29th Nov 2006 08:00
McKay Securities PLC29 November 2006 MCKAY SECURITIES PLC INTERIM RESULTS 29TH NOVEMBER 2006 ----------------------- The Directors of McKay Securities PLC announce the results of the Group for thesix months ended 30th September 2006. Highlights * Profit before tax of £7,432,000 (2005 - £3,020,000) * Adjusted profit before tax £3,878,000 (2005 - £3,867,000) - note 4 * Basic earnings per share 13.18p (2005 - 4.89p) * Diluted adjusted earnings per share 7.24p (2005 - 6.53p) - note 6 * Adjusted net asset value per share 422p (2005 - 330p) - note 8 * Interim dividend up 5.9% to 3.6 pence per share (2005 - 3.4 pence per share) * Investment property income up 12.1% to £8,144,000 (2005 - £7,267,000) * Weighted average cost of borrowing of 5.9% (2005 - 6%) * Net debt gearing of 52% (2005 - 80%) Eric Lloyd, Chairman, commented:The results for the half year show good progress in all areas; in particularfrom new lettings and significant profits arising from sales. Current andproposed schemes have also moved forward in an encouraging way. With furtherincome and capital growth potential from within the portfolio, we remainconfident about the Group's prospects for the full year. For further information please contact: McKay Securities PLC - 01189 502333 Simon Perkins (Managing Director)Alan Childs (Finance Director) www.mckaysecurities.plc.uk---------------------------- Details of the programme for the payment of the interim dividend is as follows: Ex-dividend date 6th December 2006 Record date 12th December 2006 Interim dividend payment 10th January 2007 CHAIRMAN'S STATEMENT -------------------- Results for the six months to 30th September 2006 Pre-tax profit for the half year increased to £7.43 million from £3.02 millionfor the same period in 2005. Contributing to this increase was a profit from thesale of investment properties of £3.59 million compared with £221,000 in 2005. Adjusted pre-tax profit, which excludes non-recurring profit on sales, surrenderpremiums, movement in the fair value of interest rate hedging instruments, andrevaluation movements was £3.88 million (2005 - £3.87 million). Net asset value per share, adjusted to exclude deferred tax and the fair valueof derivatives, was 422p (2005 - 330p). The Directors have declared an interim dividend of 3.6p (2005 - 3.4p), anincrease of 5.9%, payable on 10th January 2007 to shareholders on the registerat the close of business on 12th December 2006. Review The results for the half year show good progress in all areas; in particularfrom new lettings and significant profits arising from the sales of Chobham andChancery House, Sutton. Current and proposed schemes within the developmentprogramme have also moved forward in an encouraging way. Net income from investment properties increased by 12% to £8.14 million comparedwith the same period in 2005, with a full income contribution from our two majoroffice developments at Westminster and Wimbledon, which were completed and letat the end of last year. This included a £810,000 net gain in gross rents, whichincreased in total to £8.57 million. Adjusted profit before tax remained at asimilar level to 2005, with the increase in income offset by a number of one offadministrative costs, and a higher interest charge as a result of an increasedlevel of debt prior to the property sale that was completed towards the end ofthe period. The occupational market for office property has continued to favour betterquality space, and a reduction in supply is beginning to generate rental growth,particularly in central London and other established centres within our coreSouth East market. This has worked to our advantage at Pegasus Place, Crawleywhere Pegasus Three (offices - 16,400 sq ft) was let as a whole to a large Swissgroup on a 15 year term certain lease. The contracted rent of £377,635 parepresented an improved rental value for the scheme where now only 9,966 sq ftremains available to let on two floors at Pegasus One. Since the end of the half year, solicitors have been instructed on the lettingsof the ground floor retail unit at Wimbledon Gate (4,350 sq ft) and the recentlyvacated warehouse unit in Petersfield (50,026 sq ft), where there continues tobe the potential for residential use in the longer term. Should both of theselettings be completed, the combined contracted rent will be £260,000 pa. Another significant letting achieved during the period was at Chancery House,Sutton (offices - 54,615 sq ft) where 12,400 sq ft was let following therefurbishment undertaken to the common areas and the vacant office floors. Thiswas in addition to the letting of 10,700 sq ft last year, leaving only 2,400 sqft vacant. Having achieved these lettings in a market where tenant demand andrental growth have proved limited over the years, the decision was taken to sellthe property into a strong investment market before imminent break