Final Results

RNS Number : 9868M

Quintain Estates & Development PLC

03 June 2010

3 June 2010

Quintain Estates and Development plc

("Quintain"/"Company"/"Group")

Full year results for the twelve months ended 31 March 2010

QUINTAIN WELL POSITIONED FOR NEXT STAGE OF GROWTH

Quintain Estates and Development plc today announces its full year results for the twelve months ended 31 March 2010.

Key Points

· Strong financial platform secured

· Momentum maintained on major schemes with completion of key deals and developments

· Three year business plan underway to increase income and reach critical mass on regeneration schemes

Results

· Gearing significantly reduced to 46% at period end (March 2009: 105%) against covenants of 110%

· Gross profit before current asset impairment of £34.0m (March 2009: £35.0m)

· Loss before tax of £10.1m (March 2009: loss of £129.1m)

· Basic net asset value per share 120p (March 2009: 121p (adjusted for rights issue))

· Adjusted diluted net asset value per share down 1.5% to 133p (March 2009: 135p)

· Basic earnings per share loss of 3.3p (March 2009: loss of 39.1p)

· EPRA adjusted diluted earnings per share 0.1p (March 2009: 4.6p)

· Gross rental income £42.4m (March 2009: £45.1m), reflecting sales completed during the year

Strong financial platform secured and enhanced over the year

· Cash repatriation target of £150m surpassed ahead of schedule, including £82.5 million of receipts from assets sold during the year

· Administrative costs reduced by a further 12.4% (Reduction in 2008/9: 13.8%)

· Successful completion of Rights Issue, raising net proceeds of £183.1m, reducing further the Group's borrowings and positioning the business to deliver all key objectives within its three year business plan.

· £248m of undrawn committed corporate facilities

Urban Regeneration

· Adoption by the London Borough of Brent of revised masterplan, including all key points of Quintain's proposals for phase two at Wembley City

· Completion of the second apartment building on time and on budget at Wembley, increasing the number of finished homes on the scheme to 520, of which 82% have been sold or are in lawyers' hands

· Barclaycard secured as title sponsor for Wembley Arena on a five year contract; and letting signed with Cineworld for new multi-screen cinema.

· Construction completed of first two office buildings at Greenwich with 70% of space let

· Following the year end, new leases agreed at Greenwich on seven of the 13 retail units in Pier Walk, Mitre Passage and Ravensbourne College

· Sale of The O2 completed, unlocking £11.8m of capital

Fund Management

· £1.01bn of assets under management as at 31 March 2010 (March 2009: £980m), with target to grow to £2bn under management within three years

· £11.9m of fund management fees recognised over the twelve months to 31 March 2010 (March 2009: £12.9m)

· Strong operational progress within each fund:

o Quercus completed £82.7m equity raising from existing investors at 5% premium to net asset value taking advantage of investors' increasing appetite for long term healthcare assets

o iQ portfolio valued at £209.1m (March 2009: £145.7m), reflecting the addition of three new schemes in September 2009 and 5.5% year on year rental growth versus 2008/9

o Construction on Bristol and Bath Science Park, developed and operated by Quantum, began shortly after the year end

o Establishment of new fund, SeQuel, using debt and third party funding, seeded with £83.3m of high yielding property assets from Quintain's investment portfolio.

William Rucker, Chairman of Quintain, commented:

"Our three year business plan targets the increase of funds under management to £2bn and the delivery of critical mass at Wembley City. As the first step towards achievement of these 2013 targets, we have put in place a clear operational programme for the next twelve months that will bring further capital into the business, drive significant progress on our major schemes and increase the recurring income generated across the Group. Whilst the continued uncertainty in the markets will no doubt present challenges, the business is now in a significantly stronger shape and we anticipate a year of real progress."

Adrian Wyatt, Quintain's Chief Executive, commented:

"Throughout the period we have progressively reinforced the business: the cash repatriation target was achieved ahead of schedule, overheads were reduced by a further 12.4% and the Company undertook a transformational rights issue. The combined result of these activities was to reduce debt materially, adding considerable strength to our balance sheet and building a secure platform from which to focus on delivering value.

"Although the UK may well be facing a period of slow economic growth, or even decline, this should not impede reaching our primary target of being recurring cashflow-positive or impact materially the value we intend to capture from our regeneration schemes. Through careful financial management and prudent implementation of our strategy, we remain focused on the delivery for shareholders of strong and sustained returns. "

For further information, please contact:

Quintain Estates and Development plc

Rebecca Worthington/Cressida Curtis

Tel: +44 (0)20 7495 8968

Financial Dynamics

Stephanie Highett/Dido Laurimore/Laurence Jones

Tel; +44 (0)20 7831 3113

FINANCIAL HIGHLIGHTS


		31 March 2010	31 March 2009	Change %

BALANCE SHEET

Net asset value per share (pence)		120	121	(0.8)

Diluted net asset value per share (pence)		120	121	(0.8)

EPRA net asset value per share (pence)		133	135	(1.5)

Total return (%)		(0.8)	(39.0)	-

EPRA total return (%)		(1.5)	(39.0)	-

Gearing (%)

	Banking	46	105

	Accounts	57	120


INCOME STATEMENT



	Gross profit before current asset impairment (£m)	34.0	35.0	(2.9)

Loss before tax (£m)		(10.1)	(129.1)	-

Earnings per share (pence)
	Basic and diluted	(3.3)	(39.1)	-

Earnings per share (EPRA) (pence)		0.1	4.6	-

Interest cover (x)		2.8	1.7

Chairman's Statement

The Company faced difficult conditions during the financial year, but has emerged stronger and better placed to take advantage of the considerable opportunities which it holds.

Until the market changed so dramatically in 2007, Quintain relied upon the availability of bank debt, drawn down against rising valuations, to meet recurring costs.

The emergence of the liquidity crisis made this an unsustainable way to finance the business. In response, the Company devised the following solution:

· A significant rights issue to cement the financial stability of the Group;

· The acceleration of the programme to expand Fund Management and directly-held assets to a level whereby the cost of running the business is fully covered by income, to obviate the reliance on debt; and

· An increased focus on the recycling of capital from existing assets and the introduction, where appropriate, of third party capital in order to achieve faster progress at Wembley and Greenwich.

Good progress is being achieved on all three fronts.

The rights issue to raise £183.1 million was completed successfully in December 2009 and the Company now has a broader institutional shareholder base.

In our specialist sectors of healthcare and student housing we remain confident of being able to deploy our capital on attractive terms and are now seeing interesting opportunities emerge from the turmoil in the financial markets.

The recycling of capital continues. In the reporting period we received £82.5 million from asset sales, including our interest in The O2. The offices occupied by Transport for London at Greenwich have attracted interest from several potential purchasers and we continue to pursue opportunities to dispose of assets with which we have already created value.

Our three year business plan focuses on the increase of funds under management to £2bn and the delivery of critical mass at Wembley City. As the first step towards achievement of these 2013 targets, we have put in place a clear operational programme for the next twelve months that will bring further capital into the business, drive progress on our major schemes and increase the recurring income generated across the Group. Whilst the continued uncertainty in the markets will no doubt present challenges, the business is now in a significantly stronger shape and we anticipate a year of real progress.

William Rucker, Chairman

3 June 2010

Chief Executive's Statement

The financial year was characterised by the unfolding global recession, despite the efforts of governments to protect their national economies. As a result, the property sector continued to experience great challenges and, although the prime market recovered at the end of 2009 in response to a wave of cash from overseas investors and retail funds entering the market, this contrasted strongly with the weakness of tenant demand.

Results

Our results reflect the wider property environment during the year and our portfolio's weight of development assets, which typically recover at later points in the cycle. Whilst prime property was re-rated in the second half of the year, ongoing economic uncertainty dampened lenders' appetite for development risk and therefore, as anticipated, the value of our major schemes remained largely static. The resulting net asset value at 31 March 2010 was 120p. This compares with 121p, adjusted for the rights issue, at the end of the last financial year and created a total return of (0.8)%.

Throughout the period we have progressively reinforced the business: the cash repatriation target was surpassed ahead of schedule, overheads were reduced by a further 12.4% to £21.1m building on the 13.8% reduction achieved in the previous financial year, and the Company undertook a transformational rights issue. The combined result of these activities was to reduce debt materially, adding considerable strength to our balance sheet and building a secure platform from which to focus on delivering value. Gearing, as per our banking definition, was 46% at the year end (2009: 105%) against a covenant of 110% and interest cover was 2.8 times (2009: 1.7 times) against a 1.25 times covenant. The rights issue has also equipped the Group with its share of the equity funding it requires to deliver all key objectives within the three year business plan.

The performance in income terms reflects the actions taken to create this stability, with gross profit before impairment falling 2.9% to £34.0m, partly as a result of sales of investment assets. These sales gave rise to a loss on valuation, directly and through joint ventures, of £9.8m, contributing to the loss before tax of £10.1m. However, operating profits excluding impairments and exceptional items rose 18.3% to £12.9m (2009: £10.9m) demonstrating an increasingly efficient underlying business.

Business Delivery

Good operational progress was achieved during the period. Our largest Fund, Quercus, completed the year with the successful raising from existing investors of £82.7m at a 5% premium to net asset value. The number of income-generating beds in our student accommodation fund doubled during the reporting period, substantially increasing the Group's share of rental income; and construction work on the Bristol and Bath Science Park, which is being developed and operated by our Quantum Fund, began shortly after the year end. The first phase of construction of this BREEAM Excellent park will be complete and income-generating next summer.

Maintaining momentum on our Urban Regeneration schemes has remained a priority. We were pleased to finish the year with 308,000 sq ft of new commercial space at Greenwich, 70% of which has already been let, and 520 homes completed at Wembley, 82% of which are now sold or in lawyers' hands. We have continued to attract high quality, international brands to our schemes, including Hilton International, Tesco, Cineworld and Barclaycard.

People

We announce today that, after nine years' service to the Board, Senior Independent Director David Pangbourne will retire at the Annual General Meeting in September 2010. David has made an invaluable contribution to Quintain over the last decade, not least in his eight years as Chairman of the Audit Committee, and will be greatly missed.

As previously announced, in October William Rucker took over as Chairman from John Plender, who stepped down from the Board at the end of the financial year. In January, Joan MacNaughton retired and Charles Cayzer and Sir Peter Dixon joined the Board. Subsequent to the year end, Tonianne Dwyer resigned as Executive Director and Head of Fund Management and was replaced in May by David Gavaghan.

Outlook

The operational targets within our three year business plan are to grow funds under management to £2bn and complete the Western Core of Wembley City. Both actions will increase materially the amount of recurring income received by the Group.

Within this three year business plan, there are clear operational targets for the next twelve months. These are to:

· Start construction of the Hilton Hotel and progress the student accommodation build-out at Wembley City

· Secure anchor tenants for the Wembley retail outlet centre

· Conclude the sale of Pier Walk at Greenwich and recycle the capital

· Start construction of the next building at Greenwich

· Invest the remaining designated equity from the rights issue in income-generating assets

· Expand the number of income-generating beds in iQ by 20%

· Introduce an equity partner to the Corsham Street student accommodation scheme

· Create a new income-generating fund

· Achieve a 25% increase in funds under management.

Although the UK may well be facing a period of slow economic growth, or even decline, this need not impede achieving our primary target of a recurring cashflow-positive state or impact materially the value we intend to capture from our regeneration schemes. Through careful financial management and prudent implementation of our strategy, we remain focused on the delivery for shareholders of strong and sustained returns.

Adrian Wyatt, Chief Executive

3 June 2010

BUSINESS REVIEW

Urban Regeneration

70% of the Group's assets by value are managed within the Urban Regeneration business. Geographically, operations are focused on London where there is extensive opportunity to deliver above average returns from the creation of mixed-use, sustainable communities, designed to respond to the Capital's housing shortage. The segmental operating profit for the year from Urban Regeneration, before the results of asset sales and revaluations, was £5.3m.

Strategy

Urban Regeneration offers Quintain the opportunity to generate capital growth through the development and long term ownership of major new estates with excellent existing transport connections.

The demographic trends supporting the business include the long term growth of London's population and chronic shortage of housing. The maturity of the consumer society, with its demand for exciting retail and entertainment destinations, supports the mixed-use nature of our schemes, which in turn provides an inherent flexibility when determining the sequencing of the build programme. Our major schemes are characterised by the ownership or control of the operational businesses that drive millions of visitors to these destinations every year. This high level of footfall is a major draw for retailers and operators of leisure facilities.

Quintain initiates opportunities and then introduces third party capital for development through either the establishment of joint ventures, the selling of long leaseholds or the migration of assets into Quintain Fund Management. Debt funding is used where appropriate, subject to the constraints imposed by the Board through the agreed gearing limit.

Wherever possible the freehold of the new estate is retained by Quintain. This creates the opportunity to build additional material income streams through the provision of services such as estate management, hotels, entertainment, revenues from exclusive category partners (i.e. financial services and "pouring rights"), car parking, estate agency, catering, waste management, advertising and the provision of telecommunications and energy.

Market and outlook

The key property sectors for the Urban Regeneration business are residential, retail, and commercial.

There is a polarisation of the residential market in London, where prices for larger homes for purchasers with substantial equity have performed well in contrast to the new build apartment market, which targets first time buyers. Few such purchasers can meet lenders' requirements for equity and so, without parental support, many are turning to rental properties. In response the Company is building a rental business that lets units, thereby establishing an income stream that is attractive to potential investors.

In the retail sector, the most robust element has been at the budget end of the market. In delivering the only designer outlet shopping centre within the M25, at Wembley City, the Company intends to exploit this trend, in combination with addressing current local shortfalls in restaurants and leisure facilities.

The reduced commercial development pipeline in London over the last two years has resulted in an undersupply of prime commercial space in some locations, which will take several years to address. Occupiers are also increasingly seeking offices that can achieve excellent environmental performance in order to support their own sustainability programmes and reduce running costs. Recognised rating systems of such performance, such as BREEAM and the EPC, can now add value to high quality commercial product such as Pier Walk and Mitre Passage at Greenwich Peninsula. This presents favourable conditions for delivery of high quality, sustainable office space in London.

Wembley City

When complete, Quintain's flagship scheme in London will cover 87 acres around the iconic National Stadium and Arena at Wembley. Today it comprises 250,000 sq ft of retail parks, a hotel, extensive car parking to support the 170 annual events at the Stadium and Arena, leased industrial and commercial units and phase one of the scheme's development, located to the west of the Stadium.

Phase One

For the next three years, the weight of development activity at Wembley will be focused on achieving critical mass on this first phase of development, referred to as the "Western Core". In addition to the existing 520 homes, 106,000 sq ft office building, Plaza Hotel and 12,500-seat Wembley Arena, this phase will include: a four star Hilton International Hotel; accommodation for 661 students; 220,000 sq ft of retail; and a nine screen Cineworld cinema.

During the year we completed the second apartment building on time and on budget, increasing the number of finished homes on the scheme to 520. 285 of these homes have been sold to registered social landlords as affordable housing. Of the 235 private homes, the sale of 123 have been completed, an additional seven contracts have been exchanged and 14 units are currently reserved. Sales during 2009 were slow, however, an acceleration has been seen since the start of this year with 50 apartments sold in the last five months. Sale prices per square foot achieved in May 2010 ranged from £391 to £431 at Forum House and £435 to £495 at Quadrant Court.

Our residential rental business continues to grow. With residential sales across the London market being at exceptionally low levels but rental prices rising, we have sought to attract tenants for unsold private apartments before selling these with the income stream in place to investors. We have also extended this rental management service to our partners on the scheme. Revenue generated by our residential lettings business is now in excess of £1.0m per annum, with the contribution to the Group from rental income and fees being £365,000.

This autumn we will start construction of the new Hilton International Hotel, with a view to opening in 2012. Originally designed to offer 441 rooms, agreement has been reached with Hilton to reduce the number of rooms in the new hotel to 358, which we believe will deliver optimum occupancy rates, and create instead a destination Sky Bar on the top floor. The location of this venue and its views over the adjacent Wembley Stadium and Arena are designed to provide a stunning event location for those visiting, staying or performing at Wembley City.

Groundworks and an extensive pre-construction programme were undertaken during the year on the student accommodation plot next to the new Hilton, for which a forward sale is being sought. Construction of this new facility is scheduled to conclude at the same time as the hotel, bringing 661 students to the site.

Subsequent to the year end, we completed an agreement to lease with Cineworld plc regarding the 1,800-seat cinema complex within the 280,000 sq ft retail and leisure hub of the Western Core. Marketing for the retail component, including the designer outlet village, will be launched this autumn, paving the way for a start of construction in 2011 and opening in 2013.

Phase Two

In April 2010, following a public inquiry, the Planning Inspectorate endorsed Brent Council's Core Strategy, an important document setting the framework for development in the Borough until 2026. In particular, it acknowledges that Wembley will be "the economic engine" for Brent, with the town centre being extended eastwards to facilitate a further 300,000 sq ft of new retail floor space by 2016, in addition to that already granted planning consent. It also acknowledges that there is capacity for a further 1.1 million sq ft of retail floor space by 2026.

Planning consent was granted for the 240,000 sq ft Brent Civic Centre in March 2010; following the year end the Company concluded the agreement to sell this 2.25 acre plot to the Council for £10m. Brent Council anticipates opening the Civic Centre, which incorporates a library, town hall, administration offices and performance space, in June 2013. Quintain will then lease back the 13,000 sq ft income-generating retail component of the building for 150 years.

Wembley Arena

Cementing the future of the emerging Wembley City destination, it was announced in April that we secured Barclaycard as the title sponsor for Wembley Arena on a five year contract. Alongside the value of such an endorsement from a major brand, Barclaycard will extend the marketing reach of the Arena, for which we have a profit share arrangement, directly to their 10.4 million customers and offer them preferential access to tickets. They join Coca Cola and InBev as exclusive category Arena Partners.

Estate Revenue

Progress has been achieved with regard to streamlining site management, with a 125-year agreement now in place with Wembley National Stadium Ltd for car parking on event days. As well as reducing costs and management time for the Stadium, the agreement is expected to contribute £750,000 per annum to the Group in 2010/11, creating a substantial operational business throughout the useful economic life of the Stadium. This is part of the wider estate management operation, which is making an increasingly important contribution to the Group.

Greenwich Peninsula

Working alongside our joint venture partner, Lend Lease (Europe) Ltd, through the Greenwich Peninsula Regeneration Ltd ("GPRL") vehicle, Quintain is the master developer of the 190 acre Greenwich Peninsula scheme, adjacent to Canary Wharf. The scheme is based on a land draw-down model, with the Homes and Communities Agency as the major landowner and Quintain retaining ownership of 18.5 acres on the west riverbank, facing Canary Wharf.

During the year we made strong progress towards establishing Greenwich as a vibrant new office location. Transport for London and Greenwich Council anchor the initial development, whilst the architecturally-stunning O2 and Ravensbourne College provide a sense of place in a location characterised by superior environmental performance and low occupancy costs, compared with both the West End and the adjacent Canary Wharf.

Over the twelve month period, construction of the first two office buildings, totalling 308,000 sq ft, was completed. 217,000 sq ft, or 70%, of this space has been let to Transport for London and the London Borough of Greenwich on 20 year and ten year leases, respectively. Transport for London has relocated 1,800 employees, including its Crossrail team, to the Peninsula and Greenwich Council anticipates occupancy of their floors in Mitre Passage this summer. Their primary use of this space will be to attract inward investment to the Borough through their 'Destination Greenwich' programme, particularly during the London Olympics in 2012.

We have now begun the design of the third office building and appointed Fletcher Priest to create a 300,000 sq ft facility, for which we are seeking a pre-let before we start construction.

Construction of the new Ravensbourne College will complete this month, in preparation for the arrival of 1,400 digital media and design students in September. The College offers higher education up to Master degree level and connects students with businesses from the first day of their course. This influx of young, intelligent and creative people will bring immediate animation to Peninsula Central throughout the day to complement that delivered by 7.5 million visitors per annum to The O2 at night. With the imminent arrival of onsite demand, we are now analysing, with the support of the London Borough of Greenwich and Ravensbourne, the viability of introducing student accommodation to the Peninsula.

With the development and leasing of this commercial and academic hub, and over three thousand people using the Peninsula to work and study every day, new demand for retail has been created. Following the year end, leases were agreed on seven of the 13 retail units in Pier Walk, Mitre Passage and Ravensbourne College, all of which are owned by GPRL. Major brands Costa Coffee and Chiquitos will be among the first to open retail units at Greenwich Peninsula this year.

Following the international success of The O2 as an entertainment venue and the corresponding increase in its value, Quintain and Lend Lease disposed of their joint interest in the asset in October 2009. This sale released £11.8m of capital for Quintain and is in line with our corporate strategy of adding value to assets before selling down to recycle capital to fund other opportunities.

