Interim Results

RNS Number : 5810B

Primary Health Properties PLC

19 August 2008

 



Primary Health Properties PLC

PRIMARY HEALTH PROPERTIES PLC ('PHP' or the 'Group')

Modern accommodation for the Provision of Primary Health

Care Services

Half Year Results 

for the six months ended 30 June 2008

Primary Health Properties PLC, one of the UK's largest providers of modern primary healthcare facilities, announces its Half Year Results for the six months ended 30 June 2008.

Group Financial Highlights

• Acquisition or delivery of £42.3m of assets

• Portfolio including commitments is now £352.7m

• 112 primary care centres (106 completed and 6 in the course of development)

• Net asset value increased from 369.4p to 373.4p per Ordinary Share

• New term loan facilities of £50m arranged

• Interim cash dividend of 8.25p proposed for the period ended 30 June 2008

	Six months to 30 June 2008 £m	Six months to 30 June 2007 £m	Eighteen months to 31 Dec 2007 £m
Passing rent	18.6	14.5	16.2
Operating profit before revaluation result and financing	7.0	4.0	5.0
Net financing costs	(4.4)	(3.7)	(10.8)
Fair value gain/(loss) on derivatives	1.6	-	(2.8)
	4.2	0.3	(8.6)
Revaluation (loss)/gain on properties	(4.7)	5.0	4.9
(Loss)/profit before tax	(0.5)	5.3	(3.7)
(Loss)/earnings per share - basic	(2.1p)	18.9p	59.4p
Earnings per share - adjusted	8.0p	7.8p	8.2p

Harry Hyman, Managing Director of Primary Health Properties PLC, commented:

"The challenging economic environment continues to have a negative impact on the value of commercial property.  However, the niche market in which we operate remains relatively strong and there is continued demand for the provision of modern primary health care facilities, from both tenants and investors. Furthermore the spending programmes of the Government, from which we derive the majority of our rent roll, are not impacted by traditional economic factors.

In addition the recent publication of the "Darzi" report confirmed the ongoing commitment of the Government to renewing the primary care stock and ensuring that primary care is delivered out of modern, purpose-built accommodation.

The Group has an excellent portfolio of modern properties with secure long leases and high quality tenants, backed by the government. The Board remains committed to selectively increasing the Group's portfolio on a prudent basis, increasing revenue from existing leases and delivering returns for shareholders. We believe the business is well positioned to weather the current turmoil in the banking and money markets, and remain confident in the prospects of the Group."

Enquiries:

Bell Pottinger Corporate & Financial

David Rydell/Victoria Geoghegan

Tel: [phone]

Primary Health Properties PLC

Harry Hyman

Managing Director

Tel: [phone]

Mobile: [phone]

  Chairman's Statement

Since reporting the last audited figures, the Group has achieved a number of important milestones:

• It has acquired or taken delivery of £42.3m of assets

• Its portfolio including commitments is now £352.7m

• It has 112 primary care centres (106 completed and 6 in the course of development)

• Net asset value increased from 369.4p to 373.4p per Ordinary Share

• New term loan facilities of £50m arranged

•  Interim cash dividend of 8.25p proposed for the period ended 30 June 2008

Results

The results for the Group for the six months ended 30 June 2008 show a loss after taxation of £0.7m, compared with a profit after taxation of £5.2m for the six months ended 30 June 2007. However, this result is after a revaluation deficit on the property portfolio of £4.7m (six months to 30 June 2007 there was a revaluation gain of £5.0m). The results also include a mark to market gain on certain callable swaps (see below) of £1.6m (six months to 30 June 2007: £Nil), partially reversing the mark to market loss of £2.8m on such swaps arising in the last six months of 2007. After allowing for these items which are unrealised and do not affect the cash flow of the business and adjusting for exceptional items in both years, there was an increase of £3.0m  in the underlying profit attributable to the business to £7.0m.

