Interim Results

29th May 2009 07:00



Wichford P.L.C.

("Wichford" or the "Company")

UNAUDITED HALF-YEARLY FINANCIAL RESULTS

Wichford P.L.C., the property investment company, announces its unaudited half-yearly financial results for the six months ended 31 March 2009.

Highlights

 

 

Philippe de Nicolay, Chairman of Wichford, commented today:

"In a difficult period the Group continues to make robust profits from its Trading Operations. The quality of the Group's income has been important, along with some savings on administrative expenses on Trading Operations, in contributing to this result. 

However, in the six month period to March 2009 we have seen a continued decline in property valuations. Despite the security of Government rental income throughout the portfolio, the Company has not been immune to this trend and has also seen a dramatic fall in the fair value of our interest rate hedging given the impact of general interest rate decreases. These factors are clearly outside the control of the Company but the impact has been a significant decrease in the net asset value of the Company.

I am confident, though, that we are taking the right steps to position the Company to deal with its debt maturities and to take advantage of the recovery in the property markets when it comes." 

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

Michael Watters 020 7811 0100

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

The six month period under review has been characterised by further declines in property values both in the UK and in the Continental European countries in which the Group has investments. However, sentiment in the property market has started to move towards a greater focus on occupier risk and Wichford is fortunate to have Central and State Government as tenants, with close to 100% occupancy levels, an overall Weighted Average Unexpired Lease Term (WAULT) of over 8.7 years as at 31 March 2009 and a strong visibility of future rental income.

Financial results 

The Group made a profit from Trading Operations for the half year to 31 March 2009 of £4.7 million, down 9.6% on the £5.2 million reported for the same period in the prior year. The value of the Group's UK portfolio has fallen by £56.7 million (12.7%) to £389.9 million from 30 September 2008, while the Continental European properties fell in value by €15.7 million (8.2%) to €174.6 million in the same period. However, due to changes in the Euro to Sterling exchange rate, in Sterling terms, there was an increase in value by £10.9 million of the Continental European properties to £162.2 million. Following these valuation changes, the overall result for the half year is a loss of £76.2 million under IFRS reporting.

The substantial falls in interest rates has resulted in the fair value of our interest rate hedging falling by £39.3 million to a negative value of £38.0 million. This reduces our net asset value under IFRS but, as we currently intend to maintain this hedging until maturity, there will be no additional cash cost over the fixed interest rates charged to the Group.

Net assets at 31 March 2009, as reported under IFRS, were £0.2 million, equivalent to 0.1 pence per share, down from £181.0 million at 31 March 2008 (136.4 pence per share) and from £118.0 million at 30 September 2008 (88.9 pence per share). Under the European Public Real Estate Association (EPRA) definition, which excludes the fair value adjustment for the interest rate hedges, net asset value was 28.8 pence per share at 31 March 2009.

The earnings per share from Trading Operations under IFRS were 3.54 pence (2008: 3.90 pence). The total basic loss per share for the half year ended 31 March 2009 was 57.37 pence per share compared to a loss of 56.40 pence per share for the six months ended 31 March 2008. 

Strategic Review

On behalf of the Board, Wichford Property Management Ltd has undertaken a full review of Wichford's business, and as a result the following policies are being implemented:

 

The implementation of the above will be more actively pursued in the future but it will take some time before the full benefits will flow through to the trading performance.

Equity Issue

The Company is actively considering its options with respect to its balance sheet and these include the possibility of an equity issue. An equity issue would strengthen the Company's balance sheet, provide an increased number of options for the Company to deal with its debt facilities and provide greater flexibility to take advantage of acquisition opportunities in depressed property markets.

There is currently no certainty that an equity issue will be undertaken or as to its terms.

Funding 

I am pleased to report that the interest rate hedging that was put into an uncertain position with the Lehman Brothers' demise, has been resolved with the Trustees of the CMBS vehicles having agreed to the replacement with new banks for those instruments attached to the Group's principal UK facilities, and it is hoped that the facility utilised to finance the acquisition of the VBG portfolio in Germany will be resolved in the near future.

These UK facilities do not expire until 2012, provided that the WAULT is more than 9.5 years in October 2010 for each of the two facilities concerned.

This will require adjustments to the current portfolio of properties to extend the WAULT. The Board plans to complete these changes before October 2010 and steps are being pro-actively taken to address this dynamic. It is intended that the proceeds from any equity issue would, in part, be used to assist in this process.

On the one facility that is due to expire in January 2010 the Company is in conversation with the loan servicer.

Dividend 

The Board confirms that it currently intends to declare an interim dividend but will not decide the level of such dividend until the outcome of the current equity issue deliberations are known. 

Announcements will be made, as required, in due course in relation to the contemplated equity issue and the Company's interim dividend and ongoing dividend policy.

Outlook 

The fall in the valuation of the portfolio and fair value of the interest rate hedges, together with high levels of debt, have had a major impact on the Group's Net Asset Value. However the high quality of our income and the steps being taken to reduce and secure our debt will better position Wichford to weather the current storm and take advantage of the opportunities in the near term as well as the future.

Philippe de Nicolay 

Chairman 

28 May 2009 

Business Review 

Wichford continues to make profits from its Trading Operations but the general economic conditions have meant that property values and the fair value of interest rate swaps, which the Group has used to fix its interest charges on loans, have significantly declined and this is reflected in the decrease in the net asset value. 

Overview 

During the half year to 31 March 2009 the Company did not acquire or dispose of any properties. This unprecedented lack of activity was the result of the very poor state of the property market with falling values and most sales being seen by the market as forced. While this meant that some properties were relatively inexpensive to purchase the Company took the view that property values were likely to decline further before starting to recover.

At the same time the availability of debt has greatly declined and, save for the increased loan from Lloyds TSB mentioned below, the Company decided not to increase its borrowing facilities for the present time.

While valuation of the portfolio at March has shown a decline from September in local currency, such declines are overall relatively less than other property companies have reported and significantly less than the fall in the IPD general index for the UK over the same period.