The development of residential buildings at Greenwich Peninsula was slowed by the liquidity crisis in the mortgage market and our focus throughout the financial year therefore has been on the delivery of extensive infrastructure for the first four plots in the south east of the Peninsula. Following a land sale to Bellway Homes in 2007, they are constructing a block of 229 apartments and our intention now is to start construction of a second block of homes in this district.

OneBrighton

The construction of OneBrighton, our first zero carbon scheme, continued throughout the year. Demand for the scheme has been high with 90% of the 172 units already sold or in lawyers' hands and prices increasing in the last five months from £320 per sq ft to £420 per sq ft, demonstrating increasing consumer interest in the concept of an apartment that supports a sustainable lifestyle.

RiversideOne

Construction of our second zero carbon scheme, which is located on the waterside in Middlesbrough, started in April 2010. Comprising 80 apartments based on the Brighton model, this building was designed by FAT Architects and is part of a wider masterplan for the 200 acre site by Will Alsop. Adjacent to the site, Temenos, which is the first of Anish Kapoor's five giant sculptures for the north east, has been constructed. With the additional benefit of the new Middlesbrough College and Middlesbrough Football Club, the site has already acquired a very strong sense of identity that will underpin the development of this long-neglected location. Quintain's development agreement anticipates 1.3 million sq ft of mixed use space.

City Park Gate

In March 2010 the Government announced proposals to construct a second high speed rail line ("HS2") in the UK, with a station terminal in Birmingham on the site of our City Park Gate scheme. The precise positioning of this terminal and the future of the HS2 proposal itself are uncertain and discussions continue with our partners Birmingham City Council to ensure development opportunities are maximised on the site.

Silvertown, London

At Silvertown, on the north bank of the Thames facing our Greenwich Peninsula scheme, Quintain owns 12 acres in partnership with the London Development Agency ("LDA"). The site is let to 2013, generating a rental income of £845,000 per annum, whilst we discuss Olympic Legacy projects with the LDA, which is also the owner of the adjoining site.

Beverley, Yorkshire

At Beverley, where Quintain owns 19% of an edge of town centre regeneration scheme, consent for 500,000 sq ft of mixed use development, including 150,000 sq ft of retail was obtained during the year and five acres of the scheme have now been sold, subject to planning consent, for residential use.

Emersons Green, Bristol

Our 65 acre scheme at Emersons Green adjoins the site of the Bristol and Bath Science Park, which is being developed and managed by our Quantum Fund. During the year discussions with the local planners reached an advanced stage and we anticipate the resolution to grant outline planning consent during the 2010/11 financial year. There is already recognition within the local plan for 2,500 homes and 2 million sq ft of commercial space across the wider 275 acre regeneration site, of which our scheme is part.

Quintain Fund Management

28% of the Group's assets are administered through four funds within Quintain's Fund Management business. The segmental operating profit for the year from Quintain Fund Management, before the results of asset sales and revaluations, was £16.4m.

Strategy

The purpose of Quintain Fund Management ("QFM") is to generate robust recurring income to support the Group throughout the economic cycle and to provide an exit route for individual assets or groups of assets elsewhere within the business.

We primarily identify asset classes that benefit from long term social, environmental and economic trends, such as the ageing of the UK's population and the desirability of a knowledge-based economy. These sectors also feature high barriers to entry that can deliver a premium for strong performance. Teams with detailed knowledge and proven skills in the specific sectors where QFM invests are maintained within the Group.

The existing four funds are focused on healthcare, higher education institutions, science and technology parks, and industrial and commercial property.

Quercus Healthcare Fund

The long term healthcare sector has demonstrated resilience throughout the reporting period, with some pressure arising from the management of gearing by operators rather than lack of demand. With the number of people aged over 85 forecast to double by 2033, an historical lack of investment in the sector and a tight regulatory environment, it is anticipated that demand for good quality accommodation will remain high.

The public sector spending cuts recently announced by the Government are expected to impact the elderly care industry at the micro level. However, given the demographic trends noted above and the tightening regulatory environment, the investors in Quercus remain confident that at the macro level this will remain a strong market.

Quercus was launched in December 1998 in partnership with Aviva Investors. The healthcare assets within the portfolio are let on long leases with RPI-linked / 3% minimum annual rental uplifts. The tenant base is diverse with 37 tenants operating 232 properties and the average lease length remains long at 29 years.

At the start of the reporting period, and in line with market trends across the sector, valuations fell. However, after a period of stabilisation some inward yield movement began to emerge, particularly in relation to the larger operators in the portfolio.

One acquisition was made at the start of the reporting period. Otherwise, the focus for the year was the improvement of the Fund's risk profile, ensuring that the capital structure reflected more accurately its nature as a 'safe haven'. To this end £130.8m of assets were sold during the financial year and the proceeds used to reduce gearing, which ended the period at 42.3%, against a covenant of 60%.

Emphasis is increasingly placed on the quality of facilities and care provided by individual care homes. £3.2m was invested during the year in a variety of refurbishment and extension projects that will enhance the quality of the portfolio's assets and drive rental increases. This programme continues, most recently with a £1.5m project to expand a care home in Warrington from 35 beds to 59, with many benefiting from en suite facilities. It is anticipated that around £16m of similar projects will be pursued over the next twelve months.

As part of Quintain's cash repatriation programme to manage the Group's gearing, units in Quercus were sold in September 2009, which broadened the Fund's investor base to around 50. In February, the Fund took advantage of increasing appetite for long term healthcare assets and raised £82.7m from existing investors at a premium of 5% to NAV. Whilst this reduced Quintain's interest in the Fund to 14.9%, it has given Quercus substantial equity to invest in new acquisitions where high potential for value creation can be identified.

iQ Student Accommodation Fund

Purpose built student accommodation has been a growth sector in the UK for more than a decade, with student numbers rising significantly, a lack of investment into traditional university stock and an increasingly controlled regulatory environment. The constraint in public sector expenditure over the next few years is likely to support this market in that universities will seek to use their restricted capital for educational purposes, increasingly looking to outsource the management of their students' accommodation requirements. The need for institutions to take action is underpinned by the estimate that 35% of existing university stock is already in poor condition.

The iQ portfolio, which is co-owned by Quintain and the Wellcome Trust, was valued at the end of the reporting period at £209.1m (2009: £145.7m), reflecting the addition of three new schemes in September 2009. With little evidence from completed transactions relating to purpose built schemes at the valuation date, the small fall in like for like values was largely the product of a marginal softening of yields during the year from 6.4% to 6.6%, partially offset by year on year rental growth of 5.5%.

The marketing suite for one of the three new schemes was delivered behind schedule, preventing the scheme from attracting tenants during the main letting period. The impact on the overall portfolio was to reduce the occupancy level achieved during the year to 91% (2009: 99%). Significant action has been taken to market this scheme in particular for the 2010/11 academic year and lettings are now substantially ahead of this time last year. Excluding this scheme, occupancy exceeded 96%.

Across the portfolio, lettings for the 2010/11 academic year are currently well ahead of the equivalent period last year at 71% (2009: 53%). This figure includes the two new schemes that are on schedule to complete in Edinburgh next month, which will add 635 more beds to the portfolio and like for like rents are approximately 3% higher than 2009/10. Together, these factors will result in an increase of approximately £4m in annualised rental income for the Fund.

As announced in the January 2010 interim management statement, iQ purchased a site in Hoxton for £10.8m on which a 255-bed accommodation scheme is now being built. Subsequent to the year end, the Fund committed to acquire a further scheme at Elephant and Castle in London, which will house 232 students plus associated retail space. Both these schemes will be complete in time for the start of the 2011/12 academic year, meeting the ongoing strong demand for accommodation in London.

SeQuel

In September 2009, Quintain established a new fund called SeQuel using debt and some third party funding. The Fund was seeded with £83.3m of high yielding property assets from our Investment Portfolio.

The substantial fall in the value of secondary properties since 2007 offers significant opportunity for value creation in the near term and SeQuel will capitalise on this dynamic. The majority of the Fund is held in office properties, with some industrial and retail assets. The tenant base is actively managed and diverse, with minimal exposure to any single tenant. Performance is generated from the Fund through asset management initiatives such as lease re-gearing and extensions, targeted sales in response to market movement and void reductions.

We have yet to see a re-rating of values in this sector and a marginal 1.7% increase of values was delivered over the reporting period. Gross income at the period end was £8.6m, against a gross ERV of £9.5m. The initial yield was 10.1% and voids ERV totalled £986,000, representing 10.3% of the portfolio. The projected geared equity return of this Fund is anticipated to be in the mid-20s and we remain ahead of schedule with the disposals programme to recycle capital.

Quantum

Science and technology are recognised as engines of future economic growth in the UK by both the public and private sectors. However, with some notable exceptions, the UK has a distance to travel to equal leading nations in this field. In order to attract and retain high calibre investment in the UK, accommodation facilities require wholesale improvement and increasingly will be provided in clusters of excellence in areas adjacent to major conurbations across the UK.

Quantum, our second fund established in partnership with Aviva Investors, will capitalise on this trend over the next decade. The strategy for the Fund is to create and manage good quality, highly flexible space that can meet the specific requirements of science and technology businesses, which follow accelerated growth paths with swiftly evolving needs. Quantum's unique selling point is not only the ability to accommodate tenants with changeable requirements effectively, but also to connect them to sources of academic support, funding and channels to inward investment. The model successfully established by Quantum in the south west of England provides a template for collaboration between higher education institutions, central and regional government and organisations in the private sector that can deliver this valuable combination.

The major asset currently held by Quantum is the development of 54 acres into the Bristol and Bath Science Park ("SPark"). Located near the M4 and M5 to the north east of Bristol, SPark brings together the development experience of Quintain with the academic excellence and facilities of the Universities of Bath, Bristol and the West of England, and the inward investment expertise of the South West Regional Development Agency ("SWRDA").

The Park will offer dedicated, highly flexible space, underpinned by a suite of support services located within the first building on the site, called SPark One. Alongside forum space incorporating conference facilities and investment teams, this building will contain an Innovation Centre, where fledgling businesses can be based, and an Expansion Centre into which they can move as they grow.

Following the discussions noted in our interim results, the South West Regional Development Agency has committed £10m of additional capital support for the first phase of the development. This has enabled the start of the construction of SPark One, which is scheduled to open in the autumn of 2011. The resulting building will be highly sustainable, achieving a BREEAM Excellent rating and a carbon emissions target of just 30kg per square metre. The new facility will respect the existing topography of the site, while a minimum of 30% of the materials used to construct the building will be recycled and at least 40% are being locally sourced.

In March 2010 it was announced that the new National Composites Centre, supported by Rolls-Royce plc, AgustaWestland, Airbus SAS, GE and GKN plc, will be built on the site, bringing the first 200 of 6,000 new jobs to SPark from its first day of operation next autumn. This £25m facility will accommodate the design and laboratory testing of new high quality composite products that have the ability to improve efficiency in the aerospace, automotive and wind turbine industries, with the objective of accelerating their delivery to the market. This groundbreaking work will typify the quality of technological research SPark is seeking to achieve.

Corsham Street

We reported in June 2009 that Quintain has entered into a forward funding agreement regarding a 661-bed scheme in central London at Corsham Street. The developer has now started construction of the scheme, which will exploit the Zone 1 location, excellent transport links and undersupply of appropriate housing in London. Combined with the current reduced pipeline of development in this sector, continued demand for student accommodation in London and the high quality of the specification, this scheme is expected to deliver strong performance on completion in time for the September 2012 intake.

FINANCE REVIEW

Introduction

Following a very challenging year to March 2009 for the property sector, an ongoing programme of actions was undertaken to improve the stability of and prospects for the Company. This included extending the successful cash repatriation programme and further reductions in overheads as well as additional flexibility enhancements to the banking positions. Through its own actions the Company was able to deliver a stable financial position from which it launched a rights issue in November. This raised £183.1m net and will allow us to deliver the next phase of our regeneration projects and grow underlying earnings through investing in income-generating opportunities both directly and through our fund management business.

Headline Results

The basic net asset value per share at 31 March 2010 was 120p, a decrease of 0.8% from 121p (adjusted for the rights issue) in the prior year. Adjusted diluted net asset value per share, the measure recommended by The European Public Real Estate Association ("EPRA"), fell by 1.5% to 133p per share (2009: 135p).

	31 March 2010	31 March 2009	Change %
NAV per share basic	120p	121p	(0.8)
NAV per share diluted	120p	121p	(0.8)
NAV per share EPRA¹	133p	135p	(1.5)
Total return per share²	(0.8)%	(39.0)%
Total return per share EPRA³	(1.5)%	(39.0)%

¹ The EPRA NAV per share excludes the fair value adjustments for debt and related derivatives and deferred taxation on revaluations and is calculated on a fully diluted basis as set out in the table below.

² The total return is calculated by the movement in net assets per the Consolidated Balance Sheet adding back the dividend paid.

³ This uses the net assets per EPRA as shown in the table below with the dividend added back.

The table below reconciles net assets as shown in the consolidated accounts to the definition of net assets set out by EPRA.

	31 March 2010 £m	31 March 2009 £m
Balance sheet net assets (note 7)	622.1	444.8
Deferred tax arising on revaluation movements, capital allowances and derivatives
Group	37.7	35.9
Joint ventures	(11.6)	(8.7)
Associates	0.5	0.4
Fair value adjustment on interest rate swaps
Group	29.1	29.6
Joint ventures	13.2	16.8
	691.0	518.8
Dilutive effect of options	0.5	-
Impact of rights issue	-	183.1
EPRA net assets	691.5	701.9

The 2009 numbers have been adjusted for the impact of the rights issue to achieve a comparison with the 2010 net assets.

Total Return

Quintain's objective is to maximise long-term total return to shareholders. In the year to 31 March 2010 the Company delivered a total return of (0.8)%, set against a backdrop of very challenging market conditions where actions were taken to safeguard the business. Quintain also did not benefit from the re-rating of prime property that took place in the second half of the year, with the majority of the Group's assets held either in land and secondary assets where continuing political and economic uncertainty left these markets subdued, or in specialist asset classes where yields have been far more stable in both the downturn and the upswing.

Operating Performance

EPRA earnings per share for the 12 months to 31 March 2010 were 0.1p (2009: 4.6p). Excluding impairments, this would have been a positive 2.0p. The table below reconciles these numbers to the reported diluted earnings per share of a loss of 3.3p (2009: loss of 39.1p). The main reconciling items are the impact of unrealised revaluation surpluses and deficits and losses on disposals. This year's EPRA earnings include the impact of the impairment of goodwill.

	31 March 2010 pence	31 March 2009 pence
IFRS fully diluted earnings per share	(3.3)	(39.1)
Revaluation movements
Group	(3.0)	25.1
Joint ventures	0.2	26.8
Loss on disposals	4.0	1.8
Impairment of goodwill	2.6	-
Deferred tax arising on revaluation movements, capital allowances and derivatives
Group	0.8	(3.3)
Joint ventures	(1.1)	(8.5)
Fair value adjustment on interest rate swaps
Group	(0.3)	0.5
Joint ventures	0.2	1.3
EPRA earnings per share fully diluted	0.1	4.6

Gross rental income, including our share of joint ventures, was £42.4m (2009: £45.1m) with sales of directly owned assets and units in Quercus reducing income received. The gross contractual annualised rent for directly owned properties at 31 March 2010 was £18.5m. This was below gross rental income because of net disposals in the year, rent free periods and the non-contractual receipt of £0.6m of rent from the Sunday market at Wembley.

Within the directly owned portfolio, there were no acquisitions in the period, although the impact of new leases added £1.3m, more than offsetting new void costs of £0.5m. Asset disposals reduced rental income by £0.9m. Within joint ventures, the sale of units in Quercus reduced income by £2.9m, with the full impact of £5.2m, incorporating the issue of new equity, reflected in contracted rent.

	31 March 2010			31 March 2009
	Directly owned properties £m	Within joint ventures £m	Total £m	Directly owned properties £m	Within joint ventures £m	Total £m
Gross rental income	21.4	21.0	42.4	22.1	23.0	45.1
Gross contracted annualised rent	18.5	19.0	37.5	20.6	21.3	41.9
Gross ERV*	24.5	21.6	46.1	26.8	22.0	48.8

*Estimated Rental Value

Voids, as a proportion of ERV, within directly owned properties reduced to 19.1% (2009: 19.8%). This is in line with our strategy of buying secondary assets featuring opportunities to create value through active management, subsequent to which the assets are sold.

The average unexpired lease term across the Group's portfolio was 12 years (2009: 16 years). The reduction was mainly driven by a lower equity share in Quercus where the homes are typically let on 35 year RPI linked leases.

The table below sets out the lease expiries by gross contracted annualised rent, for both our directly owned properties and our share of joint ventures across the Group:

	Directly owned Properties	Share of joint ventures
	£m	£m
Less than 1 year	3.3	6.9
1 to 2 years	1.8	-
2 to 5 years	5.3	1.4
5 to 10 years	1.1	-
Greater than 10 years	7.0	10.7
Total	18.5	19.0

Within joint ventures, the short term expiries relate to the iQ fund which includes direct lets to students and so leases will always be for one academic year. Bookings for the next academic year have already reached 71%, substantially ahead of bookings at the same point last year (2009: 53%).

Gross profits before impairments fell by 2.9% to £34.0m (2009: £35.0m). The impairment of £8.1m relates to City Park Gate in Birmingham, where a charge was taken in cost of sales before most of the asset was transferred from trading to investment properties. Gross profit is analysed in note 3 to the accounts and, in addition to rental income from directly owned properties, comprises:

· Net income from hotel operations of £4.2m (2009: £3.9m) which relates wholly to the Plaza Hotel at Wembley. The net contribution after overheads was £1.6m (2009: £1.4m).

· Other net income of £1.3m (2009: £1.4m) mainly related to management and car parking fees and commissions through our Commercial Ventures at Wembley.

· Gross profit from the sale of trading properties of £0.1m (2009: £nil) arose from the sale of 10 private units at Quadrant Court, Wembley City following practical completion in February 2010. The majority of the £11.1m turnover related to the sale of affordable units in that block and reflected a reimbursement of costs from housing associations.

· Fees from fund management and other related services of £11.9m (2009: £12.9m). The main contributors are highlighted in the table below. The contribution from Quercus included a performance fee of £6.1m compared with £7.1m for the previous year.

Fees from Fund Management and Related Activities

	31 March 2010 £m	31 March 2009 £m
Quercus Healthcare Property Partnership	8.7	9.5
iQ Property Partnership	2.3	2.3
Greenwich Peninsula Regeneration Ltd	0.7	0.6
Other	0.2	0.5
Total	11.9	12.9

Administrative expenses were £21.1m (2009: £26.4m). The prior year charge includes an exceptional cost of £2.3m relating to the consideration of an equity raising. Further savings were made in the current year across staff and office costs. Costs may increase in the next financial year if higher levels of performance are achieved triggering potential bonus payments and incentives under share schemes. Additional information is given in note 4 to the accounts.

Sale of Non-Current Assets

Sales of investments in the period with proceeds of £75.5m (2009: £31.1m) gave rise to a profit on historic cost of £12.5m (2009: £8.0m) and a loss against valuation of £7.7m (2009: £4.8m). Lack of liquidity in the market in the first six months of the year was a material factor in disposals taking place at below the previous valuation.

Revaluation Surpluses and Deficits

Following the amendment to IAS 40 under the IASB's Improvement Project, all revaluation movements are now reflected through the Income Statement. The net revaluation surplus arising from directly held properties was £7.5m (2009: deficit of £280.3m of which £68.2m was reflected in the Income Statement with £212.1m through equity). These movements are discussed under Properties in the balance sheet section below. The revaluation movements on joint venture investments are incorporated within the share of profit from joint ventures which is discussed in more detail below.

Profit/(loss) from Joint Ventures

The loss from joint ventures in the year of £0.2m (2009: loss £47.3m) was driven by a revaluation deficit of £1.1m (2009: deficit of £72.7m in Income Statement with £0.5m through equity), losses on the disposal of non-current property assets of £2.1m (2009: loss £0.1m) and the breakage costs of swaps within iQ's income statement of £1.4m.

The table below analyses the components of profit. The £3.5m fall in gross profit was accounted for by a £5.7m reduction from Quercus, due mainly to our lower holding in this fund as well as asset disposals within the fund itself, partly offset by £1.9m of first time rental income from Pier Walk at Greenwich Peninsula. Administrative expenses fell from £7.9m to £5.0m. £2.5m of the reduction related to Quercus, partly reflecting our lower share of the Fund.

The valuation of joint venture assets at 31 March 2010 gave rise to a deficit of £1.1m. This compares with a deficit of £72.7m in the previous year. The assets held within specialist funds fell in value slightly, with yields remaining relatively stable during the year. Pier Walk at Greenwich Peninsula rose in value by £10.0m reflecting a compression in the yield from 7.25% to 6.0%.

Net finance costs were £11.6m (2009: £12.0m). Within iQ there was a charge of £1.4m for cancellation of hedging, and a charge of £0.6m for marking to market. This compares with a £3.6m negative mark to market for the prior year. There was a first time interest cost to the Income Statement of £1.8m for the loan on Pier Walk and Mitre Court at Greenwich Peninsula. In line with our lower holding in Quercus, our share of net finance costs fell by £2.7m. The tax credit of £0.6m (2009: £23.9m) mainly relates to a release of deferred tax relating to the deficit on valuation.

