Interim Results

Great Portland Estates PLC 13 November 2007 Half year results The Directors of Great Portland Estates plc announce the results for half year ended 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 credit environment, both absolute and relative returns will be produced by those best able to reposition their assets to drive rental growth. We believe this changing property environment plays to our relative strengths. 81% of our portfolio is in the West End, focused around Oxford Circus, where structural under-supply remains the dominant feature; our office rents are low at £32.60 per sq. ft. providing significant potential for growth; our development programme appears well timed and should materially enhance Group returns. We will continue to monitor market conditions carefully and use the Group's flexible financial resources to respond to emerging opportunities and challenges. We believe that our focused operating approach and sector specialism will underpin the long-term prospects of the Group.' Enquires etc: Great Portland Estates plc 020 7647 3000 Toby Courtauld, Chief Executive Timon Drakesmith, Finance Director Finsbury Group 020 7251 3801 James Murgatroyd Gordon Simpson The results presentation will be broadcast live at 9.30am today on http://www.gpe.co.uk/investors/presentations Our market Our market is accompanied by graphics (see Appendix 1). To view the accompanying graphics please copy and paste the below link into your 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 the world financial markets with investors' reappraisal of risk putting upward pressure on property yields. In the Capital's occupational markets, however, the main themes remain much the same as those we described in our annual report earlier 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 year is above the long-run average, with September alone accounting for 0.9 million sq ft. As a result, vacancy rates have fallen by 17% since January to 3.9%, or 1.2%, 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's balance returns to equilibrium. The current level of occupational enquiries points to take-up trending at around the long-run average, suggesting that prospects in the West End remain sound. In the City, strong letting activity (totalling 7.2 million sq ft so far this year) has materially reduced the amount of space available to let and pushed prime rents higher by 15% since January. We remain concerned about the significant development pipeline, estimated at 12 million sq ft for the period to December 2011, despite the likely dampening effect on development starts of higher construction costs and financial market uncertainties. Whilst 2007 is set to produce another record level of turnover in London's investment markets, activity has slowed markedly since the end of September as investors take stock of market conditions. Prime benchmark yields have expanded by between 25 and 50 basis points from their lows and, whilst there may be further increases to come, there remains a significant amount of money looking to invest in central London, much of it from overseas. Our business Our business is accompanied by graphics (see Appendix 2). To view the accompanying graphics please copy and paste the below link into your web browser: http://www.rns-pdf.londonstockexchange.com/rns/5674h_2-2007-11-13.pdf Valuation The valuation of the Group's properties as at 30 September 2007, including acquisitions made during the year and our share of gross assets in joint ventures, was £1,754.8 million, up 7.9% or £128.9 million, net of capital expenditure and acquisition costs, since 31 March 2007. Wholly owned properties were 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 (excluding acquisitions), including our share of joint ventures, was £1,409.4 million which, net of capital expenditure, increased in value by 8.9% or £114.7 million. Growth in rental values, asset management activity and development gains were the 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 by 7.1% or £76.2 million. Our share of acquisitions, the majority of which was in joint venture, was valued at £345.4 million at September 2007, up 4.3%, or £14.2 million net of acquisition costs. The second quarter's overall like-for-like valuation growth of 2.0% was lower than that seen in the first, due to a deterioration in real estate investor sentiment following the turbulence in the capital markets over the summer, pushing capitalisation rates higher. Rental value growth of 4.0% in the second quarter remained healthy and, although slightly lower than the 4.6% increase seen in the first quarter, was more than sufficient to offset the negative effects of rising capitalisation yields. In aggregate, the portfolio equivalent yield increased by 10 basis points over the first half to 5.0%. The overall portfolio valuation uplift was due to asset management and growth in rental values outweighing the outward yield movement. Stripping out development properties and cases of major asset repositioning that have driven yields lower and asset values sharply higher, the portfolio equivalent 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%. Our outperformance has continued to come from successful development, accretive acquisitions and our focused approach to asset management. Development The Group's development business has shown strong progress in the first half with major milestones achieved at several schemes. The development programme is now up to 25 projects; taken together, they represent a potential total area of 2.9 million sq ft, a 