13th Nov 2007 07:02
Great Portland Estates PLC13 November 2007 Half year results The Directors of Great Portland Estates plc announce the results for half yearended 30 September 2007. Highlights: • Adjusted net assets per share (1) up 11.1% to 660p • Portfolio value (2) of £1,754.8 million, up 8.9% on a like-for-like basis • Total property return (2) of 9.5%, outperforming the IPD Central London benchmark of 6.6% • 9.0% ERV growth in six months (2) making the portfolio 40.3% reversionary • Rental and joint venture fee income up 12.5% to £24.3 million • Adjusted profit before tax (1) up 55.2% to £10.4 million • Profit before tax of £130.7 million (2006: £148.1 million) • Dividend per share up 4% to 3.9p • Total development programme increased to 2.9 million sq. ft. in 25 schemes (3) • 60,000 sq. ft. development at 60 Great Portland Street, W1, pre-let • Met Building, W1, sold for £107.0 million post-redevelopment providing 156% return on capital employed • £661.6 million Great Capital joint venture formed • £329.2 million of acquisitions (2) providing more than 1 million sq. ft. of new value-add opportunities • 290,000 sq. ft. (3) let generating £15.3 million of new rent roll (3), keeping voids low at 3.2% at 31 October 2007 • The Group has undrawn committed bank facilities currently in excess of £170 million providing financial flexibility (1) EPRA adjustments on a diluted basis - see note 6(2) Includes share of joint ventures(3) Includes joint ventures Toby Courtauld, Chief Executive, said: "With property markets engulfed in negative sentiment and a challenging creditenvironment, both absolute and relative returns will be produced by those bestable to reposition their assets to drive rental growth. We believe this changingproperty environment plays to our relative strengths. 81% of our portfolio is in the West End, focused around Oxford Circus, wherestructural under-supply remains the dominant feature; our office rents are lowat £32.60 per sq. ft. providing significant potential for growth; our development programme appears well timed and should materially enhance Groupreturns. We will continue to monitor market conditions carefully and use the Group'sflexible financial resources to respond to emerging opportunities andchallenges. We believe that our focused operating approach and sector specialismwill underpin the long-term prospects of the Group." Enquires etc:Great Portland Estates plc 020 7647 3000Toby Courtauld, Chief ExecutiveTimon Drakesmith, Finance Director Finsbury Group 020 7251 3801James MurgatroydGordon Simpson The results presentation will be broadcast live at 9.30am today on http://www.gpe.co.uk/investors/presentations Our marketOur market is accompanied by graphics (see Appendix 1).To view the accompanying graphics please copy and paste the below link intoyour web browser: http://www.rns-pdf.londonstockexchange.com/rns/5674h_1-2007-11-13.pdf As a global financial centre, London has not evaded the recent turbulence in theworld financial markets with investors' reappraisal of risk putting upwardpressure on property yields. In the Capital's occupational markets, however, themain themes remain much the same as those we described in our annual reportearlier this year: • occupational demand for office space remains robust; • the availability of new office space continues to reduce with Grade A vacancy rates at or near record lows; and • the market's balance has continued to favour the landlord, resulting in rising rents across central London. In the West End, take-up totalling 4.7 million sq ft so far this calendar yearis above the long-run average, with September alone accounting for 0.9 millionsq ft. As a result, vacancy rates have fallen by 17% since January to 3.9%, or1.2%, in the Grade A category. With such constrained supply of new stock,take-up levels can afford to reduce by a sizeable margin before the market'sbalance returns to equilibrium. The current level of occupational enquiriespoints to take-up trending at around the long-run average, suggesting thatprospects in the West End remain sound. In the City, strong letting activity (totalling 7.2 million sq ft so far thisyear) has materially reduced the amount of space available to let and pushedprime rents higher by 15% since January. We remain concerned about thesignificant development pipeline, estimated at 12 million sq ft for the periodto December 2011, despite the likely dampening effect on development starts ofhigher construction costs and financial market uncertainties. Whilst 2007 is set to produce another record level of turnover in London'sinvestment markets, activity has slowed markedly since the end of September asinvestors take stock of market conditions. Prime benchmark yields have expandedby between 25 and 50 basis points from their lows and, whilst there may befurther increases to come, there remains a significant amount of money lookingto invest in central London, much of it from overseas. Our businessOur business is accompanied by graphics (see Appendix 2).To view the accompanying graphics please copy and paste the below link intoyour web browser: http://www.rns-pdf.londonstockexchange.com/rns/5674h_2-2007-11-13.pdf ValuationThe valuation of the Group's properties as at 30 September 2007, includingacquisitions made during the year and our share of gross assets in jointventures, was £1,754.8 million, up 7.9% or £128.9 million, net of capitalexpenditure and acquisition costs, since 31 March 2007. Wholly owned propertieswere valued at £1,197.2 million and the Group had four 50:50 joint ventures,which owned properties valued in aggregate at £1,115.3 million. The valuation of the portfolio held throughout the first half (excludingacquisitions), including our share of joint ventures, was £1,409.4 millionwhich, net of capital expenditure, increased in value by 8.9% or £114.7 million. Growth in rental values, asset management activity and development gains werethe main constituents of the valuation uplift in the first half: • Growth in rental values - First half growth of 9.0% across the portfolio was driven by the performance of the development properties, which grew by 15.0%. In the Rest of the West End, office rental values grew by 9.2% and in the North of Oxford Street, office rental values grew by 10.3%. • Asset management activity - Significant letting and lease regearing activity during the first half, such as at 160 Great Portland Street, repositioned a number of assets, creating good valuation growth. • Development gains - The development portfolio increased in value by 17.9% over the first half with strong gains at the Group's largest West End schemes at 60 Great Portland Street, W1 (following its office pre-letting) and at Wells & More, Mortimer Street, W1. Valuations were up across most segments with the investment portfolio growing by7.1% or £76.2 million. Our share of acquisitions, the majority of which was injoint venture, was valued at £345.4 million at September 2007, up 4.3%, or £14.2million net of acquisition costs. The second quarter's overall like-for-like valuation growth of 2.0% was lowerthan that seen in the first, due to a deterioration in real estate investorsentiment following the turbulence in the capital markets over the summer,pushing capitalisation rates higher. Rental value growth of 4.0% in the secondquarter remained healthy and, although slightly lower than the 4.6% increaseseen in the first quarter, was more than sufficient to offset the negativeeffects of rising capitalisation yields. In aggregate, the portfolio equivalent yield increased by 10 basis points overthe first half to 5.0%. The overall portfolio valuation uplift was due to assetmanagement and growth in rental values outweighing the outward yield movement.Stripping out development properties and cases of major asset repositioning thathave driven yields lower and asset values sharply higher, the portfolioequivalent yield was around 20 basis points higher on a like-for-like basis over the period. The Group delivered a total property return for the period of 9.5%,significantly outperforming the IPD Central London benchmark of 6.6%. Ouroutperformance has continued to come from successful development, accretiveacquisitions and our focused approach to asset management. DevelopmentThe Group's development business has shown strong progress in the first halfwith major milestones achieved at several schemes. The development programme isnow up to 25 projects; taken together, they represent a potential total area of2.9 million sq ft, a 70% increase over the buildings' pre-development area. Thenear-term programme alone has an estimated completed value of £766.0 million,equivalent to 44% of the Group's existing portfolio. We divide the total development pipeline into three time segments (near-term,medium-term and longer-term) depending on the start dates. Of the near-termgroup of 13 schemes, those not currently on site will all have started by theend of 2009. The medium-term projects are scheduled to commence between2009-2011, whilst the longer term programme represents prospects beyond 2011. In September, we announced the pre-let of the entire office element