clauses overa third of the building impacted on value. The price achieved was £13.33million, which showed a considerable profit over book value of £3.49 millionafter sale costs. In addition, the sale of the former distribution depot atChobham was completed during the period at a figure of £9.75 million. Whilst theprofit over book value was limited as a result of the March 2006 year endvaluation coinciding with the date of the sale, the price achieved compares witha book value of £2.75 million prior to receipt of detailed planning consent for54 residential units at the end of 2005. The combined net proceeds from the twosales was £22.52 million, and the profit over historic cost was £15.48 million. Following further design improvement, a detailed planning application wassubmitted in September for the redevelopment of 30/32 Lombard Street, EC3(offices - 36,140 sq ft). The application scheme is for a striking contemporaryheadquarters office building on ten floors with a net lettable area of 63,750 sqft, which compares with the existing planning consent of 53,280 sq ft.Consultations with the planning authority are underway and, subject to anuncontested planning approval and satisfactory market conditions nearer thetime, the flexible leases negotiated within the existing building enable thecommencement of development from January 2008. Elsewhere within the development programme, the extensive refurbishment of DacreHouse, SW1 was completed at the end of August, with the conversion of surplusplant and residential floor space increasing the lettable office floor area by10% to 12,745 sq ft. The remodelled floors and contemporary new reception areahave been finished to a high standard, and with a new air conditioning system,the building now meets modern occupier expectations in this area of London whichcontinues to see healthy rental growth. A full marketing campaign is generatingconsiderable tenant interest. At Lotus Park, Staines the refurbishment of Lotus 1 and Lotus 2, totalling32,690 sq ft, began in September after the receipt of £4.60 million (equivalentin total to 5.5 years rent) from the tenant to surrender its leases of theseoffice buildings at the end of last year. The works now underway involve acomprehensive external and internal refurbishment, including new roof coverings,replacement glazing, new mechanical and electrical installations, new doubleheight reception areas and improved landscaping. Completion will take place nextSpring, when we will be able to launch two top quality office buildings into theStaines market, which looks set to benefit in particular from the opening ofTerminal 5, Heathrow in March 2008. Following the end of the half year, contracts have been completed to purchasethe freehold of two office buildings adjacent to Lotus Park, known as Captain'sHouse (3,636 sq ft) and Waterman's House (7,311 sq ft) for £5.25 million. Thesebuildings, which look out onto the River Thames over a small marina basin, arelet on leases expiring in 2015, at a total annual rent of £301,670 pa, with thepotential for uplift at the next rent review in 2009. They will be incorporatedwithin the overall management of Lotus Park, and will complement the improvedenvironment being created. Further acquisitions with the potential to add valuethrough active management and development are under consideration. Finance Net debt at 30th September 2006 was £88.60 million (2005 - £108.73 million)representing 52.3% of shareholders' funds (2005 - 79.7%). Total facilitiesavailable to the Group increased during the period by £7.00 million to £150.00million (2005 - £128.45 million) as a new 10 year fully revolving facility wasput in place with a new lender, replacing two smaller facilities nearing expiryand helping to reduce the average cost of debt to 5.9% (2005 - 6.0%). If fullydrawn down, balance sheet gearing would increase to 88.6% of shareholders' funds(2005 - 94.1%). At the end of the period, financial hedging instrumentstotalling £110 million (2005 - £52 million) were in place providing an increasedlevel of strategic protection against future interest rate rises. The increasein cover over the last twelve months was considered prudent as a result of thehigher levels of debt available to the Group, and the prospect of furtherinterest rate rises. The tax charge for the period of £1.42 million gives an effective tax rate of19.3%, on profit before taxation excluding the results of associatedundertaking. This low rate is due to the utilisation of capital losses broughtforward; otherwise the tax rate would have been 28.2%. In my last statement I updated shareholders on the progress of the Finance Bill,which contained draft legislation for Real Estate Investment Trusts (REITs).Royal Assent was given in July 2006, introducing a tax exempt corporatestructure from January 2007, with an entry cost of 2% of the market value ofassets at