Interim Results

30th May 2008 07:02



Wichford P.L.C.

("Wichford" or the "Company")

Half-Yearly results

Wichford P.L.C., the property investment company, announces its half-yearly results for the six months to 31 March 2008. 

Financial Highlights

• Trading Operations profit after tax £5.2 million (March 2007: £3.7 million) - up 39%

• Loss after tax £74.8 million (March 2007: profit of £3.8 million)

• Trading Operations earnings per share 3.9 pence (March 2007:2.8 pence) - up 39%

• Basic loss per share 56.4 pence (March 2007: earnings per share of 2.9 pence)

• Interim dividend of 4.1 pence per share (March 2007: 4.0 pence per share)

• Net asset value per share 136.4 pence (March 2007: 218.0 pence)

Philippe de Nicolay, Non-executive Chairman of Wichford P.L.C., commented today:

"It is clear that the problems in the credit and housing markets will take some time to resolve, and the outlook for the US and many European economies over the next year is uncertain. This is likely to be reflected in the property market as a whole. Wichford is extremely fortunate to have a very high quality rental income, with an increasing proportion linked to inflation, and a broad spread of well funded properties." 

Enquiries:

Wichford P.L.C.

Philippe de Nicolay 00 33 1 40 74 42 79

Wichford Property Management Ltd

Jamie Hambro 020 7747 5678

Philip Cooper  020 7495 7111

Citigate Dewe Rogerson 020 7638 9571

George Cazenove

Hannah Seward

Notes to editors

Wichford P.L.C. (UK Listed:WICH) is a property investment company, with a portfolio focused on investment property occupied exclusively by Central and State Government bodies. Approximately a quarter of the portfolio comprises public sector rented properties in Germany, the Netherlands and France.

Chairman's Statement

At the trading level your Company has made good progress over the first half of the year with profit after tax from Trading Operations of £5.2 million (March 2007: £3.7 million) and earnings per share on Trading Operations of 3.9 pence (March 2007: 2.8 pence). The Board has declared an interim dividend of 4.1 pence per share (March 2007: 4.0 pence per share), which will be payable on 23 June 2008 to shareholders on the register at the close of business on 13 June 2008. 

The six month period under review was dominated by the continuing credit and housing problems in the United States and many European countries. In the UK, property values fell further in all sectors, reflecting both the deteriorating economic outlook and tighter credit. Falls were also recorded in Continental Europe, although these were less significant and were offset by the strength of the Euro. These adverse conditions have been reflected in our reported deficit on revaluation of our investment properties amounting to £80.1 million. This is an unrealised loss and has no impact on the rental streams from the properties or on the cash flows of the business.

Taking account of this valuation adjustment, the loss after tax is £74.8 million (March 2007: profit £3.8 million) giving a loss per share of 56.4 pence (March 2007: earnings of 2.9 pence). The net asset value (NAV) per share at 31 March 2008 is 136.4 pence per share (September 2007: 208.5 pence).

 

The NAV has fallen by 72.1 pence per share, or 35%. The mark to market impact of our interest rate hedges accounted for 9.1 pence of that fall with the majority of the balance being accounted for by the decline in value of the properties. The value of the UK portfolio declined by 12.7% during the period, performing slightly better than the IPD index, and the Continental European portfolio, which now represents approximately 26% of the total, declined by 7% in Euros, but rose by 5.8% when converted to Sterling.

Despite this difficult economic background, Wichford has continued to trade well. The exceptional quality of its tenants and its increasing proportion of properties outside the UK have served the Company well during this time. During the period, no further purchase commitments were made and we have sold one property in North London for £10.9 million where the tenant had already indicated its intention to leave. Following the period end one purchase has been completed, details of which are given in the Business Review.

We acquired a French property at St. Cloud and the Justizzentrum in Halle, Germany towards the end of September 2007. Accordingly this is the first period to have included the results from the Continental European properties for a full period. They added almost £4.1 million of rental income to our turnover and represented some 19.9% of the total rental income.

As announced today, Wichford is currently finalising negotiations with Land Securities Trillium for 16 lease extensions or renewals. If successful these improvements should enhance the NAV. A further announcement is expected by 24 June 2008. 

During May, Wichford signed a new three year loan facility with Lloyds TSB Bank plc for £58.5 million. These funds will be used for the completion of the new building in The Hague, contracted last year, and will be available for further investments both for the active portfolio in the UK and in Continental Europe.

As announced on 6 May 2008, Corovest Fund Managers (UK) Ltd, a fund management group with a strong property background, acquired 50% of our property adviser, Wichford Property Management Ltd (WPML), formerly held by Laird Capital Ltd. J O Hambro Capital Management Limited, one of the founders of Wichford, retains its 50% interest in WPML.

Wichford's shares were admitted to the Main Market of the London Stock Exchange in December 2007 and, in March 2008, were included in the FTSE All-Share index.

Your Board believes that it is likely that the problems in the credit and housing markets will take some time to resolve. As such, the outlook for the US and many European economies remains uncertain. We believe that this is likely to continue to affect the worldwide property markets and that therefore there may be potential for further declines in property values during the current year, which will undoubtedly produce opportunities for the Company to be able to purchase earnings enhancing properties. However, Wichford is extremely fortunate to have a very high quality of rental income, with an increasing proportion linked to inflation, and a broad spread of well funded properties. Accordingly, despite the ongoing adverse impact on values, we are confident that Wichford will continue to generate consistent and increasing levels of income and is therefore well positioned to maintain and increase its level of dividend payments to shareholders.

