3rd Aug 2006 07:02
Mapeley Limited03 August 2006 Not for release before 0700, 3 August 2006 MAPELEY LIMITED Unaudited Interim results for the six months ended 30 June 2006 Mapeley Limited (LSE: MAY), a market leader in property investment andoutsourcing, announces today its interim results for the six months ended 30June 2006. Operational highlights- FFO (see note 18) up 164.4% to £24.6 million, equating to 95 pence per share* (30 June 2005: £9.3 million, equating to 60 pence per share)- Dividends proposed and declared for the second quarter of 41 pence per share up 36.7%, equating to £10.9 million; - increased from 30 pence per share for the second quarter ended 30 June 2005; - increased 5.1% from 39 pence per share for the first quarter ended 31 March 2006- Investment property acquisitions in the period of £190.3 million (30 June 2005: £207.7 million) Financial highlights- Revenue up 11.1% to £178.8 million (30 June 2005: £161.0 million)- EBITDA (see note 17) increased by 50.2% to £49.2 million (30 June 2005: £32.7 million)- Profit before tax of £26.7 million (30 June 2005: loss before tax of £76.3 million)- Total asset value up 13.6% to £2,045.6 million (31 December 2005: £1,800.1 million) Commenting on the results, Jamie Hopkins, Chief Executive of Mapeley said: "Mapeley has completed an excellent first half of 2006. As we committed to do,we have grown our dividend and continued to create value from our existingportfolio and through new acquisitions. We are particularly pleased with theperformance of our existing portfolio which has been enhanced by improved assetmanagement receipts and operating cost savings. We are also making good progress with the mobilisation of the Identity andPassport Service ("IPS") Interview Centre outsourcing contract. Following thissuccess we have now been short listed for the Workplace 2010 Project for theoutsourcing of the Northern Ireland Civil Service properties. We believe we can continue to acquire new property at attractive yields andexplore further real estate outsourcing opportunities in the public and privatesectors to leverage our established operational platform and nationwideexpertise. I am confident both of Mapeley's performance for the full year andthe continued creation of long term value for our shareholders." Conference callMapeley's management will host an earnings conference call at 3:00 P.M. London time (10:00 A.M. New York time) on 3 August 2006. All interested parties are welcome to participate on the live call. You can access the conference call by dialling +1-866-323-3742 (from within the U.S.) or +1-706-643-0550 (from outside the U.S.) ten minutes prior to the scheduled start of the call; please reference "Mapeley Second Quarter 2006 Earnings Call". A replay of the conference call will be available until 11:59 P.M. New York time on Thursday, 10 August 2006 by dialling +1-800-642-1687 (from within the U.S.) or +1-706-645-9291 (from outside the U.S.); please reference access code "2975009". For further information, please contact:Emma Parr, Investor RelationsMapeleyTel: +44(0)20 7788 1742Email: [email protected] Tim McCallMJ2 Business CommunicationsTel: +44(0)20 7491 7776 / +44(0)7753 561862Email: [email protected] / [email protected] * based on weighted average number of shares in issue for the period on an undiluted basis Chief Executive's Statement PerformanceMapeley has completed an excellent first half of 2006 with funds from operations(FFO) increasing by 164.4% to £24.6 million and for the fifth successive quartersince IPO we have increased our dividend. The quarterly dividend of 41 pence pershare, represents an increase of 5.1% over the previous quarter and is in linewith our strategy of paying a stable and growing dividend to our shareholders.This has been achieved by maintaining our focus on increasing earnings from ourexisting portfolio and by acquiring new assets with yields higher than our costof funds. Outsourcing ContractsIn the first half of the year, performance from our two major outsourcingcontracts was ahead of our expectations and we continue to develop ourrelationships with Abbey and HM Revenue & Customs. In the first quarter we announced the signing of the Identity and PassportService ("IPS") Interview Centre Outsourcing Contract. This transaction includesthe acquisition, fit-out and delivery of serviced office accommodation for 69interview offices throughout the UK and is in line with our objective ofbuilding on our relationships with central government in the UK. Work is wellunderway on this contract with mobilisation proceeding to plan. We expect to satisfy approximately 15% of the property requirements under thiscontract by utilising vacant space in our existing portfolio which providesexcellent synergies across our business. The nationwide spread of our portfolioand our in-house operational expertise and experience have been key in thesuccessful performance of this contract to date. Direct Property InvestmentsAs regards our direct property investments, in the first six months of the yearwe acquired 15 office properties at an aggregate cost of £190.3 million and anaverage net initial yield of 6.9%. As predicted, and in line with the generalproperty market, we have experienced some further yield compression in theproperty markets in which we operate. However, we were still able to makeaccretive acquisitions throughout this period due to our extensive regionalplatform and expertise in identifying high yielding acquisition opportunities(often by way of off-market acquisitions) and our relatively low financingcosts. OutlookWe were delighted to be short-listed at the end of June for the Workplace 2010Project for the outsourcing of the Northern Ireland Civil Service ("NICS")properties. Our team are currently evaluating this project which NICS plans toaward by early 2007. We believe we can continue to acquire new property at attractive yields andexplore further real estate outsourcing opportunities in the public and privatesectors to leverage our established operational platform and nationwideexpertise. We have a good pipeline of opportunities and are confident both ofMapeley's performance for the full year and the continued creation of long termvalue for our shareholders. Jamie HopkinsChief Executive Officer Operating review 1) Portfolio Review Mapeley Limited and its subsidiaries ("Mapeley" or the "Group") real estateportfolio is split into two distinct segments - outsourcing contracts andinvestment property. Outsourcing Contracts The HMRC portfolioAs at 30 June 2006, the HMRC portfolio (see note 8) had a value of £554.2million (31 December 2005: £566.6 million). It comprised 143 freehold or longleasehold properties (31 December 2005: 144) and 389 rack rented leaseholdproperties (31 December 2005: 401). Portfolio occupancy (based on area) was98.8% at 30 June 2006 (31 December 2005: 98.5%). The Abbey portfolioAs at 30 June 2006, the Abbey portfolio (see note 9) had a value of £556.8million (31 December 2005: £546.5 million). It comprised 367 freehold or longleasehold properties (31 December 2005: 362) and 719 rack rented leaseholdproperties (31 December 2005: 732). Portfolio occupancy (based on area) was91.9% at 30 June 2006 (31 December 2005: 91.6%). Identity and Passport Service ("IPS") Interview Centre Outsourcing ContractMapeley has recently signed a contract for a term of 3 years, with an option toextend for a further 2 years with IPS. Mapeley will acquire and fit outapproximately 17,500 sqm of office space during 2006 in a phased roll-outprogramme. Thereafter, Mapeley