During the six month period ended 30 June 2008 there has been a slight weakening of yields. At the period end, the initial yield on the portfolio was 5.55% and the expected reversionary yield was 5.75%.

All swaps are taken out in order to mitigate exposure to interest rate risk, but under accounting rules only certain swaps qualify as “effective” hedges and the mark to market movement on these is matched against the hedged liability in the Balance Sheet. Due to the rise in market rates for money for the six months to 30 June 2008, the value of the Group’s “effective” interest rate swaps increased by £4.8m (14p per share). This increase was a significant factor in the uplift in the Net Asset Value from 369.4p to 373.4p, despite the Group reporting an operating loss in the period. The mark to market value fluctuates with movements in term interest rates, and in the case of the callable swaps, which do not qualify as effective under the hedge accounting rules and the gain or loss on which flows through the Income Statement, with market volatility.

Rental growth

Although the process for agreeing rental increases has been slower than the Board would have liked, the achieved return on those leases agreed in the six months ended 30 June 2008 was 11.9% over three years.  

Portfolio

The Group purchased a number of properties during the six months ended 30 June 2008, details of which are set out below:            

Property	Acquisition cost £m	Occupational tenants
Firdale Medical Centre, Northwich	3.1	Doctors’ practice and pharmacy
Rope Green Medical Centre, Shavington	5.0	Doctors’ practice and pharmacy
Anchor Mill Medical centre, Paisley	3.0	Doctors’ practice and pharmacy
Cherrymead Surgery, Loudwater	1.7	Doctors’ practice
Lossiemouth, Moray Coast Health Centre, Lossiemouth	6.7	Two doctors’ practices, RAF Practice,.PCT and pharmacy
Regent Gardens Surgery, Kirkintilloch	3.0	Doctors’ practice
Prospect House, Kettering	11.4	Doctors’ practice and pharmacy
Culm Valley Health Centre, Cullompton	7.9	Doctors’ practice, PCT and pharmacy
	41.8*

* acquisition costs excluding capitalised expenses of £500k.The table below sets out the portfolio as at 30 June 2008.        

	30 June  2008 £m	31 December 2007 £m	30 June  2007 £m
Investment properties	319.1	281.7	267.8
Development properties	3.8	2.8	9.2
Properties in the course of development	-	0.8	2.6
Total investment properties	322.9	285.3	279.6
Finance leases	2.9	3.0	2.9
Total owned and leased	325.8	288.3	282.5
Development Loans	-	0.2	2.8
Total owned and leased (including development loans)	325.8	288.5	285.3
Committed	26.9	35.7	35.7
Total owned, leased and committed	352.7	324.2	321.0
Passing rent (before delivery of all commitments)	18.6	16.2	14.5

Property valuation

The freehold, leasehold and development properties of the Group have been independently valued at fair value by Lambert Smith Hampton, Chartered Surveyors and Valuers, as at 30 June 2008.

Discounted cash flow property valuation

In addition to the market value exercise performed by Lambert Smith Hampton, the Joint Managers monitor the value of the Group's completed investment portfolio based on a discounted cash flow analysis. On this basis, the valuation at 30 June 2008 is £355m compared to the market value of £319.1m (31 December 2007: £316.1m compared to the market value of £281.7m). The difference of £35m represents an additional 104p of net asset value per share. 

The assumptions used in the discounted cash flow analysis are:

• A discount rate of 7%;

• An average annual increase in the individual property rents in respect of review dates of 3%; and

• Capital growth in residual values of 1% per annum.

Dividends

On 28 March 2008, the Group paid an ordinary cash interim dividend of 8.25p per Ordinary Share in respect of the six months ended 31 December 2007. The Board is now proposing a cash interim dividend in respect of 2008 of 8.25p payable to Ordinary Shareholders on the register on 17 October 2008 and payable on 20 November 2008. No Property Income Distributions ("PIDs") have been paid since 1 January 2007, when the Board advised that dividends would be cash, PIDs or a combination of the two. Further details are given in note 8.  