Philippe de Nicolay 

Chairman

BUSINESS REVIEW

Overview

The Group has had its quietest six months period for acquisitions and disposals since its floatation on AIM in August 2004 with only one disposal and no acquisitions.

However, the Group was busy with continuing progress being made in asset management of the UK and Continental European portfolios together with its move from AIM to the Main Market Official List of the London Stock Exchange plc on 28 December 2007. 

We expect further asset management initiatives to bear fruit in the second half of the year as well as increased transactional activity as the weakness in the UK commercial property market allows the Group to once again make acquisitions which are earnings enhancing.

The Company has announced today the acquisition of St Anne House, Croydon for a total cost of £15.25 million.

Market Overview - UK

Since inception the Group has experienced a strong investment market, low interest rates, easily accessible bank finance and strong demand for property assets. This changed in the Autumn of 2007 and for the six months ended 31 March 2008 the Group has experienced difficult market conditions. Started by the collapse in the US sub-prime market, there has been a global banking crisis resulting in a lack of availability of bank finance for commercial property, rising margins and a virtual closing of the securitization market. This has caused an increase in the yields demanded by investors for commercial real estate and a subsequent fall in values. 

An analysis of the Group's independent property valuation as at 31 March 2008 is provided later in this report and clearly shows the effect of the market conditions on the Group's portfolio.

Yields have moved out significantly, particularly in the short-lease Active part of our portfolio but, once again it is now possible to acquire properties occupied by the UK Government which shows a positive arbitrage over the cost of funds.

Portfolio Overview

As at 31 March 2008, the portfolio consisted of 77 properties with one other, in The Hague, contracted for but not yet acquired. Archway Tower, Islington was disposed of in the period at a sale price of £11,040,000 reflecting a satisfactory profit over a book cost of £10,175,000 and over the September 2007 valuation of £9,500,000.

As at 31 March 2008, the UK properties were independently valued at £451,145,000 and the six Continental European properties at €196,630,000 (£155,610,000).

The total portfolio value was therefore £606,755,000 (based on an €/£ exchange rate of 1.264) and the split was as follows:

	%
UK Core Portfolio	55.55
UK Active Portfolio	18.80
Continental European	25.65
	100.00

Valuation

The UK portfolio has been independently valued as at 31 March 2008 for the Group by Atisreal, the French Property by DTZ and the German portfolio by Jones Lang LaSalle and Savills.

Below is a table showing the fall in property values over the period on a like for like basis, which excludes Archway Tower, Islington, from the values as at 30 September 2007.

Type	Value as at 30/9/2007	Yield at 30/9/2007	Value as at 31/3/2008	Yield at 31/3/2008	Change in value %
UK Core	£384,220,000	5.61%	£337,035,000	6.39%	-12.3%
UK Active	£132,575,000	6.29%	£114,110,000	7.31%	-13.9%
UK Blended	£516,795,000	5.78%	£451,145,000	6.62%	-12.7%
Continental European	€211,400,000	5.26%	€196,630,000	5.82%	-7.0%

However, when converting into Sterling the strength of the Euro has affected the Continental European valuations, on the Euro figures above, as follows:-

	Value as at 30/9/2007	Value as at 31/3/2008	Change in Value
Continental European	£147,100,000	£155,610,000	+5.8%

UK Core Portfolio

The Core Portfolio consists of properties which have lease terms in excess of seven years to expiry or a possible break date at the tenants' option. This makes up the main part of the Group's assets and is the principal income generator.

As at 31 March 2008 it comprised 47 properties, totalling 175,073 sq. m. (1,884,491 sq. ft).The Gross Asset Value was £337,035,000.

The portfolio had the following characteristics:

• Annualised Rental Income £22,780,000 reflecting £130.12 per sq.m (£12.09 per sq.ft)

• Weighted Average Unexpired Lease Term of 10.23 years

• Net initial Yield on Valuation 6.39%

• 41% of rent subject to Indexation

UK Active portfolio

The Active Portfolio consists of properties having lease terms of less than seven years to expiry or a possible lease break date at the tenant's option. The focus is on individual properties which have strong potential for value enhancement through active asset management including lease renewals.

As at 31 March 2008 the Active Portfolio comprised 24 properties totalling 63,787 sq.m. (686,610 sq.ft). The Gross Asset Value was £114,110,000.

The portfolio had the following characteristics;

• Annualised Rental Income £8,823,000 reflecting £138.32 per sq.m (£12.85 per sq.ft)

• Weighted Average Unexpired Lease Term of 3.13 years

• Initial Yield on Valuation 7.31%

• 0% of rent subject to Indexation 

Continental European Portfolio

General Overview

The general situation in early 2008 is that capital continues to be attracted to the principal Continental European markets although from a reducing number of investors. This may be attributed to reduced levels of confidence amongst some investors, many of whom are finding it increasingly difficult to raise finance for their acquisitions. This lack of confidence is caused by the ongoing uncertainty in the financial markets, the uncertainty about property pricing and concerns over the weakening global economic outlook.

In terms of property values, the downward correction that started at the end of 2007 has continued through 2008, although its impact is expected to be less marked in the primary sectors than the secondary ones. According to Jones Lang LaSalle's latest Capital Markets Bulletin, the main Continental European markets could see prime yields moving out by as much as 50bps during 2008 and secondary ones by 100bps.

