Half Yearly Report

RNS Number : 8478W

Quintain Estates & Development PLC

26 November 2010

 



26 November 2010

Quintain Estates and Development plc

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

QUINTAIN REPORTS STRONG PROGRESS AGAINST 2013 BUSINESS PLAN

Quintain Estates and Development plc today announces its half year results for the six months ended 30 September 2010.

Key points

·      Strong progress achieved against 2013 business plan, with delivery of four of the nine milestones

·      Maturity extensions agreed on £300m of banking facilities

·      Funding model functioning well, with disposal of £70m of non-core assets since 1 April 2010

Results

·      Gross profit for the six months of £14.0m (30 September 2009: £14.1m)

·      Pre-tax profit of £4.8m excluding investment revaluation movements (30 Sept 2009: loss of £18.3m)

·      Gross assets of £1,116.9m (31 March 2010: £1,174.2m), showing a 5% decrease  in valuations

·      Gearing of 60% against banking covenants of 110% (31 March 2010: 46%)

·      Interest cover of 3.4 times against banking covenants of 1.25 times (31 March 2010: 2.8 times)

·      Basic net asset value per share down 6.7% to 112p (31 March 2010: 120p)

·      Loss before tax of £58.8m (30 September 2009: profit of £9.6m) due to revaluation movements

Urban Regeneration

·      Two milestones delivered:

o  Hilton hotel and student accommodation buildings now under construction at Wembley

o  Pier Walk at Greenwich Peninsula sold at 6% premium to March valuation

·      London Designer Outlet at Wembley marketing now underway: 25% of space pre-let or under offer

·      Sale of 2.5 acre plot to Brent Council completed, bringing £10m into the Group

·      Four commercial buildings at Greenwich now operational, with 3,200 people based at the Peninsula

·      Leases agreed on five of thirteen retail units at Greenwich, with a further five in lawyers' hands.

Fund Management

·      Two milestones delivered:

o  Partner secured for Corsham Street scheme, reducing Group funding commitments by £42.5m

o  20% increase in operational beds by iQ, increasing rental income by circa £2m

·      Funds under management increased to £1,094.6m (31 March 2010: £1,008.0m)

·      Net fees from fund management of £3.0m during the period (30 September 2009: £3.1m)

·      Quercus: strong progress with investment of £93m in new assets since 1 April 2010

·      iQ: increase in values of 5.3% over period and 97% occupancy achieved (89% at September 2009)

Adrian Wyatt, Quintain's Chief Executive, commented:

"Progress towards the fulfilment of our 2013 business plan is on track and will make a material financial difference to the Group. Our debt maturities are being prudently extended. Our funding strategy is functioning well and we remain firmly committed to delivering the progress we promised in June.

"We are treading a clear path to operational cash neutrality through a combination of non-core sales, doing the right commercial deals for the business at this time and focusing on building income through the implementation of our corporate milestones. We look forward to reporting further progress before the end of the financial year."

Conference call and meeting

A meeting for analysts and institutional investors will take place today at 09.00 at Financial Dynamics, 26 Southampton Buildings, London WC2A 1PB. The meeting can also be accessed via a conference call dial in facility, using the following details:

Title:                                                     Quintain Half Year Results

Dial in number:                                      [phone]

Password:                                             4642981

In addition, an audio webcast will be made available on the Company's website, www.quintain.co.uk, following the meeting.

For further information, please contact:

Quintain Estates & Development plc

Rebecca Worthington / Cressida Curtis

Tel:       [phone]

Financial Dynamics

Stephanie Highett / Dido Laurimore / Laurence Jones

Tel:       [phone]

Financial Highlights

		30 Sept 2010		31 March 2010		Change %
BALANCE SHEET
Net asset value per share (pence)		112		120		(6.7)
Diluted net asset value per share (pence)		111		120		(7.5)
EPRA net asset value per share (pence)		120		133		(9.8)
Total return (%)		(6.7)		(0.8)		-
EPRA total return (%)		(9.8)		(1.5)		-
Gearing (%)
Banking		60		46
INCOME STATEMENT
		30 Sept 2010		30 Sept 2009
Operating profit
before exceptional items (£m)		3.2		3.3
(Loss) profit  before tax (£m)		(58.8)		9.6
Earnings per share (pence)
Basic and diluted		(8.7)		2.8
Earnings per share (EPRA) (pence)		0.1		2.2
Interest cover (x)		3.4		2.3

Chief Executive's Statement

In June this year we set out the business plan through which the Group will achieve a more profitable and sustainable position. Since then, considerable progress has been made towards its fulfilment, most clearly demonstrated through the extension of maturities regarding £300m of debt, the disposal of over £70m of non-core assets to drive the funding model and the successful delivery of four of the nine key corporate milestones.

This progress has been achieved despite a slow transactional market and continued uncertainty regarding the pace of the economic recovery across Europe, demonstrating the statement made at the time of our full year results in June that the economic environment need not impede the achievement of our targets.

Performance

Whilst the Group delivered an underlying profit during the reporting period of £2.1m, a 5% write down in the valuation of the overall portfolio returned a loss for the financial period of £45.3m (2009: profit of £7.6m). The resulting net asset value per share at 30 September 2010 was 112p, compared with 120p at the end of the last financial year.

Valuations

The fall in the value of the Group's portfolio over the period was primarily attributable to two specific assets: Corsham Street and Emersons Green. Our major regeneration schemes, which are based in London, saw only a marginal decrease in value despite development land remaining out of favour. In a cautious market, our two RPI-focused funds both delivered valuation increases over the period, emphasising the relevance of our corporate strategy to increase the weight of Group investment in alternative asset classes.

Delivery

The Board has clearly stated its commitment to return the Group to a positive operational cashflow position, and good progress is being made towards this goal through both established operations and the innovative use of existing skills.

Most notable is the framework agreement announced this week through which Quintain will supply real estate consultancy to Living PlanIT, the urban technology specialist. Quintain's core business is the development of new communities and this agreement capitalises on the Group's existing skills in its natural marketplace of urban development to create a material new income stream including minimum payments of €12m for each of the next two years. Under the terms of the agreement, Quintain becomes a partner of Living PlanIT alongside global organisations such as Cisco, Buro Happold and McLaren Electronic Systems, whilst gaining unique access to the ground-breaking approach and technologies being used at the first development, PlanIT Valley in Portugal. This agreement has the potential to accelerate significantly the Group's achievement of an operating cashflow positive position.

Within the 2013 business plan, four of the nine milestones for the current financial year have been delivered:

1.   Most pleasing was the disposal at a 6% premium to valuation of our first commercial building at Greenwich Peninsula. The purchase price of £97.1m reflects a yield of 5.9% and is a strong endorsement of the wider scheme as an emerging commercial location for London.

2.   The substantial expansion of beds within our iQ student accommodation joint venture, of which Quintain and the Wellcome Trust each own 50%, not only increases recurring income for the Group but demonstrates the value of expert investment in alternative asset classes. iQ achieved 97% occupancy of the enlarged portfolio this year and anticipates further income growth with the opening of the Hoxton scheme in London for the 2011/12 academic year.

3.   Progress at Wembley has accelerated significantly. The Hilton Hotel is now under construction alongside the 660 bed student accommodation scheme and both are on schedule for opening in 2012.

4.   The fourth milestone, announced today, is the disposal of the Corsham Street scheme into iQ. This deal effectively enables the Group to retain 50% of the scheme whilst repatriating a net £7.5m of cash and reducing Group funding commitments by £42.5m.

The sale of Corsham Street was executed at the latest valuation (30 September 2010) of £15m. In anticipation of continued strong demand for high quality student accommodation in London, where 17% of the UK's university students are based, the Company is also pleased to have negotiated an overage of up to £4.6m if rental income from the scheme during the first two years of operation exceeds an agreed level. The proceeds from the sale will be re-invested in our regeneration schemes.

Our focus is now on the delivery of the remaining milestones. Within the Urban Regeneration business, excellent progress has been made on the leasing programme for the London Designer Outlet ("LDO") at Wembley. At Greenwich, construction of the next building is likely to begin subsequent to rather than before the year end, although the sale of the relevant plot, which will also return capital to Quintain, is progressing well. Within Fund Management, following the appointment of David Gavaghan in May, two senior additions have been made to the team and a range of opportunities to invest in income-producing assets is being assessed. Notwithstanding the continued challenges across the property market, we are making tangible progress towards reaching £1.25bn funds under management at 31 March 2011.  

Funding

Our funding strategy continues to focus on adding value to assets and then securing equity by introducing best in class partners or effecting a disposal that repatriates capital to the business. Over £70m of sales have been made since 1 April and we anticipate further recycling of capital, particularly from regional assets, during 2011.

Effective management of debt remains a key focus for the Board. The proceeds of the rights issue last year were initially all applied to the reduction of corporate debt, with £50m being dedicated to increase headroom for the longer term. With the progressive investment of the equity raised in line with the stated strategy, debt increased during the reporting period from £356m to £408m. This resulted in adjusted gearing of 60% (March 2010: 46%) against banking covenants of 110%. While we plan to increase this level further during the second half, we will remain comfortably within the limits set and monitored by the Board. Interest cover remains comfortable at 3.4 times (March 2010: 2.8 times) against a 1.25 times covenant, though we would similarly expect this cushion to reduce over the current period.

Recognising that conditions in the debt market remain challenging, the Board felt it prudent to secure options to extend the tranche of debt due to mature in 2013. The £25m facility with the Co-operative Bank has been extended to 2014 and this month agreement has been reached with Lloyds for options to extend the maturity of our £275m facility to 2016. Full details are set out in the Finance Review.

Board

The Board was strengthened during the period with two additions. Following Tonianne Dwyer's departure, David Gavaghan, formerly Chief Executive of Northern Ireland's Strategic Investment Board, was appointed Executive Director of Fund Management in May, and Chris Bell, formerly Chief Executive of Ladbrokes, was appointed as Quintain's Senior Independent Director following David Pangbourne's retirement in September.

Outlook

The long term dynamics of the sectors in which we operate remain fundamentally sound: the growth of London's population, where 81% of our investment assets are located, is forecast to continue well into the future; the proportion of the UK's population over the age of 85 is expected to double by 2033, with 15% requiring long term care; and the undersupply of purpose built student accommodation in key cities, at a time of reducing capital investment by higher education institutions, remains acute. Quintain is well placed to benefit from these trends, which will be in place for a generation.

Although the environment in which we operate has changed fundamentally over the last three years, the unique opportunity for value creation that originally attracted investors to Quintain remains intact. We have made a strong start in delivering on our operational commitments which will unlock this value and remain firmly focused on driving the Group's profitability through growth.

URBAN REGENERATION

Wembley City

The three year business objective for Wembley City is to achieve critical mass on the scheme, thereby establishing it as a destination and creating recurring income for the Group from new property rents and the commercialisation of public areas.

Development is currently focused on the 2m sq ft Western Core and tangible progress towards its completion by September 2013 has been made during the period.

Western Core 

The corporate milestone to start construction of the Hilton Hotel and progress construction of the adjacent student accommodation block has been achieved.

Construction of the 660-bedroom student accommodation scheme has now reached the fifth floor and the project is on schedule to open for the start of the 2012/13 academic year.

Construction of the 361-bedroom Hilton International Hotel has also begun. This 4* hotel will open in time for the start of the 2012 London Olympics, for which Wembley Arena, which is owned by Quintain, and the Stadium are official venues. The new hotel is adjacent to both these buildings and will benefit from substantially increased footfall to the site immediately after launch.

The details of the London Designer Outlet ("LDO") were unveiled in September, launching the marketing phase for this scheme. The LDO, which will be located adjacent to the Hilton and Stadium, will comprise 350,000 sq ft of development, including a nine screen cinema, 15 restaurants and bars and 85 retail units. Following a positive response from potential occupiers, 25% of space within the centre is already pre-let or under offer and the Company intends to open discussions with potential equity partners next summer.

