20th Sep 2007 07:01
Primary Health Properties PLC20 September 2007 Primary Health Properties PLC PRIMARY HEALTH PROPERTIES PLC ('PHP') Modern accommodation for the Provision of Primary Health Care Services Interim Results for the six months ended 30 June 2007 Primary Health Properties PLC, one of the UK's largest providers of modernprimary healthcare facilities, announces its Interim Results for the six monthsended 30 June 2007 Group Financial Highlights - six months ended 30 June 2007 • Portfolio valuation increased by £5.1m to £321.0m • Diluted NAV per share increased 7% to 449.8p (31 December 2006: 420.9p) • Dividend increased by 11% to 7.5p (30 June 2006: 6.75p) • Successful conversion to UK REIT status • Successful placing of £38.8m (net of expenses) Group Financial Highlights - twelve months ended 30 June 2007 • Portfolio owned, leased and committed increased by 43% to £321.0m (30 June 2006: £224.8m) • Basic earnings per share increased by 93% to 135.7p (30 June 2006: 70.3p) Harry Hyman, Managing Director of Primary Health Properties, commented: "I am pleased to report another robust first half performance for PHP. TheGroup has an excellent portfolio of modern properties with secure long leasesand high quality tenants, backed by the government, and has the prospect ofcontinued rental growth which should flow through into dividends. Our strategyof sourcing new investments from several developers will enhance our ability tocontinue to enter into new commitments, ensuring the flow of new properties incoming years. We remain a leader in our niche market and currently have a strong forwardpipeline of new properties. Future growth will be driven predominantly byfurther rental increases from the portfolio which continues to perform well.Despite recent turmoil in banking and money markets, the Board is optimisticabout the prospects for the Group." Enquiries: Bell Pottinger Corporate & FinancialDavid Rydell/Victoria GeogheganTel: 020 7861 3232 Primary Health Properties PLCHarry HymanManaging DirectorTel: 01483 306912Mobile: 07973 344768 Chairman's Statement Accounting period As announced at the time of our interim results in March, the Group has changedits accounting reference date to 31 December. These results for the six monthsto 30 June 2007 are for the second six month period within the formal accountingperiod of eighteen months to 31 December 2007. Results The results for the six months ended 30 June 2007 show a profit after tax of£5.2m compared to £8.2m for the six months ended 30 June 2006. The results forthe twelve months ended 30 June 2007 show a profit after tax of £34.8m comparedto £15.9m for the year ended 30 June 2006. The results for the twelve months include the impact of the revaluation surplusand various other matters reported at 31 December 2006, including the goodwillwrite off relating to our purchase of Cathedral (£5.5m), the REIT conversioncharge (£5.2m) and the release of deferred tax (£29.6m). None of these itemshad comparables in the previous twelve month period. The revaluation surplus for the twelve month period was £18.5m, of which £13.4marose in the first six months. The surplus was due to was due to a smallreduction in yields and higher rent reviews. At a trading level, revenues for the twelve months to 30 June 2007 increased to£14.1m (twelve months to 30 June 2006: £11.1m) and operating profit beforefinancing costs was £21.3m compared to £23.8m. The twelve month period saw theeffect of the inclusion of a management incentive fee rather than the previousshare option scheme. The diluted earnings per share for the twelve month period were 135.7p (2006:67.7p). After taking out capital items, adjusted diluted earnings per shareamounted to 14.7p compared to 16.5p in the prior twelve month period. Diluted net asset value per share in the six months to 31 December 2006 rose 7%to 449.8p (31 December 2006: 420.9p). While this was mainly due to therevaluation surplus, the net asset value also benefited from a £6.7m increase inunrealised gains attributable to our portfolio of swaps taken out to hedge theimpact of higher interest rates. Portfolio During the six months to 30 June 2007, the Group has taken delivery of £16.5m ofcompleted and let properties at Wednesbury, Handcross, Poundbury, Penkridge andLeslie and has entered into new commitments totalling £18.4m at Sandown,Lossiemouth, Paisley, Morriston and Kirkentilloch. The table below sets out the portfolio as at 30 June 2007. 