On a more positive note, although the availability of debt is undoubtedly beginning to restrict the activities of some investors, there are an increasing number of un-leveraged buyers who will be major investors during 2008. These include unlisted funds, sovereign funds and particularly the German Open Ended Funds. This latter group saw net inflows in 2007 of €6.7 billion (£5.3 billion) and they are now, as a consequence, strong investors again, both in the UK and across Continental Europe.

Office Market Overview

Demand for office space has remained at a healthy level in the main Continental European markets although prime rental growth has been slowing due to concerns about the economic outlook. This is particularly the case in Paris, Madrid and Brussels although there are exceptions, notably in some of the main German cities where rents are still growing at a healthy level.

Vacancy levels are continuing to fall across the main Continental European markets, driven by positive net absorption and moderate completion volumes, although, here again, the pace of decline is slowing. This is a trend which is likely to continue during 2008 as new development completions come on line and the uncertain economic conditions make an impact on office demand. At the same time, the supply of new developments may, in the medium term, begin to slow, as developers find it increasingly difficult to secure development finance. 

Current Continental European Acquisition - The Hague

The Company has entered into a commitment to purchase a brand new head quarters office building, in The Hague, the capital of the Netherlands. The property is built on ground and eight upper floors and will provide a total lettable area of 12,350 sq.m (132,934 sq.ft) together with 155 car parking spaces. The property is located immediately adjacent to the main Courts of International Justice in The Hague and it has been leased by the Royal Dutch Government to provide office space for the Courts. The Government have taken the entire building on a lease for an initial period of six years plus options for a further four years. The initial rent will be €2,004,000 (£1,586,000) per annum which will increase annually in line with Dutch CPI index of household costs.

The developers of the property completed the main building works at the end of March 2008 and the building has now been handed over to the tenant for fitting out. It should be noted that this property is being fitted out by the Government to a far higher specification than any other comparable office building in The Hague. The tenant is due to complete the works within three months, but in any event they will commence paying rent on 1 July 2008, at which point the Company will complete the purchase. The end purchase price will be €34,000,000 (£26,900,000).

Current Portfolio

The Continental European Portfolio consists of six properties, excluding The Hague, five in Germany and one in France. All the properties have long unexpired lease terms and all the rents are subject to indexation.

As at 31 March 2008 the six Continental European properties totalled 77,314 sq.m (832,199 sq.ft). The Gross Asset Value was €196,630,000 (£155,610,000).

The portfolio had the following characteristics:

• Annualised Rental Income €11,242,000 (£8,897,000) reflecting €145.41 (£115.08) per sq.m  (€13.51 per sq. ft)

• Weighted Average Unexpired Lease Term of 14.22 years.

• Net Initial Yield on Valuation 5.82%.

• 100% of rent subject to indexation.

Indexation of rental income

One of the Group's principal asset management objectives is to increase the percentage of the portfolio which has its rental pattern fixed or linked to indexation. Given the quality of the tenant covenants and the index linking of these rental streams, this approach improves the bond-like characteristics of the Group's investments. Its other initiatives in renewing and extending leases increase this.

The indexation level was 27% at 30 September 2006 and at 31 March 2008 stood at 45%. This 45% can be analysed as follows:

UK CPI  3.4

UK RPI 29.7

UK Fixed Increases per annum 18.3

German CPI 46.3

French Cost of Construction Index  2.3

100.0

The Company believes that pursuing this policy is in the best interest of Shareholders and will give a rising, secure rental income which should be reflected in asset values going forward.

Finance Report

This is the first Half-Yearly Financial Report issued by the Company since moving from AIM to the Main Market in December 2007 and is prepared under International Financial reporting Standards ("IFRS") as required by the London Stock Exchange plc.

The comparable report last year was entitled the Interim Report and was issued in May 2007 and was prepared under the relevant Isle of Man legislation and Generally Accepted Accounting Practices. In December 2007 these results were restated under IFRS and it is those figures that form the March 2007 comparatives in this report.

As this report is not a full set of accounts and notes but prepared under IAS 34 "Interim Financial Reporting", the principal financial statements are described as "Condensed".

The period being reported is the first that includes the income from the investments in the French property at St Cloud and the Justizzentrum in Halle, Germany both of which were only acquired towards the end of September 2007. 

The Trading Operations result shown in the Condensed Consolidated Income Statement is therefore the first set of results from the Continental European properties for a full period. They added almost £4.1 million rental income to the turnover of the Group, amounting to 19.1% of total rental income.

Overall, the profit for the period from Trading Operations at £5.2 million was up on the same period last year by 38.8 per cent. The full costs of £0.7 million arising from the Company's move from AIM to the Main Market, is shown in the Other Items column of the Consolidated Income Statement.

The Basic EPS from Trading Operations has increased similarly based on an increased average number of shares in issued of 132,718,000 from 100,828,000 for March 2008.

However, the overall result of the Group is a loss for the period of £74.8 million against a profit at March 2007 of £3.8 million.

The principal reason for this loss is the reported deficit on revaluation of investment properties of £80.1 million resulting from the weakening of the property markets. This is included in the Other Items column of the Condensed Consolidated Income Statement.

This is an unrealised loss and in no way impacts on the rental streams from the properties and thus on the Trading Operations results. This treatment is required under IFRS but it is not considered by the Company to be a fair reflection of the underlying strengths of the Company with its very stable and economically sound occupiers, namely being Central and State Government.

