20th Sep 2005 07:04
Mapeley Limited20 September 2005 PRESS RELEASENot for release before 0700, 20 September 2005 Mapeley Limited INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 Mapeley Limited (LSE:MAY), a market leader in propertyinvestment and outsourcing, announces today its interim results for the halfyear ended 30 June 2005. Highlights: • Initial public share offer completed in June 2005, raising net proceeds of £133.1 million • Revenue up 2.4% to £161.0 million (30 June 2004: £157.2 million) • EBITDA increased by 15% to £32.7 million (30 June 2004: £28.4 million) • Funds from operations for the six month period to 30 June 2005 were £9.3 million • Interim dividends of £9.6 million for the half year to 30 June 2005 equating to 60 pence per share, based on the weighted average number of shares in issue for the period, reflecting Mapeley's policy of paying stable and growing dividends • Total assets stand at £1,455.9 million • Investment property acquisitions in the period of £207.7 million with an average yield of 7.4% • Completion of £630.0 million debt refinancing resulting in a reduction of 1.3% interest rate payable per annum and one-off exceptional charge of £72.7 million Conference callMapeley's management will host an earnings conference call at 3:00 P.M.London time (10:00 A.M. New York time) on Tuesday 20 September 2005. All interested parties are welcome to participate on the live call. You can access the conference call by dialing +1-706-643-0550 (from outside of the U.S.) or +1-866-323-3742 (from within the U.S.) ten minutes prior to the scheduled start of the call; please reference "Mapeley Half Year Earnings." A replay of the conference call will be available until 04:59 A.M. London time (11:59 P.M. New York time) on Wednesday, 28 September 2005 by dialing +1-706-645-9291 (from outside of the U.S.) or +1-800-642-1687 (from within the U.S.); please reference access code "9623442." For further information, please contact:Tim McCallMJ2 Business CommunicationsTel: +44(0)20 7491 7776 / +44(0)7753 561862Email: [email protected] / [email protected] Introduction Mapeley is a market leader in property investment and outsourcing, owning £1.3billion of real estate in the UK. Mapeley owns and manages a diverse portfolioof over 1,700 properties, primarily let to strong credit quality tenants whomthe Company believes will remain in occupation on a long-term basis. It seekstenants with large property portfolio management needs such as central and localgovernment and large corporate organisations. The Company's registered office is located at Suite 6, Borough House, Rue dePre, St Peter Port, Guernsey GY1 3RH. Chairman's StatementHalf Year Review Mapeley Limited (LSE:MAY) reported EBITDA for the first half of 2005 of £32.7million and funds from operations (FFO) of £9.3 million. As of 30 June 2005, thetotal book value of the Company's stockholders' equity was £423.9 million or£18.87 per share. Mapeley successfully completed its initial public offering on 21 June 2005raising net capital of £133.1 million. Mapeley's core business strategy is toown and manage a diverse portfolio of commercial properties throughout the UK,primarily let to strong credit quality tenants on a long-term basis. Ourobjective is simple - pay a stable and growing quarterly dividend toshareholders by increasing earnings from our existing portfolio and by acquiringnew assets with yields higher than our cost of funds. In the first half of the year, performance from our two major outsourcingcontracts was in line with expectations. We continue to provide a range ofproperty related services to our main clients, HM Revenue & Custom's ("HMRC")and Abbey National plc ("Abbey"), and work closely with them regarding theiraccommodation requirements. On the new investment property side, Mapeley acquired 18 office properties at anaggregate cost of £207.7 million and an average yield of 7.4 per cent. Many ofthese investment opportunities were sourced through direct approaches to owners,rather than through the competitive bidding that we are generally witnessing inthe UK commercial real estate market. We are encouraged by the pipeline of additional investment opportunitiescurrently under review and by the continued progress we have made in developingour proprietary database of target assets. We believe that this database willcontinue to prove to be a valuable tool in maintaining Mapeley's competitiveadvantage in the market where we believe continuing capital flows will drivefurther yield compression during 2005. In addition, Mapeley continues to seek further real estate outsourcingtransactions and is currently focused on a number of opportunities in both thepublic and private sector. We continue to believe that Mapeley's operationalplatform allows us to be well positioned to take advantage of theseopportunities. Dividend Mapeley intends to pay quarterly dividends to its shareholders. As anticipatedfor the six months ended 30 June 2005, we have announced dividends of £9.6 million or 60 pence per share based on the weighted average number of shares in issue for the period. Investment Activity The 18 office properties we acquired are 98 per cent let under fully repairing and insuring leases to central and local government and major corporate tenants. The average remaining lease term is 7 years and 96 per cent of the income is derived from government and major corporate tenants. Mapeley is currently on target to invest a total of £400 million in the currentyear to 31 December 2005. Financing Consistent with our strategy, Mapeley successfully refinanced debt of £630.0million, resulting in a reduction of the interest rate payable per annum by1.3%; the associated costs have been recognised as a one-off exceptional chargein the period. In addition, Mapeley also put in place a 3 year, £200 millionrevolving acquisition facility and a £25 million working capital facility. Theserefinancings have resulted in a decrease in our future average cost of debt andhave created a flexible funding structure to support our growth strategy. Summary Our positive interim results confirm the strength of our business plan and itssuccessful execution. We believe in our strategy and our ability to providestable dividends and transparency to our shareholders. With our solid investmentpipeline, we are well-positioned to achieve long-term growth and look forward toour future as a public company. Wesley R EdensChairman Operating Review Group restructuring Mapeley Limited (the "Company") was incorporated in Guernsey, Channel Islands on26 April 2005. On 2 June 2005, the Company acquired the total issued sharecapital of Mapeley U.K. Co. Limited ("MUKCO") from Mapeley Holding CompanyLimited in a share for share exchange. This restructuring has been accounted forusing the principles of merger accounting and hence the comparative figurespresented for the consolidated Mapeley Limited group ("Mapeley" or the "Group")have been prepared as if the Company had always been the holding company for theGroup. Initial public offering On 21 June 2005, the Company's shares were admitted to the Official List on theLondon Stock Exchange under the symbol MAY. The Company was originally listed atan offer price of £23 per share and raised £133.1 million net proceeds. Share performance dataClosing share price on 30 June 2005 £26.87 per shareDividend declared for the six months ended 30 June 2005 (Note 1) £0.60 per share Property investments During the first six months of the year, the Group successfully pursued itsstrategy of acquiring individual properties or portfolios of office properties.The Group focused on purchasing property primarily with strong credit qualitytenants, who are expected to stay in the properties over the long-term. During the period, the Group has purchased investment property at a cost of£207.7 million with an average initial yield of 7.4% (including the cost ofpurchase) and has identified a significant target pool of properties it mayconsider acquiring in the future. Debt finance The Group's financial strategy is to maintain an optimal gearing ratio (Note 2)to ensure that shareholders benefit from maximum leveraged returns. At 30 