Residential sales of the remaining units at Wembley have continued at a steady pace throughout the financial year to date. With unsupported first time buyers effectively excluded from the mortgage market, our focus has been on attracting investors by securing tenants for properties which can then be sold with the income stream in place. £8.8m of residential sales were secured during the period (Quintain share: £6.2m) and this strategy has the additional benefit of securing rental and management income for the Group, which currently totals £0.8m on an annualised basis.

Phase Two

Looking beyond the completion of the Western Core in 2013, plans are now being shaped for the second phase of development, which will take place to the west of Olympic Way.

The sale of a 2.5 acre plot to London Borough of Brent to accommodate their new Town Hall completed during the period, bringing £10m into the Group. This is equivalent to £4m per acre. The Council will shortly start construction of this 240,000 sq ft building, which includes the Council's main administrative offices and Chamber and is projected to attract one million people per year. Quintain will lease back the retail element of the scheme for a peppercorn rent. The building is scheduled to open in June 2013.

Following the successful conclusion of the public consultation, we have this month submitted an application for outline consent relating to 1.7m sq ft of development across 14 acres surrounding the Civic Centre. The proposed development would deliver an exceptional setting for the new building, with a new shopping street, new homes and green public realm. A decision on the planning application is expected from the Council next summer.

To the north of this proposed development site is the half acre plot on which the Express by Holiday Inn hotel will be constructed. The Company sold this plot into its joint venture with Summit Hotels in April 2009, at which point Quintain received £2.4m in cash and £5m of loan stock. Summit is now buying out Quintain's holding through the repayment of this loan stock with interest to the sum of £6m, equivalent to £16.8m per acre.

During the reporting period, planning consent was secured for the plot of land to the south of the main Wembley City site, on which we intend to locate off-site affordable family housing required within the Stage 1 Section 106 agreement. It is intended that this will be delivered directly by a Housing Association.

Commercialisation

The commercialisation of the Wembley site continues, with £1.7m of revenue generated through advertising, events, car parking and associated deals for the current financial year to date.

During the period, a long term agreement was reached with Wembley National Stadium Ltd in relation to the Stadium's event day car parking. This deal is expected to generate in excess of £1m for the Company per annum, and is in addition to medium-term agreements with PowerLeague and BarclayCard.

Looking beyond the current financial year, initial one-off deals have been concluded with UEFA regarding the Champions League Final in 2011 and with the London Organising Committee of the Olympic Games regarding use of the wider site during the London Olympics in 2012.

Greenwich Peninsula

The first corporate milestone to be achieved during the reporting period was the sale, at a 6% premium to valuation, of Pier Walk at Greenwich Peninsula. Developed to the highest environmental standards and pre-let on a 20 year lease to Transport for London, this was the first commercial building to be completed on the emerging scheme. The £97.1m sale price reflected a yield of 5.9%, which is a strong endorsement of this previously untested location and reflects the Company's ability to transform previously neglected locations into desirable destinations.

Adjacent to Pier Walk, the construction and fit-out of Ravensbourne was completed during the summer and the College, which tutors 1,400 digital and media students, was officially opened in November by the Mayor of London.

The increase to 3,200 in the number of employees and students located in these new buildings has delivered an associated demand for retail provision. Thirteen retail units are located on the ground floor levels around Peninsula Square, and control of these has been retained by the Company's joint venture with Lend Lease at a peppercorn rent. Lease agreements have already been completed with Tesco, Wagamama's, Chiquitos and Costa Coffee on five of these units, the first of which are scheduled to open prior to Christmas. A further five are currently in lawyers' hands.

Construction of the first residential plot by Bellway continues, with the initial residents scheduled to take occupation in the spring. The sale prices achieved for homes in this riverfront building have been strong and Quintain anticipates receiving an overage on completion next year. Infrastructure for the surrounding plots has been completed and Heads of Terms have been agreed for the sale of the next plot to a national housebuilder, subject to the HCA's final approval. Completion of this sale will trigger a further repayment of infrastructure investment to Quintain.

Following the period, AEG, the operator of The O2, secured detailed planning consent for a 452 bedroom, 4* hotel and 100 serviced apartments located between the entertainment venue and Quintain's land at Peninsula Quays. This complementary proposal, which requires the additional approval of the Mayor of London, will introduce the first tower to the north of the Peninsula and add to the growing animation of the scheme.

In November, Transport for London submitted a planning application to the London Borough of Greenwich to construct a cable car across the River Thames from Greenwich Peninsula to the Excel exhibition centre. If successful, the cable car will be able to accommodate 2,500 people per hour and directly connect the regeneration scheme to Crossrail at the Custom House station. It is proposed that supporting stanchions for the cables will be sited on our land on both sides of the river, on the east side of Greenwich Peninsula and the west side of our Silvertown site.

Regional Schemes

Our first zero carbon scheme, One Brighton, reached completion during the period and 171 of the 172 homes within the building have been sold. At Middlehaven the construction of our second zero carbon scheme remains on schedule for completion next summer and the first tranche of apartments has now been launched to the market. 30 of the 80 apartments within the building have received funding from the Government's First Time Buyers Initiative, which will enable qualifying purchasers to own 50% of their home for between £175 and £265 a month, depending on the number of bedrooms.

During the reporting period, South Gloucestershire Council resolved to grant planning permission for the 275 acre Emersons Green regeneration scheme, of which Quintain owns 65 acres, on the edge of Bristol. This permits development of 1m sq ft of commercial space, 25,000 sq ft of retail and up to 2,550 new homes, although a higher than anticipated proportion of affordable housing has been stipulated, resulting in a £7m write down of the asset. Heads of terms for the Section 106 Agreement have been established and it is expected that the process will be concluded by the summer of 2011.

The sale to Hotel La Tour of Plot 4 at the City Park Gate site in Birmingham was completed in October, bringing £2.4m into the business. As reported in the March Pre-Close Statement, the rest of the site is currently affected by the Government's proposals for the High Speed II rail terminal, although a re-masterplanning exercise is underway with Birmingham City Council. In the medium term therefore the site is being used to increase the Group's recurring income stream and is currently generating in excess of £450,000 per annum from car parking and advertising.

Living PlanIT

In line with the key strategic objective of returning the Group to an operating cashflow positive status, Quintain has this month announced a new framework agreement with Living PlanIT SA, an urban technology business whose first development site is a 1,700 hectare scheme designated by the Portuguese Government as a "Project of National Importance".

Living PlanIT enables the development of intelligent and sustainable urban-scale environments, using a new approach to design, construction operation and maintenance. This enables faster, cheaper and higher quality development while significantly reducing impact on the environment through the reduction of energy, water and waste. Cisco has announced its intention to create its first global innovation centre for sensor networks and demonstrate its "Smart and Connected Communities" technologies at the scheme, which is called PlanIT Valley.

Quintain's largest business is the development of new communities. This agreement leverages the core skills and expertise within the Group in its natural market place of urban development to create a material new income stream. It also gains for the Group unique access to emerging techniques and technologies, driven by world-class companies that could be transferred back to our major schemes in London.

Quintain's fee for the delivery of real estate consultancy will be 3.5% of construction costs, with a minimum payment of €12m for each of the first two years, from 1 January 2011. The Company has also been appointed a Platinum Partner of Living PlanIT, alongside such global organisations as Cisco Systems, Buro Happold and McLaren Electronic Systems.

FUND MANAGEMENT

Quercus Healthcare Fund

The focus on providing high quality care facilities for the ageing UK population continues to prove a robust strategy for Quercus, in which the Group holds a 13.3% stake. Although at a property level the Fund underperformed its general sector IPD benchmark during the period due to the strong growth in the prime commercial property market, this is not expected to continue during the second half of the financial year and over a three year time frame Quercus continues to substantially outperform the market.

Following the commitment of £82.7m of new equity from existing investors in February and the signing of a new £65m debt facility with Santander, contracts have been completed or exchanged on £97.3m of assets since 1 April 2010. At the end of the reporting period the number of properties within the Fund stood at 241 and annualised rental income at £56.5m.

Marginal valuation increases were realised during the period and at 30 September 2010 the Fund had a gross asset value of £761.7m (31 March 2010: £680.4m). Debt decreased slightly over the six months to £268.5m (31 March 2010: £269.6m).

98% of leases within the Fund are in excess of 20 years and all are linked to RPI. Exposure to individual operators is closely managed with the five largest tenants accounting for 38% of passing rent at the end of the reporting period.

Against this solid background, the Fund placed one operator into administration over the period for non-payment of rent, but assigned the two relevant leases to an alternative tenant.

Although a period of significant change in this sector is anticipated due to a number of factors, not least the reduction in public sector spending, the impact is expected to be seen in those care homes that are older and under-invested, as opposed to the primarily modern, efficient buildings that Quercus owns. Operators with unsustainable gearing may well also seek rapid sales, which will continue to feed opportunities into the market.

Quercus has a clear strategy of close management of its operators, receiving monthly management accounts and working with tenants to ensure a continuously high level of service for residents. Issues therefore tend to be identified early in their gestation, allowing for contingency planning and reassignment of leases to other operators.

iQ Student Accommodation

Our student accommodation vehicle, of which Quintain owns 50% in partnership with the Wellcome Trust, delivered on its key milestone during the reporting period, expanding the number of income-producing beds by 20% and delivering an increase in average rents of 3%.

iQ now has 11 schemes in operation comprising 4,253 beds. Reflecting the higher rents being achieved, gross assets grew over the period, rising more than 5.3% to £256.3m as at 30 September 2010. The net initial yield of the fund remained unchanged during the period at 6.6% and, with an LTV of 54% against a covenant of 65%, debt is being comfortably managed.

Occupancy rates across the increased portfolio reached 97% for the start of the academic year compared with 89% at the same point in 2009. This is due to the maturing of the 1,182 new beds introduced in the previous financial year, an increase in marketing resources and the introduction of the StarRez online booking system, which supports automatic booking 24 hours a day and is proving particularly popular with the more affluent overseas market.

London remains by some margin the city with the most acute shortage of purpose built student accommodation and, following the acquisition from Quintain announced today, iQ now has two London schemes under construction that will deliver a total of 928 additional beds. The Hoxton scheme, which will contain 255 bedrooms, is located in Zone 1 of the transport network and construction of the scheme remains on schedule to complete in good time for the start of the 2011 academic year. The show suite at Hoxton opened this month. The newly-acquired Corsham Street scheme is close to Old Street Tube Station in London, also in Zone 1. Construction of the scheme will complete in time for the 2012 academic year, adding a further 673 beds to the iQ portfolio.

Publication of the Browne Report and the Government's spending review after the period end undoubtedly herald changes in the academic sector. A reduction in funding and a substantial increase in the level of tuition fees that higher education institutions ("HEIs") may charge from September 2012 are expected to result in a trend towards the upper fee limit and a reduction in the number of applicants for places. Increased competition for fewer applicants will encourage HEIs to compete on a more commercial basis. Accommodation is a key part of a university's offering and we expect that, in order to meet student requirements, partnerships with private sector accommodation providers such as iQ will become more prevalent. 

Quantum

Our nascent Quantum Fund seeks to create value from the Government's identification of the research and development sector as a driver of future economic growth through increased innovation and collaboration in the technology sector. 

The major development in the Fund is the 54 acre Bristol & Bath Science Park, located close to junction 19 of the M4 to the north of Bristol. Construction of the first phase of buildings began during the period and remains on schedule for completion next summer.

The market for the Park consists of large corporates, entrepreneurs and researchers operating in the science and technology sector, which invest in research to develop and grow their businesses. More specifically, the target sectors are the aerospace, defence, ICT and digital industries, which reflect the current university research and business strengths of the Bristol and Bath region, alongside two new sectors developing in the region: life sciences and environmental technologies.

The Park's first occupant will be the National Composites Centre ("NCC").  The NCC will be a state of the art design and manufacturing facility for high-tech composites. The opening of the 90,000 sq ft facility in autumn 2011 will bring more than 200 leading industry researchers and academic experts to the centre, working together to drive new technologies through the design and laboratory phases and into production.

Commercial occupiers will potentially range from large multi-national corporate businesses, to mid-sized companies and start-up enterprises comprising one or two people. There will also be occupiers who contribute to the creation of an on-site innovation eco-system such as Science City Bristol, early stage venture capital firms and professional service providers.