will provide fully serviced accommodation, whichwill be used by IPS to interview first-time passport applicants as part of theircontinuing efforts to reduce identity fraud. Facility management contractMapeley has awarded a contract to Alfred McAlpine Business Services ("AMBS"), asubsidiary of Alfred McAlpine Plc, to deliver facilities management services tothe HMRC portfolio and other properties. The contract was awarded to AMBS on 3February 2006 and it will run until Spring 2021. Investment property Direct property investment ("DPI") portfolioDuring the first six months of the year, the Group continued successfully topursue its strategy of acquiring individual properties or portfolios of regionaloffice properties. The Group focused on purchasing property primarily let tostrong credit quality tenants, who are expected to stay in the properties overthe long-term. In the six months to 30 June 2006, the Group purchased investment property at anaggregate cost of £190.3 million with an average net initial yield of 6.9%(including the cost of purchase) and continued to identify a significant targetpool of properties it may consider acquiring in the future. As at 30 June 2006, the DPI portfolio (see note 9) comprised 53 properties (31December 2005: 38) with a value of £726.9 million (31 December 2005: £529.2million). The net initial yield on this portfolio as at 30 June 2006 was 7.1%(31 December 2005: 7.2%). The properties were 98.5% let (31 December 2005:98.0%) on fully repairing and insuring leases to central and local governmentand major corporate tenants with an average unexpired lease length of 8 years(31 December 2005: 9 years). 2) Property Management LettingsDuring the first six months of 2006 the Group let 28 vacant properties (30 June2005: 17) with an annual rent role of £1.0 million (30 June 2005: £0.3 million). Rent reviews and lease renewals - As landlordDuring the first 6 months of 2006 the Group settled 19 rent reviews (30 June2005: 14) on rack rented properties in its portfolios with an annual rent rollof £0.8 million (30 June 2005: £1.0 million). The average increase was 1.6% perannum. During the same period the Group also completed lease renewals for 3 properties(30 June 2005: 8) with an annual rent roll of £0.1 million (30 June 2005: £0.2million). The average annual increase was 3.0%. Rent reviews and lease renewals - As tenantDuring the first 6 months of 2006 the Group settled 105 rent reviews (30 June2005: 76) on rack rented properties in its portfolios with an annual rent rollof £20.2 million (30 June 2005: £5.7 million). The average increase was 0.41%per annum. During the same period the Group also completed lease renewals for 24 properties(30 June 2005: 9) with an annual rent roll of £2.4 million (30 June 2005: £0.3million). The average annual decrease was negligible. 3) Financing Secondary issue of sharesOn 25 January 2006, Mapeley Limited (the "Company") issued a further 4,036,697ordinary shares at a price of £27.25 per share and raised proceeds of £106.4million, net of issue costs. The proceeds were used to repay a portion of therevolving acquisition facility, resulting in a reduction in interest costs andenabling the Group to draw new funds under its revolving acquisition facilityfor future acquisitions. Share performance dataClosing share price on 30 June 2006 £30.52 per shareDividends proposed and declared for the quarter ended 30 June 2006 £ 0.41 per share Debt finance Conversion of revolving acquisition facility to term facilityIn January 2006, at the time of the secondary share issue, the Group convertedthe £300.0 million revolving acquisition facility into a 10 year, £208.6 millionterm facility with a fixed interest rate of 4.53% plus a margin of 0.85%. Therate of interest payable is determined by the weighted average rate payableunder the Group's matching swap contracts which were terminated on the samedate. New revolving facilityHaving paid down the previous revolving acquisition facility (with the new term facility and equity, as described above), the Group also arranged a new 2 year, £300.0 million revolving loan facility (the "Gamma acquisition facility") to finance the future acquisition of investment property. The interest rate payable on the facility is LIBOR plus a margin of between 1.0% and 1.5%, plus mandatory costs (if any). The Group has also put in place a 10 year, 4.37% £200.0 million swap to fix its anticipated long term exposure to interest rate risk on these property acquisitions. As at 30 June 2006 the balance drawn down on this facility was £181.3 million. STEPS refinancingThe Group is currently in negotiations to refinance the loan facility enteredinto by Mapeley STEPS Limited and Mapeley STEPS Contractor Limited in 2001. Thiswill involve the repayment of the current 20 year, £176.0 million loan andreplacing it with a new 15 year, £179.0 million term facility. As a result, theGroup has incurred an exceptional charge of £15.3 million comprising of £4.4million resulting from a change in the estimate of the timing of repayment ofthe original loan and £10.9 million relating to swap valuation losses arisingdue to the reclassification of the related hedging instrument as ineffective.The Group intends to enter into fixed interest rate agreements at the start ofthe new facility to fix the interest payable 4) Dividend proposed and declared At a Board meeting held on 2 August 2006, the Board of the Company declared adividend for the quarter of £10.9 million, equating to £0.41 per share (quarterended 30 June 2005: £5.0 million, equating to £0.30 per share), (quarter ended31 March 2006: £10.3 million, equating to £0.39 per share) based on the weightedaverage number of shares in issue during the period.The record date for this dividend will be 11 August 2006 and the payment datewill be 31 August 2006.For the half year ended 30 June 2006, the dividends paid and proposed amountedto £21.2 million (half year ended 30 June 2005: £9.6 million). Key financial information Key Performance Measures Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £million £million £million Funds from operations (FFO) (refer to note 18) 24.6 9.3 25.5Dividends declared during period 21.2 9.6 25.4Dividend per share (pence / share)* 80p 60p 130pFFO per share (pence / share)** (refer to note 18) 95p 60p 130p Income Statement Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £million £million £million Revenue 178.8 161.0 339.4Property operating expenses (127.0) (126.3) (268.3)Net valuation surplus / (deficit) on investment property 18.7 (5.1) 18.0Administrative and other expenses (9.0) (9.3) (19.7)EBITDA (refer to note 17) 49.2 32.7 64.8Finance costs (refer to note4) (49.5) (98.9) (129.7)Finance income (refer to note 4) 13.6 2.3 3.8Gain on interest rate swap included in finance income (refer to note 4) 11.7 - -Exceptional finance charge included in finance costs (refer to note 4) (15.3) (72.7) (72.7)Profit /(loss) for the period 26.7 (76.3) (56.5) Balance Sheet As at As at As at 30 June 2006 30 June 2005 31 December 2005 £million £million £million Portfolio value 1,838.4 1,305.5 1,643.2Total non-current assets 1,872.8 1,313.1 1,650.2Financial instrument assetsincluded in total non-current assets 28.0 - -Bank loans excluding loan finance costs 1,191.8 792.4 1,086.6Financial instrument liabilities 10.9 27.5 28.0Net assets (refer to note 20) 606.9 423.9 457.0Gearing (refer to note 19) 182% 170% 220% * Dividend per share calculations are based on the number of shares in issue on an undiluted basis during the period. ** Undiluted per share