June2005, the Group had a gearing ratio of 170.1% (31 December 2004: 168.0%). Aswell as having the right level of debt in the business, it is also important toensure that the Group has flexible debt that can support the business strategyon a long term basis. During the first half of the year, the Group continued to seek attractiveinvestment property to add to its property portfolio. Initially theseacquisitions were funded by a 3 year, £200.0 million acquisition facility. Afterthe Company's listing, this acquisition facility was replaced by a 10 year,£175.0 million investment facility at LIBOR plus 75 basis points. At 30 June2005, £159.0 million was drawn down and LIBOR was fixed at an average rate of4.96% per annum through an interest rate swap. The Group also refinanced parts of its existing borrowings, replacing an 18year, £465.0 million loan, with a 7 year, £455.0 million loan. This new loanresulted in a reduction in the rate of interest payable, which fell from anaverage of 6.80% per annum to 5.45% per annum (allowing the Group to avoidaggregate payments of some £102.0 million otherwise expected to have beenpayable over the 15 years that remained under the former swap agreement). Therefinancing resulted in a one-off exceptional charge of £72.7 million including£63.9 million to close interest rate swaps. To support the continued acquisition of investment property, the Group has alsoput in place an additional 3 year, £200.0 million revolving acquisitionfacility. In addition to the above, the Group has procured a £25.0 millionworking capital facility. At 30 June 2005, neither of these facilities had beendrawn down. Note 1: Per share calculations are based on the weighted average number ofordinary shares in issue for the six months ended 30 June 2005 of 15,809,890 shares (30 June 2004: 15,100,000 shares).Note 2: Gearing is defined as net debt (total debt less cash and short termdeposits) as a proportion of total equity. Key Financial Information Income Statement Six months Six months ended ended 30 June 2005 30 June 2004 £million £million Revenue 161.0 157.2Property operating expenses (126.3) (128.3)Administrative and other expenses (9.3) (8.0)EBITDA 32.7 28.4Finance costs (98.9) (24.4)(Loss) / profit for the period (76.3) 33.5Funds from operations (FFO) 9.3 11.9Interim dividend declared 9.6 -Dividend per share (pence /share) (Note 1) 60p -FFO per share (pence / share)(Note 1) 60p 80p Balance Sheet As at 30 June As at 31 2005 December 2004 £million £million Non-current assets 1,306.3 1,104.6Bank loans before loan finance costs and amortisation 792.4 670.0Net assets 423.9 354.2Gearing (Note 2) 170.1% 168.0% Financial Review Revenue Group turnover for the six months ended 30 June 2005 was £161.0 million, in linewith the Board's expectations. Compared to the same period last year this was anincrease of 2.4%. The increase was largely due to the following factors: rentalincome of £3.9 million from the investment property the Group has acquired since30 June 2004, uplifts in income of £3.4 million in accordance with the terms ofthe Group's outsourcing contracts, offset by a reduction in third party rentalincome of £2.3 million (reflecting a one-off service charge receipt of £2.1million in the six months ended 30 June 2004) and a fall in other income of £1.2million. Property operating expenses The property operating expenses of the Group in the six months ended 30 June2005 were £126.3 million compared to £128.3 million for the same period in theprevious year, a decrease of 1.6%.The net decrease was primarily due to the following factors: a £1.6 millionreduction in rental charges (comprising £0.7 million of asset managementreceipts and £0.9 million of savings from lease renewals and expiries), a fallin lifecycle activity reducing costs by approximately £1.0 million (asoutsourcing contracts are now entering a more stable phase), and an increase of£0.6 million in facilities management costs due to indexation in the facilitiesmanagement providers' contracts. Administrative and other expenses Administrative and other expenses were £9.3 million for the six months ended 30June 2005 compared to £8.0 million for the same period in the prior year. Thenet increase of £1.3 million was largely driven by an increase in staff costs of£0.7 million and a share benefit expense of £0.4 million for shares offered toemployees and non-executive directors under the Group's Employee Share Plan. Note 1: Per share calculations are based on the weighted average number ofordinary shares in issue for the six months ended30 June 2005 of 15,809,890 shares (30 June 2004: 15,100,000 shares).Note 2: Gearing is defined as net debt (total debt less cash and short termdeposits) as a proportion of total equity. Financial Review (continued) EBITDA EBITDA (Note 3) was £32.7 million for the six months ended 30 June 2005,compared to £28.4 million for the six months ended 30 June 2004. The netincrease of £4.3 million was mainly due to the additional revenue generated bythe investment property portfolio which the Group acquired principally duringthe six month period ended 30 June 2005. Six months Six months ended ended 30 June 2005 30 June 2004 Unaudited Unaudited £ million £ million Profit before tax and finance costs 20.3 56.6Add back: Depreciation and amortisation 6.7 7.4Loss on disposal of subsidiaries 0.6 -Net valuation deficit / (surplus) on investmentproperties 5.1 (35.6) ----------- ------------EBITDA 32.7 28.4 ----------- ------------ Finance costs Finance costs increased in the six months ended 30 June 2005 by £74.5 million to£98.9 million compared with £24.4 million in the six months ended 30 June 2004.However, excluding the one-off costs of refinancing one of the Group's principaldebt facilities, finance costs rose by only £2.9 million, largely due to theacquisition of new investment property. The one-off refinancing costs comprisedswap breakage costs of £63.9 million and the expensing of related unamortisedloan issue costs of £5.1 million. The refinancing resulted in a reduction in therate of interest payable, which fell from an average of 6.80% per annum to 5.45%per annum (realising an annualised cost saving of approximately £6.8 million). During the period a 10 year, £175.0 million investment facility was arranged tofinance the acquisition of investment property and replaced the existing 2 year,£200.0 million acquisition loan facility. Consequently £1.7 million was chargedto the income statement in the six months ended 30 June 2005 to accelerate thewrite off of the original cost of raising the finance. The debt finance costsfor the investment property portfolio increased by £3.7 million due to theincreased borrowings required for new investments. Funds from operations (FFO) FFO is a management measure used to demonstrate the underlying operatingperformance of real estate companies because it provides investors withinformation regarding the Group's ability to service debt and make capitalexpenditure. FFO (Note 4) does not represent cash generated from operatingactivities in accordance with IFRS, therefore should not be considered analternative to cash flow as a measure of liquidity, and is not necessarilyindicative of cash funds available. This calculation of FFO may be differentfrom the calculation used by other companies and, therefore, comparability maybe limited. Note 3: EBITDA is defined by the Group as profit before tax; finance costs;depreciation and amortization; and valuation surplus / deficit on investment andnon-investment property.Note 4: The Group defines FFO as net earnings after tax, capital expenditure anddebt service but excludes depreciation, amortisation and movement in provisions. Funds from operations decreased by £2.6 million to £9.3 million in the sixmonths ended 30 June 2005 from £11.9 million for the same period last year. Thiswas principally attributable to a decrease in asset management receipts of £9.7million, in line with the Board's expectations. This was offset by: • a reduction in 2005 life cycle expenditure; • an increase to EBITDA of £4.3 million; and • a £2.0 million increase in net finance costs driven largely by the acquisition of new investment