Interim Results

Primary Health Properties PLC 15 March 2007 Primary Health Properties PLC PRIMARY HEALTH PROPERTIES PLC ('PHP PLC') Modern accommodation for the Provision of Primary Health Care Services Interim Results for the six months ended 31 December 2006 Group Financial Highlights *Portfolio revaluation increased by £13.4m to £260.3m *Diluted NAV per share increased 38% to 420.9p (30 June 2006: 305.1p) *Portfolio owned, leased and committed increased by 40% to £293.8m (2005: £209.9m) *Pre tax profits totalled £9.0m (2005: £9.4m) *Basic earnings per share increased by 268% to 125.4p (2005: 34.1p) *Adjusted earnings per share increased by 6% to 6.9p (2005: 6.5p) *Dividend increased by 11% to 7.5p (2005: 6.75p) *Successful acquisition and integration of CHH for £30.9m in December 2006 * Placing of £32m underwritten by Numis Securities Limited and Open Offer of £8m announced 15 March 2007 Harry Hyman, Managing Director, commented: "The first half of our financial year has started strongly with all of our key performance indicators rising. The commercial property market continued to enjoy strong investor demand and rental appreciation has been positive. We took the opportunity to make the strategic acquisition of CHH which has now been fully integrated and is performing well. I am pleased to announce today that the Company is, subject to Shareholder approval, raising up to £40m of new equity to further develop the business. The second half has started well and the Board looks forward to the future with confidence." Enquiries: Bell Pottinger Corporate & Financial David Rydell/Victoria Geoghegan Tel: 020 7861 3232 Primary Health Properties PLC Harry Hyman Managing Director Tel: 01483 306912 Mobile: 07973 344768 Chairman's Statement In June 2006, the Group announced its intention to convert to a real estate investment trust ("UK-REIT") and on 1 January 2007 the Group's conversion to a UK-REIT became effective. The Group also, with effect from 1 January 2007, changed its accounting reference date to 31 December. The current accounting period, which commenced on 1 July 2006, will therefore comprise 18 months ending 31 December 2007. In addition to the publication of these financial statements for the six months ended 31 December 2006, the Group will prepare a second interim report for the six months ending 30 June 2007 and final financial statements for the 18 months ending 31 December 2007. The results of the Group for the six months ended 31 December 2006 reflect further progress. The Group has continued to expand its portfolio of modern purpose built primary care properties, both through individual asset purchases from a number of developers and by portfolio acquisitions, having recently completed, in December 2006, the acquisition of Cathedral Healthcare (Holdings) Limited ("CHH") with its portfolio of nine properties, for a cash consideration of £30.9m. The total gross assets acquired as a result of the CHH acquisition, once fully developed, are expected to amount to £39.2m. It is expected that these assets will generate an annual rental income of approximately £2.0m, reflecting an initial yield of approximately 5%. As a result of the regular six monthly review, the property portfolio has increased by £13.4m, with the diluted net asset value per share increasing by 38% to 420.9p per share compared to 305.1p at 30 June 2006. This increase reflects both higher rents and the tightening of yields in the market. As a consequence of the CHH acquisition, continued individual property acquisitions and the revaluation surplus, the Group's investment portfolio, at 31 December 2006, had risen to £260.3m. The Group's closing portfolio, including development loans, leases and commitments, totalled £293.8m. The Group's profit before taxation, for the six months to 31 December 2006, totalled £9.0m (2005: £9.4m), a decrease of 4.2%. After the UK-REIT conversion charge and release of the deferred tax provision, profit after tax for the period was £29.6m (2005: £7.7m). Diluted earnings per share, which include the benefit of revaluation gains on investment properties, were 