Portfolio overview

Whilst it has already been stated by many commentators, it is still worth re-iterating that the current downturn in the property sector is the sharpest and deepest there has ever been. It is within this context that your Company has been operating.

Due to the significant falls in property values in general the Company has been reviewing a number of potential acquisitions. However none have been concluded in the half year as there is evidence that values may continue to fall in the near future and we would wish to purchase at the best possible price for the Company. Also the Company does not want to significantly increase gearing in light of the falling property values and their impact on the net asset value of the Group. The result of this is that no acquisitions were made in the half year.

There are a number of properties that the Company is considering disposing of as they no longer fit into the overall strategy of the Company. However, such disposals will only be made if the Company identifies a better use for the funds that would be released.

Valuation

The Company has commissioned the normal half-yearly valuation of the entire portfolio carried out by external valuers. At 31 March 2009 the UK properties were valued by Atisreal Ltd and the Continental European properties by DTZ Eurexi.

These valuations are lower than at 30 September 2008 but they have not fallen as much as the fall in the IPD index for the same period. The UK portfolio has decreased in value by 12.7% while the IPD UK All Office Capital Growth Index has decreased by 22.5%. The Company believes this demonstrates that its niche market of owning properties occupied or let to Central and State Government departments has protected Shareholders' interests better than if it had a broader commercial tenant base.

By portfolio the valuations are:

Type	Value as at 31.3.2009	Yield as at 31.3.2009	Value as at 30.9.2008	Yield as at 30.9.2008	Change in value
UK Core	£280.1 m	7.67%	£322.0 m	6.65%	-13.0%
UK Active	£109.8 m	9.09%	£124.6 m	7.86%	-11.9%
UK Blended	£389.9 m	8.07%	£446.6 m	7.00%	-12.7%
Continental European	€174.6 m	6.75%	€190.3 m	6.20%	-8.2%
Type	Value as at 31.3.2009	Yield as at 31.3.2009	Value as at 30.9.2008	Yield as at 30.9.2008	Change in value
Continental European	£162.2 m	6.75%	£151.3 m	6.20%	+7.2%

UK Core Portfolio 

This portfolio consists of United Kingdom properties where the principal lease has more than seven years to expiry or a possible lease break date at the tenant's option. The majority of the Group's assets are in this portfolio and it generates most of the rental income.

At the 31 March 2009 there were 48 properties in this portfolio with a total area of 175,036 sq. m. (30 September 2008: 175,151 sq. m.). The current valuation of this portfolio was £280.1 million which represents 71.8% of the United Kingdom total portfolio.

It has the following attributes:

 

UK Active Portfolio 

Wichford's Active Portfolio is made up of properties where the principal lease has less than seven years to expiry or a possible lease break date at the tenant's option. This portfolio is focused on individual properties where value could be enhanced through active asset management, including lease renewals with indexation and longer occupational terms. 

At 31 March 2009 there were 24 properties in this portfolio with a total area of 70,797 sq. m. (30 September 2008: 71,156 sq. m.). The current valuation of this portfolio is £109.4 million which was 28.2% of the United Kingdom total portfolio.

This portfolio has the following attributes:

 

Continental European Portfolio 

At 31 March 2009, the Continental European Portfolio made up 29.4% of the total assets on valuation converted into Sterling. Covering France, Germany and The Netherlands, this portfolio comprises seven properties, all freehold and occupied by Central and State Government bodies. These properties are on average larger than the average United Kingdom.

While the valuation of these properties in Euros has declined since September 2008 in line with the general property sector in each country, the Euro to Sterling exchange rate has fallen and so in Sterling terms, and despite the local currency fall in valuations, the valuations of these properties have increased.

At 31 March 2009 there were seven properties in this portfolio with a total area of 95,181 sq. m. (30 September 2008: 95,181 sq. m.). The current valuation of this portfolio was €174.6 million, equating to £162.2 million.

This portfolio has the following attributes:

 

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 increases or linked to indexation. While no advances on this have been concluded in the six months to 31 March 2009, the Company is still negotiating the introduction of indexation with applicable tenants.

While the Company notes that the rise in most government inflation indices has slowed down, and in some cases reduced, the indexation that the Company will benefit from is that typically over a five year rent review cycle. Thus the current situation will not have a significant impact on the Group's revenue as medium to longer term views of these indices are that they will go up; some commentators even suggesting a period of rapid inflation in one to two years' time.

Indexation clauses allow the Group to benefit from upwards only rent reviews and thus there is no exposure to possible reduction in rental income due to downward movements of the relevant indices.

LOOKING AHEAD 

The Company is actively pursuing options in relation to issuing new equity to strengthen its Balance Sheet, to provide an increased number of options to deal with its debt facilities and to take advantage of acquisition opportunities in depressed property markets.

In addition, in the next 12 months the Company should experience significant reductions in the operating costs of the Group. This will be achieved by reviewing the existing contracts of all service providers and changing to more cost effective sources if renegotiations are not successful with the present ones.

As outlined above, one of the major areas of change will be to the portfolios on which the Delta and Gamma facilities are secured in order to achieve the WAULT test to be able to extend the maturity date of these facilities for the extra two years beyond October 2010.

FINANCIAL REVIEW 

Debt 

The credit market conditions have not appreciably improved since September 2008 especially for financing property investments. The Company is fortunate in not having loan to value covenants on the majority of its Sterling debt nor on two of the four Euro debt facilities.

However, the Company recognises that as property values decrease so the gearing increases and it is reviewing both its debt facilities and property portfolio to determine how the gearing can be reduced. To this end a complete review of the Group has been carried out and the overall goal is for the Company to come out of the present economic recession stronger.

As part of this planning the Group increased its drawing from the Lloyds TSB facility arranged in July 2008 by £15 million at the end of March 2009. This gives the Company the flexibility to be able to act quickly should suitable acquisition opportunities arise. The level of this additional drawdown was based on the anticipated valuation of the properties at 31 March 2009 utilised and ring fenced as security to this facility. These have proved accurate and the Group is comfortably within the loan to value covenant on this facility.