The international deterioration in economic fortunes has impacted not only property values but also the value of the Groups cash flow hedges. This loss amounts to £ 12.1 million in the current period. This is the reduction in the fair value of the interest rate swaps the Company has entered into to protect it against interest rate movements on its borrowing facilities. Not only are these losses also unrealised but the Company has no intention of selling these instruments as they are central to the Company's strategy of removing the risk of interest rate movements adversely impacting on its results. The effect of this change in valuation is reported in the Other Items column.

These instruments remain of value to the Company as they keep the effective interest rate payable on the Group's borrowings below current market rates. This is demonstrated by their positive fair value of £3 million as shown in the Condensed Consolidated Balance Sheet, where they are described as derivative financial assets.

The Company engaged its external independent property valuers to produce a property valuation for all properties as at 31 March 2008 and this resulted in a total property portfolio valuation of £606.8 million at that date. This is a 19.5% increase from £507.6 million reported at March 2007, due mainly to the acquisition since then of all the Continental European properties. However, most properties have suffered a decline in value since March 2007 due to the overall weakening of property values.

During the period being reported the Company did not engage in any significant acquisition or disposal activities and so there are no significant figures to be commented upon. There has been one post balance sheet acquisition being that of St Anne House, Croydon for a total cost of £15.25 million, as announced today.

At March 2008, the Company had two Sterling denominated borrowing facilities and three Euro denominated ones. At March 2007 the Company only had the Sterling facilities as the others were acquired on the acquisition of the German properties in June and September 2007.

Since September 2007, the Company has negotiated an increase in the Halle facility by €5.2 million (£4.1 million) to a total of €37.1 million (£29.4 million) and restatement of it on terms negotiated more in line with its Sterling facilities with the same lender. There were no other changes to the borrowing facilities in the period being reported.

Overall the Company's borrowing facilities at March 2008 were £444.3 million against £314.3 million at March 2007. All of the interest liability of these facilities is covered by interest rate swaps designated as cash flow hedges. These derivatives continue to provide interest rate stability until the maturity of each facility.

Since March 2008 the Company has negotiated an additional borrowing facility which is Sterling denominated and secured on properties that were not party to the existing borrowing facilities. This borrowing facility is for a further £58.5 million and will be used to finance further property acquisitions. 

The net asset value of the Company at 31 March 2008 has decreased to 136.4 pence per share from 218.0 pence per share at 31 March 2007 and 208.5 pence per share at 30 September 2007.

The Directors have decided to increase the interim dividend to 4.1 pence per share from 4.0 pence per share at March 2007. This will be paid on 23 June 2008 to all Shareholders on the register at the close of business on 13 June 2008.

Directors' statement of responsibilities

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union, and that the Interim Announcement includes a fair review of the information as required by Sections 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules.

The Directors of Wichford P.L.C. are stated in the Group's Annual Report for the year ended 30 September 2007. There has been one appointment to the Board of Directors since that Report; Mr Wolf Cesman was appointed as a Non-Executive Director on 22 May 2008.

By the order of the Board

A Couper-Woods

Secretary

Auditor's Independent Review Report to Wichford P.L.C.

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2008 which comprises the condensed consolidated income statement, the condensed consolidated statement of recognised income and expense, the condensed consolidated balance sheet, the condensed consolidated cash flow statement and the notes to the financial statements. We have read the other information contained in the half-yearly financial report which comprises only the Chairman's Statement and Business Review and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Grant Thornton

Chartered Accountant 

Douglas, Isle of Man

WICHFORD PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 31 March 2008

	Six months ended 31 March 2008
	Trading Operations £'000 (unaudited)	Other Items £'000 (unaudited)	Total £'000 (unaudited)
Revenue	20,549	-	20,549
Deficit on revaluation of Investment properties	-	(80,125)	(80,125)
Profit on sale of investment properties	-	798	798
Administrative expenses	(3,364)	(663)	(4,027)
OPERATING PROFIT/(LOSS)	17,185	(79,990)	(62,805)
Finance revenue	450	-	450
Finance costs	(12,217)	-	(12,217)
PROFIT/(LOSS) BEFORE TAX	5,418	(79,990)	(74,572)
Income tax expense	(259)	-	(259)
PROFIT/(LOSS) FOR THE PERIOD	5,159	(79,990)	(74,831)
Earnings per share from continuing operations Basic/Diluted - pence	3.9	(60.3)	(56.4)

All activities are continuing.

	Restated Six months ended 31 March 2007			Year ended 30 September 2007
	Trading Operations £'000 (unaudited)	Other Items £'000 (unaudited)	Total £'000 (unaudited)	Trading Operations £'000 (audited)	Other Items £'000 (audited)	Total £'000 (audited)
Revenue	14,771	-	14,771	33,073	-	33,073
Deficit on revaluation of Investment properties	-	(1,053)	(1,053)	-	(22,562)	(22,562)
Profit on sale of investment properties	-	1,137	1,137	-	1,403	1,403
Administrative expenses	(3,139)	-	(3,139)	(3,801)	-	(3,801)
OPERATING PROFIT/(LOSS)	11,632	84	11,716	29,272	(21,159)	8,113
Finance revenue	775	-	775	1,950	-	1,950
Finance costs	(8,559)	-	(8,559)	(19,655)	-	(19,655)
PROFIT/(LOSS) BEFORE TAX	3,848	84	3,932	11,567	(21,159)	(9,592)
Income tax expense	(130)	-	(130)	(230)	-	(230)
PROFIT/(LOSS) FOR THE PERIOD	3,718	84	3,802	11,337	(21,159)	(9,822)
Earnings per share from continuing operations  Basic/Diluted - pence	2.8	0.1	2.9	9.7	(18.1)	(8.4)

CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the six months ended 31 March 2008

	Trading Operations £'000 (unaudited)	Other Items £'000 (unaudited)	Total £'000 (unaudited)
INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY (Loss)/gain on cash flow hedges (loss)/gain on foreign currency translation	- -	(12,104) (1,383)	(12,104) (1,383)
NET INCOME RECOGNISED IN EQUITY PROFIT/(LOSS) FOR THE PERIOD	- 5,159	(13,487) (79,990)	(13,487) (74,831)
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE PERIOD	5,159	(93,477)	(88,318)

All activities are continuing.