125.4p, an increase of 280% over the first half of last year (33.0p). Adjusted diluted earnings per share for the first half were 6.9p, 6% higher than the interim period last year (6.5p). The Board proposes to pay an interim dividend of 7.5p per share, a rise of 0.75p per share over last year's interim dividend. The dividend will be paid on 22 May 2007 to Shareholders on the Register of Members on 23 March 2007. During the six months ended 31 December 2006, the Group has taken delivery of £34.9m of completed and fully let properties at Didsbury, Clowne, Hythe, Wombwell, Sheerness, Clapham, Hoddesden, Milton Keynes, Oxted and Norwich and entered into new commitments totalling £34.5m during the period at Penkridge, Kettering, Sheerness, Sutton, Handcross, Wednesbury, Hoddesden (extension) and Milton Keynes (extension). The table below sets out the portfolio as at 31 December 2006: 31 December 30 June 31 December 2006 2006 2005 £m £m £m Investment properties 245.5 197.5 180.2 Development properties 9.5 - - Properties in the course of development 2.8 2.1 3.2 Total investment properties 257.8 199.6 183.4 Finance leases 2.5 2.5 2.5 Total owned and leased 260.3 202.1 185.9 Development loans 1.2 1.7 1.8 Total owned and leased (including development loans) 261.5 203.8 187.7 Deposits paid 0.1 0.1 0.2 Committed 32.2 20.9 22.0 Total owned, leased and committed 293.8 224.8 209.9 Although there have been reports of funding delays within the NHS, the Group has a strong forward pipeline of transactions. The annualised rent roll has increased from £11.3m at 30 June 2006 to £13.3m at 31 December 2006, representing both new deliveries and rental increases. Rental increases secured during the period amounted to £0.3m. On balance, the Group continues to obtain satisfactory rent reviews. The Group continues to monitor its exposure to interest rates and, during the period, has consolidated the RBS interest rate swaps. The gearing of the Group was 59% as at 31 December 2006 (based on the value of property covering debt) and the Group has covered 59% of its exposure to interest rates for the remainder of the financial period. The Group has broadly similar hedging in place for the next eight years. The share save scheme currently has 35 members representing 83,779 shares. Further details can be found on the website: www.phpgroup.co.uk. The Board has made alternative arrangements with the Registrar, Capita IRG, to offer a dividend reinvestment scheme for Shareholders who wish to reinvest their dividend as shares. A letter explaining this scheme, together with terms and conditions and an application form, will be posted to new Shareholders with the published Interim Report. On 21 September 2006, the Joint Managers exercised their options to acquire 1.6m shares at a price of £1.71 per share pursuant to the Management Options agreement dated 17 September 2003. The number of shares in issue as at 31 December 2006 was 24,277,718. On 16 November 2006, Shareholders approved the amendments to the Management Agreement by way of a Deed of Variation whereby the Joint Managers will be entitled to a performance incentive fee. On 14 February 2007, the Group negotiated a £20m increase in loan facilities to £140m from The Royal Bank of Scotland plc and a £20m increase to £50m from Allied Irish Banks, p.l.c. The portfolio now has some 89 properties with a further seven contracted for delivery and two extensions also contracted for delivery. The portfolio has performed extremely well and the Board believes that the combination of the high-quality property portfolio, long lease lengths and strong covenant quality make a desirable portfolio for future income and capital appreciation. G A Elliot Chairman 14 March 2007 GROUP INCOME STATEMENT for the six months ended 31 December 2006 Six months ended Year ended Six months ended 31 December 30 June 31 December Note 2006 2006 2005 £'000 £'000 £'000 (unaudited) (audited) (unaudited) Rental income 6,410 10,850 5,303 Finance lease income 141 281 140 Rental and related income 6,551 11,131 5,443 Net valuation gain on property portfolio 13,442 14,997 7,837 Net gain on