the Group in the six months ended 30 June2007 were £140.5 million (of which £83.1 million was rentals payable) comparedto £127.0 million (£82.8 million rentals payable) for the same period in theprevious year, an increase of 10.6%. The increase was primarily driven by anincrease in costs of £12.7 million associated with the IPS contract, offset byunwinding of the onerous lease provision. Administrative and other expenses Administrative and other expenses were £9.9 million for the six months ended 30June 2007 compared to £9.0 million for the six months ended 30 June 2006, anincrease of 10%. This was due to increases in staff and business developmentcosts. EBITDA EBITDA (see note 16) was £61.1 million for the six months ended 30 June 2007,compared to £49.2 million for the six months ended 30 June 2006, an increase of24.2%. This was primarily due to revenue growth of 15.2% outstripping propertyoperating expense growth of 10.6%. Finance costs and finance income Finance costs in the six months ended 30 June 2007 were £39.0 million (30 June2006: £49.5 million). The movement is due to a decrease of £10.9 millionrelating to exceptional costs from breaking interest rate swaps in the sixmonths ended 30 June 2006, offset by increases in the unwinding of discounts onprovisions and finance lease interest. Finance income has decreased from £13.6 million in the six months ended 30 June2006 to £6.8 million in the six months ended 30 June 2007. This is due to swapgains of £4.9 million in the period ended 30 June 2007 compared to gains of£11.7 million in the period ended 30 June 2006. Taxation Certain Group companies are resident in Bermuda and are classified as UKnon-resident landlords for tax purposes. Taxable profits in these companies aresubject to UK income tax and are exempt from local Bermuda taxes. The Group and its subsidiaries have not paid income or corporation tax in theperiod due to their tax residence and the availability of current and prior yeartax losses and other tax deductible allowances. The Group has incurred adeferred tax charge in the period of £1.7 million in relation to the write downof the deferred tax asset from £10.9 million at 31 December 2006 to £9.2 millionas a result of changes to the future tax rates. In addition the deferred taxliability arising from the revaluation of interest rate swaps increased from£4.6 million at 31 December 2006 to £10.5 million due to revaluation movementsin the period, the movement of £5.9 million has been recognised directly inequity. The Group has additional tax losses available for carry forward to future yearsbut these losses are only available to offset against future taxable profits inthe entity in which the losses arose. The Group has not recognised a deferredincome tax asset in respect of these losses and deductions due to the degree ofuncertainty over both the amount and timing of utilisation. Non-current assets Non-current assets, comprising investment property, property plant andequipment, premiums paid for operating leases, non-current trade and otherreceivables, financial instruments and deferred tax assets increased by £220.8million between 31 December 2006 and 30 June 2007. Investment property (see note 9) increased to £1,669.0 million from £1,483.1million at 31 December 2006. This reflects the acquisition of new investmentproperty in the six months to 30 June 2007 of £180.1 million and revaluationgains of £10 million on the Abbey portfolio and £3.6 million on the DPIPortfolio, offset by purchase costs on DPI acquisitions of £7.8 million. Over the same period, property, plant and equipment (see note 8) increased to£530.0 million from £523.3 million at 31 December 2006, principally due to therevaluation of certain of the Group's freehold and long leasehold propertiesheld under the HMRC portfolio. Bank loans The Group seeks to finance its property investments with long-term debtfacilities on which the interest rates have been fixed by utilising a mixture offixed rate debt and floating rate debt with matching interest rate swapagreements. At 30 June 2007, £1,455.3 million had been drawn under the Group'sloan facilities (31 December 2006: £1,278.3 million). Gearing The Group's financial strategy is to maintain an optimal gearing ratio (see note18) to ensure that shareholders benefit from maximum leveraged returns. TheGroup purchases investment property in accordance with its strategy. Investmentproperty is initially funded using short term revolving facilities. Thesefacilities are subsequently refinanced at a 70 - 75% loan to value ratio usinglong-term debt with a lower interest rate, with the balance being funded by newequity raised. At 30 June 2007, the Group had a gearing ratio of 185% (31 December 2006: 169%).The increase in gearing was primarily driven by the increase in debt resultingfrom the drawdown of £177.2 million to fund new acquisitions made by the DPIPortfolio. Independent review report to Mapeley Limited on the interim IFRS financial information for the six months ended 30 June 2007 Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the Consolidated IncomeStatement, Consolidated Statement of Changes in Equity, Consolidated BalanceSheet, Consolidated Cash Flow Statement and the related notes 1 to 19. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept 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 interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of Group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review, we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Ernst & Young LLP London 1 August 2007 Consolidated income statement For the six months ended 30 June 2007 Three months ended 30 June Six months ended 30 June Year ended 31 December 2007 2006 Notes 2007 2006 2006 Unaudited Unaudited Unaudited Unaudited Audited £m £m £m £m £m 101.6 91.7 Revenue 3 205.9 178.8 387.0 (71.4) (61.7) Property operating expenses 3 (140.5) (127.0) (285.4) 30.2 30.0 Net contract, rental & related 3 65.4 51.8 101.6 income 7.8 8.1 Net valuation surplus on 9 5.8 18.7 40.8 investment property - (0.1) (Impairment)/Reversal of 0.1 - 0.8 impairment of non-investment property 1.1 1.2 Gain on disposal of 1.0 1.2 3.2 non-investment property (5.2) (4.4) Administrative and other (9.9) (9.0) (20.7) expenses 33.9 34.8 Operating profit 62.4 62.7 125.7 (20.4) (35.4) Finance costs 4 (39.0) (49.5) (89.6) 5.4 12.7 Finance income 4 6.8 13.6 6.8 18.9 12.1 Profit before tax 30.2 26.8 42.9 (1.7) - Income tax (expense)/credit 5 (1.7) (0.1) 10.9 17.2 12.1 Profit for the period 28.5 26.7 53.8 attributable to equity holders of Mapeley Limited Dividends 13.8 10.9 Dividends attributable to the 6 27.6 21.2 45.8 period £0.47 £0.41 Dividends per share 6 £0.94 £0.80 £1.68 attributable to the period (£/ share) Earnings per share £/share £/share £/share £/share £/share 0.58 0.47 - basic 7 0.97 1.03 2.0 0.58 0.47 - diluted 7 0.97 1.03 2.0 Consolidated statement of changes in equity For the periods ended 30 June 2007 and 30 June 2006 Issued Share Net Retained Asset Other Total capital premium unrealised losses revaluation reserves equity (losses)/gains reserve £m £m £m £m £m £m £mAt 31 December 2006 (Audited) - 329.2 14.7 (50.4) 315.2 103.5 712.2 Revaluation surplus - - - - 6.9 - 6.9Depreciation written back on - - - - 2.9 - 2.9revaluation of non-investment propertyTransfer of excess revaluation - - - 2.7 (2.7) - -depreciationGains on cash flow hedges - - 26.6 - - - 26.6Tax on items taken directly to - - (5.9) - - - (5.9)equityTotal income for the period - - 20.7 2.7 7.1 - 30.5recognised directly in equityProfit for the period - - - 28.5 - - 28.5Total income for the period - - 20.7 31.2 7.1 - 59.0Cost related to issue of ordinary - (0.3) - - - - (0.3)sharesIssue of shares to Non-executive - - - - - 0.1 0.1DirectorsIssue of shares to employees under - - - - - 0.9 0.9the Employee Share PlanEquity dividends - - - (27.0) - - (27.0)At 30 June 2007 (Unaudited) - 328.9 35.4 (46.2) 322.3 104.5 744.9 At 31 December 2005 (Audited) - 132.4 (26.6) (69.1) 318.6 101.6 456.9Revaluation deficit - - - - (12.9) - (12.9)Depreciation written back on - - - - 3.1 - 3.1revaluation of non-investment propertyTransfer of excess revaluation - - - 2.9 (2.9) - -depreciationGains on cash flow hedges - - 33.4 - - - 33.4Realised gain on cash flow hedge - - 10.9 - - - 10.9Total income for the period - - 44.3 2.9 (12.7) - 34.5recognised directly in equityProfit for the period - - - 26.7 - - 26.7Total income / (expense) for the - - 44.3 29.6 (12.7) - 61.2periodIssue of ordinary shares - 110.0 - - - - 110.0Costs related to issue of ordinary - (3.6) - - - - (3.6)shares on listing of CompanyIssue of shares to Non-executive - - - - - 0.4 0.4DirectorsIssue of shares to employees under - - - - - 0.7 0.7the Employee Share PlanEquity dividends - - - (18.6) - - (18.6)At 30 June 2006 (Unaudited) - 238.8 17.7 (58.1) 305.9 102.7 607.0 Consolidated statement of changes in equity For the year ended 31 December 2006 Issued Share Net Retained Asset Other Total capital premium unrealised losses revaluation reserves Equity unrealised Equity gains £m £m £m £m £m £m £m At 31 December 2005 (Audited) - 132.4 (26.6) (69.1) 318.6 101.6 456.9 Revaluation deficit - - - - (2.8) - (2.8)Depreciation written back on revaluation - - - - 5.6 - 5.6of non-investment propertyTransfer of excess revaluation - - - 5.2 (5.2) - -depreciationTransfer of revaluation surplus on asset - - - 0.6 (0.6) - -disposalsGain on cash flow hedges - - 34.6 - - - 34.6Realised gain on cash flow hedge - - 10.9 - - - 10.9Tax on items taken directly to equity - - (4.2) - (0.4) - (4.6)Total income for the year recognised - - 41.3 5.8 (3.4) - 43.7directly in equityProfit for the year - - - 53.8 - - 53.8Total income / (expense) for the year - - 41.3 59.6 (3.4) - 97.5Issue of new ordinary shares - 203.5 - - - - 203.5Cost related to issue of new ordinary - (6.7) - - - - (6.7)sharesIssue of shares to Non-executive - - - - - 0.5 0.5DirectorsIssue of shares to employees under the - - - - - 1.4 1.4Employee Share PlanEquity dividends - - - (40.9) - - (40.9)At 31 December 2006 (Audited) - 329.2 14.7 (50.4) 315.2 103.5 712.2 Consolidated balance sheet - at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Audited Notes £m £m £mASSETSNon-current assetsProperty, plant and equipment 8 530.0 514.8 523.3Investment property 9 1,669.0 1,287.3 1,483.1Premiums on operating leases 33.7 36.7 35.2Trade and other receivables 5.8 6.0 5.9Financial instruments 51.7 28.0 20.2Deferred tax asset 9.2 - 10.9Total non-current assets 2,299.4 1,872.8 2,078.6Current assetsInventories 15.7 18.0 15.7Trade and other receivables 62.4 67.0 57.6Cash and short-term deposits - in controlled accounts 11 25.7 28.1 22.7 - for operational purposes 11 50.0 58.5 54.6 Total current assets 153.8 171.6 150.6 Non-current assets held for sale 10 0.3 1.2 3.0 TOTAL ASSETS 2,453.5 2,045.6 2,232.2EQUITY AND LIABILITIESEquity attributable to equity holders of Mapeley LimitedIssued capital (net of treasury shares) 12 - - -Share premium 328.9 238.8 329.2Net unrealised gains 35.4 17.7 14.7Retained losses (46.2) (58.1) (50.4)Asset revaluation reserve 322.3 305.9 315.2Other reserves 104.5 102.7 103.5Total equity 744.9 607.0 712.2Non-current liabilitiesTrade and other payables 5.5 5.6 5.2Interest & non-interest bearing loans and borrowings 13 1,233.8 1,191.3 1,268.7Provisions 32.1 31.2 31.5Financial instruments - 10.9 -Deferred asset management receipts 77.2 80.3 78.9Deferred tax liability 10.5 - 4.6Total non-current liabilities 1,359.1 1,319.3 1,388.9 Current liabilitiesTrade and other payables 116.4 107.0 110.5Interest & non-interest