the date of conversion and a minimum dividend distribution of 90% ofnet taxable income, after various allowances. At the date of Royal Assent,various regulations and guidance notes were still being drafted, and althoughthe regulations have been published, confirming that the presence of a 10%shareholding is not a barrier to entry, a number of the guidance notes are stillawaited. We have looked closely at the legislation, and with publication of theguidance notes expected later this month, expect to be in a position to make adecision in the near future on whether or not it is in the best interests ofshareholders to convert. Board Changes We are delighted to welcome Viscount Lifford to the board as a non-executivedirector. James has been a main board director of Rathbones Brothers Plc, fundmanagers, for the last ten years with responsibility for their regional networkof offices and also has past involvement in the property sector having beenChairman of property group Basepoint Plc. With his informed City background,James will be of great assistance in the continued expansion of the Group. Future Prospects Encouraging progress has been made in the first half of the year, adding furtherrental income to that secured at the end of last year through the success of thedevelopment programme. This looks set to continue with the level of occupierinterest now being shown in Dacre House and the two buildings undergoingrefurbishment at Lotus Park. Investor demand for commercial property continuesto exceed supply, and despite the increasing cost of debt, capital values havecontinued to rise generally over the period. Whilst the rate of growth hasslowed, we do not anticipate values falling back in the short term. The introduction of REITs in 2007 is likely to be positive for the sector as awhole, and with further income and capital growth potential from within theportfolio, we remain confident about the Group's prospects for the full year. ESG LloydChairman 29th November 2006 GROUP INCOME STATEMENT---------------------- 6 months to 6 months to 12 months to 30th 30th 31st September September March 2006 2005 2006 (Unaudited) (Unaudited) (Audited) Notes £'000 £'000 £'000 Gross rents and servicecharges receivable 9,828 9,080 18,353Surrender premiums received 101 - 3,700 --------- ------- --------- 9,929 9,080 22,053Direct property outgoings (1,785) (1,813) (3,684) --------- ------- ---------Net rental income frominvestment properties 8,144 7,267 18,369Administration costs 1,623 1,304 (3,288) --------- ------- ---------Operating profit before gainson investment properties 6,521 5,963 15,081Profit on disposal ofinvestment properties 3,593 221 167Movement in revaluation ofinvestment properties 2 (738) (228) 35,247 --------- ------ ---------Operating profit 3 9,376 5,956 50,495Finance costs 7 (2,105) (3,072) (5,344)Finance income 67 20 50Share of results of associatedundertaking 94 116 807 --------- ------- ---------Profit before taxation 7,432 3,020 46,008Taxation (1,418) (795) (12,719) --------- ------- ---------Profit for period 6,014 2,225 33,289 --------- ------- --------Earnings per shareBasic 13.18p 4.89p 73.06pDiluted 12.99p 4.87p 72.43p Adjusted earnings per share figures are shown in note 6. GROUP BALANCE SHEET------------------- As at As at As at 30th 30th 31st September September March 2006 2005 2006 (Unaudited) (Unaudited) (Audited) Notes £'000 £'000 £'000Non-current assetsInvestment properties 286,814 264,473 304,687Plant and equipment 55 76 73Investment in associate 5,794 5,135 5,700 ----------- ----------- ----------- 292,663 269,684 310,460 ----------- ----------- -----------Current assetsTrade and other receivables 5,240 3,211 3,633Cash and cash equivalents 1,490 2,676 1,838 ----------- -------- -------- 6,730 5,887 5,471 ----------- ----------- -----------Total assets 299,393 275,571 315,931 ----------- ----------- -----------Current liabilitiesLoans and other borrowings - (797) (15,016)Corporation tax payable (3,179) (716) (274)Trade and other payables (7,098) (7,142) (8,260) ----------- -------- ---------- (10,277) (8,655) (23,550) ----------- -------- ---------Non-current liabilitiesLoans and other borrowings (89,754) (110,468) (94,543)Pension fund liabilities (633) (1,148) (701)Finance lease liabilities (4,427) (4,469) (4,469)Deferred tax (24,978) (14,966) (26,708) ----------- ----------- ----------- (119,792) (131,051) (126,421) ----------- ----------- -----------Total liabilities (130,069) (139,706) (149,971) ----------- ----------- -----------Net assets 169,324 135,865 165,960 ----------- ---------- ---------- EquityCalled up share capital 9,157 9,111 9,122Share premium 2,486 2,124 2,208Capital reserve 48,683 35,724 36,065Revaluation reserve 77,669 62,718 87,599Retained earnings 31,329 26,188 30,966 ----------- ---------- -----------Total equity 169,324 135,865 165,960 ----------- ---------- ----------- Net