SeQuel

The SeQuel Fund is a high yielding secondary property portfolio mainly comprising office properties, with some industrial and retail assets. The strategy is one of active management to increase value over a five year period through lease re-gears, void reduction, refurbishment and strategic sales.

The valuation of the portfolio fell 4.3% over the six months to £75.5m. This was due to the re-assessment of two major assets within the portfolio alongside negative market sentiment regarding high yielding assets. A marginal increase in net income from £8.6m to £8.8m was seen during the period due to a new programme to reduce voids in the portfolio.

Quintain is acting as the property adviser on a significant regional asset that was placed into administration by a UK lending bank. The Company will act to enhance the asset and assist in achieving maximum recovery for creditors. This is potentially the beginning of a new business activity for the Company, drawing on the depth of commercial, investment, construction and development skills within the business. We believe that Quintain is well placed to assist financial institutions and their partners in maximising the value of their assets as they look to managing their exposures in a timely fashion.

We continue to look for well-priced opportunities in the secondary market in order to acquire high income-yielding assets.

Finance Review

Headline Results

The basic net asset value per share at 30 September 2010 was 112p, a decrease of 6.7% from 120p at 31 March 2010. This reflected a net £43.8m fall in shareholders' funds driven by a Group revaluation deficit of £57.3m. Adjusted diluted net asset value per share, the measure recommended by The European Public Real Estate Association ("EPRA"), fell by 9.8% to 120p per share (31 March 2010: 133p).

	30 September 2010	31 March 2010	% change
NAV per share basic	112p	120p	(6.7)
NAV per share diluted	111p	120p	(7.5)
NAV per share  EPRA¹	120p	133p	(9.8)
Total return per share²	(6.7)%	(0.8)%

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 diluted basis.

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

Operating Performance

Gross profit for the six months fell by 0.7% to £14.0m (30 September 2009: £14.1m). Within this, gross rental income from directly owned properties was £9.9m, down £0.6m compared with the same period last year, reflecting the impact of sales. Joint venture income was lower, with the reduced exposure to Quercus being only partially offset by increased income in iQ. This will improve in the second half with the two recently opened student schemes coming on stream. The fall in contracted annualised rent in joint ventures arises because of the sale of Pier Walk at Greenwich. At ERV level, this is more than offset by the impact of the new student accommodation within iQ. However, because these schemes are direct-let, the income is not included in the contracted line.

	30 September 2010 £m				31 March 2010 £m
		Directly owned properties	Within joint ventures	Total	Directly owned properties	Within joint ventures	Total
Gross rental income		9.9	8.6	18.5	21.4	21.0	42.4
Contracted annualised rent		20.3	15.9	36.2	18.5	19.0	37.5
ERV*		25.7	21.8	47.5	24.5	21.6	46.1

*ERV is the estimated rental value

Sales of further units in Quadrant Court (W04), Wembley gave rise to proceeds of £3.5m, but were profit neutral.

Income from hotel operations relates to the Plaza hotel at Wembley. Gross profit was in line with the prior period at £2.2m before charging administration expenses of £1.3m (30 September 2009: £1.3m). Performance was stable despite the difficult economic environment as the hotel benefits from the circa 150 annual events held at the adjacent Stadium and Arena.

Net fees from fund management for the period fell slightly to £3.0m (30 September 2009: £3.1m) reflecting a shift in Quercus, with lower asset management fees (resulting from a lower average level of gross assets during the assessment period) in part being offset by higher procurement fees as we invested the proceeds of the equity raising.

Net other income rose by £0.7m to £1.4m for the period, with lower abortive project fees and higher car parking income at Wembley.

Administration expenses remained constant at £10.8m for the six months.

Profit on Sale of Non-Current Assets

In line with our funding strategy of recycling capital from assets where value has already been added, sales of investments in the period with proceeds of £63.5m gave rise to a profit on valuation of £3.8m and a loss against historic cost of £2.2m. The most material disposal was of Quintain's interest in the office building at Greenwich, Pier Walk, which reflected a 6% premium to valuation and a yield of 5.9%.

Revaluation Surpluses and Deficits

The net revaluation deficit arising from directly held properties was £63.6m (30 September 2009: surplus £27.9m). Valuations dipped in the secondary portfolio, but the main drivers of the fall in value were revaluation deficits of £34.5m at Corsham Street, N1 (a large scheme in a cash-restricted market), £11.4m at Wembley (lower outturn expectations on residential sales) and £7.0m at Emersons Green (land near Bristol where the valuation assumes no affordable housing grant). Since the period end we have sold our investment in Corsham Street, N1 into the iQ student accommodation joint venture, which recoups £7.5m of the £15m, net of tax, invested in the scheme to date and releases Quintain from £42.5m of further capital expenditure whilst effectively retaining 50% of the scheme via the Fund. The revaluation movements on joint venture investments are incorporated within the share of profit from joint ventures which is discussed in more detail below.

Share of Profit from Joint Ventures

The profit from joint ventures in the six months was £4.7m (30 September 2009: loss £5.9m). Positive operating profits of £6.8m and a revaluation surplus of £6.4m were partially offset by swap break costs of £2.4m (in relation to the loan charged against Pier Walk and repaid as a result of the sale) and tax of £1.6m. This profit excludes net fees receivable of £3.0m (30 September 2009: £3.1m) in relation to managing the funds. A summarised income statement split by joint venture is included in note 10i to the accounts.

Finance Expenses

Net finance expenses for the period were £6.8m (30 September 2009: £5.8m). Interest payable has reduced to £10.8m (30 September 2009: £15.1m) reflecting lower levels of debt. The average cost of debt for the period was in line with the same period last year at 4.7%.

Interest capitalised in the period of £6.0m (30 September 2009: £6.6m) relates almost entirely to Wembley. The recycling of swap adjustments reflects the expiry of a swap in the period that had been classified as ineffective for accounting purposes and the adjustment to spread the cost of the re-priced £150m of swaps over their life.

	30 September 2010 £m	30 September 2009 £m
Interest payable	(11.3)	(15.6)
Interest capitalised	6.0	6.6
Interest receivable	1.5	2.5
Change in fair value of ineffective interest rate swaps and caps	(0.1)	0.7
Profit on termination of interest rate swaps Recycling of swap adjustments	0.1 (3.0)	- -
Total net finance expenses	(6.8)	(5.8)

Taxation

A tax credit of £13.5m, all of which is deferred, has been reflected in the Income Statement (30 September 2009: charge £2.0m). This has arisen mainly because of revaluation deficits in the period.

Balance Sheet

At 30 September 2010, investment properties were valued at £776.5m after a net revaluation deficit of £63.6m. Of the Group's investment properties, £645.5m are within Urban Regeneration, which also has £93.6m in joint ventures and £26.9m in trading properties. Our two largest assets, Wembley and Greenwich, are now treated as separate segments and further disclosure of them is provided below.

Wembley City

	£m
As at 1 April 2010	488.4
Capital expenditure	11.2
Disposals	(13.5)
Capitalised interest	6.0
Valuation deficit	(13.1)
As at 30 September 2010	479.0

The valuation fell by 2.7% in the six months, mainly driven by lower residential growth rates and current market sentiment towards large scale regeneration projects, which remains subdued given ongoing economic uncertainty and a constrained funding market. Investment assets increased where additional value was added. The retail in Quadrant Court rose by £3m as it was re-appraised in line with its synergy with the rest of the retail outlet offer. The Arena also rose in value by £1.1m as a result of the sponsorship deal with Barclaycard. Disposals comprised the sale of land to Brent for its Civic Centre for £10m and £3.5m from residential sales. The majority of the capital expenditure related to the construction of the student accommodation and Hilton hotel.

Greenwich Peninsula

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

	£m
As at 1 April 2010	277.1
Capital expenditure	2.4
Disposals	(44.7)
Valuation deficit	(3.8)
As at 30 September 2010	231.0

The valuation of Greenwich, which is shown partly in development properties and partly within joint ventures fell by 1.6% to £231.0m. As in the case of Wembley, this was mainly driven by lower residential growth expectations and ongoing market sentiment towards large scale regeneration projects. The disposal in the period was of Pier Walk, an office building let for 20 years to Transport for London. Quintain's share gave rise to profits of £2.6m.

Joint Ventures

As at 30 September 2010, Quintain had net investment in joint ventures totalling £214.7m (31 March 2010: £202.1m). iQ contributed the majority of the growth with two new schemes opening in September 2010. The balance sheets of the joint venture investments are available in note 10i to the accounts and summarised below.

Joint venture	Share of  equity  %	Net investment £m
Quercus	13.3	58.5
GPRL	49.0	57.6
Greenwich Peninsula N0204	50.0	21.0
Greenwich Retail	50.0	4.0
iQ	50.0	55.6
Quantum	50.0	7.0
Quintessential Homes	50.0	3.7
Other joint ventures	N/A	7.3
		214.7

Capital Commitments

The table below sets out Quintain's contractual capital commitments including our share of any commitments within joint ventures. All these commitments will be funded from existing corporate and joint venture facilities. Since the period end, the sale of the student accommodation at Corsham Street, N1 into iQ has reduced commitments by £42.5m, highlighting the importance of this transaction in managing our projected balance sheet.

	30 September 2010 £m
Group:
Wembley	16.9
Middlehaven	8.6
Corsham Street, N1	85.0
Joint ventures:
iQ	5.8
Spark, Quantum	8.0
Greenwich - N0204 / infrastructure	2.5
Other	0.1
Total	126.9

Financing Strategy

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.

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

With gearing of 60% we have decided not to apply the election to move the gearing covenant from 110% to 150% which would have required paying a 1% amendment fee.

	Covenant	30 September 2010	31 March 2010
Net borrowings		£408m	£356m
Weighted average debt maturity		3.2 years	3.7 years
% of net debt hedged		100%	122%
Undrawn committed facilities
Group		£171m	£248.0m
Joint ventures		£82.4m	£78.9m
Banking covenants
Gearing per banking covenants¹	110%	60%	46%
Interest cover²	1.25 times	3.4 times	2.8 times

¹Gearing as per our banking covenants is defined as net borrowings not subject to joint arrangements, divided by shareholders funds, excluding the impact of deferred tax and marking to market of debt

²Interest 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.

With a corporate expectation that debt markets will remain challenging for some time we are pro-actively managing maturities. Lloyds Banking Group is our largest lender with £275m of facilities in addition to a £20m liquidity facility. Since the period end we have created extension options for the 2013 and 2014 maturities. In January of each of the next three years Quintain can request an extension of both facilities first to 1 April 2014, secondly to 1 April 2015 and finally to 1 April 2016. If the bank agrees to the extension they will be entitled to request a facility reduction of £25m in June of each of those years. The margin will increase on the facilities to 1.7%.

The Co-operative Bank has increased their maturity on the £25m facility by one year to 2014 and brought their margin into line with the other 2014 maturities at 1.45%, an increase of 10 basis points.

Hedging

At 30 September 2010, Quintain's interest rate was 100% hedged (31 March 2010: 122%). The fair value adjustment on these interest rate hedging instruments was a deficit of £5.2m (30 September 2009: surplus £4.8m). Of the movement during the period £0.1m was debited to the Income Statement, being the element relating to ineffective hedges and £5.1m debited directly to equity.

Quintain expects to remain partly debt funded beyond the life of the existing facilities and hedging. In order to protect the business from material increases in LIBOR without fixing a rate that subsequently may be out of the money, we have bought £100m of forward start caps at a strike rate of 3.4%. They apply from 2013 to 2016.

In relation to joint ventures, the fair value adjustment on interest rate hedging instruments was a surplus of £0.3m (30 September 2009: £0.5m) which was credited directly to equity.

Cashflow

Net cashflow from operating activities was an outflow of £20.2m (30 September 2009: outflow £16.6m). The largest outflow was the £14.4m payment in relation to re-pricing £150m of 2013 swaps. This was excluded from interest cover for the purpose of banking calculations and has re-positioned our debt costs at a lower level over the next three years.