bearing loans and borrowings 13 213.2 0.1 1.2Provisions 14.0 6.4 13.5Deferred asset management receipts 5.9 5.8 5.9Total current liabilities 349.5 119.3 131.1 Total liabilities 1,708.6 1,438.6 1,520.0 TOTAL EQUITY AND LIABILITIES 2,453.5 2,045.6 2,232.2 Consolidated cash flow statement for the six months ended 30 June 2007 Three months ended 30 June Six months ended 30 June Year ended 31 December 2007 2006 2007 2006 2006 Unaudited Unaudited Notes Unaudited Unaudited Audited £m £m Cash flows from operating activities £m £m £m 33.9 34.8 Operating profit 62.4 62.7 125.7 Adjustment for: - 0.1 Impairment/(reversal) of impairment of (0.1) - (0.8) non-investment property (7.8) (8.1) Net valuation surplus on investment 9 (5.8) (18.7) (40.8) property 2.3 2.2 Depreciation and amortisation 4.6 5.2 9.5 (1.1) (1.2) Profit on disposal of assets held for (1.0) (1.2) (3.2) sale 0.5 0.4 Share benefit expense 1.0 1.1 1.9 27.8 28.2 Operating profit before changes in 61.1 49.1 92.3 working capital - (0.1) (Increase)/decrease in inventories - (0.3) 2.0 (5.0) (5.8) Increase in trade & other receivables (4.8) (17.7) (8.2) 1.5 (3.3) Increase / (decrease) in trade & other 3.2 (2.5) 0.9 payables 3.2 (3.2) (Decrease) / increase in provisions (0.1) (2.0) 4.5 (0.2) 4.2 (Decrease) / increase in deferred asset (1.7) 6.9 5.6 management receipts 27.3 20.0 Cash generated from operations 57.7 33.5 97.1 (17.1) (13.7) Interest paid (33.5) (30.7) (65.4) 0.9 1.0 Interest received 2.0 1.9 4.0 11.1 7.3 Net cash flows from operating 26.2 4.7 35.7 activities Cash flows from investing activities 1.6 0.9 Proceeds from assets held for sale 4.0 0.9 6.6 - - Purchase of property, plant and (0.1) (0.1) (0.1) equipment (74.8) (100.1) Purchase of investment property 9 (179.2) (190.3) (366.4) (73.2) (99.2) Net cash flows used in investing (175.3) (189.5) (359.9) activities Cash flows from financing activities (0.2) (0.7) Costs of raising finance (1.0) (2.4) (14.2) (0.3) (0.1) Payment of finance lease liabilities (0.3) (0.3) (0.6) - - Swap and loan termination fees 4 - - (13.4) 75.8 101.0 Receipt of new bank loans 177.2 395.9 956.3 - (1.3) Repayment of bank loans (0.2) (290.8) (764.6) - - Proceeds from issue of ordinary shares - 110.0 203.5 (0.1) (0.1) Costs related to issue of ordinary (0.3) (3.6) (6.7) shares (13.8) (10.3) Dividend paid to equity holders 6 (27.0) (18.6) (40.9) 61.4 88.5 Net cash flows from financing 148.4 190.2 319.4 activities (0.7) (3.4) Net (decrease) / increase in cash and (0.7) 5.4 (4.8) short-term deposits 76.4 90.0 Cash and cash equivalents at start of 76.4 81.2 81.2 period 75.7 86.6 Cash and cash equivalents at end of 11 75.7 86.6 76.4 period Notes to the unaudited interim results at 30 June 2007 1. General information The consolidated financial statements of the Group for the six months ended 30June 2007 comprise the Company and its subsidiaries and were authorised by theBoard for issue on 1 August 2007. The Company's registered office is located atRegency Court, Glategny Esplanade, St Peter Port, Guernsey GY1 1WW. 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 therelated notes for the periods then ended. The financial information contained inthis report is unaudited and does not constitute statutory accounts within themeaning of The Companies (Guernsey) Law, 1994. The annual report and accountsfor the year ended 31 December 2006, which were prepared under IFRS as adoptedby the European Union, received an unqualified auditors' report. The unauditedfinancial information has been prepared in accordance with the Listing Rules ofthe Financial Services Authority. The accounting policies adopted in the preparation of the interim consolidatedfinancial statements are consistent with those as reported in the Group's annualreport for the year ended 31 December 2006 except where such policies have beenrevised to reflect amendments to International Accounting Standards ("IAS") andthe adoption of new International Financial Reporting Standards ("IFRS") whichbecame effective from 1 January 2007. Accordingly IAS 1 (para 124A - 124C) "Presentation of Financial Statements", IFRS 7 "Financial Instruments:Disclosures", IFRIC 8 "Scope of IFRS 2", IFRIC 9 "Reassessment of embeddedderivatives" and IFRIC 10 "Interim Financial Reporting and Impairment" have beenadopted by the Group in preparing these interim financial statements. Theadoption of these standards has had no material impact on the Group's financialstatements. The following new standards and interpretations have been issued but are noteffective for the financial year ending 31 December 2007, and have not beenadopted early: IFRS 8 "Operating segments", IFRIC 11 "IFRS 2 - Group andtreasury share transactions" and IFRIC 12 "Service concession arrangements". The financial statements of the Group for the year ending 31 December 2007 willbe prepared in accordance with IFRS as adopted for use by the European Union at31 December 2007. The interim consolidated financial statements should be readin conjunction with the Group's annual financial statements as at 31 December2006. The interim consolidated financial statements are presented in pounds sterlingand all values are rounded to the nearest million (£m) except where otherwiseindicated. The functional currency of the Group is pounds sterling. 