30 June 31December 30 June 2007 2006 2006 £m £m £mInvestment properties 267.8 245.5 197.5Development properties 9.2 9.5 -Properties in the course of development 2.6 2.8 2.1Total investment properties 279.6 257.8 199.6Finance leases 2.9 2.5 2.5Total owned and leased 282.5 260.3 202.1Development Loans 2.8 1.2 1.7Total owned and leased (including development 285.3 261.5 203.8loans)Deposits paid - 0.1 0.1Committed 35.7 32.2 20.9Total owned, leased and committed 321.0 293.8 224.8 Following our portfolio development and the Cathedral acquisition in December2006, the portfolio now has 93 completed properties with a further 11 propertiesunder construction. The portfolio has performed well over the last twelve monthsand the combination of a virtually fully let portfolio, long lease lengths andcovenants backed by the government makes for an attractive portfolio for thelong term. In addition, at 30 June 2007 the Group had £35.7m of futurecommitments. REIT conversion and financing During the six months ended 30 June 2007, the Group converted to a REIT and alsocompleted a Placing and Open Offer, raising £38.8m net of expenses and therebyexpanding its shareholder base. The Placing and Open Offer resulted in 9,309,376new Ordinary Shares being issued on 11 April 2007. Although the UK-REIT sectorhas been volatile during the period, the conversion to a REIT has resulted ingreater visibility for the Group and the opening to a wider universe ofshareholders. On 21 September 2006, the Joint Managers exercised their optionsto acquire 1.6m Ordinary Shares at a price of £1.71 per share pursuant to theManagement Option Agreement dated 17 September 2003. As reported at the first interim stage, the Group negotiated a £40.0m increasein facilities with its bankers. Following the successful placing, the Group hasfurther capacity to borrow and is in the process of extending its banking lines. After the period end, and in order to manage its continuing liability managementprogramme, the Group: • purchased a £20m interest rate swap at 4.76% covering the period from 2017 to 2027. This will be accounted for as a cash flow hedging instrument. • entered into a swap of 4.835% for principal amounts of £20m from 11 August 2007 to 11 November 2007, £30m from 11 November 2007 to 11 February 2008, £40m from 11 February 2008 to 11 May 2008 and £50m to 11 August 2021. This second swap can be cancelled by the counterparty on any of the futurequarter dates. If not called, the swap runs for the fourteen years to 11 August2021. Whilst not qualifying for hedge accounting, the instrument significantlyreduces the Group's cash interest costs in place and while the currentlyvolatile short term interest rates remain above the swap level. The revaluationgain or loss on this contract, unless cancelled by the period end, will be takenthrough the income statement. Total borrowings at the period end were £135.7m of which £11.8m was being usedto fund development loans. The Group has £90m of fixed rate cover and thecontingent cover referred to above. Loan to value gearing at the period end was 46% and interest cover was 1.8times. All UK-REIT conditions were met. Dividend The Board proposes to pay a second interim dividend of 7.5p per Ordinary Share,a rise of 0.75p per Ordinary Share over last year's final dividend of 6.75p. Asexplained at the time of the conversion to a UK REIT, distributions from theCompany may comprise property income distributions ("PID"s), ordinary cashdividends or a combination of the two. The second interim dividend is a cashdividend and not a PID. The dividend will be paid on 23 November 2007 toshareholders on the register on 28 September 2007. Further details of theCompany's status and the tax treatment of distributions for shareholders isgiven in the Interim Report. Other matters The Share Plan allowing investors to purchase the Company's Ordinary Shares bylump sum or regular payments currently has 38 members holding 99,243 OrdinaryShares. Further details can be found on the website www.phpgroup.co.uk andwww.capitaregistrars.com/php. The Notice of the Annual General Meeting and proxy card for the Annual GeneralMeeting to be held on 15 November 2007 