The following table is a summary of the Group's debt and ratios at 31 March 2009.

Facility	Lender	Debt (£m)	LTV (%)	ICR (%)
Delta	Windermere XI CMBS Ltd	114.6	99.9	144.7
Gamma	Windermere VIII CMBS Ltd	199.7	100.0	147.4
Hague	SNS Property Finance	20.4	84.3	156.1
Halle	Windermere XIV CMBS Ltd	34.5	90.6	172.0
VBG1	Talisman 3	65.0	122.3	131.1
VBG2	Talisman 4	51.9	126.2	150.4
Zeta	Lloyds TSB	46.0	60.9	291.2
		532.1

The principal loan covenants are shown below:

Facility	Lender		Maximum LTV (%)	Minimum ICR (%)
Delta	Windermere XI CMBS Ltd		n/a	125.0
Gamma	Windermere VIII CMBS Ltd		n/a	115.0
Hague	SNS Property Finance		n/a	100.0
Halle	Windermere XIV CMBS Ltd		n/a	140.0
VBG1	Talisman 3		85.0	120.0
VBG2	Talisman 4		86.0	115.0
Zeta	Lloyds TSB		65.0	140.0

As can be seen from the tables above the Interest Cover Ratio (ICR) actual ratios are all comfortably in excess of the minimum required under each facility. 

With regard to the Loan To Value (LTV) ratios, which only apply to three of the seven facilities, the Zeta one at 60.9% against a maximum of 65.0% is well within the maximum. For the two facilities where, in the tables above, the actual position at 31 March 2009 is shown as greater than the maximum allowed, the figures are calculated on the valuations the Company has commissioned and not on the valuations that the facility servicer has requested and so is able to consider. When compared to the valuations that are used for this test under the terms of the facility agreements the LTV reported is less than the maximum. However it is the facility servicer's right to call for a valuation at any time under these facilities, which it has not done to date. At 31 March 2009 there was, therefore, no breach of any covenant under these facilities and so there was no requirement to classify them as current liabilities. The VBG1 facility has been classified as a current liability as the maturity date on this facility is in January 2010.

The facilities' maturity dates are shown in the table below.

Facility	Lender	Maturity
Delta	Windermere XI CMBS Ltd	October 2010	Extendable to October 2012 if WAULT will be 7.5 years at that time
Gamma	Windermere VIII CMBS Ltd	October 2010	Extendable to October 2012 if WAULT will be 7.5 years at that time
Hague	SNS Property Finance	July 2014
Halle	Windermere XIV CMBS Ltd	April 2014
VBG1	Talisman 3	January 2010
VBG2	Talisman 4	April 2011
Zeta	Lloyds TSB	May 2011	Extendable for two years with agreement of lender

To achieve the extensions on the Delta and Gamma facilities the Company has planned to sell properties that had shorter leases and to purchase properties with longer leases as well as re-gearing other properties. 

The present market conditions mean that the shorter leased properties have declined in value substantially more than those with longer leases and thus increased the yield differential between these two categories of properties. This has worked against the Company.

The calculation of the WAULT is based on the remaining time to the next break date or end of lease, whichever is the earlier. This means that if tenants do not activate their right to break a lease at the predetermined time then this would have a positive effect on the calculations. This factor is outside of the control of the Company but, due to its government tenants, it is unlikely that the Company will experience the levels of breaks that might be exercised, for instance, by retail tenants in the prevailing economic environment.

While the test for being able to extend these two facilities will not be made for 18 months from 31 March 2009, the Company is considering all options to be able to achieve these extensions on the maturity of these facilities.

The VBG1 facility is due to mature in January 2010 and the Company is in conversation with the loan servicer. 

As part of the resolution of the maturity issues on both VBG facilities, Wichford may be obliged to inject additional capital into these assets.

Lehman Brothers 

We reported in the Annual Report for the financial year ended 30 September 2008 on the situation with regard to the demise of Lehman Brothers and its effect on the Group. These securitized loans have continued to perform well for the Company and no covenant breach has occurred.

The outstanding issue is that of the interest rate swaps that the securitised vehicles had with Lehman Brothers Special Finance, Inc. (LBSF) and from which the Group benefited. From the interest payment date in October 2008 it is alleged that LBSF failed to honour their commitments. However the Group has been charged interest according to the expected schedule without interruption and has thus not suffered additional costs. 

The trustees to the securitisation vehicles have appointed advisers to resolve the predicament and new hedging instruments have been put in place for both the Delta and Gamma facilities such that the Group is now charged a fixed interest for the remainder of the term of the facilities. The revised fixed interest rate produces a slightly lower interest payment profile when taken to the end of the extension periods for maturity on the Delta and Gamma facilities.

The advisers to the trustees of the securitisation vehicles have yet to resolve the position over the Halle facility but expect to do so in the near future. In the meantime the Group continues to pay the expected fixed interest rate on this facility as calculated by the facility servicer.

Further details on the loans and hedging can be found in Notes 12 and 13 of the accounts.

Interim dividend 

The Board confirms that it currently intends to declare an interim dividend but will not decide the level of such dividend until the outcome of the current equity issue deliberations are known. Announcements will be made, as required, in due course in relation to the contemplated equity issue and the Company's interim dividend and ongoing dividend policy.

Condensed Consolidated Income Statement - Trading Operations

Below are comments on the significant elements of the condensed consolidated income statement relating to the Trading Operations.

Revenue

The rental income for the six months to 31 March 2009 was £22.4 million (March 2008: £20.6 million). The current period has benefited from all the 79 properties income for the full six months while the six months to March 2008 did not have any income for the property in the Hague as it was not acquired until July 2008 and also from the weaker Euro to Sterling exchange rate.

Administrative Expenses 

Although this is the first full period which includes the Hague property from the start, with the consequent increased costs, there has been an overall reduction in administrative expenses of £0.3 million to £3.1 million (March 2008: £3.4 million). 