asset value per share 9 370p 298p 364p Adjusted net asset value per share 9 422p 330p 421p GROUP CASH FLOW STATEMENT------------------------- 6 months to 6 months to 12 months to 30th 30th 31st September September March 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Operating activitiesProfit before tax 7,432 3,020 46,008Adjustments for:Depreciation and other non-cash movements 71 (2) 417Profit on disposal of investment properties (3,593) (221) (167)Movement in revaluation of investment properties 738 228 (35,247)Net finance costs 2,038 3,052 5,294Share of profit of associated undertaking (94) (116) (807) --------- ------ ---------Cash flow from operations before changes in working capital 6,592 5,961 15,498Increase in debtors (940) (191) (606)(Decrease)/increase in creditors (2,661) (386) 1,636 --------- -------- ---------Cash generated from operations 2,991 5,384 16,528Interest paid (1,722) (2,239) (6,294)Interest received 60 17 37Corporation tax paid (140) (545) (1,126) --------- ------- --------Cash flows from operating activities 1,189 2,617 9,145 --------- ------- --------Investing activitiesSale of investment properties 22,573 5,121 5,547Dividends from sundry investments 1 1 1Dividends from associated undertaking - - 126Purchase and development of investment properties (1,500) (34,766) (39,503)Purchase of other fixed assets (1) (31) (52) --------- ---------- ----------Cash flows from investing activities 21,073 (29,675) (33,881) --------- ---------- ----------Financing activitiesProceeds from issue of share capital 314 9 104(Decrease)/increase in borrowings (19,823) 30,278 28,572Equity dividends paid (3,101) (2,824) (4,373) --------- -------- ---------Cash flows from financing activities (22,610) 27,463 24,303 --------- -------- --------- Net (decrease)/increase in cash and cash equivalents (348) 405 (433)Cash and cash equivalents at the beginning of the year 1,838 2,271 2,271 --------- --------- ---------Cash and cash equivalents at end of year 1,490 2,676 1,838 --------- --------- --------- STATEMENT OF RECOGNISED INCOME AND EXPENSE------------------------------------------ 6 months to 6 months to 12 months to 30th 30th 31st September September March 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Actuarial movement on definedbenefit pension scheme - (11) 259Deferred tax on fair value ofshare options 104 54 - --------- ----- ------Net income recognised directlyin equity 104 43 259Profit for the period 6,014 2,225 33,289 --------- ------- ---------Total recognised income andexpense for the year 6,118 2,268 33,548Adoption of IAS 39 - 285 285Deferred tax on adoption of IAS 39 - (83) (83) --------- ------- ----------Total recognised income andexpense for the period 6,118 2,470 33,750 --------- ------- ---------- 1 Principal accounting policies The accounting policies used for the audited financial statements at 31st March2006 have been used in the preparation of the interim financial statements. Theresults for the year to 31st March 2006 have been extracted from the fullaccounts for the year which received an unqualified auditors report and whichhave been filed with the Registrar of Companies. Basis of consolidation The consolidated financial statements incorporate the results of the Company andits subsidiary companies for the six months to 30th September 2006. Subsidiarycompanies are those entities under the control of the Company. Control means thepower to govern the financial and operating policies so as to obtain benefitsfrom its activities. All subsidiary companies accounts have been prepared under IFRS. Associates An associate is an undertaking over which the Group exercises significantinfluence, but not control, through participation in the financial and operatingpolicies. The Group's share of the total recognised gains and losses ofassociates are included in the consolidated financial statements on an equityaccounted basis. Investments in associates are carried in the balance sheet atcost as adjusted by the post-acquisition changes in the Group's share of the netassets of the associate, less any impairment in the value of individualinvestments. Financial Instruments The Group uses derivative financial instruments, such as interest rate swaps, tomanage its exposure to interest rate risk. The differences between the interestpayable by the Group and the interest payable to the Group by the swapcounterparties are dealt with on an accruals basis. The instruments are stated at fair value at the balance sheet date which is theestimated amount that the Group would receive or pay to terminate theinstruments. The Group has not applied hedge accounting for any financialinstrument in place and any movement in fair value is reported in the incomestatement. Properties The Group's properties are held as investments to earn rental income and forcapital appreciation and are stated at fair value at the