28th Sep 2007 07:03
Public Service Properties Inv Ltd28 September 2007 28 September 2007 Public Service Properties Investments Limited ("PSPI", or "the Company") Interim Results for the Six Months to 30 June 2007 Public Service Properties Investments Limited (AIM: PSPI), the specialistEuropean real estate investment and financing company, announces interim resultsfor the six months ended 30 June 2007. Highlights: • Successful IPO in March raised £31 million (net) of new capital • Net gain from fair value adjustments on investment properties £9.8 million (2006: £6.8 million) • Adjusted earnings1 at £1.9 million (2006: £1.3 million) • Net assets per share as at 30 June 2007 was 159.5p (2006: 135.0p) • Interim dividend of 2p per share.2 Post period events • Acquisition of Stonelea Healthcare Limited - a portfolio of three purpose built care homes in the north of England at an aggregate purchase price of £24 million • Due diligence nearing completion on a number of potential acquisition opportunities in Germany Commenting on the results, Chairman Patrick Hall said, "Our results reflect animprovement in the capital value of our UK portfolio, as well as strong growthin rental income arising from the annual retail price indexation on all of ourUK leases. The Board has carefully reviewed the current conditions of theproperty and credit markets and concluded that these have not adversely affectedthe strategy outlined at the time of the successful IPO. The Company remainswell placed to pursue value enhancing opportunities. 1. Net profit attributable to shareholders adjusted for fair value gains on investment properties, deferred taxation on fair value gains and professional fees and deferred taxation directly attributable to the Company's AIM flotation. 2. Based on a record date of 12 October 2007 and a payment date of 26 October 2007 Dr D Srinivas Tim Worlledge Rachel DrysdaleRalph Beney Jeremy Ellis Simon HudsonRichard Borg Chris Clarke RP&C International Evolution Securities Limited Tavistock CommunicationsTel: 020 7766 7000 Tel: 020 7071 4300 Tel: 020 7920 3150 Chairman's Statement I am pleased to report your Company's financial results for the six month periodended 30 June 2007, which covers the Company's first trading period followingthe admission of its shares to the AIM market of the London Stock Exchange on 26March 2007. Financial Review The Company's consolidated operating profit, including fair value adjustments toinvestment properties, for the period ended 30 June 2007 was £14.3 millioncompared to £11.7 million for the six months ended 30th June 2006. Our resultsreflect an improvement in the capital value of our UK investment propertyportfolio, as well as strong growth in rental income arising from annual retailprice indexation on all of our UK leases. Your Company's profit after tax for the first 6 months of the year totalled £5.3million (2006: £6.1 million) after charges of approximately £3.5 million inrespect of professional fees and deferred taxation directly attributable to theCompany's AIM flotation. The profit after adjustment for the impact of certainitems (as referred to in note 5) totals £1.9m for the first six months of theyear (2006: £1.3m) giving an adjusted basic and fully diluted Earnings Per Shareof £0.03 (2006: £0.03) The Company's gross assets at 30 June 2007 were £228.2 million compared to£180.0 million at 30 June 2006. Shareholders' equity increased to £106.5 millionfrom £59.6 million as at the same date. The net asset value per share at 30 June 2007, pre and post the provision fordeferred taxation on fair value gains on investment properties and businesscombinations, were 192.4p and 159.5p respectively. Operational Review The Company's initial public offering ("IPO") raised £31 million, net ofexpenses, from institutional investors in the UK and Continental Europe. Thesefunds are allowing the Company to expand its property portfolio by acquiringGerman care homes and, on an opportunistic basis, care homes in the UK where theCompany already owns a significant portfolio of assets. The Company completed the acquisition of three purpose-built care homes in thenorth of England on 4 September at an aggregate purchase price of £24 million.The Company is completing due diligence on a number of additional homes to beacquired in Germany. As a result of the continued positive development of the Company, I am delightedto report that the Board of Directors has approved an interim dividend toshareholders in the amount of 2p per share, such dividend to be paid on 26October 2007 to shareholders of record on 12 October 2007. I refer you to the Asset Manager's Review for further details of the Company'sperformance and development. The Board has carefully reviewed the current conditions of the property andcredit markets and concluded that these have not adversely affected the strategyoutlined at the time of the successful IPO. The Company remains well placed topursue value enhancing