Interim Results
Babcock&Brown Public Ptnrships Ltd
18 September 2007
Babcock & Brown Public Partnerships Limited
Interim results announcement for the period 1 January to 30 June 2007
Results Teleconference Details
Please note a teleconference for investors and analysts will take place at 9am
today. Details are:
Teleconference number: +44 (0)20 7162 0125
Conference ID: 766518
A copy of the results presentation will be available on the website
www.bbpublicpartnerships.com
Results Highlights
H1 2007
Profit before tax £8.1m
Net Asset Value as at 30 June 2007(1) £322.4m
Net Asset Value per share 107.5p
Increase in Net Asset Value(2) 5.2%
Uncommitted cash available for investment(3) £61m
Keith Dorrian, Chairman of the Board, said;
'I am pleased to report that the Company has performed successfully during the
six months to 30 June 2007. The Company's competitiveness and pipeline of
opportunities has not been affected by the recent turbulence in capital markets
and the market for social infrastructure, whilst showing signs of maturing in
the United Kingdom, remains robust internationally as the historic under
investment in a number of developed countries is addressed by PPP-style
initiatives. The Board intends to pursue a policy which will result in the
Company developing a global reputation as a quality provider of PPP financing
and it is through this initiative that we anticipate being able to provide our
Shareholders with a sustainable superior return supported by a diversified
international portfolio of high quality assets.'
For further information, please contact:
Babcock & Brown Investment Management Limited - 020 7203 7300
Investors - Bianca Francis
Media - Anthony Kennaway
1 The Net Asset Value ('NAV') referred to above differs from the basis of
recording net assets as set out in the balance sheet included in the financial
statements. Net Asset Value as shown above is a fair market valuation of the
Group's economic interests (note 4), calculated utilising discounted cash flow
methodology, adjusted for European Private Equity and Venture Capital
Association (EVCA) guidelines, a methodology considered appropriate, given the
special nature of infrastructure investments. Estimated future cash flows
accruing to each economic interest have been discounted using discount rates
that reflect the risks associated with that interest.
The only current exception to this methodology is with respect to the valuation
of the stapled units in RiverCity Motorway project. These have been valued using
the closing share price at 30 June 2007 ('market value').
The Net Asset Value also includes cash, cash equivalents and assets and
liabilities attributable to the Company and intermediate holding companies at 30
June 2007.
2 The Net Asset Value per Ordinary Share represents an increase of 5.2 per cent
compared to the Net Asset Value at 31 December 2006 of 102.2 pence per share
prepared on the basis referred to in Note 1 above.
3 Uncommitted cash available for investment is the balance of cash raised during
the IPO, which, as at the date of these accounts, has not yet been committed.
4 The Group's economic interests at 30 June 2007 are set out in the Portfolio
Interests section of this Report.
Chairman's Statement
I am pleased to report that the Company has performed successfully during the
six months to 30 June 2007. The individual economic interests that make up the
portfolio have all performed at, or in excess of the Directors' projections. In
accordance with the Directors' declared intent, the Company has commenced the
broadening of its international exposure with the acquisition of Durham
Courthouse in Canada.
The considerable activity seen in 2006 in the market for social infrastructure
assets has continued into 2007, with the acquisition of the PFI Infrastructure
Company by I2 and Land Securities acquisition of the AMEC PPP portfolio along
with a number of other smaller transactions. As described in the Investment
Advisor's report, we have investigated the valuations applied in these
transactions and the implications that these valuations have for our own
portfolio. The Board believes that the range of investments held by the Company
have become relatively more attractive over the period and this improved
sentiment towards the asset class is reflected in the portfolio valuation.
Financial results for the period
On a consolidated basis the Group reported a profit before tax of £8.1 million
for the period and earnings per share of 4.58 pence. The Net Asset Value of the
Group's investments is valued at £322.4 million which represents an increase of
5.2% since the last reporting period.