balance sheet date. Thevalue, based on market values, is determined annually by independent externalvaluers and any gain or loss arising from a change in fair value is recognisedin the income statement. When an existing investment property is redeveloped for continued future use asan investment property it remains an investment property whilst in development. Subsequent expenditure on investment properties is capitalised only when itincreases the future economic benefits associated with the property. All otherexpenditure is charged in the income statement. Interest and other outgoings less rental income relating to investmentproperties in the course of development are capitalised, before tax relief, andadded to the cost of the property. Interest capitalised is calculated ondevelopment expenditure, including material refurbishments to investmentproperties, using the weighted average cost of general Group borrowings for theyear. A property ceases to be treated as being in the course of development whensubstantially all the activities that are necessary to prepare the property foruse are complete. The Group's investment properties held on long leases are accounted for asfinance leases and carried at fair value. The present value of the futureminimum lease payments are recognised as a liability with a corresponding assetadded to the carrying value of the leasehold property. The minimum leasepayments are apportioned between a finance charge in the income statement andthe reduction of the balance sheet liability. Contingent rents are charged as anexpense in the income statement in the period incurred. Any accrued rent receivable recognised as a separate asset in accordance withthe Group's accounting policy on lease incentives is deducted from the externalvaluation. Gains and losses arising on the disposal of investment properties are recognisedin the income statement, being the difference between net sale proceeds and thecarrying value of the property. These gains and losses are then allocated to thecapital reserve in the movements in capital and reserves. Plant and equipment Plant and equipment assets are depreciated on a straight line basis at ratescalculated to write off the cost less estimated residual value over their usefullives, which are estimated to be between 3 and 5 years. Goodwill Goodwill arising on acquisition of a subsidiary represents the excess of costover the net fair value of the separable assets acquired. Goodwill arising onacquisitions is capitalised at cost and carried in the balance sheet less anyaccumulated impairment losses. Negative goodwill, where the fair value of theassets acquired exceeds cost, is recognised immediately in the income statement. Impairment The carrying amounts of the Group's assets, other than investment propertymeasured at fair value and deferred tax assets, are reviewed at each balancesheet date to determine whether there is any indication of impairment. Assetssubject to impairment losses are stated at their estimated recoverable amount,being the greater of the net selling price or value-in-use, the loss beingrecognised in the income statement. Rental income Rental income received under operating leases from investment properties isrecognised in the income statement on a straight line basis over the term of thelease. The Group treats the aggregate value of incentives given to lessees as areduction of rental income over the lease term. Surrender premiums received from outgoing tenants prior to the expiry of theirlease are included in rental income. Borrowing costs Interest on overdrafts and other bank borrowings, is recognised in the incomestatement in the period during which it is incurred, except for interestcapitalised in accordance with the Group's policy on properties underdevelopment. The interest expense component of finance lease payments isrecognised in the income statement over the lease term. Facility arrangementcosts are recognised in the income statement over the facility term. Interest received on short term deposits is recognised in the income statementas it accrues. Share option scheme The Group operates a share option scheme under which directors and employees areable to acquire shares in the Company. The option exercise price is equal to themid-market price of the underlying shares at the date of the grant. The fair value of the benefit of the options awarded is recognised in the incomestatement over the vesting period of the award by reference to a binomial optionpricing model, adjusted only for the number of shares expected to vest. Post employment benefits The Group operates a defined benefit pension scheme providing benefits based onfinal pensionable pay. The assets of the scheme are held separately from thoseof the Group, being externally invested. The value of the defined benefit scheme obligations is recognised in the balancesheet. Changes in