Further details are shown in Note 5 to the condensed set of financial statements.

Finance Cost 

The finance cost of the Group was £14.3 million for the six months to 31 March 2009 (March 2008: £12.2 million). The increase is a result of increased borrowings over the March 2008 level to fund the purchase of the Hague and Croydon properties. Additionally, the fall in the Euro to Sterling exchange rate has led to a higher Sterling converted value for the Euro denominated facilities used to fund the Continental European acquisitions.

Condensed Consolidated Income Statement - Other Items

Below is a summary of the key elements of the condensed consolidated income statement relating to the Other Items.

Deficit on revaluation of investment properties

This is principally the result of the fall in the property values as determined by the Company's external valuers. The Directors are of the opinion that these falls are in line with the general economic climate.

Administrative Expenses 

The charge is for the advice on the Windermere interest rate swaps and other matters amounting to £0.3 million and the cost of restructuring investments in Germany of £0.7 million. Both of these are of a non recurring nature.

Further details are shown in Note 5 to the condensed set of financial statements.

Condensed Consolidated Statement of Recognised Income and Expense

Below are comments on the significant elements of this statement not made elsewhere.

Loss on cash flow hedges

The loss reported on the cash flow hedges is £39.3 million (March 2008: loss of £12.1 million). This is the result of the mark to market of the derivatives the Group benefits from and is not a cash outflow. These instruments are required under the relevant borrowing facilities and as such are not traded.

Condensed Consolidated Balance Sheet

Below are comments on the significant elements of this statement.

Investment Properties 

The carrying value of the investment properties at 31 March 2009 was £541.4 million (March 2008: £602.1 million) and further detail of this is shown in Note 9 to the condensed set of financial statements. The principal reason for the decrease is the values assigned to the Group's properties by the external valuers as described in the Operating Review.

Trade and other receivables 

The total at 31 March 2009 was £19.7 million (March 2008: £19.9 million). While there has been little change from March 2008 overall, as illustrated in Note 10, the trade receivables have significantly declined as improved rent collection procedures have taken effect. This has been largely offset since March 2008 by the increase in the deferred rental incentives resulting from the Trillium deal effective from June 2008.

Borrowings 

At 31 March 2009 the total borrowings figure was £530.0 million (March 2008: £442.5 million) of which £65.0 million was classified within current liabilities (March 2008: nil). This current liability element of borrowings related to the VBG1 facility due to mature in January 2010 as outlined in Note 12 to the condensed set of financial statements.

Since 30 September 2008 the Group has increased its borrowings by a draw down of £15 million on the Zeta facility to take the total borrowed under that facility to £46 million.

Share Premium

The Share Premium reduction of £50 million approved by Shareholders at the Annual General Meeting in January 2009 has been implemented following the approval of the Court in the Isle of Man.

Exchange rates

The average Euro to Sterling exchange rate for the six months to 31 March 2009 was 1.15316 (March 2008: 1.36400).

The closing Euro to Sterling exchange rate at 31 March 2009 was 1.07630 (March 2008: 1.26360).

STATEMENT OF DIRECTORS' RESPONSIBILTIES

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 herein includes a fair review of the information as requested by Sections 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules.

In assessing the going concern basis of preparation of the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2009, the Directors have taken into account all material matters that might foreseeably affect the Group. These matters include but are not limited to the status of existing financing facilities including their related covenants, the opportunities for adjusting the portfolio, the ability to negotiate variances to the current terms of facilities and the prospects of raising additional capital.

The Board's review has taken into account the economic environment, its challenges and mitigating factors. The forecasts take into account expected trading performance, potential sales of properties and the future financing options of the Group and indicate that the Group will have sufficient facilities for its ongoing operations.

While there will always remain some inherent uncertainty within the aforementioned forecasts, on the basis of the review undertaken the Directors have concluded that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2009.

The Directors of Wichford P.L.C. are stated in the Group's Annual Report for the year ended 30 September 2008. There have been no changes since that Report.

By order of the Board

A Couper Woods

Secretary

28 May 2009

Ten Largest Investments

1. Justizzentrum, Halle, Germany
Freehold courts and offices built in 1997 and totalling 34,689 sq m	Current rent £2.8 million p.a. German CPI indexation.
Let to Land Sachsen-Anhalt until June 2020	Valuation: £38.0 million
2. Weiner Platz, Dresden, Germany
Freehold offices built in 2004 and totalling 17,449 sq m	Current rent £2.4 million p.a. German CPI indexation.
Let to VBG Verwaltungs-Berufsgenossenschaft until April 2024	Valuation: £35.5 million
3. Martin Luther Strasse, Stuttgart, Germany
Freehold offices built in 2005 and totalling 12,455 sq m	Current rent £2.1 million p.a. German CPI indexation.
Let to VBG Verwaltungs-Berufsgenossenschaft until January 2025	Valuation: £29.5 million
4. Centenary Court, Bradford
Freehold 1990s built office of 9,743 sq m	Current rent £1.4 million p.a. UK RPI indexation.
Occupied by HMRC until April 2027 with a break in 2021	Valuation: £25.5 million
5. Haagse Veste 1, The Hague, Netherlands
Freehold 2008 built office of 12,878 sq m	Initial rent of £1.8 million p.a. Dutch CPI indexation.
Occupied by the Royal Dutch Government for use by the International Criminal Court. Let for a term of six years from July 2008 with a tenant's option to extend for a further four years	Valuation: £24.2 million
6. Castle House, Leeds
Leasehold 1980s built office of 7,281 sq m	Current rent £1.2 million p.a. UK RPI indexation
Let to Secretary of state for the Environment until 2023	Valuation: £19.0 million
7. Markgraffenstrasse, Berlin, Germany
Freehold 2005 built office of 2,025 sq m	Current rent £1.2 million p.a. German CPI indexation.
Let to VBG Verwaltungs-Berufsgenossenschaft until December 2022	Valuation: £17.5 million
8. Woodlands, Bedford
Freehold 1985 built office of 14.416 sq m	Current rent £1.4 million p.a. Fixed uplift at rent review.
Majority occupied by Highways Agency until August 2020	Valuation: £15.3 million
9. St Anne House, Croydon
Freehold 1960s office building of 6,758 sq m	Current rent £1.1 million p.a.
Let to the Home Office until 2017 with a break in 2012	Valuation: £14.7 million
10. Pilsworth Road, Rochdale
Freehold 2006 built office and warehouse complex of 9,173 sq m	Current rent £1.1 million p.a.
Let to the UK Government until 2021 with a break in 2016	Valuation: £13.7 million