Borrowings

During the six months to 30 June 2008, the Group entered into a £50m secured facility to augment its existing facilities of £200m resulting in total current facilities of £250m.of which £240 m were available on a term loan basis (maturing in 2013) and a further £10m available on an overdraft basis £203m of these facilities were drawn down as at 30 June 2008 and £159m as at 31 December 2007. This leaves the Group with substantial resources to continue its acquisition policies. 

The loan to value ratio at 30 June 2008 was 62% and interest cover was 2.1 times.  

Hedging

The amount of fixed rate cover in place at 30 June 2008 (including £83m of callable swaps) was £193m. The callable swaps were not called on 15 August 2008; the next call date is 11 November 2008.

During the six months ended 30 June 2008, £20m of five year swaps were written at an average swap price of 4.89%. The weighted average pre-margin fixed rate was 5.013%.

A basis rate swap totalling £150m was written in May 2008, maturing in August 2008. This resulted in a cash benefit to the Group of £86k over the period of the swap.

Management incentive scheme

There is no management incentive fee payable for the six months to 30 June 2008 (six months to 30 June 2007: £1.8m).  

Outlook

The investment market for the Group's properties in the primary health sector remains relatively strong, reflecting:

• The excellent covenant that the Group possesses  (89% of our rent roll comes directly or indirectly from the Government, with the balance from pharmacies);

• The relatively long lease lengths in place (average 19 years unexpired at 30 June 2008);

• The achievement of rental growth on an ongoing basis; and

• No over supply in the market place. There is little speculative development meaning that new product is generally built to order.

The recent publication of the Darzi report "NHS Next Stage Review Final Report - Our Vision for Primary and Community Care" dated June 2008 has confirmed the objective of procuring a further 150 new medical centres, one in every Primary Care Trust in the country, over the next two years. This reflects the commitment of the Government to renewing the primary care stock and making sure that primary care, which represents the gateway to the NHS, is delivered out of modern, purpose-built accommodation.

Although there is uncertainty in the wider property market, we remain committed to increasing our portfolio on a prudent basis, increasing revenue from existing leases and delivering increases in dividends paid to Shareholders.  

The Board considers that, mark to market adjustments on both assets and liabilities reflect unrealised profits and losses, whereas cash flow and cash returned to Shareholders in the form of dividends represent more tangible measures of the success of the Group. Notwithstanding the continued turmoil in the banking and money markets, the Board is satisfied with the Group's funding position and remains optimistic about the prospects for the Group going forward.  

G A Elliot

Chairman                                       18 August 2008

Interim Management Report

for the six months ended 30 June 2008

Interim Management Report for six months ended 30 June 2008 which is provided to comply with the Disclosure and Transparency Rules 4.2.3 and 4.2.7.

The Chairman's Statement contains a review of the performance and developments of the Group for the six months to 30 June 2008 and is incorporated into this report by reference. 

The principal risks and uncertainties for the remaining six months of the year to 31 December 2008 continue to be as described in the Report for the eighteen months ended 31 December 2007 on pages 16 to 18. 

The Group has engaged an environmental consultant and produced an environmental policy and the Board is not aware of any material environmental issues affecting the utilisation of its assets.

The Joint Managers operate the business on a day-to-day basis. There is no management incentive fee payable in respect of the six months to 30 June 2008 (six months to 30 June 2007: £1.8m).

Management fees of £1.2m (six months to 30 June 2007: £1.1m) are payable in line with the Joint Management Agreement.

Related party transactions

There have been no changes to the related party arrangements or transactions as reported in the statutory financial statements for the eighteen months ended 31 December 2007. 

Responsibility statement required by the Disclosure and Transparency Rule (DTR) 4.2.10 

"To the best of our knowledge and belief, the condensed financial statements for the six months to 30 June 2008 have been prepared in accordance with IAS34 "Interim Financial Reporting" as adopted by the European Union. The interim management report includes a fair review of the developments and performance of the business of the issuer and its undertakings included in the consolidation taken as a whole.