	Restated Six months ended 31 March 2007			Year ended 30 September 2007
	Trading Operations £'000 (unaudited)	Other Items £'000 (unaudited)	Total £'000 (unaudited)	Trading Operations £'000 (audited)	Other Items £'000 (audited)	Total £'000 (audited)
INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY (Loss)/gain on cash flow hedges (Loss)/gain on foreign  currency translation	- -	6,285 -	6,285 -	- -	12,948  567	12,948  567
NET INCOME RECOGNISED IN EQUITY	-	6,285	6,285	-	13,515	13,515
PROFIT/(LOSS) FOR THE  PERIOD	3,718	84	3,802	11,337	(21,159)	(9,822)
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE  PERIOD	3,718	6,369	10,087	11,337	(7,644)	3,693

CONDENSED CONSOLIDATED BALANCE SHEET

As at 31 March 2008

	31 March 2008 £'000 (unaudited)	Restated 31 March 2007 £'000 (unaudited)	30 September 2007 £'000 (audited)
NON-CURRENT ASSETS Investment properties Derivative financial assets	602,116  3,013	506,082  8,454	663,569  15,117
	605,129	514,536	678,686
CURRENT ASSETS Trade and other receivables Cash at bank	19,925  17,369	18,519  88,225	18,956  20,287
	37,294	106,744	39,243
ASSETS HELD FOR SALE	-	-	10,889
TOTAL ASSETS	642,423	621,280	728,818
CURRENT LIABILITIES Trade and other payables	(18,266)	(16,861)	(25,778)
	(18,266)	(16,861)	(25,778)
NON CURRENT LIABILITIES Borrowings Deferred tax liabilities	(442,495) (622)	(314,859) (259)	(424,614) (363)
	(443,117)	(315,118)	(424,977)
LIABILITIES ASSOCIATED WITH   ASSETS HELD FOR SALE	-	-	(1,389)
TOTAL LIABILITIES	(461,383)	(331,979)	(452,144)
NET ASSETS	181,040	289,301	276,674
EQUITY
Share capital	13,276	13,270	13,270
Share Premium	168,756	218,670	168,670
Retained earnings	(1,020)	51,076	81,219
Cash flow hedges reserve	844	6,285	12,948
Currency translation reserve	(816)	-	567
TOTAL EQUITY ATTRIBUTABLE TO  THE ORDINARY EQUITY HOLDERS  OF THE PARENT COMPANY	181,040	289,301	276,674
NET ASSET VALUE Basic/Diluted- pence per share	136.4	218.0	208.5

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 March 2008

 

	Six months ended 31 March 2008 £'000 (unaudited)	Restated Six months ended 31 March 2007 £'000 (unaudited)	Year ended 30 September 2007 £'000 (audited)
OPERATING PROFIT FOR THE PERIOD Adjust non-cash items: Decrease/(increase) in fair value of investment  properties Profit on sale of investment properties Performance fee adjustment Accrued rental income Rent incentives Working capital adjustments: Increase in trade and other receivables (Decrease)/increase in trade and other  payables Finance costs paid Finance costs received Finance lease interest Taxation	(62,805) 80,125    (798) -  (190) (3,869) (569) (7,702) (13,014) 450  (65) -	11,716  1,053  (1,137) 819  (192) 100  (5,575) 3,575  (8,283) 775  (87) 4	8,113  22,562  (1,244) (1,522) (388) 225  (5,677) 12,228  (19,215) 1,950  (182) 8
CASH FLOWS FROM OPERATING  ACTIVITIES	(8,437)	2,768	16,858
INVESTING ACTIVITIES Purchase of investment properties Sale of investment properties	-  10,972	(54,987) 6,637	(251,293) 13,344
CASH FLOWS USED IN INVESTING  ACTIVITIES	10,972	(48,350)	(237,949)
FINANCING ACTIVITIES Ordinary shares, issued (net of expenses) Increase in bank debt Equity dividends paid	-  4,492  (8,231)	73,325  49,496  (6,326)	73,325  160,960  (10,219)
CASH FLOWS FROM FINANCING  ACTIVITIES	(3,739)	116,495	224,066
INCREASE/(DECREASE) IN CASH AND  CASH EQUIVALENTS	(1,204)	70,913	2,975
Foreign exchange loss	(1,714)	-	-
Cash and cash equivalents at beginning of  period	20,287	17,312	17,312
CASH AND CASH EQUIVALENTS AT  PERIOD END	17,369	88,225	20,287

NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation

These condensed financial statements are prepared in accordance with the principal accounting policies adopted by the Group referred to in note 2 and IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board.

These accounting policies have been consistently applied to all the periods presented.

The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative information has been restated on a consistent basis.

The financial statements are prepared on the historical cost basis, except for investment property and derivative financial instruments that are measured at fair value. The financial statements are presented in thousands of pounds Sterling (£000) except where otherwise indicated.