at 60 GreatPortland Street, W1 to The Engine Group, who will take a 20 year lease over thebasement and ground to fifth floors totalling 60,000 sq ft and pay £3.6 millionper annum after a 17 month rent free period. The above ground floor office rentsrange from £65 per sq ft for the fifth floor to £60 per sq ft on the firstfloor. Building work commenced in January 2006 and we expect to finish by theend of 2007. At 180 Great Portland Street, W1 we let 16,000 sq ft at £58 per sqft, establishing a new rental level and, subsequent to the half year end, afurther 8,000 sq ft of space at this building was let for £62.50 per sq ft.Further space is under offer at £65 per sq ft. We have seven schemes on site at Wells & More, Mortimer Street, W1 (115,000 sqft), 60 Great Portland Street, W1 (90,000 sq ft), 79/83 Great Portland Street,W1 (16,000 sq ft), Foley Street, W1 (20,000 sq ft), Tooley Street, (200,000 sqft) and Bermondsey Street, (48,000 sq ft) both in SE1 and Met Wharf (110,000 sqft), E1. The Tooley Street scheme, pre-sold last year, has been entirely pre-letto Southwark Borough Council at an average rent of £38.50 per sq ft,crystallising an additional bonus payment due to the Group on practicalcompletion in the spring of 2008. In the Group's new 50:50 joint venture, the Great Capital Partnership (GCP), wehave assembled an interesting development prospect at New Fetter Lane, EC4 byacquiring a building adjacent to an existing holding. Preliminary design work isongoing and we expect to submit a planning application for an office building ofmore than 100,000 sq ft during the next 12 months. In addition, we submitted aplanning application for a 131,000 sq ft office scheme at Wigmore Street, W1where we anticipate starting on site in early 2009. At 240 Blackfriars Road,SE1 we are preparing to start our 190,000 sq ft office building in early 2008.At the Hanover Square Estate, W1, discussions continue with both the planningauthorities and Crossrail on a masterplan for the site. We continue to see significant construction cost inflation across central Londonas a consequence of heightened activity, particularly on major infrastructureprojects, and raw material price increases. So as to mitigate the effect on ourdevelopment programme, we are engaging with key suppliers at an earlier stagethan usual to create more certainty on contract values. Investment managementWe have continued to recycle capital from mature properties into projects towhich we can apply our asset management and development skills. Sales during the first half amounted to £268.6 million. Four sales were made inApril for £161.6 million in line with their March 2007 valuations being theGroup's contribution to GCP. In September we sold Met Building, 22 Percy Street,W1, the Group's successful development completed in 2005, for £107.0 million,slightly below the 31 March 2007 valuation. This development was sold off a netinitial yield of 4.1% and crystallised a return on total capital employed of156% since purchase in June 2003. The investment team has had a very active first half with £329.2 million (ourshare) of property acquired. The majority of this activity was in GCP. Createdin April 2007 for a cost of £233.3 million (our share), the joint venturebrought 17 new properties under our management totalling 610,000 sq ft, centredaround Regent Street with an average office rent of only £28 per sq ft. Sincethen, GCP has agreed to acquire six properties in four transactions at a cost of£80.0 million (our share) in Jermyn Street, SW1, Fetter Lane, EC4 and RegentStreet, W1, all adjacent or near to existing holdings. In our wholly owned portfolio, we made two acquisitions at a cost of £16.0million during the period, all adjacent to existing holdings. 18 Dering Street,W1 was purchased to augment our holding on the western side of Hanover Squarewhilst Bramah House, 65/71 Bermondsey Street together with 1 Black Swan Yard,both in Southwark were acquired to extend our holdings in this part of theSouthbank. Asset managementOur asset management team remains focused on the execution of each property'sclearly defined asset strategy. The first six months of the year have been busywith a good amount of leasing activity, driving rental values higher andnumerous lease regearings, rent reviews and lease renewals also strengthened thequality of our income. During the period, we have announced new leases coveringmore area and at a higher value than the total for the year to March 2007. Lease renewals and new lettings, including those in joint ventures, signedbetween 1 April and 30 September, will add £13.5 million to the rent roll andwere 4.5% ahead of March 2007 rental values. These include the regearing of theoffice occupational leases at 160 Great Portland Street, W1 totalling 86,000 sqft, due to expire next year, to new 11 year leases and, at the same time,marking the rent up by some 23.5%. Other operational achievements during the half year have included: • lettings at Kent House, Market Place, W1 and Elsley House, Great Titchfield Street, W1 following completion of comprehensive refurbishments; • new retail and office rental evidence being set in Regent Street, W1 and Oxford Street, W1 following judicious lease surrenders; and • successful refurbishment projects at Pollen House, Cork Street, W1 and at 67/75 Kingsway, WC2. Voids in the investment portfolio (including share of joint ventures) at 30 September were low at 4.6% and the efficient letting of empty space remains a key objective for the team, including those properties being worked up for development. Joint venturesOur joint ventures have performed well in the first half and we are pleased tohave the continuing endorsement of our partners, Liverpool Victoria FriendlySociety, Scottish Widows Investment Partnership and Capital & Counties Limited.These joint ventures, with gross property assets of £1,115.3 million, nowrepresent 48% of our gross property assets, up from 24% at the beginning of thefinancial year. GCP has started well with the 30 September property valuation of £329.9 million(our share) showing a surplus of 4.6% or £29.1 million net of all acquisitioncosts and subsequent capital expenditure, during an average ownership period ofjust over 4 months. During this short time, we have been encouraged by theopportunities our management of the assets is unearthing, augmented by thesubsequent acquisitions. We have welcomed four new employees from Capital &Counties to support GCP's business plan of growing rents from low current levelsand to implement asset management, refurbishment and development initiatives. Good progress has been made in the Great Victoria Partnerships (GVP and GVP2).Asset management activity at the Mount Royal retail block in Oxford Street, W1has moved the rents forward significantly and the final phase of development ofthe former Liberty Store at 208/222 Regent Street, W1 pre-let to Gap, wascompleted on time and on budget and handed over to the tenant. Great WigmorePartnership (GWP) has submitted a planning application for the comprehensiveredevelopment of 79/97 Wigmore Street, W1 and good letting progress has beenmade at 180 Great Portland Street, W1 with rents achieved, significantly aheadof the valuer's March estimates. Our financial positionOur financial position is accompanied by graphics (see Appendix 3).To view the accompanying graphics please copy and paste the below link intoyour web browser: http://www.rns-pdf.londonstockexchange.com/rns/5674h_3-2007-11-13.pdf Financial resultsThe Group's financial performance for the period was sound with good portfoliovaluation and NAV per share results. The second quarter's NAV per share growthrate of 2.8% was below that of the first quarter of 8.1%, as market yieldexpansion impacted many of the Group's assets. The general market valuation'headwind' was mitigated by solid asset management, helping to grow rentalvalues and significant returns from the development business. Net asset value growthAdjusted NAV per share, increased 11.1% in the half year to 660 pence. AtSeptember 2007, the Group's net assets were £1,195.0 million up from £1,076.0million at March 2007. The main drivers behind the 66 pence per share increase in adjusted NAV pershare from March to September 2007, illustrated in Appendix 3, were: • significant valuation rises of 20 pence per share from properties under development; • investment portfolio valuation growth of 35 pence per share; • increases in valuation in the joint ventures including recent acquisitions of 15 pence per share; • the sale of Met Building which crystallised a loss of 2 pence per share; and • the payment of the final 2007 dividend of 7.55 pence in excess of adjusted earnings for the period of 5.4 pence reduced NAV by a net 2 pence per share. The valuation of the near-term development schemes incorporated in the NAV pershare at September 2007 includes around 45% of the expected surplus on theschemes when complete. Triple net asset value (NNNAV) grew to 663 pence pershare, up 11.8% from March 2007, principally due to the factors described above. Income statement and earnings per shareTotal rental and joint venture fee income