opportunities. Patrick HallChairman26 September 2007 Asset Manager's Review Business Outlook Financial market conditions, particularly since the end of the second quarter,have been volatile resulting in a squeeze on credit for certain sectors. We arepleased to report that the quality of the Company's assets, the predictabilityof underlying cash flow, and the Company's conservative levels of debt have leftit well positioned. Notwithstanding volatility in other parts of the creditmarket, the Company is able to continue to access capital on an attractive basisand to execute its acquisition strategy. We expect the Company's existing investment portfolio to perform well for therest of 2007, reflecting greater cash flow from increased rents, despite adverseindications from other parts of the commercial property market. The Company's UKleases are subject to indexation based on changes in the Retail Price Index("RPI"). Between December 2006 and May 2007, when 90% of the UK leases, byvalue, were reviewed, the Company obtained a weighted average rental increase of4.3% p.a. In September, the Company purchased the shares of Stonelea Healthcare Limited("Stonelea"). This acquisition comprised three care homes located in CountyDurham and added 11.4% to the Company's existing bed capacity in the UK. Thehomes were all constructed within the last 8 years and were all rated Grade 1,the highest grade, during a recent grading by quality of all care homes inCounty Durham. The acquisition was funded almost entirely by senior debt crosscollateralised by certain other assets owned by the Group. After theacquisition, the Company's overall level of debt remains conservative with adebt to equity ratio of only 0.88:1. In addition, the Company has cash availablefor investment of circa £29 million and a line of credit available from one ofits senior lenders. The Stonelea assets have been leased for 35 years, increasing annually byreference to the RPI, with a minimum uplift of 2.5% per annum. The lessee is amember of the European Care Group, which continues to develop as one of theleading operators in the UK. The 2007 Directory of Major Providers of Long TermCare (twentieth edition), produced by Laing & Buisson, indicates that EuropeanCare has moved up from the 20th largest group in 2006, by reference to number ofbeds operated in the UK, to 7th in 2007. The Company enjoys an excellentbusiness relationship with European Care which is increasing its focus on higherlevels of specialist care and further expanding its management team. Considerable effort was expended during the second quarter of 2007 reviewing theproposed changes to the Federal Tax rules in Germany, which are scheduled forintroduction in January 2008. Based on our review and on outside advicereceived, we are confident that the Company will be able to invest on the basiscommunicated to investors earlier this year. In this connection, the Company is completing due diligence in respect of thefirst acquisitions of care home assets in Germany. The pipeline of target assetswill be acquired at an average gross yield of approximately 8% on the purchaseprice. The homes will be leased for at least 20 years to multiple operators ofgood standing The Company's investment programme for the remainder of 2007 and for 2008 islikely to focus on the acquisition of care homes in Germany, both as singleassets and, potentially, as portfolio transactions. In the UK, we will continue to pursue acquisitions, the development ofadditional bed capacity at existing locations and other opportunities. We alsointend to carefully review various refinancing options with the Group's seniorlenders. Financial Review The Company's underlying cash rental income increased by 2.0% (from £4.8m to£4.9m) for the six months ended 30 June 2007 compared to the same period in2006. Cash rental income in respect of the UK investment properties increased by4.2% whilst cash income on the Swiss and US investment properties remainedrelatively flat. However, due to the strength of sterling against both the SwissFranc and the US dollar, rental income on these properties showed a decline of7.5% in sterling terms, which will be offset by lower interest cost, in sterlingterms, on the local currency borrowings. Post acquisition of Stonelea 88% ofrental income is derived from UK operations compared to 8% from the US and 4%from Switzerland. Net gains from fair value adjustments to the Company's investment propertiesincreased to £9.8 million for the six months ended 30 June 2007 from £6.9million for the comparable period in 2006. These gains primarily reflect areduction in the capitalisation rate applied in valuing the Company's UKinvestment properties, which represented 84% of the Company's total investmentproperty portfolio at 30 June 2007 from 6.25% to 6.00%, as well as rentalincreases during the period. We believe that there may be further yieldcompression (i.e. a further lowering of the capitalisation rate) in