Interim Results

30th Nov 2007 07:01

Warner Estate Holdings PLC30 November 2007 Warner Estate Holdings PLC A PERIOD OF CONSOLIDATION Warner Estate Holdings PLC ("Warner Estate" or "Group"), the property investmentand management company has today announced its preliminary results for the half year ended 30 September 2007. Financial Highlights • Adjusted net asset value per share 766p (March 2007: 800p)(i) • Net asset value per share 752p (March 2007: 774p)(ii) • Total annualised adjusted negative return 4.3% (September 2006: positive 23.7%) • Operating profit before net gain on investments £9.9million (September 2006: £9.4million) • Realised profits £11.2million (September 2006: £7.9million)(iii) • £6.4million capital profits on property disposals - 13% over March 2007 values • Earnings per share excluding fair value movements 22.1p (September 2006: 15.0p) • Losses per share 10.7p (September 2006: earnings 73.3p) • Interim dividend up 12.5% to 11.25p Business Highlights • Property owned and under management £3.3billion • Commercial rent roll owned and under management up 3% to £180million per annum • Completion of development at Bouverie Place, Folkestone in November 2007 (i) Adjusted for deferred tax on on assets not within the REIT election and the proposed interim dividend (ii) The NAV includes deferred tax on assets not within the REIT election and is before the proposed interim dividend (iii) This excludes fair value movements, Group and joint ventures' tax Philip Warner, Chairman of Warner Estate commented "Our strategy continues to increse revenue and deliver outperformance againstour IPD benchmark. We are soundly financed both to weather current conditionsand to take advantage of attractive opportunities. Reflecting the Board'sconfidence in the future, the interim dividend has been raised by 12.5%." Date: 30 November 2007 For further information contact: Warner Estate Holdings PLC City ProfilePhilip Warner, Chairman Simon CourtenayPeter Collins, Finance Director Tel: 020-7448-3244Michael Stevens, Property DirectorTel: 020-7907-5100Web: www.warnerestate.co.uk CHAIRMAN'S STATEMENT-------------------- The property market has been heavily influenced over the last few months byturmoil in the financial markets. Although our results reflect that negativeinfluence, there is much from which shareholders can draw encouragement both inthe results and in the actions flowing from the strategy pursued in recent yearsin anticipation of more difficult times. In particular the Group's propertyperformance has beaten the relevant IPD benchmark, one of our key measurements. RESULTS OVERVIEW In the six months to September 2007 adjusted net asset value per share fell by4% from 800p to 766p and net asset value per share by 3% from 774p to 752p.Nevertheless, there is further value both in the Apia and AIF asset managementbusinesses, which generated a recurring operating profit of £2.5million(September 2006: £2.2million), and in the development pipeline whereinexpenditure is held at cost until completion. The Group made a loss for the period after tax of £6.0million (September 2006:£39.0million profit). Realised profit before tax, excluding share of jointventures' tax credit, rose by £3.3million to £11.2million (September 2006:£7.9million) but due to the reduction in property values the Group made a lossof £9.7million (September 2006: £48.3million profit) before tax. The propertyrevaluation deficit of £20.9million (September 2006: £24.5million surplus) isunrealised and actual sales of £45million of property (March 2007 values) weremade at an average profit of 13% during the six months to September 2007.However the effect of the deficit, albeit mitigated by a tax saving of at least£2.4million due to our REIT status, was to produce a negative total return of4.3% (September 2006: positive 23.7%). A more detailed analysis of the half year will be found in the Reports from theProperty Director and the Finance Director which follow this statement. The Board has increased the interim dividend to 11.25p against 10p last year, arise of 12.5%. Although the dividend is not covered by recurring earnings, itis covered twice by realised profits after tax and will be paid on 22 February2008 to shareholders on the register at close of business on 25 January 2008. STRATEGY AND OUTLOOK The Group's focus is on income, the generating, improving and increasing ofrevenue. The move into fund management was made with that in mind and so too wasthe build up of a development capability. Development not only creates newincome but improves the quality of that already flowing. The Group's 200,000 sqft shopping centre in Folkestone completed this month, 92% pre-let, and will bevalued at 31 March 2008. In joint venture with Bank of Scotland, constructionstarted on 100,000 sq ft of retail in Bolton, already 70% pre-let and scheduledfor completion in the next financial year. More development is in the pipelineand the sales and purchases made over the last few years and continuing havefurther upgraded the quality of the portfolio as a whole. The Group pursues a prudent approach to borrowing and has little exposure tocurrent credit market conditions. We have a number of long term bankingrelationships, which include joint ventures with our banks, and all the Group'sborrowings are on bank balance sheets and not exposed to the commercial mortgagebacked securities (CMBS) market. Although gearing at 86% (currently 83%) washigher than anticipated at 30 September, following more acquisitions on balancesheet than in joint venture, the properties purchased have been in the bestperforming sector, London offices, and the Group's loan to value ratio (LTV) isa comfortable 58%. Income cover is, arguably even more important than LTV andthe Group's quantity and quality of rental income have continued to increase.Only 7% of the Group's revolving facilities are scheduled for renewal during thecurrent financial year and gearing is expected to reduce following more budgetedsales. Yields have moved out across most sectors and the investment market is opaqueand uncertain; this is a reflection of financial markets and limitedtransactional evidence, not of the occupational market. Our underlying incomestream has increased on a like for like basis during the period with reducedvoid levels and improved rental values. Although we expect further outwardmovement in yields, the current share price represents a substantial discountboth to today's NAV and to that which might follow reasonable expectations ofyield shift. Furthermore, the effect on the Group will be ameliorated by theabsence of tax, consequent upon our REIT status, by the improvements in qualityand quantity of income brought about by asset management and by the prospect oflower interest rates in 2008. PROPERTY REPORT--------------- The Group manages a total portfolio of £3.3billion of property for itself andexternal investors. Of the property managed, some £1.2billion represents theGroup's equity commitment which is broken down as directly owned property (42%),share of investment in joint ventures (40%) and share of investment in funds(18%). It is this equity portfolio which drives the Group's NAV and generatesthe majority of its income. The element that is not owned produces managementfee income and the potential for performance fees which supplement the Group'soverall profit performance. In the six months to September 2007 this incomestream produced a profit before tax of £1.5million (September 2006:£1.0million) for a minimal capital investment. Across the total managed portfolio, annual rental income for the first sixmonths increased by £4.8million to £179.9million and income from standinginvestments, those managed throughout the period, rose by £1.8million. The maindrivers have been a reduction in void rate which, excluding the AshtenneIndustrial Fund (which has a deliberate void rate of 10% to14%), now stands at4.9% representing £6.4million pa, down from 6.3% at March 2007, and ouraggressive asset management programme. The same core income improvementphilosophy is at the heart of our management strategy. Our target void rate atthe start of the year was 5.0% and this has already been achieved. Total return from our equity portfolio for the first six months was 2.1% (on thetotal managed portfolio of £3.3billion it was 2.2%) compared with 1.1% from theIPD benchmark, with income returns of 2.7% (total managed portfolio 2.8%)against 2.4% from IPD. Occupational markets continue to be robust in the face of rising yields, theopposite of the situation 12 to 24 months ago, and there is now netdisinvestment as opposed to considerable demand. The equity portfolio's ERVincreased by £5.5million over the first six months to £80.2million pa,representing growth of 7% which provides plenty of opportunity for continuingincome improvement. The hard work put in over the last three years to bring our development pipelineforward is now coming to fruition with £1.88million of new contracted income tocome through in the second half of this year following November 2007 completionsat Folkestone and Bardon of which £1.74million is the Group's share. The tablebelow details the schemes completed and underway during this year. Rent achieved to Anticipated Cost of ERV (at date in Business Size Practical scheme to commencement total (and Group Comments Area Project sq ft Completion completion of works) as % of ERV) Interest & Timing Wholly Owned Folkestone, 200,000 Second half £27million £1.9million £1.6million 100% Centre opened Bouverie Place 07/08 (85%) 26.11.07 Shopping Centre Joint Ventures Bardon, Leics, 54,000 Second half £4.4million £0.275million £275,225 50% Practical Interlink Park 07/08 (100%) completion achieved 02.11.07 Bolton Shopping 100,000 Second half £35million £3.2million £1.9million 50% Under Centre - The 08/09 (59.5%) construction Market Hall In addition, the Ashtenne Industrial Fund, which the Group asset manages and hasa 6.5% investment in, has an active ongoing development programme with twoprojects currently underway at Optima Park in Kent and at Tameside Business Parkin Manchester, which totals 170,000 sq ft. The autumn credit crunch has brought illiquidity rather than, as yet, marketdeals generating comparable evidence of capital value decline; valuations are atpresent falling on sentiment and lower volumes. The IPD Quarterly index recorded a fall in value over the six months toSeptember 2007 of 1.3%, its first decline since 2001, and the IPD Universe netinitial yield rose by 6 bps to 4.64%. Our own wholly owned portfolio followed asimilar trend with its net initial yield rising by 7bps to 5.09% whilst theoverall managed portfolio of £3.3billion saw its net initial yield rise by 10bpsto 5.24% with a similar rise on the standing investments. A table showing thecomplete analysis of the All Property Returns against IPD can be