increased by 12.5% to £24.3 millioncompared to the first half of last year. Gross rental income for the period was £19.6 million, a fall of £1.8 million or8.4% compared to the first half of last year. The level of rental income hasbeen influenced by good underlying organic growth but impacted by surrenderslinked to buildings such as the Wells & More development scheme and an injectionof assets into the GCP and GWP joint ventures, which reduced rental income butincreased joint venture profits. These factors are illustrated in Appendix 3. In total, rent reviews, lease renewals and new lettings (including theamortisation of lease incentives) added £3.1 million to rental income over thesame period last year. The estimated rental value of the portfolio grew by some9.0% in the first half due to the various improvements we are bringing to ourproperties and a supportive occupational market. The Group's joint venturesgenerated management fees of £2.7 million, up 440% from September 2006, whichwere boosted by transaction and development activity at GVP2 and GCP. Adjusted profit before tax at £10.4 million was £3.7 million or 55% higher thanlast year. This increase was driven by the rise in joint venture managementfees, profits from development management operations as well as higherunderlying profits from joint ventures, partly offset by increased interest andadministration charges. Development management profits were up by £2.8 million year on year as a resultof the level of income from the Tooley Street, SE1 scheme. Underlying profitsfrom joint ventures were £7.3 million, up £6.4 million on last year, mainly dueto the creation of GCP in April 2007, which has significantly increased the sizeof this part of our business. Administration costs increased to £7.2 million(2006: £6.1 million) primarily due to higher non-cash accounting charges for theGroup's share based incentive schemes, which increased by £0.8 million year onyear. Underlying finance costs (before derivative mark to market adjustments)increased by £5.2 million to £15.1 million as the result of higher net debt dueto investment in our development schemes, acquisitions made during the half yearand higher rates on the floating segment of the Group's credit facilities. Trends in adjusted PBT are set out in Appendix 3. The Group's underlying tax charge for the period was £0.7 million, giving aneffective rate of 7%, lower than the year to 31 March 2007 due to the propertyrental business being tax exempt as a result of REIT conversion in January 2007.The Group earns sizeable profits from development management and joint venturemanagement which are outside of the REIT tax exempt segment. Adjusted earnings per share for the period were 5.4 pence, 8% greater than lastyear driven by higher adjusted PBT, although the comparative period benefitedfrom some pre-REIT tax reliefs which were not available this year. Reported profit before tax of £130.7 million was 11.7% lower than the previousyear as a result of reduced portfolio revaluation gains and higher interestcharges. Basic EPS for the year was 72.2 pence, up 2.8% on the first half oflast year as a result of a reduced deferred tax charge this year. Financial effects of near-term development schemesThe near-term development and refurbishment schemes have progressed according toplan during the period, with £25.6 million (2006: £15.0 million) spent onschemes including 60 Great Portland Street, W1, Wells & More, W1, and BermondseyStreet, SE1. The valuation of the Group's development portfolio has increased by17.9% due to growth in estimated rental value in the period and the eliminationof some of the construction risk. By 2011, the near-term schemes are forecast to generate incremental rentalincome for the Group of £31.5 million. Some of this additional revenue will becaptured through higher profits from joint ventures, as several schemes are inthe GVP, GWP and GCP ownerships. This increase in rental income from thenear-term schemes is the equivalent of over 49.0% of the Group's current rentroll. Around £289 million of project costs are planned for the near-term schemesin the period to March 2011. Results of joint venturesThe scale of the joint venture business has increased dramatically compared tolast year following the creation and expansion of the Great Capital Partnership.At March 2007 13.2% of Group rent roll and 16.4% of net assets were in 50:50joint ventures, by September 2007 the comparable figures were 37.4% and 43.3%respectively. Our share of joint venture revenue increased to £8.9 million compared to £2.9million for the first half of last year as a result of the leasing activities at180 Great Portland Street, W1, Mount Royal, Oxford Street, W1 and 208/222 RegentStreet, W1. The Group's share of joint venture underlying profits (excludingrevaluation gains and profit on sales) grew to £7.3 million as a result of theaddition of GCP assets. These profits are after charging £2.7 million ofmanagement fees to the individual joint ventures. Financial resources and capital managementThe cash consumed by operations fell to £17.2 million compared to £23.4 millionlast year as a result of fewer on balance sheet property acquisitions during theperiod. Net debt increased to £617 million, up from £389 million at March 2007,due to the initial investment of £68 million in GCP, the REIT conversion chargeand subsequent acquisitions at Fetter Lane, EC4, Regent Street, W1 and JermynStreet, SW1. Gearing increased to around 52% at September 2007 from 36% in March2007 and interest cover fell slightly to 1.7 times. In July 2007 the Group's debt facilities were enhanced to support recentacquisitions and the growing development pipeline. A new £200 million five yearrevolving credit facility was arranged on more advantageous terms than thesmaller, shorter-term facility that it replaced. Following the sale of MetBuilding the Group has undrawn committed credit facilities in excess of £170million. The Group's weighted average interest rate for the half year was 6.11%, anincrease of 56 basis points compared to the year to 31 March 2007. The summerand autumn of 2007 has seen the credit markets suffer from reduced liquidity andconfidence, combined with higher short-term rates. These market factors haveincreased the Group's floating interest cost to 6.23% in the first half of theyear compared to 5.60% in the year to 31 March 2007. To further protect theGroup from future interest rate volatility we executed £90.0 million of fiveyear interest rate swaps and collars in September. Taking into account the saleof Met Building the proportion of our period end debt which was fixed or hedgedwas 75%. DividendThe Board has declared an interim dividend of 3.9 pence per share, an increaseof 4% over the first half of last year which will be paid on 3 January 2008. Ofthis interim dividend 0.8 pence per share is a REIT Property Income Distribution(PID) in respect of the Group's tax exempt property rental business. Furtherinformation on the tax treatment of dividends can be found in "Shareholders'information" and on the Group's website. OutlookWith property markets engulfed in negative sentiment and a challenging creditenvironment, both absolute and relative returns will be produced by those bestable to reposition their assets to drive rental growth. We believe this changingproperty environment plays to our relative strengths: • our properties are well located. 81% are in the West End, the majority of which is on or near Oxford Circus; • our office rents remain low at £32.60 per sq ft providing significant potential for growth; • our development programme appears well timed and should materially enhance Group returns; • our disciplined buying and selling is boosting our relative performance; and • our chosen occupational markets remain supportive, particularly the West End where structural under-supply remains the dominant feature. We will continue to monitor market conditions carefully and use the Group'sflexible financial resources to respond to emerging opportunities andchallenges. We believe that our focused operating approach and sector specialismwill underpin the long-term prospects of the Group. GROUP INCOME STATEMENTFor the six months ended 30 September 2007 Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 Audited Unaudited Unaudited £m Notes £m £m---------- -------------------------------------------------------------------------------------------------- 46.9 Rental income 2 21.6 21.1 1.6 Joint venture fee income 2.7 0.5---------- -------------------------------------------------------------------------------------------------- 48.5 Rental and joint venture fee income 24.3 21.6---------- ----------------------- 6.2 Service charge income 3.5 3.2 (7.9) Service charge expenses (4.2) (4.2)---------- ----------------------- (1.7) (0.7) (1.0) (2.3) Other property expenses (2.6) (0.4)---------- -------------------------------------------------------------------------------------------------- 44.5 Net rental and related income 21.0 20.2 (14.2) Administrative expenses (7.2) (6.1)---------- ----------------------- 20.4 Development management revenue 17.7 9.7 (15.1) Development