respect ofthe UK portfolio, if there is no material increase in long term interest ratesover the medium term. The valuations for investment properties in the US and Switzerland remainedunchanged in their local currencies at 30 June 2007 compared to 31 December2006. We do not expect any significant change in yields in the short term forthese assets Administrative expenses increased to £2.4 million for the six months ended 30June 2007 from £1.9 million for the comparable period in 2006. Administrativecharges for 2007 include £1.4 million of fees relating to the Company's IPOwhich was completed in March. Finance costs have been reduced to £3.3 million during the first six months of2007 from £3.4 million during the comparable period in 2006, primarily as aresult of amortisation of senior debt. Interest expense should decline furtheron a like for like basis as a result of repaying £3.8 million of subordinateddebt in July 2007. In addition, the Company recently refinanced £39.0 million ofsenior debt which will result in further interest savings as well as cash flowbenefits by switching to a five-year, interest only facility. The majority ofthe Group's borrowings are fixed rates or hedged with interest rate swaps Income tax expense increased to £5.7 million in 2007 from £2.2 million in 2006.The majority of this expense involves deferred taxation associated with fairvalue gains on investment properties and approximately £2.0m as an adjustment todeferred taxation following the IPO. The Company's long term assets and total assets increased to £189.5 million and£228.2 million at 30 June 2007 from £170.9 million and £180.8 million,respectively, as at 30 June 2006. The increases primarily reflect fair valuegains on the UK portfolio and net cash received as a result of the IPO. Shareholders' equity increased to £106.5 million at 30 June 2007 from £59.6million at 30 June 2006. Excluding the net capital raised in March 2007,shareholders' equity increased by 28%. In addition to an increase in retainedearnings, the Group recognised an improvement in the fair value hedging reservefrom £0.4 million at 30 June 2006 to £2.3 million at 30 June 2007. This increasereflects a mark to market valuation of interest rate swaps associated withsenior lending on the Company's investment properties in the UK. Against thisimprovement, the Group recognised a larger deficit in the foreign currencytranslation reserve from £1.2 million at 30 June 2006 to £1.3 million at 30 June2007, reflecting adverse foreign currency movements on the carrying value of theCompany's investments in the US and Switzerland. The Company's overall exposure to foreign currency risk remains modest in thecontext of the consolidated position. However, the Company will continue tomonitor exposure to foreign currency on an on-going basis. The Company's short and long term borrowings at 30 June 2007 were approximately£6.9 million and £86.9 million, respectively, reflecting a total debt to equityratio of approximately 0.88:1 compared to 1.71:1 at 30 June 2006. The reductionin debt to equity ratio primarily results from the capital raised in the IPO.Post acquisition of Stonelea, the current debt to equity ratio is approximately1.07:1 The Board will continue to monitor the overall debt to equity ratio asthe Group invests in new assets in Germany and the UK. The Company's debt tomarket value of its investment portfolio was 56.4% at 30 June 2007 (2006:68.4%). This value is considered conservative given the strength of theunderlying cash flows and asset quality. It will allow the Company to increaseleverage for investment in new acquisitions, whilst still retaining an overallconservative approach to aggregate debt to market value. The Company's net book value is stated at approximately £106 million compared toapproximately £100 million at the time of the IPO at the end of March,representing a 6% increase in three months. As a result of the Company'soperating performance, the Board has approved an interim dividend toshareholders in the amount of 2p per share, compared to an adjusted earnings pershare of 3p for the six month period ended 30 June 2007. In the Asset Manager's view, the remainder of 2007 and the whole of 2008 shouldprovide attractive opportunities for expansion into the care home sector inGermany and for further development of the Company's existing UK portfolio. Welook forward to reporting on acquisitions and operational improvements in themonths ahead. RP&C International Inc.September 2007 CONSOLIDATED INCOME STATEMENTFOR THE PERIOD ENDED 30 JUNE 2007 Note Period Ended Period Ended Year Ended 30 June 2007 30 June 2006 31 Dec 2006 £ £ £ (unaudited) (audited) (audited) Revenue 5,704,789 5,801,399 11,081,482 Net gain from fair value adjustments on investmentproperties 7 9,758,764 6,849,623 15,294,592 Net gain from fair value adjustments on loan - - 202,750 Administrative expenses 3 (2,425,467) (1,899,198) (3,285,512) Interest income 1,245,392 928,475 