disposal of property 44 401 - Administrative expenses (2,271) (2,689) (1,308) Exceptional items: Goodwill impairment 2 (5,339) - - UK-REIT conversion costs (175) - - Operating profit before financing costs 12,252 23,840 11,972 Finance income 110 258 161 Finance costs (3,394) (5,695) (2,768) Profit before tax 8,968 18,403 9,365 Current taxation 7 - 465 - Deferred taxation charge for the period 7 (3,880) (2,931) (1,639) Deferred taxation release on conversion to 7 29,622 - - UK-REIT Conversion to UK-REIT charge (5,157) - - Taxation credit/(expense) 20,585 (2,466) (1,639) Profit for the period* 29,553 15,937 7,726 Earnings per share - basic 4 125.4p 70.3p 34.1p - diluted 4 125.4p 67.7p 33.0p Adjusted earnings per share - basic 4 6.9p 17.1p 6.7p - diluted 4 6.9p 16.5p 6.5p Dividends paid: 6 £'000 £'000 £'000 Final dividend for the year ended 30 June 2006 1,639 - - (6.75p) Interim dividend for the year ended 30 June - 1,531 - 2006 (6.75p) Final dividend for the year ended 30 June 2005 - 1,359 1,359 (6.0p) * Wholly attributable to equity shareholders of Primary Health Properties PLC All activities are continuing. GROUP BALANCE SHEET as at 31 December 2006 Note At 31 At 30 At 31 December June December 2006 2006 2005 £'000 £'000 £'000 (unaudited) (audited) (unaudited) Non current assets Investment properties 3 248,316 199,569 183,430 Development properties 3 9,525 - - Development loans 1,184 1,712 1,758 Net investment in finance leases 2,487 2,492 2,510 Derivative interest rate swaps 1,901 1,415 - 263,413 205,188 187,698 Current assets Trade and other receivables 1,855 1,470 1,678 Net investment in finance leases 12 12 - Cash and cash equivalents 3,829 3,973 2,236 5,696 5,455 3,914 Total assets 269,109 210,643 191,612 Current liabilities Derivative interest rate swaps - (74) - Corporation tax payable (201) (181) (681) UK-REIT conversion charge payable 1 (645) - - Deferred rental income (2,988) (2,466) (2,347) Trade and other payables (4,591) (2,604) (3,472) (8,425) (5,325) (6,500) Non current liabilities Term Loan (153,250) (112,800) (102,000) Deferred tax 7 - (21,193) (18,930) UK-REIT conversion charge payable 1 (4,512) - - Derivative interest rate swaps (735) - (1,896) (158,497) (133,993) (122,826) Total liabilities (166,922) (139,318) (129,326) Net assets 102,187 71,325 62,286 Equity Share capital 12,139 11,339 11,339 Share premium 13,943 12,022 12,022 Capital reserve 1,618 1,618 1,618 Cash flow hedging reserve 1,166 939 (1,327) Retained earnings 73,321 45,407 38,634 Total equity * 102,187 71,325 62,286 Net asset value per share Note - basic 8 420.9p 314.5p 274.7p - diluted 8 420.9p 305.1p 267.8p Adjusted net asset value per share - basic 8 420.9p 408.0p 358.1p - diluted 8 420.9p 392.4p 345.8p * Wholly attributable to equity holders of Primary Health Properties PLC These financial statements have been prepared in accordance with the accounting policies set out in the latest Annual Report for the year ended 30 June 2006. Group Statement of Changes in Equity for the six months ended 31 December 2006 Cash flow Share Share Capital hedging Retained capital premium reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 30 June 2006 11,339 12,022 1,618 939 45,407 71,325 Profit for the period - - - - 29,553 29,553 Transfer to income statement on cash flow hedges - - - 5 - 5 Income and expense recognised directly in equity: Loss on cashflow hedges taken to equity - - - (180) - (180) Deferred tax on loss on cashflow hedges for 52 52 the period - - - - Deferred tax on cashflow hedges released * - - - 350 - 350 Total recognised income and expense for the period - - - 227 29,553 29,780 Issue of shares (net of expenses) 800 1,921 - - - 2,721 Dividends paid: Final dividend for the year ended 30 June 2006 (6.75p) - - - - (1,639) (1,639) 31 December 2006 12,139 13,943 1,618 1,166 73,321 102,187 *Deferred tax has been released due to impending conversion to UK-REIT. Group Statement of Changes in Equity for the year ended 30 June 2006 Cash flow Share Share Capital hedging Retained capital premium reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 1 July 2005 11,326 11,952 1,618 (1,292) 