Distributions
At the time of listing the Directors announced their intention to target an
initial annualised distribution payment of 5.25 pence per share and accordingly
the Directors have approved an interim distribution of 3.35 pence per share
which will be paid on 26 October 2007 to shareholders on the register as at 28
September 2007. As intended, this distribution will take account of the period
from listing to 30 June 2007. Going forward, it is the Company's intention to
maintain the initial yield in real terms.
Gearing
As at 30 June 2007 the Company had no gearing. Borrowings of the Group relate to
the underlying project vehicles and are non-recourse to Group entities except
the project vehicle to which the borrowing applies. All such interest payments
associated with the borrowings are hedged and the Board considers that the
Company has minimal exposure to interest rate volatility.
Outlook
The Board believes that the Company's outlook is positive. The Company and its
Investment Advisor continue to review a large number of possible investment
opportunities and since the date of these accounts the Company has entered into
an agreement to acquire a 49% stake in BeNEX, a German Local Public Passenger
Transportation (LPPT) company in Germany. We believe that, in the longer term,
opportunities within the public infrastructure sector will increase in number
and size in most developed countries and the Board believes that the Company is
well placed to take advantage of these opportunities. The Board is pleased to
report that the association with the Investment Advisor has benefited the
Company substantially in that we are able to consider a wide range of
opportunities which would otherwise be very difficult and expensive to identify
and review.
The Company's competitiveness and pipeline of opportunities has not been
affected by the recent turbulence in capital markets and the market for social
infrastructure, whilst showing signs of maturing in the United Kingdom, remains
robust internationally as the historic under-investment in a number of developed
countries is addressed by PPP-style initiatives. The Board intends to pursue a
policy which will result in the Company developing a global
reputation as a quality provider of PPP financing and it is through this
initiative that we anticipate being able to provide our Shareholders with a
sustainable superior return supported by a diversified international portfolio
of high quality assets. The Company is currently reviewing a number of potential
investment opportunities around the world both in its own right and through
Babcock & Brown and the Board remains confident that the Company will be
substantially invested by year end. I am therefore satisfied that the Company
will continue to perform in line with expectations.
Portfolio Interests
The Company held economic interests in the following projects at 30 June 2007(1).
Project Name % economic Status
interest(1)
held by the (scheduled completion date)
Group
Abingdon Police Station 100% Operational
Bootle Government Offices 100% Operational
Derbyshire Magistrates Courts 100% Operational
Derbyshire Schools Phase 1 100% Operational
Hereford & Worcester Magistrates Courts 100% Operational
Norfolk Police HQ 100% Operational
North Wales Police HQ 100% Operational
Strathclyde Police Training Centre 100% Operational
St Thomas More School 100% Operational
Derbyshire Schools Phase 2 100% Operational
Calderdale Schools 100% Operational
Northamptonshire Schools 100% Construction (completion
due April 2008) (2)
Tower Hamlets ls 100% Operational
Long Bay Forensic and Prison
Hospitals Project 50% Construction (completion due
mid 2008)
RiverCity Motorway Project 4.86% Construction (completion due
mid 2010)
Royal Melbourne Showgrounds
Redevelopment Project 50% Operational
Reliance Rail 12.75% Construction (rolling stock
completion starting in 2010
through 2013)
Interests acquired during the period
Durham Courthouse 100% Construction (completion due
late 2009)
(1) Economic interests reflect an investment in the capital of the underlying
project limited partnership.
(2) Operational services are also being provided at all schools.
The Company also owns subordinated debt provided to finance certain projects
developed under the NHS LIFT initiative as set out below. The Company's
interests in NHS LIFT subordinated debt are estimated to comprise approximately
2% by value of the portfolio.
Project Name Issuer Status (scheduled
completion date)
Beckenham Hospital BBG Lift Accommodation Services Construction
Limited (completion due January
2009)
Garland Road Health BBG Lift Accommodation Services Operational
Centre Limited
Alexandra Avenue BHH Lift Accommodation Services Operational
Primary Care Limited
Centre
Monks Park Health BHH Lift Accommodation Services Operational
Centre Limited
Gem Centre Bentley Wolverhampton City and Walsall Lift Operational
Bridge Accommodation Services Limited
Phoenix Centre Wolverhampton City and Walsall Lift Operational
Accommodation Services Limited
Investment Advisor's Report
Introduction
Babcock & Brown Investment Management Ltd (BBIML) is a wholly owned subsidiary
of Babcock & Brown, a global investment and advisory firm with longstanding
capabilities in structured finance and the creation, syndication and management
of asset and cash flow based investments. Babcock & Brown was founded in 1977
and is listed on the Australian Stock Exchange. BBIML acts as Investment Advisor
to the Company and as Operator to Babcock & Brown Public Partnerships LP (BBPP
LP).