at 10.30am is enclosed with the InterimReport. Outlook Our market remains strong and while there has been uncertainty in other parts ofthe property sector, investor and tenant demand for modern primary health carefacilities remain high. The government's agenda sees an increasing role for thedelivery of care in modern primary care buildings. The Group has an excellent portfolio of modern properties with secure longleases and high quality tenants, backed by the government, and has the prospectof continued rental growth which should flow through into dividends. Ourstrategy of sourcing new investments from several developers will enhance ourability to continue to enter into new commitments, ensuring the flow of newproperties in coming years. We remain a leader in our niche market and currently have a strong forwardpipeline of new properties. Future growth will be driven predominantly byfurther rental increases from the portfolio which continues to perform well.Despite recent turmoil in banking and money markets, the Board is optimisticabout the prospects for the Group. G A ElliotChairman 19 September 2007 GROUP INCOME STATEMENTfor the six months ended 30 June 2007 Note Six months Six months Six months Twelve months Year ended ended ended ended ended 30 June 31 December 30 June 30 June 30 June 2007 2006 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) (unaudited) (audited) Rental income 6,985 6,410 5,547 13,395 10,850 Finance lease income 604 141 141 745 281 Rental and related income 7,589 6,551 5,688 14,140 11,131 Net valuation gain on property portfolio 5,055 13,442 7,160 18,497 14,997Net gain on disposal of property - 44 401 44 401Administrative expenses (3,450) (2,271) (1,381) (5,721) (2,689)Exceptional items:Goodwill impairment 2 (126) (5,339) - (5,465) -UK-REIT conversion costs - (175) - (175) - Operating profit before financing costs 9,068 12,252 11,868 21,320 23,840 Finance income 718 110 97 828 258Finance costs (4,444) (3,394) (2,927) (7,838) (5,695) Profit before tax 5,342 8,968 9,038 14,310 18,403 Current taxation 7 (103) - 465 (103) 465Conversion to UK-REIT charge 7 - (5,157) - (5,157) -Deferred taxation charge for the period 7 - (3,880) (1,292) (3,880) (2,931)Deferred taxation release on conversion to 7 - 29,622 - 29,622 -UK-REIT Taxation (expense)/credit (103) 20,585 (827) 20,482 (2,466) Profit for the period* 5,239 29,553 8,211 34,792 15,937 Earnings per share - basic 4 18.9p 125.4p 36.2p 135.7p 70.3p - diluted 4 18.9p 125.4p 34.8p 135.7p 67.7p Adjusted earnings per share - basic 4 7.8p 6.9p 10.3p 14.7p 17.1p - diluted 4 7.8p 6.9p 9.9p 14.7p 16.5p Dividends paid: 6 £'000 £'000 £'000 £'000 £'000First interim dividend period ending December 2007 (7.5p) 1,821 - - 1,821 -Final dividend year ended June 2006 (6.75p) - 1,639 - 1,639 -Interim dividend year ended June 2006 (6.75p) - - 1,531 - 1,531 Final dividend year ended June 2005 (6.0p) - - - - 1,359 * Wholly attributable to equity shareholders of Primary Health Properties PLC All activities are continuing. GROUP BALANCE SHEETas at 30 June 2007 Note At 30 At 31 At 30 June December June 2007 2006 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited)Non current assetsInvestment properties 3 270,434 248,316 199,569Development properties 3 9,174 9,525 -Development loans 2,826 1,184 1,712Net investment in finance leases 2,905 2,487 2,492Derivative interest rate swaps 7,905 1,901 1,415 293,244 263,413 205,188 Current assetsTrade and other receivables 3,459 1,855 1,470Net investment in finance leases 49 12 12Cash and cash equivalents 3,692 3,829 3,973 7,200 5,696 5,455 Total assets 300,444 269,109 210,643 Current liabilitiesDerivative interest rate swaps - - (74)Corporation tax payable (289) (201) (181)UK-REIT conversion charge payable 1 (1,012) (645) -Deferred rental income (3,138) (2,988) (2,466)Trade and other payables (5,142) (4,591) (2,604) (9,581) (8,425) (5,325)Non current liabilitiesTerm Loan (135,650) (153,250) (112,800)Deferred tax 7 - - (21,193)UK-REIT conversion charge payable 1 (4,145) (4,512) -Derivative interest rate swaps - (735) - (139,795) (158,497) (133,993) Total liabilities (149,376) (166,922) (139,318) Net assets 151,068 102,187 71,325 EquityShare capital 16,794 12,139 11,339Share premium 48,012 13,943 12,022Capital reserve 1,618 1,618 1,618Cash flow hedging reserve 7,905 