The interim management report includes a fair review of the information required on material transactions with related parties and there have been no changes in the arrangements since the last report for the eighteen months ended 31 December 2007.

For and on behalf of the Board of Primary Health Properties PLC

G A Elliot

Chairman                                                            18 August 2008  "

GROUP INCOME STATEMENT 

for the six months ended 30 June 2008

	Notes	Six months ended   30 June 2008	Six months ended   30 June 2007	Eighteen months ended 31 December 2007
		£'000	£'000	£'000
		(unaudited)	(unaudited)	(audited)
Rental income		9,095	6,985	21,301
Finance lease income		126	604	908
Rental and related income		9,221	7,589	22,209
Net valuation (loss)/gain on property portfolio		(4,724)	5,055	4,857
Impairment loss	4	-	-	(3,750)
Net gain on disposal of property		-	-	44
Administrative expenses		(2,102)	(3,450)	(7,646)
Exceptional items:
Goodwill impairment	4	(90)	(126)	(5,551)
UK-REIT conversion costs		-	-	(195)
Operating profit before financing		2,305	9,068	9,968
Finance income		1,949	718	2,178
Finance costs		(6,369)	(4,444)	(13,022)
Fair value gain/(loss) on derivatives		1,608	-	(2,808)
(Loss)/profit before tax		(507)	5,342	(3,684)
Current taxation	9	(28)	(103)	(100)
Conversion to UK-REIT charge	9	(160)	-	(5,157)
Deferred taxation charge for the period		-	-	(3,880)
Deferred taxation release on conversion to UK-REIT	9	-	-	29,622
Taxation (expense)/credit		(188)	(103)	20,485
(Loss)/profit for the period*		(695)	5,239	16,801
(Loss)/earnings per share
Basic	5	(2.1)p	18.9p	59.4p
Adjusted earnings per share **
Basic	5	8.0p	7.8p	8.2p
Dividends paid:	8
Third interim dividend period ending 31  December 2007 (8.25p)		2,771	-	-
Second interim dividend period ended 31 December 2007 (7.5p)		-	-	2,519
First interim dividend period ended 31 December 2007 (7.5p)		-	1,821	1,821
Final dividend year ended 30 June 2006 (6.75p)		-	-	1,639

* Wholly attributable to equity shareholders of Primary Health Properties PLC. The above activities are continuing. 

** Adjusted earnings per share excludes capital and non recurring items to give a better indication of dividend cover for the period.

GROUP BALANCE SHEET

as at 30 June 2008

	Note	At 30  June   2008	At 30  June   2007	At 31  December  2007
		£'000	£'000	£'000
		(unaudited)	(unaudited)	(audited)
Non current assets
Investment properties	3	319,071	270,434	282,495
Development properties	3	3,848	9,174	2,853
Development loans		33	2,826	182
Net investment in finance leases		2,889	2,905	2,914
Derivative interest rate swaps		6,522	7,905	1,651
		332,363	293,244	290,095
Current assets
Trade and other receivables	6	4,353	3,459	4,186
Net investment in finance leases		52	49	53
Cash and cash equivalents		4,022	3,692	3,862
		8,427	7,200	8,101
Total assets		340,790	300,444	298,196
Current liabilities
Derivative interest rate swaps		(1,200)	-	(2,808)
Corporation tax payable		(57)	(289)	(29)
UK-REIT conversion charge payable	1	(1,413)	(1,012)	(1,208)
Deferred rental income		(4,212)	(3,138)	(3,660)
Trade and other payables		(2,426)	(5,142)	(3,576)
		(9,308)	(9,581)	(11,281)
Non current liabilities
Term Loans		(202,683)	(135,650)	(159,219)
UK-REIT conversion charge payable	1	(3,093)	(4,145)	(3,395)
Derivative interest rate swaps		(277)	-	(224)
		(206,053)	(139,795)	(162,838)
Total liabilities		(215,361)	(149,376)	(174,119)
Net assets		125,429	151,068	124,077
Equity
Share capital		16,794	16,794	16,794
Share premium		48,009	48,012	48,009
Capital reserve		1,618	1,618	1,618
Cash flow hedging reserve		6,245	7,905	1,427
Retained earnings		52,763	76,739	56,229
Total equity *		125,429	151,068	124,077
Net asset value per share
- basic	10	373.4p	449.8p	369.4p

* Wholly attributable to equity shareholders of Primary Health Properties PLC.