In delivering the business plan of achieving critical mass at Wembley and doubling funds under management, there was a net cash outflow from investing activity of £31.7m. This included the purchase and development of property assets of £31.9m (primarily relating to infrastructure and construction of W05 at Wembley), associated tax payments of £8.9m and loans to joint ventures and associates of £5.3m. This was partly offset by proceeds of £10.3m from the sales of investment assets, in particular the sale of land to Brent Council to allow it to build its Civic Centre in the heart of our development.

Financial Outlook

The stabilised balance sheet and financial resources delivered from the rights issue at the end of last year have enabled the business to commence delivery of its three year strategy. Significant progress has been achieved towards delivering critical mass at Wembley with the student accommodation and Hilton hotel in the course of construction and good progress being made on lettings for the retail scheme that is due to start on site next summer. The dip in markets for secondary assets and continued financial challenges in the wider market mean that we are seeing very significant opportunities for growing our fund management business.

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 period we reviewed the process for monitoring and assessing risk in conjunction with Grant Thornton, acting as internal auditor. As a result of this review we changed the constitution of the Risk Committee to include the four executive directors. The risks are divided into four areas with alternating reports to the Risk Committee presented in detail at each of the quarterly meetings. At each of these meetings consideration is also given to wider group risks.

 A detailed risk register is updated regularly and those responsible for managing areas of risk are required to report on them every quarter, and by exception. Our internal audit function reviews the risk register for completeness and accuracy. 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

Description and implication of risk	Mitigation
Property valuations
§ Inherently subjective § Exacerbated by markets with low transaction volumes § Comparables for unique schemes vary more than for investment properties	§ Expert external and independent valuers used § Valuers support result with their own simplified cashflow model
Banking covenants
§ The two key financial covenants within the corporate bilateral facilities are gearing and interest cover.	§ Covenants forecast and monitored on a regular basis. § Board parameters are tighter than external covenants and factor in position in cycle. § Headroom materially increased by exclusion of NPV payment on swap re-pricing from interest cover. § Corporate debt remains fully hedged.
Development
§ Regulatory or funding issues can cause delay. § Counterparty risk remains high.	§ Risk transferred to contractors where possible § Control increased through SC² supply chain management. § Standardisation increases predictability and economies of scale § Deals and retentions are structured to mitigate counterparty risk.
Market
§ The wider economy and property  market can impact valuations and income.	§ Strategy to increase diversification of asset profile away from land. § Further investment into RPI-linked assets. § Maintenance of wide tenant base.
Reputation
§ A good reputation with the public sector and joint venture partners is critical to business success.	§ Ongoing senior management engagement with stakeholders. § All material deals are reviewed by the Board. § Perception audits are undertaken.
Personnel
§ Retaining key personnel is critical § Currently exacerbated due to low or nil value of share incentive packages.	§ Annual employee survey undertaken and issues raised publicly addressed. § A new share incentive plan will be implemented when appropriate, with shareholders' consent. § Regular formal and informal staff meetings. § Weekly transmission of news and employee contribution.

INDEPENDENT REVIEW REPORT TO QUINTAN ESTATES AND DEVELOPMENTS PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 which comprises Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, and Consolidated Cashflow Statement  and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Stephen Bligh
for and on behalf of KPMG Audit Plc
Chartered Accountants
15 Canada Square

London
E14 5GL

26 November 2010

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

• the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Adrian Wyatt

26 November 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. 

Consolidated Income Statement

for the six months ended 30 September 2010

		Notes		Unaudited Six months  ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Revenue		4		23.7	26.1	56.9
Cost of sales (before impairment in book value of
	trading properties)	4		(9.6)	(12.0)	(22.9)
Impairment in book value of trading properties		4		(0.1)	-	(8.1)
Gross profit				14.0	14.1	25.9
Administrative expenses		5		(10.8)	(10.8)	(21.1)
Operating profit before recognition of results from
	non-current asset sales and revaluation			3.2	3.3	4.8
Profit (loss) from sale of non-current assets				3.8	(10.1)	(7.7)
(Deficit) gain on revaluation of investment properties				(63.6)	27.9	7.5
Share of profit (loss) from joint ventures		10i		4.7	(5.9)	(0.2)
Share of (loss) profit from associate				(0.1)	0.2	0.3
Impairment of other non-current investments				-	-	(0.2)
Impairment recognised on acquisition				-	-	(3.1)
Operating (loss) profit before net finance expenses				(52.0)	15.4	1.4
Interest payable				(5.3)	(9.0)	(17.1)
Change in fair value of derivative financial instruments				(3.0)	0.7	0.7
Finance expenses				(8.3)	(8.3)	(16.4)
Finance income				1.5	2.5	4.8
Net finance expenses		6		(6.8)	(5.8)	(11.6)
(Loss) profit before tax				(58.8)	9.6	(10.2)
Current tax				-	(0.1)	(0.2)
Deferred tax				13.5	(1.9)	2.3
Tax credit (charge) for the period		7i		13.5	(2.0)	2.1
(Loss) profit for the financial period				(45.3)	7.6	(8.1)
Attributable to: Equity shareholders Non-controlling interest				(45.3) -	7.6 -	(8.2) 0.1
				(45.3)	7.6	(8.1)
Earnings per share (pence):		8i
	basic and diluted			(8.7)	2.8	(3.3)

Consolidated Statement of Comprehensive Income for the six months ended 30 September 2010
		Notes	Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Deficit on revaluation of other non-current
	investments		(0.2)	(0.1)	(0.1)
Effective portion of changes in fair value of cashflow
	hedges, net of recycling		(5.1)	4.1	(0.3)
Recycling of fair value adjustment on cashflow
	hedges		3.0	-	-
Share of other comprehensive income in joint
	ventures, net of tax	10i	3.0	0.3	1.2
Tax on other comprehensive income		7ii	0.6	(1.1)	0.1
Other comprehensive income for the financial period,
	net of tax		1.3	3.2	0.9
(Loss) profit for the financial period			(45.3)	7.6	(8.1)
Total comprehensive (loss) income for the financial
	period, net of tax		(44.0)	10.8	(7.2)
Attributable to:
Equity shareholders			(44.0)	10.8	(7.3)
Non-controlling interest			-	-	0.1
			(44.0)	10.8	(7.2)

Consolidated Balance Sheet

as at 30 September 2010

	Notes	Unaudited As at 30 Sept 2010 £m	Unaudited As at 30 Sept 2009 £m	Audited As at 31 March 2010 £m
Non-current assets
Investment properties	9	776.5	825.1	812.9
Owner-occupied properties, plant and equipment		2.7	3.8	2.7
Investment in joint ventures	10i	214.7	197.8	202.1
Investment in associate		1.5	1.4	1.6
Other non-current investments	10ii	3.7	4.1	3.9
Total non-current assets		999.1	1,032.2	1,023.2
Current assets
Trading properties		26.9	34.0	28.1
Trade and other receivables	11	26.9	17.1	15.9
Cash and cash equivalents		20.0	8.6	47.2
Total current assets		73.8	59.7	91.2
Total assets		1,072.9	1,091.9	1,114.4
Current liabilities
Bank loans and other borrowings	14	(3.7)	(6.2)	(1.6)
Trade and other payables	12	(33.1)	(42.9)	(37.1)
Current tax liability		(1.0)	(1.2)	(1.1)
Total current liabilities		(37.8)	(50.3)	(39.8)
Non-current liabilities
Bank loans and other borrowings	14	(421.0)	(530.1)	(397.0)
Deferred tax liability	7iii	(9.6)	(29.1)	(23.7)
Obligations under finance leases		(11.1)	(11.1)	(11.1)
Other payables	13	(14.8)	(14.7)	(20.4)
Total non-current liabilities		(456.5)	(585.0)	(452.2)
Total liabilities		(494.3)	(635.3)	(492.0)
Net assets		578.6	456.6	622.4
Equity
Issued capital	16	130.1	32.5	130.1
Share premium account		137.2	51.5	137.3
Revaluation reserve		(0.3)	(0.1)	(0.1)
Other capital reserves		108.1	108.1	108.1
Cashflow hedge reserve		(37.5)	(36.7)	(39.0)
Translation reserve		0.5	0.5	0.5
Retained earnings		249.8	311.3	294.8
Own shares held reserve		(9.6)	(10.7)	(9.6)
Equity shareholders' funds		578.3	456.4	622.1
Non-controlling interest		0.3	0.2	0.3
Total equity		578.6	456.6	622.4
Net asset value per share (pence):	8ii
basic		112	123	120
diluted		111	123	120

Consolidated Statement of Changes in Equity

for the six months ended 30 September 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	Unaudited Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance 1 April 2010	130.1	137.3	(0.1)	108.1	(39.0)	0.5	294.8	(9.6)	622.1	0.3	622.4
Loss for the financial period	-	-	-	-	-	-	(45.3)	-	(45.3)	-	(45.3)
Other comprehensive income
for the period	-	-	(0.2)	-	1.5	-	-	-	1.3	-	1.3
Issue of shares less costs	-	(0.1)	-	-	-	-	-	-	(0.1)	-	(0.1)
Cost relating to share-based
payment schemes	-	-	-	-	-	-	0.3	-	0.3	-	0.3
Balance 30 September 2010	130.1	137.2	(0.3)	108.1	(37.5)	0.5	249.8	(9.6)	578.3	0.3	578.6

Consolidated Statement of Changes in Equity

for the six months ended 30 September 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	Unaudited Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance 1 April 2009	32.5	51.5	174.6	108.1	(41.7)	0.5	131.2	(11.9)	444.8	-	444.8
Transfer on change in accounting
policy relating to development
properties (see note below)	-	-	(172.9)	-	-	-	172.9	-	-	-	-
Profit for the financial period	-	-	-	-	-	-	7.6	-	7.6	-	7.6
Other comprehensive income
for the period	-	-	(0.1)	-	5.0	-	(1.7)	-	3.2	-	3.2
Realisation of revaluation reserve	-	-	(1.7)	-	-	-	1.7	-	-	-	-
Cost relating to share-based payment
schemes	-	-	-	-	-	-	0.8	-	0.8	-	0.8
Shares awarded to employees under
share-based bonus scheme	-	-	-	-	-	-	(1.2)	1.2	-	-	-
Proceeds from sale of minority interest	-	-	-	-	-	-	-	-	-	0.2	0.2
Balance 30 September 2009	32.5	51.5	(0.1)	108.1	(36.7)	0.5	311.3	(10.7)	456.4	0.2	456.6

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	Audited Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance 1 April 2009	32.5	51.5	174.6	108.1	(41.7)	0.5	131.2	(11.9)	444.8	-	444.8
Transfer on change in
accounting policy relating to
development properties
(see note below)	-	-	(172.9)	-	-	-	172.9	-	-	-	-
Loss for the financial year	-	-	-	-	-	-	(8.2)	-	(8.2)	0.1	(8.1)
Other comprehensive income
for the year	-	-	(0.1)	-	1.0	-	-	-	0.9	-	0.9
Realisation of revaluation reserve	-	-	(1.7)	-	-	-	1.7	-	-	-	-
Realisation of hedging reserve	-	-	-	-	1.7	-	(1.7)	-	-	-	-
Rights issue	97.6	93.6	-	-	-	-	-	-	191.2	-	191.2
Expenses of rights issue	-	(8.0)	-	-	-	-	-	-	(8.0)	-	(8.0)
Issue of other shares less costs	-	0.2	-	-	-	-	-	-	0.2	-	0.2
Cost relating to share-based
payment schemes	-	-	-	-	-	-	1.2	-	1.2	-	1.2
Shares awarded to employees
under share-based bonus
scheme	-	-	-	-	-	-	(2.3)	2.3	-	-	-
Proceeds from sale of minority
interest	-	-	-	-	-	-	-	-	-	0.2	0.2
Balance 31 March 2010	130.1	137.3	(0.1)	108.1	(39.0)	0.5	294.8	(9.6)	622.1	0.3	622.4

With effect from the financial year commencing 1 April 2009, development properties have been accounted for under IAS 40, 'Investment Property', instead of, as previously, under IAS 16, 'Property, Plant and Equipment', with revaluation movements being reflected through the Income Statement rather than through equity.  The balance in the revaluation reserve as at 1 April 2009 of £172.9m relating to development properties was transferred to retained earnings.   