BBIML is part of the Babcock & Brown group of companies. Babcock & Brown
operates from 29 offices across Australia, North America, Europe, Asia, United
Arab Emirates and Africa and has in excess of 1,250 employees worldwide. BBIML
was incorporated in England and Wales on 14 September 2000 and is authorised and
regulated by the Financial Services Authority.
Portfolio Investment Performance
Each of the underlying businesses within the Portfolio performed at least in
line with expectations during the period, ensuring the Company is in a position
to meet its stated distribution target. Construction was completed at the
Garland Road Health Centre as well as at the remaining sites on the Tower
Hamlets Schools project and the Portfolio remains balanced with approximately
25% of assets in their construction phase and the remaining 75% already in
operation.
During the period the first investment was made in a Canadian PPP project. The
project comprises a 100% economic interest in Durham Courthouse and involves the
design, build and subsequent operation and maintenance of the 33 courtroom
public courthouse for a period of 30 years. The acquisition supports the
Company's policy of seeking investment in international markets and offers
projected returns that meet or exceed the Company's stated investment criteria.
Construction commenced in May 2007 and is anticipated to take approximately
three years.
A number of operational initiatives in order to enhance the long-term
performance of the Portfolio are being examined. The fact that the Portfolio
consists substantially of 100% interests in individual projects provides
significant influence over the decisions made at the underlying asset level and
should allow realisation of greater returns from the portfolio over time.
Initiatives completed during the period included the re-pricing of several
facilities management contracts, a pooling of the operational project insurances
resulting in significant premium reductions, and the ability to bring to market
(having completed construction works) surplus land at Tower Hamlets Schools
which should be realised at a premium to our valuation. Limited performance or
availability deductions were made against the projects, and those levied were
passed through to the facilities management providers. In addition, six sites at
the largest project in the portfolio, Northamptonshire Schools, were completed
during the period ensuring that the project remains on schedule for final
completion in 2008.
On 15 August 2007, the Company entered into an agreement to acquire an economic
interest in 49% of BeNEX, a company holding interests in German local public
passenger transportation companies (LPPTs). BeNEX is a subsidiary of Hamburger
Hochbahn AG, the second largest LPPT company in Germany and comprises all the
existing expansion activities in the LPPT sector outside the metropolitan region
of Hamburg. The transaction represents the Company's first investment in the
German market and is expected to combine Hamburger Hochbahn's experience and
strong track record in the German LPPT market and BBPP's experience in
investment in public private partnerships, creating a powerful partnership in
the recently deregulated German transport market. BBPP, through BeNEX, hopes to
participate actively in future local bus and rail tenders and, in doing so, may
also examine the potential acquisition of other LPPT businesses across Germany.
Valuation
The Administrator (Heritage International Fund Managers Limited), calculates the
Net Asset Value of an Ordinary Share with the assistance of BBIML, who produce
fair market valuations of the Group's investments on a six-monthly basis as at
30 June and 31 December. The valuation methodology used is based on discounted
cash flow methodology, with the exception of the Company's investment in the
Australian Stock Exchange listed RiverCity Motorway project which is valued at
mark to market. The discount rates used for valuing each economic interest are
based on an analysis of the appropriate risk premium that applies to each
project in excess of the risk free rate.
The risk premium applied by the Directors of the Company in valuing the
Company's economic interest is based on the advice of the Investment Advisor,
market knowledge and information in the public domain from comparable
transactions.