2. Significant Accounting Policies

The accounting policies used for the preparation of the Annual Report for the year ended 30 September 2007 have been used throughout the period now being reported. These accounting policies can be found in the published Annual Report.

3. Turnover

The primary reporting segment of the Group is the entire business. The business activity of the Group is property investment which the Board considers to be the only business segment. Therefore information provided elsewhere in the financial statements relates to that segment.

Secondary reporting format - Geographic segments

The following table presents revenue, expenditure and certain asset information regarding the Group:

Six Months ended 31 March 2008	UK £'000	Rest of Europe £'000	Total £'000
Segment revenue	16,471	4,078	20,549
Carrying amount of Segment assets
Segment assets	475,150	167,273	642,423
Segment capital expenditure
Acquisition of investment properties	-	-	-
Six Months ended 31 March 2007	UK	Rest of Europe	Total
	£'000	£'000	£'000
Segment revenue	14,771	-	14,771
Carrying amount of Segment assets
Segment assets	621,280	-	621,280
Segment capital expenditure Acquisition of investment properties	61,237	-	61,237
Year ended 30 September 2007	UK	Rest of Europe	Total
	£'000	£'000	£'000
Segment revenue	31,275	1,748	33,073
Carrying amount of Segment assets
Segment assets	572,659	156,159	728,818
Segment capital expenditure Acquisition of investment properties	110,390	149,633	260,023

4. Revenue

	Six months ended 31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended 30 September 2007 £'000
Rental income	20,530	14,470	33,018
Other income	19	31	55
	20,549	14,771	33,073
Financial revenue	450	775	1,950
	20,999	15,546	35,023

5. Administration Expenses

	Six months ended 31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended 30 September 2007 £'000
Property Adviser's Fees
- advisory fees	2,030	1,565	3,384
- accrued performance fees	-	819	(1,523)
Property Manager's Fees	70	82	185
Other administration expenses	1,927	673	1,755
Total	4,027	3,139	3,801

Included in the Other administration expenses of £1,927,000 are the costs of the move from AIM to the Main Market of the London Stock Exchange plc, which amounts to £663,000.

6. Income Tax

Tax on profit/(loss) from ordinary activities

	Six months ended 31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended  30 September 2007 £'000
(Loss)/profit for the period  not subject to UK  income tax	(74,572)	3,932	(9,592)
(Loss)/profit before tax	(74,572)	3,932	(9,592)
Current income tax Adjustments in respect of  previous year	-	(4)	(8)
Total current income tax	-	(4)	(8)
Deferred tax Origination and reversal  of temporary differences	259	130	238
Income tax expense  reported in the income  statement	259	130	230
Deferred tax Deferred tax included in the balance sheet is as follows:
	Six months ended 31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended  30 September 2007 £'000
Deferred tax liability Lease accounting  temporary differences	622	259	363
Deferred tax liability	622	259	363
The deferred tax included in the income statement is as follows:
	Six months ended 31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended  30 September 2007 £'000
Lease accounting  temporary differences	259	130	238
Deferred income tax  expenses	259	130	238

7. Earnings per share

Basic earnings per share for the period ended 31 March 2008 is based on the loss attributable to equity shareholders of £74,831,000 (March 2007: profit of £3,802,000; September 2007: loss of £9,822,000) and a weighted average number of Ordinary shares outstanding during the period ended 31 March 2008 of 132,718,137 (March 2007: 100,828,406; September 2007: 116,904,399).

Diluted earnings per share are the same as basic earnings per share.

However, on 12 March 2007 the Company made a placing of 35,377,358 Ordinary shares. The shares issued did not rank for any dividend related to the financial period ended 31 March 2007, but ranked pari passu with the remaining Ordinary shares for the financial periods beginning on or after 1 April 2007.

	Six months ended 31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended  30 September 2007 £'000
(Loss)/profit attributable to  equity shareholders	(74,831)	3,802	(9,822)
Weighted average  number of ordinary  shares (000's) Basic Adjusted for shares not ranking for dividend for  period	132,718  132,718	100,828 97,326	116,904  116,904
Earnings per share - pence Basic (loss)/earnings per share Adjusted for shares not  ranking for dividend for period	(56.4) (56.4)	3.8 3.9	(8.4) (8.4)

8. Net Assets Per Share

Net assets per share is calculated by dividing the net assets at 31 March 2008 attributable to the equity holders of the parent of £181,040,000 (March 2007: £289,301,000; September 2007: £276,674,000) by the number of ordinary shares as at 31 March 2007 of 132,761,948 (March 2007: 132,703,055; September 2007: 132,703,055).

	31 March 2008	31 March 2007	30 September 2007
Net assets attributable to equity holders of the parent (£'000)	181,040	289,301	276,674
Number of ordinary shares (000's)	132,762	132,703	132,703
NET ASSETS PER SHARE (PENCE)	136.4	218.0	208.5

9. Investment properties

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
As at 1 October	663,569	451,398	451,398
Purchases during the period	-	61,237	260,023
Disposals during the period	-	(5,500)	(16,851)
Unrealised deficit on revaluation	(80,125)	(1,053)	(22,562)
Transferred to assets held for sale	-	-	(10,889)
Payment on account for asset in  course of construction	338	-	2,450
Foreign exchange and other  adjustments on consolidation	18,334	-	-
As at 31 March/30 September	602,116	506,082	663,569

During the period the Group disposed of one property for £10.9 million producing a profit in excess of £0.7 million. This property was shown as an asset held for sale on the balance sheet at 30 September 2007. At 31 March 2008 the Group owned 77 properties throughout the UK, France and Germany.