A detailed breakdown of profit by joint venture is set out in note 11 to these accounts. An explanation of the activities of each joint venture below is given within the balance sheet section and a full analysis of key joint ventures is provided in the operating review.

Joint Venture Income

	31 March 2010 £m	31 March 2009 £m
Gross profit	18.3	21.8
Administration expenses	(5.0)	(7.9)
Revaluation deficit Loss on disposals Share of profit/(loss) from joint ventures	(1.1) (2.1) 0.7	(72.7) (0.1) (0.3)
Net finance costs	(11.6)	(12.0)
Loss before tax	(0.8)	(71.2)
Taxation	0.6	23.9
Loss after tax	(0.2)	(47.3)

Impairment of Other Non-Current Investments

The charge of £0.2m related to a write-down in shares in a vehicle owning a hotel in Cambridge. The charge of £3.1m related to an impairment arising on the acquisition of the remaining 50.1% interest in Bioregional Quintain, and comprised mainly the historic losses on the acquired proportion. In the previous year an investment of £7.8m in Serrastone SA was fully written off.

Finance Expenses

Net finance expenses were £11.6m (2009: £9.6m). Interest payable fell by £1.0m to £32.7m. Debt levels fell substantially in December 2009 on receipt of the proceeds of the rights issue. Reduced interest payable from lower average debt levels and interest rates was partially offset by the £6m amendment fee paid to give greater flexibility on covenants. The average cost of debt for the year to 31 March 2010 was 4.9% compared with 5.6% for the previous year. Of the interest capitalised in the year, £13.4m related to Wembley and £2.2m to Greenwich.

Interest receivable of £4.8m (2009: £9.7m) related to interest on cash deposits and loan notes to joint ventures. Interest receivable for the prior period also included a third party loan that was repaid during that year. The £0.7m credit for the change in fair value of financial instruments relates to the element of Quintain's on-balance sheet swaps that are classified as ineffective hedges. In addition to this a £0.3m deficit has been reflected in equity.

	31 March 2010 £m	31 March 2009 £m
Interest payable	32.7	33.7
Interest capitalised	(15.6)	(12.5)
Interest receivable	(4.8)	(9.7)
Profit on termination of interest swaps	-	(3.3)
Change in fair value of financial instruments	(0.7)	1.4
Total net finance expenses	11.6	9.6

Taxation

The Income Statement shows a tax credit for the year of £2.1m (2009: £22.8m). In addition to this a further £0.1m has been credited to reserves (2009: £66.1m), reflecting a reduction in the deferred tax provision on the effective element of interest rate swaps. The prior year credit also included a reduction in the deferred tax provision in line with the valuation deficit for that year.

Balance Sheet

As at 31 March 2010, the Group had directly held investment properties valued at £812.9m. This includes properties which under IAS 16 had previously been classified as development. The revaluation movement in the 12 months to 31 March 2010 gave rise to a surplus of £7.5m (2009: deficit £280.3m). Net of capital expenditure, this represented an increase of 0.9%.

Of the Group's investment properties, £662.4m are within the Urban Regeneration Segment which, given the nature of the assets, is treated as a single operation. Within it, the two largest assets are Wembley City and Greenwich Peninsula and a further analysis of their valuations is set out below. Part of these assets are owned within joint ventures and so included within Investment in Joint Ventures.

Wembley City

	£m
As at 1 April 2009	481.4
Expenditure on trading assets	19.1
Capital expenditure on investment assets	5.7
Capitalised interest	13.4
Disposals	(18.8)
Valuation deficit	(11.9)
As at 31 March 2010	488.9

The expenditure on trading assets related to the completion of Quadrant Court, W04 and the acquisition of Juniper Close, both at Wembley City. The capital expenditure was to deliver infrastructure, in particular in relation to the Western Core. Disposals included £5m for the sale of Fulton and Malcolm House and £13.8m for sales of residential units.

The valuation was driven by current market sentiment towards large scale regeneration projects, which remained subdued given economic and political uncertainties. Whilst the stand-back view takes priority, Savills' valuation is supported with a buyer's expectations of cashflows. Within the assessment of the cashflows the key change in variables from the previous year were lower forecasts for residential sales inflation, higher near term cost inflation and revised phasing and delivery of infrastructure. Given the ongoing economic concerns the discount rate remained unchanged at 15%. Of the standing assets, the only one that experienced material yield contraction was the Stadium Retail Park which is let on long leases. There the initial yield moved from 7.75% to 5.75%.

Greenwich Peninsula

The valuation below relates to Quintain's interests at Greenwich Peninsula as developer and landowner.

	£m
As at 1 April 2009	230.0
Capital expenditure	30.2
Capitalised interest	2.2
Disposals	(11.8)
Valuation surplus	26.5
As at 31 March 2010	277.1

Within capital expenditure £21.5m related to the completion of N0204, the first office buildings on the Peninsula. We disposed of our interests in the O2 for £11.8m. Of the valuation surplus £10.0m was accounted for by the uplift in the value of the N0204 commercial buildings. In particular the first of those, Pier Walk, being a prime building let for 20 years to TfL, experienced material yield contraction from 7.25% to 6.0%. As with Wembley, the ongoing economic uncertainties meant that market appetite for regeneration projects did not re-emerge in the way it did for prime commercial assets and therefore this aspect of the valuation was relatively flat. Within the assessment of the discounted cashflow, higher near term cost inflation and lower forecasts for residential sales inflation were offset by marginally higher base prices for apartments, as pricing evidence emerged and reallocation of development exposure between plots.

Capital Commitments

The table below sets out capital commitments including our share of any commitments within joint ventures. Corsham Street is a student accommodation block that we have forward funded from the developer. On 1 April 2010 we made the initial payment of £15m. It is anticipated that the asset will be sold into a joint venture before the next payment of £36m is due in the next financial year.

	31 March 2010 £m
Group: Corsham Street	104.0
Wembley	7.8
Middlehaven	10.4
Others	0.1
Joint ventures:
iQ	5.4
Spark	13.0
Greenwich - MDL Wembley	2.2 0.2
	143.1

Joint Ventures

As at 31 March 2010, Quintain had net investment in joint ventures totalling £202.1m. A breakdown of this is included in the table below and more financial details are available in note 11i to the accounts.

Joint venture	Share of equity	Net investment £m
Quercus	14.9%	57.2
GPRL	49.0%	55.3
Greenwich Peninsula N0204	50.0%	19.5
iQ	50.0%	46.0
Quantum	50.0%	5.8
Quintessential Homes	50.0%	5.7
Other joint ventures	N/A	12.6
		202.1

Quercus

This is a healthcare property fund, of which Quintain owns 14.9% of the equity and acts as asset manager. For this role Quintain receives asset management, transaction and performance fees. Details of the operations and activities of this fund are set out in the QFM business review.

Greenwich Peninsula Regeneration Ltd

This vehicle has a development agreement to draw down 190 acres at Greenwich Peninsula, for which it has gained a 13.2m sq ft mixed-use planning consent. It can either develop the land directly or sell it on to third party developers. The remaining 51% is owned by Lend Lease (Europe) Limited.

Greenwich Peninsula N0204

This is a 50/50 joint venture with Lend Lease (Europe) Limited to build the first commercial buildings at Greenwich Peninsula. The buildings comprise 308,000 sq ft of commercial space including 15,400 sq ft of retail. This is divided into two buildings: Pier Walk, which completed in June 2009, with the 196,000 sq ft of commercial space fully let to TfL for 20 years; and Mitre Passage, comprising 112,000 sq ft, which was completed in December 2009. The top two floors have been let to Greenwich Council, which will occupy the space this summer.

iQ is a 50/50 joint venture with The Wellcome Trust to invest in student accommodation. Quintain is the asset manager, a role for which it receives fees. Details of the Fund's strategy and activities are set out in the Fund Management business review.

Quintessential Homes

Forum House is the first residential block at Wembley, also known as W01. The building contains 145 private apartments which have been funded 50% by Quintain and 25% by each of Genesis and Family Housing Associations. The housing associations have funded 100% of the 141 affordable housing units. Sales of 80 of the private units have completed to date. Of the unsold units, 35 are let at initial yields of between 4% and 7%.

Quantum

Quantum is a science park fund owned 50/50 with Aviva Life and Pensions UK Limited, managed by Aviva Investors. It has signed its first development agreement to build an 829,000 sq ft science and technology park, SPark at Emersons Green, Bristol and is now on site with phase one. Quantum will look to acquire further investment and development opportunities as appropriate. Details of this agreement and the plans for the Fund are set out in the Operational Review.

Minority Interests

The Sequel Fund was created during the year with the intention of introducing equity partners into this secondary commercial portfolio. To date we have sold a minority stake, resulting in the Fund being accounted for as a subsidiary and minority interests of £0.3m (2009: £nil) shown in the Balance Sheet.

Financing Strategy and Capital Structure

Our financial strategy in the medium term is to manage a level of debt that balances the risks to the business with the higher returns on equity that, over time, will accrue due to the lower cost of debt. Gearing levels, being the proportion of debt compared with equity, will vary depending on the profile of operational risks, the capital that is currently committed or expected to be committed in the future and the cyclical high or low of property valuations.

Our financing structure needs to be flexible and cost effective. This has been achieved through securing funding at the corporate level, giving us the scope to fund efficiently all areas of the portfolio which otherwise would be more challenging, such as infrastructure works at Wembley and Greenwich. It also provides us with liquidity and operational flexibility.

Towards the end of the last financial year to March 2009 and beginning of this, we negotiated additional headroom on all of our corporate bilateral facilities. This allowed us for each of three years, in return for paying a 1% amendment fee, to increase the maximum gearing covenant from 110% to 150%. Because of the significant reduction in gearing arising mainly from the rights issue, we have elected not to apply the option for the current year. Other flexibility changes, such as the ability to elect to exclude losses from the interest cover calculation in return for pro-rata repaying and cancelling of facilities, remain in place. The average margin on the bilateral facilities is now running at 1.4%.

The weighted average rate of interest of the Group's debt at the year end was 6.2% (2009: 4.0%). The rights issue proceeds were used to pay down floating rate debt, so increasing the average cost of debt for the last quarter. This cost reduces as £100m of 3% swaps expired in May 2010. Also in May 2010 we re-set the 5% 2013 swaps to the current market price of 1.735% following consent from all the bilateral facilities that the £14.4m NPV of the transaction will be excluded from the interest charge in calculating the interest cover ratio.

	Covenant	31 March 2010	31 March 2009
Net borrowings		£356.0m	£533.3m
Weighted average debt maturity		3.7 years	4.5 years
% of net debt hedged		122%	100%
Undrawn committed facilities
Group		£248.0m**	£134.5m
Joint ventures		£78.9m	£96.0m
Capital commitments
Group		£122.3m	£32.4m
Joint ventures		£20.8m	£36.1m
Banking covenants
Gearing per banking covenants	110%	46%	105%
Interest cover*	1.25 times	2.8 times	1.7 times

* Interest cover, per our banking covenants, is defined as operating profit before net finance expenses plus realised surpluses on disposals divided by net finance costs excluding marking to market adjustments.

**This excludes £15m of facilities cancelled after the year end.

Hedging

The corporate bilateral facilities require that a minimum of 50% of exposure to interest rate movements is hedged. As at 31 March 2010, Quintain's interest rate risk was 122% hedged by swaps. The over-hedging arose because of the net £183.1m of rights issue proceeds being used to pay down debt. The over-hedging fell away after the year end with the expiry in May 2010 of £100m of 3% swaps.

In addition, as explained above, since the year end we have re-set the 5% 2013 swaps to current market price of 1.735%. This followed consent from all the bilateral facilities that the £14.4m NPV of the transaction will be excluded from the interest charge in calculating the interest cover ratio.

The fair value adjustment at 31 March 2010 of interest rate hedging instruments was a surplus of £0.4m (2009: deficit £31.1m). Of the movement during the year, £0.7m was credited to the Income Statement, being the element relating to non-cashflow hedges and £0.3m debited directly to equity. This unrealised adjustment is excluded in calculating gearing for covenant calculation purposes.

In relation to joint ventures, the fair value adjustment on these interest rate hedging instruments was a deficit of £0.6m (2009: deficit £15.3m) all of which was debited to the Income Statement.

A 50 basis point increase or decrease during the year would have changed profit before tax by £0.5m. Whilst at this level it is symmetrical, when interest rates reach a level where the caps become effective, increasing rates have a lesser impact on the cost than reducing rates do on cost savings.

The Quercus fund has floating rate non-recourse debt of which 87% was hedged by swaps at 31 March 2010. Quintain's share of the fair value surplus was £1.8m. This is reflected in equity.

The iQ joint venture also has floating rate non-recourse debt of which 132% was hedged with caps and floors at 31 March 2010. The over-hedging position will diminish as the existing pipeline is built out and new schemes are brought forward. Of the fair value deficit, Quintain recognised £0.6m in the Income Statement and £0.4m in equity.

The N0204 joint venture as at 31 March 2010 had fixed 80% of its floating debt at 5.28%. Quintain's share of the fair value surplus, reflected in equity, was £0.2m. Whilst the debt is non-recourse, there is a contingent equity element. Details of these are set out in note 19 to the accounts.

Cashflow

Net cash generated from operating activities was £(30.6)m (2009: £3.7m). This included a £28.3m outflow for purchases and capital expenditure within trading properties. Distributions of £8.9m (2009: £5.9m) from joint ventures are included within the investing activities and wholly related to Quercus. Alongside net proceeds on disposals, this gave rise to a net cash inflow from investing activities of £27.3m (2009: outflow £3.4m). The rights issue proceeds of £183.1m were mainly used to pay down debt, leaving a net cash inflow from financing activities of £41.3m (2009: outflow £19.9m).

Accounting

From 1 April 2009 development properties are treated in line with investment properties under IAS 40, whereby valuation movements on development properties are reflected in the Income Statement rather than through equity as previously treated under IAS 16. As it has only been applied prospectively, prior year results have not been restated.

Key Performance Indicators

We measure our performance both financially and in terms of the service we provide to our stakeholders. The leading indicators measuring our performance against the key elements of our objectives and strategy are:

Financial Performance Indicator	Target	One year	Five years

Total return*	10% Real	(0.8)%	(5.1)%

IPD Performance**	Top quartile	95^th percentile	19^th percentile

* Total return is the movement in net asset value per share adjusted for the dividends paid in the year as a percentage of the opening net asset value per share

** The IPD performance is measured in comparison with the March Universe

Our total return target is set to be a challenging medium term goal. Quintain has not been immune from the significant issues faced by the property industry over the last two years and in particular the total return in the previous year of (39)% has materially impacted the five year return. However, we remain focused on this target and believe that, with the stable platform we have built this year, the target is challenging but achievable in the medium term. Quintain underperformed IPD for the first time in 10 years this year. In particular we did not benefit from the re-rating of prime stock that took place in the second half of last year, with the majority of the assets held in land and secondary assets where continuing political and economic uncertainty left these markets subdued, and in specialist asset classes where yields had been far more stable in both the downturn and the upswing. Considered over five years, our performance improves considerably delivering a top quartile position. Over the 17 years since inception, Quintain is in the first percentile.

In addition to these financial measures, we monitor the security of the business by reference to the key banking covenants and by our stated objective to achieve a cashflow positive position as quickly as possible post the rights issue and then build on this to allow the payment of a covered dividend.

Financial Performance Indicator	Target	31 March 2010

Interest Cover*	Minimum 1.5x (covenant 1.25x)	2.8x

Gearing**	Maximum 90% (covenant 110%)	46%

Operating cash flow***	Cash flow positive	£(5.1)m

** Gearing, per our banking covenants, is defined as the ratio of net borrowings of the Company and its wholly owned subsidiaries to equity shareholders' funds adjusted for deferred tax and marking to market movements.

*** Operating cash flow is defined as operating cash flow after cash interest excluding investment in current assets and swap breakage costs adding back dividends received from joint ventures

Interest cover and gearing remain firmly within the tighter internal limits. The internal limit on gearing includes an allowance for position in the cycle, so the gearing limit will fall as the market rises.

As highlighted in both the Chairman and the Chief Executive's statements, a key milestone for the business is to become cashflow positive on a recurring basis and part of the proceeds of the rights issue has been allocated to achieve this.

At Quintain our most important asset is our staff, whose retention and motivation is crucial to the success of the Company. From our annual staff survey we gain significant feedback, which we act upon. Here we have identified the key measure of those that feel "very happy at work".

2010

2009

Staff retention and motivation

Staff that feel "very happy at work"

82%

71%

RISK MANAGEMENT

In addition to those general economic, security and regulatory risks faced by a wide range of companies that are part of the general commercial environment, we consider there to be a number of specific risks that are faced by our Company.

How We Manage Risk

In managing the business, the identification and monitoring of risk is crucial. During the year Grant Thornton was appointed to interrogate and refine our risk register, introducing a more robust method of assessment of risk and the effectiveness of mitigating actions. A detailed risk register is updated regularly and those responsible for managing areas of risk are required to report on them every six months, and by exception. Our internal audit function reviews the risk register for completeness and accuracy. They also carry out with the internal team a risk workshop on a six monthly basis. All those that have responsibility for any risk areas are invited and all aspects of the Group are considered in order to promote a wider understanding of risk in the business. In addition, the risk register is considered by the Audit Committee. The Risk Committee debates key risks and mitigation on a regular basis. Set out below are management's view of the current key specific business risks and action taken in mitigation.

Risks and Mitigation

Property valuations - Property valuations are inherently subjective and uncertain. This is more acute both in current markets where transaction volumes are lower than average and in relation to our major regeneration projects which are unique with comparables used varying materially more than for investment properties.

Mitigation - We use external independent valuers that are well regarded in the industry. We keep in close contact to understand how valuations are moving. With respect to the urban regeneration properties, valuers support their stand back valuation with their own simplified cashflow model.

Breach of banking covenants - the two key financial covenants within the corporate bilateral facilities are gearing and interest cover. The gearing ratio of 46% is significantly below the covenant of 110%. Interest cover for the year was 2.8 times against a covenant of 1.25 times.

Mitigation - Covenants are forecast and monitored on a regular basis. Internal guidelines which have been endorsed by the Board operate at tighter levels of control than the external covenants and incorporate the impact of positioning in the cycle to encourage significant headroom at the top of the cycle. In re-pricing the 2013 swaps to market, the banks have agreed to exclude the NPV payment from interest cover which materially increases headroom against forecast for the next three years. The corporate debt remains fully hedged to assist in cost certainty and part of the proceeds of the rights issue was set aside to invest in income producing assets and build the fund management business to improve the income profile of the Group.

Development - The Group is exposed to risks associated with development projects. Delays could occur for regulatory or funding reasons. Counterparty risk remains high with a risk that contractors may become bankrupt or insolvent. This also applies to other counterparties such as development partners who may fail to meet their obligations. Control of timing and construction costs are vital to prevent overspend or delays once on site.

Mitigation - Quintain's in-house project management team transfers risk to contractors where possible and employs a culture of no changes once the design is agreed. The supply chain management initiative, SC2, is creating increasing visibility into opportunities for cost control and reduction, whilst standardisation across Quintain's projects will increase predictability and provide economies of scale. Structuring of deals and retentions provide some support against counterparty risk.

Market risk - The Group's business is dependent on the general economic and property market conditions in the United Kingdom. Deterioration in residential and commercial property markets could lead to further declines in the value of the Group's property portfolio, tenant default and a reduction in income from these properties. Land, which makes up 45.5% of the Group's gross assets, tends to experience greater volatility in valuations than income producing assets.

Mitigation - There is significant diversification in the profile of assets, from nursing homes with RPI linked long leases and minimum rental uplifts, to direct lets of student accommodation, secondary regional property with a wide tenant base and regeneration projects with lower initial income profiles. Whilst the Group has a considerable quantity of planning consents, we have few development obligations. The largest tenant at 7.9% of contracted annualised rent is Transport for London, which is effectively a Government covenant. Live Nation, operating Wembley Arena, is the second largest, comprising 4.6% of contracted annualised rent. This exposure is reduced by receipts equating to approximately half of the rent being received in Quintain controlled bank accounts before being passed on and also by Quintain's ability to step in to the business.

Reputation risk - Quintain's reputation with many stakeholders is important in the continued effective operations of the business. Support from the public sector is essential in continuing to achieve detailed planning consents. Relationships with joint venture partners and other professional organisations are critical in delivery of the business.

Mitigation - Ongoing senior management engagement with stakeholders. All deals that may have a material impact on reputation must be reviewed by the Board. In order to increase our understanding and manage the risk, we recently commissioned a perceptions audit and are creating an action plan to address any concerns that arise.

Personnel - the loss of key personnel could affect delivery of the business strategy. This risk is currently increased because share incentive packages have very little value or no value.