found at theend of the Property Review. We believe there will be greater falls across themarket in the value of secondary assets, whilst prime investments should remainmore resilient. Our own properties increasingly lean towards prime, as reportedin June 2007, and this trend has continued in the first half year with£45million of property realising £55million before costs from disposals ofsecondary and ex-growth assets at a net 13% above their March 2007 values whichhave been replaced by £93million of Central London offices with significantasset management potential. KEY STATISTICS Total under management Warner equity investment 30 September 2007 31 March 2007 30 September 2007 31 March 2007 Capital Value £3,252million £3,221million £1,215million £1,172millionAnnualised rent roll £179.9million £175.1million £65.8million £62.6millionInitial Yield 5.24% 5.14% 5.15% 5.06%Equivalent Yield 6.26% 6.24% 5.95% 5.99%Average Unexpired Lease 6.80 years 7.16 years 8.63 years 6.96 yearsTermVoid Rate 8.6% 10.8% 5.9% 7.5%Number of Properties 542 562 n/a n/aAverage Lot Size £6.00million £5.73million n/a n/a *Investment properties and properties under the course of development, where the capital value is before the accounting adjustment for ground lease interest for leasehold properties and certain properties treated as finance lease assets of £4.5million (2006: £1.1million). WARNER EQUITY PORTFOLIO Property Type Ownership Share of Net Wholly Joint Share of Annualised Initial Equivalent Owned Ventures Funds Total Rent Roll ERV Yield Yield Weighting £million £million £million £million £million £million Shopping Centres 85 289 - 374 19.2 26.6 4.75% 5.89% 30.8%Shopping Centre 25 - - 25 n/a n/a n/a n/a 2.1%DevelopmentOther Retail 116 - - 116 6.0 6.8 4.99% 5.43% 9.5% Total Retail 226 289 - 515 25.2 33.4 4.78% 5.82% 42.4% Offices 205 51 137 393 22.4 26.7 5.20% 5.97% 32.3%Distribution 18 148 - 166 10.7 10.7 5.95% 5.95% 13.7%Industrial 44 - 83 127 7.0 8.9 5.41% 6.68% 10.5%Other 14 - - 14 0.5 0.5 n/a n/a 1.1% Total Equity 507 488 220 1,215 65.8 80.2 5.15% 5.95% 100.0% UNDER MANAGEMENT Number Capital Annualised rent Net initial of properties value roll ERV yield £million £million £million %Aggregate of all propertiesWholly Owned* 78 506.7 27.3 31.6 5.09%Joint Ventures (50% owned) • Agora / Agora Max Shopping Centres* 11 577.7 29.2 42.2 4.60% • Radial Distribution* 14 296.6 18.3 18.4 5.90% • Greater London Offices* 2 102.4 4.6 6.1 4.26%Funds asset managed by the GroupApia Regional Offices 22 501.0 28.2 32.7 5.27%Ashtenne Industrial** 415 1,267.3 72.3 94.7 5.42% Total under management 542 3,251.7 179.9 225.7 5.24% * Capital value is before accounting adjustments for ground lease interest for leasehold properties, and certain properties treated as finance lease assets ** Includes 100% of the Space Northwest JV portfolio Wholly Owned PortfolioValue: £506.7million (Cushman & Wakefield and Directors)Rental Income: £27.3million pa Acquisition activity has been almost exclusively focused on Central London withclose to £100million of acquisitions across three office buildings: AmericaHouse, America Square, London EC3 (£26.0million); 16 Upper Woburn Place LondonWC1 (£22.6million) and Cable House, New Broad Street, London EC2 (£44.0million).85% of the Wholly Owned properties are located in London and the South East. The strategy for selling out of smaller ex-growth properties has continued withthe realisation of approximately £55million, a net surplus of 13% on March 2007valuations, from the sale of 11 assets. Rental income has increased by £2.81million pa (11.5%) over the half year. Development Within our Wholly Owned portfolio the new 200,000 sq ft Bouverie Place ShoppingCentre, Folkestone reached practical completion in November 2007, 92% pre-let(by floor area) and in Aylesbury, where we are working with Aylesbury ValeDistrict Council on the 265,000 sq ft (24,628 sq m) extension to the Hale LeysCentre, a planning application is expected to be made in early 2008. Theacquisition of JS Real Estate plc in March 2007 included a number of potentialnew development opportunities most notably Herluin Way, Weston-Super-Mare,40,000 sq ft of out-of-town retail. In our joint ventures the 54,000 sq ft extension by Radial to Interlink Park,Bardon, Leicestershire, also reached practical completion in November and is100% pre-let. Works on the 100,000 sq ft (9,294 sq m) extension to Agora'sshopping centre in Bolton are continuing to programme and budget, 70% pre-let(by floor area) including the two anchor stores leased to H&M Hennes and Zara.Recent new pre-lets at £164 and £172 per sq ft headline Zone A are ahead of theinitial estimated rental value at the start of the scheme. The project is oncourse for opening in autumn 2008. In the Funds, AIF completed its 85,500 sq ft (7,946 sq m) industrial scheme of15 units at Quadrant Centre, Gloucester in April 2007. Construction started inMay 2007 on the redevelopment of Tameside Business Centre, Manchester consistingof 78,000 sq ft (7,249 sq m) of new office/industrial space. Phase 2 of OptimaPark, Crayford, Kent a six unit 93,000 sq ft (8,643 sq m) industrial park, wascompleted in August 2007 with 45% of the space pre-let or pre-sold at practicalcompletion. PROPERTY JOINT VENTURES (ALL 50% OWNED) Agora / Agora Max Shopping Centres Value: £577.7million (DTZ and Directors) Rental Income: £29.2million pa In June 2007 planning consent was granted for a new 1,400 sq ft (130 sq m) cafein The Grange Shopping Centre, Birkenhead which will be a flagshipsustainability project. Work is due to commence on site in early 2008. Recentlettings in The Grange and Pyramids Shopping Centres include Caffe Nero andRepublic, improving both the food and fashion offer. At The Pallasades in Birmingham discussions continue with Network Rail regardingtheir Gateway proposals for New Street Station. The scheme proposes extensivechanges to the station and the shopping centre. We continue to improve theretail offer at the centre with six new lettings completed since March includinga new letting to Pret a Manger, who have introduced the first of their newconcept 'Pret Pod'. Improvement works are planned in Cavern, Liverpool and early phases of theextension to Fishergate in Preston are being pursued with retailer attitude tothe centre continuing to be encouraging. In both Preston and Bolton we have extended the joint ventures' ownerships withthe acquisition of Victoria and Albert Buildings in Preston for £1.25million and32-34 Corporation Chambers, in Bolton, for £0.35million. Both providesignificant asset management opportunities. At Middleton, through activemanagement we have increased the rental level in the main mall from £72 per sqft Zone A (ITZA) to £78 per sq ft ITZA. Total income in Agora and Agora Max increased over the period by £500,000 pa. Radial Distribution Value: £296.6million (DTZ and Directors) Rental Income: £18.3million pa Following the purchase of a fourth 222,000 sq ft warehouse at DIRFT, Daventryfor £17.9million in January of this year, Radial now has 14 UK assets with atotal floor space of 3.2million sq ft under management. The new unit at DIRFTis vacant but has the benefit of a full rental cover until July 2008. A bespoke 54,000 sq ft extension and lease re-gear was completed to the Antaliswarehouse at Interlink Park, Bardon, Leicestershire in November. Radial is now focusing on its stated strategy to extend growth further intoEurope and hopes to purchase at least two European warehouses within the nextsix to nine months. Total income in Radial increased over the period by £33,000 pa. Greater London Offices Value: £102.4million (CBRE) Rental Income: £4.6million pa Assets owned by the joint venture continue to perform well on the back of strongmarket conditions. We completed the refurbishment of vacant space at 55 OldBroad Street and let all 27,100 sq ft to MWB Business Exchange at £40 per sq ftagainst ERV of £37.50 per sq ft. Total income fell over the period by £312,000 pa (6.8%). MULTI-INVESTOR PROPERTY FUNDS Apia Regional Office Fund Value: £501.0million (DTZ) Rental Income: £28.2million pa The Fund remains one of the few specialists investing exclusively in city centreoffices outside Central London. Over the six month period ending September 2007 there has been a total of c.35,000 sq ft of lettings representing new contracted income of £273,000 pa andhelping to reduce the overall void rate from 6.4% at March 2007 to a historicallow level of 5.4%. Notable letting successes have been achieved in the Scottish properties with afurther floor (14,253 sq ft) letting in 225 Bath Street, Glasgow to WA Fairhurstand a total of 10,000 sq ft in Apex 123, Edinburgh to EC Harris and Cyril Sweet,all ahead of ERV, and each following completed refurbishment projects. Ashtenne Industrial Fund (AIF) Value: £1.27billion (King Sturge and DTZ) Rental Income: £72.3million pa There has been little transactional activity in 2007 due to market conditionsand uncertainty over pricing. This change in the market was foreseen so theteam has been focused on the large number of value enhancing opportunitiesinherent in the Fund. As a result of this activity the void level of AIF hasfallen from 11.14% in March 2007 to 10.1% in September 2007 (200,000 sq ftreduction). Rental income has increased by £1.62million pa (2.3%). Over the last two years AIF has acquired £130million of assets (held at existinguse value) which have potential for either residential, office or retailalternative use. If planning applications for better use are achieved theseproperties will supplement the returns of the Fund in the short to medium term. The most noticeable transaction in the period was the sale of four vacantestates in the northwest for £8.2million which represented a 30% return oncosts. With the healthy occupier market throughout the UK for good quality industrialunits under 10,000 sq ft, AIF is well placed due to the size of units it ownsto minimise the effects of the present correction which is taking place inindustrial values. All Property Value 6 Month Returns Spot measures as at 30 September 2007 % WEH 100% Equity Total Capital Income Initial Equivalent Void Equity Value Invested Return Growth Return Yield Yield Rate £million £million Wholly Owned 100% 506.7 506.7 3.0% 0.4% 2.7% 5.09% 5.93% 6.0%Joint Ventures • Agora / Agora Max (Shopping Centres) 50% 577.7 288.8 0.5% (1.9)% 2.5% 4.60% 5.90% 6.9% • Radial (Distribution) 50% 296.6 148.3 0.0% (3.0%) 3.1% 5.90% 5.87% 0.0% • Greater London Offices 50% 102.4 51.2 6.2% 3.5% 2.5% 4.26% 5.31% 0.0% Funds asset managed by the Group • Apia 27% 501.0 137.4 2.8% 0.0% 2.8% 5.27% 5.88% 5.4% (Regional Offices) • AIF (Industrial) 7% 1,267.3 82.6 2.6% (0.2%) 2.8% 5.42% 6.88% n/a Total (excl. AIF from voids) 3,251.7 1,215.0 2.2% (0.6%) 2.8% 5.24% 6.3% 4.9% AIF included in void rate 8.6% IPD Monthly Index Industrials 0.6% (2.1%) 2.8% 5.38% 6.28% 11.1%IPD Monthly Index Offices 3.4% 1.0% 2.4% 4.51% 5.57% 10.4%IPD Monthly Index Retails (0.4%) (2.7%) 2.3% 4.45% 5.31% 7.2%IPD Monthly Index Shopping Centre 0.3% (2.3%) 2.6% 4.93% 5.90% 8.8% IPD All Property (excl. Industrials from voids) 1.1% (1.3%) 2.4% 4.64% 5.56% 8.5% IPD Industrials included in void rate 8.9% FINANCIAL REPORT---------------- The information contained in this review is extracted or calculated from theattached income statement, balance sheet, cashflow statement, statement ofrecognised income and expense, statement of changes in equity and notes, as hasthe information included in the presentation on these results that has beenposted on the Group's website together with these results. The presentationcontains some additional analysis of the results, particularly in respect of theanalysis of the Group's REIT and non-REIT income. It should also be noted thatthis is the first period in which the Group has announced its results as a REITwhereas the comparatives for September 2006 covered a period when the Group wasnot a REIT and therefore comparable REIT information is not available. Inaddition the Group's results include £2.0 million of tax credits in the pre taxprofit line as required under IFRS accounting for the profits of joint ventureswhich have been reallocated to the tax line in the following commentary. RESULTS For the six months to 30 September 2007, the Group made a loss before tax of£9.7million, which includes property revaluation deficits of £20.9millioncompared to a £24.5million surplus in 2006. 