calculations for the six months ended 30 June 2006 are based on the weighted average number of ordinary shares in issue during the period of 25,919,221 shares. Undiluted per share calculations for the six months ended 30 June 2005 are based on the weighted average number of ordinary shares in issue during the period of 15,809,890 shares. Undiluted per share calculations for the year ended 31 December 2005 are based on the weighted average number of ordinary shares in issue during the period of 19,510,770 shares. Financial review Funds from operations ("FFO") Funds from operations is a non-GAAP financial management measure used todemonstrate the underlying operating performance of real estate businesses. Itprovides investors with information regarding the Group's ability to servicedebt and make capital expenditure. Further information on FFO is set out in note18. Funds from operations were £24.6 million in the six months ended 30 June 2006,compared with £9.3 million in the six months ended 30 June 2005. The increase inFFO of £15.3 million was primarily driven by income generated by investmentproperties acquired in the period and stronger performance from the Group'sexisting outsourcing contracts driven by lower operating costs and higher assetmanagement receipts. Dividends On 2 August 2006, the Board of Directors declared a dividend of £0.41 per sharefor the quarter ended 30 June 2006 (quarter ended 31 March 2006: £0.39 pershare), an increase of 5.1% per share on the prior quarter, reflecting theCompany's policy of paying stable and growing dividends. Revenue Group revenue for the six months ended 30 June 2006 was £178.8 million, anincrease of £17.8 million (11.1%) over the same period last year. The increasewas driven by additional rental income of £17.6 million from the Direct PropertyInvestment ("DPI") portfolio. There was an increase, net of vacations, of £1.3million in contractual income from outsourcing contracts offset by a fall inproperty trading of £1.1 million. Property operating expenses The property operating expenses of the Group in the six months ended 30 June2006 were £127.0 million (of which £82.7 million was rentals payable) comparedto £126.3 million (£81.5 million rentals payable) for the same period in theprevious year, an increase of 0.5%. The increase was primarily driven by anincrease in rental payments of £1.2 million offset by savings on facilitymanagement costs. Administrative and other expenses Administrative and other expenses were £9.0 million for the six months ended 30June 2006 compared to £9.3 million for the six months ended 30 June 2005, adecrease of 3.2%. The decrease was driven largely by a reduction in staffingcosts. EBITDA EBITDA (see note 17) was £49.2 million for the six months ended 30 June 2006,compared to £32.7 million for the six months ended 30 June 2005, an increase of50.2%. This was a direct result of revenue growth of 11.1% outstripping totalcost growth of 0.3%. Finance costs and finance income Finance costs in the six months ended 30 June 2006 were £49.5 million (30 June2005: £98.9 million). The finance costs for the six months ended 30 June 2006included exceptional break costs of £15.3 million (30 June 2005: £72.7 million)relating to the refinancing of certain Group borrowings in 2006. Exceptionalbreak costs in 2006 comprise, a finance charge of £4.4 million resulting from achange in the timing of repayment of the original loan and £10.9 millionrelating to swap valuation losses arising due to the reclassification of therelated hedging instrument as ineffective, as a consequence of the expectedrefinancing. Excluding exceptional break costs, finance costs have increased by£8.0 million during the period due to higher interest costs on the increasedborrowings required for new investments in 2006. Finance income has benefited from unrealised gains on interest rate swaps in2006 of £11.7 million. The gain on the interest rate swap of £11.7 million hasarisen as a result of a favourable movement in long term interest ratesapplicable to the £200.0 million swap taken out in January 2006 on the Gammaacquisition facility. The swap fixed the Group's anticipated long term exposureto interest rate risk on certain property acquisitions. Taxation The Group has made a tax provision of £0.1 million in respect of the six monthperiod to 30 June 2006. Certain Group companies are resident in Bermuda and areclassified as UK Non-resident Landlords for tax purposes. Taxable profits inthese companies are subject to UK Income Tax and are exempt from local Bermudataxes. The Group has significant tax losses available for carry forward to future yearsbut in many cases these losses are only available to offset against futuretaxable profits in the entity in which the losses arose. The Group and itssubsidiaries did not pay income or corporation tax in 2005 in any of thejurisdictions in which they operated due to their tax residence status, currentyear losses and the availability of losses brought forward from prior years. Non-current assets Non-current assets, comprising investment property, property plant andequipment, premiums paid for operating leases, non-current trade and otherreceivables and financial instruments, increased by £222.6 million between 31December 2005 and 30 June 2006. Investment property (see note 9) increased to £1,287.3 million from £1,077.4million at 31 December 2005. This reflects the acquisition of new investmentproperty in the six months to 30 June 2006 of £190.3 million plus a valuationsurplus recognized in the period of £18.7 million and transfers from inventoriesof £0.8 million. Over the same period, property, plant and equipment (see note 8) decreased to£514.8 million from £527.9 million at 31 December 2005, principally due to therevaluation of certain of the Group's freehold and long leasehold properties. Bank loans The Group seeks to finance its property investments with long-term debtfacilities on which the interest rates have been fixed by utilising a mixture offixed rate debt and floating rate debt with matching interest rate swapagreements. At 30 June 2006 £1,191.8 million (31 December 2005: £1,086.6million), had been drawn under the Group's loan facilities. The Group drew downfunds of £395.9 million in the period and repaid loans of £290.8 million,further described in the "Operating Review". Gearing The Group's financial strategy is to maintain an optimal gearing ratio (see note19) to ensure that shareholders benefit from maximum leveraged returns. TheGroup purchases investment property in accordance with its strategy. Investmentproperty is initially funded using short term revolving facilities. Thesefacilities are subsequently refinanced at a 70 - 75% Loan to Value ratio ("LTV")using long-term debt with a lower interest rate, with the balance being fundedby new equity raised. At 30 June 2006, the Group had a gearing ratio of 182% (31 December 2005: 220%).The decrease in gearing was primarily driven by an increase in equity followingthe Group's secondary issue of shares in January 2006 and the use of theproceeds raised to partially repay the £300 million revolving acquisitionfacility. Independent review report to Mapeley Limitedon the interim IFRS financial information for the six months ended 30 June 2006 Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Changes in Equity, and the related notes 1 to 20. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 2, the next annual financial statements of the Group willbe prepared in accordance with those IFRSs adopted for use by the EuropeanUnion. The financial information for the six months ended 30 June 2006 has beenprepared on the basis of the accounting policies which the Directors intend touse in the next financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies have been applied. A review excludes audit proceduressuch as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review, we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Ernst & Young LLP London2 August 2006 Consolidated income statementFor the six months ended 30 June 2006 Six months ended Six months ended Year ended Notes 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited £000 £000 £000 Revenue 3 178,751 160,963 339,402Property operating expenses 3 (127,001) (126,313) (268,303) ------------ ------------ ------------Net contract, rental & related income 3 51,750 34,650 71,099 Net valuation surplus / (deficit) on investment property 9 18,690 (5,054) 18,037Reversal of impairment of non-investment property 27 - -Impairment of non-investment property - (70) (589)Profit on disposal of assets held for sale 11 1,241 - -Gain on disposal of subsidiaries - - 599Administrative and other expenses (9,017) (9,267) (19,708) ------------ ------------ ------------ Operating profit 62,691 20,259 69,438 Finance costs 4 (49,506) (98,859) (129,718)Finance income 4 13,571 2,296 3,805 ------------ ------------ ------------ Profit / (loss) before tax 26,756 (76,304) (56,475) Income tax expense- Guernsey 5 - - -- UK 5 (76) - -- Overseas 5 - - - ------------ ------------ ------------Profit / (loss) for the period 26,680 (76,304) (56,475) attributable to equity holders ============ ============ ============ of Mapeley Limited Dividends- paid 6 18,654 8,890 17,052- proposed and declared 6 10,867 748 8,312 ============ ============ ============ Dividends per share £/share £/share £/share- paid 6 0.76 0.57 0.93- proposed and declared 6 0.41 0.03 0.37 ============ ============ ============Earnings / (loss) per share- basic 7 1.03 (4.83) (2.89)- diluted 7 1.03 (4.83) (2.89) ============ ============ ============ Consolidated statement of changes in equityFor the period ended 30 June 2006 and 30 June 2005 Issued Share Net Retained Asset Other Total capital premium unrealised earnings revaluation reserves equity (losses)/ reserve gains £000 £000 £000 £000 £000 £000 £000 -------------------------------------------------------------------------------At 31 December 2005 (Audited) - 132,389 (26,561) (69,094) 318,622 101,598 456,954 Revaluation deficit - - - - (12,927) - (12,927)Depreciation written back on revaluation of non-investment property - - - - 3,093 - 3,093Transfer of excess revaluation depreciation - - - 2,869 (2,869) - -Gain on cash flow hedges - - 33,443 - - - 33,443Transfer to income statement - - 10,876 - - - 10,876 -------------------------------------------------------------------------------Total income / (expense) for the period recognised directly in equity - - 44,319 2,869 (12,703) - 34,485 Profit for the period - - - 26,680 - - 26,680 -------------------------------------------------------------------------------Total income / (expense) for the period - - 44,319 29,549 (12,703) - 61,165 -------------------------------------------------------------------------------Issue of ordinary shares - 110,000 - - - - 110,000Cost related to issue of ordinary shares on listing of Company - (3,579) - - - - (3,579)Issue of shares to Non-executive Directors - - - - - 396 396Issue of shares to employees under the Employee Share Plan - - - - - 663 663Equity dividends - - - (18,654) - - (18,654) -------------------------------------------------------------------------------At 30 June 2006 (Unaudited) - 238,810 17,758 (58,199) 305,919 102,657 606,945 =============================================================================== At 31 December 2004 (Audited) - - (63,623) (1,911) 298,914 120,808 354,188Revaluation surplus - - - - 2,096 - 2,096Reversal of impairment of non-investment property - - - - 70 - 70Depreciation written back on revaluation of non-investment property - - - - 3,360 - 3,360Transfer of excess revaluation depreciation - - - 3,018 (3,018) - -Loss on cash flow hedges - - (27,717) - - - (27,717)Realised loss on cash flow hedge - - 63,880 - - - 63,880 -------------------------------------------------------------------------------Total profit for the period recognised directly in equity - - 36,163 3,018 2,508 - 41,689Loss for the period - - - (76,304) - - (76,304) -------------------------------------------------------------------------------Total income / (expense) for the period - - 36,163 (73,286) 2,508 - (34,615)Capitalised shareholder loans - - - - - 8,086 8,086Repaid other reserves - - - - - (29,000) (29,000)Issue of ordinary shares on listing of Company - 140,800 - - - - 140,800Costs related to issue of ordinary shares on listing of Company - (7,658) - - - - (7,658)Issue of shares to Non-executive Directors - - - - - 345 345Issue of shares to employees under the Employee Share Plan - - - - - 71 71Write back of loss on disposal of subsidiary - - - 599 - - 599Equity dividends - - - (8,890) - - (8,890) -------------------------------------------------------------------------------At 30 June 2005 (Unaudited) - 133,142 (27,460) (83,488) 301,422 100,310 423,926 =============================================================================== Consolidated statement of changes in equityFor the year ended 31 December 2005 Issued Share Net Retained Asset Other Total capital premium unrealised earnings revaluation reserves equity (losses)/ reserve gains £000 £000 £000 £000 £000 £000 £000 -------------------------------------------------------------------------------At 31 December 2004 (Audited) - - (63,623) (1,911) 298,914 120,808 354,188 Impairment of non-investment property reclassified to non-current assets held for sale - - - - (255) - (255)Revaluation surplus - - - - 19,437 - 19,437Depreciation written back on revaluation of non-investment property - - - - 6,870 - 6,870Transfer of excess revaluation Depreciation - - - 6,344 (6,344) - -Loss on cash flow hedges - - (26,818) - - - (26,818)Realised loss on cash flow hedge - - 63,880 - - - 63,880 -------------------------------------------------------------------------------Total profit for the year recognised directly in equity - - 37,062 6,344 19,708 - 63,114Loss for the year - - - (56,475) - - (56,475) -------------------------------------------------------------------------------Total income / (expense) for the year - - 37,062 (50,131) 19,708 - 6,639Capitalised shareholder loans - - - - - 8,086 8,086Repaid other reserves - - - - - (29,000) (29,000)Issue of ordinary shares on listing of Company - 140,800 - - - - 140,800Cost related to issue of ordinary shares on listing of Company - (8,411) - - - - (8,411)Issue of shares to Non-executive Directors - - - - - 805 805Issue of shares to employees under the Employee Share Plan - - - - - 899 899Equity dividends - - - (17,052) - - (17,052) -------------------------------------------------------------------------------At 31 December 2005 (Audited) - 132,389 (26,561) (69,094) 318,622 101,598 456,954 =============================================================================== Consolidated balance sheet - at 30 June 2006 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited Notes £000 £000 £000 ASSETSNon-current assetsProperty, plant and equipment 8 514,778 514,131 527,945Investment property 9 1,287,282 752,018 1,077,429Premiums on operating leases 36,715 40,174 38,432Trade and other receivables 5,965 6,773 6,405Financial instruments 