Construction completion at Garland Road Health Centre and Tower Hamlets Schools,
as well as significant construction progress at our largest project,
Northamptonshire Schools, and the general maturing of the overall portfolio has
caused us to lower the discount rate applied to the portfolio slightly. We will
continue to monitor the discount rates applied to the portfolio to ensure we
continue to report fair market valuations.
The discount rates used for valuing the Group's economic interests as at 30 June
2007 range from 7.0% to 9.4% and the weighted average discount rate is 7.7%. As
at 31 December 2006 the weighted average discount rate utilised for valuation
purposes was 8.0%.
The Company's portfolio was valued at £322.4 million at 30 June 2007, up from
£306.6 million at 31 December 2006.
Net Asset Value
The Net Asset Value per Ordinary Share, as defined on page 2, as at 30 June 2007
was 107.5 pence. This represents an increase of 5.2% compared to the Net Asset
Value at 31 December 2006 of 102.2 pence per Ordinary Share.
Gearing
As at 30 June 2007 the Company had no gearing. Borrowings of the Group relate to
the underlying project vehicles and are non-recourse to Group entities except
the project vehicle to which the borrowing applies. Currently each of the
operating projects are meeting their debt service obligations. In addition, the
debt in the Company's underlying investments is currently fully hedged in
respect of interest rate risk, therefore minimising any exposure to fluctuations
in underlying interest rates.
Outlook
The acquisition of Durham Courthouse and the investment in BeNEX demonstrates
the ability of the Investment Advisor to source attractive assets for the
Company internationally and is a further demonstration of the benefits of the
relationship of the Investment Advisor with the wider Babcock & Brown group,
which provides substantial resources in the origination and execution of
investment opportunities for the Company. Through Babcock & Brown we are
reviewing a number of opportunities across the globe. We remain confident that
these opportunities will offer attractive value for shareholders and look
forward to updating you on each of these projects at the appropriate time.
We believe this solid pipeline of investment opportunities, together with the
ongoing performance of the existing assets, will provide continued share price
performance for the Company's investors.
Babcock & Brown Investment Management Limited
18 September 2007
Independent Review Report to the members of
Babcock & Brown Public Partnerships Limited
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2007 which comprise the consolidated income
statement, the consolidated statement of changes in equity, the consolidated
balance sheet, the consolidated cash flow statement and related notes 1 to 15.
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 financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
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 interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which requires that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Deloitte & Touche LLP
Chartered Accountants
Guernsey, Channel Islands
18 September 2007
Consolidated Income Statement (unaudited)
Six months ended 30 June 2007
Notes Six months
ended 30 June
2007
£'000s
Continuing operations
Revenue 3 59,482
Cost of sales (56,472)
Gross profit 3,010
Investment income 20,642
Other gains and losses 541
Share of results from associates 411
Other operating income 651
Total other income 22,245
Finance costs 4 (10,925)
Operating expenses 4 (2,698)
Administrative expenses 4 (3,501)
Total other expenses 4 (17,124)
Profit before tax 8,131
Tax 5 5,615
Profit for the period from continuing
operations 13,746
Attributable to:
Equity holders of the parent 13,746
Pence
Earnings per share
From continuing operations
Basic 8 4.58
=====
Diluted 8 4.58
=====
Consolidated Statement of Changes in Equity (unaudited)
Six months ended 30 June 2007
Share capital Share premium Hedging and Revaluation Other Retained Total
account translation reserves distributable earnings
reserves reserves
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance at
31 December 2006 30 293,601 1,549 572 - 1,616 297,368
Net increase in fair
value of hedging
derivatives - - 15,145 - - - 15,145
Net increase in fair
value of hedging
derivatives
from associates - - 1,043 - - - 1,043
Exchange difference
on translation of
foreign operations - - 388 - - - 388