2,062,940 ------------ ------------ ------------Operating profit 14,283,478 11,680,299 25,356,252 Finance costs 4 (3,271,870) (3,416,409) (7,340,757) ------------ ------------ ------------Profit before income tax 11,011,608 8,263,890 18,015,495 Income tax expense (5,721,540) (2,209,766) (4,070,183) ------------ ------------ ------------Profit for the period 5,290,068 6,054,124 13,945,312 ============ ============ ============ Attributable to: Equity holders of the Company 5,290,068 6,054,124 13,945,312 ============ ============ ============Basic earnings per share (£ per share) 5 0.09 0.14 0.32 ============ ============ ============ Diluted earnings per 5 0.09 0.14 0.31share (£ per share) ============ ============ ============ Adjusted earnings per 5 0.03 0.03 0.08share (£ per share) ------------ ------------ ------------ CONSOLIDATED BALANCE SHEETAS AT 30 JUNE 2007 Note As at As at As at 30 June 2007 30 June 2006 31 Dec 2006 £ £ £ (unaudited) (audited) (audited)ASSETSNon current assetsInvestment property 7 165,994,859 148,692,829 155,650,387Receivable from finance lease 7,895,375 7,607,651 7,870,146Loans and receivables 7,304,252 7,304,250 7,304,250Accrued income 8,313,584 7,017,243 7,479,003Derivative financial instruments - 280,516 - ------------ ------------ ------------ 189,508,070 170,902,489 178,303,786Current assetsReceivables and prepayments 3,204,024 5,751,104 4,777,011Derivative financial instruments 2,309,348 153,960 512,763Cash 33,158,035 3,182,462 2,444,528 ------------ ------------ ------------ 38,671,407 9,087,526 7,734,302 ------------ ------------ ------------Total assets 228,179,477 179,990,015 186,038,088 ============ ============ ============EQUITYCapital and reservesShare Capital 8 344,853 16,633 16,633Share Premium 8 64,038,167 32,358,823 31,728,823Fair value hedging reserve 2,309,348 434,476 512,763Translation reserve (1,308,427) (1,148,265) (1,177,602)Retained Earnings 41,146,046 27,964,790 35,855,978 ------------ ------------ ------------Total equity 106,529,987 59,626,457 66,936,595 ------------ ------------ ------------LIABILITIESNon current liabilitesBorrowings 86,872,352 86,125,317 88,762,232Deferred income tax 25,035,189 17,159,298 19,332,699 ------------ ------------ ------------ 111,907,541 103,284,615 108,094,931 Current liabilitiesBorrowings 6,848,477 15,632,500 6,881,387Trade and other payables 1,965,535 199,904 2,871,501Current income tax liabilities - 247,574 -Accruals 927,937 998,965 1,253,674 ------------ ------------ ------------ 9,741,949 17,078,943 11,006,562 ------------ ------------ ------------Total liabilities 121,649,490 120,363,558 119,101,493 ------------ ------------ ------------ ------------ ------------ ------------Total equity and liabilities 228,179,477 179,990,015 186,038,088 ------------ ------------ ------------ CONSOLIDATED CASH FLOW STATEMENTFOR THE PERIOD ENDED 30 JUNE 2007 Note Period ended Period ended Year ended 30 June 2007 30 June 2006 31 Dec 2006 £ £ £ (unaudited) (audited) (audited)Cash flow from operating activitiesCash generated from operations 9 3,040,465 3,195,530 10,715,388Interest paid (2,753,753) (3,077,123) (6,516,271)Tax received - 285,619 - ------------ ------------ ------------Net cash generated by operating activities 286,712 404,026 4,199,117 Cash flow from investing activitiesCash paid for investment property 7 (1,290,956) (126,284) (146,623)Cash paid for loans & receivables - (2,750,000) (2,750,000)Interest received 621,138 273,475 501,753 ------------ ------------ ------------Net cash used in investing activities (669,818) (2,602,809) (2,394,870) Cash flow from financing activitiesProceeds from borrowings (257,661) 424,500 11,581,593Repayments of borrowings (1,299,040) (993,527) (16,502,384)Capital increases 8 34,212,692 - -Transaction costs relating to capital raising 8 (1,575,128) (630,000) ------------ ------------ ------------ Net cash generated/(used) by financing activities 31,080,863 (569,027) (5,550,791) Increase/(Decrease) in cash and cash equivalents 30,697,757 (2,767,810) (3,746,544) ============ ============ ============ Movement in cash and cash equivalentsAt start of period 2,444,528 5,810,560 5,810,560Increase/(Decrease) 30,697,757 (2,767,810) (3,746,544)Foreign currency translation adjustments 15,750 139,712 380,512 ------------ ------------ ------------At end of period 33,158,035 3,182,462 2,444,528 ============ ============ ============ CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYFOR THE PERIOD ENDED 30 JUNE 2007 Attributable to equity holders of the Company ------------------------------------------------------------ Notes Share Share Fair value Translation Retained Total capital premium hedging reserve earnings Equity reserve £ £ £ £ £ £ Balance as of 1 January 2006 16,633 32,358,823 (1,068,782) (799,728) 21,910,666 52,417,612 Cash flow hedges - net - - 1,503,258 - - 1,503,258 Foreign currency translation - - - (348,537) - (348,537) ----------------------------------------------------------------------Net