14 28,044 - - ----------- ----------- -----------Total non-current assets 1,872,784 1,313,096 1,650,211 ----------- ----------- -----------Current assetsInventories 10 17,980 19,680 18,509Trade and other receivables 67,011 51,665 48,889Cash and short-term deposits- in controlled accounts 28,085 19,817 25,704- for operational purposes 58,475 51,606 55,452 ----------- ----------- -----------Total current assets 171,551 142,768 148,554 ----------- ----------- ----------- Non-current assets held for sale 11 1,246 - 1,376 ----------- ----------- -----------TOTAL ASSETS 2,045,581 1,455,864 1,800,141 =========== =========== ===========EQUITY AND LIABILITIESEquity attributable to equity holders of Mapeley LimitedIssued capital (net of treasury shares) 12 - - -Share premium 238,810 133,142 132,389Net unrealised gains / (losses) 17,758 (27,460) (26,561)Retained earnings (58,199) (83,488) (69,094)Asset revaluation reserve 305,919 301,422 318,622Other reserves 102,657 100,310 101,598 ----------- ----------- -----------Total equity 606,945 423,926 456,954 ----------- ----------- -----------Non-current liabilitiesTrade and other payables 5,557 5,230 5,413Interest & non-interest bearing loans and borrowings 13 1,191,338 785,223 797,792Provisions 31,153 27,440 28,235Financial instruments 14 10,876 27,460 26,561Deferred asset management receipts 80,270 68,847 74,011Current liabilitiesTrade and other payables 107,042 101,767 108,764Interest & non-interest bearing loans and borrowings 13 120 2,128 285,422Provisions 6,418 9,300 10,366Financial instruments 14 - - 1,439Deferred asset management receipts 5,862 4,543 5,184 ----------- ----------- -----------Total liabilities 1,438,636 1,031,938 1,343,187 ----------- ----------- -----------TOTAL EQUITY AND LIABILITIES 2,045,581 1,455,864 1,800,141 =========== =========== =========== Approved by the Board of Directors on 2 August 2006 and signed on its behalf by J P Hopkins, Director Consolidated cash flow statementfor the six months ended 30 June 2006 Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited Notes £000 £000 £000 Cash flows from operating activitiesOperating profit 62,691 20,259 69,438Adjustment for:Reversal of impairment of non-investment property (27) - -Impairment of non-investment property - 70 589Net valuation (surplus) / deficit on investment property 9 (18,690) 5,054 (18,037)Depreciation and amortisation 5,187 6,739 13,420Profit on disposal of assets held for sale 11 (1,241) - -(Profit) / loss on disposal of subsidiaries - 599 (599)Share benefit expense 1,059 416 1,704 ----------- ----------- -----------Operating profit before changes in working capital 48,979 33,137 66,515Increase in inventories (293) (2,407) (1,236)(Increase) / decrease in trade & other receivables (17,682) 17,432 21,177(Decrease) / increase in trade & other payables (2,410) 8,694 5,547Decrease in provisions (2,005) (3,102) (2,224)Increase in deferred asset management receipts 6,937 5,303 11,108 ----------- ----------- -----------Cash generated from operations 33,526 59,057 100,887Interest paid (30,673) (31,833) (48,848)Interest received 1,848 2,296 3,805 ----------- ----------- -----------Net cash flows from operating activities 4,701 29,520 55,844 ----------- ----------- -----------Cash flows from investing activitiesProceeds from sale of assets held for sale 873 - -Purchase of property, plant and equipment (108) (274) (333)Purchase of investment property 9 (190,341) (207,748) (507,161) ----------- ----------- -----------Net cash flows used in investing activities (189,576) (208,022) (507,494) ----------- ----------- -----------Cash flows from financing activitiesCosts of raising finance (2,391) (6,275) (8,185)Payment of finance lease liabilities (246) (87) (589)Receipt of shareholder loans - 675 675Swap and loan termination fees - (65,902) (65,931)Receipt of new bank loans 13 395,920 614,095 1,059,595Repayment of bank loans 13 (290,771) (491,677) (642,940)Receipt of other reserves - 29,000 29,000Repayment of other reserves - (29,000) (29,000)Proceeds from issue of ordinary shares on secondary issue / IPO 110,000 140,800 140,800Costs related to issue of ordinary shares on secondary issue / IPO (3,579) (7,658) (8,411) Dividend paid to equity holders 6 (18,654) (8,890) (17,052) ----------- ----------- -----------Net cash flows from financing activities 190,279 175,081 457,962 ----------- ----------- -----------Net increase / (decrease) in cash and short-term deposits 5,404 (3,421) 6,312Cash and cash equivalents at start of period 81,156 74,844 74,844 ----------- ----------- -----------Cash and cash equivalents at end of period 86,560 71,423 81,156 =========== =========== =========== Notes to the unaudited interim resultsat 30 June 2006 1. General information The consolidated interim financial statements of the Group for the six monthsended 30 June 2006 comprise the Company and its subsidiaries and were authorisedby the Board for issue on 2 August 2006. The Company's registered office islocated at Suite 6, Borough House, Rue du Pre, St Peter Port, Guernsey GY1 3RH. 2. Basis of preparation and accounting policies The accounting policies adopted in the preparation of the interim consolidatedfinancial statements are consistent with those as reported in the Group's annualreport for the year ended 31 December 2005 except where such policies have beenrevised to reflect amendments to International Accounting Standards ("IAS") andthe adoption of new International Financial Reporting Standards ("IFRS") whichbecame effective from 1 January 2006. Accordingly IAS 39 Amendments to IAS 39Financial Instruments: Recognition and Measurement The Fair Value option, whichbecame effective from 1 January 2006, has been adopted by the Group in preparingthese interim financial statements. The financial statements of the Group for the year ending 31 December 2006 willbe prepared in accordance with IFRS as adopted for use by the European Union at31 December 2006. The interim consolidated financial statements should be read in conjunction withthe Group's annual financial statements as at 31 December 2005. The interim consolidated financial statements are presented in pounds sterlingand all values are rounded to the nearest thousand (£000) except where otherwiseindicated. The functional currency of the Group is pounds sterling. Prior year comparatives Certain comparative figures for the six months ended 30 June 2005 have beenadjusted or extended to conform to the presentation adopted in respect of thesix months ended 30 June 2006 and the year ended 31 December 2005. Theadjustments are explained below: - Trade and other receivables and trade and other payables have been reclassified between current and non-current assets and liabilities respectively. The impact of this reclassification has increased non-current assets by £6.8 million (current assets reduced by the same amount) and increased non-current liabilities by £5.2 million (current liabilities reduced by the same amount); - Provisions have been reclassified between current and non-current liabilities. The impact of this reclassification has increased current liabilities by £9.3 million (non-current liabilities reduced by the same amount); - Financial derivatives have been reclassified between current and non-current liabilities. The impact of this reclassification has increased non-current liabilities by £27.5 million (current liabilities reduced by the same amount). 