 

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 2009 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 related explanatory notes to the condensed financial statements. We have read the other information contained in the half-yearly financial report which comprise only the Chairman's Statement, Business Review and Financial 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 IFRSs 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 2009 is not prepared, in all material aspects, 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 ACCOUNTANTS

Douglas, Isle of Man

28 May 2009

WICHFORD PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 31 March 2009

		Six months ended 31 March 2009
	Note	Trading Operations * £m  (unaudited)	Other Items ** £m (unaudited)	Total    £m (unaudited)
Revenue	4	22.4	-	22.4
Deficit on revaluation of Investment properties		-	(79.9)	(79.9)
Profit on sale of investment properties		-	-	-
Administrative expenses	5	(3.1)	(1.0)	(4.1)
OPERATING PROFIT/(LOSS)		19.3	(80.9)	(61.6)
Finance revenue		0.2	-	0.2
Finance costs		(14.3)	-	(14.3)
PROFIT/(LOSS) BEFORE TAX		5.2	(80.9)	(75.7)
Income tax expense	6	(0.5)	-	(0.5)
PROFIT/(LOSS) FOR THE PERIOD		4.7	(80.9)	(76.2)
Earnings per share from continuing operations Basic/Diluted - pence	7	3.5	(60.9)	(57.4)

 

All activities are continuing. \* Trading Operations: This excludes the Other Items and reflects the trading activities of the

Group. ** Other Items: Includes the profits and losses on the sales of investment properties and items of a non trading,

non cash nature such as valuation adjustments arising from the fair valuing of investment properties and derivative

financial instruments. 

 

Six months ended 31 March 2008

Year ended 30 September 2008

		Trading Operations * £m (unaudited)	Other Items **  £m (unaudited)	Total    £m (unaudited)	Trading Operations * £m (audited)	Other  Items **  £m  (audited)	Total    £m (audited)
Revenue		20.6	-	20.6	42.0	-	42.0
Deficit on revaluation of Investment properties		-	(80.1)	(80.1)	-	(140.8)	(140.8)
Profit on sale of investment properties		-	0.8	0.8	-	0.8	0.8
Administrative expenses		(3.4)	(0.7)	(4.1)	(6.7)	(0.7)	(7.4)
OPERATING PROFIT/(LOSS)		17.2	(80.0)	(62.8)	35.3	(140.7)	(105.4)
Finance revenue		0.5	-	0.5	1.2	-	1.2
Finance costs		(12.2)	-	(12.2)	(25.8)	-	(25.8)
PROFIT/(LOSS) BEFORE TAX		5.5	(80.0)	(74.5)	10.7	(140.7)	(130.0)
Income tax expense		(0.3)	-	(0.3)	(0.4)	-	(0.4)
PROFIT/(LOSS) FOR THE PERIOD		5.2	(80.0)	(74.8)	10.3	(140.7)	(130.4)
Earnings per share from continuing operations Basic/Diluted - pence		3.9	(60.3)	(56.4)	7.8	(106.0)	(98.2)

CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the six months ended 31 March 2009

	Trading Operations * £m (unaudited)	Other Items ** £m (unaudited)	Total £m (unaudited)
INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY  (Loss)/gain on cash flow hedges  (loss)/gain on foreign currency translation	- -	(39.3) 2.8	(39.3) 2.8
NET INCOME RECOGNISED IN EQUITY   PROFIT/(LOSS) FOR THE PERIOD	- 4.7	(36.5)   (80.9)	(36.5)   (76.2)
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE PERIOD	4.7	(117.4)	(112.7)

All activities are continuing.

\* Trading Operations: This excludes the Other Items and reflects the trading activities of the Group.

** Other Items: Includes the profits and losses on the sales of investment properties and items of a non trading, non cash nature such as valuation adjustments arising from the fair valuing of investment properties and derivative financial instruments.

	Six months ended 31 March 2008			Year ended 30 September 2008
	Trading Operations  £m  (unaudited)	Other  Items  £m (unaudited)	Total £m (unaudited)	Trading Operations  £m  (audited)	Other  Items £m (audited)	Total £m (audited)
INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY (Loss)/gain on cash flow hedges  (Loss)/gain on foreign currency translation	-   -	(12.1) (1,4)	(12.1) (1.4)	-   -	(13.8) 1.2	(13.8) 1.2
NET INCOME RECOGNISED   IN EQUITY	-	(13.5)	(13.5)	-	(12.6)	(12.6)
PROFIT/(LOSS) FOR THE PERIOD	5.2	(80.0)	(74.8)	10.3	(140.7)	(130.4)
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE PERIOD	5.2	(93.5)	(88.3)	10.3	(153.3)	(143.0)