Net increase in fair
value of financial
assets held
as available
for sale - - - 357 - - 357
-------- -------- -------- -------- -------- -------- -------
Net income recognised
directly in equity - - 16,576 357 - - 16,933
Net profit
for the period - - - - - 13,746 13,746
-------- -------- -------- -------- -------- -------- -------
Total recognised
income and expense - - 16,576 357 - 13,746 30,679
Issue fees applied to
share premium account - (95) - - - - (95)
Transfer of share
premium account - (293,506) - - 293,506 - -
======== ======== ======== ======== ========= ======== =======
Balance 30 - 18,125 929 293,506 15,362 327,952
at 30 June 2007 ======== ======== ======== ======== ========= ======== =======
Consolidated Balance Sheet (unaudited)
As at 30 June 2007 (continued)
Notes 30 June 31 December
2007 2006
£'000s £'000s
Non-current assets
Intangible assets 10 119,350 90,173
Property, plant and
equipment 9,535 9,742
Interests in associates 9,244 7,681
Available for sale
investments 13,950 13,153
Derivative financial
instruments 21,015 -
Financial asset loans
and receivables 11 414,642 232,222
Total non-current assets 587,736 352,971
Current assets
Financial asset loans
and receivables 11 27,306 22,946
Trade and other
receivables 11,475 6,987
Current tax asset 452 -
Cash and cash
equivalents 272,338 188,107
Total current assets 311,571 218,040
Total assets 899,307 571,011
Current liabilities
Trade and other payables 17,090 22,181
Current tax liabilities - 3
Bank loans 6,241 4,764
Total current
liabilities 23,331 26,948
Non-current liabilities
Bank loans 452,686 153,434
Derivative financial
instruments 1,034 7,198
Deferred tax liabilities 93,747 85,506
Long-term provisions 557 557
Total non-current
liabilities 548,024 246,695
Total liabilities 571,355 273,643
Net assets 327,952 297,368
Note 30 June 2007 31 December
2006
£'000s £'000s
Equity
Share capital 30 30
Share premium account - 293,601
Revaluation reserves 929 572
Hedging and translation
reserves 18,125 1,549
Other distributable
reserves 12 293,506 -
Retained earnings 15,362 1,616
------- -------
Equity attributable to
equity holders of the
parent 327,952 297,368
------- -------
Total equity 327,952 297,368
======= =======
The half yearly financial report was approved by the Board of Directors on 18
September 2007.
Keith Dorrian Rupert Dorey
Chairman Director
18 September 2007 18 September 2007
Consolidated Cash Flow Statement (unaudited)
Six months ended 30 June 2007
Notes Six months
ended 30 June
2007
£'000s
Net cash used in operating activities 13 (5)
Investing Activities
Interest received 4,173
Acquisition of subsidiaries (net of cash acquired) 9 472
Investment in financial asset loans & receivables (49,888)
------
Net cash used in investing activities (45,243)
------
Financing Activities
Flotation expenses paid (95)
Proceeds from borrowings 129,574
------
Net cash provided by financing activities 129,479
------
Net increase in cash and cash equivalents 84,231
Cash and cash equivalents at beginning of period 188,107
------
Cash and cash equivalents at end of period 272,338
======
Cash and cash equivalents of £272.3 million at 30 June 2007 include £149 million
held by non-recourse PFI project entities (£74.8 million at 31 December 2006).
Notes to the Consolidated Accounts (unaudited)
Six months ended 30 June 2007
1. General information
Babcock & Brown Public Partnerships Limited is a closed ended investment company
incorporated in Guernsey under The Companies (Guernsey) Law, 1994. The address
of the registered office is given on page 1. The nature of the Group's
operations and its principal activities are set out in the Investment Advisor's
Report on pages 8 to 10.
These financial statements are presented in pounds sterling as the currency of
the primary economic environment in which the Group operates and represents the
functional currency of the Group.
The financial information for the period ended 31 December 2006 is derived from
the financial statements delivered to the UK Listing Authority. The Auditors
reported on those accounts; their report was unqualified and did not contain a
statement under section 65(3) of The Companies (Guernsey) Law, 1994.
2. Accounting policies
In accordance with the Listing Rules of the Financial Services Authority, the
half yearly financial report has been prepared on the basis of the accounting
policies set out in the Group's Annual Report and Financial Statements for the
period ended 31 December 2006.