income/(expense) recognised directly in equity - - 1,503,258 (348,537) - 1,154,721 Profit for the period - - - - 6,054,124 6,054,124 ----------------------------------------------------------------------Total recognised income for 6months to 30 June 2006 and balanceas of 30 June 2006 16,633 32,358,823 434,476 (1,148,265) 27,964,790 59,626,457 Balance as of 1 July 2006 16,633 32,358,823 434,476 (1,148,265) 27,964,790 59,626,457 Cash flow hedges - net - - 78,287 - - 78,287 Transaction costs relating toCapital Raising 8 - (630,000) - - - (630,000) Foreign currency translation - - - (29,337) - (29,337) ----------------------------------------------------------------------Net income/(expense) recogniseddirectly in equity - (630,000) 78,287 (29,337) - (581,050) Profit for the period - - - - 7,891,188 7,891,188 ----------------------------------------------------------------------Total recognised income for 6 months to 31 December and balanceas of 31 December 2006 16,633 31,728,823 512,763 (1,177,602) 38,855,978 66,936,595 Balance as of 1 January 2007 16,633 31,728,823 512,763 (1,177,602) 35,855,978 66,936,595 Cash flow hedges - net - - 1,796,585 - - 1,796,585 Issue of new shares 8 328,220 33,884,472 - - - 34,212,692Transaction costs relating toCapital Raising 8 - (1,575,128) - - - (1,575,128) Foreign currency translation - - - (130,828) - (130,828) ----------------------------------------------------------------------Net income/(expense) recognised 328,220 32,309,344 1,796,585 (130,828) - -directly in equity Profit for the period - - - - 5,290,068 5,290,068 ----------------------------------------------------------------------Total recognised income for 6 months to 30 June 2007 and balanceas of 30 June 2007 344,853 64,038,167 2,309,348 (1,308,430) 41,146,046 106,529,987 ---------------------------------------------------------------------- NOTES TO THE INTERIM FINANCIAL STATEMENTSFOR THE PERIOD ENDED 30 JUNE 2007 1. GENERAL INFORMATION Public Service Properties Investments Limited (formerly USI Group Holdings Limited), domiciled in the British Virgin Islands (registered office at Nerine Chambers, Road Town, Tortola, British Virgin Islands), is the parent company of the Group. The Company and its international subsidiaries (together the Group), is an investment property Group with a portfolio in the USA, the UK and Continental Europe. It is principally involved in leasing out real estate where the rental income is primarily generated directly or indirectly from governmental sources. The Company was formed in February 2001. 2. ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these interim financial statements have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS), published by the International Accounting Standards Board (IASB). The consolidated financial statements are reported in British Pounds unless otherwise stated and are based on the accounting policies set out in pages 14 to 21 of the audited statutory accounts for the year ended 31 December 2006. This report is prepared in compliance with IAS 34 "Interim Financial Reporting". The consolidated financial statements are prepared under the historical cost convention as modified by the revaluation of investment properties, other financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results can differ from those estimates. 2.2 Principles of consolidation The results of subsidiary undertakings, which are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to exercise control over the operations, are consolidated. Subsidiaries are consolidated from the date on which control is transferred to the Group and they cease to be consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. All intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group. 2.3 Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns which are different from those of other business segments. A geographical segment is one that is engaged in providing products or services within a particular economic area that are subject to risks and returns that are different from those of segments operating in other economic areas. 3. ADMINISTRATIVE EXPENSES 30 June 30 June 31 Dec 2007 2006 2006 £ £ £ Property rent, maintenance and office expenses 78,534 117,246 216,379 Administration of group companies 39,836 34,137 53,403 Management fees 355,672 900,861 1,824,309 Professional fees 404,585 528,076 685,651 Audit fees 75,215 226,920 171,187 Sundry expenses 36,625 91,958 51,583 Capital Raising Fees 1,435,000 - 283,000 ---------- ---------- ---------- 2,425,467 1,899,198 3,285,512 ========== ========== ========== 4. FINANCE COSTS 30 June 30 June 31 Dec 2007 2006 2006 £ £ £ Interest on mortgages 1,969,014 2,102,307 4,119,605 Other interest and borrowing expenses 345,808 352,823 1,106,317 Interest on pre IPO notes 207 61,596 90,987 Interest on notes 543,149 399,338 1,153,680 ---------- ---------- ---------- 2,858,178 2,916,064 6,470,589Amortisation