3. Revenue and segmental information For management purposes, the Group is currently organised into two segments inline with the Group's business model - Outsourcing Contracts and Direct PropertyInvestments. These divisions are the basis on which the Group reports itsprimary segment information. The segments are described below: Outsourcing Contracts This segment consists of activities arising from the purchase and subsequentleaseback of the HMRC and Abbey property portfolios and the fit-out and deliveryof serviced accommodation under the IPS contract. The main characteristics ofthese arrangements are listed below: • long-term contracts (the contracts run over periods from 3 to 20 years); • agreements are tailored in accordance with the client's accommodation requirements (from simple purchase and lease back to fully serviced accommodation); • the HMRC and Abbey agreements allow them to exercise flexibility to vacate properties within defined parameters; and • under the HMRC and Abbey agreements the revenue earned is subject to annual increases. Direct Property Investments The segment previously known as "Investment property" has been renamed "DirectProperty Investments". The Group has embarked on a separate strategy of acquiring individual andportfolios of office property. The Group's activities within this segment willfocus on purchasing property primarily let to strong credit quality tenants, whoare likely to stay in the properties for a minimum term of 5 years. The Group has a single geographical segment, being the UK commercial propertymarket. Three months ended 30 June 2007 (Unaudited) 30 June 2006 (Unaudited)Business segments Direct Outsourcing Total Direct Outsourcing Total Property contracts operations Property contracts operations Investments Investments £m £m £m £m £m £mRental revenue 17.3 - 17.3 11.4 - 11.4Property trading - 0.1 0.1 - 0.9 0.9 Facility unitary charge - 57.1 57.1 - 52.3 52.3 Contractual rents - 20.1 20.1 - 19.8 19.8 Third party rents - 7.0 7.0 - 7.3 7.3Contractual revenue - 84.2 84.2 - 79.4 79.4 Segment revenue 17.3 84.3 101.6 11.4 80.3 91.7 Rentals payable (0.2) (44.9) (45.1) (0.1) (39.3) (39.4)Other direct property and contract (0.3) (26.0) (26.3) (0.2) (22.1) (22.3)expenditure *Net contract, rental & related income 16.8 13.4 30.2 11.1 18.9 30.0Impairment of non-investment property - - - - (0.1) (0.1)Net valuation surplus on investment property - 7.8 7.8 1.6 6.5 8.1Gain on disposal of assets held for sale - 1.1 1.1 - 1.2 1.2Segment result 16.8 22.3 39.1 12.7 26.5 39.2Unallocated expenses (5.2) (4.4)Operating profit 33.9 34.8Net finance costs (15.0) (22.7)Income tax (1.7) -Profit for the period 17.2 12.1 Six months ended 30 June 2007 (Unaudited) 30 June 2006 (Unaudited)Business segments Direct Outsourcing Total Direct Outsourcing Total Property contracts operations Property contracts operations Investments Investments £m £m £m £m £m £mRental revenue 33.3 - 33.3 21.4 - 21.4Property trading 0.1 0.2 0.3 - 1.0 1.0 Facility unitary charge - 117.6 117.6 - 103.2 103.2 Contractual rents - 40.9 40.9 - 39.3 39.3 Third party rents - 13.8 13.8 - 13.9 13.9Contractual revenue - 172.3 172.3 - 156.4 156.4 Segment revenue 33.4 172.5 205.9 21.4 157.4 178.8 Rentals payable (0.4) (82.7) (83.1) (0.1) (82.7) (82.8)Other direct property and contract (1.3) (56.1) (57.4) (0.4) (43.8) (44.2)expenditure *Net contract, rental & related income 31.7 33.7 65.4 20.9 30.9 51.8Reversal of impairment of non-investment - 0.1 0.1 - - -propertyNet valuation (deficit)/surplus on (4.2) 10.0 5.8 7.4 11.3 18.7investment propertyGain on disposal of assets held for sale - 1.0 1.0 - 1.2 1.2Segment result 27.5 44.8 72.3 28.3 43.4 71.7Unallocated expenses (9.9) (9.0)Operating profit 62.4 62.7Net finance costs (32.2) (35.9)Income tax (1.7) (0.1)Profit for the period 28.5 26.7 * Other direct property and contract expenditure includes depreciation. Year ended 31 December 2006 (Audited)Business segments Direct Property Outsourcing Total Investments contracts operations £m £m £mRental revenue 50.3 - 50.3Property trading and other income - 0.8 0.8 Facility unitary charge - 219.7 219.7 Contractual rents - 88.3 88.3 Third party rents - 27.9 27.9Contractual revenue - 335.9 335.9Segment revenue 50.3 336.7 387.0Rentals payable (0.3) (173.6) (173.9)Other direct property and contract expenditure * (1.2) (110.3) (111.5)Net contract, rental & related income 48.8 52.8 101.6Reversal of impairment of non-investment property - 0.8 0.8Net valuation surplus on investment property 8.1 32.7 40.8Gain on disposal of non-investment property - 3.2 3.2Segment result 56.9 89.5 146.4Unallocated expenses (20.7)Operating profit 125.7Net finance costs (82.8)Income tax credit 10.9Profit for the year 53.8 4. Finance costs and finance income Three months ended 30 June Six months ended 30 June Year ended 31 December 2007 2006 2007 2006 2006 Unaudited Unaudited Unaudited Unaudited Audited £m £m £m £m £m Finance costs 19.6 17.3 Bank loans and overdrafts 37.5 37.5 73.7 0.2 0.1 Finance charges payable 0.3 0.1 0.6 under finance leases - 17.5 Loss on breaking interest rate - 10.9 13.4 swap 0.6 0.5 Unwinding of discount on 1.2 1.0 1.9 provisions 20.4 35.4 39.0 49.5 89.6 Finance income 1.0 1.0 Bank interest receivable 1.9 1.9 4.0 4.4 11.7 Gain on interest swap 4.9 11.7 2.8 5.4 12.7 6.8 13.6 6.8 Bank loans and overdraft charges include a charge of £1.0 million (six monthsended 30 June 2006: £5.6 million; year ended 31 December 2006: £7.7 million)relating to loan finance fees recognized under the effective interest method. Ofthis amount £nil (six months ended 30 June 2006: £4.4 million; year ended 31December 2006: £6.4 million) relates to exceptional charges resulting from achange in timing of the repayment of the original loan as a consequence ofrefinancing. * Other direct property and contract expenditure includes depreciation. 