32,175 55,779 Profit for the period - - - - 15,937 15,937 Transfer to income statement on cashflow hedges - - - 238 - 238 Income and expense recognised directly in equity: Gains on cashflow hedges taken to equity - - - 2,949 - 2,949 Deferred tax on cashflow hedges taken to equity - - - (956) - (956) Total recognised income and expense for the period - - - 2,231 15,937 18,168 Issue of shares 13 74 - - - 87 Issue expenses - (4) - - - (4) Share based payment charge - - - - 185 185 Dividends paid: Final dividend for the year ended 30 June 2005 (6.0p) - - - - (1,359) (1,359) Interim dividend for the year ended 30 June 2006 (6.75p) - - - - (1,531) (1,531) 30 June 2006 11,339 12,022 1,618 939 45,407 71,325 Group Statement of Changes in Equity for the six months ended 31 December 2005 Cash flow Share Share Capital hedging Retained capital premium reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 1 July 2005 11,326 11,952 1,618 (1,292) 32,175 55,779 Profit for the period - - - - 7,726 7,726 Transfer to income statement on cashflow hedges - - - 118 - 118 Income and expense recognised directly in equity: Losses on cashflow hedges taken to equity - - - (168) - (168) Deferred tax on cashflow hedges taken to equity - - - 15 - 15 Total recognised income and expense for the period - - - (35) 7,726 7,691 Issue of shares 13 74 - - - 87 Issue expenses - (4) - - - (4) Share based payment charge - - - - 92 92 Dividends paid: Final dividend for the year ended 30 June 2005 (6.0p) - - - - (1,359) (1,359) 31 December 2005 11,339 12,022 1,618 (1,327) 38,634 62,286 Group Cash Flow Statement for the six months ended 31 December 2006 Six months Year Six months ended ended ended 31 December 30 June 31 December 2006 2006 2005 £'000 £'000 £'000 (unaudited) (audited) (unaudited) Operating activities Group operating profit before financing costs 12,252 23,840 11,972 Adjustments to reconcile group operating profit to net cash flows from operating activities: Less: Revaluation gains on property (13,442) (14,997) (7,837) Less: Gains on disposal of property (44) (401) - Plus: Goodwill impairment 5,339 - - Plus: Share based payment expense - 185 92 Decrease/(increase) in trade and other receivables 430 (54) (196) Increase in trade and other payables 734 212 160 Cash generated from operations 5,269 8,785 4,191 Interest received from developments 107 219 102 Taxation paid - (34) - Net cash flow from operating activities 5,376 8,970 4,293 Investing activities Receipts from disposal of investment properties 465 7,711 - Payments to acquire investment properties (12,891) (25,770) (10,459) Development loans advanced (1,133) (2,612) (749) Bank interest received 28 47 12 Acquisition of subsidiary (30,393) - - Net cash flow from investing activities (43,924) (20,624) (11,196) Financing activities Expenses on issue of shares (5) (4) (4) Cash received on exercise of Management Options 2,726 - - Term bank loan 40,450 24,000 13,200 Interest paid (3,128) (6,678) (3,897) Equity dividends paid (1,639) (2,803) (1,272) Net cash flow from financing activities 38,404 14,515 8,027 (Decrease)/increase in cash and cash equivalents for (144) 2,861 1,124 the period Cash and cash equivalents at start of period 3,973 1,112 1,112 Cash and cash equivalents at end of period 3,829 3,973 2,236 NOTES: 1. Accounting Policies Basis of preparation/ Statement of compliance The Group's financial statements for the six months to 31 December 2006 have been presented under International Financial Reporting Standards ("IFRS") as adopted by the European Union and on the basis of the accounting policies set out in the statutory accounts for the year ended 30 June 2006, which are also expected to apply for the period ending 31 December 2007.This report is prepared in compliance with IAS34:"Interim Financial Reporting". 