Half-yearly Report

FOR IMMEDIATE RELEASE 26th September 2007 LONDON & ASSOCIATED PROPERTIES PLC: HALF YEAR RESULTS FOR SIX MONTHS TO 30 JUNE 2007 HIGHLIGHTS - Since period end acquired 50% outstanding interest in King Edward Court, Windsor for £14.1m - Directly owned portfolio now stands at £249m - Net assets increase further to £103.6m from £101.9m at December 2006 year end - Under UK GAAP net assets would have been £126m - Disposals of mature assets total £44m - Rental income over period grew 7% to £6.2m despite sales - 200,000 sq ft partial redevelopment of Windsor completed and tenants fitting- out - Improved financing margins on Windsor will generate additional £800,000 net profit "As shareholders can see, LAP is in a sound position. We have completed our disposal programme just as the market is showing signs of softening. At the same time we have cash of £31m and further committed facilities of £24m. This will enable us to take advantage of opportunities to acquire new shopping centres should they reach more acceptable levels. Our portfolio is well located and, following our disposals, the properties within it have good growth prospects. The quality of the cash flows from our investment properties remains strong, our established management teams are confident of delivering our projects on time and on budget, and I look forward to the future with confidence," Michael Heller, Chairman. Contact: London & Associated Properties PLC Tel: 020 7415 5000 John Heller, Chief Executive Robert Corry, Finance Director Baron Phillips Associates Tel: 020 7920 3161 Baron Philips LAP Half Year Report 2007 Chairman's Statement I am pleased to report on an active period during which LAP made further significant progress in pursuing its strategy of growing its net asset base. We have continued our policy of ensuring that our portfolio comprises substantial property assets with long term growth potential. This was the reasoning behind our acquisition of the outstanding 50% of Analytical Properties, our joint venture with Bank of Scotland. Analytical's sole asset is King Edward Court, Windsor, a prime shopping centre in the heart of Windsor's shopping core. Over the last few years we have deliberately changed the emphasis of our portfolio and sold assets which we viewed as having matured. We also wished to take advantage of a buoyant market background and, so far this year, we have sold properties with a combined value of £43.9m against a book value, as at 31 December 2006, of £41.3m. In the last three years we have sold some £132m of mature property. Disposals so far this year include The Mall, Dagenham and Saxon Square, Christchurch, for £18.7m and £20.5m respectively. These prices represent net initial yields of 5.4% and 5.1%. We also sold a house in Notting Hill (part of the London Portfolio) and a small retail property in Wolverhampton for a combined £4.8m. All the disposals were in excess of their most recent external valuations. Over the six months to 30 June 2007 gross rental income grew by 7% to £6.2m from £5.8m despite the portfolio restructuring. However, more significantly, we now have £31m of cash on deposit, even after paying £14.1m for the remaining shares in Analytical Properties. This places us in a strong position to acquire quickly any suitable retail property that becomes available. We are already seeing a softening of retail property values and, therefore, we believe that our timing has been good. We are also benefiting from the significant positive differential between the interest earned on the cash proceeds, which we have placed on deposit, and the rental income lost as a result of these sales. Our total directly owned property portfolio now stands at £249m. Some 60% of this portfolio is located in prime central London and affluent parts of the South East where demand from both investors and retailers for properties in these locations remains strong. We are confident that these assets will continue to perform over the medium term. Total assets under management, including those of Bisichi Mining plc and Dragon Retail Properties, stand today at £344m. Our net assets at 30 June 2007 were £103.6m compared with £101.9m at the 2006 December year end. We do not value our properties at the half-year stage and our net asset figure does not include a property revaluation. Under UK GAAP, the former accounting rules, our net assets at 30 June 2007 would have been £126m. We continue to extensively manage the London Portfolio which we acquired for £50.3m in September 2006. I have reported previously that our management team is already making progress and we have made considerable savings on the irrecoverable expenses that are a feature of this portfolio. A short term impact of these expenses has been a dip in our pre-tax profits to £0.9m against £1.3m for the same period last year. Profits have also been affected in the short term by interest payments on the debt used to acquire the portfolio. We are confident that we will increase our profits as our management and development plans for this portfolio and elsewhere start to bear fruit. We have benefited from a tax credit of £1.3m