3. Business and geographical segments
Geographical segments
For management purposes, the Group is currently organised into three
geographical segments in Europe, Asia Pacific and North America. These
geographical segments are the basis on which the Group reports its primary
segment information.
Segment information about these businesses is presented below.
Six months ended 30 June 2007
Europe Asia Pacific North America Total
£'000s £'000s £'000s £'000s
Revenue 48,400 - 11,082 59,482
====== ====== ====== ======
No inter-segment sales were made for the six months ended 30 June 2007.
Notes to the Consolidated Accounts (unaudited)
Six months ended 30 June 2007 (continued)
Business and geographical segments (continued)
Results Europe Asia Pacific North America Six months
ended
30 June 2007 30 June 2007 30 June 2007 30 June 2007
£'000s £'000s £'000s £'000s
Share of
associates
earnings - 411 - 411
Segment result 7,101 998 (379) 7,720
----- ----- ----- -----
Profit before tax 7,101 1,409 (379) 8,131
Taxation 5,615
------
Profit after tax 13,746
======
Balance Sheet Europe Asia Pacific North America 30 June 2007
30 June 2007 30 June 2007 30 June 2007 £'000s
£'000s £'000s £'000s
Assets
Segment assets 770,363 1,107 104,643 876,113
Interests in
associates - 9,244 - 9,244
Available for sale
investments - 13,950 - 13,950
----- ----- ----- -----
Consolidated total
assets 770,363 24,301 104,643 899,307
======= ====== ======= =======
Liabilities
Segment
liabilities 466,343 - 105,012 571,355
----- ----- ----- -----
Consolidated total
liabilities 466,343 - 105,012 571,355
----- ----- ----- -----
Net assets 304,020 24,301 (369) 327,952
======= ====== ======= =======
Depreciation of £207,000 and amortisation of £3,360,000 relates to the Europe
segment.
4. Profit before tax
Profit before tax for the period has been arrived at after charging/(crediting):
Six months
ended
30 June
2007
£'000s
Asset management fees 1,683
Other operating expenses 1,015
------
Operating expenses 2,698
Audit & accounting 253
Amortisation of intangible assets 2,761
Legal fees 186
Bank service charges 45
Other administrative expenses 256
------
Administrative expenses 3,501
------
Total finance costs 10,925
------
Total other expenses 17,124
======
5. Tax
Income tax for the six month period includes a current period tax charge of £0.4
million, a prior year deferred tax charge of £0.2 million off-set by a £6.2
million adjustment due to the change in the UK corporate tax rate from 30% to
28%. The current period charge of £0.4 million is a charge at 5% representing
the best estimate of the average annual effective income tax rate expected for
the full year, applied to the pre-tax income of the six month period.
6. Seasonality of interim operations
The nature of operations is such that there is unlikely to be any factor
consistently impacting the weighting of operating results between the first and
second six months of the calendar year.
7. Distributions
The Board approved the proposed interim distribution of 3.35 pence per share on
18 September 2007. The distribution will be paid to shareholders on the register
as at 28 September 2007 and will be paid on 26 October 2007. The total amount of
£10.050 million will be paid and this will be for the period from listing to 30
June 2007.
8. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings
Six months
ended
30 June
2007
£'000s
Earnings for the purposes of basic and diluted
earnings per share being net profit attributable to 13,746
equity holders of the parent
------
Number
Number of shares
Weighted average number of Ordinary Shares for the 300,000,000
purposes of basic and diluted earnings per share
===========
The weighted average number of shares is based on the period from 1 January 2007
to 30 June 2007.
The denominator for the purposes of calculating both basic and diluted earnings
per share are the same as the Company had not issued any share options or other
instruments that would cause dilution.
Six months
ended
30 June
2007
pence/share
Basic 4.58
=====
Diluted 4.58
=====
9. Acquisition of subsidiaries
On 31 January 2007, the Group acquired 100% of the issued share capital of
Babcock & Brown (PPP) Limited for cash consideration of £36.6 million including
the costs of acquisition of £0.2 million.