These financial statements have been prepared in accordance with the accounting policies set out in the latest statutory Report for the eighteen month period ended 31 December 2007.

  Group Statement of Changes in Equity (unaudited)

for the six months ended 30 June 2008

	Share capital	Share premium	Capital reserve	Cash flow hedging reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
1 January 2008	16,794	48,009	1,618	1,427	56,229	124,077
Loss for the period	-	-	-	-	(695)	(695)
Transfer to income statement on cash flow hedges	-	-	-	(1,621)	-	(1,621)
Income and expense recognised directly in equity:
Gain on cash flow hedges taken to equity	-	-	-	6,439	-	6,439
Total recognised income and expense for the period	-	-	-	4,818	(695)	4,123
Dividends paid:
Third interim dividend for period ended 31 December 2007 (8.25p)	-	-	-	-	(2,771)	(2,771)
30 June 2008	16,794	48,009	1,618	6,245	52,763	125,429

  Group Statement of Changes in Equity (unaudited)

for the six months ended 30 June 2007

	Share capital	Share premium	Capital reserve	Cash flow hedging reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
1 January 2007	12,139	13,943	1,618	1,166	73,321	102,187
Profit for the period	-	-	-	-	5,239	5,239
Transfer to income statement on cash flow hedges	-	-	-	295	-	295
Income and expense recognised directly in equity:
Gain on cash flow hedges taken to equity	-	-	-	6,444	-	6,444
Total recognised income and expense for the period	-	-	-	6,739	5,239	11,978
Issue of shares (net of expenses)	4,655	34,069	-	-	-	38,724
Dividends paid:
First interim dividend paid for the period ended 31 December 2007 (7.5p)	-	-	-	-	(1,821)	(1,821)
30 June 2007	16,794	48,012	1,618	7,905	76,739	151,068

Group Statement of Changes in Equity (audited)

for the eighteen months ended 31 December 2007

	Share capital	Share premium	Capital reserve	Cash flow hedging reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
1 July 2006	11,339	12,022	1,618	939	45,407	71,325
Profit for the period	-	-	-	-	16,801	16,801
Transfer to income statement on cash flow hedges	-	-	-	(1,231)	-	(1,231)
Income and expense recognised directly in equity:
Gain on cash flow hedges taken to equity	-	-	-	1,317	-	1,317
Deferred tax on cash flow hedges *	-	-	-	402	-	402
Total recognised income and expense for the period	-	-	-	488	16,801	17,289
Issue of shares (net of expenses)	5,455	35,987	-	-	-	41,442
Dividends paid:
Final dividend for the year ended 30 June 2006 (6.75p)	-	-	-	-	(1,639)	(1,639)
First interim dividend for the period ended 31 December 2007 (7.5p)	-	-	-	-	(1,821)	(1,821)
Second interim dividend for the period ended 31 December 2007 (7.5p)	-	-	-	-	(2,519)	(2,519)
31 December 2007	16,794	48,009	1,618	1,427	56,229	124,077

*    Deferred tax was released in the period to 31 December 2006 due to the impending conversion to UK-REIT.