property. Reconciliation from EBITDA to FFO Six months Six months ended ended 30 June 2005 30 June 2004 Unaudited Unaudited £million £million EBITDA 32.7 28.4Net finance costs (Note 5) (22.7) (20.7)Onerous lease provision (3.1) (2.4)Life cycle expenditure (Note 6) (3.3) (8.4)Asset management receipts (Note 7) 5.3 15.0Employee shares 0.4 - ------------ ------------FFO 9.3 11.9 ------------ ------------ Non-current assetsNon-current assets comprising investment property, property plant and equipmentand premiums paid for operating leases increased by £201.7 million between 31December 2004 and 30 June 2005. Investment property increased to £752.0 million from £549.3 million. Thisreflects a revaluation surplus on certain freehold property and the acquisitionof new investment property in the period to 30 June 2005 of £207.7 million,offset by a write down of the acquisition costs incurred on those new propertiesacquired in 2005. Over the same period, property, plant and equipment increased by £1.2 million to£514.1 million at 30 June 2005, principally due to the revaluation of certain ofthe Group's freehold and long leasehold properties. Capitalised premiums paid for operating leases decreased by £2.2 million from£42.4 million at 30 June 2004 to £40.2 million at 30 June 2005 as a result ofamortisation. Note 5: Net finance costs are stated after eliminating the effect ofamortisation of loan finance fees, loss on interest rate swap,loan termination costs and unwinding of discounts on provisions, and include finance income.Note 6: Life cycle expenditure is the total cash expenditure incurred in theperiod in addition to the amount already recognised in EBITDA.Note 7: Asset management receipts are the total cash receipts in the period inaddition to the amount already recognised in EBITDA. Principal differences between UK GAAP and IFRS UK GAAP / IFRS differencesIn common with all companies listed on stock exchanges in the European Union,Mapeley is required to prepare interim and annual financial statements inaccordance with IFRS. The Group issued the 2004 financial statements for itsformer holding company, MUKCO, restated under IFRS on 16 June 2005. That report(which, under the principles of merger accounting, forms the basis of thecomparatives in these interim financial statements), together withreconciliations between the net assets of the Group prepared in accordance withIFRS and UK GAAP ("Generally Accepted Accounting Principles in the UnitedKingdom"), and explanations on the differences, are set out in the financialstatements and special purpose IFRS conversion accounts for the year ended 31December 2004 which are available on the Group's website at www.mapeley.com. There are two major differences in the net asset value ("NAV") under UK GAAPwhen compared to IFRS at 30 June 2005. The first of these differences relates to the treatment of asset managementreceipts. Under IFRS, asset management receipts are deferred and released as acredit to operating costs over the lease term, even if the payments are not madeon such a basis. Under UK GAAP, the income, in most cases, is recognised overthe period when rentals are not at market rates, with the premiums beingrecognised immediately where market rents are already being paid and willcontinue to be periodically adjusted to market rates. The second of these differences relates to the reclassification of 3 longleasehold properties as operating leases under IFRS. The net effect of thisreclassification is to reduce the revaluation reserve, as the premium paid forthese operating leases is shown at cost under IFRS and not at market value asrequired under UK GAAP. Six months Six months ended ended 30 June 2005 30 June 2004 Unaudited Unaudited £million £million Principal differences between NAV prepared underIFRS and under UK GAAP Asset management receipts (spread over the lease length under IFRS) 56.4 43.33 long leasehold properties reclassifiedas operating leases under IFRS 17.3 17.7 Independent review report to Mapeley Limitedon the interim IFRS financial information for the six months ended 30 June 2005 Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2005 which comprises the Consolidated IncomeStatement, Consolidated Statement of Changes in Equity, Consolidated BalanceSheet, Consolidated Cash Flow Statement, and the related notes 1 to 13. 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. The next annual financial statements of the Group will be prepared in accordancewith those IFRSs adopted for use by the European Union. The accounting policies are consistent with those that the Directors intend touse in the next financial statements. 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 making enquiriesof Group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies have been applied. A review excludes audit proceduressuch as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an audit opinionon 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 2005. Ernst & Young LLP London19 September 2005 Consolidated income statementFor the six months ended 30 June 2005 Six months Six months Year ended ended ended 31 December Notes 30 June 2005 30 June 2004 2004 Unaudited Unaudited Audited £000 £000 £000 Revenue 3 160,963 157,200 314,093Property operatingexpenses (126,313) (128,249) (260,222) ---------- ---------- ----------- Net contract, rental& related income 34,650 28,951 53,871 Net valuation(deficit) / surpluson non-investmentproperty (70) - 4,645Net valuation(deficit) / surpluson investmentproperty (5,054) 35,606 48,072Profit on disposal ofinvestment property - 6 204Administrative andother expenses (9,267) (7,990) (17,601) ---------- ---------- ----------- Profit before tax andfinance costs 20,259 56,573 89,191 Finance costs 7 (98,859) (24,410) (49,393)Finance income 2,296 1,321 3,496 ---------- ---------- ----------- Loss / profit beforetax (76,304) 33,484 43,294 Income tax expense - UK 8 - - -- Overseas - - - ---------- ---------- -----------(Loss) / profit forthe periodattributable toshareholders (76,304) 33,484 43,294 ========== ========== =========== Dividends- paid 6 8,890 - -- proposed 748 - - ========== ========== =========== (Loss) / earnings per share £/share £/share £/share restated- basic 4 (4.8) 2.2 2.9- diluted (4.8) 2.2 2.8 ========== ========== =========== Consolidated statement of changes in equityat 30 June 2004 and 31 December 2004 Issued capital Share premium Net unrealised Retained Asset Other reserves Total equity losses earnings revaluation £000 £000 £000 £000 £000 £000 £000 At 31 December2003 (Audited) - - (56,023) (50,950) 277,247 119,437 289,711 Depreciationwritten backon revaluation ofnon-investmentproperty - - - - 3,207 - 3,207Transfer ofexcessrevaluation Depreciation - - - 2,867 (2,867) - -Net gain oncash flowhedges - - 24,979 - - - 24,979 ------ -------- ------- -------- -------- ------- --------Total profitfor the period recogniseddirectly inequity - - 24,979 2,867 340 - 28,186Profit for theperiod - - - 33,484 - - 33,484 ------ -------- ------- -------- -------- ------- --------Total incomefor the period - - 24,979 36,351 340 - 61,670 ------ -------- ------- -------- -------- ------- --------At 30 June2004(Unaudited) - - (31,044) (14,599) 277,587 119,437 351,381 ------ -------- ------- -------- -------- ------- -------- Revaluationsurplus - - - - 25,413 - 25,413Impairmentreversal - - - - (4,645) - (4,645)Depreciationwritten backon revaluation ofnon-investmentproperty - - - - 3,437 - 3,437Transfer ofexcessrevaluation Depreciation - - - 2,878 (2,878) - -Net loss oncash flowhedges - - (32,579) - - - (32,579)Total (loss) /profit for theperiod recogniseddirectly inequity - - (32,579) 2,878 21,327 - (8,374)Profit for theperiod - - - 9,810 - - 9,810 ------ -------- ------- -------- -------- ------- --------Total(expense) /income for the Period - - (32,579) 12,688 21,327 - 1,436Surpluscontributed inthe period - - - - - 280 280Contributedsurplus repaid in the period - - - - - (146) (146)Investment inown shares - - - - - 1,237 1,237 ------ -------- ------- -------- -------- ------- --------At 31 December2004 (Audited) - - (63,623) (1,911) 298,914 120,808 354,188 ====== ======== ======= ======== ======== ======= ======== Consolidated