of loan notes - 71,361 86,608Credit enhancement premia 413,692 428,984 922,913 Exchange gains - - (139,353) ---------- ---------- ---------- 3,271,870 3,416,409 7,340,757 ========== ========== ========== 5. EARNINGS PER SHARE Basic earnings per share are calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares outstanding during the period. As of As of As of 30 June 30 June 31 Dec 2007 2006 2006 £ £ £ Net profit attributable toshareholders 5,291,068 6,054,124 13,945,312 Weighted average number of ordinary shares outstanding 56,164,171 44,142,071 44,142,071 Basic earnings per share (£ pershare) 0.09 0.14 0.32 In December 2002 the Company issued warrants to a third party for an amount of up to $4 million. Under the terms of the warrants, the holder is entitled to exercise the warrants at any time during a two year period following completion of a public offering of shares in the Company at the same share price as that offered at the time of flotation. During 2006 these warrants were assumed by an affiliated company outside of the group. In January 2004 the Company issued CHF 7 million of 4% Senior Unsecured Pre-IPO Notes due in 2011. CHF 6.47 million of these notes were redeemed in October 2006 and a further Chf 0.505m were redeemed in February 2007. Each noteholder received warrants attached to the notes which may be exercised up to two years after a public offering of the Company's shares. The warrants entitle the noteholders to subscribe for the Company's shares at a discount to the public offering of shares between 5% - 20% depending on the timing of a public flotation of the Company's shares. Management has estimated that the maximum number of additional ordinary shares that could be issued at 30 June 2007 of 610 (2006 - 185,456). Based on this, the diluted earnings per share at June 2007 was £0.09 (2006- £0.14). ADJUSTED EARNINGS PER SHARE The Directors have chosen to disclose "adjusted earnings per share" in order to provide an indication of the groups' underlying business performance. Accordingly it excludes the effect of the items as detailed below: As of As of As of 30 June 30 June 31 Dec 2007 2006 2006 £ £ £Net profit attributable toshareholders 5,291,068 6,054,124 13,945,312 Fair Value Gains on Investment Properties (9,758,764) (6,849,623) (15,294,592) Deferred Taxation on Fair Value Gains 2,927,629 2,054,887 4,588,378 Loss of Tax Losses due to change in beneficial ownershipof subsidiary 2,006,548 - - Capital Raising Fees 1,435,000 - 283,000 ---------- ---------- ----------Adjusted Earnings 1,901,481 1,259,388 3,522,098 ---------- ---------- ----------Weighted average number of ordinary shares outstanding 56,164,171 44,142,071 44,142,071 Basic adjusted earnings per share (£ per share) 0.03 0.03 0.08 Dilutive Shares 610 185,456 12,960 Diluted adjusted earnings per share (£ per share) 0.03 0.03 0.08 6. DIVIDENDS The Directors have approved an interim dividend in the amount of 2p per share,such dividend to be paid on 26 October 2007 to shareholders of record on 12October 2007; this will result in a distribution of £1,336,175. No dividends were paid in 2006. 7. INVESTMENT PROPERTY As of As of As of 30 June 30 June 31 Dec 2007 2006 2006 £ £ £ Beginning of the period /year 155,650,387 142,753,825 142,753,825Extension of properties - 126,284 146,623Additions 1,290,956 - -Net gains on fair value adjustment 9,758,764 6,646,873 15,294,592Net changes in fair value adjustments due to exchange differences (705,248) (834,153) (2,544,653) ------------ ------------ ------------End of the period /year 165,994,859 148,692,829 155,650,387 ============ ============ ============Fire Insurance Value 101,291,193 98,926,818 101,291,193 ============ ============ ============ Valuations of the investment properties were made as at 30 June 2007 byindependent Property Consultants. The valuation of the investment properties in the UK was conducted by ColliersCRE, UK. Based on the detailed review of relevant information, Colliers CREconcluded that capitalisation rate of 6.0% was appropriate under marketconditions prevailing at 30 June 2007. The Company has used this rate inpreparation of the consolidated financial statements. The valuation of the investment properties in the US was conducted by RealEstate Asset Counselling Inc, US, using the direct capitalisation of the NOI(Net Operating Income) approach in their valuation. Based on the most recenttransactions in the sector reviewed by REAC, the overall direct capitalisationrates ranged between 6.33% and 7.50%. The Company applied the meancapitalisation rate of 6.89% The valuation of the investment properties in Switzerland was conducted by BottaManagement, AG, using a discounted cash flow analysis. A discount factor of 4.5%was used for the valuation at 30 June 2007. 