70% increase over the buildings' pre-development area. The near-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-term group of 13 schemes, those not currently on site will all have started by the end of 2009. The medium-term projects are scheduled to commence between 2009-2011, whilst the longer term programme represents prospects beyond 2011. In September, we announced the pre-let of the entire office element at 60 Great Portland Street, W1 to The Engine Group, who will take a 20 year lease over the basement and ground to fifth floors totalling 60,000 sq ft and pay £3.6 million per annum after a 17 month rent free period. The above ground floor office rents range from £65 per sq ft for the fifth floor to £60 per sq ft on the first floor. Building work commenced in January 2006 and we expect to finish by the end of 2007. At 180 Great Portland Street, W1 we let 16,000 sq ft at £58 per sq ft, establishing a new rental level and, subsequent to the half year end, a further 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 sq ft), 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 sq ft) and Bermondsey Street, (48,000 sq ft) both in SE1 and Met Wharf (110,000 sq ft), E1. The Tooley Street scheme, pre-sold last year, has been entirely pre-let to Southwark Borough Council at an average rent of £38.50 per sq ft, crystallising an additional bonus payment due to the Group on practical completion in the spring of 2008. In the Group's new 50:50 joint venture, the Great Capital Partnership (GCP), we have assembled an interesting development prospect at New Fetter Lane, EC4 by acquiring a building adjacent to an existing holding. Preliminary design work is ongoing and we expect to submit a planning application for an office building of more than 100,000 sq ft during the next 12 months. In addition, we submitted a planning application for a 131,000 sq ft office scheme at Wigmore Street, W1 where 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 planning authorities and Crossrail on a masterplan for the site. We continue to see significant construction cost inflation across central London as a consequence of heightened activity, particularly on major infrastructure projects, and raw material price increases. So as to mitigate the effect on our development programme, we are engaging with key suppliers at an earlier stage than usual to create more certainty on contract values. Investment management We have continued to recycle capital from mature properties into projects to which we can apply our asset management and development skills. Sales during the first half amounted to £268.6 million. Four sales were made in April for £161.6 million in line with their March 2007 valuations being the Group'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 net initial yield of 4.1% and crystallised a return on total capital employed of 156% since purchase in June 2003. The investment team has had a very active first half with £329.2 million (our share) of property acquired. The majority of this activity was in GCP. Created in April 2007 for a cost of £233.3 million (our share), the joint venture brought 17 new properties under our management totalling 610,000 sq ft, centred around Regent Street with an average office rent of only £28 per sq ft. Since then, 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 Regent Street, W1, all adjacent or near to existing holdings. In our wholly owned portfolio, we made two acquisitions at a cost of £16.0 million during the period, all adjacent to existing holdings. 18 Dering Street, W1 was purchased to augment our holding on the western side of Hanover Square whilst 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 the Southbank. Asset management Our asset management team remains focused on the execution of each property's clearly defined asset strategy. The first six months of the year have been busy with a good amount of leasing activity, driving rental values higher and numerous lease regearings, rent reviews and lease renewals also strengthened the quality of our income. During the period, we have announced new leases covering more 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, signed between 1 April and 30 September, will add £13.5 million to the rent roll and were 4.5% ahead of March 2007 rental values. These include the regearing of the office occupational leases at 160 Great Portland Street, W1 totalling 86,000 sq ft, 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 ventures Our joint ventures have performed well in the first half and we are pleased to have the continuing endorsement of our partners, Liverpool Victoria Friendly Society, Scottish Widows Investment Partnership and Capital & Counties Limited. These joint ventures, with gross property assets of £1,115.3 million, now represent 48% of our gross property assets, up from 24% at the beginning of the financial 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 acquisition costs and subsequent capital expenditure, during an average ownership period of just over 4 months. During this short time, we have been encouraged by the opportunities our management of the assets is unearthing, augmented by the subsequent acquisitions. We have welcomed four new employees from Capital & Counties to support GCP's business plan of growing rents from low current levels and 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, W1 has moved the rents forward significantly and the final phase of development of the former Liberty Store at 208/222 Regent Street, W1 pre-let to Gap, was completed on time and on