1,166 939Retained earnings 76,739 73,321 45,407 Total equity * 151,068 102,187 71,325 Net asset value per share Note - basic 8 449.8p 420.9p 314.5p - diluted 8 449.8p 420.9p 305.1p Adjusted net asset value per share ** - basic 8 449.8p 420.9p 408.0p - diluted 8 449.8p 420.9p 392.4p * Wholly attributable to equity shareholders of Primary Health Properties PLC. ** Adjusted for deferred taxation at 30 June 2006, prior to REIT conversioncharge. These financial statements have been prepared in accordance with the accountingpolicies set out in the latest Annual Report for the year ended 30 June 2006. Group Statement of Changes in Equity (unaudited)for the six months ended 30 June 2007 Cash flow Share Share Capital hedging Retained capital premium reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 31 December 2006 12,139 13,943 1,618 1,166 73,321 102,187 Profit for the period - - - - 5,239 5,239Transfer to income statement on cash flow hedges - - - 295 - 295 Income and expense recognised directly inequity:Gain on cash flow hedges taken to equity - - - 6,444 - 6,444 Total recognised income and expense for the period - - - 6,739 5,239 11,978 Issue of shares (net of expenses) 4,655 34,069 - - - 38,724Dividends paid:First interim dividend for period ending 31December 2007 (7.5p) - - - - (1,821) (1,821) 30 June 2007 16,794 48,012 1,618 7,905 76,739 151,068 Group Statement of Changes in Equity (unaudited)for the twelve months ended 30 June 2007 Cash flow Share Share Capital hedging Retained capital premium reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 30 June 2006 11,339 12,022 1,618 939 45,407 71,325 Profit for the period - - - - 34,792 34,792Transfer to income statement on cash flow hedges - - - 300 - 300 Income and expense recognised directly inequity:Gain on cash flow hedges taken to equity - - - 6,264 - 6,264Deferred tax on loss on cash flow hedges forthe year - - - 52 - 52Deferred tax on loss on cash flow hedgesreleased* - - - 350 - 350 Total recognised income and expense for theyear - - - 6,966 34,792 41,758Issue of shares (net of expenses) 5,455 35,990 - - - 41,445Dividends paid:Final dividend for the year ended 30 June2006 (6.75p) - - - - (1,639) (1,639)First interim dividend paid or the periodending 31 December 2007 (7.5p) - - - - (1,821) (1,821) 30 June 2007 16,794 48,012 1,618 7,905 76,739 151,068 * Deferred tax was released in the period to 31 December 2006 due to theimpending conversion to UK-REIT. Group Statement of Changes in Equity (unaudited)for the six months ended 31 December 2006 Cash flow hedging Share Share Capital hedging Retained capital premium reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 30 June 2006 11,339 12,022 1,618 939 45,407 71,325 Profit for the period - - - - 29,553 29,553Transfer to income statement on cash flow hedges - - - 5 - 5Income and expense recognised directly inequity:Loss on cash flow hedges taken to equity - - - (180) - (180)Deferred tax on loss on cash flow hedges forthe period - - - 52 - 52Deferred tax on cash flow hedges released* - - - 350 - 350 Total recognised income and expense for theperiod - - - 227 29,553 29,780Issue of shares (net of expenses) 800 1,921 - - - 2,721Dividends paid:Final dividend for the year ended 30 June2006 (6.75p) - - - - (1,639) (1,639) 31 December 2006 12,139 13,943 1,618 1,166 73,321 102,187 * Deferred tax was released in the period to 31 December 2006 due to theimpending conversion to UK-REIT. Group Statement of Changes in Equity (audited)for the year ended 30 June 2006 Cash flow Share Share Capital hedging Retained capital premium reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 1 July 2005 11,326 11,952 1,618 (1,292) 32,175 55,779 Profit for the year - - - - 15,937 15,937Transfer to income statement on cash flow hedges - - - 238 - 238Income and expense recognised directly inequity:Gains on cash flow hedges taken to equity - - - 2,949 - 2,949Deferred tax on cash flow hedges taken toequity - - - (956) - (956) Total recognised income and expense for theyear - - - 2,231 15,937 18,168Issue of shares (net of expenses) 13 70 - - - 83Share based payment charge - - - - 185 185Dividends paid:Final dividend for the year ended 30 June2005 (6.0p) - - - - (1,359) (1,359)Interim dividend for the year ended 30 June2006 (6.75p) - - - - (1,531) (1,531) 30 June 2006 11,339 