30 September 2007 30 September 2006 £million £million Recurring profit before taxation 5.1 6.5Non-recurring profits 6.1 1.4 Realised profits 11.2 7.9Fair value movements (20.9) 40.4 (Loss) / profit before tax (9.7) 48.3Joint ventures' tax 2.0 (5.8) (7.7) 42.5Group tax 1.7 (3.5) (Loss) / profit after tax (6.0) 39.0 The realised profit before tax rose by £3.3million to £11.2million compared tothe equivalent period in 2006. This increase was due to capital profits in theperiod of £6.4million compared to £1.8million in the comparable period andrepresented a 13% profit over the 31 March 2007 values. The Group's recurring profits fell by £1.4million to £5.1million. The mainreason for the reduction, accounting for £1.1million of the adverse variance, isthe disposal of higher yielding properties and their replacement with CentralLondon properties at lower yields with potential for significant growth,. Theother main constituents are increased void costs of £0.5million arising mainlydue to development works and additional administration costs which have beenpartly offset by an increase in asset management fees. Recurring profit before tax is analysed below and, as noted above, due to theGroup's conversion to a REIT best estimates have been used to reallocate headoffice costs for the period to 30 September 2006. Recurring Profit 30 September 2007 30 September 2006 £million £million Net income from property investment activities 10.1 9.3Net income from asset management activities 1.0 0.6Share of joint ventures' profits 0.7 0.6Unallocated head office costs (0.9) (0.8)Income from investment in funds 2.8 2.5Net interest payable (8.6) (5.7) 5.1 6.5 The average cost of debt during the period was 5.6% compared to 6.8% last year.The reduction in the cost of debt, despite a significant increase in interestrates, is due to last year's repayment of £65.5million of expensive debt coupledwith a reduction in the Group's borrowing margins. The reduction in property asset values of £20.9million includes £3.2millionrelating to three assets purchased in the last six months, two of which haveincreased in value although not sufficiently to totally offset the costs ofacquisition. The most recent purchase, Cable House, London for £44million,exchanged in August, completed on the 24 September and had its £2.5million ofpurchase costs written off. Given the purchase of a property within a month ofthe period end the impact of costs being written off is particularly acute inthese results. Fair Value Movements 30 September 2007 30 September 2006 £million £millionProperty - Wholly Owned (11.4) 8.2 - Share of Joint Ventures (9.5) 16.3 (20.9) 24.5Investments in Funds - AIF (0.7) 4.2 - Apia (0.3) 7.9 Other Investments (0.2) 1.1 Swaps & Caps Marked to Market - Wholly Owned 0.5 0.7 - Share of Joint Ventures 0.7 2.0 (20.9) 40.4 Due to the reduction in property values in the half year, the Group's totaladjusted return was a negative 4.3% compared to a positive 23.7% in thecomparable period last year. Return 30 September 2007 30 September 2006 £million £million (Loss) / profit for the period (6.0) 39.0 (Less) / add back deferred tax movement on revaluations (3.0) 1.7during the periodChange in fair value of fixed rate debt, net of tax (0.2) 0.9 Total adjusted return for the period (9.2) 41.6 Equity shareholders' funds at start of period 432.7 350.6 Annualised return on shareholders' funds -2.8% 22.2% Annualised adjusted return on shareholders' funds -4.3% 23.7% REIT Analysis The profit before tax has been analysed in the table below between profitsfalling within the REIT regime and therefore not taxable and those which remaintaxable. This shows that the Group made a loss in the period on its non-REITbusiness which was exacerbated by the fact that under the REIT rules all costsare apportioned against profits leaving no unallocated head office costs. Theperiod does not include any income from performance fees that might bereceivable by the Group as, whilst both funds managed by the Group haveperformed well in their year to date, they have December year ends and it is tooearly to say whether any performance fees will be earned this year. REIT Non-REIT Capital Fair Head Total Value Office Movement Costs** Asset Management Other Total £million £million £million £million £million £million £million £million Profit/(loss) before reallocated costs* 6.2 0.8 (1.1) (0.3) 6.7 (20.9) (1.4) (9.7)Reallocated costs** (0.3) (1.1) - (1.1) - - 1.4 - Profit/(loss) before tax* 5.9 (0.3) (1.1) (1.4) 6.7 (20.9) - (9.7)Current tax - 0.1 1.0 1.1 - (0.1) - 1.0Deferred tax - - - - - 2.7 - 2.7 Profit/(loss) 5.9 (0.2) (0.1) (0.3) 6.7 (18.3) - (6.0)after tax * This excludes tax credits in the joint ventures of £2.0million** These are pure head office costs which are reallocated to arrive at the REIT profit Tax This is the first year in which the Group has operated as a REIT. All profits,whether revenue or capital, that arise within the REIT part of the Group are nottaxable and, as the non-REIT element of the business in total made a loss, thereis no corporation tax payable in the period. The Group will continue to showdeferred tax on its listed and unlisted investments as these do not fall withinthe REIT although any distribution income from the Funds is not subject to tax.Movements on the value of interest rate swaps are also subject to deferred tax.During the period the income statement includes a credit of £0.8million due to areduction in the value of the Group's investments. In addition, our share ofjoint venture results will show deferred tax movements on the valuation ofproperties within Agora Max and Greater London Offices as these have not beenelected for REIT status. Our share of joint venture results includes a deferredtax credit of £2.2million as the decrease in the value of the properties ownedby Agora Max exceeded the increase in those owned by Greater London Offices andthis is offset by a charge of £0.2million on our share of the positive fairvalue movement of the joint venture interest rate swaps. In terms of the impact of the REIT the Group paid no corporation tax on its REITincome and would have paid £2.4million in capital gains tax on the capitalprofits made in the period if we had not converted to a REIT. This represents15% of the REIT conversion charge paid by the Group excluding the jointventures. Fund Management This business manages £1.8billion (March 2007: £1.8billion) of assets and hasseven regional offices which employ 130 people of which 29 are service chargerecoverable. The Ashtenne Industrial Fund and Apia Regional Office Fund havefour and fourteen years respectively to run. Summary Fund Management Income Statement 30 September 2007 30 September 2006 £million £million Asset management and other fees 6.2 5.3Direct expenditure (3.7) (3.1) Operating profit 2.5 2.2Head office recharges (0.8) (1.0) 1.7 1.2 Performance fees - -Reallocated net interest (0.2) (0.2) Profit before reallocated costs 1.5 1.0 Operating margin 40% 41% AIF Asset Management 30 September 2007 30 September 2006 £million £million Asset management fees 3.2 2.6Letting and other fees 2.0 1.8 Total fees 5.2 4.4Direct expenditure (3.2) (2.7) Operating profit 2.0 1.7Head office recharges (0.7) (0.8) 1.3 0.9 Performance fees - -Reallocated net interest (0.2) (0.2) Profit before reallocated costs 1.1 0.7 Operating margin 38% 38% Group investment in AIFDistributions from fund 0.8 1.1Value of units at 30 September 2007 44.1 42.9% share of fund 6.52% 6.52%Annualised yield on holding 3.87% 5.24% Total fees earned by this business increased by 18% year-on-year as a result ofthe expansion of AIF in the period with the profit before performance fees andreallocated net interest being 44% higher at £1.3million. Negotiations toreview the formulae for the performance fee assessment and to extend the life ofthe Fund, which currently has four years to run, have been scheduled for 2008. This business is carried in the Group's accounts at £11million being theacquisition goodwill net of surpluses made on the disposal of assets purchasedas part of the acquisition. An interest element of £0.2million (September 2006:£0.2million) relating to the carrying value of this goodwill has beenreallocated to this business unit and profit before tax and reallocated groupcosts has risen by 57% to £1.1million. Apia Asset ManagementIncome statement 30 September 2007 30 September 2006 £million £million Asset management fees 1.0 0.9Direct expenditure (0.5) (0.4) Operating profit 0.5 0.5Head office recharges (0.1) (0.2) 0.4 0.3Performance fees - -Profit before reallocated costs 0.4 0.3 Operating margin 50% 55% Group investment in ApiaDistributions from fund 2.0 1.4Value of units at 30 September 2007 74.5 71.8% share of fund 27.43% 28.59%Annualised yield on holding 5.43% 3.77% In the period to 30 September 2007 the business earned £1.0million in managementfees, an increase of 11% from September 2006. This increase resulted in profitin the period of £0.4million. The Group's accounts and therefore the NAV do notinclude any value for the Apia fund management business which was set up twoyears ago and established in-house rather than purchased from a third party. Management Fees The table below briefly summarises the main terms on which the Group receivedits management fee income from each of the