8. SHARE CAPITAL 30 June 30 June 31 Dec 2007 2006 2006 £ £ £Authorised:Equity interests: 150,000,000 Ordinary shares of $0.01 each 786,081 33,878 786,081 --------- --------- ---------Allotted, called up and fullypaid:Equity interests: 66,808,738 Ordinary shares of $0.01 each 344,853 16,633 16,633 --------- --------- --------- Number of Ordinary Share shares shares premium Total £ £ £ At 30 June 2006 2,816,022 16,633 32,358,823 32,375,456 Transaction costs relating to Capital Raising - - (630,000) (630,000) ------------------------------------------------At 31 December 2006 2,816,022 16,633 31,728,823 31,745,456 ================================================ Issue of new shares (20th March 2007) 41,326,049 212,692 - 212,692 Transaction costs relating to Capital Raising - - (1,575,128) (1,575,128) Issue of new shares (26th March 2007) 22,666,667 115,528 33,884,472 34,000,000 -------------------------------------------------At 30 June 2007 66,808,738 344,853 64,038,167 64,383,020 ================================================= Pursuant to a written resolution passed on 22 November 2006, the amount ofshares the company is authorised to issue was increased from 5,000,000 to150,000,000 ordinary shares of US $0.01 each. On 20 March 2007, 41,326,049 were issued to USIGH Limited at par value resultingin a payment to PSPI of $413,260.49. On 26 March 2007, 22,666,667 were issued upon admission to the AlternativeInvestment Market of the London Stock Exchange ("AIM"). These shares were issuedat a placing price of 150 pence per share. 9. CASH GENERATED FROM OPERATIONS 30 June 30 June 31 Dec 2007 2006 2006 £ £ £ Profit for the period attributable to equityholders: 5,290,068 6,054,124 13,945,312 Adjustments for:- Interest expense (Note 6) 2,858,178 2,916,064 6,470,589- Interest income (1,245,392) (928,475) (2,062,940)- Tax 5,693,423 2,209,766 4,070,183 - Amortisation of Loan Notes - 71,361 86,608 - Changes in fair value of investment Property & loans Note 9) (9,758,764) (3,882,327) (15,497,342) - Changes in receivable and prepayments 2,172,012 (313,592) 2,427,427 - Changes in accrued income (834,581) (1,024,623) (1,486,382) - Changes in trade and other payables (905,966) 177,274 2,773,456 - Changes in accruals (228,513) (266,622) (11,523) -------------------------------------------------Cash generated from operations 3,040,465 3,195,530 10,715,388 ================================================= 10. EMPLOYEES The Company had no employees at 30 June 2007 (2006 - none). 11. ULTIMATE CONTROLLING PARTY The ultimate controlling company up to 26 March 2007 was USI Group Holdings AG("USIGH AG"), a company domiciled in Switzerland (registered office:Bahnhofstrasse 106, CH-8023, Zurich, Switzerland), with registered shares listedat the SWX Swiss Stock Exchange under the ticker symbol USIN. In March 2007, the Company reorganised its capital structure as referred to innote 8 above. As a result of the new shares issued to a number of institutionalinvestors on the London AIM stock market, USIGH AG's holding was reduced to25.16% of the enlarged capital. As such, the Company did not have a controllingparty with effect from this date. 12. SUBSEQUENT EVENTS On 4 September 2007 the Group acquired 100% of the issued share capital ofStonelea, an owner and operator of nursing and residential care home facilitiesin the UK for a total purchase consideration of £24.2m. The Group hasacquired three new homes with 157 registered beds with a further 20beds currently under construction. On the same day the assets and business wereleased to a third party operator at an initial rent of £1.58 million per annum.The lease is for an initial period of 35 years, The Group borrowed £23.75 million on an interest only, five year facility tofund the acquisition. Details of net assets acquired and goodwill are asfollows: Purchase consideration: £- Cash paid 23,000,000- Direct costs relating to acquisition 1,228,316 -----------Total purchase consideration 24,228,316Fair value of net assets acquired 20,634,591 -----------Goodwill 3,593,725 =========== The goodwill is attributable to recognition of deferred taxation on fair valuegains on investment property, including the difference between the fair valueand the tax base of the investment properties on the business combination. Thedirectors are of the opinion that deferred taxation liabilities will notcrystallise in part or in full on the basis that any sale of investment propertywould be conducted in a tax efficient manner. The assets and liabilities arising from the acquisition are as follows: Fair Value Acquiree's Carrying Amount £ £ Cash and cash equivalents 124,547 124,547Investment Property 27,000,000 27,000,000Receivables 534,118 534,118Payables (424,074) (424,074)Deferred Taxation (6,600,000) (93,111) ------------ ------------Net Assets Acquired 20,634,591 27,141,480 ============ ============ As part of the acquisition of Stonelea,, the company also refinanced £39million of existing senior debt on a shorter term, interest only basis and ata lower blended margin. 