12,022 1,618 939 45,407 71,325 Group Cash Flow Statementfor the six months ended 30 June 2007 Six months Six months Twelve months Year ended ended ended ended 30 June 30 June 30 June 30 June 2007 2006 2007 2006 £'000 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) (audited) Operating activitiesProfit before tax 5,342 9,038 14,310 18,403Less: Finance income (718) (97) (828) (258)Plus: Finance costs 4,444 2,927 7,838 5,695 Operating profit before financing costs 9,068 11,868 21,320 23,840 Adjustments to reconcile Group operating profitto net cash flows from operating activities:Less: Revaluation gains on property (5,055) (7,160) (18,497) (14,997)Less: Gains on disposal of property - (401) (44) (401)Plus: Goodwill impairment 126 - 5,465 -Plus: Share based payment expense - 93 - 185(Increase)/decrease in trade and other receivables (1,110) 142 (680) (54)Increase in trade and other payables 917 52 1,651 212 Cash generated from operations 3,946 4,594 9,215 8,785Interest received from developments 35 117 142 219Taxation paid (15) (34) (15) (34) Net cash flow from operating activities 3,966 4,677 9,342 8,970 Investing activitiesReceipts from disposal of investment properties - 7,711 465 7,711Payments to acquire investment properties (16,824) (15,311) (29,715) (25,770)Development loans advanced (1,509) (1,863) (2,642) (2,612)Bank interest received 27 35 55 47Acquisition of subsidiary (410) - (30,803) - Net cash flow used in investing activities (18,716) (9,428) (62,640) (20,624) Financing activitiesProceeds from issue of shares 38,752 - 38,747 (4)(net of expenses)Cash received on exercise of Management Options - - 2,726 -Term bank loan drawdowns 14,900 10,800 55,350 24,000Term bank loan repayment (32,500) - (32,500) -Interest paid (4,718) (2,781) (7,846) (6,678)Equity dividends paid (1,821) (1,531) (3,460) (2,803) Net cash flow from financing activities 14,613 6,488 53,017 14,515 (Decrease)/increase in cash and cash equivalents for the period/year (137) 1,737 (281) 2,861 Cash and cash equivalents at start of period/ year 3,829 2,236 3,973 1,112 Cash and cash equivalents at end of period/year 3,692 3,973 3,692 3,973 NOTES: 1. Accounting Policies Basis of preparation/ Statement of compliance The interim report for the six months ended 30 June 2007 has been prepared inaccordance with IAS 34 'Interim Financial Reporting'. The interim report does not include all the information and disclosures requiredin the annual financial statements and should be read in conjunction with theGroup's annual financial statements as at 30 June 2006. The financial information contained in this report does not constitute statutoryaccounts within the meaning of Section 240 Companies Act 1985. The auditors'report on the full financial statements under section 235 Companies Act 1985,for the year ended 30 June 2006, did not contain a statement under Section 237(2) or (3) Companies Act 1985. This audit report, which was unqualified, wasdelivered to the Registrar of Companies together with financial statements forthe year ended 30 June 2006. Convention The financial statements are presented on a historical cost basis inSterling rounded to the nearest thousand. Segmental reporting The Group operates under one business segment and one geographical segment,being investment in primary health care property within the United Kingdom. Basis of consolidation The Group's financial statements consolidate the financial statements of PrimaryHealth Properties PLC and its wholly owned subsidiary undertakings. Subsidiariesare consolidated from the date of their acquisition, being the date on which theGroup obtained control and continue to be consolidated until the date that suchcontrol ceases. Control comprises the power to govern the financial andoperating policies of the investee so as to obtain benefit from its activitiesand is achieved through direct or indirect ownership of voting rights; currentlyexercisable or convertible potential voting rights; or by way of contractualagreement. The financial statements of the subsidiary undertakings are preparedfor the accounting reference period ending 31 December each year, usingconsistent accounting policies. All intercompany balances and transactions,including unrealised profits arising from them, are eliminated. Conversion to UK-REIT The Group's