funds. Management Fee % Property Year Property Valuation Rent Roll End Asset Value 30 September 2007 30 September Name Other Fees Performance Fees 2007 AIF 31/12 0.5% Lettings, rent Based on outperforming the IPD £1,267.3million £72.3million (a) reviews, disposals, all industrial index on a additions, etc 3-year rolling basisApia 31/12 0.4%(b) n/a Based on outperforming the IPD £501.0million £28.2million (a) regional office index (excluding business parks) on a 3-year rolling basis and a minimum 10% total return. (a): The performance fees in these Funds are receivable in the second half of the Group's financial year to 31 March as the fees are calculated on the results of the Funds for the year to 31 December. (b): The Apia management fee reduces to 0.35% on the property assets managed between £0.5billion and £1.0billion and to 0.3% on the property assets managed over £1.0billion. Earnings per Share Losses per share were 10.7p (September 2006: earnings 73.3p). Earnings pershare excluding valuation movements were 22.1p (September 2006: 15.0p). Theearnings per share figures are not strictly comparable as those for 2006 includea full tax charge on realised profits and deferred tax on properties which arenow within the REIT and this reduced the earnings per share by 6.5p per share.This period's earnings are further analysed as follows: £million Pence per share REIT profits 5.9 10.6Capital profits 6.7 12.0Non-REIT losses (0.3) (0.5) 12.3 22.1Revaluation movements (properties, investments and derivative (18.3) (32.8)financial instruments) (6.0) (10.7) Dividends Under the REIT rules, 90% of the profits of the property rental business (theREIT profits) for the year must be distributed by way of a dividend known as aProperty Income Distribution ("PID"). This distribution will be made net of 22%withholding tax unless shareholders have filled in the appropriate formsallowing the dividend to be paid gross, details of which were circulated toshareholders earlier this month and are contained on the Group's website. The Group has made the decision to declare an interim dividend of 11.25p, thewhole of which will be distributed as a PID. As seen in the table above, 10.6prelates to REIT profits which will be 100% distributed. The remaining 0.65p ofthe interim dividend relates to capital profits made on the disposal of theGroup's investment properties. These profits are not liable to tax and anydistributions are treated as part of the PID. Cashflow The cashflow from operations in the period shows an outflow of £16.2million.This outflow includes some £18.1million in respect of the JS Real Estate PLC ("JSRE") acquisition; the bulk of which was the £13.6million redemption of loannotes that have been refinanced by equivalent bank debt and the purchase of£4.5million of JSRE shares and related costs in April, the funding of which wasput in place prior to 31 March 2007. The operation's cashflow also does notinclude dividends received from the Group's investments in the Funds of£2.75million which are received quarterly and the Group would treat as part ofits operations cashflow. These items have been adjusted for in the followingcashflow: Six months ended 30 September 2007 £million Operating cashflow 4.7Dividends (6.2) (1.5) Capital Movements - Net property acquisitions (60.4) - Net purchases of own shares (1.7) - Net loan repayments (20.6) - Other movements (4.6)* (87.3) Net cash outflow (88.8) * This mainly relates to the JSRE share purchases and related costs referred to above Balance Sheet As at 30 September 2007, shareholders' funds were £418.4million (March 2007:£432.7million), a decrease of 3%. The underlying elements of the movement inequity shareholders' funds are analysed in the table below. £million Pence per share Equity shareholders' funds at 31 March 2007 432.7 773.8Change in number of shares in issue 3.8 777.6 Movement in the period to 30 September 2007 (Group and share ofjoint ventures)Profit before fair value losses 11.2 20.1Net fair value losses (20.9) (37.5)Taxation - current 1.0 1.8Taxation - deferred 2.7 4.9 Loss for the period (6.0) (10.7) Other equity movementsShares issued 0.1 0.2Dividends paid (6.1) (11.0)Investment in own shares (1.7) (3.1)Share based payments reserve (0.6) (1.1) Equity shareholders' funds at 30 September 2007 418.4 751.9 As shown in the table below, the equity shareholders' funds have been adjustedfor the remaining deferred tax on fair value gains on the Group's investment inApia and AIF along with our share of the fair value gains in Agora Max andGreater London Offices which have not been elected for REIT status. The Groupdoes not anticipate this deferred tax will materialise. In addition, we haveadjusted for the fair value on fixed rate debt which is not included on thebalance sheet along with the interim proposed dividend which is also excluded. The Group's net asset value per share at 30 September 2007 was 751.9p; theadjustments result in an adjusted net asset value per share of 766.3p. 30 September 2007 31 March 2007 £million Pence per £million Pence per share share Equity shareholders' funds 418.4 751.9 432.7 773.8 Add back deferred tax on revaluation gains (including JVs) 13.8 24.8 19.0 34.0Less proposed dividend (6.3) (11.3) (6.2) (11.0)Add fair value adjustments on derivative financial instruments 0.5 0.9 0.7 1.3Add fair value gain on Folkestone - - 1.2 2.1 Adjusted equity shareholders' funds 426.4 766.3 447.4 800.2 Financing The Group is cognisant of the various difficulties that the current financialand credit market conditions could present. However, the potential impact onthe Group's funding is limited for the following reasons: 1. Although the commercial mortgage backed securities ("CMBS") market is effectively closed, the Group's borrowings are on balance sheet and therefore not exposed to the CMBS market. There are two tranches of funding in the joint ventures where the financing was sold by the banks onto the CMBS market in 2006 but these are not due for renewal until 2011. 2. The disparity between the bank base rate and 3-month LIBOR is currently around 50bps compared to a norm of 15 to 20bps. This problem has been avoided by rolling any unhedged debt either on the overnight money market or at 1-week LIBOR depending on the rates available. This has recently meant rolling at a rate of 7bps or 8bps above the bank base rate of 5.75%. 3. The margins currently being charged by banks for new debt facilities have increased by 30bps to 40bps compared to the position before August 2007. Over the next twelve months the Group only has one facility, representing less than one fifth of the Group's total facilities, which is due for renewal in 2008. There is also one facility in the Agora joint venture with Bank of Scotland which is due for renewal in April 2008. The other joint venture facilities are not due for renewal until 2009 or 2011 whilst the facilities in the funds are in place until 2010 and 2011. Debt Total net borrowings for the Group as at 30 September 2007 were £365.6million(March 2007: £296.6million) including loan notes of £6.2million. The increasein net debt of £69.0million was mainly utilised to fund the acquisition, net ofdisposals, of three properties with a combined value of over £90million for thewholly owned portfolio. Net gearing on adjusted equity shareholders' funds hasrisen from 66% at the year end to 86% at 30 September 2007. The breakdown ofdebt at 30 September 2007, compared with 31 March 2007, is set out below. On balance sheet Share of joint Share of funds Total ventures £million £million £million £million Net short-term debt / (cash) 69.1 64.3 (6.0) 127.4Long term debt 296.5 260.3 94.6 651.4 Total net debt at 30 September 2007 365.6 324.6 88.6 778.8 Of which:Total net recourse debt 340.1 - - 340.1Long-term non-recourse debt 25.5 324.6 88.6 438.7 Gearing (on adjusted 86% 183%shareholders' funds)Recourse gearing 80% 80% Total net debt at 31 March 2007 296.6 321.8 90.7 709.1 Gearing (on adjusted 66% 158%shareholders' funds)Recourse gearing 61% 61% Since 30 September 2007, cash received from two properties sold before theperiod end totalling £10.6million has reduced net debt to £355million andreduced gearing to 83%. The Group debt of £366million is secured by £579million of assets whichrepresents a loan to value (LTV) of 63%. The Group has additional assets thatcan be used as chargeable security in excess of £50million which, if taken intoaccount, reduces the LTV to 58%. The Group's average cost of debt at 30 September 2007 was 6.48% (March 2007:6.18%). The increase of 30bps is due to the increase in interest rates from5.25% at 31 March 2007 to 5.75% at 30 September 2007 on the unhedged portion ofdebt. The Group's Rental Income to Interest cover was 1.5 times (March 2007:1.8 times). The reduction is due to the purchase of low yield properties duringthe period, along with the increase in bank base rate on the unhedged portion ofthe Group debt. At 30 September 2007, the Group had £468million of borrowing facilities of which£415million were revolving credit facilities and the balance, term debtfacilities (see table below). Since the period end the Group has refinanced£27million of term debt facility to fund the Folkestone development throughutilisation of its existing revolving credit facilities. As a result, the Groupnow has £441million of borrowing facilities, more than half of which roll on anongoing basis. Of these facilities, the amount unutilised was £102million at 30September 2007 (March 2007: £171million) and £39million (March 2007:£54million) can be utilised without the provision of any additional security.This is sufficient to meet our working capital requirements. Debt Analysis Committed Drawn Amount Facilities Debt Hedged £million £million £million Group 468 366 196 Joint Ventures Agora 160 148 143 Agora Max 235 235 234 Radial 260 218 154 GLO 72 72 72 Managed Funds Apia 240 237 195 AIF 480 455 335 With regard to the joint ventures discussions have commenced with the bank witha view to extending the Agora Shopping Centres' borrowing facility for a furtherfive years from April 2008. The development at Market Hall, Bolton, within theAgora Shopping Centre joint venture, has bank funding in place until thecompletion of this development in September 2008. At 30 September 2007, the Group held investments in the Apia Regional OfficeFund and the Ashtenne Industrial Fund amounting to 27.4% and 6.5% respectively.At this date Apia had debt of £237million with property under management of morethan £500million and AIF had debt of £455million with property under managementof more than £1.2billion. The Funds have loan to value ratios of 47% and 41%and rental income to interest cover ratios of 2.2 and 2.4 times respectively. Hedging The interest rate exposure on the Group's debt is managed to ensure that thereis a balance between flexibility and certainty. The Group has