3. Revenue and segmental information Six months ended 30 June 2006 (Unaudited)Business segments Investment Outsourcing Total property contracts operations £000 £000 £000Rental revenue 21,443 - 21,443Property trading - 995 995 ------------------------------------------ Facility unitary charge - 103,075 103,075 Contractual rents - 39,302 39,302 Third party rents - 13,936 13,936 ------------------------------------------Contractual revenue - 156,313 156,313 Segment revenue 21,443 157,308 178,751Rentals payable (145) (82,588) (82,733)Other direct property and contract expenditure * (440) (43,828) (44,268) ------------------------------------------Net contract, rental & related income 20,858 30,892 51,750Reversal of impairment of non-investment property - 27 27Net valuation surplus on investment property 7,368 11,322 18,690Profit on disposal of assets held for sale - 1,241 1,241 ------------------------------------------Segment result 28,226 43,482 71,708 ==========================Unallocated expenses (9,017) ---------Operating profit 62,691Net finance costs (35,935)Income tax (76) ---------Profit for the period 26,680 ========= Six months ended 30 June 2005 (Unaudited)Business segments Investment Outsourcing Total property contracts operations £000 £000 £000Rental revenue 3,877 - 3,877Property trading 139 1,958 2,097 ------------------------------------------ Facility unitary charge - 101,995 101,995 Contractual rents - 40,051 40,051 Third party rents - 12,943 12,943 ------------------------------------------Contractual revenue - 154,989 154,989 Segment revenue 4,016 156,947 160,963Rentals payable (4) (81,535) (81,539)Other direct property and contract expenditure * (169) (44,605) (44,774) ------------------------------------------Net contract, rental & related income 3,843 30,807 34,650Impairment of non-investment property - (70) (70)Net valuation deficit on investment property (5,047) (7) (5,054) ------------------------------------------Segment result (1,204) 30,730 29,526 ==========================Unallocated expenses (9,267) ---------Operating profit 20,259Net finance costs (96,563) ---------Loss for the period (76,304) ========= Year ended 31 December 2005 (Audited)Business segments Investment Outsourcing Total property contracts operations £000 £000 £000Rental revenue 15,880 - 15,880Property trading 330 2,176 2,506 ------------------------------------------ Facility unitary charge - 213,779 213,779 Contractual rents - 81,152 81,152 Third party rents - 26,085 26,085 ------------------------------------------Contractual revenue - 321,016 321,016 Segment revenue 16,210 323,192 339,402Rentals payable (19) (167,676) (167,695)Other direct property and contract expenditure * (424) (100,184) (100,608) ------------------------------------------Net contract, rental & related income 15,767 55,332 71,099Impairment of non-investment property - (589) (589)Net valuation (deficit) / surplus on investment property (2,289) 20,326 18,037 ------------------------------------------Segment result 13,478 75,069 88,547 ==========================Gain on disposal of subsidiaries 599Unallocated expenses (19,708) ---------Operating profit 69,438Net finance costs (125,913) ---------Loss for the year (56,475) ========= * Other direct property and contract expenditure includes depreciation. 4. Finance costs and finance income Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited £000 £000 £000Finance costsBank loans and overdrafts 37,502 31,762 59,996Shareholder interest payable - 13 13Finance charges payable under finance leases 153 192 395Loss on interest swap 10,876 - 1,410Loss on breaking interest rate swap - 63,851 63,880Loan termination costs - 2,051 2,051Unwinding of discount on provisions 975 990 1,973 ------------ ------------ ------------ 49,506 98,859 129,718 ============ ============ ============Finance incomeBank interest receivable 1,848 2,296 3,805Gain on interest swap 11,723 - - ------------ ------------ ------------ 13,571 2,296 3,805 ============ ============ ============ Bank loans and overdraft charges include a charge of £5.6 million (six monthsended 30 June 2005: £7.0 million; year ended 31 December 2005: £8.8 million)relating to loan finance fees recognized under the effective interest method. Ofthis amount £4.4 million (six months ended 30 June 2005: £6.8 million; yearended 31 December 2005: £6.8 million) relates to exceptional charges as outlinedbelow. In total the Group incurred an exceptional charge of £15.3 million for theperiod (six months ended 30 June 2005: £72.7 million; year ended 31 December2005: £72.7 million) relating to the expected refinancing of certain Groupborrowings in 2006 as detailed in note 16. The exceptional charge comprises, afinance charge of £4.4 million resulting from a change in the timing ofrepayment of the original loan and £10.9 million relating to swap valuationlosses arising due to the reclassification of the related hedging instrument asineffective, as a consequence of the expected refinancing. 5. Income tax expense a) Tax on profit on ordinary activities The charge during the six months ended 30 June 2006 of £76,000 relates to UKincome tax. There has been no income tax or deferred tax charged in priorperiods. b) Deferred income tax The Group also had deferred tax liabilities of £4,629,000 at 30 June 2006 (31December 2005: £340,000), which have been netted against its deferred tax assetsof £56,097,000 at 30 June 2006 (31 December 2005: £64,588,000). The net deferredtax asset of £51,468,000 (31 December 2005: £64,248,000) was unrecognized. Themovement during the period was due to the utilization of losses and changes inthe swap valuations. During the period the Group has reassessed the basis onwhich deferred tax is provided on deferred asset management receipts. Thedeferred tax assets for the prior periods are now also stated on that basis. 6. Dividends Six months Six months Year ended ended ended 31 December 30 June 2006 30 June 2005 2005 Unaudited Unaudited Audited £000 £000 £000Declared and paid during the period:Equity dividends on ordinary shares: First interim dividend for 2005: £0.30 per share - 4,615 4,615 Second interim dividend for 2005: £0.27 per share - 4,275 4,275 Third interim dividend for 2005: £0.03 per share - - 748 Fourth interim dividend for 2005: £0.33 per share - - 7,414 Fifth interim dividend for 2005: £0.37 per share, paid 5 January 2006 8,312 - - First interim dividend for 2006: £0.39 per share - 10,342 - ------------ ------------ ------------ 18,654 8,890 17,052 ============ ============ ============ Proposed and approved at the Board meeting on 2 August 2006 (To be deducted from retained earnings in the three months ending 30 September 2006) Equity dividends on ordinary shares: Second interim dividend for 2006: £0.41 per share; (30 June 2005: £0.03 per share; 31 December 2005: £0.37 per share) 10,867 748 8,312 ============ ============ ============ 7. Earnings / (loss) per share The calculation of basic and diluted earnings per share figures is based on thefollowing: - Net profit attributable to equity holders of the Company for the period of £26.7 million (six months ended 30 June 2005: loss of £76.3 million; year ended 31 December 2005: loss of £56.5 million) - Weighted average number of ordinary shares for basic earnings per share 25,919,221 (six months ended 30 June 2005: 15,809,890; year ended 31 December 2005: 19,510,770) - Weighted average number of ordinary shares for diluted earnings per share 25,929,424 (six months ended 30 June 2005: 15,809,890; year ended 31 December 2005: 19,527,249) 8. Property, plant and equipment The HMRC portfolio has been valued at 30 June 2006 at £554,215,000 (31 December2005: £566,613,000). Of this amount £512,029,000 (31 December 2005:£524,930,000) is attributable to assets held within property, plant andequipment. The remaining assets in this category consist of properties held atDirectors' valuation of £2,328,000 (31 December 2005: £2,432,000) and assetsheld at depreciated historical cost of £421,000 (31 December 2005: £584,000). The valuation by Savills resulted in a valuation deficit for the six monthperiod of £12,927,000 (31 December 2005: surplus £19,437,000). This was due toan increase in the Group's assessment of the cost of providing facilitiesmanagement services to certain properties as part of the HMRC contract followingthe signing of a new facilities management contract. Under this contract the overall cost of services across the whole estatereduced, with the reduction on the short leasehold properties more thancompensating for the increased costs attributable to the freehold and longleasehold properties. 