statement of changes in equityat 30 June 2005 Issued capital Share premium Net unrealised Retained Asset Other reserves Total equity losses earnings revaluation £000 £000 £000 £000 £000 £000 £000 ------ ------- ------- ------- -------- ------- --------At 31 December2004 (Audited) - - (63,623) (1,911) 298,914 120,808 354,188 Revaluationsurplus - - - - 2,096 - 2,096Impairment offixed assets - - - - 70 - 70Depreciationwritten backon revaluation ofnon-investmentproperty - - - - 3,360 - 3,360Transfer ofexcessrevaluation Depreciation - - - 3,018 (3,018) - -Net gains oncash flowhedges - - 36,163 - - - 36,163 ------ ------- ------- ------- -------- ------- --------Total incomefor the period recogniseddirectly inequity - - 36,163 3,018 2,508 - 41,689Loss for theperiod - - - (76,304) - - (76,304) ------ ------- ------- ------- -------- ------- --------Total income /(expense) forthe Period - - 36,163 (73,286) 2,508 - (34,615)Capitalisedshareholderloans - - - - - 8,086 8,086Repaidcontributedsurplus - - - - - (29,000) (29,000)Issue ofordinaryshares on IPO - 140,800 - - - - 140,800Cost relatedto issue of ordinary shareson IPO - (7,658) - - - - (7,658)Issue ofshares to Non-executiveDirectors - - - - - 345 345Issue ofshares toemployees under theEmployee SharePlan - - - - - 71 71Write back ofloss ondisposal of Subsidiaries - - - 599 - - 599Equitydividends - - - (8,890) - - (8,890) ------ ------- ------- ------- -------- ------- --------At 30 June2005(Unaudited) - 133,142 (27,460) (83,488) 301,422 100,310 423,926 ====== ======= ======= ======= ======== ======= ======== Consolidated balance sheet - at 30 June 2005 30 June 2005 30 June 2004 31 December 2004 Unaudited Unaudited Audited Notes £000 £000 £000ASSETSNon-current assetsProperty, plant andequipment 9 514,131 488,466 512,923Investment property 10 752,018 513,422 549,324Premiums for operatingleases 40,174 44,552 42,391 --------- --------- -----------Total non-current assets 1,306,323 1,046,440 1,104,638 --------- --------- -----------Current assetsInventories 19,680 10,508 17,273Trade and otherreceivables 58,438 88,225 104,872Cash and short-term deposits- in controlled accounts 19,817 54,694 57,438- for operational purposes 51,606 32,930 17,406 --------- --------- -----------Total current assets 149,541 186,357 196,989 --------- --------- ----------- TOTAL ASSETS 1,455,864 1,232,797 1,301,627 ========= ========= =========== EQUITY AND LIABILITIESEquity attributable to equityholders of MapeleyLimitedShare capital - - -Share premium 133,142 - -Net unrealised gainsreserve (27,460) (31,044) (63,623)Retained earnings (83,488) (14,599) (1,911)Asset revaluation reserve- Property, plant &equipment 301,422 277,587 298,914Other reserves 100,310 119,437 120,808 --------- --------- -----------Total equity 423,926 351,381 354,188 --------- --------- -----------Non-current liabilitiesInterest-bearing loans andborrowings 11 785,223 644,460 668,411Provisions 36,740 40,277 38,852Deferred asset managementreceipts 68,847 57,799 64,016Current liabilitiesTrade and other payables 106,997 100,303 104,965Interest-bearing loans andborrowings 11 2,128 4,007 3,472Interest rate swap 27,460 31,044 63,652Deferred asset managementreceipts 4,543 3,526 4,071 --------- --------- -----------Total liabilities 1,031,938 881,416 947,439 --------- --------- ----------- TOTAL EQUITY ANDLIABILITIES 1,455,864 1,232,797 1,301,627 ========= ========= =========== Approved by the Board of Directors on 19 September 2005 and signed on its behalfby: J P Hopkins, Director Consolidated cash flow statementfor the six months ended 30 June 2005 Six months Six months Year ended ended ended 30 June 2005 30 June 2004 31 December 2004 Unaudited Unaudited Audited £000 £000 £000 Cash flows from operating activitiesProfit before tax and financecost 20,259 56,573 89,191Adjustment for:Fair value adjustments onnon-investment property 70 - (4,645)Fair value adjustments oninvestment property 5,054 (35,606) (48,072)Depreciation and amortisation 6,739 7,404 14,712Profit on disposal ofinvestment property - - (204)Loss on disposal ofsubsidiaries 599 - -Share benefit expense 416 - - ---------- ---------- ----------Operating profit beforechanges in working capital 33,137 28,371 50,982Increase in inventory (2,407) (7,815) (14,580)Decrease / (increase) intrade & other receivables 17,432 (4,681) (21,328)Increase in trade & otherpayables 8,694 13,477 18,601Decrease in provisions (3,102) (2,354) (5,830)Increase in deferred assetmanagement receipts 5,303 14,983 21,745 ---------- ---------- ----------Cash generated fromoperations 59,057 41,981 49,590Interest paid (31,833) (22,402) (44,626)Interest received 2,296 1,320 3,496Costs of raising finance (6,275) - (1,015) ---------- ---------- ----------Net cash flows from operatingactivities 23,245 20,899 7,445 ---------- ---------- ---------- Cash flows from investing activitiesProceeds from disposal ofinvestment property - 188 1,193Purchase of property, plantand equipment (274) (175) (817)Purchase of investmentproperty (207,748) (54) (24,406) ---------- ---------- ----------Net cash flows used ininvesting activities (208,022) (41) (24,030) ---------- ---------- ---------- Cash flows from financing activitiesPayment of finance leaseliabilities (87) (80) (159)Receipt of shareholder loans 675 1,000 1,000Swap and loan terminationfees (65,902) - -Receipt of new bank loans 614,095 - 25,694Repayment of bank loans (491,677) (921) (1,873)Receipt of capitalcontribution 29,000 - -Repayment of contributedsurplus (29,000) - -Proceeds of issue of ordinaryshares 140,800 - -Cost related to issue ofordinary shares on IPO (7,658) - -Dividend paid to equityholders (8,890) - - ---------- ---------- ----------Net cash flows from financingactivities 181,356 (1) 24,662 ---------- ---------- ---------- Net (decrease) / increase incash and cash equivalents (3,421) 20,857 8,077Cash and cash equivalents atstart of period 74,844 66,767 66,767 ---------- ---------- ----------Cash and cash equivalents atend of period 71,423 87,624 74,844 ========== ========== ========== Notes to the unaudited interim resultsat 30 June 2005 1. General Information Mapeley Limited was registered in Guernsey on 26 April 2005 under the provisionsof the Companies (Guernsey) Law, 1994. On 2 June 2005, the Company issued16,037,100 shares to the shareholders of MUKCO to acquire its issued sharecapital. On 21 June 2005, through its initial public offering, the Companyissued 6,121,739 ordinary shares to investors at a price of £23 each. At thesame time, the Company issued 291,308 ordinary shares under the share scheme foremployees and 5,000 ordinary shares each to J W Harris, R W Carey and C N KParkinson in their capacity as Non-executive Directors of the Company. Theshares issued to the employee share scheme and to the Non-executive Directorswere issued for £nil consideration. The consolidated financial statements of the Group for the six months ended 30June 2005 comprise the Company and its subsidiaries. The address of theCompany's registered office and the principal activities of the Group are setout in the Introduction. The consolidated interim financial statements were authorised for issue on 19September 2005. 