5. Income tax expense a) Tax on profit on ordinary activities Current taxation No current income tax is chargeable to the income statement or the statement ofchanges in equity in the current period in respect of Guernsey, UK or otheroverseas taxation. The charge during the three months ended 31 March 2006 of£0.1 million related to UK income tax. Deferred taxation A tax charge of £1.7 million has been recognised in the current period in theincome statement in relation to the movement in the deferred tax asset balancearising as a result of changes in future tax rates. In addition a further £5.9million charge has been recognised directly in equity in relation to themovement in the deferred tax liability on the revaluation of interest rate swapsto fair value. b) Reconciliation of income tax charge The weighted average income tax rate for the period of 3.6% (period ended 31March 2006: 5.1%; year ended 31 December 2006: 10.8%) is based on the weightedaverage tax rate applicable across the Group's operations. This has beencalculated by dividing (1) Group companies' profits before tax multiplied by thetax rate applicable for each Group company by (2) the Group's profit before tax. c) Deferred income tax The Group has re-evaluated its forecasts of future profits of Group companiesand has concluded that the recognition of a deferred tax asset remainsappropriate however the deferred tax asset has decreased to £9.2 million (31December 2006: £10.9 million) due to changes in the future rates of taxresulting in a charge of £1.7 million to the income statement. The Group hasadditional tax losses available for carry forward to future years but in manycases these losses are only available to offset against future taxable profitsin the entity in which the losses arose. The Group has not recognised a deferredincome tax asset in respect of these losses and deductions due to the degree ofuncertainty over both the amount and timing of utilisation. The deferred tax liability has increased during the period to £10.5 million (31December: £4.6 million) as a result of the revaluation of interest rate swaps tofair value during the period. This has given rise to a tax charge of £5.9million which has been recognised directly in equity. 6. Dividends Six months ended 30 June Year ended 31 December 2007 2006 2006 Unaudited Unaudited Audited £m £m £mDeclared and paid during the period:Equity dividends on ordinary shares: Fifth interim dividend for 2005: £0.37 per - 8.3 8.3 share, paid 5 January 2006 First interim dividend for 2006: £0.39 per - 10.3 10.3 share Second interim dividend for 2006: £0.41 per - - 10.9 share Third interim dividend for 2006: £0.43 per share - - 11.4 Fourth interim dividend for 2006: £0.45 per share 13.2 - - First interim dividend for 2007: £0.47 per 13.8 - - share 27.0 18.6 40.9 Proposed and approved at the Board meeting on 1 August 2007Equity dividends on ordinary shares: Second interim dividend for 2007: £0.47 per share; 13.8 10.9 13.2 (30 June 2006: £0.41 per share; 31 December 2006: fourth interim dividend for 2006 : £0.45 per share) 7. Earnings per share The calculation of basic and diluted earnings per share figures is based on thefollowing: - Net profit attributable to equity holders of the Company for the threemonths ended 30 June 2007 of £17.2 million (three months ended 30 June 2006:£12.1 million) - Net profit attributable to equity holders of the Company for the sixmonths ended 30 June 2007 of £28.5 million (six months ended 30 June 2006: £26.7million; year ended 31 December 2006: £53.8 million) - Weighted average number of ordinary shares for the three months ended30 June 2006 for basic earnings per share 29,420,437 (three months ended 30 June2006: 25,919,221) - Weighted average number of ordinary shares for the six months ended30 June 2007 for basic earnings per share 29,416,662 (six months ended 30 June2006: 25,919,221; year ended 31 December 2006: 26,887,700) - Weighted average number of ordinary shares for the three months ended30 June 2007 for diluted earnings per share 29,420,437 (three months ended 30June 2006: 25,929,424) - Weighted average number of ordinary shares for the six months ended30 June 2007 for diluted earnings per share 29,416,662 (six months ended 30 June2006: 25,929,424; year ended 31 December 2006: 26,903,833) 8. Property, plant and equipment Freehold Property Plant and acquired under equipment property finance leases Total £m £m £m £m Cost or valuation:At 1 January 2007 (audited) 479.2 46.3 16.4 541.9Additions - - 0.1 0.1Revaluations 5.2 1.7 - 6.9Reversal of impairment 0.1 - - 0.1Transfers (0.3) - - (0.3)At 30 June 2007 (unaudited) 484.2 48.0 16.5 548.7 Accumulated depreciation:At 1 January 2007 (audited) - (2.4) (16.2) (18.6)Provided during the period (2.7) (0.2) (0.1) (3.0)Written back on 2.7 0.2 - 2.9 RevaluationAt 30 June 2007 (unaudited) - (2.4) (16.3) (18.7) Net book value:At 30 June 2007 (unaudited) 484.2 45.6 0.2 530.0 At 31 December 2006 (audited) 479.2 43.9 0.2 523.3 Freehold property and property acquired under finance leases are included inproperty, plant and equipment where the Group provides significant ancillaryservices to tenants, and is carried at fair value. Freehold property held at 30 June 2007 of £484.2 million (31 December 2006:£479.2 million) and the majority of the property acquired under finance leasesat 30 June 2007 of £43.5 million (31 December 2006: £41.7 million) were valuedat 30 June 2007 by Savills Commercial Limited ("Savills"), a valuer external tothe Group as part of the valuation of all the valuable properties held by theGroup under the HMRC contract. The valuations at 30 June 2007 and 31 December2006 have been carried out in accordance with The Royal Institution of CharteredSurveyors' ("RICS") Appraisal and Valuation Standards published in February 2003(the "Red Book") and the CESR Guidance on property valuations. Certain other properties held under finance lease and included within Property,Plant and Equipment were valued in accordance with the Red Book by the directorsat a market value of £2.1 million (31 December £2.2 million) having taken advicefrom a suitably qualified employee (a member of The Royal Institution ofChartered Surveyors). 