put in place astrategy to build up 80% to 90% of cover on the floating rate debt over a periodof time so that the hedging instruments will have different maturity and calldates, in order to ensure that at any given time there will be more than 75% ofcover on the floating rate debt. The exact timing of these additional hedges isdependent on the ability to obtain rates which are at competitive levels. Proportion of Floating Rate Debt Hedged as at 30 September 2007 Group on Balance Sheet Share of Joint Ventures £million £million Fixed Rate debt 25.5 -Floating Rate debt 340.1 324.6 365.6 324.6 Percentage of floating rate loans at 30 September 2007Covered by swaps 14% 70%Covered by caps 44% 23% 58% 93% Percentage of floating rate loans at 31 March 2007Covered by swaps 18% 70%Covered by caps 39% 23% 57% 93% Against Group debt, there is now £25.5million of fixed rate debt together withswaps of £47million and a cap of £150million which provide coverage of 58% ofthe floating rate debt. When combined, the total amount of hedging and fixedrate debt comprises 61% of the total Group debt. With effect from 1 April nextyear a further £25million swap becomes effective at a rate of 4.16% at whichpoint the coverage rises to 68%. The Group's share of the £649.2million of net debt in the joint ventures ishedged by caps amounting to £151million and swaps of £451million which comprises93% of the total joint venture net debt. Both of the Funds, Apia and AIF, were 82% and 74% covered by a combination ofswaps and caps as at 30 September 2007. Post Balance Sheet Events The developments at Folkestone and Bardon (owned by Radial Distribution), whichare included in these results at cost, completed in November 2007. Anyvaluation movements will be included in the results for the year ending 31 March2008. DIRECTORS' STATEMENT OF RESPONSIBILITIES---------------------------------------- The Directors confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34 Interim Financial Reporting, as adopted bythe European Union, and that the Interim Announcement herein includes a fairreview of the information as required by 4.2.7 and 4.2.8 of the Disclosure andTransparency Rules. The Directors of Warner Estate Holdings PLC are stated in the Group's AnnualReport for the year ended 31 March 2007. By the order of the BoardD J LanchesterSecretary30 November 2007 INDEPENDENT REVIEW REPORT TO WARNER ESTATE HOLDINGS PLC------------------------------------------------------- Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007, which comprises the consolidated income statement, consolidatedbalance sheet, consolidated statement of recognised income and expense,consolidated statement of changes in equity, consolidated cash flow statementand related notes. We have read the other information contained in thehalf-yearly financial report and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedset of financial statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the Disclosure and Transparency Rules of theFinancial Services Authority and for no other purpose. We do not, in producingthis report, accept or assume responsibility for any other purpose or to anyother person to whom this report is shown or into whose hands it may come savewhere expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. PricewaterhouseCoopers LLPChartered Accountants30 November 2007 Notes: (a) The maintenance and integrity of the Warner Estate Holdings PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. SIGNIFICANT EVENTS DURING SIX MONTH PERIOD TO 30 SEPTEMBER 2007--------------------------------------------------------------- Date Detail Category April 2007 Company converts to a Real Estate Investment Trust (REIT) Group April 2007 Purchase of St Magnus House, Aberdeen by Apia Regional Office Fund for Funds £23.7million May 2007 Purchase of 2 America Square, London EC3 for £25.1million and 16 Upper Group Investment Woburn Place, London WC1 for £21.75million Property August 2007 Purchase of Cable House, 56 - 62 New Broad Street, London EC2 for £44million Group Investment Property August 2007 250,000 Ordinary shares purchased as Treasury shares Group SIGNIFICANT EVENTS POST 30 SEPTEMBER 2007----------------------------------------- Date Detail Category November 2007 Completion of development at Bouverie Place, Folkestone Group November 2007 Completion of extension at Interlink Park, Bardon Joint Ventures UNAUDITED CONSOLIDATED INCOME STATEMENT--------------------------------------- For the six months ended 30 September 2007 Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March Notes 2007 2006 2007 £000 £000 £000 Revenue 21,950 21,349 53,424 Rental and similar income 13,013 10,936 21,604Revenue from property trading activities - 1,731 5,225Cost of sales of property trading activities - (1,346) (4,170)Service charge and similar income 1,710 2,329 4,172Service charge expense and similar charges (2,277) (2,710) (4,703) Net rental and trading income 2 12,446 10,940 22,128 Revenue from asset management activities 7,227 6,353 22,423Cost of sales of asset management activities (6,217) (4,124) (12,215) Net income from asset management activities 2 1,010 2,229 10,208Administrative expenses (1,334) (1,713) (3,757)Property expenses (2,220) (2,045) (3,778) Operating profit before net gains on investments 2 9,902 9,411 24,801 Net (loss) / gain from fair value adjustments oninvestment properties (11,410) 8,169 11,198 Net (loss) / gain from fair value adjustment on investments (1,277) 13,230 14,124Profit on sale of investment properties 4 6,306 1,738 1,751Profit on sale of finance lease assets 133 - -Profit on sale of investments 5 - 28 987Operating profit 3,654 32,576 52,861Finance income 6 3,695 3,281 8,185Finance expense 7 (9,451) (7,129) (21,460)Change in fair value of derivative financial instruments 513 710 1,011Share of associates' post tax profits - 19 -Share of joint ventures' post tax (losses) / profits 13 (6,148) 13,069 27,157 (Loss) / profit before income tax (7,737) 42,526 67,754Taxation - current 8 979 (3,617) (5,182)Taxation - deferred 8 798 98 17,787REIT conversion charge - - (10,917)(Loss) / profit for the period (5,960) 39,007 69,442 Attributable to:Equity holders (5,960) 39,004 69,425Minority interests - 3 17 p p pBasic (losses) / earnings per share 10 (10.67) 73.28 129.26Fully diluted (losses) / earnings per share 10 (10.52) 72.33 127.69 UNAUDITED CONSOLIDATED BALANCE SHEET------------------------------------ Notes Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000ASSETSNon-current assetsGoodwill 11 11,279 11,205 11,279Investment properties 12 482,586 305,768 437,832Properties under the course of development 12 24,896 14,414 19,658Plant and equipment 550 527 539Investments in joint ventures 13 145,420 132,798 151,568Investments in funds 14 119,465 115,766 120,622Investments in listed and unlisted shares 15 13,140 21,406 13,260Investments in associates 16 24 155 24Net investment in finance leases 3,761 - 5,283Deferred income tax assets 17 553 383 1,343Derivative financial assets 1,144 - 810Trade and other receivables 16 97 33 802,834 602,519 762,251Current assetsInventories - 9,819 -Net investment in finance leases 9 - 9Trade and other receivables 36,109 24,417 29,754Current income tax assets - 358 384Cash and cash equivalents 25,187 30,813 34,333 61,305 65,407 64,480 Total assets 864,139 667,926 826,731 LIABILITIESNon-current liabilitiesBorrowings, including finance leases (300,162) (223,203) (286,725)Trade and other payables (12,197) - (14,238)Derivative financial liabilities (317) (720) (451)Deferred income tax liabilities 17 (10,931) (29,274) (11,814)Retirement benefit obligations 3 (201) (556) (378)Provisions for other liabilities and charges 18 (3,306) (8,829) (5,334) (327,114) (262,582) (318,940) Current liabilitiesBorrowings, including finance leases (88,109) (417) (25,803)Trade and other payables (27,046) (17,410) (46,754)Current income tax liabilities (939) - - (116,094) (17,827) (72,557) Total liabilities (443,208) (280,409) (391,497) Net assets 420,931 387,517 435,234 EQUITYCapital and reserves attributable to theCompany's equity holdersShare capital 20 2,806 2,675 2,805Reserves 20 416,668 382,413 430,661Investment in own shares 20 (1,051) (908) (740)Equity shareholders' funds 418,423 384,180 432,726Minority interest 23 2,508 3,337 2,508 Total equity 420,931 387,517 435,234 UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE----------------------------------------------------------------- For the six months ended 30 September 2007 Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000(Loss) / profit for the period attributable to equity shareholders (5,960) 39,004 69,425Actuarial profits / ( losses) on retirement benefit obligations 134 (109) 22Deferred tax arising on retirement benefit obligations (53) 23 (31) Total recognised income and expense for the period (5,879) 38,918 69,416 UNAUDITED STATEMENT OF CHANGES IN EQUITY---------------------------------------- For the six months ended 30 September 2007 Unaudited Audited 6 months Unaudited Year ended 6 months ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Opening equity in shareholders' funds 432,726 350,586 350,586Shares issued 1 - 130Share premium on shares issued 82 - 21,311Acquisition of investment in own shares (330) (341) (386)Disposal of investment in own shares 19 359 572Cost of share based payments 72 - 1,004Deferred tax arising on share based payments (652) - 784Acquisition of treasury shares (1,454) - - 430,464 350,604 374,001Total recognised income and expense for the period (5,879) 38,918 69,416Dividend paid in period (6,162) (5,342) (10,691) Closing equity shareholders funds 418,423 384,180 432,726 UNAUDITED CONSOLIDATED CASH FLOW STATEMENT------------------------------------------ For the six months ended 30 September 2007 Notes Unaudited Unaudited Audited 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Cash flows from operating activitiesCash (outflows) / inflows from operations 21 (10,283) (6,240) 6,105Interest paid (9,228) (6,445) (21,601)Interest received 1,008 186 2,330UK Corporation tax received / (paid) 2,282 (9,400) (11,249) Net cash outflow from operating activities (16,221) (21,899) (24,415) Cash flows from investing activitiesPurchase of investment properties and related (106,526) (12,771) (15,336)capital expenditureSale of investment properties 46,136 48,289 51,812Purchase of plant and equipment (103) (134) (225)Purchase of investments in listed shares - (209) (209)Sale of investments in listed shares - - 5,242Sale of investments in funds - 438 500Purchase of investments in unlisted shares - - (5,000)Net cash acquired from purchase of shares in - 137 (82,984)subsidiary companyPurchase of shares in joint ventures - (11,072) (11,062)Loans to joint ventures - (6,724) (13,299)Loans repaid by joint ventures - - 1,883Dividends received from listed investments - 