CONDENSED CONSOLIDATED BALANCE SHEET

As at 31 March 2009

	Note	31 March 2009  £m (unaudited)	31 March 2008 £m (unaudited)	30 September 2008 £’000 (audited)
ON-CURRENT ASSETS  Investment properties  Derivative financial assets	9	541.4  -	602.1 3.0	587.0 1.3
		541.4	605.1	588.3
CURRENT ASSETS  Trade and other receivables Cash at bank	10	19.7 32.6	19.9 17.4	31.3 15.1
		52.3	37.3	46.4
TOTAL ASSETS		593.7	642.4	634.7
CURRENT LIABILITIES Trade and other payables Borrowings Derivative financial liabilities	11 12 13	(24.3) (65.0) (38.0)	(18.3)  -  -	(25.5) - -
		(127.3)	(18.3)	(25.5)
NON CURRENT LIABILITIES Borrowings Deferred tax liabilities	12	(465.0) (1.2)	(442.5) (0.6)	(490.5) (0.7)
		(466.2)	(443.1)	(491.2)
TOTAL LIABILITIES		(593.5)	(461.4)	(516.7)
NET ASSETS		0.2	181.0	118.0
EQUITY
Share capital	14	13.3	13.3	13.3
Share Premium	15	118.8	168.8	168.7
Retained earnings	16	(96.3)	(1.0)	(65.2)
Cash flow hedges reserve		(40.2)	0.8	(0.6)
Currency translation reserve		4.6	(0.9)	1.8
TOTAL EQUITY ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE PARENT COMPANY		0.2	181.0	118.0
NET ASSET VALUE Basic/Diluted- pence per share	8	0.1	136.4	88.9

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 March 2009

	Six months ended  31 March 2009 £m  (unaudited)	Six months ended 31 March 2008  £m  (unaudited)	Year ended  30 September 2008  £m  (audited)
OPERATING LOSS FOR THE PERIOD  Adjust non-cash items: Decrease in fair value of  investment properties  Profit on sale of investment properties  Accrued rental income  Rent incentives  Foreign exchange loss Working capital adjustments: Decrease/(increase) in trade and other receivables  Decreasein trade and other   Payables Finance costs paid  Finance costs received Finance lease interest	(61.6)     79.9 - (0.2) 0.6 (5.2) 10.5 (0.5) (14.4) 0.2 (0.1)	(62.8)   80.1 (0.8) (0.2) (3.9) (1.7) (0.6) (7.7) (13.0) 0.5 (0.1)	(105.4)   140.8 (0.8) (0.3) (11.8) (5.7) (0.1) (0.6) (26.0) 1.3 (0.2)
CASH FLOWS FROM OPERATING ACTIVITIES	9.2	(10.2)	(8.6)
INVESTING ACTIVITIES  Purchase of investment properties  Sale of investment properties	(1.8) -	- 11.0	(42.4) 11.0
CASH FLOWS USED IN INVESTING ACTIVITIES	(1.8)	11.0	(31.4)
FINANCING ACTIVITIES  Increase in bank debt  Equity dividends paid	14.3 (4.2)	4.5 (8.2)	48.5 (13.7)
CASH FLOWS FROM FINANCING ACTIVITIES	10.1	(3.7)	34.8
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	17.5	(2.9)	(5.2)
Cash and cash equivalents at beginning of period	15.1	20.3	20.3
CASH AND CASH EQUIVALENTS AT PERIOD END	32.6	17.4	15.1

NOTES TO THE CONDENSED 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 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 millions of pounds Sterling (£m) 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 2008 have been used throughout the period now being reported. These accounting policies can be found in the published Annual Report.

3. Segment information

The primary reporting segment of the Group is the entire business. The business activity of the Group is property investment in the UK and Continental Europe 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, capital expenditure and certain asset information regarding the Group:

Six Months ended 31 March 2009	UK £m	Rest of Europe £m	Total £m
Segment revenue	16.2	6.2	22.4
Carrying amount of Segment assets
Segment assets	388.4	205.3	593.7
Segment capital expenditure
Acquisition of investment properties	-	1.8	1.8
Six Months ended 31 March 2008	UK	Rest of Europe	Total
	£m	£m	£m
Segment revenue	16.5	4.1	20.6
Carrying amount of Segment assets
Segment assets	475.1	167.3	642.4
Segment capital expenditure
Acquisition of investment properties	-	-	-
Year ended 30 September 2008	UK	Rest of Europe	Total
	£m	£m	£m
Segment revenue	33.0	9.0	42.0
Carrying amount of Segment assets
Segment assets	441.4	194.0	635.4
Segment capital expenditure
Acquisition of investment properties	15.2	28.6	43.8

4. Revenue

	Six months ended  31 March 2009  £m	Six months ended  31 March 2008  £m	Year ended  30 September 2008  £m
Rental income	22.4	20.6	42.0
Other income	-	-	-
	22.4	20.6	42.0
Financial revenue	0.2	0.5	1.2
	22.6	21.1	43.2

5. Administration Expenses

	Six months ended  31 March 2009  £m	Six months ended  31 March 2008  £m	Year ended  30 September 2008  £m
Property Adviser's Fees
- advisory fees	1.8	2.0	3.9
- accrued performance fees	-	-	-
Property Manager's Fees	0.1	0.1	0.1
Other administration expenses	2.2	2.0	3.4
Total	4.1	4.1	7.4

Included in the Other administration expenses for the six months to 31 March 2009 are the costs of advice on the Windermere interest rate swaps and other matters of £0.4 million and the cost of restructuring investments in Germany of £0.6 million.

Included in the Other administration expenses for both the six months to 31 March 2008 and the year ended 30 September 2008 are the costs of the move from AIM to the Main Market of the London Stock Exchange plc, which amounts to £0.7 million.

6. Income Tax

(a) Tax on loss from ordinary activities

	Six months ended  31 March 2009  £m	Six months ended  31 March 2008  £m	Year ended  30 September 2008  £m
Loss for the period not subject to UK income tax	(75.7)	(74.6)	(123.4)
Loss before tax	(75.7)	(74.6)	(123.4)
Current income tax Adjustments in respect of previous year	-	-	-
Total current income tax	-	-	-
Deferred tax Origination and reversal of temporary differences	0.5	0.3	0.4
Income tax expense reported in the income statement	0.5	0.3	0.4
(b)Deferred tax  Deferred tax included in the balance sheet is as follows:
	Six months ended 31 March 2009 £m	Six months ended 31 March 2008 £m	Year ended 30 September 2008  £m
Lease accounting temporary differences	1.2	0.6	0.7
Total deferred tax liability	1.2	0.6	0.7
The deferred tax included in the income statement is as follows:
	Six months ended  31 March 2009  £m	Six months ended  31 March 2008  £m	Year ended  30 September 2008  £m
Lease accounting temporary differences	0.5	0.3	0.4
Deferred income tax expenses	0.5	0.3	0.4

7. Earnings per share

Basic earnings per share for the period ended 31 March 2009 is based on the loss attributable to equity shareholders of £76.2 million (March 2008: loss of £74.8 million; September 2008: loss of £130.4 million) and a weighted average number of Ordinary shares outstanding during the period ended 31 March 2009 of 132,761,948 (March 2008: 132,718,137; September 2008: 132,726,728).