management costs (13.4) (8.2)---------- ----------------------- 5.3 4.3 1.5---------- -------------------------------------------------------------------------------------------------- Operating profit before gains on investment property and 35.6 results of joint ventures 18.1 15.6 278.1 Gains from investment property 7 93.8 117.8 45.2 Share of results of joint ventures 9 33.7 25.1---------- -------------------------------------------------------------------------------------------------- 358.9 Operating profit before financing costs 145.6 158.5 0.3 Finance income 3 0.1 0.1 (22.0) Finance costs 4 (15.0) (10.3) (11.2) Premium on redemption of interest-bearing loans and borrowings - (0.2) 326.0 Profit before tax 130.7 148.1 56.8 Tax 5 (0.7) (34.4)========== ================================================================================================== 382.8 Profit for the period 130.0 113.7========== ================================================================================================== 235.7p Basic earnings per share 6 72.2p 70.2p========== ================================================================================================== 214.3p Diluted earnings per share 6 72.2p 64.1p========== ================================================================================================== 10.2p Adjusted earnings per share 6 5.4p 5.0p========== ================================================================================================== All results are derived from continuing operations. Total operating profit before gains on investment property Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 Audited Unaudited Unaudited £m Notes £m £m-------- -------------------------------------------------------------------------------------------------- 35.6 Operating profit before gains on investment 18.1 15.6 property and results of joint ventures 3.1 Share of profit of joint ventures 9 7.3 0.9-------- -------------------------------------------------------------------------------------------------- 38.7 Total operating profit before gains on investment property 25.4 16.5-------- -------------------------------------------------------------------------------------------------- GROUP BALANCE SHEETAt 30 September 2007 31 March 30 September 30 September 2007 2007 2006 Audited Unaudited Unaudited £m Notes £m £m-------- -------------------------------------------------------------------------------------------------- Non-current assets 1,314.3 Investment property 7 1,183.8 1,098.8 20.9 Development property, plant and equipment 8 24.0 18.7 176.0 Investment in joint ventures 9 517.8 156.2 - Pension asset 1.0 --------- -------------------------------------------------------------------------------------------------- 1,511.2 1,726.6 1,273.7-------- -------------------------------------------------------------------------------------------------- Current assets 22.2 Trade and other receivables 10 129.8 18.3 - Income tax receivable 0.1 - 0.8 Deferred tax 13 - - 4.2 Cash and cash equivalents 10.6 6.9-------- -------------------------------------------------------------------------------------------------- 27.2 140.5 25.2 -------- -------------------------------------------------------------------------------------------------- 1,538.4 Total assets 1,867.1 1,298.9-------- -------------------------------------------------------------------------------------------------- Current liabilities 30.7 Trade and other payables 11 36.2 27.1 28.2 Income tax payable - - 2.9 Interest-bearing loans and borrowings 12 - 3.0-------- -------------------------------------------------------------------------------------------------- 61.8 36.2 30.1-------- -------------------------------------------------------------------------------------------------- Non-current liabilities 390.4 Interest-bearing loans and borrowings 12 627.4 382.7 10.0 Obligations under finance leases 8.5 10.0 - Deferred tax - 116.9 0.2 Pension liability - 0.6-------- -------------------------------------------------------------------------------------------------- 400.6 635.9 510.2-------- -------------------------------------------------------------------------------------------------- 462.4 Total liabilities 672.1 540.3-------- -------------------------------------------------------------------------------------------------- 1,076.0 Net assets 1,195.0 758.6======== ================================================================================================== Equity 22.6 Share capital 14 22.6 20.4 68.2 Share premium 15 68.2 15.9 - Equity reserve - 8.8 0.5 Hedging reserve 16 0.2 (0.1) 16.4 Capital redemption reserve 16 16.4 16.4 1.5 Revaluation reserve 16 2.8 0.2 967.7 Retained earnings 16 1,084.7 698.4 (1.0) Investment in own shares 17 - (1.4)-------- -------------------------------------------------------------------------------------------------- 1,075.9 Equity shareholders'funds 1,194.9 758.6-------- -------------------------------------------------------------------------------------------------- 0.1 Minority interest 0.1 -======== ================================================================================================== 1,076.0 Total equity 1,195.0 758.6======== ================================================================================================== 594p Net assets per share 6 660p 464p======== ================================================================================================== 594p Adjusted net assets per share 6 660p 513p======== ================================================================================================== GROUP STATEMENT OF CASH FLOWSFor the six months ended 30 September 2007 Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 Audited Unaudited Unaudited £m Notes £m £m-------- -------------------------------------------------------------------------------------------------- Operating activities 358.9 Operating profit before financing costs 145.6 158.5 (319.4) Adjustments for non-cash items 18 (122.0) (140.4) (16.8) Increase in receivables (1.0) (11.5) 5.6 Increase / (decrease) in payables 3.2 (1.5) (216.3) Purchase and development of property (42.9) (108.5) (0.2) Purchase of fixed assets (0.1) - 132.1 Sale of properties - 80.0-------- -------------------------------------------------------------------------------------------------- (56.1) Cash consumed by operations (17.2) (23.4) 0.3 Interest received 0.1 0.1 (23.9) Interest paid (15.7) (10.4) (0.7) Tax paid - (0.2) - REIT conversion charge (28.3) --------- -------------------------------------------------------------------------------------------------- (80.4) Cash flows from operating activities (61.1) (33.9)-------- -------------------------------------------------------------------------------------------------- Investing Activities (6.9) Purchase of interest in joint ventures (138.8) (6.9)-------- -------------------------------------------------------------------------------------------------- (6.9) Cash flows from investing activities (138.8) (6.9)-------- -------------------------------------------------------------------------------------------------- Financing activities (43.1) Redemption of loans (2.9) (1.4) 90.0 Borrowings drawn 237.0 51.0 - Loans to joint venture (14.2) - 52.5 Issue of debenture - - (0.3) Purchase of derivatives - (0.3) 0.1 Issue of minority interest - - (18.0) Equity dividends paid (13.6) (11.9)-------- -------------------------------------------------------------------------------------------------- 81.2 Cash flows from financing activities 206.3 37.4-------- -------------------------------------------------------------------------------------------------- (6.1) Net Increase / (decrease) in cash and cash equivalents 6.4 (3.4) 10.3 Cash and cash equivalents at 1 April 4.2 10.3-------- -------------------------------------------------------------------------------------------------- 4.2 Cash and cash equivalents at balance sheet date 10.6 6.9======== ================================================================================================== GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the six months ended 30 September 2007 Year ended Six months to Six months to31 March 30 September 30 September 2007 2007 2006 Audited Unaudited Unaudited £m Notes £m £m-------- -------------------------------------------------------------------------------------------------------- 1.5 Revaluation of development properties 1.3 0.2 0.1 Deferred tax on development properties recognised directly in equity - - - Reversal of deferred tax provision on disposal of development property - 1.4 0.5 Fair value movement on derivatives net of deferred tax (0.3) (0.1) - Actuarial gains/(losses) on defined benefit scheme net of deferred tax 0.6 (0.2) 2.1 Net gain recognised directly in equity 1.6 1.3 382.8 Profit for the period 130.0 113.7-------- -------------------------------------------------------------------------------------------------------- 384.9 Total recognised income and expense for the period 131.6 115.0======== ======================================================================================================== GROUP