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 year ended 30 June 2006, did not contain a statement under Section 237 (2) or (3) Companies Act 1985. This audit report, which was unqualified, was delivered to the Registrar of Companies together with financial statements for the year ended 30 June 2006. Convention The financial statements are presented in Sterling rounded to the nearest thousand. Segmental reporting The Group operates under one business segment and one geographical segment, being investment in primary health care property within the United Kingdom. Basis of consolidation The Group's financial statements consolidate the financial statements of Primary Health Properties PLC and its wholly owned subsidiary undertakings. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtained control and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement. The financial statements of the subsidiary undertakings are prepared for the accounting reference period ending 31 December each year, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated. Conversion to UK-REIT The Group's conversion to UK REIT status was effective from 1 January 2007. Conversion to a UK-REIT means that, where the relevant UK-REIT criteria are met, the Group's property profits, both income and gains, should be exempt from UK taxation from 1 January 2007. The deferred tax liabilities as at 31 December 2006 of £30.0m are therefore released with £29.6m credited to the Group Income Statement and £0.4m taken direct to the cashflow hedging reserve. On conversion to UK-REIT, the Group is subject to a taxation charge based on the value of properties as at the date of conversion, amounting to £5.2m. The amount is payable over four years. Change of accounting reference date The Group changed its accounting reference date to 31 December, with effect from 1 January 2007. The current accounting reference period, which commenced on 1 July 2006, will therefore comprise 18 months ending 31 December 2007. In addition to these interim financial statements for the six months ended 31 December 2006, the Group will prepare a second interim report for the six months ending 30 June 2007 and final financial statements for the 18 month period ending 31 December 2007. 2. Acquisition of Cathedral Healthcare (Holdings) Ltd ("CHH") On 22 December 2006, the Group exchanged contracts to acquire 100% of CHH for a cash consideration of £30.9m. CHH was the holding company of a group of companies that owned nine primary healthcare facilities across the UK which have been incorporated into the Group portfolio. Of the nine facilities, three are under construction and are expected to be completed by 31 December 2007. In addition, two of the completed facilities are undergoing extension work, which is expected to be finished in 2007. Consideration of £30.9m was paid upon completion. Cash acquired upon acquisition of CHH amounted to £0.2m. The total gross assets acquired once fully developed are expected to amount to £39.2m. These assets are expected to generate a total annual rental income of approximately £2.0m, reflecting an initial yield of approximately 5%. Details of the acquisition of CHH: £'000 Total cost of acquisition 30,852 Investment and development property acquired (30,825) Other net liabilities acquired 5,312 Goodwill arising on acquisition 5,339 Prior to the acquisition of CHH, the investment and development properties were included in the books of CHH at £21.5m. A fair value exercise was carried out by Lambert Smith Hampton as at 1 December 2006 resulting in an uplift in value of these properties of £9.3m to £30.8m. A deferred tax liability arose on this uplift of £2.8m. As the Group paid consideration equal to the value of the acquired properties, goodwill arises in respect of the other assets and liabilities, principally a deferred tax liability of £4.9m. On conversion to UK-REIT, the deferred tax liability is eliminated resulting in an impairment of goodwill arising on acquisition. The impact of post-acquisition trading on the Group Income Statement is not material. 