Group Cash Flow Statement 

for the six months ended 30 June 2008

	Six months  ended  30 June  2008	Six months  ended  30 June  2007	Eighteen months ended 31 December 2007
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Operating activities
(Loss)/profit before tax	(507)	5,342	(3,684)
Less: Finance income	(1,949)	(718)	(2,178)
Plus: Finance costs	6,369	4,444	13,022
Plus: Fair value(gain)/loss on derivatives	(1,608)	-	2,808
Operating profit before financing	2,305	9,068	9,968
Adjustments to reconcile Group operating profit to net cash flows from operating activities:
Plus: Revaluation losses/(gains) on property	4,724	(5,055)	(4,857)
Less: Gains on disposal of property	-	-	(44)
Plus: Impairment loss	-	-	3,750
Plus: Goodwill impairment	90	126	5,551
Increasein trade and other receivables	(459)	(1,110)	(1,177)
Increase/(decrease) in trade and other payables	188	917	(448)
Cash generated from operations	6,848	3,946	12,743
Interest received from developments	206	35	-
UK REIT Conversion charge instalment	(553)	-	(554)
Taxation paid	-	(15)	(272)
Net cash flow from operating activities	6,501	3,966	11,917
Investing activities
Receipts from disposal of investment properties	-	-	464
Payments to acquire investment properties	(35,025)	(16,824)	(48,972)
Development loans advanced	-	(1,509)	(2,671)
Interest received on developments	-	-	281
Bank interest received	134	27	83
Acquisition of Cathedral	-	(410)	(30,924)
Cash acquired on acquisition of Cathedral	-	-	174
Acquisition of Northwich and Shavington	(7,988)	-	-
Net cash flow used in investing activities	(42,879)	(18,716)	(81,565)
Financing activities
Proceeds from issue of shares  (net of expenses)	-	38,752	41,443
Term bank loan drawdowns	54,245	14,900	47,050
Term bank loan repayment	(10,500)	(32,500)	-
Interest paid	(4,436)	(4,718)	(12,977)
Equity dividends paid	(2,771)	(1,821)	(5,979)
Net cash flow from financing activities	36,538	14,613	69,537
Increase/(decrease) in cash and cash equivalents for the period	160	(137)	(111)
Cash and cash equivalents at start of period	3,862	3,829	3,973
Cash and cash equivalents at end of period	4,022	3,692	3,862

  Notes to the financial statements

1. Accounting policies

Basis of preparation/Statement of compliance

The half year report for the six months ended 30 June 2008 has been prepared in accordance with IAS 34 'Interim Financial Reporting' and International Financial Reporting Standards as adopted by the European Union and reflected in the accounting policies set out in the Group's financial statements as at 31 December 2007. 

The half year report does not include all the information and disclosures required in the statutory financial statements and should be read in conjunction with the Group's financial statements as at 31 December 2007.

The financial information contained in this report does not constitute statutory accounts within the meaning of section 240 Companies Act 1985. The auditors' report on the full financial statements under section 235 Companies Act 1985, for the eighteen month period ended 31 December 2007 did not contain a statement under section 237(2) or (3) of the Companies Act 1985. This audit report, which was unqualified, was delivered to the Registrar of Companies together with the financial statements for the eighteen month period ended 31 December 2007.

Convention

The financial statements are presented in Sterling rounded to the nearest thousand.

Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business and one geographical segment, being investment in property in the United Kingdom leased principally to GPs, Primary Care Trusts, Health Authorities and other associated health care users.

Conversion to UK-REIT

The Group's conversion to UK-REIT status was effective from 1 January 2007. 

Conversion to a UK-REIT results in, subject to continuing relevant UK-REIT criteria being met, the Group's property profits, both income and gains, being exempt from UK taxationfrom 1 January 2007. 

On conversion to a UK-REIT, the Group was subject to a one-off taxation charge based on the value of the properties as at the date of conversion, amounting to £5.2m. This amount is payable over four years.

2. Acquisition of SPCD (Shavington) Limited and SPCD (Northwich) Limited

On 4 January 2008, the Group acquired 100% of the ordinary share capital of the above two companies for a cash consideration of £7.9m. SPCD (Shavington) owns Rope Green Medical Centre, Shavington and SPCD (Northwich) owns Firdale Medical centre, Northwich.