due to the write back of part of a tax provision following the disposal of The Mall, Dagenham and the utilisation of tax losses. Gearing will rise to 120% under IFRS (98% under UK GAAP) following our acquisitions of the London Portfolio and the further 50% holding in Analytical. The latter must now be treated as a subsidiary. Its debt will therefore be shown in its entirety on our balance sheet although the Analytical debt continues to be ring-fenced from the rest of the LAP assets. We are declaring an interim dividend of 0.65p payable on 25 January 2008 to shareholders on the register as at 21 December 2007. I will now deal with some of our major properties and projects in more detail. Windsor At King Edward Court, the 200,000 sq ft development of new retail units, a supermarket, a hotel and a restaurant is completed and the pre-let units have been handed over to the tenants. The final development cost will be around £22m at which level the project is profitable, and it has been very well received by both tenants and public alike. Waitrose, Zara, Hennes and New Look are all fitting out their units and expect to open for trading by the middle of next month. Travelodge opened for the August Bank Holiday weekend and has reportedly enjoyed excellent occupancy levels. We are near to completing a lease on the one remaining mall level unit to a national fashion retailer while the kiosk is under offer to a juice bar operator. The rest of King Edward Court continues to trade well and the rents are growing in line with expectations. We have recently concluded a rent review with Next at £252,000 a year, an annual increase of £72,000 and slightly ahead of ERV. As already mentioned, LAP has acquired the 50% outstanding interest it did not already own in Analytical Properties for £14.1m from the Bank of Scotland. Analytical's only asset is King Edward Court and we are delighted to now fully own this high quality shopping centre. We are confident that our part re-development of this centre will produce good returns over the coming years as new retailers seek to join the top quality new tenants that we have introduced. We also have further initiatives to raise the Centre's income from existing levels. We financed the acquisition from our cash resources and refinanced the existing facility with a new loan of £70m to Analytical Properties from Bank of Scotland. We were able to negotiate improved margins as 100% owner and this alone will generate £800,000 per annum of additional net profit for LAP. The London Portfolio After a year of ownership, the portfolio continues to trade satisfactorily. We have begun a £275,000 high quality refurbishment of the vacant flat above Antiquarius on Kings Road. Following completion we anticipate letting the property at a rent of £1,200 a week. Refurbishment is also underway of the vacant house on Upper Street, Islington, where we expect to achieve a weekly rent of £800 following expenditure of approximately £200,000. I am particularly pleased to report that we now have full control of Chenil House, Kings Road, following a lease surrender, effective from February 2008, from the tenant, Daisy and Tom. The site has a 15,000 sq ft footprint but the four floors of offices above are only a maximum of 1,100 sq ft per floor. We are working with our architects and designers to extend the accommodation of the upper parts by some 20,000 sq ft and we intend submitting a planning application on this project in the near future. I expect to be able to report on further initiatives to increase the lettable space in the London Portfolio properties in the near future. Sheffield Orchard Square continues to thrive from its excellent position in the prime core of Sheffield. It will also benefit from being next to an exciting city centre regeneration project that is about to commence and which will further consolidate the Centre's position at one of the best locations in this major city. The River Island unit we created on Fargate is trading well, and we have now let the small adjacent unit we built at the same time to The Perfume Shop at £79,000 a year. This equates to £236 Zone A, in line with expectations and further assisting in the rent review on another of our units on Fargate that is currently underway. To the rear, work has started on a new 45,000 sq ft anchor store. This will incorporate the existing TK Maxx unit, the vacant Stonehouse pub that we acquired in 2003, and three kiosks. The entire new unit has been pre-let to TK Maxx at an annual rent of £625,000, an increase of £383,000 over the combined rent received on the existing units. It is anticipated that the development will cost some £4.5m, including all the tenant incentives, and is scheduled for completion in Autumn 2008. We will fund these works from our cash resources. As shareholders can see, LAP is in a sound position. We have completed our disposal programme just as the market is showing signs of softening. At the same time we have £31m of cash and further committed facilities of £24m. This will enable us to take advantage of opportunities to acquire new shopping centres should they reach more acceptable