Mitigation - A new share incentive plan will be implemented subject to shareholder consent at the next AGM. In order to understand and address employees' issues within the business there is an annual employee survey, the findings of which are openly disclosed and addressed. There are regular formal staff meetings and monthly informal events at which staff can communicate with senior management, as well as weekly transmission of news and successes allowing all employees to understand the activities around the Group and the impact of their contribution.

The detailed assessment of financial risk management covering credit, liquidity and market risk is set out in note 19 to the accounts.

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

• the Directors' Report, the Business Review, the Principal Risks, Key Performance Indicators and the Financial Review sections of this report include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board

William Rucker Rebecca Worthington

Chairman Finance Director

3 June 2010 3 June 2010

Forward looking statements

This document includes statements that are, or may be deemed to be, "forward-looking statements''. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes'', "estimates'', "plans'', "anticipates'', "targets'', "aims'', "continues'', "projects'', "assumes'', "expects'', "intends'', "may'', "will'', "would'' or "should'', or in each case, their negative or other variations or comparable terminology.

These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Group's result of operations, financial condition, liquidity, prospects, growth strategies and the sectors in which the Group operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including without limitation: conditions in the market, market position of the Group, earnings, financial position, cash flows, return on capital, anticipated investments and capital expenditures, changing business or other market conditions and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this document based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Subject to the Company's continuing obligations under the Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules, the Company undertakes no obligation to update publicly or revise any forward- looking statements, whether as a result of new information, future events or otherwise.

QUINTAIN ESTATES AND DEVELOPMENT PLC

Consolidated Income Statement

for the year ended 31 March 2010

			2010	2009
	Notes		£000	£000
Revenue	3		56,937	66,019
Cost of sales (before impairment in book value of trading properties)	3		(22,947)	(30,986)
Impairment in book value of trading properties	3		(8,114)	-
Gross profit			25,876	35,033
Administrative expenses (before exceptional administrative expenses)		4a	(21,111)	(24,109)
Exceptional administrative expenses	4b		-	(2,336)
Operating profit before recognition of results from non-current
asset sales and revaluation			4,765	8,588
Loss from the sale of non-current assets			(7,707)	(4,821)
Gain (deficit) on revaluation of investment properties	9		7,513	(63,282)
Deficit on revaluation of development properties			-	(4,967)
Share of loss from joint ventures	11i		(194)	(47,291)
Share of profit from associate	11ii		346	86
Impairment of other non-current investments	11iii		(150)	(7,790)
Impairment recognised on acquisition	26		(3,144)	-
Operating profit (loss)			1,429	(119,477)

Interest payable			(17,039)	(21,163)
Change in fair value of derivative financial instruments			672	1,912
Finance expenses			(16,367)	(19,251)
Finance income			4,789	9,662
Net finance expenses	5		(11,578)	(9,589)
Loss before tax			(10,149)	(129,066)

Current tax			(169)	11,362
Deferred tax			2,262	11,474
Tax credit for the year	6i		2,093	22,836
Loss for the financial year			(8,056)	(106,230)

Attributable to:
Equity shareholders			(8,222)	(106,230)
Non-controlling interest			166	-
			(8,056)	(106,230)

Earnings per share (pence):	7i
Basic			(3.3)	(39.1)

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2010

			2010	2009
		Notes	£000	£000
Foreign currency translation difference			(35)	250
Deficit on revaluation of development properties			-	(212,062)
Deficit on revaluation of other non-current investments		11iii	(60)	(364)
Recycling of revaluation movement on other non-current investments		11iii	-	2,159
Effective portion of changes in fair value of cashflow hedges, net of
	recycling	20i	(316)	(29,712)
Share of other comprehensive income in joint ventures, net of tax		11i	1,244	(12,125)
Tax on other comprehensive income		6iii	88	66,139
Other comprehensive income for the financial year, net of tax			921	(185,715)
Loss for the financial year			(8,056)	(106,230)
Total comprehensive income for the financial year, net of tax			(7,135)	(291,945)
Attributable to:
Equity shareholders			(7,301)	(291,945)
Non-controlling interest			166	-
			(7,135)	(291,945)

Consolidated Balance Sheet

As at 31 March 2010

		2010	2009
	Notes	£000	£000

Non-current assets
Investment properties	9	812,858	143,452
Development properties	9	-	656,688
Owner-occupied properties, plant and equipment	10	2,716	4,135
Investment in joint ventures	11i	202,143	214,995
Investment in associate	11ii	1,589	1,243
Other non-current investments	11iii	3,925	10,820
Total non-current assets		1,023,231	1,031,333
Current assets
Trading properties	12	28,058	26,601
Trade and other receivables	13	15,939	15,658
Current investments	14	4	4
Cash and cash equivalents	19iii	47,209	9,215
Total current assets		91,210	51,478

Total assets		1,114,441	1,082,811

Current liabilities
Bank loans and other borrowings	16	(1,600)	-
Trade and other payables	15	(37,091)	(46,913)
Current tax liability		(1,118)	-
Total current liabilities		(39,809)	(46,913)
Non-current liabilities
Bank loans and other borrowings	16	(397,066)	(533,490)
Deferred tax liability	6iv	(23,675)	(26,025)
Obligations under finance leases	17	(11,148)	(11,156)
Other payables	18	(20,360)	(20,382)
Total non-current liabilities		(452,249)	(591,053)

Total liabilities		(492,058)	(637,966)

Net assets		622,383	444,845

Equity
Issued capital	22	130,117	32,511
Share premium account		137,272	51,518
Revaluation reserve		(75)	174,588
Other capital reserves	21	108,136	108,136
Cashflow hedge reserve		(39,036)	(41,727)
Translation reserve		533	568
Retained earnings		294,784	131,191
Own shares held reserve		(9,639)	(11,940)
Equity shareholders' funds		622,092	444,845
Non-controlling interest		291	-
Total equity		622,383	444,845

Net asset value per share (pence):	7ii
Basic		120	121

Diluted		120	121

Approved by the Board of Directors on 3 June 2010 and signed on its behalf by:

ADRIAN WYATT REBECCA WORTHINGTON

Director Director

Consolidated Statement of Changes in Equity

for the year ended 31 March 2010

			Issued capital	Share premium account	Revaluation reserve	Other capital reserves	Cashflow hedge reserve	Translation reserve	Retained earnings	Own shares held reserve	Equity shareholders' funds	Non-controlling interest	Total equity
			Issued capital	Share premium account	Revaluation reserve	Other capital reserves	Cashflow hedge reserve	Translation reserve	Retained earnings	Own shares held reserve	Equity shareholders' funds	Non-controlling interest	Total equity
			£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance 1 April 2009			32,511	51,518	174,588	108,136	(41,727)	568	131,191	(11,940)	444,845	-	444,845
Transfer on change in
		accounting policy
		relating to development
		properties (note 1)	-	-	(174,603)	-	-	-	174,603	-	-	-	-
Loss for the financial year			-	-	-	-	-	-	(8,222)	-	(8,222)	166	(8,056)
Other comprehensive income
		for the year, net of tax	-	-	(60)	-	1,016	(35)	-	-	921	-	921
Realisation of hedging reserve			-	-	-	-	1,675	-	(1,675)	-	-	-	-
Rights issue			97,540	93,638	-	-	-	-	-	-	191,178	-	191,178
Expenses of rights issue			-	(8,031)	-	-	-	-	-	-	(8,031)	-	(8,031)
Issue of other shares less
	costs		66	147	-	-	-	-	(9)	-	204	-	204
Purchase of own shares as
	treasury shares		-	-	-	-	-	-	-	(36)	(36)	-	(36)
Costs relating to share-based
		payment schemes	-	-	-	-	-	-	1,233	-	1,233	-	1,233
Shares awarded to
		employees under share-
		based bonus schemes	-	-	-	-	-	-	(2,337)	2,337	-	-	-
Proceeds from sale of
		minority interest	-	-	-	-	-	-	-	-	-	125	125
Balance 31 March 2010			130,117	137,272	(75)	108,136	(39,036)	533	294,784	(9,639)	622,092	291	622,383

Refer to note 21 for more information.

Consolidated Statement of Changes in Equity

for the year ended 31 March 2009

		Issued capital	Share premium account	Revaluation reserve	Other capital reserves	Cashflow hedge reserve	Translation reserve	Retained earnings	Own shares held reserve	Equity shareholders' funds	Non-controlling interest	Total equity
		Issued capital	Share premium account	Revaluation reserve	Other capital reserves	Cashflow hedge reserve	Translation reserve	Retained earnings	Own shares held reserve	Equity shareholders' funds	Non-controlling interest	Total equity
		£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance 1 April 2008		32,483	51,343	327,360	108,136	(322)	318	238,805	(12,422)	745,701	-	745,701
Loss for the financial year		-	-	-	-	-	-	(106,230)	-	(106,230)	-	(106,230)
Other comprehensive
	income for the year, net
	of tax	-	-	(152,772)	-	(41,405)	250	8,212	-	(185,715)	-	(185,715)
Issue of shares less costs		28	175	-	-	-	-	(71)	-	132	-	132
Costs relating to share-
	based payment schemes	-	-	-	-	-	-	1,829	-	1,829	-	1,829
Shares awarded to
	employees under share-
	based bonus schemes	-	-	-	-	-	-	(482)	482	-	-	-
Dividends paid in the year		-	-	-	-	-	-	(10,872)	-	(10,872)	-	(10,872)
Balance 31 March 2009		32,511	51,518	174,588	108,136	(41,727)	568	131,191	(11,940)	444,845	-	444,845

Refer to note 21 for more information.

Consolidated Cashflow Statement

for the year ended 31 March 2010

	Notes	2010 £000	2009 £000
Operating activities
Loss for the financial year		(8,056)	(106,230)
Adjustments for:
Depreciation of owner-occupied properties, plant and equipment		780	726
Costs relating to share-based payment schemes		1,233	1,829
Net finance expenses		11,578	9,589
Loss on sale of properties held as non-current assets		7,707	4,821
(Gain) deficit on revaluation of investment properties		(7,513)	63,282
Deficit on revaluation of development properties		-	4,967
Share of loss from joint ventures		194	47,291
Share of profit from associate		(346)	(86)
Loss (profit) on sale of plant and equipment		53	(4)
Impairment of other non-current investments		150	7,790
Impairment recognised on acquisition		3,144	-
Impairment in book value of trading properties		8,114	-
Tax on continuing operations		(2,093)	(22,836)
		14,945	11,139
(Increase) decrease in trade and other receivables		(1,586)	19,746
Decrease in trade and other payables		(5,538)	(4,209)
Increase in trading properties		(17,271)	(4,462)
Cash generated from operations		(9,450)	22,214
Interest paid		(23,891)	(29,708)
Interest received		1,337	8,561
Tax recovered		1,448	2,625
Net cashflow from operating activities		(30,556)	3,692

Investing activities
Proceeds from sales of investment properties		30,515	19,479
Purchase and development of property assets		(14,443)	(23,594)
Purchase of owner-occupied properties, plant and equipment		(93)	(2,104)
Proceeds from sales of other non-current assets		7,436	-
Proceeds from sale of interests in joint ventures		43,241	19,578
Loans to joint ventures		(48,335)	(64,113)
Distributions received from joint ventures		8,937	5,921
Acquisition of other non-current investments		-	(1,619)
Repayment of non-current receivable		-	43,081
Net cashflow from investing activities		27,258	(3,371)

Financing activities
Issue of shares		183,351	132
Investment in own shares		(36)	-
Proceeds from new borrowings		364,258	440,000
Repayment of borrowings		(503,691)	(441,600)
Payment of loan issue costs		(1,762)	(6,787)
Payment of finance lease liabilities		(774)	(796)
Equity dividends paid		-	(10,872)
Net cashflow from financing activities		41,346	(19,923)

Net increase (decrease) in cash and cash equivalents		38,048	(19,602)
Cash and cash equivalents at start of year		9,215	27,982
Effect of exchange rate fluctuations on cash held		(54)	835
Cash and cash equivalents at end of year	19iii	47,209	9,215

Notes to the accounts

for the year ended 31 March 2010

1 Accounting policies

i) Basis of preparation

In the statutory accounts for the financial year ended 31 March 2009, the Directors concluded that there was a material uncertainty arising from the impact on loan covenants of the continuing fall in property values which appeared to cast doubt on the Group's and Company's ability to continue as a going concern. The successful outcome to the rights issue announced on 5 November 2009, the improving outlook for the Group's properties, as evidenced by the positive revaluation movement in the year, and the results of the programme for the repatriation of funds through the disposal of investment properties and non-current investments, have reduced the gearing ratio, as defined within the banking loan documentation, and have enabled the directors to conclude that there is no longer a material uncertainty which may cast significant doubt on the ability of the Group to continue as a going concern. The directors therefore consider it appropriate to prepare the financial statements on a going concern basis.

Further information regarding the Group's business activities, together with the factors likely to affect its future development, performance and position is set out in the Business Review. In addition, note 19 to these financial statements sets out the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities and its exposure to credit risk and liquidity risk.

The Group's financial statements have been prepared and approved by the Board in accordance with International Financial Reporting Standards and Interpretations issued by the International Financial Reporting Interpretations Committee as adopted by the European Union ('IFRS') and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements are presented in Sterling and have been prepared on an historical cost basis except that investment properties, other non-current investments and certain financial instruments described in section xv below have been stated at fair value.

IAS 1 (revised) 'Presentation of Financial Statements', requires the presentation of a Statement of Changes in Equity as a primary statement, separate from the Income Statement and Statement of Comprehensive Income. As a result, a Statement of Changes in Equity has been included in the primary statements, showing changes in each component of equity for both the current and comparative periods.

One of the amendments which forms part of the International Accounting Standards Board annual improvements project and has effect for accounting periods commencing on or after 1 January 2009 relates to the accounting treatment for development properties, previously accounted for under IAS 16, 'Property, Plant and Equipment'. Under the amendment, such properties are now accounted for under IAS 40, 'Investment Property' with revaluation movements recognised in the Income Statement rather than through equity. The change has had no impact upon the Group's net assets or cashflows and as it has been applied prospectively, prior periods' results have not been restated. The cumulative balance of £174,603,000 included within the revaluation reserve in respect of development properties as at 1 April 2009 has been transferred to retained earnings in the current year.

In addition, the Group has applied IFRS 2 (amended), 'Share-based Payments - vesting conditions and cancellations', and IFRS 8, 'Operating Segments', both of which are effective for accounting periods beginning on or after 1 January 2009. Neither has had a material impact on the financial statements.

The Group has also adopted the amendments to IFRS 7, 'Financial Instruments: Disclosure', to expand the disclosures required in respect of fair value measurements and liquidity risk. The Group has elected not to provide comparative information for this disclosure in the current year, in accordance with the transitional reliefs included in the amendment.

IAS 23 (amended), 'Borrowing Costs', effective for accounting periods beginning on or after 1 January 2009 had no impact on the financial statements.

The following new standards, amendments to standards and interpretations have been issued but are not effective for the financial year and have not been adopted early:

IFRIC 15, 'Agreements for the Construction of Real Estate', effective for accounting periods beginning on or after 1 January 2010.

IFRS 3 (revised), 'Business Combinations', effective for accounting periods beginning on or after 1 July 2009.

Amendments to IAS 27, 'Consolidated and Separate Financial Statements', effective for accounting periods beginning on or after 1 July 2009.

Amendments to IAS 28, 'Investment in Associates', effective for accounting periods beginning on or after 1 July 2009.

None of these standards and interpretations, when applied, is expected to have a material impact on the financial statements, other than in relation to disclosure or presentation.

The majority of amendments made as part of the IASB's 2009 Annual Improvements Programme affect accounting periods beginning on or after 1 January 2010.

ii) Significant judgements, estimates and assumptions

The preparation of financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities as at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements that are not readily apparent from other sources. However, the actual results may differ from these estimates.

The measurement of fair value constitutes the main area of judgement exercised by the Board in respect of the Group's results. In relation to the Group's investment properties, the Board has relied upon the external valuations carried out by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. The principal valuers of the Group's investment properties are Savills Commercial Limited and Jones Lang LaSalle Limited while Christie + Co have valued the investment properties within Quercus, the Group's healthcare joint venture, and Savills Commercial Limited the investment properties within iQ, the Group's student accommodation fund.

The changes in the market values of investment properties are disclosed in notes 9 and 11 and discussed in the Risk Management section of the Financial Review.

Copies of the valuation reports of Savills Commercial Limited and Jones Lang LaSalle Limited, which together account for 99.0% of these categories of non-current assets will be contained in the Annual Report.

In relation to the Group's investment properties, the key assumptions relate to the amount and timing of future income streams, anticipated maintenance costs and other landlord's liabilities and an appropriate yield. Valuers also have regard to market evidence generated by transactions involving similar properties.

In relation to properties in the course of development shown under investment properties, the valuers have regard to relevant legal rights and synergies, the discount rate appropriate to the current stage of the masterplan, the implementation strategy, the timing and conditions of planning consent, future development costs, the likely completed sales values, cost and value inflation and current market dynamics.

In respect of derivative financial instruments, the Board has relied on the valuation carried out by JC Rathbone Associates Limited, financial risk consultants, and the basis for this exercise is referred to below in section xv of this note and in note 20.

The Board has also exercised its judgement in relation to the recognition of certain deferred tax assets, which is discussed in further detail in note 6iv, and in assessing the recoverability of trade receivables by reference to their age and the ability of debtors to pay.

The carrying value of trading properties is routinely assessed by the Executive Directors supported where necessary by an independent external assessment of their net realisable value.

Other areas of judgement, risk and uncertainty which are relevant to an understanding of these results and the Group's financial position are referred to in the Business and Financial Review.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

iii) Basis of consolidation

The Group's financial statements consolidate those of the Company and its subsidiaries, together referred to as the Group, and equity account the Group's interest in joint ventures and the associate.

Subsidiaries are those entities controlled by the Group. Control exists when the Group has power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date it ceases.

A joint venture is an undertaking in which the Group has a long term interest and over which it exercises joint control. An associate is an entity in which the Group has significant influence but not control over financial and operating policies. The Group equity accounts for its share of net profit after tax of its joint ventures and associate including any change in the fair value of investment properties through the Income Statement. The effective portion of changes in the fair value of cashflow hedges within joint ventures less any related tax is recognised directly in equity. The Group's interest in the net assets of joint ventures and the associate is included in the Consolidated Balance Sheet.

Where an asset is transferred to an existing joint venture or the Group disposes of an interest in a subsidiary, the Group recognises a share of the profit equivalent to the interest it has sold to an external party. All such transactions occur at fair value.

iv) Foreign currency

Assets and liabilities of foreign operations are translated into Sterling at exchange rates ruling at the balance sheet date. Operating income and expenses are translated at average exchange rates. The year end and average rates used for these purposes were as follows:

	Year end		Average
£1=	2010	2009	2010	2009
France	€1.12	€1.08	€1.08	€1.20
United States	$1.51	$1.42	$1.54	$1.72

Exchange differences arising from the translation of the net investment in foreign operations are reflected in the translation reserve and released to the Income Statement upon the disposal of the foreign operation.

v) Revenue and cost of sales

Revenue is stated net of VAT and comprises rental income, proceeds from sales of trading properties, income from hotel operations, fees, commissions and other income.

Rental income from investment and development properties leased out under operating leases is recognised in the Income Statement on a straight-line basis over the term of the lease.

Contingent rents which comprise turnover rents are recognised as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants.

Lease incentives are recognised as an integral part of the net consideration for the use of the property and amortised on a straight-line basis over the term of the lease, or the period to the first tenant break, if shorter.

Property operating costs are expensed as incurred including any element of service charge expenditure not recovered from tenants.

Sales of trading properties are recognised in the accounts on the date of unconditional exchange or where an exchange is conditional, on the date that conditions have been satisfied, except for contracts with affordable housing associations for development and eventual sale which are recognised on a percentage of completion basis under IAS 11, 'Construction Contracts'. Where a land sale occurs prior to the development, the profit is recognised at the point of the original sale.

Income from hotel operations represents income receivable from the Plaza Hotel, Wembley prior to the redevelopment of the site, for which outline planning permission has been obtained. Hotel revenue is recognised when the relevant services are provided.

Fees from fund management relate to base and performance fees receivable in respect of asset management together with property procurement fees. Performance fees are recognised when it is likely that performance criteria have been met. All other fees are recognised on a receivable basis.

Other income comprises tenant lease surrender premiums, insurance commission, car parking receipts, property management fees and miscellaneous income.

vi) Purchase and disposal of properties held as non-current assets

Property purchases and sales are recognised in the accounts on the date of unconditional exchange or where an exchange is conditional, on the date that conditions have been satisfied.

Profits or losses arising on disposal are calculated by reference to the carrying value of the asset at the last revaluation, adjusted for subsequent capital expenditure.