79 123Dividends received from unlisted investments - - 87Dividends received from funds 2,750 3,153 6,340Dividends received from joint ventures - 1,274 1,274Dividends received from associates - 373 373 Net cash (outflow) / inflow from investing activities (57,743) 22,833 (60,481) Cash flows from financing activitiesIssue of shares 83 - 21,441Purchase of own shares for AESOP scheme (330) (341) (386)Disposal of own shares for share option scheme - 352 456Purchase of treasury shares (1,454) - -Dividends paid (6,162) (5,342) (10,691)Purchase of derivative financial instruments - - (882)Increase in bank loans 7,429 1,548 3,549Repayment of bank loans (14,431) (5,339) (71,200)Repayment of mortgages and other loans - - (384) Net cash outflow from financing activities (14,865) (9,122) (58,097) Net decrease in cash and cash equivalents* (88,829) (8,188) (142,993)Cash and cash equivalents at beginning of period (220,665) (77,672) (77,672) Cash and cash equivalents at end of period (309,494) (85,860) (220,665) * Includes overdraft facility balances shown in borrowings UNAUDITED NOTES TO THE FINANCIAL STATEMENTS------------------------------------------- 1. ACCOUNTING POLICIES Basis of preparation The unaudited interim consolidated financial statements of the Group for the sixmonths to 30 September 2007 have been prepared in accordance with Disclosure andTransparency Rules of the Financial Services Authority and with IAS 34 InterimFinancial Reporting, as adopted by the EU, and on the basis of accountingpolicies set out in the Group's Annual Report and Accounts for the year ended 31March 2007. These Interim Financial Statements do not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 31 March 2007 have been delivered tothe Registrar of Companies and include an audit report which was unqualified anddid not contain a statement under either Section 237(2) or 237(3) of theCompanies Act 1985. 2. SEGMENTAL REPORTING business segments For management purposes the Group is organised into two operating divisions,Property Investment and Asset Management: Property Asset Management Unallocated and Total Investment other activities £000 £000 £000 £000 Six months to 30 September 2007 (unaudited)Revenue 14,723 7,227 - 21,950 Rental and similar income 13,013 - - 13,013Service charge and similar income 1,710 - - 1,710Service charge expense and similar charges (2,277) - - (2,277) Net rental and trading income 12,446 - - 12,446Turnover from asset management activities - - Management fee income - 7,227 - 7,227 Performance fee income - - - - - 7,227 - 7,227Asset management expenses - (6,217) - (6,217)Administrative expenses - - (1,334) (1,334)Property management expenses (2,220) - - (2,220) Operating profit / (loss) before net gain on investments 10,226 1,010 (1,334) 9,902Net loss from fair value adjustments on investment properties (11,410) - - (11,410)Net loss from fair value adjustments on investments - - (1,277) (1,277)Profit on sale of investment properties 6,306 - - 6,306Profit on sale of finance lease assets 133 - - 133 Operating profit / (loss) 5,255 1,010 (2,611) 3,654 Total assets 531,599 23,149 309,391 864,139Liabilities net of borrowings (28,026) (6,775) (20,136) (54,937)Borrowing, including finance leases (3,735) - (384,536) (388,271) Net assets / (liabilities) 499,838 16,374 (95,281) 420,931 Other segment items:Capital expenditure 7,845 - - 7,845Depreciation 16 65 11 92 Property Asset Management Unallocated and Total Investment other activities £000 £000 £000 £000 Six months to 30 September 2006 (unaudited)Revenue 14,996 6,353 - 21,349 Rental and similar income 10,936 - - 10,936Turnover from property trading activities 1,731 - - 1,731Cost of sales of property trading activities (1,346) - - (1,346)Service charge and similar income 2,329 - - 2,329Service charge expense and similar charges (2,710) - - (2,710) Net rental and trading income 10,940 - - 10,940 Turnover from asset management activities Management fee income - 6,353 - 6,353 Performance fee income - - - - - 6,353 - 6,353Asset management expenses - (4,124) - (4,124)Administrative expenses (restated)i - - (1,713) (1,713)Property management expenses (2,045) - - (2,045) Operating profit / (loss) before net gain on investments 8,895 2,229 (1,713) 9,411Net gain from fair value adjustments on investment properties 8,169 - - 8,169Net gain from fair value adjustments on investments (restated)ii - - 13,230 13,230Profit on sale of investment properties 1,738 - - 1,738Profit on sale of investments - 28 - 28Operating profit 18,802 2,257 11,517 32,576 Total assets 349,643 263,346 54,937 667,926 Total liabilities (28,897) (20,019) (7,873) (56,789) Borrowing, including finance leases (1,501) - (222,119) (223,620) Net assets / (liabilities) 319,245 243,327 (175,055) 387,517 Other segment items:Capital expenditure 2,244 - - 2,244Depreciation - - 72 72 Property Asset Management Unallocated and Total Investment other activities £000 £000 £000 £000Year ended 31 March 2007 (audited)Revenue 31,001 22,423 - 53,424 Rental and similar income 21,604 - - 21,604Turnover from property trading activities 5,225 - - 5,225Cost of sales of property trading activities (4,170) - - (4,170)Service charge and similar income 4,172 - - 4,172Service charge expense and similar charges (4,703) - - (4,703) Net rental and trading income 22,128 - - 22,128 Turnover from asset management activities Management fee income - 13,939 - 13,939 Performance fee income - 8,484 - 8,484 - 22,423 - 22,423Asset management expenses - (12,215) - (12,215)Administrative expenses (restated)i - - (3,757) (3,757)Property management expenses (3,778) - - (3,778) Operating profit / (loss) before net gain on investments 18,350 10,208 (3,757) 24,801Net gain from fair value adjustments on investment properties 11,198 - - 11,198Net gain from fair value adjustments on investments - - 14,124 14,124Profit on sale of investment properties 1,751 - - 1,751Profit on sale of investments - - 987 987 Operating profit 31,299 10,208 11,354 52,861 Total assets 469,078 20,617 337,036 826,731Total liabilities (29,817) (1,620) (47,532) (78,969)Borrowing, including finance leases (1,500) - (311,028) (312,528) Net assets / (liabilities) 437,761 18,997 (21,524) 435,234 Other segment items:Capital expenditure 7,988 - - 7,988Depreciation - - 151 151 All turnover and operating profit has arisen from continuing operations. As the property investment and asset management segments have developed, thefollowing adjustments are required: i. Administrative expenses have been reallocated from property investment to unallocated and other activities. ii. Net gain from fair value adjustments on investments have been reallocated from asset management to unallocated and other activities. 3. RETIREMENT BENEFIT OBLIGATIONS The Group operates and contributes to pension schemes for certain Directors andemployees and makes some discretionary allowances. The costs charged to theincome statement for the six months to 30 September 2007 in respect of theseamounted to £457,000 (September 2006: £386,000; March 2007: £762,000).Pension premiums paid in advance were £66,000 (September 2006: £306,000; March2007: £181,000). The Group operated a defined benefit scheme in the UK, The Warner Estate GroupRetirement Benefits Scheme. The costs charged to the income statement for thesix months to 30 September 2007 in respect of these amounted to £31,000(September 2006: £32,000; March 2007: £62,000). A full valuation was carriedout at 1 April 2005. The values at 30 September 2007, 30 September 2006, and 31March 2007 were updates of the 1 April 2005 valuation carried out by a qualifiedindependent actuary. It has been agreed with the Trustees that the Group contributes 26.8% ofpensionable salary plus £68,000 per annum. The value of the assets and liabilities of the Scheme were as follows: Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Total market value of assets 5,816 5,791 5,845Present value of scheme liabilities (6,017) (6,347) (6,223)Retirement benefit obligations (201) (556) (378) Analysis of amount charged to operating profit: Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Current service cost 31 32 62 4. PROFIT ON SALE OF INVESTMENT PROPERTIES Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Surplus over carrying value:Investment properties 6,306 1,738 1,751 5. PROFIT ON SALE OF INVESTMENTS Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Surplus over carrying value:Listed investments - - 959Unlisted investments - 28 28 - 28 987 6. FINANCE INCOME Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Income from investmentsDividends from listed investments - 79 123Dividends from unlisted investments - - 87Distributions from funds (see note 14) 2,877 2,505 5,989 2,877 2,584 6,199Interest receivable and similar income:From joint ventures 271 530 1,466Other interest 538 161 506Other finance incomeExpected return on pension scheme assets 173 157 316Interest on pension scheme liabilities (164) (151) (302) 9 6 14 3,695 3,281 8,185 7. FINANCE EXPENSE Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Interest payable on loans and overdrafts 9,974 7,309 14,002Charges in respect of cost of raising finance 266 310 8,626 10,240 7,619 22,628Less: Interest capitalised (860) (551) (1,300) 9,380 7,068 21,328Interest payable under finance leases 71 61 132 9,451 7,129 21,460 8. TAXATION The taxation credit / (charge) for the period has been estimated from theexpected taxable profits of the Group after taking account of capital allowancesavailable. 9. DIVIDENDS Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000On Ordinary 5p sharesFinal 11.0p at 31 March 2007 paid 21 September 2007 6,162 - -Final 10.0p at 31 March 2006 paid 15 September 2006 - 5,343 5,343Interim 10.0p at 30 September 2006 paid 23 February 2007 - - 5,348 6,162 5,343 10,691 10. EARNINGS PER SHARE Basic losses per share of 10.67p (half year to 30 September 2006: earnings73.28p; year to 31 March 2007: earnings 129.26p) are calculated on the loss forthe period of £5,960,000 (half year to 30 September 2006: profit £39,004,000;year to 31 March 2007: profit £69,425,000) and the weighted average of55,840,016 (half year to 30 September 2006: 53,224,590; year to 31 March 2007:53,709,342) shares in issue throughout the period. Fully diluted losses per share of 10.52p (half year to 30 September 2006:earnings 72.33p; year to 31 March 2007: earnings 127.69p) are based on the lossfor the period as above divided by the weighted average number of shares inissue, being 56,678,166 (half year to 30 September 2006: 53,926,052; year to 31March 2007: 54,369,516) after the dilutive impact of share options granted. A reconciliation of the weighted average number of shares used to calculateearnings per share and to that used to calculate diluted earnings per share isshown below: Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 Earnings per share: weighted average number of shares 55,840,016 53,224,590 53,709,342Weighted average ordinary shares to be issued under employee incentive arrangements 838,150 701,462 660,174Diluted earnings per share: weighted average number of 56,678,166 53,926,052 54,369,516shares 11. goodwill £000CostAt 31 March 2007 (audited) and 30 September 2007 (unaudited) 11,279ImpairmentsAt 31 March 2007 (audited) and 30 September 2007 (unaudited) -Net book value at 31 March 2007 (audited) and 30 September 2007 (unaudited) 11,279 Goodwill is not amortised but is subject to an annual impairment test. Goodwillof £11,205,000 is allocated to the cash generating unit ("CGU") defined as thefund management business owned by Industrial Funds Limited. The remaininggoodwill of £74,000 is allocated to the CGU defined as the property investmentbusiness owned by JS Real Estate Limited. The recoverable amount of the CGU hasbeen calculated based on the value-in-use calculations. These calculations usecash flow projections based on financial projections approved by managementcovering a five year period. 