2. Summary of significant accounting policies The consolidated financial statements of Mapeley Limited have been prepared inaccordance with International Financial Reporting Standards ("IFRS"). Inpreparing interim financial statements, the accounting principles appliedreflect the amendments to IAS and the adoption of the new IFRS which becameeffective from 1 January 2005. The interim statements also reflect those IFRSand International Financial Reporting Interpretations Committee ("IFRIC")determinations which the Directors expect to be in force at the time the Companyprepares its financial statements for the year ending 31 December 2005. Otherthan in respect of these changes, explained further below, the interim financialstatements have been prepared under the same accounting principles and methodsof computation as in the special purpose conversion financial statementsprepared under IFRS for the year ended 31 December 2004 from which thecomparative figures for the year ended 31 December 2004 have been extracted. IFRS 2 Share-based Payment IFRS 2 Share-based Payment was effective from 1 January 2005 and has beenapplied to the preparation of these financial statements. It requires an expenseto be recognised where the Group buys goods or services in exchange for sharesor rights over shares ("equity-settled transactions"), or in exchange for otherassets equivalent in value to a given number of shares or rights over shares("cash-settled transactions"). The main impact of IFRS 2 on the Group is theexpensing of employees and directors' deferred shares and other share basedincentives. Anticipated IFRIC determination on straight line recognition of rental incomeunder IAS 17 The Directors anticipate that at the time the Group draws up its financialstatements for the year ending 31 December 2005, IFRIC will have issued apronouncement clarifying the treatment of stepped rental revenue under IAS 17.Certain of the Group's outsourcing contracts provide for pre-determined upliftsin rental income. The components of rents not contingent on future events, havebeen recognised on a straight line basis over the life of the contracts. Othercomponents of rental income are recognised on a receivable basis. Certain comparative figures have been adjusted or extended to conform to thepresentation adopted in respect of the six months ended 30 June 2005. Basis of Preparation The consolidated financial statements have been prepared on the historical costbasis, except for investment properties, land and buildings, derivativefinancial instruments and available for sale financial assets that have beenmeasured at fair value. Costs related to the issue of ordinary shares arecharged against share premium. Basis of Consolidation The consolidated financial statements comprise the financial statements ofMapeley Limited and its subsidiaries for the six months ended 30 June 2005.Subsidiaries are consolidated from the date on which control is transferred tothe Group and cease to be consolidated from the date on which control istransferred from the Group. The restructuring of the Group during the period involved a share for shareexchange, which introduced a new holding company, Mapeley Limited. The relativerights of the former shareholders of MUKCO were not altered and thisrestructuring has been accounted for using the merger method of accounting.Although Mapeley Limited was only formed on 26 April 2005, the accountinginformation has been prepared as if the Group had always been in existence inits current form and prior period comparatives presented accordingly. Allintra-group transactions are eliminated as part of the consolidation process. Revenue Revenue represents amounts receivable in respect of contractual income, propertyrental income and other property and trading activity earned in the normalcourse of business, net of VAT and other sales-related taxes. Gross contract and rental income The Group's gross contract and rental income comprises income earned by itsproperty outsourcing businesses, rentals and service charges received fromtenants. In accordance with the guidance in IFRIC4 Determining whether an arrangementcontains a lease, contracts entered into under the UK government's privatefinance initiative ("PFI") scheme are unbundled, either at inception or on areassessment of the arrangement. Income from the embedded leases isdistinguished from income from the other contract elements. Amounts receivableunder PFI contracts in respect of the provision of property to customers aretreated in accordance with the provisions of IAS 17 Leases (with the minimumlease payments being spread on a straight line basis over the life of thelease). However, the cost and revenue profiles of the portion of the contractconcerned with the provision of property related services are treated as arisingfrom service contracts in accordance with IAS 18 Revenue. Income from service contracts is recognised and accounted for according to thestage reached in the contract by reference to the value of work completed. Anappropriate estimate of the profit attributable to the work undertaken isrecognised once the outcome of the contract can be assessed with reasonablecertainty. The costs of service contracts not yet taken to the income statement,less any foreseeable losses and payments on account, are shown in work inprogress. Incentives for lessees to enter into lease agreements are spread evenly over thenon-cancellable period of the lease, even if the payments are not made on such abasis. In addition to service charges, as part of the property outsourcing contract,the Group is also responsible for procuring certain additional goods andservices supplied to its customers. The direct costs of supplying these goodsare invoiced to the Group and recharged to customers in full. As the Groupreceives a pre-determined fee for managing such activity on behalf of itscustomers and the risks in relation to the provisions of these goods andservices are primarily borne by the Group's customers, revenue for this activityrecorded by the Group comprises the net income earned by the Group from thisactivity in each financial reporting period. Property trading and other income Income earned from property trading consists of proceeds from the sale oftrading properties. Sales are recognised on completion of contracts. Rentals payable under operating leases Rentals under operating leases are charged on a straight-line basis over thelease term, even if the payments are not made on such a basis. Incentives givenby lessors to enter into lease agreements, including asset management receipts,are spread evenly over the lease term as a reduction of rental expense, even ifthe payments are not made on such a basis. Investment property Freehold property held to earn rent or for capital appreciation or both isclassified as investment property in accordance with IAS 40 Investment Property.Property held under finance leases for similar purposes is also classified asinvestment property.Investment property is held at fair value. The surplus or deficit on revaluationis reported in the income statement. No depreciation is provided in respect ofinvestment property. Non-investment property Where the Group provides significant levels of ancillary services to theoccupiers of its property, this property is not classified as investmentproperty. Such freehold property and property held under finance leases arerevalued annually and depreciated in accordance with IAS 16 Property, Plant andEquipment. Surpluses or deficits on individual properties are transferred to therevaluation reserve, except that deficits below historical cost are taken to theincome statement. Premiums for operating leases Premiums paid for operating leases are stated at cost less amortisation and anyadditional provision for impairment which may be required. Depreciation and amortisation Depreciation is provided at rates calculated to write off the cost or valuation,less the estimated residual value, of each asset on a straight line basis overits expected useful life. • Buildings are classified according to condition and date of construction, and are depreciated over periods between 20 and 50 years according to the classification. Buildings held under finance leases are depreciated over the term of the lease if shorter. • Premiums paid for operating leases are amortised over the remaining lease term. • Plant and equipment, excluding information systems equipment, are depreciated over four years. • Information systems equipment, including computer equipment, major business systems software and telecommunications apparatus is depreciated over two to four years. • No depreciation charge is applied to land. Trading property Property, which is held with the intention of being sold, is included ininventories at the lower of cost and net realisable value. Onerous leases Provision is made for vacant leasehold properties or those sublet at a levelwhich renders the properties loss-making over the length of the lease. The cashflows for each lease are discounted back to the balance sheet date representingthe Group's best estimate of the impact of the time value of money and the risksinherent