The net assets acquired amounted to £7.9m and consisted of properties.  There were no fair value adjustments and the post acquisition profits generated by the companies are not material to the interim financial statements.  The annual rent roll from the two properties is £443k.

3. Investment and development properties

The freehold, leasehold and development properties have been independently valued at fair value by Lambert Smith Hampton, Chartered Surveyors and Valuers, as at 30 June 2008.

The revaluation loss for the six months ended 30 June 2008 amounted to £4.7m. The revaluation gain for the eighteen months ended 31 December 2007 amounted to £4.9m and that for the six months ended 30 June 2007 amounted to £5.0m.

Property additions (including capitalised costs of £500k) relating to contracts for the six months ended 30 June 2008 amounted to £42.3m. There were no properties disposed of in the six months to 30 June 2008.

Property additions for the eighteen months ended 31 December 2007 amounted to £76.7m. Properties disposed of in the eighteen months ended 31 December 2007, valued at £0.4m as at 30 June 2006, realised a gain of £0.04m.

Property additions for the six months ended 30 June 2007 amounted to £16.5m. There were no property disposals during this period.  Commitments at 30 June 2008 amounted to £26.9m (31 December 2007: £35.7m).

4. Impairment loss and exceptional items

The impairment loss of £3.75m which was recognised in the Income Statement for the period ended 31 December 2007 reflects the difference between the estimated market value of properties in the course of development at the period-end and their contracted development cost. The impairment was recognised as a provision against the capitalised cost of property.

Goodwill, representing costs of £90k, arose in respect of the acquisition of SPCD Northwich and SPCD Shavington on the 4 January 2008. The goodwill has been written off in full to the Income Statement during the period (30 June 2007: £126k; 31 December 2007: £5.6m).

5. Earnings per share

The purpose of calculating an adjusted earnings per share is to provide a better indication of dividend cover for the period by excluding capital items, including valuation gains.

Following the exercise of the Management Options by the Joint Managers on 21 September 2006, there is no dilution and therefore no difference between the adjusted basic and diluted net assets values as at 30 June 2007, 31 December 2007 and 30 June 2008.

The calculation of basic and adjusted earnings per share as at 30 June 2008 is based on the following:

Loss for the six months ended 30 June 2008	Net profit attributable to Ordinary Shareholders £'000	Ordinary* shares  number	Per share  pence
Basic loss per share	(695)	33,587,094	(2.1)
Adjusted loss per share for the six months ended 30 June 2008:
Basic loss per share	(695)	33,587,094	(2.1)
Adjustments to remove:
Goodwill impairment	90
REIT Conversion charge	160
Net valuation gains on valuation of property	4.274
Fair value gains on derivatives **	(1,608)
Adjusted basic earnings per share	2,671	33,587,094	8.0

Earnings per share for the six months ended 30 June 2007	Net profit   attributable to  Ordinary   Shareholders   £'000	Ordinary* shares  number	Per share  Pence
Basic earnings per share	5,239	27,673,730	18.9
Adjusted Earnings per share for the six months ended 30 June 2007
Basic earnings per share	5,239	27,673,730	18.9
Adjustments to remove:
Management incentive fee	1,839
Goodwill impairment	126
Net valuation gains on valuation of property	(5,055)
Fair value gain on derivatives**	-
Adjusted basic earnings per share	2,149	27,673,730	7.8

Earnings per share for the eighteen months ended 31 December 2007	Net profit attributable to Ordinary Shareholders £'000	Ordinary* shares  number	Per share  pence
Basic earnings per share	16,801	28,297,852	59.4
Adjusted earnings per share for the eighteen months ended 31 December 2007
Basic earnings per share	16,801	28,297,852	59.4
Adjustments to remove:
Management incentive fee	2,591
Goodwill impairment	5,551
UK-REIT conversion charge	5,157
Deferred tax charge	3,880
Deferred tax release	(29,622)
Net valuation gains	(4,857)
Fair value loss on derivatives**	2,808
Adjusted basic earnings per share	2,309	28,297,852	8.2

*     Weighted average number of Ordinary Shares in issue during the period.