12. investment properties and properties under the course of development Freehold Leasehold with over Total Properties Under 50 years Investment the Course of unexpired Properties Development £000 £000 £000 £000 At 1 April 2007 (audited) 397,206 40,626 437,832 19,658Acquisitions 25,010 75,200 100,210 -Capital expenditure 2,534 73 2,607 5,238Disposals (46,751) (14) (46,765) -Exchange differences 112 - 112 -Net loss from fair value adjustments on investment property (7,432) (3,978) (11,410) - At 30 September 2007 (unaudited) 370,679 111,907 482,586 24,896 13. JOINT VENTURES Unaudited At Unaudited At Audited At 30 September 30 September 31 March 2007 2007 2006 £000 £000 £000Share of joint venturesAt 1 April 151,568 103,372 103,372Share of (loss) / profit for the period (6,148) 13,069 27,157Net equity movements - 9,633 39,910Net loan movements - 6,724 (18,871)At 30 September / 31 March 145,420 132,798 151,568Unlisted shares at cost less amounts written off 72,834 37,798 72,834Group's share of post acquisition retained profits and reserves 53,646 50,465 59,794 126,480 88,263 132,628Amounts owed by joint ventures 18,940 44,535 18,940 145,420 132,798 151,568 Included in share of joint ventures' gross assets and liabilities are: Agora Radial Agora Max Greater Others Total Shopping Distribution Limited London Limited Offices Centres Limited (a) (b) (d) (e) (f) £000 £000 £000 £000 £000 £000Period to 30 September 2007 (unaudited)Group share of results Revenue 4,209 4,304 5,711 1,559 - 15,783 Operating profit before net gains on investments 2,421 4,038 3,371 1,274 6 11,110Net (loss) / gain from fair value adjustments on investment properties (1,050) (4,548) (5,535) 1,636 - (9,497) Operating profit / (loss) 1,371 (510) (2,164) 2,910 6 1,613Net finance (expense) / income (2,104) (3,508) (3,588) (1,242) 7 (10,435)Change in fair value of derivative financial instruments (408) (267) 1,492 (96) - 721 (Loss) / profit before income tax (1,141) (4,285) (4,260) 1,572 13 (8,101)Taxation - current 22 - - - (5) 17Taxation - deferred 141 95 2,150 (452) - 1,934 (Loss) / profit after income tax (978) (4,190) (2,110) 1,120 8 (6,150)Minority interests - - 2 - - 2 (Loss) / profit for the period (978) (4,190) (2,108) 1,120 8 (6,148) Amounts received and receivable by GroupAsset management fees 157 277 477 33 - 944Performance fees - - - - - -Interest receivable - - - 271 - 271 Group share ofNon-current assetsInvestment properties 133,808 140,326 173,879 51,200 - 499,213Investments in unlisted shares - - - - 25 25Finance lease assets - 3,282 - - - 3,282Derivative financial assets 749 934 8,046 615 - 10,344Other non-current assets 850 - - - - 850 135,407 144,542 181,925 51,815 25 513,714Current assetsFinance lease assets - 249 - - - 249Other current assets 3,797 4,954 4,413 1,350 1,585 16,099 3,797 5,203 4,413 1,350 1,585 16,348 Total assets 139,204 149,745 186,338 53,165 1,610 530,062 Greater Agora Radial Agora Max London Shopping Distribution Limited Offices Centres Limited Limited Others Total (a) (b) (d) (e) (f)Non-current liabilitiesDeferred income tax liabilities (225) (280) (4,753) (776) - (6,034)Borrowings, including finance leases (4,515) (107,728) (132,005) (39,425) - (283,673)Other non-current liabilities (960) (1,137) - - - (2,097) (5,700) (109,145) (136,758) (40,201) - (291,804)Current liabilitiesBorrowings, including finance leases (74,806) - - - - (74,806)Other current liabilities (6,072) (4,162) (24,378) (1,560) (800) (36,972) (80,878) (4,162) (24,378) (1,560) (800) (111,778) Total liabilities (86,578) (113,307) (161,136) (41,761) (800) (403,582) Share of net assets 52,626 36,438 25,202 11,404 810 126,480 Agora Radial Bareway Agora Max Greater Others Total Shopping Distribution Industrial Limited London Limited Properties Offices Centres Limited Limited (a) (b) (c) (d) (e) (f) £000 £000 £000 £000 £000 £000 £000Period to 30 September 2006(unaudited)Group share of resultsRevenue 4,332 2,802 - 5,464 - - 12,598Operating profit / (loss) before net gains on investments 2,643 2,568 (6) 3,825 - 4 9,034Net gain from fair value adjustments on investmentproperties 4,966 5,711 - 5,675 - - 16,352Operating profit / (loss) 7,609 8,279 (6) 9,500 - 4 25,386Net finance (expense) / income (2,398) (2,563) - (3,535) - 21 (8,475)Change in fair value of derivative financial instruments 234 534 - 1,877 (648) - 1,997Profit / (loss) before income tax 5,445 6,250 (6) 7,842 (648) 25 18,908Taxation - current (2) (17) - - - (6) (25)Taxation - deferred (1,668) (2,054) - (2,283) 194 - (5,811)Profit / (loss) after income tax 3,775 4,179 (6) 5,559 (454) 19 13,072Minority interests - - - (3) - - (3)Profit / (loss) for the period 3,775 4,179 (6) 5,556 (454) 19 13,069 Agora Radial Bareway Agora Max Greater Others Total Shopping Distribution Industrial Limited London Limited Properties Offices Centres Limited Limited (a) (b) (c) (d) (e) (f) £000 £000 £000 £000 £000 £000 £000Amounts received andreceivable by GroupAsset management fees 300 302 - 432 - - 1,034Performance fees - - - - - - -Interest receivable 272 258 - - - - 530Group share ofNon-current assetsInvestment properties 130,338 118,203 - 177,542 48,792 - 474,875Investments in unlisted shares - - - - - 25 25Finance lease assets - 3,954 - - - - 3,954Deferred income tax assets - - - - 194 - 194Derivative financial assets 1,381 245 - 1,928 - - 3,554Other non-current assets 418 - - - - - 418 132,137 122,402 - 179,470 48,986 25 483,020 Current assetsFinance lease assets - 257 - - - - 257Other current assets 23,109 3,116 - 5,171 946 3,854 36,196 23,109 3,373 - 5,171 946 3,854 36,453 Total assets 155,246 125,775 - 184,641 49,932 3,879 519,473 Non-current liabilitiesDeferred income tax liabilities (9,755) (5,486) - (4,462) - - (19,703)Borrowings, including finance leases (86,669) (103,583) - (131,489) (39,392) - (361,133)Derivative financial liabilities - - - - (648) - (648) (96,424) (109,069) - (135,951) (40,040) - (381,484) Current liabilitiesBorrowings, including finance leases (4,860) - - (7) - - (4,867)Other current liabilities (14,802) (4,140) - (22,682) (861) (2,374) (44,859) (19,662) (4,140) - (22,689) (861) (2,374) (49,726) Total liabilities (116,086) (113,209) - (158,640) (40,901) (2,374) (431,210) Share of net assets 39,160 12,566 - 26,001 9,031 1,505 88,263 Agora Radial Bareway Agora Max Greater Others Total Shopping Distribution Industrial Limited London Limited Properties Offices Centres Limited Limited (a) (b) (c) (d) (e) (f) £000 £000 £000 £000 £000 £000 £000Year to 31 March 2007 (audited)Group share of resultsRevenue 8,497 7,017 - 11,307 1,454 - 28,275 Operating profit / (loss) 3,626 6,312 (5) 5,330 1,179 16 16,458before net gains on investmentsNet gain from fair value 3,621 7,155 - 6,558 373 - 17,707adjustments on investmentpropertiesProfit on sale of - 374 - - - - 374investment properties Operating profit / (loss) 7,247 13,841 (5) 11,888 1,552 16 34,539Net finance (expense) / (4,967) (6,354) - (7,049) (1,247) 92 (19,525)incomeChange in fair value of 10 1,490 - 6,502 711 - 8,713derivative financialinstruments Profit / (loss) before income 2,290 8,977 (5) 11,341 1,016 108 23,727taxTaxation - current 567 8 - - - (92) 483Taxation - deferred 7,722 3,053 - (4,722) (325) - 5,728 Profit / (loss) after income tax 10,579 12,038 (5) 6,619 691 16 29,938REIT conversion charge (1,281) (1,515) - - - - (2,796)Minority interests - - - 15 - - 15 Profit / (loss) for the year 9,298 10,523 (5) 6,634 691 16 27,157 Amounts received andreceivable by GroupAsset management fees 692 758 - 974 34 - 2,458Performance fees 2,986 - - 3,722 - - 6,708Interest receivable 543 649 - - 274 - 1,466 Group share ofNon-current assetsInvestment properties 132,143 143,742 - 179,029 49,445 - 504,359Investments in unlisted shares - - - - - 25 25Finance lease assets - 3,408 - - - - 3,408Derivative financial assets 1,157 1,200 - 6,554 711 - 9,622Other non-current assets 402 - - - - - 402 133,702 148,350 - 185,583 50,156 25 517,816Current assetsFinance lease assets - 243 - - - - 243Other current assets 5,244 7,337 - 4,845 1,222 3,048 21,696 5,244 7,580 - 4,845 1,222 3,048 21,939 Total assets 138,946 155,930 - 190,428 51,378 3,073 539,755 Agora Radial Bareway Agora Max Greater Others Total Shopping Distribution Industrial Limited London Limited Properties Offices Centres Limited Limited (a) (b) (c) (d) (e) (f) £000 £000 £000 £000 £000 £000 £000Non-current liabilitiesDeferred income tax liabilities (366) (378) - (6,902) (324) - (7,970)Borrowings, including finance leases (4,515) (109,975) - (131,907) (39,391) - (285,788)Derivative financial liabilities (1,121) (1,326) - - - - (2,447) (6,002) (111,679) - (138,809) (39,715) - (296,205)Current liabilitiesBorrowings, including finance leases (72,861) - - - - - (72,861)Other current liabilities (6,140) (3,626) - (24,538) (1,486) (2,271) (38,061) (79,001) (3,626) - (24,538) (1,486) (2,271) (110,922) Total liabilities (85,003) (115,305) - (163,347) (41,201) (2,271) (407,127) Share of net assets 53,943 40,625 - 27,081 10,177 802 132,628 (a) Agora Shopping Centres was set up on 5 March 2003 and subsequently acquired the Pyramids, Birkenhead on 25 June 2003 and The Grange, Birkenhead on 30 September 2004. On 7 March 2006, The Pyramids, Birkenhead and The Grange, Birkenhead were disposed of into the Agora Max joint venture group. (b) Fairway Industrial Limited was set up on 29 August 2003 and changed its name to Radial Distribution Limited on 14 October 2004. (c) Bareway Industrial Properties Limited was set up on 29 August 2003. In November 2005, the properties were disposed of into the Ashtenne Industrial Fund. On 11 September 2006 the Group acquired the remaining 50% interest of Bareway Industrial Properties Limited. (d) Agora Max Limited was set up on 16 September 2005 and subsequently acquired The Pallasades, Birmingham on 25 October 2005. The