9. Investment property At valuation: Property acquired Freehold under finance property leases Total £m £m £mAt 1 January 2007 (Audited) 1,457.0 26.1 1,483.1Additions 179.2 0.9 180.1Revaluations 5.3 0.5 5.8At 30 June 2007 (Unaudited) 1,641.5 27.5 1,669.0 It is the Group's policy to carry investment property at fair value inaccordance with IAS 40 "Investment Property". Investment property was valued at30 June 2007 by CB Richard Ellis Limited ("CBRE") and Savills, valuers externalto the Group. These valuations have been incorporated into the interim financial statements.Both Savills and CBRE have consented to the use of their names in thesefinancial statements. Investment property comprises the Group's Abbey portfolio and its directproperty investments. CBRE's valuation of the Abbey portfolio of properties was£585.2 million (31 December 2006: £575.7 million). As at 31 December 2006 twoproperties with a valuation of £3.0 million were identified for sale and heldwithin non-current assets held for sale. As at 30 June 2007 these propertieshave been sold. Savills and CBRE both carried out valuations of the Group's other propertiesheld within investment property, which were valued as at 30 June 2007 at £90.0million (31 December 2006: £53.1 million), and at £988.7 million (31 December2006: £850.6 million) respectively as at 30 June 2007. The remaining properties held under Property acquired under finance leases werevalued by the Directors at a Market Value of £5.1 million (31 December 2006:£4.2 million), having taken advice from a suitably-qualified employee (a memberof The Royal Institution of Chartered Surveyors). These valuations are summarised below: As at As at 30 June 2007 31 December 2006 Unaudited Audited £m £mValuation of Abbey portfolio by CBRE 585.2 575.7Valuation of asset held for sale by the Directors - 2.5Transfer to non-current assets held for sale - (3.0) 585.2 575.2Valuation of direct property investments by Savills 90.0 53.1Valuation of direct property investments by CBRE 988.7 850.6Valuation of certain finance leases by the Directors 5.1 4.2 1,669.0 1,483.1 The valuations at 30 June 2007 and 31 December 2006 have been carried out inaccordance with The Royal Institution of Chartered Surveyors' ("RICS") Appraisaland Valuation Standards published in February 2003 (the Red Book) and the CESRGuidance on property valuations. 10. Non-current assets held for sale As at As at 30 June 2007 31 December 2006 Unaudited AuditedAt valuation £m £mAt start of the period 3.0 1.4Reclassifications from Investment Property - 3.0Reclassifications from Property, Plant and Equipment 0.3 -Disposals (3.0) (1.4)At end of the period 0.3 3.0 As at 31 December 2006 the Group had decided to dispose of two investmentproperties. During the six months to 30 June 2007 these properties have beensold. During the period ended 30 June 2007 one property was transferred fromproperty, plant and equipment to non-current assets held for sale. This propertyis being actively marketed and it is anticipated that this disposal will takeplace in the near future. In accordance with the provisions of IFRS 5, thisproperty is held at the lower of carrying value and fair value less estimatedcosts of realisation, it forms part of the Group's outsourcing business segment. 11. Cash and short-term deposits Cash and short-term deposits earn interest at floating rates based on daily bankdeposit rates. Short-term deposits are made for varying periods of between oneday and one month depending on the immediate cash requirements of the Group, andearn interest at the respective short-term deposit rates. The fair value of cashand short-term deposits at 30 June 2007 was £75.7 million (31 December 2006£77.3 million). For the purposes of the consolidated cash flow statement, cash and short-termdeposits comprise the following at 31 December: As at As at 30 June 2007 31 December 2006 Unaudited Audited £m £mCash at bank- in controlled accounts 25.7 22.7- for operational purposes 50.0 54.6Cash and short-term deposits 75.7 77.3 Bank overdrafts (note 13) - (0.9) Total cash and short-term deposits net of bank 75.7 76.4overdrafts The amounts held in controlled accounts comprise property sale proceeds andother capital receipts which will be held in controlled accounts until the nextinterest payment date in accordance with the terms of the relevant loan facilityagreements. This cash can be accessed within 24 hours of any request by theGroup. 12. Issued capital As at 30 June 2007Authorised No. of ordinary £m sharesOrdinary shares at par value of £nil Unlimited - Issued No. of shares £mAt 1 January 2007 (net of 698 treasury shares) 29,416,128 -Issued on 2 May 2007 20,000 -Movement in shares held by the Employee Share Trust (12,092) -At 30 June 2007 (net of 12,790 treasury shares) 29,424,036 - 13. Interest and non-interest bearing loans and borrowings The table below sets out the Group's interest and non-interest bearing loans andborrowings as at 31 December 2006 and 30 June 2007: Effective As at As at interest Maturity 30 June 2007 31 December 2006 rate % Unaudited Audited £m £mNon-currentObligations under finance leases 8.2% 2008-2021 7.9 7.0Bank loans: Term loan under the HMRC portfolio 5.8% Mar 2021 166.6 166.5facility Term loan under the Abbey portfolio 5.6% Jul 2012 451.9 451.7facility Acquisition term loan 5.8% Jul 2015 170.1 170.0 Term loan under the Beta portfolio 5.4% Apr 2016 207.6 207.5facility Term loan under the Gamma portfolio 5.0% Jan 2017 229.7 229.6 facility Revolving Delta acquisition facility 6.4% Apr 2008 - 36.4 1,233.8 1,268.7CurrentObligations under finance leases 8.2% 2007 0.1 0.1Bank loans: Overdraft (note 11) 2007 - 0.9 Term loan under the HMRC portfolio 5.8% 2007 - 0.2facility Revolving acquisition facility 6.4% Apr 2008 213.1 - 213.2 1.2 All of the Group's properties, as valued by Savills and CBRE have