in its obligations. Any increase or decrease in the provision is takento the income statement each year. The unwinding of the discount in theprovision is charged to the income statement each year within finance costs. Thebasis of the provision and amounts provided are reviewed bi-annually. Share-based payments The cost of equity-settled transactions with employees is measured by referenceto the fair value at the date at which shares are granted. The cost ofequity-settled transactions is recognised (together with a correspondingreduction in retained earnings) over the period in which the shares vest. Thecumulative expense recognised for equity-settled transactions at each reportingdate until the vesting date reflects the extent to which the vesting periodshave expired. Shares issued to directors and employees with no vesting period are charged inthe income statement at the date of issue at their fair value at that date. Financial instruments Interest-bearing loans and borrowings All loans and borrowings are initially recognised at cost, being the fair valueof the consideration received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings aresubsequently measured at amortised cost using the effective interest method.Amortised cost is calculated by taking into account any issue costs, and anydiscount or premium on settlement. Borrowing costs are recognised in the income statement using the effectiveinterest rate method. Gains and losses are recognised in the income statement when the liabilities arederecognised or impaired, as well as through the amortisation process. Derivative financial instruments The Group uses derivative financial instruments such as interest rate swaps tohedge its risks associated with interest rate fluctuations. Such derivativefinancial instruments are stated at fair value. Fair value for a swap is market value, as determined by a break cost quote by anexperienced, independent broker, which is estimated by applying current yieldsto anticipated future cash flows. Notes to the unaudited interim resultsat 30 June 2005 For the purpose of hedge accounting, interest rate swaps are designated as cashflow hedges where they hedge exposure to variability in cash flows that iseither attributable to a particular risk associated with a recognised asset orliability or a forecast transaction. For derivatives that do not qualify for hedge accounting, any gains or lossesarising from changes in fair value are taken directly to the income statementfor the year. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated or exercised, or no longer qualifies for hedge accounting. At thatpoint in time, any cumulative gain or loss on the hedging instrument recognisedin equity is kept in equity until the forecast transaction occurs. If a hedgedtransaction is no longer expected to occur, the net cumulative gain or lossrecognised in equity is transferred to the income statement for the year. Taxation The Company is a limited company registered in Guernsey, Channel Islands and isnot subject to local taxation. Certain Group undertakings are subject to foreigntaxes in respect of foreign source income, including UK income tax on rentalincome within UK Group undertakings. Deferred taxation Deferred income tax is provided, using the liability method, on all temporarydifferences at the balance sheet date between the tax bases of assets andliabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporarydifferences. Deferred income tax assets are recognised for all deductible temporarydifferences, carry-forward of unused tax assets and unused tax losses, to theextent that it is probable that taxable profit will be available against whichthe deductible temporary differences, and the carry-forward of unused tax assetsand unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balancesheet date and reduced to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the deferredincome tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates thatare expected to apply to the year when the asset is realised or the liability issettled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised inequity and not in the income statement. 3. Revenue and segmental information The Directors continue to keep under review the accounting polices andpresentation of the financial statements as required by IAS 8 Accountingpolicies, changes in accounting estimates and errors. The Directors have refinedthe definition of their business segments in accordance with the strategy ofacquiring outsourcing contracts and investment property as follows: Outsourcing contracts The property outsourcing contracts segment consists of activities arising fromthe sale and subsequent leaseback of HMRC and Abbey property portfolios. Themain characteristics of these arrangements are listed below: • long term contracts (both contracts run over a period of 20 years); • agreements are tailored in accordance with the client's accommodation requirements (from simple purchase and lease back to fully serviced accommodation); • the agreements allow HMRC and Abbey to exercise flexibility to vacate properties within defined parameters; and • the revenue earned is subject to annual uplifts. Property investments The Group has embarked on a successful strategy of acquiring individual officeproperties on a direct basis, rather than under outsourcing arrangements, andintends to acquire new assets that are accretive to earnings. The Group willfocus on purchasing property primarily with low credit risk tenants, who arelikely to stay in the properties long-term. These investment properties are letwith commercial lease arrangements and rents are subject to market reviews. Changes in the definition of segments resulted in the investment property fromthe Abbey property portfolio being included within the outsourcing contractssegment in the six months ended 30 June 2005. They were previously shown withinthe property investments segment. The effect of redefining business segments resulted in revenue derived from theoutsourcing contracts segment increasing by £93.0 million, segment resultincreasing by £80.3 million, segment assets increasing by £591.1 million andsegment liabilities increasing by £686.0 million, with a corresponding impact onthe property investment segment. Accordingly, segmental information presented in the financial statements inrespect of the year ended 31 December 2004 has been restated to ensure it iscomparable with the presentation of the current year. Six months ended 30 June 2005 (Unaudited)Business segments Investment Outsourcing Total property contracts operations £000 £000 £000Rental revenue 3,877 - 3,877Property trading andother revenue 139 1,958 2,097 ---------- ---------- --------- --------- Facility unitary charge - 101,995 101,995 Contractual rents - 40,051 40,051 Third party rents - 12,943 12,943 ---------- ---------- ---------Contractualrevenue - 154,989 154,989 Segment revenue 4,016 156,947 160,963Rents payable (4) (81,535) (81,539)Other direct property andcontract expenditure (Note 8) (169) (44,605) (44,774) ---------- ---------- ---------Net contract,rental & relatedrevenue 3,843 30,807 34,650Valuation deficit onnon-investment property - (70) (70)Net valuation deficit oninvestment property (5,047) (7) (5,054) ---------- ---------- --------- Segment result (1,204) 30,730 29,526 ========== ========== Unallocatedexpenses (9,267) ---------Profit from operationsbefore finance costs 20,259Net finance costs (96,563) ---------Loss for the period (76,304) ========= Assets and liabilitiesSegment assets 227,738 1,182,555 1,410,293 ========== ==========Unallocated assets 45,571 ---------Total assets 1,455,864 ========= Segment liabilities 4,061 211,287 215,348 ========== ==========Unallocated liabilities 816,590 ---------Total liabilities 1,031,938 =========Other segment informationDepreciation andamortisation - (6,254) (6,254)Expenditure onpurchase ofinvestment property 207,748 - 207,748 ========== ========== ========= Note 8: Other direct property and contract expenditure includes depreciation. Six months ended 30 June 2004 (Unaudited)Business segments Investment Outsourcing Total property contracts operations £000 £000 £000Rental revenue - - -Property trading andother revenue - 2,675 2,675 ---------- ----------- --------- Facility unitary charge - 99,814 99,814 Contractual rents - 39,505 39,505 Third party rents - 15,206 15,206 ---------- ----------- ---------Contractual revenue - 154,525 154,525 Segment revenue - 157,200 157,200Rents payable - (83,099) (83,099)Other direct property andcontract expenditure(Note 8) - (45,150) (45,150) ---------- ----------- ---------Net contract, rental &related revenue - 28,951 28,951Net valuation surplus on investment property - 35,606 35,606Profit on disposal ofinvestment property /fixed asset - 6 6 ---------- ----------- --------- Segment result - 64,563 64,563 ========== =========== Unallocated expenses (7,990) ---------Profit from operationsbefore finance costs 56,573Net finance costs (23,089) ---------Profit for theperiod 33,484 ========= Assets and liabilitiesSegment assets - - ========== ===========Unallocatedassets 1,232,797 ---------Total assets 1,232,797 ========= Segmentliabilities - 205,978 205,978 ========== ===========Unallocatedliabilities 675,438 ---------Totalliabilities 881,416 =========Other segment informationDepreciationandamortisation - (6,455) (6,455) ========== =========== ========= Note 8: Other direct property and contract expenditure includes depreciation. Year ended 31 December 2004 (Restated)Business segments Investment Outsourcing Total property contracts operations £000 £000 £000Rental revenue 182 - 182Propertytrading andother revenue - 3,950 3,950 --------- ---------- --------- Facility unitary charge - 201,512 201,512 Contractual rents - 79,697 79,697 Third party rents - 28,752 28,752 --------- ---------- --------- Contractualrevenue - 309,961 309,961 Segmentrevenue 182 313,911 314,093Rents payable - (174,577) (174,577)Other directproperty andcontractexpenditure(Note 8) (343) (85,302) (85,645) --------- ---------- ---------Net contract,rental &relatedrevenue (161) 54,032 53,871Valuationdeficit onnon-investmentproperty - 4,645 4,645Net valuationsurplus oninvestmentproperty - 48,072 48,072Profit ondisposal ofinvestmentproperty /fixed asset - 204 204 --------- ---------- --------- Segment result (161) 106,953 106,792 ========= ========== Unallocatedexpenses (17,601) ---------Profit fromoperationsbefore financecosts 89,191Net financecosts (45,897) ---------Profit for theyear 43,294 ========= Assets and liabilitiesSegment assets 24,813 1,212,133 1,236,946 ========= ==========Unallocatedassets 64,681 ---------Total assets 1,301,627 ========= Segmentliabilities 1,004 206,378 207,382 ========= ==========Unallocatedliabilities 740,057 ---------Totalliabilities 947,439 =========Other segment informationDepreciationandamortisation - (13,183) (13,183)Expenditure onpurchase ofinvestmentproperty 24,406 - 24,406 ========= ========== ========= Note 8: Other direct property and contract expenditure includes depreciation. 4. (Loss) / earnings per share The calculation of basic and diluted earnings per share figures is based on thefollowing:- Net loss attributable to equity holders of the Company for the period of £76.3 million (six months ended 30 June 2004: profit of £33.5 million; year ended 31 December 2004: profit of £43.3 million). - Weighted average number of ordinary shares for basic earnings per share 15,809,890 (six months ended 30 June 2004: 15,100,000; year ended 31 December 2004: 15,100,000) - Weighted average number of ordinary shares for diluted earnings per share 15,809,890 (six months ended 30 June 2004: 15,322,600; year ended 31 December 2004: 15,322,600) To aid comparability, the weighted average numbers of ordinary shares for thesix months ended 30 June 2004 and year ended 31 December 2004 have been restatedto reflect the share for share exchange that took place on 2 June 2005, in whichexisting shareholders were offered 100 ordinary shares in the Company for everyone share held in MUKCO. 5. Employee Share Plan The Group established its Employee Share Plan (the "Plan") during the periodwhich replaced the Group's Leveraged Co-investment Plan and Performance OptionPlan, both of which were wound up during 2004. On the Group's admission to theOfficial List of the London Stock Exchange on 21 June 2005, 291,308 ordinaryshares were granted and issued in the names of Plan members subject to certainvesting conditions. Vesting takes place over a 5 year period from the date ofissue and is conditional on employees remaining in employment; there are noperformance conditions. During the vesting period, the participants receivedividends and the shares may be sold, but the proceeds of any sale are subjectto the same vesting terms as the shares. The total estimated cost to the Group of shares issued under the Plan of £6.7million is to be spread over the relevant vesting periods; 30% will vest on eachof the third and fourth anniversaries of admission and 40% will vest on the lastbusiness day before the fifth anniversary of admission. As a result, wages andsalaries include a share benefit expense of £71,000 for the six months ended 30June 2005 (30 June 2004: £nil; 31 December 2004: £728,000). Wages and salaries also include a charge of £345,000 which relates to a sharebenefit expense for three Non-executive Directors who were each awarded 5,000ordinary shares. These shares are not conditional on a qualifying vesting periodand accordingly the expense has been recognised immediately in the six monthsended 30 June 2005. 6. Dividends Six months ended 30 June 2005 Unaudited £000 Declared and paid during the year:Equity dividends on ordinary shares:First interim dividend for 2005: £0.30 per share 4,615Second interim dividend for 2005: £0.27 per share 4,275 ------------ 8,890 ============ Proposed and approved at the Board meeting on 2 August 2005Equity dividends on ordinary shares:Third interim dividend for 2005: £0.03 per share 748 ============No dividends were declared or paid during the year ended 31December 2004. 7. Finance costs Six months Six months Year ended 31 ended 30 June ended 30 June December 2004 2005 2004 Audited Unaudited Unaudited £000 £000 £000 Bank loans andoverdrafts 24,792 21,820 44,117Amortisationof loanfinance fees 6,970 297 671Shareholderinterestpayable 13 41 75Financechargespayable 192 200 399under finance leasesLoss oninterest swap - - 29Exceptionalloss onbreaking 63,851 - -interest rate swapLoanterminationcosts 2,051 - -Unwinding ofdiscount 990 2,052 4,102on provisions ----------- ------------ ---------- 98,859 24,410 49,393 =========== ============ ========== Amortisation of loan finance fees includes accelerated amortisation charges of£6.8 million in respect of loan finance fees on certain of the Group'sborrowings. In accordance with IAS 39 Financial Instruments: Recognition andMeasurement, unamortised loan finance fees at 31 December 2004, incurred inconnection with those borrowings, have been charged over the period from 31December 2004 to the expected revised date of repayment of the borrowings. Following the refinancing of certain parts of the Group's borrowings, the Groupincurred costs to exit its existing interest rate swap agreements. Since theswap arrangements were entered into, interest rates have changed andconsequently an exceptional cost of £63.9 million was incurred in breaking theseagreements which was charged to the income statement in the six months ended 30June 2005. The Group also incurred termination costs of £2.0 million in breakingthe existing loan, which was charged in the same period. 8. Income tax expense (a) Tax charge The Group does not expect to pay income tax in respect of the six months ended30 June 2005 or the year ending 31 December 2005 (six months ended 30 June 2004:£nil; year ended 31 December 2004: £nil), and accordingly no tax has beenprovided for the six months ended 30 June 2005. (b) Deferred income tax The Group has losses arising in prior years that would be available indefinitelyfor offset against future taxable profits of the companies in which the lossesarose. The Group has not recognised any deferred income tax as the Directors ofMapeley Limited do not consider there is sufficient certainty in the timing andquantum of future taxable profits that would allow reversal of the asset arisingin the relevant Group companies. The unrecognised deferred tax asset balance at 30 June 2005 was £56.9 million(30 June 2004: £55.6 million; 31 December 2004: £47.5 million). There would be no material liability if the Group's properties were to be soldat their period end values. 