The acquisition or disposal of shares in subsidiaries and interests in joint ventures where properties constitute the only or main asset are accounted for as property transactions unless the fair values attributed to other assets and liabilities within the entity differ from their carrying value.

vii) Impairment

The carrying values of the Group's assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such indication becomes evident, the asset's recoverable amount is estimated and an impairment loss recognised whenever the carrying amount of the asset exceeds its recoverable amount.

The recoverable amount of an asset is the greater of its fair value less costs to sell and its value-in-use. The value-in-use is determined as the net present value of the future cashflows expected to be derived from the asset, discounted using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

viii) Employee benefits

Pensions

Contributions to employees' personal plans are charged to the Income Statement as incurred.

Share-based payment schemes

The fair value of equity rights is estimated using the Black Scholes and binomial models at the date of grant to Directors and staff and is dependent on factors such as the exercise price, expected volatility, option price and risk free interest rate. The fair value is then amortised through the Income Statement on a straight-line basis over the vesting period. Expected volatility is determined based on the historic share price volatility (market price) for the Company on the grant date over a period matched to the expected life of the awards.

The amount recognised as an expense is adjusted to reflect the actual number of share options that vest, except where forfeiture is only due to the share price not achieving the threshold for vesting.

ix) Capitalisation of borrowing costs

Net borrowing costs in respect of capital expenditure on properties under development or undergoing refurbishment are capitalised. Interest is capitalised using the Group's weighted average cost of borrowing from the commencement of development work until the date of practical completion. The capitalisation of finance costs is suspended if there are prolonged periods when development activity is interrupted. Tax relief on interest capitalised on properties under development is reflected in the Income Statement. All other borrowing costs are recognised in the Income Statement in the period in which they are incurred.

x) Tax

Tax is included in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in equity. Current tax is the expected tax payable on the taxable income for the year using tax rates applicable at the balance sheet date. Tax payable upon the realisation of revaluation gains recognised in prior periods is recorded as a current tax charge with a release of the associated deferred taxation.

Deferred tax is provided on all temporary differences, except in respect of investments in subsidiaries and joint ventures where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is provided using the balance sheet liability method in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amount used for taxation purposes.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates applicable at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

xi) Investment properties

Investment properties are properties owned or leased by the Group which are held either for long term rental growth or for capital appreciation or both. This includes property held for development and for long term retention. Investment properties are initially recognised at cost including related transaction costs and valued bi-annually by professionally qualified external valuers. In relation to completed properties, the valuations are prepared by considering the aggregate of the net annual rents receivable from the properties and where relevant, associated costs. Investment properties under development are valued on the basis of their future cashflows. A yield which reflects the specific risks inherent in the net cashflows is then applied to the net annual rentals to arrive at the property valuation.

Properties held under operating leases are accounted for as investment properties where the other criteria for recognition are met. Such operating leases are accounted for as if they are finance leases.

Additions to investment properties consist of costs of a capital nature and in the case of investment properties under development, capitalised interest.

Gains or losses arising from changes in the fair value of investment property are included in the Income Statement of the year in which they arise.

xii) Leases

Where a Group company is the lessee:

a) Operating leases - lease in which substantially all risks and rewards of ownership are retained by another party, the lessor, are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the Income Statement on a straight line basis over the period of the lease.

b) Finance leases - leases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in current and non-current borrowings. The finance charges are charged to the Income Statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The investment properties acquired under finance leases are subsequently carried at their fair value.

Where a Group company is the lessor:

a) Operating leases - properties leased out to tenants under operating leases are included in investment and development properties in the Balance Sheet with rental income recognised on a straight-line basis over the lease term.

b) Finance leases - when assets are leased out under a finance lease, the present value of the minimum lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method before tax which reflects a constant periodic rate of return. Where only the buildings element of a property lease is classified as a finance lease, the land element is shown within operating leases.

xiii) Owner-occupied properties, plant and equipment

Owner-occupied properties are held at cost less, in the case of leasehold assets, accumulated depreciation. Depreciation is provided on a straight line basis over the life of the lease.

Fixtures, fittings and equipment are carried at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the useful life of these assets estimated at between three to five years.

xiv) Trading properties

Trading properties are properties acquired or developed and held for sale and are shown at the lower of cost and net realisable value. The cost of trading properties is determined on the basis of specific identification of their individual costs. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs to completion and the estimated costs necessary to make the sale.

xv) Financial instruments

The Group initially recognises all financial instruments at fair value.

Non-current receivables

Non-current receivables are held at amortised cost.

Other non-current investments

Other non-current investments are non-derivative investments that are designated as available for sale and are shown at fair value. Adjustments to fair value are recognised in equity except for impairments which are reflected in the Income Statement.

Trade and other receivables

Trade and other receivables are recognised at amortised cost. A provision for impairment of trade receivables is established where there is objective evidence that the Group will not be able to collect all amounts due according to the agreed terms of the receivables concerned.

Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, deposits with banks and other short term highly liquid

investments with original maturities of three months or less.

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Borrowings are subsequently stated at amortised cost with any difference between the amount initially recognised and the redemption value being recognised in the Income Statement over the period of the borrowings on an effective interest rate basis.

Trade and other payables

Trade and other payables are non-interest bearing and are recognised at amortised cost.

Derivative financial instruments

The Group uses derivative financial instruments to manage its interest rate risk. These financial instruments are recognised initially at fair value and subsequently re-measured at fair value.

The gain or loss on re-measurement to fair value is recognised immediately in the Income Statement, unless the derivatives qualify for hedge accounting as cashflow hedges in which case the effective element of the gain or loss is recognised directly through equity in a hedging reserve.

The Group's derivative financial instruments are shown in these accounts at fair value as derived by JC Rathbone Associates Limited, financial risk consultants, based on market prices, estimated future cashflows and forward rates as appropriate.

Other derivative instruments

From time to time, the Group invests in derivatives to mitigate or enhance its exposure to a particular class or a spectrum of property assets and related businesses. Such instruments are accounted for initially at fair value with subsequent recognition in the Balance Sheet at fair value being reflected through the Income Statement.

xvi) Own shares held by ESOP Trusts and treasury shares

Transactions of the Group-sponsored ESOP Trusts, The Quintain Group Employee Benefit Trust and the Quintain Estates and Development Deferred Bonus Plan Trust, are included in the Group financial statements. In particular, the Trusts' purchases of shares in the Company and shares acquired as treasury shares are debited to equity.

2 SEGMENTAL ANALYSIS

The Group has the following reporting segments by which the Board monitors the business and allocates resources. Urban Regeneration includes a number of properties with similar characteristics, risks and rewards in connection with mixed-use redevelopment in urban locations. The Group also invests in a number of property funds with differing characteristics, each of which is treated as a separate segment. All activities are based in the United Kingdom and Channel Islands. The analysis of the Group's results by business segment for the year ended 31 March 2010 was as follows:

		Urban Regeneration		Quercus	iQ	Sequel	Other QFM	Total QFM	Other	Unallocated	Total
			£000	£000	£000	£000	£000	£000	£000	£000	£000
Gross revenue			32,525	9,537	2,318	5,615	367	17,837	6,575	-	56,937
Cost of sales (before impairment in book
	value of trading properties)		(19,150)	(817)	(2)	(606)	(2)	(1,427)	(2,370)	-	(22,947)
Impairment in book value of trading
	properties		(8,114)	-	-	-	-	-	-	-	(8,114)
Gross profit			5,261	8,720	2,316	5,009	365	16,410	4,205	-	25,876
Administrative expenses
	(before exceptional administrative expenses)		-	-	-	-	-	-	-	(21,111)	(21,111)
Operating profit (loss) before
	recognition of results from non-current asset sales and revaluation		5,261	8,720	2,316	5,009	365	16,410	4,205	(21,111)	4,765
(Loss) profit from the sale of non-
	current property assets		(2,715)	(8,479)	-	2,236	(341)	(6,584)	1,592	-	(7,707)
Gain (deficit) on revaluation of
	investment properties		8,824	-	-	6,218	(1,969)	4,249	(5,560)	-	7,513
Share of profit (loss) from joint
	ventures		6,886	(3,888)	(3,319)	-	127	(7,080)	-	-	(194)
Share of profit from associate			-	-	-	-	346	346	-	-	346
Impairment of non-current asset
	investments		-	-	-	-	-	-	(150)	-	(150)
Impairment recognised on acquisition			(3,144)	-	-	-	-	-	-	-	(3,144)
Segmental operating profit (loss)			15,112	(3,647)	(1,003)	13,463	(1,472)	7,341	87	(21,111)	1,429
Net finance expenses			-	-	-	-	-	-	-	(11,578)	(11,578)
Profit (loss) before tax			15,112	(3,647)	(1,003)	13,463	(1,472)	7,341	87	(32,689)	(10,149)

Note: References to QFM relate to the Group's Quintain Fund Management division.

The segmental results that are monitored by the Board include all the separate lines making up the segmental IFRS operating profit. This excludes administrative and finance expenses which are not allocated to operating segments.

Depreciation of £171,000 (2009: £14,000) on fixtures, fittings and equipment is included within cost of sales under Urban Regeneration. Depreciation of £609,000 (2009: £712,000) is included in administrative expenses (before exceptional administrative expenses) (note 4) and has not been allocated.

The segmental analysis of the Group's results for the year ended 31 March 2009 was as follows:

		Urban Regeneration	Quercus	iQ	Other QFM	Total QFM	Other	Unallocated	Total
		£000	£000	£000	£000	£000	£000	£000	£000
Gross revenue		39,081	10,610	2,335	743	13,688	13,250	-	66,019
Cost of sales		(26,388)	(1,069)	-	(167)	(1,236)	(3,362)	-	(30,986)
Gross profit		12,693	9,541	2,335	576	12,452	9,888	-	35,033
Administrative expenses
	(before exceptional administrative expenses)	-	-	-	-	-	-	(24,109)	(24,109)
Exceptional administrative expenses		-	-	-	-	-	-	(2,336)	(2,336)
Operating profit (loss) before
	recognition of results from non-current asset sales and revaluation	12,693	9,541	2,335	576	12,452	9,888	(26,445)	8,588
Loss from the sale of non-
	current property assets	(82)	(3,667)	-	-	(3,667)	(1,072)	-	(4,821)
Deficit on revaluation of investment
	properties	(13,900)	-	-	(4,475)	(4,475)	(44,907)	-	(63,282)
Deficit on revaluation of development
	properties	(2,195)	-	-	(499)	(499)	(2,273)	-	(4,967)
Share of loss from joint
	ventures	(17,040)	(13,656)	(15,977)	(618)	(30,251)	-	-	(47,291)
Share of profit from associate		-	-	-	86	86	-	-	86
Impairment of other non-current
	investments	(7,790)	-	-	-	-	-	-	(7,790)
Segmental operating loss		(28,314)	(7,782)	(13,642)	(4,930)	(26,354)	(38,364)	(26,445)	(119,477)
Net finance expenses		-	-	-	-	-	-	(9,589)	(9,589)
Loss before tax		(28,314)	(7,782)	(13,642)	(4,930)	(26,354)	(38,364)	(36,034)	(129,066)

The (deficit) gain on revaluation of development properties included in equity in the previous year was as follows:

Urban

Regeneration

Quercus

Other

QFM

Total

QFM

Other

Unallocated

Total

£000

(247,307)

35,245

(212,062)

In the current year, development properties are treated as investment properties and revaluation movements on these shown in the Income Statement (note 1).

The segmental analysis of the Group's Balance Sheet as at 31 March 2010 was as follows:

			Urban Regeneration	Quercus	iQ	Sequel	Other QFM	Total QFM	Other	Unallocated	Total
		Notes	£000	£000	£000	£000	£000	£000	£000	£000	£000
Non-current assets
Investment properties			662,360	-	-	78,917	44,048	122,965	27,533	-	812,858
Owner-occupied properties, plant and
	equipment		-	-	-	-	-	-	-	2,716	2,716
Investment in joint ventures			92,986	57,193	45,966	-	5,998	109,157	-	-	202,143
Investment in associate			-	-	-	-	1,589	1,589	-	-	1,589
Other non-current investments			3,925	-	-	-	-	-	-	-	3,925
Total non-current assets			759,271	57,193	45,966	78,917	51,635	233,711	27,533	2,716	1,023,231

Current assets
Trading properties			28,058	-	-	-	-	-	-	-	28,058
Trade and other receivables			3,937	2,543	883	2,265	367	6,058	606	5,338	15,939
Current investments			-	-	-	-	-	-	-	4	4
Cash and cash equivalents			-	-	-	-	-	-	-	47,209	47,209
Total current assets			31,995	2,543	883	2,265	367	6,058	606	52,551	91,210

Total assets			791,266	59,736	46,849	81,182	52,002	239,769	28,139	55,267	1,114,441

Current liabilities
Bank loans and other borrowings			-	-	-	-	-	-	-	(1,600)	(1,600)
Trade and other payables			(13,935)	(324)	-	(3,363)	(218)	(3,905)	(497)	(18,754)	(37,091)
Current tax liability			-	-	-	-	-	-	-	(1,118)	(1,118)
Total current liabilities			(13,935)	(324)	-	(3,363)	(218)	(3,905)	(497)	(21,472)	(39,809)

Non-current liabilities
Bank loans and other borrowings			-	-	-	-	-	-	-	(397,066)	(397,066)
Deferred tax liability			-	-	-	-	-	-	-	(23,675)	(23,675)
Obligations under finance leases			-	-	-	(1,220)	-	(1,220)	(9,928)	-	(11,148)
Other payables			(998)	-		(395)	-	(395)	-	(18,967)	(20,360)
Total non-current liabilities			(998)	-	-	(1,615)	-	(1,615)	(9,928)	(439,708)	(452,249)

Total liabilities			(14,933)	(324)	-	(4,978)	(218)	(5,520)	(10,425)	(461,180)	(492,058)
Segmental net assets			776,333	59,412	46,849	76,204	51,784	234,249	17,714	(405,913)	622,383
Capital expenditure on directly owned
properties		9	5,772	-	-	94	142	236	48	-	6,056

For balance sheet purposes, segmental net assets include property assets and directly related receivables and payables as measured under IFRS. Owner-occupied properties, plant and equipment, financial assets/liabilities and tax balances are excluded from segmental net assets.

The segmental analysis of the Group's Balance Sheet as at 31 March 2009 was as follows:

			Urban Regeneration	Quercus	iQ	Other QFM	Total QFM	Other	Unallocated	Total
		Notes	£000	£000	£000	£000	£000	£000	£000	£000
Non-current assets
Investment properties			26,600	-	-	12,300	12,300	104,552	-	143,452
Development properties			604,637	-	-	38,750	38,750	13,301	-	656,688
Owner-occupied properties, plant
	and equipment		-	-	-	-	-	-	4,135	4,135
Investment in joint ventures			77,929	107,378	24,156	5,532	137,066	-	-	214,995
Investment in associate			-	-	-	1,243	1,243	-	-	1,243
Other non-current investments			10,820	-	-	-	-	-	-	10,820
Total non-current assets			719,986	107,378	24,156	57,825	189,359	117,853	4,135	1,031,333

Current assets
Trading properties			26,601	-	-	-	-	-	-	26,601
Trade and other receivables			3,573	57	693	3,538	4,288	4,028	3,769	15,658
Current investments			-	-	-	-	-	-	4	4
Cash and cash equivalents			-	-	-	-	-	-	9,215	9,215
Total current assets			30,174	57	693	3,538	4,288	4,028	12,988	51,478

Total assets			750,160	107,435	24,849	61,363	193,647	121,881	17,123	1,082,811

Current liabilities
Trade and other payables			(17,241)	(6,304)	-	(240)	(6,544)	(4,857)	(18,271)	(46,913)
Total current liabilities			(17,241)	(6,304)	-	(240)	(6,544)	(4,857)	(18,271)	(46,913)

Non-current liabilities
Bank loans and other borrowings			-	-	-	-	-	-	(533,490)	(533,490)
Deferred tax liability			-	-	-	-	-	-	(26,025)	(26,025)
Obligations under finance leases			-	-	-	-	-	(11,156)	-	(11,156)
Other payables			-	-	-	-	-	-	(20,382)	(20,382)
Total non-current liabilities			-	-	-	-	-	(11,156)	(579,897)	(591,053)

Total liabilities			(17,241)	(6,304)	-	(240)	(6,544)	(16,013)	(598,168)	(637,966)
Segmental net assets			732,919	101,131	24,849	61,123	187,103	105,868	(581,045)	444,845
Capital expenditure on directly owned
properties		9	23,820	-	-	254	254	852	-	24,926

3 REVENUE, COST OF SALES AND GROSS PROFIT

		2010	2010	2010	2009	2009	2009
		Revenue	Cost of sales	Gross profit	Revenue	Cost of sales	Gross profit
		£000	£000	£000	£000	£000	£000
Rental income		21,412	(4,945)	16,467	22,074	(5,348)	16,726
Income from sales of trading
	properties	11,149	(11,018)	131	19,381	(19,381)	-
Income from hotel operations		7,688	(3,489)	4,199	7,332	(3,384)	3,948
Fees from fund management
	and other services provided to related parties	12,722	(817)	11,905	14,007	(1,069)	12,938
Other income		3,966	(2,678)	1,288	3,225	(1,804)	1,421
		56,937	(22,947)	33,990	66,019	(30,986)	35,033
Impairment in book value
	of trading properties	-	(8,114)	(8,114)	-	-	-
		56,937	(31,061)	25,876	66,019	(30,986)	35,033

The cost of sales in relation to rental income comprised:

	2010 £000	2009 £000
Service charge expenditure	2,090	3,507
Service charge recovery	(1,051)	(2,597)
Irrecoverable service charges	1,039	910
Rents payable	89	79
Property management fees	326	447
Legal and professional fees	786	824
Allowance for impairment in respect of trade receivables	803	412
Other property costs	1,902	2,676
	4,945	5,348

Other income related to:

	2010	2010	2010	2009	2009	2009
	Revenue	Cost of sales	Gross profit	Revenue	Cost of Sales	Gross profit
	£000	£000	£000	£000	£000	£000
Surrender premiums	182	-	182	194	-	194
Management fees and commissions	1,330	(573)	757	1,778	(782)	996
Car parking income	1,787	(631)	1,156	941	(274)	667
Abortive project costs	-	(787)	(787)	-	(359)	(359)
Sundry income	667	(687)	(20)	312	(389)	(77)
	3,966	(2,678)	1,288	3,225	(1,804)	1,421

Cost of sales in relation to other income includes depreciation of £171,000 (2009: £14,000) in respect of depreciation of fixtures, fittings and equipment.

The impairment in the book value of trading properties relates to a property asset that was transferred to investment properties. The property was revalued to its fair value on the date of transfer with the impairment recognised as a cost of sale.

4 ADMINISTRATIVE EXPENSES

a) The analysis of the Group's ongoing administrative expenses (before exceptional administrative expenses)

was as follows:

	2010	2009
	£000	£000
Directors' remuneration	2,299	2,328
Staff costs	11,045	12,016
Total staff costs	13,344	14,344
Legal and other professional fees	2,264	3,347
Office costs	3,166	4,110
Loss (profit) on sale of plant and equipment	53	(4)
Depreciation of tangible fixed assets	609	712
Operating lease payments	1,133	1,178
General expenses	542	422
Total administrative expenses (before exceptional administrative expenses)	21,111	24,109

i) Fees paid to auditors and their affiliates

		2010	2009
		£000	£000
Fees payable to the Company's auditor for the audit of the
	Company's annual accounts	240	240
Fees payable to the Company's auditor and its associates for other services:
	The audit of the Company's subsidiaries pursuant to legislation	55	55
	Tax services	18	27
Other services		202	561

Included in fees for other services is a fee of £150,000 in relation to the rights issue charged to the share premium account.

Fees paid to other accountancy firms, mainly for tax advisory and internal audit services, amounted to £291,000 (2009: £354,000) of which £nil of the advisory fees (2009: £133,000) were capitalised.

ii) Staff costs are included in both cost of sales and administrative expenses. Gross staff costs were as follows:

	2010	2009
	£000	£000
Wages and salaries	10,642	11,891
Total costs relating to share-based payments	1,233	1,829
Provision for national insurance on unexercised share options and rights	206	(805)
Social security costs	1,397	898
Pension costs	905	1,079
Other employment costs	978	1,362
	15,361	16,254

Cost of sales	2,017	1,910
Administrative expenses	13,344	14,344
	15,361	16,254

Of the total costs relating to share-based payments, £264,000 (2009: £723,000) related to the Executive Directors' Performance Share Plan and £969,000 (2009: £1,106,000) related to other share-based incentive schemes.

Details of directors' emoluments, pensions and entitlements to share options and rights are contained in the Remuneration Report. Details of directors' interests in the share capital of the Company are contained in the Report of the Directors. This information forms part of these financial statements.

iii) Staff numbers

The average number of persons employed by the Group during the year was as follows:

	2010	2009
Property portfolio management and administration	108	131
Hotel operations	114	111
	222	242

Staff are allocated between cost of sales and administrative expenses as follows:

	2010	2009
Cost of sales	100	97
Administrative expenses	122	145
	222	242

b) In the previous year the exceptional costs of £2,336,000 shown in the Income Statement related to fees in relation to an abortive fund raising initiative of which £440,000 was payable to the Company's auditor and is included in fees for other services provided by the auditors in note 4ai.