budget and handed over to the tenant. Great Wigmore Partnership (GWP) has submitted a planning application for the comprehensive redevelopment of 79/97 Wigmore Street, W1 and good letting progress has been made at 180 Great Portland Street, W1 with rents achieved, significantly ahead of the valuer's March estimates. Our financial position Our financial position is accompanied by graphics (see Appendix 3). To view the accompanying graphics please copy and paste the below link into your web browser: http://www.rns-pdf.londonstockexchange.com/rns/5674h_3-2007-11-13.pdf Financial results The Group's financial performance for the period was sound with good portfolio valuation and NAV per share results. The second quarter's NAV per share growth rate of 2.8% was below that of the first quarter of 8.1%, as market yield expansion impacted many of the Group's assets. The general market valuation 'headwind' was mitigated by solid asset management, helping to grow rental values and significant returns from the development business. Net asset value growth Adjusted NAV per share, increased 11.1% in the half year to 660 pence. At September 2007, the Group's net assets were £1,195.0 million up from £1,076.0 million at March 2007. The main drivers behind the 66 pence per share increase in adjusted NAV per share 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 per share at September 2007 includes around 45% of the expected surplus on the schemes when complete. Triple net asset value (NNNAV) grew to 663 pence per share, up 11.8% from March 2007, principally due to the factors described above. Income statement and earnings per share Total rental and joint venture fee income increased by 12.5% to £24.3 million compared to the first half of last year. Gross rental income for the period was £19.6 million, a fall of £1.8 million or 8.4% compared to the first half of last year. The level of rental income has been influenced by good underlying organic growth but impacted by surrenders linked to buildings such as the Wells & More development scheme and an injection of assets into the GCP and GWP joint ventures, which reduced rental income but increased joint venture profits. These factors are illustrated in Appendix 3. In total, rent reviews, lease renewals and new lettings (including the amortisation of lease incentives) added £3.1 million to rental income over the same period last year. The estimated rental value of the portfolio grew by some 9.0% in the first half due to the various improvements we are bringing to our properties and a supportive occupational market. The Group's joint ventures generated management fees of £2.7 million, up 440% from September 2006, which were 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 than last year. This increase was driven by the rise in joint venture management fees, profits from development management operations as well as higher underlying profits from joint ventures, partly offset by increased interest and administration charges. Development management profits were up by £2.8 million year on year as a result of the level of income from the Tooley Street, SE1 scheme. Underlying profits from joint ventures were £7.3 million, up £6.4 million on last year, mainly due to the creation of GCP in April 2007, which has significantly increased the size of 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 the Group's share based incentive schemes, which increased by £0.8 million year on year. 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 due to investment in our development schemes, acquisitions made during the half year and 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 an effective rate of 7%, lower than the year to 31 March 2007 due to the property rental business being tax exempt as a result of REIT conversion in January 2007. The Group earns sizeable profits from development management and joint venture management which are outside of the REIT tax exempt segment. Adjusted earnings per share for the period were 5.4 pence, 8% greater than last year driven by higher adjusted PBT, although the comparative period benefited from 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 previous year as a result of reduced portfolio revaluation gains and higher interest charges. Basic EPS for the year was 72.2 pence, up 2.8% on the first half of last year as a result of a reduced deferred tax charge this year. Financial effects of near-term development schemes The near-term development and refurbishment schemes have progressed according to plan during the period, with £25.6 million (2006: £15.0 million) spent on schemes including 60 Great Portland Street, W1, Wells & More, W1, and Bermondsey Street, SE1. The valuation of the Group's development portfolio has increased by 17.9% due to growth in estimated rental value in the period and the elimination of some of the construction risk. By 2011, the near-term schemes are forecast to generate incremental rental income for the Group of £31.5 million. Some of this additional revenue will be captured through higher profits from joint ventures, as several schemes are in the GVP, GWP and GCP ownerships. This increase in rental income from the near-term schemes is the equivalent of over 49.0% of the Group's current rent roll. Around £289 million of project costs are planned for the near-term schemes in the period to March 2011. Results of joint ventures The scale of the joint venture business has increased dramatically compared to last 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 50:50 joint 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 £2.9 million for the first half of last year as a result of the leasing activities at 180 Great Portland Street, W1, Mount Royal, Oxford Street, W1 and 208/222 Regent Street, W1. The Group's share of joint venture underlying profits (excluding revaluation gains and profit on sales) grew to £7.3 million as a result of the addition of GCP assets. These profits are after charging £2.7 million of management fees to the individual joint ventures. Financial resources and capital management The cash consumed by operations fell to £17.2 million compared to £23.4 million last year as a result of fewer on balance sheet property acquisitions during the period. 