conversion to UK REIT status was effective from 1 January 2007. Conversion to a UK-REIT results in, subject to continuing relevant UK-REITcriteria being met, the Group's property profits, both income and gains, beingexempt from UK taxation from 1 January 2007. The deferred tax liabilities as at31 December 2006 of £30.0m are therefore released with £29.6m credited to theGroup Income Statement and £0.4m to the cash flow hedging reserve. On conversion to a UK-REIT, the Group is subject to a one off taxation chargebased on the value of properties as at the date of conversion, amounting to£5.2m. This amount is payable over four years. Change of accounting reference date The Group changed its accounting reference date to 31 December, with effect from1 January 2007. The current accounting reference period, which commenced on 1July 2006, will therefore comprise 18 months ending 31 December 2007. Inaddition to the interim financial statements for the six months ended 31December 2006, and this second interim report for the six months ended 30 June2007, the Group will prepare final financial statements for the 18 month periodending 31 December 2007. 2. Acquisition of PHIP CHH Limited ("CHH") On 22 December 2006, the Group exchanged contracts to acquire 100% of theordinary share capital of CHH for a cash consideration of £31.0m. CHH was theholding company of a group of companies that owned nine primary healthcarefacilities across the UK which have been incorporated into the Group'sportfolio. Of the nine facilities, three are under construction and are expected to becompleted by 31 December 2007. In addition, two of the completed facilities areundergoing extension work, which is also expected to be finished in 2007. Consideration of £30.9m was paid upon completion with a further balance of £0.1mpaid in April 2007. Cash acquired upon acquisition of CHH amounted to £0.2m. The total gross assets acquired once fully developed are expected to amount to£39.2m. These assets are expected to generate a total annual rental income ofapproximately £2.0m, reflecting an initial yield of approximately 5%. Details of the acquisition of CHH: £'000 Total cost of acquisition 30,978Investment and development property acquired (30,825)Other net liabilities acquired 5,312 Goodwill arising on acquisition 5,465 Prior to the acquisition of CHH, the investment and development properties wereincluded in the books of CHH at £21.5m. A fair value exercise was carried out byLambert Smith Hampton as at 1 December 2006 resulting in an uplift in value ofthe properties of £9.3m to £30.8m. A deferred tax liability arose on thisuplift of £2.8m. As the Group paid consideration equal to the assessed value of the acquiredproperties, goodwill arises in respect of the other net liabilities acquired,principally a deferred tax liability of £4.9m. However, on conversion toUK-REIT, the deferred tax liability is eliminated resulting in an impairment ofgoodwill arising on acquisition. 3 Investment Properties The freehold, leasehold and development properties have been independentlyvalued at fair value by Lambert Smith Hampton Chartered Surveyors and Valuers asat 30 June 2007. The revaluation gain for the six months ended 30 June 2007 amounted to £5.1m,giving an overall revaluation gain of £18.5m for the twelve months to 30June 2007. The revaluation gain for the year ended 30 June 2006 amounted to£15.0m. Property additions for the six months ended 30 June 2007 amounted to £16.5m,giving total additions for the twelve months to 30 June 2007 of £61.9m(including £30.8m on the PHIP CHH acquisition). There were no propertiesdisposed of in the six months to 30 June 2007. Properties disposed of during thetwelve months to 30 June 2007, valued at £0.4m as at 30 June 2006, realised again of £0.04m. Property additions for the year ended 30 June 2006 amounted to £27.5m.Properties disposed of for the year ended 30 June 2006, valued at £6.8m as at 30June 2005, realised a gain of £0.4m. 4 Earnings per share Following the exercise of the Management Options by the Joint Managers on 21September 2006, there is no dilution and therefore there is no differencebetween the basic and the diluted net asset values as at 31 December 2006 and 30June 2007. The purpose of calculating an adjusted earnings per share, is to provide abetter indication