 

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

 

	Six months ended  31 March 2009  £m	Six months ended  31 March 2008  £m	Year ended  30 September 2008  £m
Loss attributable to equity shareholders	(76.2)	(74.8)	(130.4)
Weighted average  number of ordinary  shares (000's)  Basic	132,762	132,718	132,727
Earnings per share - pence Basic earnings per share	(57.4)	(56.4)	(98.2)

8. Net Assets per Share

Net assets per share is calculated by dividing the net assets at 31 March 2009 attributable to the equity holders of the parent of £0.2 million (March 2008: £181.0 million; September 2008: £118.0 million) by the number of Ordinary Shares as at 31 March 2009 of 132,761,948 (March 2008: 132,761,948; September 2008: 132,761,948).

	31 March 2009	31 March 2008	30 September 2008
Net assets attributable to equity holders of the parent (£m)	0.2	181.0	118.0
Number of ordinary shares (000's)	132,762	132,762	132,762
Net assets per share (pence)	0.1	136.4	88.9

9. Investment properties

	31 March 2009 £m	31 March 200  £m	30 September 2008 £m
As at 1 October	587.0	663.6	663.6
Foreign exchange and other adjustments on consolidations	25.7	18.3	20.5
Purchases during the period	1.8	-	43.5
Disposals during the period	-	-	(10.2)
Valuations losses	(73.1)	(80.1)	(141.3)
Transferred to assets held for sale	-	-	10.9
Payment on account for asset in course of construction	-	0.3	-
As at 31 March/30 September	541.4	602.1	587.0

At 31 March 2009 the Group owned 79 properties throughout the UK, France, Germany and the Netherlands.

While the Group has not purchased any additional properties during the six months to 31 March 2009 it has made provision for the future cost of exercising options to purchase the remaining shares in connection with its investments in Germany. This amounts to £1.8 million.

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

	31 March 2009  £m	31 March 2008  £m	30 September 2008  £m
Investment property at market value as determined by external valuers	552.1	606.8	597.9
Add minimum payment under head leases separately included as a payable in the balance sheet	2.0	2.0	2.0
Less accrued incentives separately included as a receivable in the balance sheet	(11.5)	(8.6)	(11.8)
Less accrued rental income separately included as a receivable in the balance sheet	(1.4)	(1.0)	(1.2)
Add accrued rental income separately included as a payable in the balance sheet	0.2	0.1	0.1
	541.4	599.3	587.0
Add payment on account for asset in the course of construction	-	2.8	-
Balance sheet carrying value of investment property	541.4	602.1	587.0

10. Trade and other receivables

	31 March 2009  £m	31 March 2008  £m	30 September 2008  £m
Trade receivables	1.5	6.1	6.9
VAT recoverable	0.2	1.1	5.5
Deferred rental incentives	12.0	9.0	11.8
Accrued rental income	1.4	1.0	0.5
Other prepayments	4.0	2.1	5.3
Service charges	0.6	0.6	1.3
	19.7	19.9	31.3

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 2009 nil trade receivables were impaired (March 2008: nil; September 2008: nil). As at 31 March 2009, nil trade receivables were overdue but not impaired (March 2008: nil; September 2008: nil).

11. Trade and other payables

	31 March 2009 £m	31 March 2008 £m	30 September 2008 £m
Rent received in advance	8.1	7.3	9.7
VAT payable	1.1	1.2	1.1
Other payables and accruals	14.5	9.2	13.4
Service charges	0.6	0.6	1.3
	24.3	18.3	25.5

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 2009£m	31 March 2008£m	30 September 2008 £m
Current
Bank loans	65.0	-	-
Non current
Bank loans	467.1	444.3	492.8
Less: deferred finance costs	(4.1)	(3.8)	(4.3)
Finance leases	2.0	2.0	2.0
	465.0	442.5	490.5

 

 

(a) Bank loans

At 31 March 2009, the bank borrowings of £532.1 million were secured by fixed and floating charges over the assets and income streams of the Group. They comprised of six separate borrowing facilities each secured on a number of discrete assets with no common assets. There was also one property that was not pledged as security for any borrowing facility.

These facilities are summarised below:

Facility	Lender	31 March 2009  £m	31 March 2008  £m	30 September 2008  £m
Delta	Windermere XI CMBS Ltd	114.6	114.6	114.6
Gamma	Windermere VIII CMBS Ltd	199.7	199.7	199.7
Hague	SNS Property Finance	20.4	-	17.5
Halle	Windermere XIV CMBS Ltd	34.5	29.4	29.5
VBG1	Talisman 3	65.0	56.0	55.9
VBG2	Talisman 4	51.9	44.6	44.6
Zeta	Lloyds TSB	46.0	-	31.0
		532.1	444.3	492.8

The Delta and Gamma facilities are non-amortising and have initial repayment dates in October 2010 with the option to extend these to final repayment dates in October 2012, subject to satisfaction of certain conditions, and both have been put into securitisation conduits by the lender. The VBG facilities are amortising dependent 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.

As the VBG1 facility is due to mature in January 2010 it has been classified as a current liability. The Company is confident that suitable arrangements can be made prior to this date to ensure that the Group does not have to repay this amount at that date.

The Halle facility is non-amortising and has a final repayment date in April 2014.

The Zeta facility is non-amortising and has a final repayment date in May 2011.