been securedagainst the Group's loan facilities. The loan balances above represent theamounts outstanding at 30 June 2007 and 31 December 2006 on the followingfacilities: Term loan under the HMRC portfolio facility The HMRC portfolio is financed by a 15 year, £176.0 million fixed rate loansecured on properties held in the HMRC portfolio. The interest rate payable onthis facility is a fixed rate of 4.5% plus a margin of 0.75% for the first 7years of the loan increasing to 2.25% for the remainder of the loan, plusmandatory costs (if any). Term loan under the Abbey portfolio facility The Abbey portfolio is financed by a £455.0 million, 7 year loan which issecured against all investment property held in the Abbey portfolio and by acharge over the investments of Mapeley Columbus Holdings Limited. The loan isrepayable in 2012. Interest on the loan is paid quarterly at a rate of LIBORplus 0.95% plus mandatory costs (if any). The borrowers have entered intoseparate interest rate agreements to fix the interest payable. Acquisition term loan Mapeley's direct investment portfolio is partly financed with a 10 year, £170.9million term loan. At inception the loan had a loan to value ratio of 70%. Thereis no amortisation during its term and the loan is repayable in July 2015. Theinterest payable on this loan is fixed at 4.95% plus a 0.75% margin. Beta Acquisition term loan Mapeley's direct investment portfolio is further financed with a 10 year, £208.6million term loan. At inception the loan had a loan to value ratio of 75%. Thereis no amortisation during its term and the loan is repayable in April 2016. Theinterest payable on this loan is fixed at 4.53% plus a 0.85% margin. Gamma Acquisition term loan Mapeley's direct investment portfolio is further financed with a 10 year, £231.3million term loan. At inception the loan had a loan to value ratio of 75%. Thereis 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 the interest payable increases by 0.20% each year until the endof the loan. Revolving Delta Acquisition facility The Group has a 3 year, £300.0 million revolving acquisition facility to financefurther property investments. Acquisitions under this facility are initiallyfully debt financed and will be refinanced using a mix of long-term debt andequity at a later date. The facility is repayable in April 2008. The interestrate payable on the facility is LIBOR plus a margin of between 1.0% and 1.15 %plus mandatory costs (if any). The Group has also put in place a 10 year, 4.37%£20.7 million swap to fix part of its anticipated long-term exposure to interestrate risk on these property acquisitions. Working capital facility The Group has a £25.0 million working capital facility which ends in June 2008.At 30 June 2007, £nil was drawn down. The interest rate payable on the facilityis LIBOR plus 2.0% plus mandatory costs (if any). The loan is guaranteed byMapeley Limited. 14. Related party transactions The Group continues to provide property management services in respect of 135property interests owned by Pinnacle Towers Limited, a company in which FortressInvestment Group LLC held a significant interest. In return for the provision ofthese services, the Group receives £100,000 per annum evenly spread across theyear and receivable one month in arrears. During the period £50,000 had beenreceived of which £16,667 was outstanding as at 30 June 2007. 15. Subsequent events Since 30 June 2007, the Group has exchanged and completed contracts to acquire 2properties for a consideration of £23.7 million. These properties have beenfunded by the revolving Delta Acquisition facility. The Board of the Company proposed and declared an interim dividend of £13.8million (31 December 2006: £13.2 million; 30 June 2006: £10.9 million) at aBoard meeting held on 1 August 2007. The dividend payment date is 24 August2007. 16. Earnings before interest, tax, depreciation and amortisation Earnings before interest, tax, depreciation and amortisation or "EBITDA" is akey performance measure of the Group defined by the Group as profit before tax,finance costs, depreciation and amortisation, valuation surplus / deficit oninvestment property, gain on disposal of subsidiaries and impairment /impairment reversal of non-investment property. EBITDA for the period iscomputed as follows: Three months ended 30 June Six months ended 30 June Year ended 31 December 2007 2006 2007 2006 2006 Unaudited Unaudited Unaudited Unaudited Audited £m £m £m £m £m 18.9 12.1 Profit before tax 30.2 26.8 42.9 15.0 22.7 Add back: Finance cost net of finance 32.2 35.9 82.8 income 2.3 2.2 Depreciation and 4.6 5.2 9.5 amortisation (7.8) (8.1) Net valuation (5.8) (18.7) (40.8) surplus on investment property - 0.1 Reversal of (0.1) - (0.8) impairment of non-investment property 28.4 29.0 EBITDA 61.1 49.2 93.6 17. Funds from operations Funds from operations or "FFO" is a management measure used to demonstrate theunderlying operating performance of real estate businesses such as the Company.It provides investors with information regarding the Group's ability to servicedebt and make capital expenditure. FFO does not represent cash generated fromoperating activities in accordance with IFRS, therefore it should not beconsidered an alternative to cash flow as a measure of liquidity, and is notnecessarily indicative of cash funds available. This calculation of FFO may bedifferent 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 work in progress"plus the movement in "net asset management receipts" plus the charge in respectof "employee shares" plus realised revaluation gains. This definition has beenrefined at 31 December 2006 but this has had no impact on reported FFO for 2006.More detailed definitions of these adjustments to EBITDA are given below: "Net finance costs" comprise finance costs