3 Investment Properties The freehold, leasehold and development properties have been independently valued at fair value by Lambert Smith Hampton Chartered Surveyors and Valuers, for the six months ended 31 December 2006. The revaluation gain for the six months ended 31 December 2006 amounted to £13.4m. Property additions during the period amounted to £45.3m (including the acquired CHH properties of £30.8m). Properties disposed of during the period, valued at £0.4m as at 30 June 2006, realised a gain of £0.04m. 4 Earnings per share The calculation of basic and diluted earnings per share as at 31 December 2006 is based on the following: Earnings per share as at 31 December 2006 Net profit Ordinary Per share attributable to shares pence Ordinary (weighted Shareholders average) £'000 number Basic and diluted earnings per 29,553 23,573,370 125.4 share Adjusted earnings per share as at 31 December 2006 Net profit Ordinary Per share attributable to shares pence Ordinary (weighted Shareholders average) £'000 number Basic and diluted earnings per share 29,553 23,573,370 125.4 Adjustments to remove: Incentive fee accrual 752 Goodwill impairment 5,339 UK-REIT conversion charge 5,157 Deferred tax charge 3,880 Deferred tax release (29,622) Net valuation gains on valuation of property (13,442) Adjusted basic and diluted earnings per share 1,617 23,573,370 6.9 Following the exercise of the Management options by the Joint Managers on 21 September 2006, there is no dilution. Earnings per share as at 30 June 2006 Net profit Ordinary Per share attributable to shares pence Ordinary (weighted Shareholders average) £'000 number Basic earnings per share 15,937 22,667,946 70.3 Option exercise* - 861,960 ** Diluted earnings per share 15,937 23,529,906 67.7 Adjusted earnings per share as at 30 June 2006 Net profit Ordinary Per share attributable to shares pence Ordinary (weighted Shareholders average) £'000 number Basic earnings per share 15,937 22,667,946 70.3 Adjustments to remove: Deferred tax charge 2,931 Net valuation gains on valuation of (14,997) property Adjusted basic earnings per share 3,871 22,667,946 17.1 Option exercise* - 861,960 ** Adjusted diluted earnings per share 3,871 23,529,906 16.5 Earnings per share as at 31 December 2005 Net profit Ordinary Per share attributable to shares pence Ordinary (weighted Shareholders average) £'000 number Basic earnings per share 7,726 22,658,334 34.1 Option exercise* - 782,328 ** Diluted earnings per share 7,726 23,440,662 33.0 Adjusted earnings per share as at 31 December 2005 Net profit Ordinary Per share attributable to shares pence Ordinary (weighted Shareholders average) £'000 number Basic earnings per share 7,726 22,658,334 34.1 Adjustments to remove: Deferred tax charge 1,639 Net valuation gains on valuation of (7,837) property Adjusted basic earnings per share 1,528 22,658,334 6.7 Option exercise* - 782,328 ** Adjusted diluted earnings per share 1,528 23,440,662 6.5 * Excess of the total number of potential shares on option exercise over the number that could be issued at fair value as calculated in accordance with International Accounting Standard No.33: Earnings per share. ** All Management Options were exercised in full on 21 September 2006. The purpose of calculating an adjusted earnings per share calculation is to provide a better indication of the normalised pre-tax tax trading performance for the period. 5 Performance incentive scheme On 16 November 2006, Shareholders approved the amendments to the Management Agreement whereby the Joint Managers will be entitled to a performance incentive fee of 15% of any performance in excess of an 8% per annum increase in the Company's "Total Return" as derived from the audited financial statements for the respective financial period. The Total Return shall be determined by comparing the variation in the stated net asset value per share (on a fully diluted basis, adjusting for deferred tax and the REIT conversion charge and adding back gross dividends paid or declared in such period) against the fully diluted net asset value per share from the previous period's audited accounts. Included in Administration Expenses within the Income Statement is an estimated incentive fee expense of £752,000. This amount has been calculated based on 50% of the expected performance incentive fee for the 12 month period to 30 June 2007. 