of dividend cover for the period by excluding capital itemsincluding valuation gains. (^) Weighted average number of Ordinary Shares in issue during the period. * Excess of the total number of potential shares on option exercise over thenumber that could be issued at fair value (IAS 33: "Earnings per share"). ** All Management Options were exercised in full on 21 September 2006. The calculation of basic and diluted earnings per share as at 30 June 2007 is based on the following: Earnings per share for the six months ended 30 June 2007 Net profit attributable to Ordinary Ordinary(^) Shareholders shares Per share £'000 number pence Basic and diluted earnings per share 5,239 27,673,730 18.9 Adjusted earnings per share for the six months ended 30 June 2007 Net profit attributable to Ordinary Ordinary(^) Shareholders shares Per share £'000 number Pence Basic and diluted earnings per share 5,239 27,673,730 18.9 Adjustments to remove:Incentive fee accrual 1,839Goodwill impairment 126Net valuation gains on valuation of property (5,055) Adjusted basic and diluted earnings per share 2,149 27,673,730 7.8 Earnings per share for the six months ended 30 June 2006 Net profit attributable to Ordinary Ordinary(^) Shareholders shares Per share £'000 number pence Basic earnings per share 8,211 22,677,718 36.2 Options exercised* - 917,037 ** Diluted earnings per share 8,211 23,594,755 34.8 Adjusted earnings per share for the six months ended 30 June 2006 Net profit attributable to Ordinary Ordinary(^) Shareholders shares Per share £'000 number pence Basic earnings per share 8,211 22,677,718 36.2 Adjustments to remove:Deferred tax charge 1,292Net valuation gains on valuation of property (7,160) Adjusted basic earnings per share 2,343 22,677,718 10.3Options exercised* - 917,037 ** Adjusted diluted earnings per share 2,343 23,594,755 9.9 Earnings per share for the twelve months ended 30 June 2007 Net profit attributable to Ordinary Ordinary(^) Shareholders shares Per share £'000 number pence Basic and diluted earnings per share 34,792 25,631,493 135.7 Adjusted earnings per share for the twelve months ended 30 June 2007 Net profit attributable to Ordinary Ordinary(^) Shareholders shares Per share £'000 number pence Basic and diluted earnings per share 34,792 25,631,493 135.7 Adjustments to remove:Incentive fee accrual 2,591Goodwill impairment 5,465UK-REIT conversion charge 5,157Deferred tax charge 3,880Deferred tax release (29,622)Net valuation gains on valuation of property (18,497) Adjusted basic and diluted earnings per share 3,766 25,631,493 14.7 Earnings per share for the year ended 30 June 2006 Net profit attributable to Ordinary Ordinary(^) Shareholders shares Per share £'000 number pence Basic earnings per share 15,937 22,667,946 70.3 Option exercise* - 861,960 ** Diluted earnings per share 15,937 23,529,906 67.7 Adjusted earnings per share for the year ended 30 June 2006 Net profit attributable to Ordinary Ordinary(^) Shareholders shares Per share £'000 number pence Basic earnings per share 15,937 22,667,946 70.3 Adjustments to remove:Deferred tax charge 2,931Net valuation gains on valuation of property (14,997) Adjusted basic earnings per share 3,871 22,667,946 17.1Option exercise* - 861,960 ** Adjusted diluted earnings per share 3,871 23,529,906 16.5 5 Performance incentive scheme On 16 November 2006, Shareholders approved the amendments to the ManagementAgreement whereby the Joint Managers are entitled to a performance incentive feeof 15% of any performance in excess of an 8% per annum increase in the Company's"Total Return" as derived from the audited financial statements for therespective financial period. The Total Return is determined by comparing the variation in the stated netasset value per share (on a fully diluted basis, adjusting for deferred tax andthe REIT conversion charge and adding back gross dividends paid or declared insuch period) against the fully diluted net asset value per share from theprevious period's audited accounts. Included in Administration Expenses within the Income Statement for the twelvemonths to 30 June 2007 is a performance incentive fee expense of £2,591,000 (sixmonths to 30 June 2007: £1,839,000, six months to 31 December 2006: £752,000). 