Pyramids and The Grange, both in Birkenhead, were acquired from Agora Shopping Centres on 7 March 2006. (e) Greater London Offices Limited was set up and subsequently acquired Old Broad Street and Central House, London on 28 September 2006. (f) Net assets relate to a £25k investment in the general partner of Apia Regional Office Fund and net assets of £785k which is the investment in smaller joint ventures acquired through Ashtenne. Amounts owed by / (due to) joint ventures comprise: Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Agora Shopping Centres Limited 2,600 27,085 2,940Radial Distribution Limited 57 17,074 429Agora Max Limited 21,447 279 21,573Greater London Offices Limited 4,160 2,654 3,907Others (1,074) - (1,074) 27,190 47,092 27,775 14. INVESTMENTS IN FUNDS £000As at 31 March 2007 (audited) 120,622Net loss from fair value adjustments (1,157)At 30 September 2007 (unaudited) 119,465 Fund information: AIF Apia Others Total (a) (b) (c) £000 £000 £000 £000Period to 30 September 2007 (unaudited) Distributions receivable 854 2,023 - 2,877 Net assets at 30 September 2007 676,902 271,462 -Percentage share at 30 September 2007 6.52% 27.43% -Group share of net assets 44,134 74,462 869 119,465 AIF Apia Others Total (a) (b) (c) £000 £000 £000 £000Period to 30 September 2006 (unaudited) Distributions receivable 1,126 1,356 23 2,505 Net assets at 30 September 2006 658,328 251,287 -Percentage share at 30 September 2006 6.52% 28.59% -Group share of net assets 42,923 71,843 1,000 115,766 AIF Apia Others Total (a) (b) (c) £000 £000 £000 £000Year to 31 March 2007 (audited) Distributions receivable 2,838 3,130 21 5,989 Net assets at 31 March 2007 687,546 266,537 -Percentage share at 31 March 2007 6.52% 28.07% -Group share of net assets 44,828 74,817 977 120,622 (a) The Group invested £12,000,000 in the Ashtenne Industrial Fund in August 2005. A £23,105,000 investment was acquired on the purchase of the remaining 50% of Industrial Funds Limited. (b) The Apia Regional Office Fund was set-up on 7 June 2005 and the Group invested an initial £44,088,000. A further £10,000,000 was invested in December 2005, of which £902,000 was disposed of in March 2006. A further £472,000 was disposed of in April 2006. It is treated as an investment rather than an associate as the Group does not exert significant influence as a Trustee which is independent of the Group is responsible for the strategic decisions of the unit trust and the Group's investment holding in the unit trust will continue to reduce over the short-term. (c) This relates to minority interest holdings in Agora Max Unit Trust, Agora Max Birkenhead Unit Trust and The Pallasades Birmingham Unit Trust which were acquired during the year to 31 March 2006. 15. INVESTMENTS IN LISTED AND UNLISTED SHARES Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Listed investments 843 6,397 1,045Unlisted investments 12,297 15,009 12,215 13,140 21,406 13,260 16. INVESTMENTS IN ASSOCIATES Total £000CostAt 31 March 2007 (audited) and 30 September 2007 (unaudited) 24 Goodwill arising on acquisitionAt 31 March 2007 (audited) and 30 September 2007 (unaudited) - Net book value at 31 March 2007 (audited) and 30 September 2007 24(unaudited) 17. DEFERRED TAXATION Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2007 2006 £000 £000 £000Deferred taxation assetsDeferred taxation arising from unrealised derivative 95 216 135financial instruments valuationsDeferred taxation arising from retirement benefit 60 167 113obligationsDeferred taxation arising from share based payments 398 - 1,095 553 383 1,343 Deferred taxation liabilitiesDeferred taxation arising from the temporary differencesnoted below:Short term temporary differences (51) - (31)Capital and industrial buildings allowances claimed on - (1,813) -investment propertiesUnrealised property and investment valuations (10,880) (27,461) (11,783) (10,931) (29,274) (11,814) 18. PROVISIONS FOR OTHER LIABILITIES AND CHARGES Onerous contracts £000 At 31 March 2007 (audited) 5,334Utilised during the period (2,028) At 30 September 2007 (unaudited) 3,306 Provisions have been analysed between current and non-current as follows: Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Non-current 3,306 8,829 5,334Current - - - 3,306 8,829 5,334 The onerous lease provision is made in relation to onerous leases on propertieswhich are vacant or sublet at a level which renders the properties loss-makingover the remaining life of the lease. The provision represents the Directors'estimate of the net cash flows on the properties. 19. FINANCIAL INSTRUMENTS Financial Liabilities The interest rate profile of the Group's financial liabilities at 30 September2007, after taking account of interest rate instruments taken out by the Groupwas: Unaudited At Unaudited At Audited At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Floating financial rate liabilities 143,454 - 110,975Capped rate financial liabilities 150,000 12,731 100,000Fixed rate financial liabilities 70,852 194,153 85,643 364,306 206,884 296,618 The above balances are net of cash balances of £20,230,000 (half year to 30September 2006: £15,657,000; year to 31 March 2007: £14,410,000) which can beoffset under the Group's borrowing arrangements. The benchmark rate for determining interest payments for the floating ratefinancial liabilities was LIBOR / base rate depending upon the facility. The weighted average interest rate on the fixed rate debt and the averagematurity of that debt was as follows: Unaudited At Unaudited At Audited At 30 September 30 September 31 March 2007 2006 2007 % % %Weighted average interest rateGroup 5.62 5.90 6.52Joint Ventures 5.84 5.81 5.74 Weighted average period for which interest rate is fixed Years Years YearsGroup 2.39 6.60 4.50Joint Ventures 6.26 5.87 1.24 Maturity of financial liabilities Unaudited At Unaudited At Audited At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Group Within one year or on demand 88,226 417 25,824 Between one and two years 441 14,214 429 Between two and five years 296,976 185,410 285,972 In five years or more - 22,500 - 385,643 222,541 312,225 Borrowing facilities The Group has various borrowing facilities that were not fully utilised at theperiod end and for which the conditions for utilising those facilities were met. Unaudited At Unaudited At Audited At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Expiring in one year or less: Total facilities 67,500 - - Unutilised 9,188 - - Expiring between two and five years: Total facilities 286,000 123,388 263,400 Unutilised 29,861 19,120 54,383 Fair values of financial assets and liabilities The table below sets out by category the changes to the balance sheet values onfixed rate debt that would occur if fair values were applied. Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2006 2007 Difference Difference Difference between book between book between book and fair and fair values and fair values values £000 £000 £000 Group Primary financial instruments Liabilities Long term debt (over one year) 757 (6,052) 1,011 Assets Long term loan notes (over one year) (63) (935) (227) Joint Ventures Primary financial instruments Long term loan notes 63 935 227 757 (6,052) 1,011 The effect on net assets per share of the total fair value adjustment (£757,000less tax £227,000) would be an increase of 0.9p (half year to 30 September 2006:decrease 8.0p; year to 31 March 2007: increase 1.3p) The calculation of the fair values has been arrived at as follows: Debt has been calculated by discounting cash flows at prevailing rates ofinterest for instruments with a similar risk profile. 20. CAPITAL AND RESESRVES Reserves Non-distributable Investment reserves in own Share Distributable shares Capital reserves Total £000 £000 £000 £000 £000 At 31 March 2007 (audited) 2,805 193,109 237,552 (740) 432,726Shares issued 1 - - - 1Premium on shares issued - 82 - - 82Retained loss for the period - - (5,960) - (5,960)Realised on disposal of investment properties - (11,202) 11,202 - -Net loss from fair value adjustment on investment properties - (11,410) 11,410 - -Share of joint ventures' net loss from fair value adjustment on investment properties - (9,497) 9,497 - -Net loss from fair value adjustment on listed investments - (202) 202 - -Net loss from fair value adjustment on unlisted investments - (1,075) 1,075 - -Change in fair value of derivative financial instruments - 513 (513) - -Share of change in fair value of joint ventures' derivative financial instruments - 721 (721) - -Acquisition of investments in own shares - - - (330) (330)Disposal of investment in own shares - - - 19 19Acquisition of treasury shares - - (1,454) - (1,454)Dividends paid - - (6,162) - (6,162)Actuarial gain on pensions scheme assets - - 134 - 134Deferred tax movement on pension assets - - (53) - (53)Cost of share based payments - 72 - - 72Deferred tax movement on share based payments - (652) - - (652) At 30 September 2007 (unaudited) 2,806 160,459 256,209 (1,051) 418,423 21. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Operating profit before net gains on investments 9,902 9,411 24,801Depreciation of plant and equipment 92 72 151Decrease in inventories - 1,120 3,514Decrease / (increase) in trade and other receivables 2,034 (1,163) (8,284)Decrease in trade and other payables (22,311) (15,680) (14,077) Cash (outflows) /inflows from operations (10,283) (6,240) 6,105 22. CONTINGENT ASSETS Unaudited Unaudited Audited At At At 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Potential performance fees arising under joint ventureagreementsAgora Shopping Centres - 8,800 -Radial Distribution - 1,800 - - 10,600 - These assets have not been recognised on the balance sheet. 23. MINORITY INTEREST This represents investments held by The F15 Partnership in Balmcrest EstatesLimited. 24. RELATED PARTY TRANSACTIONS In accordance with IAS 27 "Consolidated and Separate Financial Statements,"transactions between the company and subsidiaries, which are related parties,have been eliminated on consolidation and are not disclosed in this note. Details of transactions and balances between the Group and joint ventures areset out in note 13. Remuneration of key management personnel: Unaudited Six Unaudited Audited months ended 30 Six months Year ended September 2007 ended 30 31 March September 2006 2007 £000 £000 £000 Short-term employee benefits 986 857 1,665Post-employee benefits 49 277 340Share based payments 49 67 226 1,084 1,201 2,231 25. EVENTS AFTER THE BALANCE SHEET DATE The developments at Folkestone and Bardon (owned by Radial Distribution), whichare included in these results at cost, completed in November 2007. Anyvaluation movements will be included in the results for the year ending 31 March2008. This information is provided by RNS The company news service from the London Stock Exchange

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