9. Investment property Property Freehold acquired under property finance leases Total £000 £000 £000At valuation:At 1 January 2005 (Audited) 1,054,305 23,124 1,077,429Additions 190,341 - 190,341Transfers from inventories 420 402 822Revaluations 17,383 1,307 18,690 ---------- ---------- ----------At 30 June 2006 (Unaudited) 1,262,449 24,833 1,287,282 ========== ========== ========== During the period ended 30 June 2006, 5 properties were transferred frominventories to investment property as the Group intends to hold these propertieson a long term basis. It is the Group's policy to carry investment property at fair value inaccordance with IAS 40 "Investment Property". Investment property was valued at30 June 2006 by CB Richard Ellis Limited ("CBRE") and Savills, valuers externalto the Group. These valuations have been incorporated into the interim financial statements.Both Savills and CBRE have consented to the use of their names in thesefinancial statements. Investment property comprises the Group's Abbey portfolio and its directproperty investments. CBRE's valuation of the Abbey portfolio of properties was£556,813,700 (31 December 2005: £546,503,000). Certain properties with avaluation of £nil (31 December 2005: £1,841,000) included within this valuationare being marketed for sale and as such are classified as trading propertieswithin inventories. These are carried at the lower of cost and net realisablevalue in the financial statements. Savills and CBRE both carried out valuations of the Group's other propertiesheld within investment property, which were valued as at 30 June 2006 at£40,550,000 (31 December 2005: £24,825,000), and at £686,383,000 (31 December2005: £504,399,000) respectively as at 30 June 2006. The remaining properties held under Property acquired under finance leases werevalued by the Directors at a Market Value of £3,535,000 (31 December 2005:£3,543,000), having taken advice from a suitably-qualified employee (a member ofThe Royal Institution of Chartered Surveyors). These valuations are summarised below: As at As at 30 June 2005 31 December 2005 Unaudited Audited £000 £000Valuation of Abbey portfolio by CBRE 556,814 546,503Less properties valued by CBRE held in inventories at lower of cost or net realisable value - (1,841) ------------ ------------ 556,814 544,662Valuation of direct property investments by Savills 40,550 24,825Valuation of direct property investments by CBRE 686,383 504,399Valuation of certain finance leases by the Directors 3,535 3,543 ------------ ------------ 1,287,282 1,077,429 ============ ============ The valuations at 30 June 2006 and 31 December 2005 have been carried out inaccordance with The Royal Institution of Chartered Surveyors' ("RICS") Appraisaland Valuation Standards published in February 2003 (the "Red Book") and the CESRGuidance on property valuations. 10. Inventories As at As at 30 June 2006 31 December 2005 Unaudited Audited £000 £000Trading properties 822 822Transfer to investment property (822) - ------------ ------------Trading properties - 822Work in progress (at cost) 17,980 17,687 ------------ ------------ 17,980 18,509 ============ ============ During the period, trading properties were transferred to investment property(refer to note 9). Work in progress represents costs on long term contracts notyet taken to the income statement less any foreseeable losses and payments onaccount. 11. Non-current assets held for sale Assets with a book value of £130,000 were disposed of during the period to 30June 2006 (31 December 2005: £nil), resulting in a net gain on disposal of£1,241,000 (six months ended 30 June 2005: £nil). 12. Issued capital As at 30 June 2006 Authorised No. of ordinary shares £000Ordinary shares at par value of £nil Unlimited - ============ ====== Issued No. of shares £000At 1 January 2006 (net of 1,460 treasury shares) 22,463,687 -Issued on 25 January 2006 4,036,697 -Issued on 17 March 2006 under the Employee share plan 13,059 -Issued on 17 March 2006 to the Non-executive Directors 5,000 -Issued on 26 June 2006 to the Non-executive Directors 20,000 -Treasury shares (34,526) - ----------- ------At 30 June 2006 (net of treasury shares) 26,503,917 - =========== ====== On 25 January 2006, through an additional public offering, the Company issued afurther 4,036,697 ordinary shares to investors at a price of £27.25 each. TheCompany also issued 13,059 ordinary shares under the share plan for employeesand 25,000 ordinary shares to the Non-executive Directors during the period. The ordinary shares issued to the Employee Share Plan and to the Non-executiveDirectors were issued for £nil consideration. 13. Interest and non-interest bearing loans and borrowings Revolving acquisition facility A 10 year, £208.6 million fixed rate facility was arranged during the period torefinance the Group's £300.0 million revolving acquisition facility secured oncertain of the Group's properties. The interest rate payable on the facility isfixed at 4.53% plus a margin of 0.85%. When the assets funded by the facilitywere initially purchased, the Directors entered into swap arrangements to fixthe rate of interest payable. Once all assets had been purchased, theacquisition facility and related swap arrangements were terminated and the ratepayable under the investment facility which replaced it, determined by theweighted average rate payable under the Group's matching swap contracts. Eachborrower under this facility has granted security over all its assets in favourof the lender. The loan is partly repaid when properties within the portfolioare sold. Any unpaid loan balance outstanding at expiry will be repaid in fullat that time. Revolving Gamma acquisition facility During the period the Group also arranged a 2 year, £300.0 million RevolvingGamma facility to finance the future acquisition of investment property. Theinterest rate payable on the facility is LIBOR plus a margin of between 1.0% and1.5% plus mandatory costs (if any). The Group has also put in place a 10 year,4.37% £200.0 million swap to fix its anticipated long term exposure to interestrate risk on these property acquisitions. 14. Financial Instruments The fair value of the Group's outstanding interest rate swaps has beendetermined by the swap counterparty and JC Rathbone Associates, based on the present value of future cash flows, using appropriate market discount rates. The positive changes in the valuations of the Group's floating to fixed interestrate swaps arose as a result of an increase in long term interest rates duringthe period. 