RECONCILIATION OF OTHER MOVEMENTS IN EQUITYFor the six months ended 30 September 2007 Year ended Six months to Six months to31 March 30 September 30 September 2007 2007 2006 Audited Unaudited Unaudited £m Notes £m £m-------- -------------------------------------------------------------------------------------------------------- 654.7 Opening total equity 1,076.0 654.7 384.9 Total recognised income and expense for the period 131.6 115.0 53.7 Conversion of convertible bonds - 0.6 0.1 Minority interest - - (0.6) Deferred tax on convertible bonds - (0.2) 1.2 Employee Long-Term Incentive Plan and Share Matching Plan 1.0 0.4 (18.0) Dividends (13.6) (11.9)-------- -------------------------------------------------------------------------------------------------------- 1,076.0 Closing total equity 1,195.0 758.6======== ======================================================================================================== NOTES FORMING PART OF THE HALF YEAR REPORT 1 Basis of preparation The unaudited financial information contained in this report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The full financial statements for the year ended 31 March 2007 were prepared under IFRS and did not contain a statement under section 237(2) or (3) of the Companies Act 1985 and, together with an unqualified audit report in accordance with section 235 of the Companies Act 1985, have been delivered to the Registrar of Companies. The half year financial report has been prepared using accounting policies set out in the full financial statements for the year ended 31 March 2007, which are consistent with IFRS. 2 Rental income--------------------------------------------------------------------------------------------------------------------- Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- -------------------------------------------------------------------------------------------------------- 44.9 Gross rental income 19.6 21.4 2.1 Amortisation of capitalised lease incentives 2.0 (0.2) (0.1) Ground rents payable - (0.1)-------- -------------------------------------------------------------------------------------------------------- 46.9 21.6 21.1======== ======================================================================================================== 3 Finance income--------------------------------------------------------------------------------------------------------------------- Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- -------------------------------------------------------------------------------------------------------- 0.2 Interest on short-term deposits 0.1 0.1 0.1 Other - - -------- -------------------------------------------------------------------------------------------------------- 0.3 0.1 0.1======== ======================================================================================================== 4 Finance costs--------------------------------------------------------------------------------------------------------------------- Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- -------------------------------------------------------------------------------------------------------- 11.5 Interest on bank overdrafts and loans 11.8 4.4 7.4 Interest on debentures 4.1 3.8 3.6 Interest on convertible bonds - 2.0 0.1 Interest on loan notes - 0.1 0.6 Interest on obligations under finance leases 0.4 0.3 0.2 Other interest - 0.2-------- -------------------------------------------------------------------------------------------------------- 23.4 Gross finance costs 16.3 10.8 (1.5) Less: capitalised interest (1.2) (0.9)-------- -------------------------------------------------------------------------------------------------------- 21.9 15.1 9.9 0.1 Fair value movement on derivatives (0.1) 0.4-------- -------------------------------------------------------------------------------------------------------- 22.0 15.0 10.3======== ======================================================================================================== 5 Tax--------------------------------------------------------------------------------------------------------------------- Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- -------------------------------------------------------------------------------------------------------- Current tax 0.3 UK corporation tax - - 28.3 REIT conversion charge - - (0.1) Tax over provided in previous years - (0.1)-------- -------------------------------------------------------------------------------------------------------- 28.5 Total current tax - (0.1) (85.3) Deferred tax 0.7 34.5-------- -------------------------------------------------------------------------------------------------------- (56.8) Tax charge/(credit) for the period 0.7 34.4======== ======================================================================================================== The difference between the standard rate of tax and the effective rate of tax arises from the items set out below:--------------------------------------------------------------------------------------------------------------------- Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- -------------------------------------------------------------------------------------------------------- 326.0 Profit before tax 130.7 148.1-------- -------------------------------------------------------------------------------------------------------- 97.8 Tax on profit at standard rate of 30% 39.2 44.4 0.3 Expenses not deductible for tax purposes 0.1 0.2 (0.8) Accelerated capital allowances - (1.3) (5.2) Sale of investment properties - (3.6) (0.1) Previous years' corporation tax - (0.1) 28.3 REIT conversion charge - - (135.4) Deferred tax released on conversion to REIT status - - (0.9) Ring-fenced rental income and gains (38.8) - (0.4) Receipts taxed as chargeable gains or taxed in prior year - - 1.9 Accounting losses arising in the period not relievable against current tax 0.4 - (41.5) Property revaluations - (4.7) (0.3) Accounting profits arising in the period not taxable - (0.1) (0.5) Other (0.2) (0.4)-------- -------------------------------------------------------------------------------------------------------- (56.8) Tax charge for the period 0.7 34.4======== ======================================================================================================== During the period £0.1 million (2006: £1.5 million) of tax was charged directly to equity. This charge related to deferred tax in respect of derivatives and pension liabilities. The Group became a REIT on 1 January 2007, and as such is broadly exempt from corporation tax in respect of its rental profits and chargeable gains relating to its property rental business. The Group is otherwise subject to corporationtax. 6 Earnings and net assets per share Earnings and net assets per share are calculated in accordance with the guidance issued in January 2006 by the European Public Real Estate Association (EPRA). Weighted average number of ordinary shares--------------------------------------------------------------------------------------------------------------------- Year to Six months to Six months to 31 March 30 September 30 September 2007 2007 2006No. of shares No. of shares No. of shares------------- --------------------------------------------------------------------------------------------------- 163,181,906 Issued ordinary share capital at 1 April 181,019,809 163,181,906 346,843 Conversion of convertible bonds 1,621 53,354 (1,115,628) Investment in own shares (865,147) (1,115,628)------------- --------------------------------------------------------------------------------------------------- 162,413,121 Weighted average number of ordinary shares 180,156,283 162,119,632------------- --------------------------------------------------------------------------------------------------- 17,534,658 Effect of conversion of convertible bonds - 17,868,140------------- --------------------------------------------------------------------------------------------------- 179,947,779 Diluted weighted average number of ordinary shares 180,156,283 179,987,772------------- --------------------------------------------------------------------------------------------------- Basic, diluted and adjusted earnings per share--------------------------------------------------------------------------------------------------------------------- Year to Six months to Six months to Six months to Six months to 31 March 30 September 30 September 30 September 30 September 2007 2007 2007 2006 2006 Earnings Profit Earnings Profit Earningsper share After tax per share After tax per share pence £m pence £m pence ========= ======================================================================================================= 235.7 Basic 130.0 72.2 113.7 70.2 (21.4) Effect of convertible bonds - - 1.6 (6.1)--------- ------------------------------------------------------------------------------------------------------- 214.3 Diluted 130.0 72.2 115.3 64.1 (155.0) Gains from investment property (93.8) (52.1) (91.9) (51.0) (23.4) Gains from joint venture investment property (26.4) (14.6) (15.8) (8.8) 15.8 REIT conversion charge and associated