Consolidated Cashflow Statement

for the six months ended 30 September 2010

	Notes	Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Operating activities
(Loss) profit for the financial period		(45.3)	7.6	(8.1)
Adjustments for:
Depreciation of plant and equipment		0.4	0.4	0.8
Cost relating to share-based payment schemes		0.3	0.8	1.2
Net finance expenses		6.8	5.8	11.6
(Profit) loss on sale of properties held as non-current assets		(3.8)	10.1	7.7
Deficit (gain) on revaluation of investment properties		63.6	(27.9)	(7.5)
Share of (profit) loss from joint ventures		(4.7)	5.9	0.2
Share of loss (profit) from associate		0.1	(0.2)	(0.3)
Loss from sale of plant and equipment		-	-	0.1
Impairment of other non-current investments		-	-	0.1
Impairment recognised on acquisition		-	-	3.1
Impairment in book value of trading properties		0.1	-	8.1
Tax on continuing operations		(13.5)	2.0	(2.1)
		4.0	4.5	14.9
Decrease (increase) in trade and other receivables		3.1	(2.2)	(1.6)
Decrease in trade and other payables		(2.3)	(1.3)	(5.5)
Decrease (increase) in trading properties		0.5	(8.6)	(17.3)
Cash generated from operations		5.3	(7.6)	(9.5)
Interest paid	i	(25.8)	(11.6)	(23.9)
Interest received		0.4	0.8	1.3
Tax (paid) recovered	ii	(0.1)	1.8	1.5
Net cashflow from operating activities		(20.2)	(16.6)	(30.6)
Investing activities
Proceeds from sales of investment properties		10.3	2.0	30.5
Purchase and development of property assets		(31.9)	(4.2)	(14.4)
Purchase of owner-occupied properties, plant and equipment		(0.3)	-	(0.1)
Proceeds from sales of other non-current assets		-	6.8	7.4
Proceeds from sale of interests in joint ventures		1.1	31.3	43.2
VAT payment in relation to investing activities	ii	(8.9)	-	-
Loans to joint ventures and associate		(5.3)	(24.6)	(48.3)
Distributions received from joint ventures		3.3	5.2	8.9
Net cashflow from investing activities		(31.7)	16.5	27.2
Financing activities
Issue of shares		-	-	183.4
Proceeds from new borrowings		93.5	179.9	364.3
Repayment of borrowings		(68.3)	(179.0)	(503.7)
Payment of loan issue costs		(0.1)	(1.0)	(1.8)
Payment of finance lease liabilities		(0.4)	(0.4)	(0.8)
Net cashflow from financing activities		24.7	(0.5)	41.4
Net (decrease) increase in cash and cash equivalents		(27.2)	(0.6)	38.0
Cash and cash equivalents at start of period		47.2	9.2	9.2
Cash and cash equivalents at end of period		20.0	8.6	47.2

Notes:

i. In the six months ended 30 September 2010, interest paid included a payment of £14.4m relating to the repricing of two of the Group's swaps.  

ii. The total cashflow movement in respect of tax paid was as follows:

Net cashflow from operating activities		(0.1)	1.8	1.5
Net cashflow from investing activities		(8.9)	-	-
		(9.0)	1.8	1.5

Notes to the accounts

for the six months ended 30 September 2010

1. Accounting policies

The financial information contained in this half year report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The results for the year ended 31 March 2010 are an abridged version of the full accounts for that year, which received an unqualified report from the auditors, did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 or include a reference to any matter to which the auditors drew attention by way of matter of emphasis without qualifying their report, and have been filed with the Registrar of Companies. The annual financial statements are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this report has been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union.

The same accounting policies, presentation and key sources of estimation are followed in the condensed set of financial statements as applied to the latest audited annual financial statements with the exception that the following new standards and interpretations were adopted with effect from 1 April 2010 but had no material impact upon the Group's results:

IFRS 3 (Revised), 'Business Combinations'

IAS 27 (Amended), 'Consolidated and Separate Financial Statements'

Amendment to IAS39, 'Financial instruments: Recognition and Measurement: Eligible Hedged Items'

The Group has also adopted the amendments which form part of the International Accounting Standards Board's annual improvements project which had effect for accounting periods commencing on or after 1 July 2009 and for accounting periods commencing on or after 1 January 2010 but in neither case, have these changes had a material impact upon these results.

The preparation of the interim financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenue and expense 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 the 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 CB Richard Ellis Limited have valued those within iQ, the student accommodation joint venture.  The changes in the market values of properties are disclosed in notes 9 and 10 and discussed in the Risk Management section of the Financial Review.

The Group has also exercised its judgement in relation to deferred tax assets, the estimation of the tax rate for the six month period using the tax rate expected to apply to the full year's results, the measurement of fair value of derivative financial instruments, for which it has relied on the valuation carried out by JC Rathbone Associates, and in assessing the recoverability of trade receivables by reference to their age and the ability of debtors to pay.  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.

There have been no material changes to reportable contingent liabilities since 31 March 2010 and the Group's financial performance does not suffer materially from seasonal fluctuations.

Notes to the accounts (continued)

2. Results for the period

The following table separates underlying earnings performance from movements relating to fair value adjustments to the Group's property assets and derivative financial instruments.

			Unaudited Six months ended 30 Sept 2010						Unaudited Six months ended 30 Sept 2009			Audited Year ended 31 March 2010
			Adjusted £m				Capital £m	Total £m	Adjusted £m	Capital £m	Total £m	Adjusted £m	Capital £m	Total £m
Revenue					23.7		-	23.7	26.1	-	26.1	56.9	-	56.9
Cost of sales (before
	impairment in book value
	of trading properties)			(9.6)			-	(9.6)	(12.0)	-	(12.0)	(22.9)	-	(22.9)
Impairment in book value
	of trading properties				-		(0.1)	(0.1)	-	-	-	-	(8.1)	(8.1)
Gross profit (loss)					14.1		(0.1)	14.0	14.1	-	14.1	34.0	(8.1)	25.9
Administrative expenses					(10.8)		-	(10.8)	(10.8)	-	(10.8)	(21.1)	-	(21.1)
Operating profit (loss)
	before recognition
	of results from non-
	current asset sales
	and revaluation			3.3			(0.1)	3.2	3.3	-	3.3	12.9	(8.1)	4.8
Profit (loss) from sale
	of non-current assets			-			3.8	3.8	-	(10.1)	(10.1)	-	(7.7)	(7.7)
(Deficit) gain on
	revaluation of
	investment
		properties		-			(63.6)	(63.6)	-	27.9	27.9	-	7.5	7.5
Share of profit (loss)
	from joint ventures			2.6			2.1	4.7	3.4	(9.3)	(5.9)	1.4	(1.6)	(0.2)
Share of (loss) profit
	from associate			-			(0.1)	(0.1)	-	0.2	0.2	-	0.3	0.3
Impairment of other
	non-current
	investments			-			-	-	-	-	-	-	(0.2)	(0.2)
Impairment recognised
	on acquisition			-			-	-	-	-	-	-	(3.1)	(3.1)
Operating profit (loss)
	before net
	finance expenses				5.9		(57.9)	(52.0)	6.7	8.7	15.4	14.3	(12.9)	1.4
Interest payable					(5.3)		-	(5.3)	(9.0)	-	(9.0)	(17.1)	-	(17.1)
Change in fair value of
	derivative financial
	instruments				-		(3.0)	(3.0)	-	0.7	0.7	-	0.7	0.7
Finance expenses					(5.3)		(3.0)	(8.3)	(9.0)	0.7	(8.3)	(17.1)	0.7	(16.4)
Finance income					1.5		-	1.5	2.5	-	2.5	4.8	-	4.8
Net finance expenses					(3.8)		(3.0)	(6.8)	(6.5)	0.7	(5.8)	(12.3)	0.7	(11.6)
Profit (loss) before tax					2.1		(60.9)	(58.8)	0.2	9.4	9.6	2.0	(12.2)	(10.2)
Current tax					-		-	-	(0.1)	-	(0.1)	(0.2)	-	(0.2)
Deferred tax					-		13.5	13.5	-	(1.9)	(1.9)	-	2.3	2.3
Tax credit (charge) for
	the period				-		13.5	13.5	(0.1)	(1.9)	(2.0)	(0.2)	2.3	2.1
Profit (loss) for the
	financial period				2.1		(47.4)	(45.3)	0.1	7.5	7.6	1.8	(9.9)	(8.1)
Non-controlling interest					-		-	-	-	-	-	(0.1)	-	(0.1)
Profit (loss) for the
	financial period
	attributable to
	equity shareholders				2.1		(47.4)	(45.3)	0.1	7.5	7.6	1.7	(9.9)	(8.2)

Notes to the accounts (continued)

3. Segmental analysis

The Group's reportable segments have been amended this period following a change in the management reporting lines within the Group. Wembley and Greenwich now have separate segment managers and thus management believe it is more appropriate to disaggregate these segments going forward. As a result, the Urban Regeneration segment has been disaggregated into Wembley, Greenwich and Other Urban Regeneration.  The comparative periods have been restated accordingly.

The Group also invests in a number of property joint ventures. Each of these has different characteristics such as different customers and property types. On this basis, Quercus (the Group's healthcare joint venture), iQ (the Group's student accommodation joint venture) and SeQuel (the Group's secondary property fund) have been disclosed as separate operating segments within the Quintain Fund Management  division.

The Other operating segment consists of secondary properties held directly by the Group.

All activities are based in the United Kingdom and Channel Islands.

The analysis of the Group's results by business segment was as follows:

i) INCOME STATEMENT

Total Group

Six months ended 30 September 2010

	Urban Regeneration £m	QFM £m	Other £m	Unallocated £m	Unaudited Total £m
Revenue	14.4	7.9	1.4	-	23.7
Gross profit	6.8	6.3	0.9	-	14.0
Loss before tax	(17.0)	(23.1)	(1.1)	(17.6)	(58.8)

Six months ended 30 September 2009

	Urban Regeneration £m	QFM £m	Other £m	Unallocated £m	Unaudited Total £m
Revenue	16.7	3.3	6.1	-	26.1
Gross profit	6.7	2.8	4.6	-	14.1
Profit (loss) before tax	34.5	(12.0)	3.7	(16.6)	9.6

Year ended 31 March 2010

	Urban Regeneration £m	QFM £m	Other £m	Unallocated £m	Audited Total £m
Revenue	32.5	17.8	6.6	-	56.9
Gross profit	5.3	16.4	4.2	-	25.9
Profit (loss) before tax	15.1	7.3	0.1	(32.7)	(10.2)

a) Urban Regeneration

Six months ended 30 September 2010

	Wembley £m	Greenwich £m	Other Urban Regeneration £m	Unaudited Total Urban Regeneration £m
Revenue	13.6	0.3	0.5	14.4
Gross profit	6.3	0.3	0.2	6.8
Loss before tax	(6.3)	(4.7)	(6.0)	(17.0)

Notes to the accounts (continued)

3. Segmental analysis (continued)

Six months ended 30 September 2009

	Wembley £m	Greenwich £m	Other Urban Regeneration £m	Unaudited Total Urban Regeneration £m
Revenue	15.8	0.5	0.4	16.7
Gross profit	6.2	0.4	0.1	6.7
Profit before tax	9.3	24.8	0.4	34.5

Year ended 31 March 2010

	Wembley £m	Greenwich £m	Other Urban Regeneration £m	Audited Total Urban Regeneration £m
Revenue	30.8	0.9	0.8	32.5
Gross profit (loss)	12.5	0.8	(8.0)	5.3
(Loss) profit before tax	(2.0)	27.5	(10.4)	15.1

b) QFM

Six months ended 30 September 2010

	Quercus	iQ	SeQuel	Other QFM	Unaudited Total QFM
	£m	£m	£m	£m	£m
Revenue	2.0	1.3	4.4	0.2	7.9
Gross profit	1.3	1.3	3.6	0.1	6.3
Profit (loss) before tax	4.4	5.5	0.2	(33.2)	(23.1)

Six months ended 30 September 2009

	Quercus £m	iQ £m	SeQuel £m	Other QFM £m	Unaudited Total QFM £m
Revenue	1.8	1.2	-	0.3	3.3
Gross profit	1.4	1.2	-	0.2	2.8
(Loss) profit before tax	(10.2)	(2.1)	-	0.3	(12.0)

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).