9. Property, plant and equipment Freehold Property Plant and Total acquired under equipment finance leases Property £000 £000 £000 £000 Cost or valuation:At 31 December2004 471,204 40,154 15,970 527,328Additions - - 274 274Revaluations 1,826 270 - 2,096 ---------- ---------- ---------- ----------At 30 June2005 473,030 40,424 16,244 529,698 ========== ========== ========== ========== Accumulated depreciation:At 31 December2004 - - (14,405) (14,405)Providedduring theperiod (3,206) (266) (1,050) (4,522)Written backon 3,206 154 - 3,360revaluationDisposals - - - - ---------- ---------- ---------- ---------- - (112) (15,455) (15,567) ========== ========== ========== ========== Net book value:At 30 June2005 473,030 40,312 789 514,131 ========== ========== ========== ========== At 31 December2004 471,204 40,154 1,565 512,923 ========== ========== ========== ========== The Group carries freehold property and property acquired under finance leasesat fair value in accordance with IAS 16. The properties were valued at 3 June 2005 by Savills Commercial Limited, avaluer external to the Group using the discounted cash flow method of valuation.In the opinion of a suitably qualified Group employee, there has been nomaterial change in the fair value of the properties between 3 June 2005 and 30June 2005 and, accordingly, these valuations have been approved by the Directorsand incorporated into the interim financial statements. 10. Investment property Freehold Property Total acquired under finance leases Property £000 £000 £000 At valuation:At 31 December2004 529,678 19,646 549,324Additions 207,748 - 207,748Revaluations (5,047) (7) (5,054) ----------- ----------- -----------At 30 June 2005 732,379 19,639 752,018 =========== =========== =========== It is the Group's policy to carry investment property at fair value inaccordance with IAS 40. Investment property was valued at 3 June 2005 by CBRichard Ellis Limited and Savills Commercial Limited, valuers external to theGroup, on the basis of Market Value in accordance with The Royal Institute ofChartered Surveyors' Appraisal and Valuation Standards. In the opinion of asuitably qualified Group employee, there has been no material change in the fairvalue of investment property between 3 June 2005 and the 30 June 2005 and,accordingly, these valuations have been approved by the Directors andincorporated into the interim financial statements. In the opinion of theDirectors, the fair values of properties acquired after 3 June 2005 are notmaterially different to their market values at their dates of acquisition. 11. Interest and non-interest bearing loans and borrowings Six month ended Six month ended Year ended 31 30 June 2005 30 June 2004 December 2004 Unaudited Unaudited Audited £000 £000 £000 Non-currentObligationsunder financeleases 4,449 4,585 4,492Bank loans 780,774 633,617 657,661Loans fromshareholders - 6,100 6,100Interest duetoshareholders - 158 158 ----------- ----------- ----------- 785,223 644,460 668,411 =========== =========== =========== CurrentObligationsunder financeleases 129 159 174Bank loans 1,999 1,942 1,999Loans fromshareholders - 1,641 1,000Interest duetoshareholders - 265 299 ----------- ----------- ----------- 2,128 4,007 3,472 =========== =========== ===========Bank loans are stated net of unamortised loan finance costs of £9.6 million (30June 2004: £9.7 million; 31 December 2004: £10.3 million). Revolving acquisition facilityDuring the period, a 3 year, £200.0 million revolving acquisition facility wasarranged to finance the acquisition of investment property. Of this amount £nilhad been drawn at 30 June 2005 (30 June 2004: £nil; 31 December 2004: £nil).This facility will be drawn down as investment property is acquired. The couponinterest rate payable on the facility is LIBOR plus 1.5% plus mandatory costs(if any). As a condition precedent to drawing any advances, each borrower hasgranted security over all its assets in favour of a security trustee. Theborrower's obligations are guaranteed by the Company and certain subsidiaries. Investment facilityA 10 year, £175.0 million investment facility was arranged during the period torefinance existing financial indebtedness secured on certain properties owed bymembers of the Group. Of this amount, £159.0 million had been drawn down by 30June 2005 (30 June 2004: £nil; 31 December 2004: £nil). The coupon interest ratepayable on the facility is LIBOR plus 0.75% plus mandatory costs (if any). Onceall assets are purchased, the Directors intend to enter into swap arrangementsto fix the rate of interest payable. Each borrower under this facility hasgranted security over all its assets in favour of the lender. New term loan in relation to the Abbey portfolioThe Group refinanced its existing loan facility in relation to the Abbeyportfolio on 30 June 2005, replacing the 18 year, £465.0 million loan with a 7year, £455.0 million loan facility. The bank loan is secured against theinvestment property held in the Abbey portfolio. Interest on the loan is paidquarterly at a rate of LIBOR plus 0.95% plus mandatory costs (if any). Theborrowers have entered fixed interest rate agreements to fix the interestpayable. Working capital facilityA 1 year, £25.0 million working capital facility was arranged during the periodwith an option to extend the term for 2 years. The coupon interest rate payableon the facility is LIBOR plus 2.0% plus mandatory costs (if any). The loan issecured by a fixed charge over all the assets of MUKCO. 12. Related party disclosures During the period, MUKCO, a wholly owned subsidiary of Mapeley Limited, sold theshares of three subsidiaries, Mapeley Milton Keynes Limited, Willen Lake Limitedand Mapeley Services Limited to Mapeley Holding Company Limited, a companyoutside the Group and owned by Fortress Investment Group. The shares were soldat book value but the consideration was still unpaid at the 30 June 2005. The following table provides the total amount owed to and by related parties Amounts owed by Amounts owed to related parties (accounted with (accounted with in Trade & other in Trade & payables) other receivables) £000 £000 Related party Mapeley Holding Company LimitedSale ofsubsidiaries 2,631 2,161 ============== ============= Shareholder loans with a book value of £8.1 million from FIT Mapeley HoldingLimited and Fortress UK Acquisition Company were converted into 655,000 ordinaryshares on 27 May 2005. The Company issued 5,000 shares each to J W Harris, R W Carey and C N KParkinson in their capacity as Non-executive Directors of the Company. Themarket value of the shares at the time of issue was £23.00 per share. 13. Subsequent events Since 30 June 2005 the Group has exchanged and completed contracts for thepurchase of a further 4 properties in accordance with its business plan. Totalconsideration was £21.4 million, funded by the Group's cash resources,investment facility and revolving acquisition facility. The Group is currently in negotiations to refinance the loan facility enteredinto by Mapeley STEPS Limited and Mapeley STEPS Contractor Limited. If thesenegotiations are successfully concluded, it is currently anticipated that thiswill involve the repayment of the current 20 year, £178.0 million loan andreplacing it with a 7 year, £200.0 million term facility. It is also currentlyanticipated that the Group would enter fixed interest rate agreements at thestart of the loan to fix the interest payable and that it would be required towrite off unamortised loan finance costs on the borrowings, at this timeamounting to £4.3 million, and incur costs in breaking existing swap agreementsof some £20.8 million. The Board of the Company declared a dividend of £0.7 million (30 June 2004:£nil; 31 December 2004: £nil) at a board meeting held on 2 August 2005, whichwas paid on 2 September 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Mayflower (wi)