levels. Our portfolio is well located and, following our disposals, the properties within it have good growth prospects. The quality of the cash flows from our investment properties remains strong, our established management teams are confident of delivering our projects on time and on budget, and I look forward to the future with confidence. Michael Heller Chairman 26 September 2007 Consolidated income statement for the six months ended 30 June 2007 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 Gross rental income Group and share of joint ventures 6,230 5,798 11,840 Less: joint ventures - share of rental income (1,026) (2,281) (3,949) 5,204 3,517 7,891 Less: property overheads: Direct property expenses (846) (455) (1,107) Attributable overheads (1,624) (1,015) (3,623) Property overheads (2,470) (1,470) (4,730) Net rental income 2,734 2,047 3,161 Listed investments held for trading 79 32 264 Operating profit before adjustments 2,813 2,079 3,425 Costs of evaluation - - (1,849) Goodwill impairment - - (7,483) London Portfolio 3 - - (9,332) Profit on sale of subsidiary investments - - 52 Profit on sale of investment properties 375 - - Net gain on revaluation of investment properties - - 21,610 Net increase in value of investments held for trading 158 225 680 Operating profit after adjustments 3,346 2,304 16,435 Share of profit of joint ventures 369 387 4,358 Share of profit of associate 454 120 972 4,169 2,811 21,765 Interest receivable 1 586 350 742 Interest payable 1 (3,752) (1,888) (4,182) Profit before taxation 1,003 1,273 18,325 Income tax 2 1,254 417 (3,107) Profit for the period 2,257 1,690 15,218 Basic earnings per share 4 2.96p 2.22p 20.00p Diluted earnings per share 4 2.96p 2.22p 19.97p Consolidated balance sheet at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 Non current assets Value of properties attributable to group 170,729 117,913 192,788 Obligations under head leases 7,758 8,582 9,340 Property 5 178,487 126,495 202,128 Plant and equipment 947 964 1,033 Investments in joint ventures 15,632 18,398 15,263 Investments in associated company 7,283 6,294 6,872 Held to maturity investments 1,834 3,784 1,834 204,183 155,935 227,130 Current assets Trade and other receivables 4,101 4,212 3,849 Interest derivatives 72 - - Financial assets-investments held for trading 5,071 4,761 4,992 Cash and cash equivalents 26,464 6,397 14,555 35,708 15,370 23,396 Total assets 239,891 171,305 250,526 Current liabilities Financial liabilities-borrowings (3,356) (3,138) (5,693) Trade and other payables (10,590) (6,764) (11,434) (13,946) (9,902) (17,127) Non current liabilities Financial liabilities-borrowings (93,600) (52,502) (99,976) Obligations under head leases (7,758) (8,582) (9,340) Deferred tax (20,970) (11,049) (22,223) (122,328) (72,133) (131,539) Total liabilities (136,274) (82,035) (148,666) Net assets 103,617 89,270 101,860 Equity Share capital 8,232 8,232 8,232 Share premium account 5,236 5,228 5,236 Translation reserve (560) (318) (517) Capital redemption reserve 47 47 47 Other reserves 429 429 429 Retained earnings (excluding treasury shares) 96,766 82,284 94,966 Treasury shares (6,533) (6,632) (6,533) Retained earnings 90,233 75,652 88,433 Total shareholders' equity 103,617 89,270 101,860 Net assets per share 6 135.93p 117.26p 133.62p Diluted net assets per share 6 135.77p 117.10p 133.47p Consolidated statement of recognised income and expense for the six months ended 30 June 2007 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit for the period 2,257 1,690 15,218 Currency translation in associate (43) (342) (541) Total recognised income and expense for the period 2,214 1,348 14,677 Consolidated statement of changes in shareholders' equity for the six months ended 30 June 2007 Retained Earnings Earnings Share Share Translation Other Treasury ex: treasury Total capital premium reserve reserves shares shares equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2006 8,232 5,228 24 476 (6,632) 81,013 88,341 Currency translation in associate - - (342) - - - (342) Dividend - - - - (419) (419) Profit for the period - - - - 1,690 1,690 Balance at 30 June 2006 (unaudited) 8,232 5,228 (318) 476 (6,632) 82,284 89,270 Balance at 1 January 2006 8,232 5,228 24 476 (6,632) 81,013 88,341 Investment valuation in joint venture - - - - - 24 24 Equity share options in associate - - - - - 44 44 Acquisition of own shares - - - - (40) - (40) Disposal of own shares - - - - 139 - 139 Gain/(loss) on disposal of own shares - 8 - - - (20) (12) Currency translation in associate - - (541) - - - (541) Dividend - - - - - (1,313) (1,313) Profit for the year - - - - - 15,218 15,218 Balance at 31 December 2006 (audited) 8,232 5,236 (517) 476 (6,533) 94,966 101,860 Currency translation in associate - - (43) - - - (43) Dividend - - - - - (457) (457) Profit for the period - - - - - 2,257 2,257 Balance at 30 June 2007 (unaudited) 8,232 5,236 (560) 476 (6,533) 96,766 103,617 Consolidated cash flow statement for the six months ended 30 June 2007 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Operating activities Operating profit after adjustments 3,346 2,304 16,435 Depreciation 100 80 178 