Year ended 31 March 2010

	Quercus £m	iQ £m	SeQuel £m	Other QFM £m	Audited Total QFM £m
Revenue	9.5	2.3	5.6	0.4	17.8
Gross profit	8.7	2.3	5.0	0.4	16.4
(Loss) profit before tax	(3.6)	(1.0)	13.4	(1.5)	7.3

Notes to the accounts (continued)

3. Segmental analysis (continued)

ii) BALANCE SHEET

Total Group

As at 30 September 2010

	Urban Regeneration £m	QFM £m	Other £m	Unaudited Total £m
Investment properties	645.5	97.7	33.3	776.5
Capital expenditure on investment properties	10.8	16.3	7.8	34.9
Investment in joint ventures and associate	93.6	122.6	-	216.2
Trading properties	26.9	-	-	26.9
Total revaluation movement	(24.6)	(30.7)	(2.0)	(57.3)

As at 30 September 2009

	Urban Regeneration £m	QFM £m	Other £m	Unaudited Total £m
Investment properties	656.6	134.4	34.1	825.1
Capital expenditure on investment properties	0.7	0.1	-	0.8
Investment in joint ventures and associate	92.9	106.3	-	199.2
Trading properties	34.0	-	-	34.0
Total revaluation movement	29.7	(8.4)	(0.9)	20.4

As at 31 March 2010

	Urban Regeneration £m	QFM £m	Other £m	Audited Total £m
Investment properties	662.4	123.0	27.5	812.9
Capital expenditure on investment properties	5.8	0.2	-	6.0
Investment in joint ventures and associate	93.1	110.6	-	203.7
Trading properties	28.1	-	-	28.1
Total revaluation movement	15.1	(2.6)	(5.6)	6.9

a) Urban Regeneration

As at 30 September 2010

	Wembley £m	Greenwich £m	Other Urban Regeneration £m	Unaudited Total Urban Regeneration £m
Investment properties	453.1	151.2	41.2	645.5
Capital expenditure on investment properties	10.6	0.1	0.1	10.8
Investment in joint ventures and associate	9.6	82.6	1.4	93.6
Trading properties	14.0	-	12.9	26.9
Total revaluation movement	(13.1)	(3.9)	(7.6)	(24.6)

Notes to the accounts (continued)

3. Segmental analysis (continued)

As at 30 September 2009

	Wembley £m	Greenwich £m	Other Urban Regeneration £m	Unaudited Total Urban Regeneration £m
Investment properties	457.5	157.8	41.3	656.6
Capital expenditure on investment properties	0.6	-	0.1	0.7
Investment in joint ventures and associate	14.6	67.5	10.8	92.9
Trading properties	17.6	-	16.4	34.0
Total revaluation movement	4.9	24.2	0.6	29.7

As at 31 March 2010

	Wembley £m	Greenwich £m	Other Urban Regeneration £m	Audited Total Urban Regeneration £m
Investment properties	458.0	155.7	48.7	662.4
Capital expenditure on investment properties	5.8	-	-	5.8
Investment in joint ventures and associate	12.9	74.8	5.4	93.1
Trading properties	16.3	-	11.8	28.1
Total revaluation movement	(12.1)	26.5	0.7	15.1

b) QFM

As at 30 September 2010

	Quercus £m	iQ £m	SeQuel £m	Other QFM £m	Unaudited Total QFM £m
Investment properties	-	-	75.5	22.2	97.7
Capital expenditure on investment
properties	-	-	0.1	16.2	16.3
Investment in joint ventures and associate	58.5	55.6	-	8.5	122.6
Total revaluation movement	1.2	6.1	(3.5)	(34.5)	(30.7)

As at 30 September 2009

	Quercus £m	iQ £m	SeQuel £m	Other QFM £m	Unaudited Total QFM £m
Investment properties	-	-	88.5	45.9	134.4
Capital expenditure on investment  properties	-	-	-	0.1	0.1
Investment in joint ventures and associate	60.3	39.1	-	6.9	106.3
Total revaluation movement	(5.7)	(3.1)	0.4	-	(8.4)

Notes to the accounts (continued)

3. Segmental analysis (continued)

As at 31 March 2010

	Quercus £m	iQ £m	SeQuel £m	Other QFM £m	Audited Total QFM £m
Investment properties	-	-	78.9	44.1	123.0
Capital expenditure on investment  properties	-	-	0.1	0.1	0.2
Investment in joint ventures and associate	57.2	46.0	-	7.4	110.6
Total revaluation movement	(5.9)	(1.4)	6.2	(1.5)	(2.6)

4. Revenue, cost of sales and gross profit

		Unaudited Six months ended 30 Sept 2010				Unaudited Six months ended 30 Sept 2009			Audited  Year  ended 31 March 2010
		Revenue £m		Cost of sales £m	Gross profit £m	Revenue £m	Cost of sales £m	Gross profit £m	Revenue £m	Cost of sales £m	Gross profit £m
Rental income		9.9		(2.4)	7.5	10.5	(2.4)	8.1	21.4	(4.9)	16.5
Income from sale
	of trading
	properties	3.5		(3.5)	-	6.3	(6.3)	-	11.1	(11.0)	0.1
Income from
	hotel operations		4.0	(1.8)	2.2	4.0	(1.8)	2.2	7.7	(3.5)	4.2
Fees from fund
	management
	and other
	services
	provided to
	related parties	3.7		(0.7)	3.0	3.5	(0.4)	3.1	12.7	(0.8)	11.9
Other income		2.6		(1.2)	1.4	1.8	(1.1)	0.7	4.0	(2.7)	1.3
		23.7		(9.6)	14.1	26.1	(12.0)	14.1	56.9	(22.9)	34.0
Impairment in
	book value of
	trading
	properties	-		(0.1)	(0.1)	-	-	-	-	(8.1)	(8.1)
		23.7		(9.7)	14.0	26.1	(12.0)	14.1	56.9	(31.0)	25.9

The impairment in the book value of trading properties for the year ended 31 March 2010 related 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.   There was a further impairment in relation to this property asset in the current period.

There were no contingent rents in the current period or the comparative periods.

The cost of sales in relation to rental income comprised:

		Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Service charge expenditure		1.1	1.1	2.1
Service charge recovery		(0.5)	(0.4)	(1.1)
Irrecoverable service charge		0.6	0.7	1.0
Rents payable		0.1	0.1	0.1
Property management fees		0.1	0.1	0.3
Legal and professional fees		0.3	0.2	0.8
Allowance for impairment in respect of trade receivables		0.4	0.2	0.8
Other property costs		0.9	1.1	1.9
		2.4	2.4	4.9

Notes to accounts (continued)

4. Revenue, cost of sales and gross profit (continued)

Other income related to:

		Unaudited Six months  ended 30 Sept 2010			Unaudited Six months ended 30 Sept 2009			Audited Year ended 31 March 2010
		Revenue £m	Cost of sales £m	Gross profit £m	Revenue £m	Cost of sales £m	Gross profit £m	Revenue £m	Cost of sales £m	Gross profit £m
Surrender
	premiums	0.1	-	0.1	0.1	-	0.1	0.2	-	0.2
Management
	fees and
	commissions	1.1	(0.3)	0.8	1.0	(0.2)	0.8	1.3	(0.6)	0.7
Car parking
	income	0.9	(0.4)	0.5	0.4	(0.1)	0.3	1.8	(0.6)	1.2
Abortive project
	costs	-	(0.1)	(0.1)	-	(0.5)	(0.5)	-	(0.8)	(0.8)
Sundry income		0.5	(0.4)	0.1	0.3	(0.3)	-	0.7	(0.7)	-
		2.6	(1.2)	1.4	1.8	(1.1)	0.7	4.0	(2.7)	1.3

The cost of sales in relation to other income included depreciation of £0.1m (six months ended 30 September 2009: £0.1m and year ended

31 March 2010: £0.2m) in respect of fixtures, fittings and equipment.

5. Administrative expenses

		Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Directors' remuneration		1.2	1.0	2.3
Other staff costs		5.5	5.9	11.0
Total staff costs		6.7	6.9	13.3
Legal and other professional fees		1.3	1.1	2.3
Office costs		1.6	1.7	3.2
Loss on sale of plant and equipment		-	-	0.1
Depreciation of tangible fixed assets		0.3	0.3	0.6
Operating lease payments		0.6	0.5	1.1
General expenses		0.3	0.3	0.5
Total administrative expenses		10.8	10.8	21.1

Notes to accounts (continued)

6. Net finance expenses

		Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Interest payable on bank loans and overdrafts		10.8	15.1	31.4
Interest payable on other loans		0.1	0.1	0.5
Interest on obligations under finance leases		0.4	0.4	0.8
		11.3	15.6	32.7
Interest capitalised		(6.0)	(6.6)	(15.6)
		5.3	9.0	17.1
Profit realised on termination of interest rate swaps		(0.1)	-	-
Recycling of swap adjustments		3.0	-	-
Change in fair value of interest rate swaps and caps		0.1	(0.7)	(0.7)
Finance expenses		8.3	8.3	16.4
Finance income: interest receivable		(1.5)	(2.5)	(4.8)
Net finance expenses		6.8	5.8	11.6

Of interest capitalised in the period, the amount capitalised to investment properties in the course of construction was £5.9m (six months ended

30 September 2009: £6.3m and year ended 31 March 2010: £14.8m) and trading properties £0.1m (six months ended 30 September 2009: £0.3m and year ended 31 March 2010: £0.8m).  The average interest rate used for capitalisation was 6.1% (six months ended 30 September 2009: 5.4% and year ended 31 March 2010: 6.2%).

7. Tax

i) Tax (credit) charge on (loss) profit

		Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
UK current tax at 28% (2009: 28%)		-	-	0.1
Overseas tax		-	0.1	0.1
Total current tax charge		-	0.1	0.2
Deferred tax (note 7iii)		(13.5)	1.9	(2.3)
Tax (credit) charge		(13.5)	2.0	(2.1)

ii) Tax recognised directly in equity

			Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Deferred tax (credit) charge on effective element of interest
	rate swaps		(0.6)	1.1	(0.1)

Notes to accounts (continued)

7. Tax (continued)

iii) Deferred tax movements

	Audited			Unaudited	Unaudited
	31 March 2010 £m	Recognised in income £m	Recognised in equity £m	30 Sept 2010 £m	30 Sept 2009 £m
Capital gains less capital losses	38.3	(15.8)	-	22.5	44.4
Capital allowances	8.0	0.4	-	8.4	7.8
Derivative financial instruments	(8.6)	0.1	(0.6)	(9.1)	(7.4)
Other temporary differences	(0.6)	-	-	(0.6)	(4.2)
Revenue tax losses	(13.4)	1.8	-	(11.6)	(11.5)
Deferred tax provision	23.7	(13.5)	(0.6)	9.6	29.1

The deferred tax liability as at the period end has been reduced following the enacted change in the rate of corporation tax from 28% to 27% effective from 20 July 2010. An announcement has also been made that the rate of corporation tax will decrease by a further 1% each year from 1 April 2012 until it reaches 24% in 2014. If this takes place, then this is likely to lead to a further reduction in the current deferred tax liability. However, as at the period end, an estimate of the likely impact of the reduced rate cannot yet be made.

8. Earnings per share and net asset value per share

i) Earnings per share

Unaudited  Six months ended 30 Sept 2010						Unaudited Six months ended 30 Sept 2009			Audited Year ended 31 March 2010
	Loss after tax attributable to equity shareholders			Weighted average number of shares	Earnings per share	Profit 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
	£m			m	pence	£m	m	pence	£m	m	pence
Basic		(45.3)		517.8	(8.7)	7.6	271.7	2.8	(8.2)	247.9	(3.3)
Adjustment:
Employee
share-based
payment
schemes			-	-	-	-	0.5	-	-	-	-
Diluted		(45.3)		517.8	(8.7)	7.6	272.2	2.8	(8.2)	247.9	(3.3)

In November 2009, the Company issued 390.2m new shares through a rights issue. To reflect the rights issue, the number of shares previously used to calculate the earnings per share data for the six months ended 30 September 2009 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.  