**     In view of the continuing volatility in the mark to market adjustment in respect of the period end valuation of derivatives that flows through the Income Statement, the Directors now believe that it is appropriate to remove the gain or loss in the calculation of adjusted results and the comparatives have been restated accordingly.

6. Trade and other receivables

		30 June 2008 £000	31 December 2007 £000
Development property interest		676	540
Property lease extensions		379	379
Other debtors		96	203
Rent receivable		637	663
Rent increase accrued income		836	613
Prepayments		449	468
Recoverable VAT		1,280	1,320
		4,353	4,186

7. Management incentive scheme

The management incentive fee is calculated on an annual basis, using the audited financial statements.No management incentive fee is payable for the period ended 30 June 2008. Included in Administration Expenses within the Income Statement for the six months to 30 June 2007 is a performance incentive fee expense of £1.8m (eighteen months to 30 June 2007: £2.6m). No fee was payable for the six months ended 31 December 2007.

8. Dividends paid

	No of shares dividend paid upon	Six months to 30 June 2008	Six months to 30 June 2007	Eighteen months to 31 Dec 2007
		£'000	£'000	£'000
Third interim dividend for the period ending 31 December 2007 (8.25p) paid 28 March 2008	33,587,094	2,771	-	-
Second interim dividend for the period ending 31 December 2007 (7.5p) paid 23 November 2007	33,587,094	-	-	2,519
First interim dividend for the period ended 31 December 2007 (7.5p) paid 22 May 2007	24,277,718	-	1,821	1,821
Final dividend for the year ended 30 June 2006 (6.75p) paid 22 November 2006	24,277,718	-	-	1,639
		2,771	1,821	5,979

The Board proposes to pay an interim dividend of 8.25p per Ordinary Share for the six months to 30 June 2008, payable on 20 November 2008, amounting to £2.7m.

9. Taxation

Taxation in the Income Statement:
	Six months ended 30 June 2008	Six months ended 30 June 2007	Eighteen months ended 31 Dec 2007
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Current tax
UK Corporation tax on non property income	28	30	23
Adjustments in respect of prior period	-	73	73
	28	103	100
Conversion to UK-REIT charge	160	-	5,157
	188	103	5,257
Deferred tax
Deferred tax charge for the period	-	-	3,880
Deferred tax release on conversion to UK-REIT (see note 1)	-	-	(29,622)
	-	-	(25,742)
Taxation expense/(credit) in the Income Statement	188	103	(20,485)

* Conversion to a UK-REIT means that the Group is no longer subject to UK Corporation tax. This enabled the Group to release deferred tax liabilities in respect of the property acquisitions made in the period at the expense of incurring a conversion charge of £160k (31 December 2007: £5.1m).

10. Net asset value calculations

There is no difference between the normal and adjusted net asset values as at 30 June 2007, 31 December 2007 and 30 June 2008, due to the release of all deferred tax liabilities on conversion to UK-REIT status.Following the exercise of the Management Options by the Joint Managers on 21 September 2006, there is no dilution and therefore no difference between adjusted basic and diluted net asset values as at 30 June 2007, 31 December 2007 and 30 June 2008. 

Net asset values have been calculated as follows:

	30 June  2008	30 June  2007	31 December   2007
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Net assets per Group Balance Sheet	125,429	151,068	124,077
	No. of shares	No. of shares	No. of shares
Ordinary shares:
Issued share capital	33,587,094	33,587,094	33,587,094
Net asset value per share	373.4p	449.8p	369.4p

The Half Year Report for the six months ended 30 June 2008 will be posted to Shareholders and Information Rights Holders on 28 August 2008 and to those on the mailing list as soon as practicable thereafter. It will also be available on request from the Company Secretary, J O Hambro Capital Management Limited, Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB and from the web site at www.phpgroup.co.uk.

 

END

 

 

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