costs - - - - (42.3) Reversal of deferred tax on REIT conversion - - - - - Movement in fair value of derivatives (0.1) (0.1) 0.4 0.3 5.1 Premium on redemption of loans - - 0.1 - (4.3) Deferred tax on accelerated capital allowances - - 0.8 0.4--------- ------------------------------------------------------------------------------------------------------- 10.2 Adjusted 9.7 5.4 8.9 5.0--------- ------------------------------------------------------------------------------------------------------- Net assets per share------------------------------------------------------------------------------------------------------------------------31 March 2007 30 September 30 September 30 September 30 September 30 September 30 September Net 2007 2007 2007 2006 2006 2006 assets Net No. of Net Net No. of Net assets share Assets shares per share assets shares per share Pence £m million Pence £m million Pence======== ============================================================================================================== 594 Basic 1,195.0 181.0 660 758.6 163.4 464 - Convertible bonds - - - 52.7 17.6 (16)-------- -------------------------------------------------------------------------------------------------------------- 594 Diluted 1,195.0 181.0 660 811.3 181.0 448 (1) Fair value of financial-------- -------------------------------------------------------------------------------------------------------------- liabilities net of tax 4.9 3 (12.5) (7)-------- -------------------------------------------------------------------------------------------------------------- 593 Diluted triple net assets 1,199.9 663 798.8 441 Fair value of financial 1 liabilities net of tax (4.9) (3) 12.5 7 - Fair value of derivatives (0.5) - 0.2 - - Deferred tax on capital - - 8.5 5 allowances - Deferred tax on revaluation gains - - 108.1 60-------- -------------------------------------------------------------------------------------------------------------- 594 Adjusted net assets 1,194.5 660 928.1 513======== ============================================================================================================== 7 Investment property Investment property---------------------------------------------------------------------------------------- Freehold Leasehold Total £m £m £m----------------------------------------------------------------------------------------Book value at 1 April 2007 906.9 275.6 1,182.5Acquisitions 16.0 - 16.0Costs capitalised 9.1 - 9.1Disposals (209.4) (61.2) (270.6)Net valuation gain on investment property 52.1 10.5 62.6---------------------------------------------------------------------------------------- Book value at 30 September 2007 774.7 224.9 999.6========================================================================================Investment property - development---------------------------------------------------------------------------------------- Freehold Leasehold Total £m £m £m----------------------------------------------------------------------------------------Book value at 1 April 2007 131.8 - 131.8Costs capitalised 17.8 - 17.8Interest capitalised 0.5 - 0.5Net valuation gain on investment property 34.1 - 34.1----------------------------------------------------------------------------------------Book value at 30 September 2007 184.2 - 184.2========================================================================================Book value of total investment property at 30 September 2007 958.9 224.9 1,183.8======================================================================================== Book value of total 30 September 30 September 2007 2006 £m £m----------------------------------------------------------------------------------------Net valuation gain on investment property 96.7 105.9(Loss)/profit on sale of investment properties (2.9) 11.9----------------------------------------------------------------------------------------Gains from investment property 93.8 117.8======================================================================================== The investment and development properties (note 8) were valued on the basis ofMarket Value by CB Richard Ellis, as at 30 September 2007 in accordance with theAppraisal and Valuation Standards of the Royal Institution of CharteredSurveyors. The book value of investment properties includes £8.5 million (2006:£10.0 million) in respect of the present value of future ground rents. At 30 September 2007, properties with a carrying value of £292.9 million (2006:£239.0 million) were secured under first mortgage debenture stock (see note 12). 8 Development property, plant and equipment---------------------------------------------------------------------------------------- Leasehold Fixtures and Development improvements fittings property Total £m £m £m £m----------------------------------------------------------------------------------------Cost or valuationAt 1 April 2007 2.0 0.7 18.7 21.4Costs capitalised - 0.1 1.4 1.5Interest capitalised - - 0.5 0.5Net valuation gain taken to equity - - 1.3 1.3----------------------------------------------------------------------------------------At 30 September 2007 2.0 0.8 21.9 24.7========================================================================================DepreciationAt 1 April 2007 0.3 0.2 - 0.5Charge for the period 0.1 0.1 - 0.2----------------------------------------------------------------------------------------At 30 September 2007 0.4 0.3 - 0.7----------------------------------------------------------------------------------------Carrying amount at 31 March 2007 1.7 0.5 18.7 20.9========================================================================================Carrying amount at 30 September 2007 1.6 0.5 21.9 24.0======================================================================================== The historical cost of development properties at 30 September 2007 was £19.1 million (2006: £16.3 million). The cumulative interest capitalised in development properties was £1.1 million (2006: £0.2 million). 9 Investment in joint ventures---------------------------------------------------------------------------------------- Equity Loans Total £m £m £m----------------------------------------------------------------------------------------At 1 April 2007 166.5 9.5 176.0Acquisitions 300.4 14.2 314.6Share of profits of joint ventures 7.3 - 7.3Revaluation of joint ventures 26.4 - 26.4Distributions (6.5) - (6.5)----------------------------------------------------------------------------------------At 30 September 2007 494.1 23.7 517.8======================================================================================== The investments in joint ventures comprise the following:===================================================================================================31 March 30 September 30 September 2007 Country 2007 2006--------- --------------------------------------------------------------------------------------- - The Great Capital Partnership United Kingdom 50% - 50% The Great Victoria Partnership United Kingdom 50% 50% 50% The Great Victoria Partnership (No. 2) United Kingdom 50% 50% 50% The Great Wigmore Partnership United Kingdom 50% 50%--------- --------------------------------------------------------------------------------------- On 25 April 2007 the Group entered into a new joint venture with Capital & Counties Limited managed on a similar basis to the existing joint ventures. Included in the financial statements are the following items that represent the Group's share in the assets and liabilities, revenues and expenses for the joint ventures. ----------------------------------------------------------------------------------------------------------------------31 March 30 September 30 September 2007 Great Great Great 2007 2006 Total Capital Victoria Wigmore Total Total £m Partnership Partnerships Partnership £m £m-------- ---------------------------------------------------------------------------------------------------------- 212.6 Investment property 345.2 139.3 88.4 572.9 201.1 14.3 Current assets 6.7 9.9 0.9 17.5 10.8 (46.0) Bank loans - (46.0) - (46.0) (49.4) (14.4) Current liabilities (20.0) (14.3) (0.7) (35.0) (15.8) - Finance leases (15.3) - - (15.3) --------- ---------------------------------------------------------------------------------------------------------- 166.5 Net assets 316.6 88.9 88.6 494.1 146.7======== =========================================================================================================== 5.6 Net rental income 4.9 2.8 1.2 8.9 2.9 (2.5) Expenses (0.4) (0.9) (0.3) (1.6) (2.0)-------- ------- ------- ------- ------- ------- 3.1 Share of profit of joint ventures 4.5 1.9 0.9 7.3 0.9 38.4 Revaluation of investment property 13.1 9.9 3.4 26.4 24.2 3.7 Profit on sale of investment property - - - - --------- ---------------------------------------------------------------------------------------------------------- 45.2 Net profit 17.6 11.8 4.3 33.7 25.1======== ========================================================================================================== The investment properties include £15.3 million (2006: £nil) in respect of the present value of future ground rents. During the period the Group received a management fee of £2.7 million (2006: £0.5 million). 