5 NET FINANCE EXPENSES

	2010	2009
	£000	£000
Interest payable on bank loans and overdrafts	31,431	32,311
Interest payable on other loans	459	596
Interest on obligations under finance leases	766	790
	32,656	33,697
Interest capitalised	(15,617)	(12,534)
	17,039	21,163
Change in fair value of derivative financial instruments	(672)	1,385
Profit realised on termination of derivative financial instruments	-	(3,297)
Finance expenses	16,367	19,251
Finance income: interest receivable	(4,789)	(9,662)
Net finance expenses	11,578	9,589

Of interest capitalised in the year, the amount capitalised to development properties in the course of construction included within investment properties was £14,761,000 (2009: £11,851,000) and trading properties £856,000 (2009: £683,000). The average rate of interest used for capitalisation was 6.2%

(2009: 5.6%).

In accordance with IAS 39, 'Financial Instruments: Recognition and Measurement', the Group has reviewed its interest rate hedges in existence as at 31 March 2010 along with those in its joint ventures. As assessed by JC Rathbone Associates Limited, movements in fair value of the elements of those viewed as effective have been recognised through equity while all other movements, including those relating to the ineffective elements of designated hedges, are reflected in the Income Statement.

6 TAX

i) Tax credit for the year

		2010	2009
		£000	£000
UK current tax at 28% (2009: 28%)		54	-
Adjustment to prior years' UK corporation tax		-	(11,393)
		54	(11,393)
Overseas tax		115	31
Total current tax charge (credit)		169	(11,362)

Deferred tax:
	On investment properties	761	(9,463)
	On derivative financial instruments	188	(388)
	On other temporary differences	(3,211)	(1,623)
Total deferred tax credit		(2,262)	(11,474)
Tax credit		(2,093)	(22,836)

ii) Tax credit reconciliation

	2010	2009
	£000	£000
Loss before tax	(10,149)	(129,066)

Tax applied at UK corporation tax rate of 28% (2009: 28%)	(2,842)	(36,138)
Locked-in capital allowances	-	(326)
Use of losses and differing tax rates in respect of overseas results	(275)	(62)
Indexation relief on UK investment properties	(3,565)	4,650
Adjustment to prior years' current and deferred tax	(842)	(12,167)
Tax charge taken to share of income from joint ventures and associate	2,289	17,186
Other movements	3,142	4,021
Tax credit	(2,093)	(22,836)

iii) Tax recognised directly in equity

	2010	2009
	£000	£000
Deferred tax credit on revaluation of development properties	-	(57,820)
Deferred tax credit on effective element of interest rate swaps	(88)	(8,319)
	(88)	(66,139)

iv) Deferred tax movements

	1 April 2009 £000	Recognised in income £000	Recognised in equity £000	31 March 2010 £000
Capital gains less capital losses	37,576	761	-	38,337
Capital allowances	7,081	910	-	7,991
Derivative financial instruments	(8,770)	188	(88)	(8,670)
Other temporary differences	(573)	(25)	-	(598)
Revenue tax losses	(9,289)	(4,096)	-	(13,385)
Deferred tax provision	26,025	(2,262)	(88)	23,675

Deferred tax assets estimated at £12,646,000 (2009: £12,646,000) have not been recognised due to a higher degree of uncertainty over both the amount and timing of the utilisation of the underlying tax losses and deductions, which amounted to £26,829,000 (2009: £26,829,000). Under current tax legislation, there is no expiry date associated with the unprovided deferred tax assets.

There were no temporary differences associated with investment in subsidiaries and interests in joint ventures and the associate for which deferred tax liabilities have not been recognised.

v) Total tax credit

The tax credit recognised in these financial statements was as follows:

	2010	2009
	£000	£000
Tax credit on loss as above	(2,093)	(22,836)
Tax credit on share of profit in joint ventures (note 11ic)	(583)	(23,902)
Tax charge on share of profit in associate (note 11iic)	134	34
Tax credit on other comprehensive income	(88)	(66,139)
Tax credit on share of other comprehensive income in joint ventures	-	(19)
	(2,630)	(112,862)

7 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE

i) Earnings per share

			2010			2009
	Loss after tax attributable to equity shareholders	Weighted average number of shares	Earnings per share	Loss after tax attributable to equity shareholders	Weighted average number of shares	Earnings per share
	£000	000	pence	£000	000	pence
Basic	(8,222)	247,855	(3.3)	(106,230)	271,385	(39.1)

In November 2009, the Company issued 390,160,296 new shares through a rights issue. Further details are provided in note 22. To reflect the rights issue, the number of shares previously used to calculate the 2009 earnings per share data has been amended in the table shown above. An adjustment factor of 2.1214 has been applied, based on the ratio of the Company's share price of 166 pence per share on 24 November 2009, the day before the record date for the rights issue, and the theoretical ex-rights price at that date of 78.25 pence per share.

ii) Net asset value per share

					2010			2009
		Equity shareholders' funds		Number of shares	Net asset value per share	Equity shareholders' funds	Number of shares	Net asset value per share
		£000		000	pence	£000	000	pence
As per accounts		622,092		520,467		444,845	130,042
Less: Treasury shares			-	(2,774)		-	(2,059)
Basic		622,092		517,693	120	444,845	127,983	348
Impact of rights issue			-	-		183,147	390,160
Restated basic			622,092	517,693	120	627,992	518,143	121
Adjustments:
Employee share-
	based payment schemes	491		1,775		-	435
Diluted		622,583		519,468	120	627,992	518,578	121

Although not required under IFRS, net asset value per share is considered a key performance indicator in the sector in which the Group operates.

The number of shares in issue has been adjusted for the 2,773,568 (2009: 2,059,388) shares held by ESOP Trusts and by the Group as treasury shares.

Apart from allocations which have vested but not been released, entitlements under the Executive Directors' Performance Share Plan have been excluded from the calculation in ii) above as the commitments relate to contingently issuable shares where the conditions had not been met at the balance sheet date.

The 2009 net asset value per share has been adjusted to reflect the impact of the rights issue as this gives a more informative number for comparative purposes.

8 DIVIDEND

The Board does not propose to pay a final dividend. The dividend of £10,872,000 included in the Consolidated Statement of Changes in Equity for 2009 comprises the 2008 final dividend which was paid on 8 September 2008.

9 INVESTMENT AND DEVELOPMENT PROPERTIES

The movements in the year in investment and development properties were as follows:

Investment properties						Development properties
		Freehold	Long leasehold	Short leasehold	Total	Freehold	Long leasehold	Total
		£000	£000	£000	£000	£000	£000
Balance 31 March 2008		176,910	36,014	7,700	220,624	828,030	15,506	843,536
Transfer to trading properties		-	-	-	-	(5,812)	-	(5,812)
Additions		784	-	-	784	23,819	323	24,142
Interest capitalised		-	-	-	-	11,851	-	11,851
Disposals		(5,110)	(9,564)	-	(14,674)	-	-	-
Revaluation (deficit) surplus		(54,323)	(7,393)	(1,566)	(63,282)	(250,001)	32,972	(217,029)
Balance 31 March 2009		118,261	19,057	6,134	143,452	607,887	48,801	656,688
Reclassification of development
	properties	607,887	48,801	-	656,688	(607,887)	(48,801)	(656,688)
Transfer from trading properties		4,666	7,100	-	11,766	-	-	-
Additions		6,034	18	4	6,056	-	-	-
Interest capitalised		14,761	-	-	14,761	-	-	-
Disposals		(27,378)	-	-	(27,378)	-	-	-
Revaluation surplus (deficit)		8,844	(812)	(519)	7,513	-	-	-
Balance 31 March 2010		733,075	74,164	5,619	812,858	-	-	-

There were no acquisitions in the year or in the previous year. Additions in both years represented improvements to existing properties.

Under the cost model, the historical cost of the Group's investment properties as at 31 March 2010 was £645,487,000 (2009: investment properties: £199,361,000 and development properties: £461,121,000) and included capitalised interest of £61,467,000 (2009: £47,209,000). With effect from 1 April 2009, development properties are accounted for as investment properties (note 1).

The average rate used for capitalisation is shown in note 5.

All of the Group's properties were externally valued as at 31 March 2010 on the basis of market value by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors.

The Group's land holdings in Greenwich and the Wembley development have been valued by Savills Commercial Limited. The discount rates which have been applied in relation to these developments were 15.8% and 15.0% respectively. Savills have also valued the Group's property at Silvertown. Other properties in the United Kingdom have been valued by Jones Lang LaSalle Limited and Christie + Co. The Group's property in the Channel Islands has been valued by Guy Gothard & Co.

A reconciliation of the valuations carried out by the external valuers to the carrying values shown in the Balance Sheet was as follows:

		2010	2009	2009	2009
		Investment properties	Investment properties	Development properties	Total
		£000	£000	£000	£000
Investment and development
	properties at market value as determined by valuers	802,834	143,225	647,317	790,542
Adjustment in respect of rent
	free periods and other tenant incentives	(1,158)	(1,174)	(410)	(1,584)
Adjustment in respect of
	minimum payment under head leases separately included as a liability in the Balance Sheet	11,182	1,401	9,781	11,182
As shown in the Balance Sheet		812,858	143,452	656,688	800,140

The percentage of investment and development properties valued by each of the principal valuers was as follows:

	2010	2010	2010	2010	2009
	Per valuers' reports	Adjustment for properties held in joint ventures and the associate and as trading	Properties held as investment properties	Percentage valued by each valuer	Percentage valued by each valuer
	£000	£000	£000	%	%
Savills Commercial Ltd.	778,085	(151,814)	626,271	78.0	76.3
Jones Lang LaSalle Ltd.	173,790	(4,975)	168,815	21.0	22.0
Other valuers	7,748	-	7,748	1.0	1.7
	959,623	(156,789)	802,834	100.0	100.0

Copies of the valuation reports of Savills Commercial Limited and Jones Lang LaSalle Limited are included within the Annual Report.

10 OWNER-OCCUPIED PROPERTIES, PLANT AND EQUIPMENT

	Long leasehold	Fixtures, fittings & equipment	Total
	£000	£000	£000
Cost:
Balance 31 March 2008	727	2,862	3,589
Additions	7	2,097	2,104
Disposals	-	(696)	(696)
Balance 31 March 2009	734	4,263	4,997
Additions	5	85	90
Disposals	(739)	(17)	(756)
Balance 31 March 2010	-	4,331	4,331

Depreciation:
Balance 31 March 2008	-	(832)	(832)
Charge for year	(2)	(724)	(726)
Disposals	-	696	696
Balance 31 March 2009	(2)	(860)	(862)
Charge for year	(8)	(772)	(780)
Disposals	10	17	27
Balance 31 March 2010	-	(1,615)	(1,615)

Net book value:

31 March 2010	-	2,716	2,716
31 March 2009	732	3,403	4,135
31 March 2008	727	2,030	2,757

11 NON-CURRENT INVESTMENTS

i) Investment in joint ventures

a) The movement in investment in joint ventures was as follows:

	Total
	£000
Balance 31 March 2008	239,340
Additions	41
Amounts advanced	64,858
Disposals	(23,250)
Distributions	(6,578)
Share of loss, net of tax	(47,291)
Share of revaluation deficit recognised in equity	(325)
Share of effective portion of changes in fair value of cashflow hedges, net of tax	(11,800)
Balance 31 March 2009	214,995
Additions	1,688
Amounts advanced	47,306
Reclassification of joint venture as subsidiary	(2,891)
Disposals	(52,023)
Distributions	(7,982)
Share of loss, net of tax	(194)
Share of effective portion of changes in fair value of cashflow hedges, net of tax	(71)
Recycling of cashflow hedge	1,315
Balance 31 March 2010	202,143

b) The Group's interest in its joint ventures was as follows:

	% of share capital held	Country of incorporation	Joint venture partner
Quercus Healthcare Property Unit Trust (Quercus)	14.94*	Channel Islands	Aviva Life & Pensions UK Limited
Greenwich Peninsula Regeneration Limited (GPRL)	49.00	United Kingdom	Lend Lease (Europe) Limited

Greenwich Peninsula N0204 Blocks A&B Unit Trusts (N0204)	50.00	Channel Islands	Lend Lease N0204 Block A Limited/ Lend Lease N0204 Block B Limited

iQ Unit Trust (iQ)	49.98	Channel Islands	Wellcome Trust Investment Limited Partnership
Quantum Unit Trust (Quantum)	50.00	Channel Islands	Aviva Life & Pensions UK Limited
Quintessential Homes (Wembley) LLP (Quintessential)	50.02	United Kingdom	Geninvest Limited Family Housing Development Company Limited
Crest Nicholson BioRegional Quintain LLP (OneBrighton)	50.00	United Kingdom	Crest Nicholson (South East) Limited

Wembley City HIX Limited (Wembley Hotel)	49.00	United Kingdom	Summit Hotels Limited

*Quercus is accounted for as a joint venture as the Group has a 50% share of the general partner which controls the operation of the Unit Trust.

During the year, the Company purchased the remaining 50.1% of BioRegional Quintain Limited, which was treated as a joint venture as at 31 March 2009. As a consequence, Crest Nicholson BioRegional Quintain LLP (OneBrighton) became a joint venture of the Group, as it is held as a joint venture within BioRegional Quintain Limited.

c) The Group's share of the results of its joint venture operations was as follows:

Summarised income statements for the year ended 31 March 2010			Quercus	GPRL	N0204		iQ	Quantum	Quintessential	OneBrighton	Other joint ventures	Group share in joint ventures
			£000	£000	£000		£000	£000	£000	£000	£000	£000
Rental income			11,792	390	2,235		6,189	191	162	-	-	20,959
Income from sale of trading properties			-	-	-		-	-	3,161	374	-	3,535
Other income			-	14,540	-		-	-	-	-	147	14,687
Revenue			11,792	14,930	2,235		6,189	191	3,323	374	147	39,181
Cost of sales			-	(14,512)		(346)	(2,404)	(117)	(3,243)	(307)	68	(20,861)
Gross profit			11,792	418	1,889		3,785	74	80	67	215	18,320
Administrative expenses			(3,143)	(232)	(58)		(1,147)	(44)	(20)	-	(373)	(5,017)
Operating profit (loss)			8,649	186	1,831		2,638	30	60	67	(158)	13,303
Loss from sale of non-current property
		assets	(2,138)	-	-		-	-	-	-	-	(2,138)
Share of profit from joint ventures			-	-	-		-	-	-	-	750	750
(Deficit) gain on revaluation of investment
		properties	(5,902)	(3,884)	10,022		(1,448)	(130)	-	-	283	(1,059)
Profit (loss) before net finance expenses
		and taxation	609	(3,698)	11,853		1,190	(100)	60	67	875	10,856
Finance expenses			(3,179)	(9)	(1,770)		(5,459)	-	(17)	-	(1,532)	(11,966)
Finance income			128	9	-			163	2	-	31	333
(Loss) profit before taxation			(2,442)	(3,698)	10,083		(4,269)	63	45	67	(626)	(777)
Taxation			(1,446)	4,199	(2,882)		950	64	-	-	(302)	583
(Loss) profit after taxation			(3,888)	501	7,201		(3,319)	127	45	67	(928)	(194)

Share of recognised income and expense
	recognised directly in equity:
Share of effective portion of changes in fair
	value of cashflow hedges, net of tax		157	-	211		(439)	-	-	-	-	(71)
Recycling of cashflow hedge			-	-	-		1,315	-	-	-	-	1,315
			157	-	211		876	-	-	-	-	1,244

Summarised balance sheets as at 31 March 2010		Quercus	GPRL	N0204	iQ	Quantum	Quintessential	OneBrighton	Other joint ventures	Group share in joint ventures
		£000	£000	£000	£000	£000	£000	£000	£000	£000
Investment properties		93,503	-	65,150	104,551	3,422	-	-	6,000	272,626
Investment in joint ventures		-	1,171	-	-	-	-	-	-	1,171
Trading properties		1,942	66,411	-	-	-	9,679	5,802	-	83,834
Other assets		9,401	5,894	2,200	3,547	2,231	550	169	1,669	25,661
Gross assets		104,846	73,476	67,350	108,098	5,653	10,229	5,971	7,669	383,292
Current liabilities:
	trade and other payables	(4,321)	(17,997)	(5,583)	(7,632)	(225)	(4,502)	(517)	-	(40,777)
Current tax liability		-	(185)	-	-	-	-	-	5	(180)
Non-current liabilities:
	bank loans and other borrowings	(40,276)	-	(45,812)	(58,811)	-	-	-	-	(144,899)
Deferred tax (liability) asset		(1,417)	-	4,594	8,534	401	-	-	(490)	11,622
Other liabilities		(1,639)	-	(1,053)	(4,223)	-	-	-	-	(6,915)
Net external assets		57,193	55,294	19,496	45,966	5,829	5,727	5,454	7,184	202,143

Represented by:

Capital	57,193	334	(11,793)	45,966	5,829	5,727	5,454	7,184	115,894
Loans	-	54,960	31,289	-	-	-	-	-	86,249
Total investment	57,193	55,294	19,496	45,966	5,829	5,727	5,454	7,184	202,143

Summarised income statements for the year ended 31 March 2009			Quercus	GPRL	N0204	iQ	Quantum	Quintessential	BioRegional Quintain	Other joint ventures	Group share in joint ventures
			£000	£000	£000	£000	£000	£000	£000	£000	£000
Rental income			17,493	843	-	4,256	390	8	-	-	22,990
Income from sale of trading properties			-	-	-	-	-	18,687	-	-	18,687
Other income			-	-	-	-	-	-	120	-	120
Revenue			17,493	843	-	4,256	390	18,695	120	-	41,797
Cost of sales			-	(65)	-	(1,682)	(156)	(18,113)	(13)	-	(20,029)
Gross profit			17,493	778	-	2,574	234	582	107	-	21,768
Administrative expenses			(5,666)	(400)	(30)	(1,370)	(49)	(51)	(317)	-	(7,883)
Operating profit (loss)			11,827	378	(30)	1,204	185	531	(210)	-	13,885
Loss from sale of non-current property
		assets	(122)	-	-	-	-	-	-	-	(122)
Share of loss from joint ventures			-	-	-	-	-	-	(260)	-	(260)
Deficit on revaluation of investment and
	development properties		(27,904)	(976)	(23,712)	(19,059)	(1,094)	-	-	-	(72,745)
(Loss) profit before net finance
		expenses and taxation	(16,199)	(598)	(23,742)	(17,855)	(909)	531	(470)	-	(59,242)
Finance expenses			(6,148)	-	-	(6,136)	(33)	(130)	(469)	(972)	(13,888)
Finance income			393	18	-	94	-	33	19	1,380	1,937
(Loss) profit before taxation			(21,954)	(580)	(23,742)	(23,897)	(942)	434	(920)	408	(71,193)
Taxation			8,298	53	7,476	7,920	324	-	-	(169)	23,902
(Loss) profit after taxation			(13,656)	(527)	(16,266)	(15,977)	(618)	434	(920)	239	(47,291)

Share of recognised income and
		expense recognised directly in equity:
Deficit on revaluation of development
		properties	-	-	-	(325)	-	-	-	-	(325)
Share of effective portion of changes in
		fair value of cashflow hedges, net of tax	(4,590)	-	(2,960)	(4,250)	-	-	-	-	(11,800)
			(4,590)	-	(2,960)	(4,575)	-	-	-	-	(12,125)

Summarised balance sheets as at 31 March 2009			Quercus	GPRL	N0204	iQ	Quantum	Quintessential	BioRegional Quintain	Other joint ventures	Group share in joint ventures
			£000	£000	£000	£000	£000	£000	£000	£000	£000
Investment properties			202,467	-	-	62,094	2,513	-	-	-	267,074
Development properties			2,951	15,000	34,000	10,742	2,646	-	-	-	65,339
Investment in joint ventures			-	989	-	-	-	-	3,400	-	4,389
Trading properties			-	52,071	-	-	-	12,520	2,058	-	66,649
Other assets			10,663	11,989	4,305	3,897	341	339	7,041	1,536	40,111
Gross assets			216,081	80,049	38,305	76,733	5,500	12,859	12,499	1,536	443,562
Current liabilities:
	trade and other payables		(3,363)	(17,164)	(5,301)	(6,102)	(352)	(4,796)	(1,797)	(767)	(39,642)
	bank loans and other borrowings		-	-	-	-	-	(1,255)	-	-	(1,255)
	current tax liability		-	(185)	-	-	(28)	-	-	(324)	(537)
Non-current liabilities:
	bank loans and other borrowings		(100,113)	-	(37,053)	(48,496)	-	-	-	-	(185,662)
Deferred tax (liability) asset			(2,384)	(4,310)	7,476	7,584	365	-	-	(16)	8,715
Other liabilities			(2,843)	-	(1,780)	(5,563)	-	-	-	-	(10,186)
Net external assets			107,378	58,390	1,647	24,156	5,485	6,808	10,702	429	214,995

Represented by:
Capital		107,378		12,030	(19,223)	24,156	5,485	6,808	(1,946)	429	135,117
Loans		-		46,360	20,870	-	-	-	12,648	-	79,878
Total investment		107,378		58,390	1,647	24,156	5,485	6,808	10,702	429	214,995

Details of the floating rate debt within Quercus, iQ and Greenwich Peninsula N0204 and of interest rate swaps entered into by each of these are given in notes 16 and 20 below.