Babcock & Brown (PPP) Limited is the parent company of the entities holding the
PFI concessions of Calderdale Schools, Derbyshire Schools Phase II and
Northamptonshire Schools that form part of the consolidated Group. This
transaction has been accounted for by the purchase method of accounting.
Total
£'000s
Assets
Intangible assets 29,932
Property, plant and equipment 10
Financial assets loans and receivables 148,814
Trade and other receivables 800
Cash and cash equivalents 37,061
Derivative financial instruments 6,089
-------
Total Assets acquired 222,706
-------
9. Acquisition of subsidiaries (continued)
Total
£'000s
Liabilities
Trade and other payables 8,490
Bank Loans 170,559
Tax liabilities 90
Deferred tax liabilities 6,978
-------
Total Liabilities acquired 186,117
-------
Net Book Value 36,589
======
Total consideration 36,589
======
Net cash inflow on acquisition
Cash (36,589)
Cash acquired at acquisition 37,061
======
Net cash inflow 472
======
The acquiree's identified assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 are recognised at fair value at
the acquisition date. The excess amount arising on acquisition is recognised as
an intangible asset and initially carried at fair value at acquisition.
The fair values used have been determined on a provisional basis pending the
finalisation of the fair value of Intangible assets and financial asset loans
and receivables.
The intangible asset arising on acquisition is attributable to the right to
future profits on the services element of the related concessions acquired.
All amounts shown above are at book and fair value.
Babcock & Brown (PPP) Limited contributed £36.7 million revenue and £1.2 million
profit before tax of the Group for the period between the date of acquisition
and 30 June 2007.
10. Intangible assets
The increase in intangible assets from £90.2 million at 31 December 2006 to
£119.4 million at 30 June 2007 reflects intangible assets acquired as part of
the Babcock & Brown (PPP) Limited acquisition of £29.9 million, an additional
intangible asset recognised in Tower Hamlets Holding Limited of £2.0 million
offset by amortisation for the period to 30 June 2007 of £2.7 million.
11. Financial asset loans and receivables
The increase in the total financial asset loans and receivables balance from
£255.2 million at 31 December 2006 to £441.9 million at 30 June 2007 reflects
the acquisition of £148.8 million financial asset loans and receivables in
Babcock & Brown (PPP) Limited and construction costs of £43.8 million on the
Northamptonshire Schools and Durham Courthouse projects, off-set by principle
repayments of £5.9 million.
12. Distribution reserve
On 19 January 2007 the Company applied to the Royal Court of Guernsey, following
the placing of the Ordinary Shares, to reduce its share premium account in order
to provide a distributable reserve to repurchase its shares if and when it is
considered beneficial to do so by the Directors. As such, the share premium
account, after deducting all preliminary costs, was reduced by £293,506 and a
distributable reserve created for this amount.
13. Notes to the cash flow statement
Six months
ended
30 June 2007
£'000s
Profit for the period after taxation 13,746
Adjusted for:
Investment revenue recognised in profit and loss (4,173)
Share of profit from associates (411)
Finance costs 10,925
Depreciation of plant property and equipment 207
Amortisation of intangible assets 2,761
Dividends received from associates 314
Other gains (18)
Income tax benefit (5,615)
------
Operating cash flows before movements in working capital 17,736
Increase in receivables (3,715)
Decrease in payables (3,131)
------
Cash generated by operations 10,890
Interest paid (10,302)
Income taxes paid (593)
------
Net cash outflow from operating activities (5)
======
Cash and cash equivalents held by the Group and short-term bank deposits with an
original maturity of three months or less. The carrying value of these assets
approximates their fair value.
14. Contingent liabilities
The Directors have not identified any contingent liabilities at the date of this
report.
15. Events after the balance sheet date
On 15 August 2007, the Company entered into an agreement to acquire a 49% stake
in the newly established Hochbahn AG subsidiary named BeNEX GmbH. Hochbahn AG is
the second largest Local Public Passenger Transportation (LPPT) company in
Germany and placed all its existing expansion activities in the LPPT sector
outside the metropolitan region of Hamburg into BeNEX. BeNEX has shares in four
rail transportation companies and in four bus transportation companies.
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