10 Trade and other receivables------------------------------------------------------------------------------------------------------31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- ------------------------------------------------------------------------------------------ 3.9 Trade receivables 6.6 2.3 1.1 Prepayments and accrued income 1.4 1.1 11.4 Amounts receivable on development management agreements 10.5 10.0 4.9 Other trade receivables 110.8 4.9 0.9 Derivatives 0.5 --------- ------------------------------------------------------------------------------------------ 22.2 129.8 18.3======== ==========================================================================================Included in other trade receivables is £107.0 million receivable in respect of the sale of Met Building, W1. 11 Trade and other payables------------------------------------------------------------------------------------------------------31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- ------------------------------------------------------------------------------------------ 12.7 Trade payables 20.5 10.1 18.0 Non-trade payables and accrued expenses 15.7 17.0-------- ------------------------------------------------------------------------------------------ 30.7 36.2 27.1======== ========================================================================================== 12 Interest-bearing loans and borrowings------------------------------------------------------------------------------------------------------31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- ------------------------------------------------------------------------------------------ Non-current liabilities Secured - £32.1 million 71/4% debenture stock 2027 - 30.9 144.4 £142.9 million 55/8% debenture stock 2029 144.4 91.9 Unsecured - 51/4% convertible bonds 2008 - 52.7 246.0 Bank loans 483.0 207.0 - Fair value of derivatives - 0.2-------- ------------------------------------------------------------------------------------------ 390.4 627.4 382.7======== ========================================================================================== Current liabilities 2.9 Unsecured loan notes - 3.0-------- ------------------------------------------------------------------------------------------ 393.3 627.4 385.7======== ========================================================================================== The Group has two floating rate revolving credit facilities of £300 million and £200 million each. The £300 million facility is unsecured, attracts a floating rate of 0.525% above LIBOR and expires in 2012. The £200 million facility is unsecured, attracts a floating rate of 0.50% above LIBOR and expires in 2012. The floating rate bank facilities are hedged using the following interest rate swaps, caps and collars:------------------------------------------------------------------------------------------------------ Interest rate Maturity date------------------------------------------------------------------------------------------------------Interest rate swaps£40 million 5.115% 2011£20 million 5.648% 2012£20 million 5.655% 2012£20 million 5.650% 2012£20 million 5.580% 2012£20 million 5.505% 2012£15 million 5.538% 2012£10 million 5.668% 2012£10 million 5.660% 2012£10 million 5.590% 2012Interest rate caps £40 million 6.000% 2011Interest rate collars £25 million 4.68%-6.5% 2012------------------------------------------------------------------------------------------------------ All interest-bearing loans and borrowings are in Sterling. At 30 September 2007 the Group had available £22 million (2006: £208 million) of undrawn committed bank facilities. Following completion of the sale of Met Building, W1 and the agreement of a new bank facility the Group had undrawn committed bank facilitiesof £178 million. Maturity of financial liabilities The maturity profile of the financial liabilities of the Group at 30 September 2007 was as follows:------------------------------------------------------------------------------------------------------31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- ------------------------------------------------------------------------------------------ 2.9 In one year or less, or on demand - 3.0 - In more than one year but not more than two years - 52.7 246.0 In more than four years but not more than five years 483.0 207.2 144.4 In more than five years 144.4 122.8-------- ------------------------------------------------------------------------------------------ 393.3 627.4 385.7======== ========================================================================================== Fair value of financial liabilities------------------------------------------------------------------------------------------------------31 March 31 March 30 September 30 September 30 September 30 September 2007 2007 2007 2007 2006 2006 Book Fair Book Fair Book Fair value value value value value value £m £m £m £m £m £m------------------- ------------------------------------------------------------------------------ 2.9 2.9 Current liabilities - - 3.0 3.0 390.4 392.1 Non-current liabilities 627.4 622.5 382.5 454.0 (0.9) (0.9) Derivatives (0.5) (0.5) 0.2 0.2------------------- ------------------------------------------------------------------------------ 392.4 394.1 626.9 622.0 385.7 457.2=================== ============================================================================== The fair values of the Group's cash and short-term deposits are not materially different from those at which they are carried in the financial statements. Market values have been used to determine the fair value of listed long-term borrowings and interest rate swaps have been valued by reference to market rates of interest. The market values of all other items have been calculated by discounting the expected future cash flows at prevailing interest rates. 13 Deferred tax------------------------------------------------------------------------------------------------------ At Recognised At 1 April Recognised directy in 30 September 2007 in income equity 2007 £m £m £m £m------------------------------------------------------------------------------------------------------Deferred tax liabilitiesDerivatives 0.2 - (0.2) -Deferred tax assetsLong-Term Incentive Plan and Share Matching Plan (0.9) 0.9 - -Pension liabilities (0.1) (0.2) 0.3 -------------------------------------------------------------------------------------------------------Net deferred tax(asset)/provision (0.8) 0.7 0.1 -====================================================================================================== A deferred tax asset of £2.5 million, mainly relating to tax losses carried forward at 30 September 2007, was not recognised because it is uncertain whether future taxable profits against which these losses can be offset will arise. 14 Share capital------------------------------------------------------------------------------------------------------------------------ Year to Year to Six months to Six months to Six months to Six months to 31 March 31 March 30 September 30 September 30 September 30 September 2007 2007 2007 2007 2006 2006 Number £m Number £m Number £m------------------------------------------------------------------------------------------------------------------------ Ordinary shares of 121/2 pence each550,100,752 68.8 Authorised 550,100,752 68.8 550,100,752 68.8------------------------------------------------------------------------------------------------------------------------ Allotted, called up and fully paid163,181,906 20.4 At the beginning of the period 181,019,809 22.6 163,181,906 20.417,837,903 2.2 Conversion of convertible bonds 3,225 - 250,966 -------------------------------------------------------------------------------------------------------------------------181,019,809 22.6 At the end of the period 181,023,034 22.6 163,432,872 20.4======================================================================================================================== 15 Share premium------------------------------------------------------------------------------------------------------ Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- ------------------------------------------------------------------------------------------ 15.1 At the beginning of the period 68.2 15.1 53.1 Conversion of convertible bonds - 0.8-------- ------------------------------------------------------------------------------------------ 68.2 At the end of the period 68.2 15.9======== ========================================================================================== 16 Reserves----------------------------------------------------------------------------------------------------------- Capital Hedging redemption Revaluation Retained Reserve reserve reserve earnings £m £m £m £m-----------------------------------------------------------------------------------------------------------At 1 April 2007 0.5 16.4 1.5 967.7Profit for the period - - - 130.0Actuarial gains on defined benefit schemes - - - 0.9Deferred tax