The valuation of properties held within Quercus as at 31 March 2010 has been carried out by Christie + Co, Chartered Surveyors, as external valuers, on the basis of market value and in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. Properties within the Greenwich joint ventures and the iQ Unit Trust were valued by Savills Commercial Limited and within the Quantum Unit Trust by CB Richard Ellis.

The Quercus and Quantum joint ventures have accounting periods ending on 31 December. The Group's share of their results for the remainder of the financial year has been based on their management accounts.

d) The summarised financial statements of the Groups principal joint venture operations were as follows:

	2010 Quercus	2009 Quercus	2010 GPRL	2009 GPRL	2010 N0204	2009 N0204	2010 iQ	2009 iQ
	£000	£000	£000	£000	£000	£000	£000	£000
Income statements
Revenue	59,098	62,825	30,487	1,720	4,469	-	12,383	8,703
Expenses	(71,205)	(139,938)	(38,034)	(2,904)	15,697	(47,484)	(20,924)	(56,517)
(Loss) profit before taxation	(12,107)	(77,113)	(7,547)	(1,184)	20,166	(47,484)	(8,541)	(47,814)

Balance sheets
Non-current assets	625,857	808,096	2,390	32,630	130,300	68,000	209,254	145,730
Current assets	75,925	41,947	147,562	130,735	4,399	8,610	7,029	7,797
Total assets	701,782	850,043	149,952	163,365	134,699	76,610	216,283	153,527
Current liabilities	(28,927)	(13,230)	(37,107)	(35,406)	(11,165)	(10,602)	(15,271)	(12,209)
Non-current liabilities	(290,036)	(414,398)	-	(8,796)	(84,542)	(62,714)	(109,043)	(92,987)
Net external assets	382,819	422,415	112,845	119,163	38,992	3,294	91,969	48,331
Percentage share held by Group	14.94%	25.42%	49.00%	49.00%	50.00%	50.00%	49.98%	49.98%
Group share of net external assets	57,193	107,378	55,294	58,390	19,496	1,647	45,966	24,156

	2010 Quantum	2009 Quantum	2010 Quintessential	2009 Quintessential	2010 OneBrighton	2009 BioRegional Quintain
	£000	£000	£000	£000	£000	£000
Income statements
Revenue	708	780	6,647	37,441	747	279
Expenses	(582)	(2,664)	(6,557)	(36,573)	(613)	(2,122)
Profit (loss) before taxation	126	(1,884)	90	868	134	(1,843)

Balance sheets
Non-current assets	6,844	10,318	-	-	-	6,814
Current assets	4,462	682	20,450	25,708	11,941	18,234
Total assets	11,306	11,000	20,450	25,708	11,941	25,048
Current liabilities	(450)	(760)	(9,001)	(12,097)	(1,033)	(3,601)
Non-current liabilities	802	730	-	-	-	-
Net external assets	11,658	10,970	11,449	13,611	10,908	21,447
Percentage share held by the Group	50.00%	50.00%	50.02%	50.02%	50.00%	49.90%
Group share of net external assets	5,829	5,485	5,727	6,808	5,454	10,702

ii) Investment in associate

a) The movement in the investment in the associate was as follows:

			£000
Balance 31 March 2008			1,157
Share of profit, net of tax			86
Balance 31 March 2009			1,243
Share of profit, net of tax			346
Balance 31 March 2010			1,589

b) The Group's interest in its associate undertaking was as follows:

		% of equity held	Other member
Aqua Trust		50	Aviva Annuity UK Limited

The principal asset of the associate consists of a reversionary interest in three properties, which has been valued as at 31 March 2010 by Jones Lang LaSalle Limited.

c) The Group's share of the summarised income statement for the associate for the year ended 31 March 2010 was as follows:

	2010 £000	2009 £000
Gain on revaluation of investment properties	480	120
Deferred tax charge for the year	(134)	(34)
Profit after taxation	346	86

d) The Group's share of the summarised balance sheet for the associate as at 31 March 2010 was as follows:

	2010 £000	2009 £000
Investment properties	2,075	1,595
Deferred tax liability	(486)	(352)
Net external assets	1,589	1,243

Represented by:

Capital

1,589

1,243

iii) The movement in other non-current investments, all of which have been classified as available for sale, was as follows:

			£000
Fair value 31 March 2008			15,196
Additions			1,619
Impairment			(7,790)
Recycling of revaluation movements from earlier years			2,159
Revaluation loss			(364)
Fair value 31 March 2009			10,820
Disposals			(6,685)
Impairment			(150)
Revaluation loss			(60)
Fair value 31 March 2010			3,925

In the year to 31 March 2009, an impairment loss was recognised in the Income Statement in relation to the whole of the Group's investment in Serrastone SA following a revision to the cashflow forecasts of the business in the light of prevailing economic conditions. For similar reasons, in the current year, an investment held in a company which was operating a hotel in the United Kingdom has been fully impaired. The remaining investment at the balance sheet date is shown at the value at which it is quoted on AIM.

During the year, the Group redeemed one of its investments with proceeds of £6,759,000 and a profit over book value of £74,000.

12 TRADING PROPERTIES

As at 31 March 2010, five properties were held for resale and are shown at the lower of cost and net realisable value and include capitalised interest of £1,969,000 (2009: £1,113,000). As at that date, the Directors have assessed that the net realisable value of the Group's trading properties exceeds the carrying value. During the year an impairment of £8,114,000 (2009: £nil) was recognised in respect of one of the Group's trading properties.

During the year, the Group sold residential units at Wembley which had a book value of £11,018,000 (2009: £19,381,000) (note 3).

13 TRADE AND OTHER RECEIVABLES

	2010 £000	2009 £000
Trade receivables	9,695	5,837
Other receivables	3,524	6,288
Trade and other receivables	13,219	12,125
Tax recoverable	-	596
Prepayments and accrued income	2,720	2,937
	15,939	15,658

The aging of trade and other receivables was as follows:

	2010	2010	2010	2009	2009	2009
	Gross	Impairment	Net	Gross	Impairment	Net
	£000	£000	£000	£000	£000	£000
Not past due	8,781	-	8,781	10,035	(250)	9,785
Past due less than one month	3,055	-	3,055	1,867	-	1,867
Past due one to three months	123	(45)	78	548	(77)	471
Past due three to six months	995	(225)	770	220	(220)	-
Past due over six months	1,488	(953)	535	265	(263)	2
	14,442	(1,223)	13,219	12,935	(810)	12,125

The movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:

				£000
Balance as at 1 April 2009				810
Amounts written-off in year				(390)
Increase in allowance				803
Balance 31 March 2010				1,223

14 CURRENT INVESTMENTS

2010

£000

2009

£000

UK Government Treasury stock

The nominal value of the Treasury stock as at 31 March 2010 was £4,000 (2009: £4,000).

15 CURRENT LIABILITIES: TRADE AND OTHER PAYABLES

	2010 £000	2009 £000
Trade payables	4,712	2,918
Other payables	4,221	10,778
Accruals	17,985	23,841
Interest rate swaps	10,173	9,376
	37,091	46,913

16 BANK LOANS AND OTHER BORROWINGS

	2010 £000	2009 £000
Current liabilities:
Bank loans	1,600	-
Non-current liabilities:
Bank loans	399,467	540,500
10% First Mortgage Debenture Stock 2011 (secured)	2,068	2,093
	401,535	542,593
Amortised borrowing costs	(4,469)	(9,103)
	397,066	533,490

Total bank loans and other borrowings	403,135	542,593
Amortised borrowings costs	(4,469)	(9,103)
	398,666	533,490

The loans are secured by floating charges over assets owned by subsidiary undertakings.

The 10% First Mortgage Debenture Stock 2011 issued by Estates Property Investment Company Limited is secured by a cash deposit of £3,362,000 and has a redemption value of £2,017,000. The premium over par arising from fair valuing the debenture on acquisition is amortised over its remaining life.

The maturity profile of the Group's debt was as follows:

	2010	2010	2010	2009	2010	2009
	Bank loans and overdrafts	Other loans	Total debt	Total debt	Undrawn facilities	Undrawn facilities
	£000	£000	£000	£000	£000	£000
Within one year	1,600	-	1,600	-	15,000	-
From one to two years	1,600	2,068	3,668	95,000	-	-
From two to five years	396,017	-	396,017	447,593	248,000	134,500
After five years	1,850	-	1,850	-	-	-
	401,067	2,068	403,135	542,593	263,000	134,500

After taking account of interest rate swap arrangements, the risk profile of the Group's borrowings was as follows:

	2010	2010	2010	2009	2009	2009
	Fixed or capped	Floating	Total debt	Fixed	Floating	Total debt
	£000	£000	£000	£000	£000	£000
Sterling	403,135	-	403,135	542,593	-	542,593

The interest rate profile of the Group's fixed or capped rate debt was as follows:

Percent	2010 £000	2009 £000
4.0 - 5.0	5,500	100,000
5.0 - 6.0	28,000	-
6.0 - 7.0	350,000	350,000
7.0 - 8.0	17,567	50,000
8.0 - 9.0	-	40,500
9.0 - 10.0	2,068	2,093
	403,135	542,593

The weighted average rate and the weighted average period of the Group's fixed rate debt were as follows:

2010

2009

2010

years

2009

years

Sterling

6.2

6.1

The maturity profile of the Group's share of floating rate debt held within its joint ventures as at 31 March 2010 was as follows:

	2010 £000	2009 £000
Within one year	-	1,255
From two to five years	144,899	185,662
	144,899	186,917

17 OBLIGATIONS UNDER FINANCE LEASES

The Group has entered into a number of leases in relation to its investment properties, the carrying amounts of which are disclosed in note 9.

These leases are for fixed terms and subject to regular rent reviews. They contain no material provisions for contingent rents, renewal or purchase options and escalation clauses nor any restrictions outside of the normal lease terms.

Finance lease obligations in respect of rents payable on leasehold properties were payable as follows:

	2010	2010	2010	2009	2009	2009
	Minimum lease payments	Interest	Present value of minimum lease payments	Minimum lease payments	Interest	Present value of minimum lease payments
	£000	£000	£000	£000	£000	£000
Within one year	774	(766)	8	774	(766)	8
From one to two years	774	(765)	9	727	(719)	8
From two to five years	2,346	(2,315)	31	2,370	(2,341)	29
From five to 25 years	15,483	(15,010)	473	15,483	(15,042)	441
After 25 years	36,925	(26,298)	10,627	37,646	(26,976)	10,670
	56,302	(45,154)	11,148	57,000	(45,844)	11,156

18 NON-CURRENT LIABILITIES: OTHER PAYABLES

	2010 £000	2009 £000
Interest rate swaps	18,967	20,382
Other creditors	1,393	-
	20,360	20,382

19 FINANCIAL ASSETS AND LIABILITIES

The Group is exposed to the following types of risk from its use of financial instruments:

Credit risk

Liquidity risk

Market risk

This note presents information about the nature of the Group's exposure, its objectives, policies and processes for measuring and managing risk and the Group's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board has established a Risk Committee which meets four times a year and is responsible for developing and monitoring the Group's risk management policies. The Committee reports regularly to the Board in relation to its activities.

The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group's Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. This function is currently outsourced to Grant Thornton. The internal auditor undertakes both regular and ad hoc reviews of risk management control and procedures, the results of which are reported to the Audit Committee.

Credit risk

The Group's exposure to credit risk arises from the potential financial loss if a tenant or counterparty to a financial instrument fails to meet its contractual obligations. It relates principally to the Group's receivables from tenants and other third parties. The credit rating of counterparties to financial instruments is kept under review, particularly in the light of the current economic climate. Given that the majority of positions are significantly out of the money, this does not represent a major risk at the current time.

Trade and other receivables

The Group's activities are focused exclusively in Great Britain and the Channel Islands and within this geographical area, its exposure to credit risk arising from trade and other receivables is influenced by the individual characteristics of each tenant. As at 31 March 2010, the Group's 20 largest tenants within its directly held properties and its joint ventures accounted for 39.2% (2009: 34.6%) of the passing rents from these properties.

The Group operates a policy whereby the creditworthiness of each tenant is assessed prior to lease or pre-lease terms being agreed. The process includes seeking external ratings where available and reviewing financial information in the public domain. In certain cases, the Group will require collateral to support these lease obligations. This usually takes the form of a rent deposit, parent company guarantee or a bank guarantee.

Rent collection is outsourced to managing agents who report regularly on payment performance and provide the Group with intelligence on the continuing financial viability of tenants. Arrears are monitored internally on a weekly basis by the internal property management teams and a strategy for dealing with significant potential defaults is presented on a timely basis by the Head of Investment Portfolio or the property managers of the Group's various joint ventures to the weekly meeting of the Executive Directors.

Outstanding tenant balances are reviewed on a quarterly basis for impairment with an allowance of £803,000 being made in the current year (2009: £412,000) as shown in note 3.

In addition to input from its managing agents, the Quercus fund uses an external organisation for monitoring the credit strength of its healthcare tenants.

In relation to iQ, the student accommodation fund in which the Group has a 49.98% share, rents are either collected directly from universities or are underpinned by deposits received in advance from students.

Guarantees

Where Group companies enter into financial guarantee contracts to guarantee the indebtedness of obligations of other companies within the Group, the guarantee contract is treated as a contingent liability until such time as it becomes probable that the guarantor will be required to make a payment under the guarantee. In the current and comparative periods, such guarantees did not have any impact on the financial statements.

In respect of the development of the two office buildings on the Greenwich Peninsula as part of the N0204 joint venture, the Group's outstanding contingent liabilities relate to the joint venture banking facilities and comprise:

i) an interest guarantee in respect of 50% of all interest, costs and commitment fees or equity injection (see below); and

ii) a contingent equity guarantee in respect of 50% of any repayment obligation or equity injection (see below) up to a maximum of £30m.

If at 30 November 2010, interest cover is less than 1.0 times and/or the loan to value covenant is less than 70%, the Group and Lend Lease Europe Limited must provide sufficient funds by way of an equity injection to ensure compliance with these covenants.

In respect of iQ, if the loan to value covenant of 65% is not met, or the interest cover covenant of 1.25 times is not met, then the Group would be required to inject equity alongside its partner, Wellcome, to restore the covenants.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as these fall due.

Cash levels are monitored to ensure sufficient resources are available to meet the Group's operational requirements. The Group has a £20m working capital facility to manage day-to-day cash movements. Surplus cash is used to reduce debt.

The Group's policy is to finance its activities using equity and medium term debt, the proportions depending on the profile of the operational and financial risks to the business. The Group generally borrows on an unsecured basis on the strength of its covenant but with floating charges over the assets of its subsidiaries.

The Group's bilateral banking facilities carry an average interest rate of LIBOR plus a margin of 115 basis points. The key covenants negotiated with the banks included interest cover of 1.25 times after taking account of capitalised borrowing costs and gearing of 110% based on net assets as shown in the Group's balance sheet adjusted for deferred tax on revaluation surpluses and fair value adjustments on financial instruments.

Following renegotiation, in March 2009 the Group was granted an option exercisable annually over a three year period to extend the gearing limit to 150% with a ratcheted margin rate and payment on each occasion of the exercise of the option of an amendment fee. The option was exercised in respect of the financial year ended 31 March 2010 but following receipt of the proceeds of the rights issue, not for the financial year ending 31 March 2011. On not exercising the option, the margin increased by 25 basis points.

During the year, the Group also negotiated a new secured facility of £51.7m with an interest rate of LIBOR plus a margin of 2% and a final maturity date of September 2014.

At the year end, the Group had unutilised facilities of £263m (2009: £134.5m). Subsequently, £15m of these facilities have been cancelled.

Market risk

In relation to the Group, market risk arises mainly from the impact that changes in interest rates might have on the Group's cost of borrowing. The weighted average rate of interest relating to the Group's debt as at 31 March 2010 was 6.2% (2009: 4.0%).

The Group does not speculate in treasury products but uses these only to limit potential interest rate fluctuations. It usually borrows at floating rates of interest and uses hedging instruments to achieve an interest rate profile where the majority of borrowings are fixed or capped. As at 31 March 2010 and 31 March 2009, all of the Group's net debt was fixed or protected. Further information on the Group's financial instruments is given in note 20.

The fair value of the Group's outstanding financial instruments, as shown in note 20, have been estimated by JC Rathbone, financial risk consultants, by calculating the present value of future cash flows, using appropriate market discount rates. The derivatives have all been deemed to be Level 2 in the fair value hierarchy. All other financial liabilities and assets are deemed to be Level 3.

Since 31 March 2010, the Group has re-set the swap rate relating to £150m of the swaps in existence at the year end with a termination date of 22 April 2013 to the current market rate of 1.735%.

The Group is also exposed to market rate risk through the activities of its joint ventures, which borrow at variable rates and use financial instruments to safeguard against market movements in rates. This is disclosed in note 20 in respect of the Group's interests in its Quercus, iQ and N0204 (Greenwich) investments.

Capital management

The Board's policy is to maintain a strong capital base with a view to underpinning investor, creditor and market confidence and sustaining the future development of the business. The Board receives ongoing reports on the demographic spread of shareholders and maintains regular contact with the principal investors of these in order to discuss performance and communicate strategy. The Board monitors the Group's performance in terms of its main financial indicator, total return, at both a corporate and individual asset level, and sets internal guidelines for interest cover and gearing. The Executive Directors monitor the Group's current and projected financial position against these guidelines.

In the interest of the shareholders, the Board has in the past pursued a progressive dividend policy but has currently deferred the payment of dividends until the business becomes cash positive again.

The Board also encourages employees to participate in the share ownership structure through savings investment plans, the share-based element of bonus arrangements and the various performance related employee share option schemes, all of which it considers best align the interest of employees with those of the Group and its shareholders. Shareholder approval for proposals relating to new employee share participation schemes is to be sought at the forthcoming Annual General Meeting.

From time to time, the Group purchases its own shares in the market. Such purchases can take the form of treasury shares with the aim of using these to cover entitlements under bonus arrangements and options schemes but also for cancellation on occasions when the Board considers that this course of action would enhance the value of the Group for the shareholders. No shares were purchased during the year.

There were no changes to the Group's approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements other than those referred to above in connection with the Group's financing arrangements.

i) Finance income and expense

	2010 £000	2009 £000
Recognised in Income Statement:
Finance expenses on liabilities not recognised at fair value in the Income Statement	31,890	32,907
Interest on obligations under finance leases	766	790
Financial expenses	32,656	33,697

Finance income on assets not recognised at fair value in the Income Statement	(4,789)	(9,662)

Net financial income and expense	27,867	24,035
Capitalised interest	(15,617)	(12,534)
Change in fair value of financial instruments	(672)	1,385
Profit on termination of interest rate swaps and caps	-	(3,297)
Net finance expenses (note 5)	11,578	9,589

Recognised directly in equity:
Net change in fair value of available for sale financial assets	(60)	(364)
Effective portion of changes in fair value of cashflow hedges	(316)	(29,712)
Foreign currency translation differences	(35)	250
	(411)	(29,826)

ii) Sensitivity analysis

As at 31 March 2010, it is estimated that an increase of 50 basis points in interest rates would have increased the Group's loss before tax by £536,000 (2009: £1,132,000) and that a decrease of 50 basis points would have reduced the Group's loss before tax by £536,000 (2009: £1,132,000). There would have been no effect on amounts recognised directly in equity.

These estimates have been compiled by applying the interest rate change to the variable rate borrowings net of interest rate swaps in existence during the year.

The impact on the fair value of the Group's interest rate swaps and caps in existence as at 31 March 2010 of an increase in 50 basis points in interest rates would have been to reduce the loss before tax by £100,000 with a credit directly to equity of £4,980,000. A decrease in interest rates by 50 basis points would have increased the Group's loss before tax by £80,000 with a debit directly to equity of £4,980,000.