6. Dividends paid Dividends paid in the period are as follows: No of shares Six months to Year to Six months to dividend paid 31 December 30 June 31 December upon 2006 2006 2005 £'000 £'000 £'000 Final dividend for the year 1,639 - - ended 30 June 2006 (6.75p) 24,277,718 Interim dividend for the year - 1,531 - ended 30 June 2006 (6.75p) 22,677,718 Final dividend for the year - 1,359 1,359 ended 30 June 2005 (6.0p) 22,677,718 1,639 2,890 1,359 The Directors propose to pay a dividend of 7.5p per Ordinary Share for the six months to 31 December 2006, payable on 22 May 2007, amounting to £1,820,829. 7. Taxation 31 December 2006 30 June 2006 31 December 2005 £'000 £'000 £'000 Taxation in the Income Statement: Current tax UK Corporation tax - 181 - Adjustment in respect of prior year - (646) - UK-REIT conversion charge 5,157 - - 5,157 (465) - Deferred tax Deferred tax charge for the period 3,880 2,931 1,639 Deferred tax release on conversion to UK-REIT (29,622) - - (see note 1) (25,742) 2,931 1,639 Taxation (credit)/charge in the Income (20,585) 2,466 1,639 Statement Taxation in the Balance Sheet: Deferred tax liability - on timing differences - 6,186 5,045 - on revaluation gains - 14,605 14,454 - on derivative interest rate swaps - 402 (569) Deferred tax liability at end of period - 21,193 18,930 8. Net asset value calculations Net asset values have been calculated as follows: 31 December 2006 30 June 2006 31 December 2005 £'000 £'000 £'000 (unaudited) (audited) (unaudited) Net assets per Group Balance Sheet * 102,187 71,325 62,286 Add - Receipts from the exercise of Management Options - 2,736 2,736 Diluted net assets 102,187 74,061 65,022 No. of shares No. of shares No. of shares Ordinary shares: Issued share capital * 24,277,718 22,677,718 22,677,718 Add - New shares issued assuming the exercise of the Management Options - 1,600,000 1,600,000 Diluted number of Ordinary Shares 24,277,718 24,277,718 24,277,718 Net asset value per share 420.9p 314.5p 274.7p Diluted net asset value per share 420.9p 305.1p 267.8p * figures for basic net asset value calculations Calculations assume that the dilution takes place on the respective balance sheet dates. Following the exercise of the Management Options by the Joint Managers on 21 September 2006, there is no dilution and therefore there is no difference between the basic and diluted net asset values as at 31 December 2006. Diluted adjusted net asset values per share 31 December 2006 30 June 2006 31 December 2005 £'000 £'000 £'000 (unaudited) (audited) (unaudited) Net assets per Group Balance Sheet * 102,187 71,325 62,286 Adjustments to add back: Deferred tax on timing differences - 6,186 5,045 Deferred tax on revaluation gains - 14,605 14,454 Deferred tax on derivative interest rate swaps - 402 - Adjustment to remove: Deferred tax on derivative interest rate swaps - - (569) Adjusted net assets 102,187 92,518 81,216 Add - Receipts from the exercise of Management Options - 2,736 2,736 Diluted adjusted net assets 102,187 95,254 83,952 No. of shares No. of shares No. of shares Ordinary shares: Issued share capital * 24,277,718 22,677,718 22,677,718 Add - New shares issued assuming the exercise of the Management Options - 1,600,000 1,600,000 Diluted number of Ordinary Shares 24,277,718 24,277,718 24,277,718 Adjusted net asset value per share 420.9p 408.0p 358.1p Diluted adjusted net asset value per share 420.9p 392.4p 345.8p * figures for basic net asset value calculations There is no difference between the normal and adjusted net asset values as at 31 December 2006, due to the release of all deferred tax liabilities due to conversion to UK-REIT. Calculations assume that the dilution takes place on the respective balance sheet dates. Following the exercise of the Management Options by the Joint Managers on 21 September 2006, there is no dilution as at 31 December 2006 and therefore there is no difference between adjusted basic and diluted net asset values as at 31 December 2006. 9. The Interim Report will be posted to Shareholders on 3 April 2007, 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. END This information is provided by RNS The company news service from the London Stock Exchange

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