Notes to accounts (continued)

8. Earnings per share and net asset value per share (continued)

ii) Net asset value per share
		Unaudited  As at 30 Sept 2010					Unaudited  As at   30 Sept 2009				Audited As at 31 March 2010
		Equity shareholders' funds £m		Number of  shares m		Net asset value per share pence	Equity shareholders' funds £m	Number of  shares m	Net asset value per share pence		Equity shareholders' funds £m	Number of  shares m	Net asset value per share pence
As per
	accounts	578.3		520.6			456.4	130.1			622.1	520.5
Less: Treasury
	shares	-		(2.8)			-	(1.9)			-	(2.8)
Basic		578.3		517.8		112	456.4	128.2	356		622.1	517.7	120
Impact of
	rights issue	-		-			183.1	390.2			-	-
Restated
	basic	578.3		517.8		112	639.5	518.4	123		622.1	517.7	120
Adjustment:
Employee
	share-based
	payment
	schemes	0.3		1.5			0.7	0.9			0.5	1.8
Diluted		578.6		519.3		111	640.2	519.3	123		622.6	519.5	120

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 2.8m (30 September 2009: 1.9m and 31 March 2010: 2.8m) 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 satisfied. 

The net asset value per share as at 30 September 2009 has been adjusted to reflect the impact of the rights issue as this gives a more informative number for comparative purposes.

9. Investment properties 

The movement in the period in investment properties was as follows:

					Unaudited 30 Sept 2010	Unaudited  30 Sept 2009	Audited 31 March 2010
					£m	£m	£m
Opening balance					812.9	800.1	800.1
Transfer from trading properties					-	-	11.8
Additions					34.9	0.8	6.0
Interest capitalised					5.9	6.3	14.8
Disposals					(13.6)	(10.0)	(27.3)
Revaluation (deficit) surplus					(63.6)	27.9	7.5
Closing balance					776.5	825.1	812.9

Notes to accounts (continued)

9. Investment properties (continued)

All of the Group's properties were externally valued as at 30 September 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 at Greenwich, Wembley and Silvertown have been valued by Savills Commercial Limited. The discount rates which have been applied in relation to these developments were 15.8% for the Greenwich interests and 15% for the Wembley development. Other properties in the United Kingdom have been valued by Jones Lang LaSalle Limited and Christie + Co. Properties in the Channel Islands have 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:

						Unaudited 30 Sept 2010	Unaudited 30 Sept 2009	Audited 31 March 2010
						£m	£m	£m
Investment properties at market
		value as determined by valuers				766.6	815.6	802.8
Adjustment in respect of rent-free
	periods and other tenant incentives					(1.3)	(1.7)	(1.1)
Adjustment in respect of minimum
	payments under head leases
	separately included as a liability in the
	Balance Sheet					11.2	11.2	11.2
As shown in the Balance Sheet						776.5	825.1	812.9

10. Non-current investments

i) Investment in joint ventures

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

		Unaudited 30 Sept 2010		Unaudited 30 Sept 2009	Audited 31 March 2010
		£m		£m	£m
Opening balance		202.1		215.0	215.0
Additions		5.9		1.4	1.7
Amounts advanced		5.3		31.7	47.3
Reclassification of joint venture as
	subsidiary	-		-	(2.9)
Disposals		(3.2)		(40.0)	(52.0)
Distributions		(3.1)		(4.7)	(8.0)
Share of profit (loss), net of tax		4.7		(5.9)	(0.2)
Share of other comprehensive income		3.0		0.3	1.2
Closing balance		214.7		197.8	202.1

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

			% of share capital held	Country of incorporation	Principal joint venture partners
Quercus Healthcare Property Unit Trust (Quercus)			13.28	Channel Islands	Aviva Life & Pensions UK Limited
Greenwich Peninsula Regeneration Limited (GPRL)			49.00	United Kingdom	Lend Lease (Europe) Limited
Greenwich Peninsula N0204 Block B Unit Trust  (Greenwich Peninsula N0204)			50.00	Channel Islands	Lend Lease N0204 Block B Limited
Greenwich Peninsula Retail LLP (Greenwich Retail)			50.00	United Kingdom	Lend Lease GP Retail 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  (One Brighton)			50.00	United Kingdom	Crest Nicholson (South East) Limited
Wembley City HIX Limited (Wembley Hotel)			49.00	United Kingdom	Summit Hotels Limited

Notes to the accounts (continued)

10. Non-current investments (continued)

i) Investment in joint ventures (continued)

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

Summarised income statements for the six months ended 30 September 2010
		Quercus £m	GPRL £m	Greenwich Peninsula N0204 £m		Greenwich Retail £m	iQ £m	Quantum £m	Quintessential £m	One Brighton £m	Other joint ventures £m	Unaudited Group share in joint ventures £m
Rents receivable		3.9	0.4	0.7		-	3.4	0.1	0.1	-	-	8.6
Proceeds from sale of trading properties		-	-	-		-	-	-	2.6	6.1	-	8.7
Revenue		3.9	0.4	0.7		-	3.4	0.1	2.7	6.1	-	17.3
Cost of sales		-	(0.2)	(0.3)		-	(1.3)	(0.1)	(2.5)	(4.7)		(9.1)
Gross profit		3.9	0.2	0.4		-	2.1	-	0.2	1.4	-	8.2
Administrative expenses		(0.6)	-	(0.1)		-	(0.6)	-	-	-	(0.1)	(1.4)
Operating profit (loss) before recognition of results from non-current asset sales and revaluation		3.3	0.2	0.3		-	1.5	-	0.2	1.4	(0.1)	6.8
Gain (deficit) on revaluation of investment properties		1.2	-	(0.4)		1.1	6.1	0.1	-	-	(1.7)	6.4
	Operating profit (loss)	4.5	0.2	(0.1)		1.1	7.6	0.1	0.2	1.4	(1.8)	13.2
	Finance expenses	(0.9)	-	(4.1)		-	(2.0)	-	-	-	-	(7.0)
Finance income		-	-	-		-	-	0.1	-	-	-	0.1
Profit (loss)
	before
	taxation	3.6	0.2	(4.2)		1.1	5.6	0.2	0.2	1.4	(1.8)	6.3
Taxation		(0.3)	-	0.1		(0.3)	(1.5)	-	-	-	0.4	(1.6)
	Profit (loss) after taxation	3.3	0.2	(4.1)		0.8	4.1	0.2	0.2	1.4	(1.4)	4.7

Notes to the accounts (continued)

10. Non-current investments (continued)

i) Investment in joint ventures (continued)

Share of other comprehensive income for the six months ended 30 September 2010
		Quercus £m	GPRL £m	Greenwich Peninsula N0204 £m	Greenwich Retail £m	iQ £m	Quantum £m	Quintessential £m	One Brighton £m	Other joint ventures £m	Unaudited Group share in joint ventures £m
	Share of effective portion of changes in fair value of cashflow hedges, net of tax	0.3	-	-	-	-	-	-	-	-	0.3
	Recycling of cashflow hedge adjustment	-	-	2.7	-	-	-	-	-	-	2.7
		0.3	-	2.7	-	-	-	-	-	-	3.0

Summarised balance sheets as at 30 September 2010
				Quercus £m	GPRL £m		Greenwich Peninsula N0204 £m	Greenwich Retail £m	iQ £m	Quantum £m	Quintessential £m	One Brighton £m	Other joint ventures £m	Unaudited Group share in joint ventures £m
Investment  properties		92.2				-	17.0	4.0	122.1	2.8	-	-	4.6	242.7
Investment in joint ventures		-				1.1	-	-	-	-	-	-	-	1.1
Trading properties		1.3				61.5	-	-	-	-	7.4	1.3	-	71.5
Other assets		7.5				7.3	0.6	0.3	6.2	5.7	0.7	0.3	1.6	30.2
Gross assets		101.0				69.9	17.6	4.3	128.3	8.5	8.1	1.6	6.2	345.5
Current liabilities:
Trade and other payables		(3.7)				(12.1)	(1.3)	-	(11.5)	(1.9)	(4.4)	(0.3)	(0.1)	(35.3)
Current tax liability		-				(0.2)	-	-	-	-	-	-	-	(0.2)
Non-current liabilities:
Bank loans and other borrowings		(35.6)				-	-	-	(64.3)	-	-	-	-	(99.9)
Deferred tax (liability) asset		(1.7)				-	4.7	(0.3)	7.0	0.4	-	-	(0.1)	10.0
Other liabilities		(1.5)				-	-	-	(3.9)	-	-	-	-	(5.4)
	Net external  assets			58.5	57.6		21.0	4.0	55.6	7.0	3.7	1.3	6.0	214.7
Represented by:
Capital				58.5	0.2		(8.1)	2.9	55.6	7.0	3.7	1.3	-	121.1
Loans				-	57.4		29.1	1.1	-	-	-	-	6.0	93.6
Total investment				58.5	57.6		21.0	4.0	55.6	7.0	3.7	1.3	6.0	214.7

The valuations of investment properties held within Quercus as at 30 September 2010 were performed by Christie + Co, Chartered Surveyors, as external valuers, on the basis of market value and in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors.  Properties within the Greenwich joint ventures were valued by Savills Commercial Limited and those within the Quantum Unit Trust and the iQ Unit Trust by CB Richard Ellis Limited.

Notes to the accounts (continued)

10. Non-current investments (continued)

i) Investment in joint ventures (continued)

Summarised income statements for the six months ended 30 September 2009
			Quercus	GPRL	Greenwich Peninsula N0204	iQ	Quantum	Quintessential	BioRegional	Other joint ventures	Unaudited Group share in joint ventures
			£m	£m	£m	£m	£m	£m	£m	£m	£m
Rents receivable			7.4	0.4	0.5	1.9	0.1	0.1	-	-	10.4
	Proceeds   from sale of trading properties		-	-	-	-	-	1.7	-	-	1.7
Other income			-	0.3	-	-	-	-	0.1	-	0.4
Revenue			7.4	0.7	0.5	1.9	0.1	1.8	0.1	-	12.5
Cost of sales			-	-	-	(1.0)	-	(1.7)	-	(0.1)	(2.8)
Gross profit (loss)			7.4	0.7	0.5	0.9	0.1	0.1	0.1	(0.1)	9.7
Administrative expenses			(1.0)	(0.1)	(0.1)	(0.6)	-	-	(0.2)	-	(2.0)
		Operating profit (loss) before recognition of results from non-current asset sales and revaluation	6.4	0.6	0.4	0.3	0.1	0.1	(0.1)	(0.1)	7.7
		Loss from sale of non-current property assets	(2.2)	-	-	-	-	-	-	-	(2.2)
		(Deficit) gain on revaluation of investment properties	(5.7)	(3.9)	4.4	(3.1)	(0.2)	-	-	0.8	(7.7)
		Share of profit from joint ventures	-	-	-	-	-	-	0.2	-	0.2
Operating (loss) profit			(1.5)	(3.3)	4.8	(2.8)	(0.1)	0.1	0.1	0.7	(2.0)
Finance expenses			(2.3)	-	(0.3)	(1.4)	-	-	(0.8)	-	(4.8)
Finance income			0.4	-	-	-	-	-	-	-	0.4
(Loss) profit before
		taxation	(3.4)	(3.3)	4.5	(4.2)	(0.1)	0.1	(0.7)	0.7	(6.4)
Taxation			0.4	0.8	(1.3)	0.8	-	-	-	(0.2)	0.5
		(Loss) profit after taxation	(3.0)	(2.5)	3.2	(3.4)	(0.1)	0.1	(0.7)	0.5	(5.9)