In relation to the year ended 31 March 2009, the impact on the fair value of interest rate swaps held at that year end of an increase in interest rates of 50 basis points would have been to reduce the loss before tax by £446,000 with a credit directly to equity of £6,846,000. A decrease in interest rates of 50 basis points would have increased the Group's loss before tax by £308,000 with a debit directly to equity of £6,846,000.

iii) Financial assets

The currencies in which the Group's cash and cash equivalents were held were as follows:

	2010 £000	2009 £000
Sterling	46,830	7,761
Euros	156	1,179
United States dollars	223	275
	47,209	9,215

The Sterling balance included £23,792,000 (2009: £nil) held by solicitors to the order of the Group in relation to the purchase of a property completed after the balance sheet date. The remainder principally comprises deposits placed with banks at market rates for maturities of not more than one month, at an average rate of 1.3% (2009: 2.8%). Such deposits are considered to be cash equivalents.

iv) Fair value and financial instruments

As at 31 March 2010, the fair values of the Group's financial assets and liabilities were equal to their book values with the exception of non-current liabilities: bank loans and other borrowings which have a negative fair value adjustment as assessed by JC Rathbone Associates Limited of £1,055,000 (2009: negative £194,000).

v) Contractual maturity and cashflow

The maturity analysis of financial liabilities was as follows:

As at 31 March 2010		Bank loans	10% first mortgage debenture stock	Interest	Financial liability cashflows	Current liabilities:		Obligations under finance leases	Non-current liabilities: other payables	Total
As at 31 March 2010		Bank loans	10% first mortgage debenture stock	Interest	Financial liability cashflows	Trade and other payables	Interest rate swaps	Obligations under finance leases	Non-current liabilities: other payables	Total
		£000	£000	£000	£000	£000	£000	£000	£000	£000
Within one year		1,600	-	22,560	24,160	26,918	10,173	774	-	62,025
From one to two
	years	1,600	2,068	22,007	25,675	-	-	774	9,903	36,352
From two to five
	years	396,017	-	32,942	428,959	-	-	2,346	10,457	441,762
From five to 25
	years	1,850	-	278	2,128	-	-	15,483	-	17,611
After 25 years		-	-	-	-	-	-	36,925	-	36,925
		401,067	2,068	77,787	480,922	26,918	10,173	56,302	20,360	594,675

As at 31 March 2009		Bank loans	10% first mortgage debenture stock	Interest	Financial liability cashflows	Current liabilities:		Obligation under finance leases	Non-current liabilities: other payables	Total
As at 31 March 2009		Bank loans	10% first mortgage debenture stock	Interest	Financial liability cashflows	Trade and other payables	Interest rate swaps	Obligation under finance leases	Non-current liabilities: other payables	Total
		£000	£000	£000	£000	£000	£000	£000	£000	£000
Within one year		-	-	22,239	22,239	37,537	9,376	774	-	69,926
From one to two
	years	95,000	-	20,869	115,869	-	-	727	9,140	125,736
From two to five
	years	445,500	2,093	51,745	499,338	-	-	2,370	11,242	512,950
From five to 25
	years	-	-	-	-	-	-	15,483	-	15,483
After 25 years		-	-	-	-	-	-	37,646	-	37,646
		540,500	2,093	94,853	637,446	37,537	9,376	57,000	20,382	761,741

It is not expected that the cashflows included in the maturity analysis could occur significantly earlier or at significantly different amounts.

20 FINANCIAL INSTRUMENTS

All the Group's financial instruments have been valued by JC Rathbone Associates Limited, financial risk consultants.

i) Designated cashflow hedges

The Group's interest swaps as at 31 March 2010 were classified as cashflow hedges with movements in fair value as follows:

Amount	Maturity date	Swap rate	2010 Fair value adjustments Effective	2010 Fair value adjustments Ineffective	2009 Fair value adjustments Effective
£000		%	£000	£000	£000
100,000	05.05.10	3.02	418	934	(1,581)
75,000	22.04.13	4.96	(116)	-	(6,743)
75,000	22.04.13	4.99	(100)	-	(6,816)
50,000	03.01.14	4.94	(173)	-	(4,851)
50,000	03.01.14	4.97	(186)	-	(4,859)
50,000	03.01.14	5.00	(159)	-	(4,862)
400,000			(316)	934	(29,712)

Fair value adjustments in respect of cashflow hedges classified as effective are accounted for through the hedging reserve while those in respect of cashflow hedges classified as ineffective are reflected in the Income Statement.

ii) Interest rate caps

As at 31 March 2010, the profile of the Group's interest rate caps, which have been classified as ineffective cashflow hedges with value adjustments reflected in the Income Statement, was as follows:

Amount £000	Maturity date	Strike rate %	2010 Fair value adjustments £000	2009 Fair value adjustments £000
25,000	03.01.13	5.50	(32)	(222)
25,000	03.01.13	5.75	(43)	(137)
150,000	22.04.13	7.50	(38)	(852)
50,000	22.07.13	6.50	(19)	(304)
250,000			(132)	(1,515)

iii) During the year, basis swaps totalling £350,000,000 matured. These swaps had a positive fair value of £130,000 as at 31 March 2009.

iv) Joint venture financial instruments

As at 31 March 2010, the Group's share of fair value adjustments on interest rate swaps held within Quercus, a joint venture in which the Group has a 14.94% interest (2009: 25.42%), was as follows:

Amount	Maturity date	Swap rate	2010 Group share reflected in equity	2009 Group share reflected in equity
£000		%	£000	£000
40,000	22.01.09	4.86	-	(45)
50,000	25.10.09	4.84	148	(298)
25,000	25.11.09	5.02	90	(282)
25,000	24.10.11	2.95	(107)	-
30,000	23.07.12	3.10	(161)	-
80,000	22.01.13	5.11	92	(1,764)
100,000	22.01.13	4.99	95	(2,229)
350,000			157	(4,618)

As at 31 March 2010, the following interest rate caps and collars were held within iQ, a joint venture in which the Group has a 49.98% interest (2009: 49.98%):

				2010	2010	2009	2009
Amount	Maturity date	Strike rate Floor	Strike rate Cap	Group share reflected in Income Statement	Group share reflected in equity	Group share reflected in Income Statement	Group share reflected in equity
£000		%	%	£000	£000	£000	£000
26,396	31.12.12	5.28	5.75	-	(145)	-	-
52,793	31.12.12	5.28	5.75	-	-	(42)	(2,146)
52,793	31.12.12	5.08	6.00	(280)	(163)	-	(1,969)
25,909	04.10.12	4.89	6.25	-	(131)	-	-
51,818	04.10.12	4.89	6.25	-	-	(1,850)	-
51,818	04.10.12	4.69	6.50	(286)	-	(1,744)	-
261,527				(566)	(439)	(3,636)	(4,115)

During the year, the following interest rate swap was held by the Greenwich Peninsula N0204 A & B joint ventures, in which the Group has a 50.00% interest (2009: 50.00%):

Amount

Maturity

date

Swap

rate

2010

Group share

reflected in equity

2009

Group share

reflected in equity

£000

74,194

30.12.11

5.28

211

(2,960)

21 RECONCILIATION OF MOVEMENTS IN EQUITY

The revaluation movements on the Group's investment and development properties whether held directly or through joint ventures and the associate were as follows:

		2010	2009
		£000	£000
Recognised in the Income Statement:
Gains (deficits) on revaluation of investment properties		7,513	(63,282)
Deficits on revaluation of development properties		-	(4,967)
Deficits on revaluation of investment and development
	properties in joint ventures	(1,059)	(72,745)
Gain on revaluation of investment properties in associate		480	120
Recognised directly in equity:
Deficits on revaluation of development properties		-	(212,062)
Deficits on revaluation of development properties in joint ventures		-	(451)
		6,934	(353,387)

The movement in the Group's other capital reserves were as follows:

Capital

redemption

reserve

£000

Merger

reserve

£000

Total other capital

reserves

£000

Balance 31 March 2009 and 31 March 2010

2,074

106,062

108,136

The charge against retained earnings in respect of the issue of shares less costs related to options exercised by staff in a subsidiary company. There was no equivalent entry in the accounts of the Company.

As at 31 March 2010, ESOP Trusts held 2,768,334 (2009: 2,054,154) shares in the Company which had been purchased in the market at a cost of £9,607,000 (2009: £11,908,000). The purpose of the Trusts is to acquire and hold shares which will be transferred to employees to meet future obligations under the Group employee share-based payment schemes as set out in note 22 and share-based bonus entitlements. As at

31 March 2010, these shares had a market value of £1,571,000 (2009: £173,000). The Quintain Group Employee Benefit Trust has waived the right to receive dividends.

As at 31 March 2010, the Company also held 5,234 (2009: 5,234) of its own shares which had been purchased in the market at a cost of £32,000 (2009: £32,000). As at that date, these shares had a market value of £3,000 (2009: £440).

CAPITAL REDEMPTION RESERVE

The capital redemption reserve reflects the nominal value of shares purchased by the Group for cancellation.

MERGER RESERVE

The merger reserve has arisen following corporate acquisitions where the Group's equity has formed all or part of the consideration and represents the premium on the shares issued less costs.

CASHFLOW HEDGE RESERVE

The cashflow hedge reserve comprises the effective portion of the cumulative net change in the cashflow hedging instruments.

TRANSLATION RESERVE

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the Group's foreign subsidiaries.

22 SHARE CAPITAL

		Number of shares 000	Nominal value £000
Allotted, called up and fully paid:
In issue as at 31 March 2008		129,930	32,483
Issue of shares under share-based payment schemes at between 25p
	and 155.3p per share	112	28
In issue as at 31 March 2009		130,042	32,511
Issue of shares under share-based payment schemes at 25p per
	share	17	4
Issue of shares at 80.6p per share		248	62
Rights issue at 49p per share		390,160	97,540
In issue as at 31 March 2010		520,467	130,117

As at 31 March 2010, share capital included 2,768,334 (2009: 2,054,154) shares held by ESOP Trusts. These shares had a nominal value of £692,084 (2009: £513,539). The Company also held 5,234 (2009: 5,234) of its own shares with a nominal value of £1,309 (2009: £1,309).

As at 31 March 2010, the following commitments to issue shares to employees under various share-based payment schemes remained outstanding:

Date of grant	Number of shares	Exercise price per share pence	Exercise period
			from	to
Executive Directors' Performance Share Plan (LTIP)
26.09.03	2,120,000	-	26.09.12	27.09.12
12.07.05	993,750	-	12.07.14	13.07.14
	3,113,750

1996 Approved Executive Share Option Scheme (1996 Approved)
13.06.00	61,800	73.3	13.06.03	12.06.10
04.09.01	3,188	94.1	04.09.04	03.09.11
17.06.02	27,651	127.8	17.06.05	16.06.12
13.06.03	128,010	135.4	13.06.06	12.06.13
02.02.04	18,486	162.3	02.02.07	01.02.14
13.09.04	91,636	218.0	13.09.07	12.09.14
	330,771

2005 Share Option Plan (2005 Plan)
27.06.07	64,306	376.5	27.06.10	26.06.17
	64,306

1996 Executive Share Option (No.2) Scheme (1996 Unapproved)
13.06.03	30,471	271.0	13.06.06	12.06.10
13.06.03	841,588	287.0	13.06.06	12.06.10
	872,059

2004 Unapproved Share Plan (2004 Unapproved)
13.06.03	32,569	25.0	13.06.06	12.06.10
02.02.04	19,743	25.0	02.04.07	01.02.14
02.02.04	27,960	25.0	02.04.08	01.02.14
13.09.04	344,425	25.0	13.09.07	12.09.14
12.07.05	392,229	25.0	12.07.08	11.07.15
09.01.06	4,150	25.0	09.01.09	08.01.16
27.06.07	342,369	25.0	27.06.10	26.06.17
	1,163,445

Senior Operational Employees' Incentive Plan
24.09.08	411,182	-	24.09.11	24.09.11
	411,182

Total	5,955,513

The exercise prices and the number of shares under option have been adjusted following the rights issue in November 2009.

The Group's share-based bonus payments are all equity settled.

Executive Directors' Performance Share Plan (LTIP)

The Plan was approved by shareholders of the Company in September 2003 on the following terms:

i) participation in the plan is confined to Executive Directors of the Company;
ii) individual awards to Directors are restricted to 1% of the Company's issued share capital on the date
	of award and an aggregate of 2.5% of the Company's issued share capital;
iii) awards are granted at nil cost to participants; and
iv) vesting occurs, subject to the achievement of performance conditions, over years 5,6,7,8 and 9. No
	release of shares shall take place until the ninth anniversary of the award date.

1996 Approved Executive Share Option Scheme (1996 Approved)

The Scheme is an HMRC approved scheme with the following provisions:

i) since 2004 vesting of the options has been subject to a share price based performance condition; and

ii) individual awards are restricted to £30,000.

No awards have been made under the scheme since 2005.

2005 Share Option Plan (2005 Plan)

The Scheme is an HMRC approved scheme. It has the following provisions:

i) vesting of the options is subject to a share price based performance condition; and

ii) individual awards are restricted to £30,000 and 10% of the Group's issued share capital in the aggregate.

1996 Executive Share Option (No.2) Scheme (1996 Unapproved)

The Scheme is not approved by HMRC and has expired as to new awards. It has the following provisions:

i) options do not have any performance conditions attached; and

ii) individual awards are restricted to four times earnings over a ten year period.

Aggregate awards are restricted to:

(a) when combined with other shares to be issued on exercise of options under this and any scheme, no more than 5% of the issued share capital over a ten year period; and

(b) when combined with other shares to be issued on exercise of options under this and any scheme, no more than 3% of the issued share capital over a three year period.

2004 Unapproved Share Plan (2004 Unapproved)

The Scheme is not approved by HMRC and has the following provisions:

i) vesting of rights is subject to achievement of total return based performance conditions; and

ii) individual awards are restricted to annual earnings.

Aggregate awards are restricted to 5% of the issued share capital of the Company on the date of issue.

Deferred Bonus Plan

The Plan is not approved by HMRC and its main provisions are as follows:

i) shares are held on trust for a three year period and released, at nil cost to the participants; and

ii) no performance conditions, other than continued employment, apply.

Senior Operational Employees' Incentive Plan

The plan is not approved and its main provisions are as follows:

i) shares are held on trust for a three year period and released at nil cost to the participants; and

ii) in addition to continued employment, the performance condition of the awards is based on achievement of top quartile IPD performance over a three year period.

The movement in the year in the number and weighted average exercise price of outstanding options was as follows:

		2010	2010	2009	2009
		Number of shares	Weighted average exercise price pence	Number of shares	Weighted average exercise price pence
In issue as at 1 April		4,085,011	117.5	4,307,450	131.8
Options granted		-	-	163,329	-
Impact of rights issue		3,786,694	-	-	-
Options exercised		(16,425)	25.0	(112,297)	272.0
Distribution under share-based
	payment scheme (Deferred bonus)	(235,093)	-	-	-
Options lapsed		(1,664,674)	167.0	(273,471)	117.6
In issue as at 31 March		5,955,513	37.1	4,085,011	117.5

The weighted average share price at the date of exercise for share options exercised during the year was 81p (2009: 181p). The options outstanding as at 31 March 2010 had a weighted average remaining contingent life of 3.0 years (2009: 3.3 years).

No options were granted during the current year. Options granted in the previous year have been valued using the Black Scholes and binominal models on the basis of the following main assumptions:

Date of grant		24 September 2008 Senior Operational Employees' Share Plan
Number		163,329
Exercise price (pence)		-
Term of option (years)		3
Expected volatility (%)		-
Expected annual dividend yield (%)		-
Risk free rate (%)		4.3
Fair value (pence)		196.0

Details of the Group's share-based payment schemes are disclosed in the Remuneration Report.

23 CAPITAL COMMITMENTS

As at 31 March 2010, the Group had capital commitments of £122,309,000 (2009: £32,488,000) in relation to its own development properties and £nil (2009: £56,000) in respect of contractual commitments for repairs, maintenance and enhancement in relation to its investment properties. Capital commitments in relation to development properties are shown gross of government grants recoverable of £3,261,000 (2009: £nil). The Group's share of capital commitments in relation to its joint ventures was £20,775,000 (2009: £36,139,000).

24 OPERATING LEASE AGREEMENTS

i) As lessee

Future minimum lease payments payable by the Group under non-cancellable operating leases were as follows:

		2010 £000	2009 £000
Operating leases which expire:
	Within one year	50	-
	From one to two years	-	218
	From two to five years	-	-
	After five years	4,647	5,479
		4,697	5,697

The Group's lease commitments relate to its own offices at 16 Grosvenor Street, London W1K 4QF and 66 Grosvenor Street, London W1K 3JL.

ii) As lessor

The Group earns rental income by leasing its investment properties to tenants under non-cancellable operating leases. The majority of properties are let for terms from five to 35 years at a market rent. Standard lease provisions include service charge recovery and upward only rent reviews every five years. On review, rents are increased either by a contractual formula or to current market rent (estimated rental value or ERV). Typically, single let properties are leased on terms where the tenant is responsible for repair, insurance and running costs while multi-let properties are leased on terms which include recovery of a share of service charge expenditure and insurance. Only one of the Group's properties is let on terms which include a turnover based element.

Future minimum lease payments receivable by the Group under such leases were as follows:

		2010 £000	2009 £000
Operating leases which expire:
	Within one year	1,398	1,732
	From one to two years	2,408	4,061
	From two to five years	18,862	17,978
	After five years	138,325	169,954
		160,993	193,725

In addition, the Group's share of minimum lease payments receivable under non-cancellable operating leases contained within the Group's joint ventures was £295,858,000 (2009: £476,057,000).

25 RELATED PARTY DISCLOSURES

During the year, the Group received the following fees in respect of services provided to its joint ventures:

	2010 £000	2009 £000
Quercus Healthcare Property Partnership	9,531	10,610
iQ Property Partnership	2,318	2,335
Greenwich Peninsula Regeneration Limited	647	556
BioRegional Quintain Limited	176	326
Quintessential Homes LLP	30	160
Quantum Property Partnership	20	20
	12,722	14,007

The Group also received interest on loan notes amounting to £1,488,000 (2009: £3,108,000) from Greenwich Peninsula Regeneration Limited, £634,000 (2009: £865,000) from Greenwich N0204, £1,648,000 (2009: £1,323,000) from BioRegional Quintain Limited, and £485,000 (2009: £nil) from Wembley City HIX Limited, which are included in finance income.

The following amounts due from related parties are included in trade and other receivables in note 13.

	2010 £000	2009 £000
Quercus Healthcare Property Partnership	2,543	57
iQ Property Partnership	883	693
Greenwich Peninsula Regeneration Limited	198	100
BioRegional Quintain Limited	-	1,722
Quintessential Homes LLP	-	303
Quantum Property Partnership	6	44
	3,630	2,919

Amounts due from related parties are due on demand and are unsecured.

The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the applicable categories specified in IAS 24, 'Related Party Disclosures'. Further information about the remuneration of individual directors is provided in the audited section of the Remuneration Report.

	2010 £000	2009 £000
Short-term employee benefits	2,041	2,104
Post-employment benefits	258	224
Directors' remuneration included in administrative expenses (note 4)	2,299	2,328

The members of the Board are the only key management personnel as defined under IAS 24.

26 ACQUISITION OF SUBSIDIARY

On 15 March 2010, the Company acquired the remaining 50.1% of the share capital of BioRegional Quintain Limited for a consideration of £1. The fair value of the assets and liabilities as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition were:

		Carrying value at transaction date	Fair value adjustments	Fair value recognised on acquisition
		£000	£000	£000
Investment in joint ventures		5,822	(16)	5,806
Trading properties		4,054	(793)	3,261
Net current liabilities		(921)	(119)	(1,040)
Non-current liabilities		(2,423)	-	(2,423)
Net assets acquired		6,532	(928)	5,604
Represented by:
Initial cost of the Group's 49.9%
	equity interest in the joint venture			11,593
Loss under the equity method of the
	initial 49.9% interest			(2,976)
Impairment of investment				(3,144)
Costs of acquisition				131
				5,604

27 DISPOSAL OF INTEREST

On 30 September 2009, the Company disposed of a 1.5% minority stake in one of its subsidiaries, Signal Property Investments LLP (the Sequel Property Fund) for a consideration of £125,000. At the date of the disposal, the fair value of the assets and liabilities were as follows:

	£000
Investment properties	83,250
Bank loans	(48,950)
Shareholder loans	(25,147)
Net assets	9,153

Fair value of minority stake	(137)
Proceeds from disposal	125
Loss on disposal	(12)

28 FINANCIAL STATEMENTS

The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 March 2010 or 2009 which were prepared under International Financial Reporting Standards, as adopted by the European Union ('IFRS'). Statutory accounts for 2009 have been delivered to the Registrar of Companies. The auditors have reported on those accounts. Their report was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985, but was modified to include an emphasis of matter paragraph which drew attention to note 1 to the financial statements which indicated the existence of a material uncertainty which appeared to cast significant doubt on the Group's ability to continue as a going concern.

Statutory accounts for 2010 will be delivered to the Registrar of Companies following the Company's Annual General Meeting and will be made available on the Company's website www.quintain.co.uk. The accounts have been prepared on a going concern basis which the Directors consider appropriate given the significant progress achieved by the Group during the year. The auditors have reported on those accounts. Their report was unqualified, did not include a reference to any matters to which the auditors draw attention by way of emphasis without qualifying their report and did not contain statements under section 498(1) or (2) of the Companies Act 2006.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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