actuarial gains and losses arising in respect of the Group'sobligations are recognised as movements in equity, through the statement ofrecognised income and expense. Current service cost and interest on schemeliabilities less the expected return on scheme assets are recognised as anexpense in the income statement. The Group also contributes to certain eligible employees' defined contributionpersonal pension plans and does not accept any responsibility for the benefitsgained from these plans. The contributions are recognised as an expense in theincome statement as incurred. Taxation The tax charge in the income statement comprises current and deferred tax exceptto the extent that it relates to items recognised directly in reserves, in whichcase the related tax is recognised in reserves. Current tax is based on the taxable income for the year and any adjustment totax payable in respect of previous years. Taxable income may exclude income andexpenses in the income statement that are taxable or deductible in other yearsand items that are never taxable or deductible. The tax rate is that enacted orsubstantially enacted at the balance sheet date. Deferred tax is recognised using the balance sheet liability method, withoutdiscounting, on temporary differences arising between the carrying amounts ofassets and liabilities for financial reporting purposes and their tax base usedfor taxation purposes. Deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that future taxable profitswill be available against which the asset can be utilised. Such assets andliabilities are not recognised if the temporary difference arises from goodwillnot deductible for tax purposes, and the initial recognition of other assets andliabilities that affect neither accounting nor taxable profit. Deferred taxassets are reviewed at each balance sheet date and reduced to the extent that itis no longer probable that there will be future taxable profits against whichthe asset can be utilised. Deferred tax is calculated at the rate enacted orexpected to apply in the period when the liability is settled or the asset isrealised. Deferred tax on property valuation movements has been calculated on the basis ofthe contingent tax that would arise in the event of a sale of a property. Themethod has been applied as the Group sells properties from time to time andultimately the carrying value of the properties will be recovered through sale. 2 Properties The Group's properties are valued at the end of each financial year and were notrevalued at 30th September 2006. The consolidated balance sheet reflects thevalues as at 31st March 2006 adjusted for additions (including lease set upcosts) and disposals during the period, and any adjustments resulting fromspreading lease incentives over the lease term. The movement in property valuation in the period under review relates tocapitalisation of lease set up costs and a net increase in the lease incentivedebtor. 3 Operating profit Operating profit is identified in the income statement and represents the profiton activities before finance costs, share of associated undertakings andtaxation. 4 Adjusted profit before tax Adjusted profit before tax is the Group's preferred measure to provide a clearerpicture of recurring profits from core rental activities before tax, adjustedfor the items below. 6 months to 6 months to 12 months to 30th 30th 31st September September March 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Profit before tax 7,432 3,020 46,008Surrender premiums received (101) - (3,700)Change in fair value ofderivatives (624) 851 263Movement in revaluation ofinvestment properties 738 228 (35,247)Profit on disposal of investmentproperties (3,593) (221) (167)Associated undertakings' disposalsand revaluation movement 26 (11) (588) --------- -------- --------Adjusted profit before tax 3,878 3,867 6,569 --------- -------- -------- 5 Taxation 6 months to 6 months to 12 months to 30th 30th 31st September September March 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Analysis of charge in period: Current tax: UK corporation tax on profits for the period 3,042 568 712 Adjustments in respect of prior periods 2 (3) - --------- ----- ------- Total current tax 3,044 565 712 Deferred tax: Origination and reversal of temporary differences (1,626) 230 12,007 --------- ---- --------- Total tax charge in the income statement 1,418 795 12,719 --------- ----- --------- Reconciliation to effective rate of tax: Profit before tax 7,432 3,020 46,008 --------- ------- --------- Tax on profit at 30% (2005 - 30%) 2,230 906 13,802 Effects of: Expenses not deductible for tax purposes (97) (8) 11 Deferred tax released on sale of investment properties - (67) (29) Associated undertaking (28) (35) (242) Chargeable gains on sale of investment properties (33) (66) (50) Utilisation of tax losses (656) - - Movement on revaluation of