less finance income as set out in theGroup income statement, adjusted to exclude amortisation of loan finance fees,gains or losses on interest rate swaps, loan termination costs and the unwindingof discounts on provisions. "Movement in the onerous lease provision" is the net release (or charge) to theGroup income statement as a result of the change in the Group onerous leaseprovisions, excluding interest charged on the unwinding of the provision.Although these amounts offset rental costs in the income statement, they do notrepresent cash movements and are therefore excluded from the computation of FFO. "Movement in work in progress" or the "movement in long-term accrued costs" isthe year on year change in Group work in progress or if negative at the balancesheet date, accrued cost. The amount represents the increase or decrease in lifecycle costs deferred by the Group so as to match costs with revenue. "Net asset management receipts" are the total cash receipts in the year lessamounts amortised in the financial period. The accounting treatment of assetmanagement receipts is set out in the accounting policies. "Employee shares" - Under IFRS 2, costs are charged to the Group incomestatement when share based payments are made. This is a non cash expense and istherefore excluded from the measure. "Organic FFO" is defined as the FFO contribution from property assets orservices following the first anniversary of their acquisition or commencement ofthe contract, net of central overhead costs. "Acquisition FFO" is defined as the FFO contribution from property assets orservices in the first year of ownership in the case of property assets andcontract commencement in the case of new services. "Realised profit on disposal for FFO" is defined as the difference between theprofit on disposal as per the income statement and the profit on disposalcalculated based upon the historical cost of the asset. Unaudited Unaudited Three months ended 30 June 2007 Three months ended 30 June 2006 Organic Acquisition Total Organic Acquisition Total £m £m £m £m £m £mEBITDA 23.2 5.2 28.4 21.1 7.9 29.0Net finance costs (15.5) (2.8) (18.3) (10.0) (5.8) (15.8)Movement in the onerous lease 3.2 - 3.2 (3.2) - (3.2)provisionMovement in work in progress 0.2 - 0.2 (0.2) - (0.2)Movement in long-term accrued (0.2) - (0.2) 0.5 - 0.5costsAsset management receipts (0.2) - (0.2) 3.7 - 3.7Share benefit expense 0.5 - 0.5 0.4 - 0.4Realised profit on disposal for 0.2 - 0.2 - - -FFOFFO 11.4 2.4 13.8 12.3 2.1 14.4 FFO per share 47 pence 56 pence Unaudited Unaudited Six months ended 30 June 2007 Six months ended 30 June 2006 Organic Acquisition Total Organic Acquisition Total £m £m £m £m £m £mEBITDA 50.6 10.5 61.1 32.9 16.3 49.2Net finance costs (29.1) (5.8) (34.9) (19.5) (10.7) (30.2)Movement in the onerous lease (0.1) - (0.1) (2.0) - (2.0)provisionMovement in work in progress - - - (0.3) - (0.3)Movement in long term accrued costs (0.6) - (0.6) 0.6 - 0.6Asset management receipts (1.7) - (1.7) 6.2 - 6.2Share benefit expense 1.0 - 1.0 1.1 - 1.1Realised profit on disposal for FFO 2.7 - 2.7 - - -FFO 22.8 4.7 27.5 19.0 5.6 24.6 FFO per share 94 pence 95 pence Audited Year ended 31 December 2006 Organic Acquisition Total £m £m £mEBITDA 61.7 31.9 93.6Net finance costs (43.5) (19.1) (62.6)Movement in the onerous lease provision 4.5 - 4.5Movement in work in progress 2.0 - 2.0Movement in long-term accrued costs - 0.7 0.7Asset management receipts 5.6 - 5.6Share benefit expense 1.9 - 1.9FFO 32.2 13.5 45.7 FFO per share 170 pence The calculation of FFO per share is based on the following: - FFO for the three months ended 30 June 2007 of £13.8 million (threemonths ended 30 June 2006: £14.4 million) - FFO for the six months ended 30 June 2007 of £27.5 million (six monthsended 30 June 2006: £24.6 million; year ended 31 December 2006: £45.7 million) - Weighted average number of ordinary shares for the three months ended 30June 2007 of 29,420,437 (three months ended 30 June 2006: 25,919,221) - Weighted average number of ordinary shares for the six months ended 30June 2007 of 29,416,662 six months ended 30 June 2006: 25,919,221; year ended 31December 2006: 26,887,700) 18. Gearing ratio Gearing is defined as Group net debt (total debt less cash and short-termdeposits) as a proportion of total consolidated equity attributable to theequity holders of the parent. "Total debt" is defined as actual current andnon-current loan balances together with any overdrafts owed to lenders andexcludes any unamortised finance costs or adjustments to apply the effectiveinterest rate method. Equity is as set out in the consolidated balance sheet.Gearing is computed as follows: As at As at As at 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited £m £m £m"Total debt" 1,455.3 1,191.8 1,279.2Less: Cash and short-term deposits (75.7) (86.6) (77.3)Net debt 1,379.6 1,105.2 1,201.9 Equity 744.9 607.0 712.2 Gearing ratio 185% 182% 169% 19. Net assets per share As at As at As at 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited AuditedBasic net assets per share £25.32 £22.90 £24.21Diluted net assets per share £25.32 £22.89 £24.19 The calculation of basic and diluted net asset value per share figures is basedon the following: - Consolidated net assets (equity) attributable to the equity holders ofthe Company as at 30 June 2007 of £744.9 million (30 June 2006: net assets of£607.0million; 31 December 2006: net assets of £712.2 million) - Number of ordinary shares for basic net asset value per share 29,424,036(30 June 2006: 26,503,917; 31 December 2006: 29,416,128) - Number of ordinary shares for diluted net asset value per share29,424,036 (30 June 2006: 26,514,720; 31 December 2006: 29,436,128) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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