Goodwill impairment - - 7,483 Costs of evaluation - - 1,849 London portfolio - - 9,332 Loss/(gain) on disposal of non-current assets 13 (7) (30) Profit on sale of investment properties (375) - - Profit on sale of subsidiary investments - - (52) Net gain on revaluation of investment properties - - (21,610) Net increase in value of investments held for trading (158) (225) (680) Decrease/(increase) in net current assets 693 (1,036) (129) Interest received 505 411 757 Interest paid (3,663) (2,383) (4,980) Income tax paid - (243) (359) Cash flow from operating activities 461 (1,099) (1,138) Cash flows from investing activities 20,792 761 (19,615) Cash flow from financing activities (7,007) (169) 25,849 Net increase/(decrease) in cash and cash equivalents 14,246 (507) 5,096 Cash and cash equivalents at beginning of period 8,862 3,766 3,766 Cash and cash equivalents at end of period 23,108 3,259 8,862 Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts: 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash and cash equivalents 26,464 6,397 14,555 Bank overdraft (3,356) (3,138) (5,693) Cash and cash equivalents at end of period 23,108 3,259 8,862 Notes to the half year report 1. Finance costs 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Interest receivable 586 350 742 Interest payable - Interest on bank loans and overdrafts (2,563) (960) (2,839) Other loans (1,052) (1,052) (2,124) Interest on obligations under finance leases (222) (220) 36 Total borrowing costs (3,837) (2,232) (4,927) Less : amounts included in the cost of qualifying assets 85 344 745 (3,752) (1,888) (4,182) (3,166) (1,538) (3,440) 2. Income tax 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Current tax - 16 - Deferred tax (1,254) (433) 3,107 (1,254) (417) 3,107 The deferred tax release at 30 June 2007 is due to the write back of part of a tax provision following the disposal of properties and the utilisation of tax losses. 3. Exceptional items 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Costs of evaluation - - 1,849 Goodwill impairment - - 7,483 London Portfolio - - 9,332 The costs of evaluation represent costs incurred by the company, prior to the decision being taken that LAP Ocean Holdings Limited should acquire the whole of the issued share capital of APL Ocean Limited, the owner of the London Portfolio. Goodwill impairment arose on the acquisition of APL Ocean Limited on 22 September 2006. This goodwill primarily arose as a result of recognising deferred tax in respect of property valuations on the business combination and the goodwill was immediately written off to the income statement. 4. Earnings per share 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited)(unaudited) (audited) Group profit after tax (£'000) 2,257 1,690 15,218 Weighted average number of shares in issue for the period ('000) 76,229 76,129 76,102 Basic earnings per share 2.96p 2.22p 20.00p Diluted number of shares in issue ('000) 76,317 76,230 76,205 Fully diluted earnings per share 2.96p 2.22p 19.97p 5. Property Properties at 30 June 2007 are included at valuation as at 31 December 2006, plus additions, less disposals in the period. 6. Net assets per share 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Shares in issue ('000) 76,229 76,129 76,229 Net assets per balance sheet (£'000) 103,617 89,270 101,860 Basic net assets per share 135.93p 117.26p 133.62p Shares in issue diluted by outstanding share options ('000) 76,349 76,279 76,349 Net assets after issue of share options (£'000) 103,657 89,322 101,900 Fully diluted net assets per share 135.77p 117.10p 133.47p 7. Post balance sheet event On 24 September 2007 at an Extraordinary General Meeting, the shareholders approved the acquisition by the company of (1) the 50 per cent of the issued share capital of Analytical Properties Holdings Limited (APHL) that it does not already own from Uberior Ventures Limited and (2) £1,829,000 of secured, subordinated B loan stock of APHL. The company made a payment of £14.1 million in aggregate on completion at 25 September 2007. As at 30 June 2007 APHL was treated on the balance sheet within investments in joint ventures. From 25 September 2007 APHL will be accounted for as a fully consolidated wholly owned subsidiary. 8. Financial information The above financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The figures for the year ended 31st December 2006 are based upon the latest statutory accounts, which have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. The six months ended 30 June 2007 uses the same accounting policies as for the year ended 31 December 2006, and the half year results have not been audited or subject to review by the company's auditors. 9. Board approval These half year results were approved by the Board of London & Associated Properties PLC on 26 September 2007. 10.Posting to shareholders The half year report will be sent to shareholders by mail. Copies are now available at the company's registered office: Carlton House, 22a St James's Square, London, SW1Y 4JH and may also be downloaded from the company's website: www.lap.co.uk.

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