investment properties - 68 (773) Adjustment to tax charge in respect of prior years 2 (3) - --------- ----- --------- Tax charge for period (as above) 1,418 795 12,719 --------- ----- --------- 6 Earnings per share 6 months to 6 months to 12 months to 30th 30th 31st September September March 2006 2005 2006 p p P Earnings per share 13.18 4.89 73.06 Deferred tax on capital allowances 0.70 0.44 2.12 Surrender premium received (0.15) - (8.12) Change in fair value of derivatives (0.96) 1.31 0.59 Movement in revaluation of investment properties 1.62 0.50 (53.59) Property on disposal of investment properties after taxation (7.02) (0.58) (0.37) Associated undertaking disposals and revaluation movement (0.02) - (1.29) --------- ------- ------- Adjusted earnings per share 7.35 6.56 12.40 --------- ------- ------- Earnings per share on ordinary shares are based on earnings after tax of£6,014,000 (2005 - £2,225,000) and 45,633,732 (2005 - 45,552,512) shares, beingthe weighted average number of ordinary shares in issue during the period. Reconciliation of earnings per share to diluted earnings per share: 6 months to 6 months to 6 months to 6 months to 30th 30th 30th 30th September September September September 2006 2005 2006 2005 p pWeighted number ofordinary shares inissue 45,633,732 45,552,512 13.18 4.89Number of sharesunder option 1,447,487 1,556,201 (0.41) (0.15)Number of shares thatwould have been issuedat fair value (791,243) (1,334,698) 0.22 0.13 --------------- --------------- -------- ------- 46,289,976 45,774,015 12.99 4.87 --------------- --------------- -------- ------- 6 months to 6 months to 12 months to 30th 30th 31st September September March 2006 2005 2006 p p pDiluted earnings per share 12.99 4.87 72.43 Deferred tax on capital allowances 0.69 0.44 2.10 Surrender premium received (0.15) - (8.05) Change in fair value of derivatives (0.94) 1.30 0.56 Movement in revaluation of investment properties 1.59 0.50 (53.12) Profit on disposal of investment properties after taxation (6.92) (0.58) (0.36) Associated undertaking disposals and revaluation movement (0.02) - (1.28) ------- ------- --------Adjusted diluted earnings per share 7.24 6.53 12.28 ------- ------- -------- Diluted earnings per share are based on the same earnings after tax and on theweighted average number of shares in issue during the year of 46,289,976 (2005 -45,774,015) shares, which takes into account the number of potential ordinaryshares arising from the exercise of share options. Adjusted earnings per share excludes the after tax effect of profit from thedisposal of investment properties, the change in the fair value of derivativesand the movement in revaluation of investment properties, as well as thedeferred tax provided on capital allowances on development and investmentproperties, where no tax payment is expected to crystallise. These adjustmentsare made in order to show the recurring element of the Group's profit. 7 Finance costs 6 months to 6 months to 12 months to 30th 30th 31st September September March 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Interest expense: Interest on bank overdraft and loans 3,040 2,735 5,930 Finance lease interest on leasehold property obligations 144 144 289 Change in fair value of derivatives (624) 851 263 Amortisation of loan facility costs 18 7 15 Other interest - - 8 -------- -------- ------- 2,578 3,737 6,505 Capitalised interest (473) (665) (1,161) -------- -------- -------- 2,105 3,072 5,344 -------- -------- -------- 8 Net asset value per share 30th September 2006 30th September 2005 31st March 2006 Net Net Net asset asset Asset value value Value Net per Net per Net Per assets Shares share assets Shares share assets Shares Share £'000 '000 p £'000 '000 p £'000 '000 p Basic 169,324 45,787 370 135,865 45,556 298 165,960 45,609 364 Deferred tax on capital 6,626 - 15 5,535 - 12 6,308 - 14 allowances Deferred tax on revaluation surplus 17,507 - 38 8,771 - 19 19,600 - 43 Fair value of derivatives (net of tax) (452) - (1) 396 - 1 (15) - - ---------- --------- ------ ----------- --------- ----- ---------- --------- ------ Adjusted 193,005 45,787 422 150,567 45,556 330 191,853 45,609 421 ---------- --------- ------ ---------- --------- ----- ---------- --------- ------ Number of shares under option 2,800 1,301 (5) 2,287 1,214 (3) 3,104 1,479 (7) ---------- -------- ----- --------- -------- ----- ----------- --------- ------ Adjusted diluted 195,805 47,088 417 152,854 46,770 327 194,957 47,088 414 ---------- -------- ----- --------- ------- ----- ----------- --------- ------ 9 Interim statement The Interim Statement is being posted to all shareholders today. Copies are available to members of the public from the Company's registered office at 20 Greyfriars Road, Reading, Berkshire RG1 1NL, and on the Company's website at www.mckaysecurities.plc.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MCKS.L