6. Dividends paid Dividends paid in the period are as follows: No of shares Six months Six months Twelve dividend paid to to months to Year to upon 30 June 30 June 30 June 30 June 2007 2006 2007 2006 £'000 £'000 £'000 £'000 First interim dividend for the period ending 31 December 2007(7.5p) 24,277,718 1,821 - 1,821 - Final dividend for the year ended 30 June 2006 (6.75p) 24,277,718 - - 1,639 - Interim dividend for the year ended 30 June 2006 (6.75p) 22,677,718 - 1,531 - 1,531 Final dividend for the year ended 30 June 2005 (6.0p) 22,677,718 - - - 1,359 1,821 1,531 3,460 2,890 The Board proposes to pay an interim dividend of 7.5p per Ordinary Share for the six months to 30 June 2007, payable on 23 November 2007, amounting to £2,519,032. 7. Taxation Taxation in the Income Statement: Six months Six months Six months Twelve months Year ended ended 30 June ended 31 ended 30 June ended 30 June 30 June 2007 December 2006 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) (unaudited) (audited) Current taxUK Corporation tax on non property income 30 - 181 30 181Adjustments in respect of prior period 73 - (646) 73 (646) 103 - (465) 103 (465)Conversion to UK-REIT charge - 5,157 - 5,157 - 103 5,157 (465) 5,260 (465) Deferred taxDeferred tax charge for the period/year - 3,880 1,292 3,880 2,931 Deferred tax release on conversion to - (29,622) - (29,622) -UK-REIT (see note 1) - (25,742) 1,292 (25,742) 2,931 Taxation expense/(credit) in the Income Statement 103 (20,585) 827 (20,482) 2,466 Taxation in the Balance Sheet:Deferred tax liability - on timing differences - - 6,186 - 6,186 - on revaluation gains - - 14,605 - 14,605 - on derivative interest rate swaps - - 402 - 402 Deferred tax liability at end of period/ - - 21,193 - 21,193year 8 Net asset value calculations There is no difference between the normal and adjusted net asset values as at 31December 2006 and 30 June 2007, due to the release of all deferred taxliabilities on conversion to UK-REIT status. Following the exercise of the Management Options by the Joint Managers on 21September 2006, there is no dilution and therefore no difference betweenadjusted basic and diluted net asset values as at 31 December 2006 and 30 June2007. Net asset values have been calculated as follows: 30 June 31 December 30 June 2007 2006 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Net assets per Group Balance Sheet * 151,068 102,187 71,325Add - Receipts assuming the exercise of Management Options - - 2,736 Diluted net assets 151,068 102,187 74,061 No. of shares No. of shares No. of sharesOrdinary shares:Issued share capital * 33,587,094 24,277,718 22,677,718Add - New shares issued assuming the exercise of the Management Options - - 1,600,000 Diluted number of Ordinary Shares 33,587,094 24,277,718 24,277,718 Net asset value per share 449.8p 420.9p 314.5pDiluted net asset value per share 449.8p 420.9p 305.1p * figures for basic net asset value calculations Calculations assume that the dilution takes place on the respective BalanceSheet dates. Adjusted net asset value per share 30 June 31 December 30 June 2007 2006 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Net assets per Group Balance Sheet * 151,068 102,187 71,325Adjustments to add back:Deferred tax on timing differences - - 6,186Deferred tax on revaluation gains - - 14,605Deferred tax on derivative interest rate swaps - - 402Adjustment to remove: Adjusted net assets 151,068 102,187 92,518 Add - Receipts assuming the exercise of Management Options - - 2,736 Diluted adjusted net assets 151,068 102,187 95,254 No. of shares No. of shares No. of sharesOrdinary shares:Issued share capital * 33,587,094 24,277,718 22,677,718Add - New shares issued assuming the exercise of Management Options - - 1,600,000 Diluted number of Ordinary Shares 33,587,094 24,277,718 24,277,718 Adjusted net asset value per share 449.8p 420.9p 408.0pDiluted adjusted net asset value per share 449.8p 420.9p 392.4p * figures for basic net asset value calculations Calculations assume that the dilution takes place on the respective BalanceSheet dates. 9. The Interim Report will be posted to Shareholders on 3 October 2007 and tothose on the mailing list as soon as practicable thereafter. It will also beavailable on request from the Company Secretary, J O Hambro Capital ManagementLimited, Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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