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 charge and subsequent acquisitions at Fetter Lane, EC4, Regent Street, W1 and Jermyn Street, SW1. Gearing increased to around 52% at September 2007 from 36% in March 2007 and interest cover fell slightly to 1.7 times. In July 2007 the Group's debt facilities were enhanced to support recent acquisitions and the growing development pipeline. A new £200 million five year revolving credit facility was arranged on more advantageous terms than the smaller, shorter-term facility that it replaced. Following the sale of Met Building the Group has undrawn committed credit facilities in excess of £170 million. The Group's weighted average interest rate for the half year was 6.11%, an increase of 56 basis points compared to the year to 31 March 2007. The summer and autumn of 2007 has seen the credit markets suffer from reduced liquidity and confidence, combined with higher short-term rates. These market factors have increased the Group's floating interest cost to 6.23% in the first half of the year compared to 5.60% in the year to 31 March 2007. To further protect the Group from future interest rate volatility we executed £90.0 million of five year interest rate swaps and collars in September. Taking into account the sale of Met Building the proportion of our period end debt which was fixed or hedged was 75%. Dividend The Board has declared an interim dividend of 3.9 pence per share, an increase of 4% over the first half of last year which will be paid on 3 January 2008. Of this 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. Further information on the tax treatment of dividends can be found in 'Shareholders' information' and on the Group's website. Outlook With property markets engulfed in negative sentiment and a challenging credit environment, both absolute and relative returns will be produced by those best able to reposition their assets to drive rental growth. We believe this changing property 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's flexible financial resources to respond to emerging opportunities and challenges. We believe that our focused operating approach and sector specialism will underpin the long-term prospects of the Group. GROUP INCOME STATEMENT For the six months ended 30 September 2007 Year to Six months to Six months to 31 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 to 31 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 SHEET At 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 FLOWS For the six months ended 30 September 2007 Year to Six months to Six months to 31 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 EXPENSE For the six months ended 30 September 2007 Year ended Six months to Six months to 31 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 EQUITY For the six months ended 30 September 2007 Year ended Six months to Six months to 31 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 to 31 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 to 31 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 to 31 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 to 31 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 to 31 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 corporation tax. 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 2006 No. 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 Earnings per 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 1,182.5 Acquisitions 16.0 - 16.0 Costs capitalised 9.1 - 9.1 Disposals (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 - 131.8 Costs capitalised 17.8 - 17.8 Interest capitalised 0.5 - 0.5 Net 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 of Market Value by CB Richard Ellis, as at 30 September 2007 in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. 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 valuation At 1 April 2007 2.0 0.7 18.7 21.4 Costs capitalised - 0.1 1.4 1.5 Interest capitalised - - 0.5 0.5 Net valuation gain taken to equity - - 1.3 1.3 ---------------------------------------------------------------------------------------- At 30 September 2007 2.0 0.8 21.9 24.7 ======================================================================================== Depreciation At 1 April 2007 0.3 0.2 - 0.5 Charge 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 9.5 176.0 Acquisitions 300.4 14.2 314.6 Share of profits of joint ventures 7.3 - 7.3 Revaluation of joint ventures 26.4 - 26.4 Distributions (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% 2012 Interest rate caps £40 million 6.000% 2011 Interest 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 facilities of £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 liabilities Derivatives 0.2 - (0.2) - Deferred tax assets Long-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 each 550,100,752 68.8 Authorised 550,100,752 68.8 550,100,752 68.8 ------------------------------------------------------------------------------------------------------------------------ Allotted, called up and fully paid 163,181,906 20.4 At the beginning of the period 181,019,809 22.6 163,181,906 20.4 17,837,903 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 to 31 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 1.5 967.7 Profit for the period - - - 130.0 Actuarial gains on defined benefit schemes - - - 0.9 Deferred 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 to 31 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 573,871 shares held by the Great Portland Estates plc LTIP Employee Share Trust which will vest in certain senior employees of the Group if performance conditions are met. 18 Adjustment for non-cash movements in the cash flow statement ------------------------------------------------------------------------------------------------------ Year to Six months to Six months to 31 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 Drakesmith Chief Executive Finance Director 13 November 2007 13 November 2007 Independent review report to Great Portland Estates plc Introduction We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007 which comprises the Group income statement, the Group balance sheet, the Group statement of cash flows, the Group statement of recognised income and expense, the Group reconciliation of other movements in equity and related notes 1 to 19. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly 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 LLP Chartered Accountants and Registered Auditor London, UK 13 November 2007 GLOSSARY -------------------------------------------------------------------------------- Adjusted earnings per share Earnings per share adjusted to exclude non-recurring items, profits or losses on sales of investment properties' property revaluations and deferred tax on capital allowances and property revaluations on a diluted basis. Adjusted net assets per share NAV adjusted to exclude deferred tax on capital allowances and property revaluations on a diluted basis. Diluted figures Reported amounts adjusted to include the effects of potential shares issuable under the convertible bond. Earnings per share (EPS) Profit after tax divided by the weighted average number of ordinary shares in issue. EPRA adjustments Standard calculation methods for adjusted EPS and adjusted NAV as set out by the European Public Real Estate Association (EPRA) in their January 2006 Best Practice and Policy Recommendations. Estimated rental value (ERV) The market rental value of lettable space as estimated by the Company's valuers at each balance sheet date. F&BS Finance and business services sector. IPD The Investment Property Databank Limited (IPD) is a company that produces an independent benchmark of property returns. IPD central London An index, compiled by IPD, of the central and inner London properties in their monthly and quarterly valued universes. Like-for-like portfolio Properties that have been held for the whole of the period of account. Market value The amount as estimated by the Company's valuers for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. In line with market practice, 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 the balance sheet date. Net gearing Total borrowings less short-term deposits and cash as a percentage of adjusted equity shareholders' funds. Net initial yield Annual net rents on investment properties as a percentage of the investment property 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 projected cash flows from the portfolio would result in a net present value of zero. REIT UK Real Estate Investment Trust. Rent roll The annual contracted rental income. Return on capital employed (ROCE) Return on capital employed is measured as profit before financing costs plus revaluation surplus on development property divided by the opening gross capital. Return on shareholders' equity The growth in the adjusted diluted net assets per share plus dividends per share for the period expressed as a percentage of the adjusted net assets per share at the beginning of the period. Reversionary or under-rented The percentage by which ERV exceeds rents passing, together with the estimated rental value of vacant space. Reversionary yield The anticipated yield, which the initial yield will rise to once the rent reaches the ERV. Total property return (TPR) Capital growth in the portfolio plus net rental income derived from holding these properties plus profit on sale of disposals expressed as a percentage return on the period's opening value. Total shareholder return (TSR) The growth in the ordinary share price as quoted on the London Stock Exchange plus dividends per share received for the period expressed as a percentage of the 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 a diluted basis. True equivalent yield The constant capitalisation rate which, if applied to all cash flows from an investment property, including current rent, reversions to current market rent and such items as voids and expenditures, equates to the market value having taken into account notional purchasers' costs. Assumes rent is received quarterly in advance. Voids The element of a property which is unoccupied but available for letting, usually expressed as the ERV of the void space divided by the existing rent roll plus the 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 of the 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 Exchange

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