15. Related party transactions During the period the Company issued 25,000 (see note 12) ordinary shares to theNon-executive Directors as follows: M Fascitelli 10,000R Carey 5,000C Parkinson 5,000J Harris 5,000 The Company also issued 9,328 shares under the share plan for employees with afair value of £26.80 each to certain key management personnel. 16. Subsequent events Since 30 June 2006, the Group has exchanged and completed contracts to acquirefour properties for a consideration of £17.7 million. These properties have beenfunded by the revolving Gamma acquisition facility. The Group is currently in negotiations to refinance the loan facility enteredinto by Mapeley STEPS Limited and Mapeley STEPS Contractor Limited. This willinvolve the repayment of the current 20 year, £177.3 million loan and replacingit with a 15 year, £179.0 million term facility. Consequently, the Group hasincurred an exceptional charge of £15.3 million comprising, £4.4 millionresulting from a change in the estimate of the timing of repayment of theoriginal loan and £10.9 million relating to swap valuation losses resulting fromthe reclassification of the related hedging instrument as ineffective, inaccordance with IAS 39. The Group intends to enter into fixed interest rateagreements at the start of the new facility to fix interest payable. The Board of the Company proposed and declared a dividend of £10.9 million (31December 2005: £8.3 million; 30 June 2005: £0.7 million) at a Board meeting heldon 2 August 2006. 17. Earnings before interest, tax, depreciation and amortisation Earnings before interest, tax, depreciation and amortisation or "EBITDA" is akey performance measure of the Group defined by the Group as profit before tax,finance costs, depreciation and amortisation, valuation surplus / deficit oninvestment property, gain on disposal of subsidiaries and impairment /impairment reversal of non-investment property. EBITDA for the period iscomputed as follows: Six months Six months Year ended ended ended 31 December 30 June 2006 30 June 2005 2005 Unaudited Unaudited Audited £000 £000 £000 Profit / (loss) before tax 26,756 (76,304) (56,475)Add back: Finance cost net of finance income 35,935 96,563 125,913Depreciation and amortisation 5,187 6,739 13,420Net valuation (surplus) / deficit on investment property (18,690) 5,054 (18,037)Reversal of impairment of non - investment property (27) - -Impairment of non - investment property - 70 589Gain on disposal of subsidiaries - 599 (599) ---------- ---------- ----------EBITDA 49,161 32,721 64,811 ========== ========== ========== 18. Funds from operations Funds from operations or "FFO" is a management measure used to demonstrate theunderlying operating performance of real estate businesses. It provides investors with information regarding the Group's ability to service debt andmake capital expenditure. FFO does not represent cash generated from operatingactivities in accordance with IFRS, therefore it should not be considered analternative to cash flow as a measure of liquidity, and is not necessarilyindicative of cash funds available. This calculation of FFO may be differentfrom the calculation used by other companies and, therefore, comparability maybe limited. The Group defines "FFO" as Group "EBITDA" less "net finance costs" less the"movement in the onerous lease provision" less the "movement in work inprogress" plus the movement in "net asset management receipts" plus the chargein respect of "employee shares". More detailed definitions of these adjustmentsto EBITDA are given below: "Net finance costs" comprise finance costs less finance income as set out in theGroup income statement, adjusted to exclude amortisation of loan finance fees,gains or losses on interest rate swaps, loan termination costs and the unwindingof discounts on provisions. The "Movement in the onerous lease provision" - This is the net release (orcharge) to the Group income statement as a result of the change in the Grouponerous lease provisions, excluding interest charged on the unwinding of theprovision. Although these amounts offset rental costs in the income statement,they do not represent cash movements and are therefore excluded from thecomputation of FFO. The "Movement in work in progress"- This is the period on period change in Groupwork in progress or if negative, accrued cost. The amount represents theincrease or decrease in lifecycle costs deferred by the Group so as to matchcosts with revenue. "Net asset management receipts" - These are the total cash receipts in theperiod less amounts amortised in the financial period. "Employee shares" - Under IFRS 2, costs are charged to the Group incomestatement when share based payments are made. This is a non cash expense and istherefore excluded from the measure. Six months Six months Year ended ended ended 31 December 30 June 2006 30 June 2005 2005 Unaudited Unaudited Audited £000 £000 £000EBITDA 49,161 32,721 64,811Net finance costs (30,229) (22,701) (47,795)Movement in the onerous lease provision (2,005) (3,103) (2,227)Movement in work in progress (293) (3,317) (2,146)Asset management receipts 6,937 5,301 11,108Share benefit expense 1,059 416 1,704 ------------ ------------ ------------FFO 24,630 9,317 25,455 ============ ============ ============ ------------ ------------ ------------FFO per share 95 pence 60 pence 130 pence ============ ============ ============ The calculation of FFO per share is based on the following: - FFO for the period of £24.6 million (six months ended 30 June 2005: £9.3 million; year ended 31 December 2005: £25.5 million) - Weighted average number of ordinary shares of 25,919,221 (six months ended 30 June 2005: 15,809,890; year ended 31 December 2005: 19,510,770) 19. Gearing ratio Gearing is defined as Group net debt (total debt less cash and short-termdeposits) as a proportion of total consolidated equity attributable to theequity holders of the parent. "Total debt" is defined as actual current andnon-current loan balances together with any overdrafts owed to lenders andexcludes any unamortised finance costs or adjustments to apply the effectiveinterest rate method. Equity is as set out in the consolidated balance sheet.Gearing is computed as follows: As at As at As at 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited £000 £000 £000 "Total debt" 1,191,760 792,375 1,086,613Less: Cash and short-term deposits (86,560) (71,423) (81,156) ------------ ------------ ------------Net debt 1,105,200 720,952 1,005,457 ============ ============ ============ Equity 606,945 423,926 456,954 ============ ============ ============Gearing ratio 182% 170% 220% ============ ============ ============ 20. Net assets per share As at As at As at 30 June 2006 30 June 2005 31 December 2005 Unaudited Unaudited Audited Basic net assets per share £22.90 £18.87 £20.34 ============ ============ ============Diluted net assets per share £22.89 £18.87 £20.34 ============ ============ ============ The calculation of basic and diluted net asset value per share figures is basedon the following: - Consolidated net assets (equity) attributable to the equity holders of the Company as at 30 June 2006 of £606.9 million (30 June 2005: net assets of £423.9 million; 31 December 2005: net assets of £457.0 million) - Number of ordinary shares for basic net asset value per share 26,503,917 (30 June 2005: 22,465,147; 31 December 2005: 22,463,687) - Number of ordinary shares for diluted net asset value per share 26,514,720 (30 June 2005: 22,465,147; 31 December 2005: 22,480,166) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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