A reconciliation of investment and development property valuations to the balance sheet carrying value of investment property is shown below:

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
Investment property at market value as  determined by external valuers	606,755	507,640	673,458
Add minimum payment under head leases separately included as a payable in the balance sheet	2,015	3,236	3,414
Less accrued incentives separately included as a receivable in the balance sheet	(8,568)	(4,305)	(4,180)
Less accrued rental income separately included as a receivable in the balance sheet	(993)	(565)	(780)
Add accrued rental income separately included as a payable in the balance sheet	119	76	96
	599,328	506,082	672,008
Add payment on account for asset in the course of construction	2,788	-	2,450
Less property transferred to assets held for sale	-	-	(10,889)
Balance sheet carrying value of investment property	602,116	506,082	663,569

10. Trade and other receivables

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
Trade receivables	6,073	3,782	7,271
VAT recoverable	1,080	59	131
Deferred rental incentives	9,054	4,305	4,180
Accrued rental income	993	565	780
Other prepayments	2,096	9,655	6,197
Service charges	629	153	397
	19,925	18,519	18,956

Trade receivables are non interest-bearing and generally have a 14 day term. Due to their short maturities, the fair value of trade and other receivables approximates to their book value.

As at 31 March 2008 nil trade receivables were impaired (March 2007: nil; September 2007: nil). As at 31 March 2008, nil trade receivables were overdue but not impaired (March 2007: nil; September 2007: nil).

11. Trade and other payables 

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
Rent received in advance	7,258	7,959	8,272
VAT payable	1,223	990	535
Other payables and accruals	9,156	7,759	16,478
Accrued rental income	-	-	96
Service charges	629	153	397
	18,266	16,861	25,778

Trade and other payables are non-interest bearing and it is the Group's policy to pay within the stated terms which typically vary from 30 - 45 days. Due to their short maturities, the fair value of trade payables approximates to their book value.

12. Borrowings

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
Non current
Bank loans	444,256	314,286	425,281
Less: deferred finance costs	(3,776)	(2,663)	(2,692)
Finance leases	2,015	3,236	3,414
Less: finance leases classified as   held for sale	-	-	(1,389)
	442,495	314,859	424,614

(a) Bank loans

At 31 March 2008, the bank borrowings of £443,251,000 are secured by fixed and floating charges over the assets and income streams of the Group. It comprised of five separate borrowing facilities each secured on a number of discrete assets with no common assets. There were also a number of properties that were not pledged as security for any borrowing facility.

These facilities are summarised as below:

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
Gamma	199,678	199,678	199,678
Delta	114,608	114,608	114,608
VBG1	56,031	-	49,547
VBG2	44,579	-	39,253
Halle	29,360	-	22,195
	444,256	314,286	425,281

The Gamma and Delta facilities are non-amortising and have final repayment dates in October 2012 and both have been put into securitisation conduits by the lender. The VBG facilities are amortising dependant upon expected rent rises with final repayment dates in January 2010 for VBG1 and April 2011 for VBG2.

However, on acquisition, part of the purchase price was paid into escrow accounts such that all expected amortisation of these bank loans will be funded by the escrow accounts. These facilities have been put into securitisation conduits by the lender.

The Halle facility is non-amortising and has a final repayment date in April 2014. During the period this facility has been increased and restated on more favourable terms to the Group.

All the facilities are subject to the interest rate swaps detailed in Note 13. 

The book value of borrowings is not materially different to the fair value.

(b) Finance leases

Obligations under finance leases at the balance sheet dates are analysed as follows:

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
Gross finance lease liabilities repayable: In one year or less In more than one year, but not more than five years In more than five years	122  490  10,090	198  792  17,738	198  792  18,561
	10,702	18,728	19,551
Less: finance charges allocated to future  periods	(8,687)	(15,492)	(16,137)
Present value of minimum lease payments	2,015	3,236	3,414
	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
The present value of finance lease liabilities  repayable: In one year or less In more than one year, but not more than five years In more than five years	40  96  1,879	30  122  3,084	8  40  3,366
Present value of minimum lease payments	2,015	3,236	3,414

The present values of minimum lease payments have been calculated by using the market cost of external borrowings available to the Group at the inception of the lease. The Directors consider that the carrying amount of these finance lease obligations approximate their fair value.

13. Derivative Financial Instruments 

The Group enters into interest rate swaps and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Group's operations and its sources of finance.

It is the Group's policy that no trading in derivatives shall be undertaken.

a) Interest rate swap agreements

In accordance with the terms of the borrowing arrangements, the Group has entered into interest rate swap agreements.

The interest rate swaps are used to manage the interest rate profile of financial liabilities. The Group has employed interest rate swaps to eliminate future exposure to interest rate fluctuations. As a result of the use of interest rate swaps the fixed rate profile of the Group was:

Effective date	Maturity date	Swap rate	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
29/06/2007	15/01/2010	3.17%	56,206	-	49,594
29/06/2007	15/04/2011	3.93%	44,579	-	39,206
27/09/2007	15/04/2014	4.20%	29,361	-	22,195
30/09/2005	20/10/2012	4.57%	70,606	70,606	70,606
20/01/2006	20/10/2012	4.66%	40,000	40,000	40,000
15/07/2004	21/10/2008	4.70%	30,000	30,000	30,000
11/11/2005	20/102012	4.79%	40,000	40,000	40,000
15/07/2005	01/11/2011	4.90%	11,113	9,334	10,221
19/03/2004	20/01/2009	4.93%	5,211	5,271	5,241
30/01/2004	20/01/2009	4.97%	7,918	8,010	7,964
15/07/2005	01/11/2011	5.07%	29,550	29,840	29,700
21/01/2007	15/10/2012	5.14%	15,000	15,000	15,000
21/01/2007	15/10/2012	5.19%	35,000	35,000	35,000
28/04/2004	20/01/2009	5.21%	3,623	3,723	3,673
01/12/2003	20/01/2009	5.22%	7,178	7,971	7,572
01/07/2004	20/01/2009	5.43%	3,400	3,601	3,500
24/06/2004	20/01/2009	5.49%	9,021	9,043	9,032
29/07/2004	20/01/2009	5.57%	6,666	6,887	6,777
TOTAL			444,432	314,286	425,281

The Group also has entered into the following additional interest rate swap contract that commences after the period end as follows:

			31 March 2008	31 March 2007	30 September 2007
Effective date	Maturity date	Swap rate	£'000	£'000	£'000
01/11/2011	15/10/2012	4.90%	113,680	113,680	113,680

During the period being reported the Group has renegotiated the interest rate swap on the loan inherited on the acquisition of the Justizzentrum in Halle, Germany, in line with the negotiated increase in the borrowing facility secured on this property. The new interest rate swap has a nominal value of €37.1 million (£29.4 million) and a swap rate of 4.195% effective from 15 October 2007.

The overall effect of the derivatives in the above tables is to maintain a constant total nominal value of the amount hedged against the non-amortising facilities. This is achieved by the notional value of a number of the above derivatives reducing over time, offset by the nominal value of another increasing over the total period of the borrowings.

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
Fair value of the Group's  derivative arrangements	3,013	8,454	15,117

(a) Hedge accounting

The mark to market adjustment of £12,104,000 in the period ended 31 March 2008 is reported in the cash flow hedges reserve as the Group has applied hedge accounting to their swap agreements since 1 October 2006. The cash flow hedges have been assessed as highly effective. The swap agreements are designated a cash flow hedge against interest rate fluctuations.

(b) Forward Exchange Agreements

The Group has entered into short term foreign exchange sale and purchase contracts for the purpose of mitigating the Group's exposure to foreign exchange rate movements on its equity investment in foreign property acquisitions. The Group chooses not to designate these contracts as hedging instruments.

Due to the short term nature of these contracts their fair value approximates to their book value.

14. Share capital 

Company	31 March 2008	31 March 2007	30 September 2007
AUTHORISED
Ordinary Shares of 10p each - number	180,000,000	180,000,000	180,000,000
Ordinary Shares of 10p each - £	18,000,000	18,000,000	18,000,000
ISSUED, CALLED UP AND FULLY PAID
Ordinary Shares of 10p each - number	132,761,948	132,703,055	132,703,055
Ordinary Shares of 10p each - £	13,276,195	13,270,305	13,270,305

Holders of the Ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.

The parent company issued 58,893 Ordinary shares on 30 January 2008 as payment of Performance Fees to the Property Adviser for the period to 30 September 2005.

15. Retained earnings

	31 March 2008 £'000	31 March 2007 £'000	30 September 2007 £'000
As at 1 October	81,219	52,783	52,783
Transfer to distributable  reserves	-	-	50,000
Total recognized income  for the period	(74,831)	10,087	(9,822)
Credit relating to performance  fee of Property Adviser	-	817	(1,523)
Shares issued relating to  performance fee of Property  Adviser	(92)	-	-
Foreign exchange and other  adjustments on consolidation	915	-	-
Dividends paid	(8,231)	(6,326)	(10,219)
As at 31 March/30 September	(1,020)	57,361	81,219

16. Dividends

	Six months ended  31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended 30 September 2007 £'000
Ordinary dividends paid
Final dividend for 2006 - 6.5 pence  per share	-	6,236	6,326
Interim dividend for 2007 - 4 pence per share	-	-	3,893
Final dividend for 2007 - 6.2 pence per share	8,231	-	-
	8,231	6,326	10,219

The final dividend for 2007, which was paid in the period, was approved by the Shareholders at the Annual General Meeting and was paid on 18 February 2008 to all those Shareholders on the register at the close of business on 8 February 2008.

The Directors have decided to pay an interim dividend for the period being reported of 4.1 pence per share (amounting to £5,443,000).This interim dividend will be paid on 23 June 2008 to all those Shareholders on the register at the close of business on 13 June 2008.

17. Capital commitments 

As at 31 March 2008 the Group had a commitment to complete on the purchase of one property in The Hague, The Netherlands, on which contracts had been exchanged but the purchase had not been completed. It is expected that this acquisition will be completed around July 2008.This commitment is for approximately £24 million.

18. Events after the balance sheet date

Following the financial period being reported, the Group has entered into a new borrowing facility of £58.5 million secured on properties that were not pledged to any borrowing facility at 31 March 2008. The Group has drawn down £17.0 million on this new borrowing facility.

As announced today, the Group has acquired St Anne House, Croydon for a cost of £15.25 million.

19. Half-Yearly Financial Report

This Half-Yearly Financial Report is not the Company's statutory accounts. The statutory accounts for the year ended 30 September 2007 have been audited, approved and received an audit report which was unqualified.

Copies of the Half-Yearly Financial Report will be available shortly from the Registered Office at Top Floor, 14 Athol Street, Douglas, Isle of Man IM1 1JA.

ENDIR GGGZKLLGGRZM

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