13. SEGMENT INFORMATION For the period ended 30 June 2007 --------------------------------------------------- SEGMENT UK US Switzerland Total NOTE £ £ £ £ Revenue 4,873,312 585,378 246,099 5,704,789 Net gain on fair value adjustment of investment property and loans 7 9,758,764 - - 9,758,764Administrative expenses 3 (1,959,004) (310,858) (155,605) (2,425,467)Interest income 1,234,953 10,431 8 1,245, ---------------------------------------------------Segment result / operating profit 13,908,025 284,951 90,503 14,283,478 Finance costs - net 4 (2,736,426) (437,970) (97,474) (3,271,870) ---------------------------------------------------Profit / (loss) before income tax 11,171,599 (153,019) (6,972) 11,011,608 Income Taxes (3,686,875) (2,006,548) (28,117) (5,721,540) --------------Profit for the year 5,290,068 -------------Attributable to:Equity holders of the Company 5,290,068 =============ASSETSSegment assets 161,001,098 17,566,051 12,125,543 190,692,692Unallocated assets 37,486,785 ------------- 228,179,477 =============Total assets LIABILITIESSegment liabilities (87,806,153) (11,337,345) (12,125,543) (105,910,520)Unallocated liabilities (15,738,970) -------------Total liabilities (121,649,490) =============Other segment itemsAmortisation of loan notes - - - - --------------------------------------------------- At the 30 June 2007, the Group's business segment is organised on a worldwide basis into threemain geographical areas. The nature of operations in the US is that of Postal Offices and inthe UK and Switzerland that of Nursing Homes, although geographical segments are considered primary. For the period ended 30 June 2006 --------------------------------------------------- SEGMENT UK US Switzerland Total NOTE £ £ £ £ Revenue 4,900,486 642,719 258,194 5,801,399 Net gain on fair value adjustment of investment property 7 6,092,177 852,874 (95,428) 6,849,623 Administrative expenses 3 (1,713,572) (143,325) (42,301) (1,899,198) Interest income 912,240 16,249 (14) 928,475 ---------------------------------------------------Segment result/operating profit 10,191,331 1,368,517 120,451 11,680,299 Finance costs - net 4 (2,888,866) (362,271) (165,272) (3,416,409) ---------------------------------------------------Segment profit / (loss) before income tax 7,302,465 1,006,246 (44,821) 8,263,890 Income Taxes (2,223,263) - 13,497 (2,209,766) ------------Profit for the year 6,054,124 ============Attributable to:Equity holders of the Company 6,054,124Minority interests - ------------ 6,054,124 ============ASSETSSegment assets 142,153,374 19,110,617 13,513,267 174,777,258Unallocated assets 5,212,757 ------------ 179,990,015 ============Total assets LIABILITIESSegment liabilities (86,281,769) (12,834,709) (8,105,624) (107,222,102)Unallocated liabilities (13,141,456) ------------Total liabilities (120,363,558) ============ Other segment itemsCost incurred to acquire segment assets - - - - Amortisation of loan notes - 71,361 - 71,361 --------------------------------------------------- At the 30 June 2006, the Group's business segment was organised on a worldwidebasis into three main geographical areas. The nature of operations in the US isthat of Postal Offices and in the UK and Switzerland that of Nursing Homes,although geographical segments are considered primary. 13. SEGMENT INFORMATION (Cont.) For the year ended 31 December 2006 --------------------------------------------------- SEGMENT UK US Switzerland Total NOTE £ £ £ £ Revenue 9,317,812 1,248,311 515,359 11,081,482 Net gain on fair value adjustment of investment property and loans 7 15,869,077 364,922 (736,657) 15,497,342 Administrative expenses 3 (2,926,182) (266,058) (93,272) (3,285,512)Interest income 2,033,669 29,271 - 2,062,940 ----------------------------------------------------Segment result / operating profit 24,294,376 1,376,446 (314,570) 25,356,252 Finance costs - net 4 (5,976,813) (1,093,246) (270,698) (7,340,757) ----------------------------------------------------Profit / (loss) before income tax 18,317,563 283,200 (585,268) 18,015,495 Income Taxes (4,330,321) - 260,138 (4,070,183) -----------Profit for the year 13,987,242 283,200 (325,130) 13,945,312 ===========Attributable to:Equity holders of the Company 13,945,312Minority interests - ----------- 13,945,312 ===========ASSETSSegment assets 152,975,982 16,509,205 11,593,750 181,078,937Unallocated assets 4,959,151 ----------- 186,038,088 ===========Total assets LIABILITIESSegment liabilities (90,746,201) (11,522,702) (6,912,867) (109,181,770)Unallocated liabilities (9,919,723) ------------Total liabilities (119,101,493) =============Other segment itemsAmortisation of loan notes - 86,608 - 86,608 --------------------------------------------------- At the 31 December 2006, the Group's business segment was organised on aworldwide basis into three main geographical areas. The nature of operations inthe US is that of Postal Offices and in the UK and Switzerland that of NursingHomes, although geographical segments are considered primary. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PSPI.L