on actuarial gains on defined benefit schemes - - - (0.3)Net valuation gain taken to equity - - 1.3 -Fair value movement on derivatives (0.5) - - -Deferred tax on fair value movement on derivatives 0.2 - - -Dividends to shareholders - - - (13.6)-----------------------------------------------------------------------------------------------------------At 30 September 2007 0.2 16.4 2.8 1,084.7=========================================================================================================== 17 Investment in own shares------------------------------------------------------------------------------------------------------ Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- ------------------------------------------------------------------------------------------ 1.8 At the beginning of the period 1.0 1.8 (1.2) Employee Long-Term Incentive Plan and Share Matching Plan charge (1.0) (0.4) 0.4 Transfer to retained earnings - --------- ------------------------------------------------------------------------------------------ 1.0 At the end of the period - 1.4======== ========================================================================================== The investment in the Company's own shares is held at cost and comprises 573,871shares held by the Great Portland Estates plc LTIP Employee Share Trust whichwill vest in certain senior employees of the Group if performance conditions aremet. 18 Adjustment for non-cash movements in the cash flow statement------------------------------------------------------------------------------------------------------ Year to Six months to Six months to31 March 30 September 30 September 2007 2007 2006 £m £m £m-------- ------------------------------------------------------------------------------------------ (278.1) Gains from investment properties (93.8) (117.8) 1.2 Employee Long-Term Incentive Plan charge 1.0 0.4 0.2 Capitalisation of lease incentives (2.0) 0.2 (42.7) Share of profit on joint ventures (27.2) (23.2)-------- ------------------------------------------------------------------------------------------ (319.4) Adjustment for non-cash items (122.0) (140.4)======== ========================================================================================== 19 Dividends------------------------------------------------------------------------------------------------------The proposed interim dividend of 3.9 pence per share (2006: 3.75 pence per share) was approved by the Board on 13 November 2007 and is payable on 3 January 2008 to shareholders on the register on 23 November 2007. The dividend is not recognised as a liability in the half year report. The 2007 final dividend of£13.6 million was paid on 11 July 2007 and is included within the Group Reconciliation of Other Movements in Equity. Directors' responsibility statement We confirm that to the best of our knowledge: (a) the condensed set of financial statements has been prepared in accordance with IAS 34; (b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and (c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). By the order of the Board Toby Courtauld Timon DrakesmithChief Executive Finance Director 13 November 2007 13 November 2007 Independent review report to Great Portland Estates plc IntroductionWe have been engaged by the Company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises the Group income statement, the Group balancesheet, the Group statement of cash flows, the Group statement of recognisedincome and expense, the Group reconciliation of other movements in equity andrelated notes 1 to 19. We have read the other information contained in thehalf-yearly financial report and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedset of financial statements. This report is made solely to the Company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the Company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company, for our review work, for thisreport, or for the conclusions we have formed. Directors' responsibilitiesThe half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting," as adopted by the European Union. Our responsibilityOur responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of reviewWe conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. ConclusionBased on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half yearly report for the six months ended 30 September 2007 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. Deloitte & Touche LLPChartered Accountants and Registered AuditorLondon, UK 13 November 2007 GLOSSARY-------------------------------------------------------------------------------- Adjusted earnings per shareEarnings per share adjusted to exclude non-recurring items, profits or losses onsales of investment properties' property revaluations and deferred tax oncapital allowances and property revaluations on a diluted basis. Adjusted net assets per shareNAV adjusted to exclude deferred tax on capital allowances and propertyrevaluations on a diluted basis. Diluted figuresReported amounts adjusted to include the effects of potential shares issuableunder the convertible bond. Earnings per share (EPS)Profit after tax divided by the weighted average number of ordinary shares inissue. EPRA adjustmentsStandard calculation methods for adjusted EPS and adjusted NAV as set out by theEuropean Public Real Estate Association (EPRA) in their January 2006 BestPractice and Policy Recommendations. Estimated rental value (ERV)The market rental value of lettable space as estimated by the Company's valuersat each balance sheet date. F&BSFinance and business services sector. IPDThe Investment Property Databank Limited (IPD) is a company that produces anindependent benchmark of property returns. IPD central LondonAn index, compiled by IPD, of the central and inner London properties in theirmonthly and quarterly valued universes. Like-for-like portfolioProperties that have been held for the whole of the period of account. Market valueThe amount as estimated by the Company's valuers for which a property shouldexchange on the date of valuation between a willing buyer and a willing sellerin an arm's length transaction after proper marketing wherein the parties hadeach acted knowledgeably, prudently and without compulsion. In line with marketpractice, values are stated net of purchasers' costs. Net assets per share or net asset value (NAV)Equity shareholders' funds divided by the number of ordinary shares at thebalance sheet date. Net gearingTotal borrowings less short-term deposits and cash as a percentage of adjustedequity shareholders' funds. Net initial yieldAnnual net rents on investment properties as a percentage of the investmentproperty valuation having added notional purchasers' costs. Portfolio internal rate of return (IRR)The rate of return that if used as a discount rate and applied to the projectedcash flows from the portfolio would result in a net present value of zero. REITUK Real Estate Investment Trust. Rent rollThe annual contracted rental income. Return on capital employed (ROCE)Return on capital employed is measured as profit before financing costs plusrevaluation surplus on development property divided by the opening grosscapital. Return on shareholders' equityThe growth in the adjusted diluted net assets per share plus dividends per sharefor the period expressed as a percentage of the adjusted net assets per share atthe beginning of the period. Reversionary or under-rentedThe percentage by which ERV exceeds rents passing, together with the estimatedrental value of vacant space. Reversionary yieldThe anticipated yield, which the initial yield will rise to once the rentreaches the ERV. Total property return (TPR)Capital growth in the portfolio plus net rental income derived from holdingthese properties plus profit on sale of disposals expressed as a percentagereturn on the period's opening value. Total shareholder return (TSR)The growth in the ordinary share price as quoted on the London Stock Exchangeplus dividends per share received for the period expressed as a percentage ofthe share price at the beginning of the period. Triple net asset value (NNNAV)NAV adjusted to include the fair value of the Group's financial liabilities on adiluted basis. True equivalent yieldThe constant capitalisation rate which, if applied to all cash flows from aninvestment property, including current rent, reversions to current market rentand such items as voids and expenditures, equates to the market value havingtaken into account notional purchasers' costs. Assumes rent is receivedquarterly in advance. VoidsThe element of a property which is unoccupied but available for letting, usuallyexpressed as the ERV of the void space divided by the existing rent roll plusthe ERV of the void space. Weighted average cost of capital (WACC)The weighted average pre-tax cost of the Group's debt and the notional cost ofthe Group's equity used as a benchmark to assess investment returns. Weighted average unexpired lease term (WAULT)The weighted average unexpired lease term expressed in years. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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