 

All the facilities are subject to the interest rate swaps detailed in Note 13 either by the Group being counter-party to individual instruments or indirectly by means of interest rate swaps being entered into by the lenders as a result of lending to the Group. 

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 2009  £m	31 March 2008  £m	30 September 2008  £m
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	0.1 0.5 9.8	0.1 0.5 10.1	0.1 0.5 18.3
	10.4	10.7	18.9
Less: finance charges allocated to future periods	(8.4)	(8.7)	(16.9)
Present value of minimum lease payments	2.0	2.0	2.0
	31 March 2009  £m	31 March 2008  £m	30 September 2008 £m
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	- 0.1 1.9	- 0.1 1.9	- 0.1 1.9
Present value of minimum lease payments	2.0	2.0	2.0

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 for floating rate borrowings 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.

The interest rate swaps which were originally taken out by the Group as interest rate hedges on the Delta, Gamma and Halle facilities were novated to or were taken out with a Lehman Brothers company. From then a fixed rate interest became payable, equivalent to that under the swaps. Since, by this means the Group has the economic interest in the swaps, it has recognized them in its accounts.

However the interest rate swaps held by the securitisation vehicles had a Lehman Brothers company as counter-party at 31 March 2009. 

The Group has continued to receive the benefit of these interest rate swaps as the agent for the securitisation vehicles is continuing to charge interest according to the profiles of these interest rate swaps whilst the trustees of the securitisation vehicles consider how best to replace them. Since 31 March 2009 the Group has been advised that the Delta and Gamma facilities' have been novated such that the Lehman Brothers company is no longer a counter-party to the instruments. The trustees to the securitization vehicles and their advisers are still working to resolve the Halle facility instrument.

The total fair vale of the Group's derivative arrangements at 31 March 2009 was £(38.0) million and by facility is: 

	31 March 2009  £m	31 March 2008  £m	30 September 2008  £m
Delta	(10.3)	0.2	-
Gamma	(16.6)	1.8	-
Hague	(2.5)	-	(0.3)
Halle	(2.9)	(0.2)	-
VBG1	(1.0)	1.0	1.2
VBG2	(2.5)	0.2	0.6
Zeta	(2.2)	-	(0.2)
Fair value of the Group's derivative arrangements	(38.0)	3.0	1.3

The fair value of the instruments that replaced those attached to the Delta and Gamma facilities is not significantly different to those they replaced. 

There is no cash impact of these fair values where the instruments remain until maturity. If they were to be terminated prior to their maturity dates then the fair value at that time would become payable by the Group. However if the particular instrument could be used elsewhere in the Group then it would be transferred.

Hedge accounting

The mark to market adjustment of £(39.6) million in the period ended 31 March 2009 is reported in the cash flow hedges reserve as the Group has applied hedge accounting to its 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.

At 31 March 2009 the Group had only one outstanding foreign exchange sale and purchase contract in place which was for an amount of €19.2 million.

(c) Financial assets

The financial assets of the Group comprise cash deposits and hedging instruments held at fair value. The fair value of the cash deposits equates to the amount in the various Group bank accounts.

(d) Financial liabilities

The financial liabilities of the Group comprise the Group's bank loans. These are held at amortised cost.

14. Authorised and issued share capital 

	31 March 2009  £m	31 March 2008  £m	30 September 2008  £m
AUTHORISED
Ordinary Shares of 10p each - number	180,000,000	180,000,000	180,000,000
Ordinary Shares of 10p each - £m	18.0	18.0	18.0
ISSUED, CALLED UP AND FULLY PAID
Ordinary Shares of 10p each - number	132,761,948	132,761,948	132,761,948
Ordinary Shares of 10p each - £m	13.3	13.3	13.3

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

15. Share Premium Account

Following the Shareholders' approval at the Annual General Meeting of the Company in January 2009 to cancel £50 million of the share premium account, the Company successfully applied to the Court in the Isle of Man and its approval was registered with the Financial Supervision Commission of the Isle of Man on 30 March 2009. 

16. Retained earnings

	31 March 2009  £m	31 March 2008  £m	30 September 2008  £m
At 1 October	(65.2)	81.2	81.2
Foreign exchange and other adjustments on consolidation	(0.7)	0.9	(2.3)
Transfer from share premium account	50.0	-	-
Total recognised income for the period	(76.2)	(74.8)	(130.4)
Shares issued relating to performance fee of Property Adviser	-	(0.1)	-
Dividends paid	(4.2)	(8.2)	(13.7)
As at 31 March/30 September	(96.3)	(1.0)	(65.2)

17. Dividends

	31 March 2009 £m	31 March 2008  £m	30 September 2008  £m
Ordinary dividends paid
Final dividend for 2007 - 6.2 pence per share	-	8.2	8.2
Interim dividend for 2008 - 4.1 pence per share	-	-	5.5
Final dividend for 2008 - 3.15 pence per share	4.2	-	-
	4.2	8.2	13.7

The final dividend for 2008, which was paid in the period, was approved by the Shareholders at the Annual General Meeting and was paid on 20 February 2009 to all those Shareholders on the register at the close of business on 30 January 2009.

The Board confirms that it intends to declare an interim dividend but will not decide the level of such dividend until the outcome of the current equity issue deliberations are known. An announcement will be made, as appropriate, in due course in relation to the contemplated equity issue and the Company's dividend policy.

The record and payment dates will be announced in due course.

18. Capital commitments 

As at 31 March 2009 the Group had no capital commitments.

19. Performance measures

The European Public Real Estate Association (EPRA) issued Best Practices Policy Recommendations in November 2006 which gives guidelines for performance measures. These include earnings per share and net asset value definitions which are different from those under IFRS. The Company considers that these measures are more appropriate for comparisons over time.

These definitions are used in the tables below.

EARNINGS PER SHARE

 

 

 

 

20. Events after the balance sheet date

The Company has announced as part of this report that it is currently actively contemplating its options to issue equity.

This Half-Yearly Financial Report is not the Company's statutory accounts. The statutory accounts for the year ended 30 September 2008 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 MGGZKFRDGLZZ

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