Share of other comprehensive income

for the six months ended 30 September 2009

	Quercus £m	GPRL £m	Greenwich Peninsula N0204 £m	iQ £m	Quantum £m	Quintessential £m	BioRegional £m	Other joint ventures £m	Unaudited Group share in joint ventures £m
Share of effective portion of changes in fair value of cashflow hedges, net of tax	0.2	-	(0.2)	0.3	-	-	-	-	0.3

Notes to the accounts (continued)

10. Non-current investments (continued)

i) Investment in joint ventures (continued)

Summarised balance sheets

as at 30 September 2009

		Quercus	GPRL	Greenwich Peninsula N0204	iQ	Quantum	Quintessential	BioRegional	Other joint ventures	Unaudited Group share in joint ventures
		£m	£m	£m	£m	£m	£m	£m	£m	£m
Investment properties		116.0	11.8	50.0	93.6	5.1	-	-	6.0	282.5
Investment in joint
	ventures	-	1.2	-	-	-	-	3.8	-	5.0
Trading properties		-	57.7	-	-	-	11.0	2.1	-	70.8
Other assets		8.6	8.1	1.2	2.0	0.3	0.4	6.7	2.3	29.6
Gross assets		124.6	78.8	51.2	95.6	5.4	11.4	12.6	8.3	387.9
Current liabilities:
Trade and other
	payables	(5.0)	(14.9)	(2.8)	(2.4)	(0.3)	(4.3)	(1.0)	(0.6)	(31.3)
Current tax liability		-	(0.1)	-	-	-	-	-	-	(0.1)
Non-current liabilities:
Bank loans and other
	borrowings	(57.2)	-	(44.2)	(53.5)	-	-	-	-	(154.9)
Deferred tax
	(liability) asset	(2.1)	(3.4)	6.2	8.2	0.4	-	-	(0.2)	9.1
Other liabilities		-	-	(3.2)	(8.8)	-	-	(0.9)	-	(12.9)
Net external assets		60.3	60.4	7.2	39.1	5.5	7.1	10.7	7.5	197.8
Represented by:
	Capital	60.3	10.3	(16.2)	39.1	5.5	7.1	(2.4)	2.1	105.8
	Loans	-	50.1	23.4	-	-	-	13.1	5.4	92.0
Total investment		60.3	60.4	7.2	39.1	5.5	7.1	10.7	7.5	197.8

Notes to the accounts (continued)

10. Non-current investments (continued)

i) Investment in joint ventures (continued)

Summarised income statements for the year ended 31 March 2010
		Quercus £m	GPRL £m	Greenwich Peninsula N0204 £m	iQ £m	Quantum £m	Quintessential £m	One Brighton £m	Other joint ventures £m	Audited Group share in joint ventures £m
Rents receivable		11.8	0.4	2.2	6.2	0.2	0.2	-	-	21.0
Proceeds from sale of
	trading properties	-	-	-	-	-	3.1	0.4	-	3.5
Other income		-	14.5	-	-	-	-	-	0.1	14.6
Revenue		11.8	14.9	2.2	6.2	0.2	3.3	0.4	0.1	39.1
Cost of sales		-	(14.5)	(0.3)	(2.4)	(0.1)	(3.2)	(0.3)	0.1	(20.7)
Gross profit		11.8	0.4	1.9	3.8	0.1	0.1	0.1	0.2	18.4
Administrative expenses		(3.2)	(0.2)	(0.1)	(1.1)	(0.1)	-	-	(0.4)	(5.1)
	Operating profit (loss)before recognition of results from non-current asset sales and revaluation	8.6	0.2	1.8	2.7	-	0.1	0.1	(0.2)	13.3
	Loss from sale of non-current property assets	(2.1)	-	-	-	-	-	-	-	(2.1)
	(Deficit) gain on revaluation of investment  properties	(5.9)	(3.9)	10.0	(1.5)	(0.1)	-	-	0.3	(1.1)
	Share of profit from joint ventures	-	-	-	-	-	-	-	0.7	0.7
Operating profit (loss)		0.6	(3.7)	11.8	1.2	(0.1)	0.1	0.1	0.8	10.8
Finance expenses		(3.2)	-	(1.7)	(5.5)	-	-	-	(1.5)	(11.9)
Finance income		0.1	-	-	-	0.2	-	-	-	0.3
	(Loss) profit before taxation	(2.5)	(3.7)	10.1	(4.3)	0.1	0.1	0.1	(0.7)	(0.8)
Taxation		(1.4)	4.2	(2.9)	1.0	-	-	-	(0.3)	0.6
	(Loss) profit after taxation	(3.9)	0.5	7.2	(3.3)	0.1	0.1	0.1	(1.0)	(0.2)

Share of other comprehensive income

for the year ended 31 March 2010

		Quercus £m	GPRL £m	Greenwich Peninsula N0204 £m	iQ £m	Quantum £m	Quintessential £m	One Brighton £m	Other joint ventures £m	Audited Group share in joint ventures £m
	Effective portion  of changes in fair value of cashflow hedges, net of tax	0.1	-	0.2	(0.4)	-	-	-	-	(0.1)
	Recycling of cashflow hedge adjustment	-	-	-	1.3	-	-	-	-	1.3
		0.1	-	0.2	0.9	-	-	-	-	1.2

Notes to the accounts (continued)

10. Non-current investments (continued)

i) Investment in joint ventures (continued)

Summarised balance sheets   As at 31 March 2010
			Quercus £m	GPRL £m	Greenwich Peninsula N0204 £m	iQ £m	Quantum £m	Quintessential £m	One Brighton £m	Other joint ventures £m	Audited Group share in joint ventures £m
Investment properties			93.5	-	65.2	104.6	3.4	-	-	6.0	272.7
Investment in joint
	ventures		-	1.2	-	-	-	-	-	-	1.2
Trading properties			1.9	66.4	-	-	-	9.7	5.8	-	83.8
Other assets			9.4	5.9	2.2	3.5	2.2	0.5	0.2	1.7	25.6
Gross assets			104.8	73.5	67.4	108.1	5.6	10.2	6.0	7.7	383.3
Current liabilities:
Trade and other
	payables		(4.3)	(18.0)	(5.6)	(7.6)	(0.2)	(4.5)	(0.6)	-	(40.8)
Current tax liability			-	(0.2)	-	-	-	-	-	-	(0.2)
Non-current liabilities:
Bank loans and other
	borrowings		(40.3)	-	(45.8)	(58.8)	-	-	-	-	(144.9)
Deferred tax
	(liability) asset		(1.4)	-	4.6	8.5	0.4	-	-	(0.5)	11.6
Other liabilities			(1.6)	-	(1.1)	(4.2)	-	-	-	-	(6.9)
Net external assets			57.2	55.3	19.5	46.0	5.8	5.7	5.4	7.2	202.1
Represented by:
	Capital		57.2	0.3	(11.8)	46.0	5.8	5.7	5.4	1.5	110.1
	Loans		-	55.0	31.3	-	-	-	-	5.7	92.0
Total investment			57.2	55.3	19.5	46.0	5.8	5.7	5.4	7.2	202.1

ii) Other non-current investments

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

		Unaudited 30 Sept 2010 £m	Unaudited 30 Sept 2009 £m	Audited 31 March 2010 £m
Unquoted investments:
Opening balance		3.9	10.8	10.8
Disposals		-	(6.6)	(6.6)
Impairment as charged in the Income Statement		-	-	(0.2)
Revaluation deficit		(0.2)	(0.1)	(0.1)
Closing balance		3.7	4.1	3.9

As at 30 September 2010, the remaining investment is shown at the value at which it is quoted on AIM.

Notes to the accounts (continued)

11. Trade and other receivables

		Unaudited 30 Sept 2010 £m	Unaudited 30 Sept 2009 £m	Audited 31 March 2010 £m
Trade receivables		7.6	6.4	9.7
Other receivables		12.9	7.0	3.5
Trade and other receivables		20.5	13.4	13.2
Amounts due under contract for sale		4.5	-	-
Prepayments and accrued income		1.9	3.7	2.7
		26.9	17.1	15.9

12. Trade and other payables

		Unaudited 30 Sept 2010 £m	Unaudited 30 Sept 2009 £m	Audited 31 March 2010 £m
Trade payables		1.5	3.7	4.7
Other payables		3.8	11.0	4.2
Accruals		21.9	16.8	18.0
Interest rate swaps		5.9	11.4	10.2
		33.1	42.9	37.1

13. Other payables

		Unaudited 30 Sept 2010 £m	Unaudited 30 Sept 2009 £m	Audited 31 March 2010 £m
Interest rate swaps		13.5	14.3	19.0
Other creditors		1.3	0.4	1.4
		14.8	14.7	20.4

14. Bank loans and other borrowings:

		Unaudited 30 Sept 2010 £m	Unaudited 30 Sept 2009 £m	Audited 31 March 2010 £m
Current liabilities:
Bank loans		1.6	6.2	1.6
10% first mortgage debenture stock 2011 (secured)		2.1	-	-
		3.7	6.2	1.6
Non-current liabilities:
Bank loans		424.6	535.2	399.4
10% first mortgage debenture stock 2011 (secured)		-	2.1	2.1
		424.6	537.3	401.5
Amortised borrowing costs		(3.6)	(7.2)	(4.5)
		421.0	530.1	397.0
Total bank loans and borrowings		428.3	543.5	403.1
Amortised borrowing costs		(3.6)	(7.2)	(4.5)
		424.7	536.3	398.6

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 £3.4m and has a redemption value of £2.0m. The premium over par arising from fair valuing the debenture on acquisition is amortised over its remaining life.

Notes to the accounts (continued)

14. Bank loans and other borrowings (continued)

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

	30 Sept 2010 Bank loans and overdrafts	30 Sept 2010 Other loans	Unaudited 30 Sept 2010 Total debt	Unaudited 30 Sept 2009 Total debt	Audited 31 March 2010 Total debt	Unaudited 30 Sept 2010 Undrawn facilities	Unaudited 30 Sept 2009 Undrawn facilities	Audited 31 March 2010 Undrawn facilities
	£m	£m	£m	£m	£m	£m	£m	£m
Within one year	1.6	2.1	3.7	6.2	1.6	-	-	15.0
From one to two years	1.6	-	1.6	8.7	3.7	-	5.0	-
From two to five years	421.2	-	421.2	486.3	396.0	171.0	158.5	248.0
From five to 25 years	1.8	-	1.8	42.3	1.8	-	1.7	-
	426.2	2.1	428.3	543.5	403.1	171.0	165.2	263.0

b) After taking account of interest rate swaps and caps, the risk profile of the Group's borrowings was as follows:

		Unaudited 30 Sept 2010 £m	Unaudited 30 Sept 2009 £m	Audited 31 March 2010 £m
Fixed or capped		428.3	543.5	403.1

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

Percent		Unaudited 30 Sept 2010 £m	Unaudited 30 Sept 2009 £m	Audited 31 March 2010 £m
3.0 - 4.0		150.0	-	-
4.0 - 5.0		5.5	105.5	5.5
5.0 - 6.0		28.0	28.0	28.0
6.0 - 7.0		175.0	350.0	350.0
7.0 - 8.0		67.7	50.0	17.5
8.0 - 9.0		-	7.9	-
9.0 - 10.0		2.1	2.1	2.1
		428.3	543.5	403.1

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

	Unaudited 30 Sept 2010 %	Unaudited 30 Sept 2009 %	Audited 31 March 2010 %	Unaudited 30 Sept 2010 years	Unaudited 30 Sept 2009 years	Audited 31 March 2010 years
	5.5	6.0	6.2	3.0	4.0	3.0

Notes to the accounts (continued)

15. Financial instruments

The Group's policy is to finance its activities with equity and long term debt, the proportions depending on the profile of the operational and financial risks to the business. The Group does not speculate in treasury products but uses derivative financial instruments to manage its exposure to interest rate fluctuations. It usually borrows at floating rates of interest based on LIBOR and uses hedging to achieve an interest rate profile where the majority of borrowings are fixed or capped.  As at 30 September 2010, 100% (30 September 2009 and

31 March 2010: 100%) of the Group's net debt was fixed or capped.

i) Designated cashflow hedges

As at 30 September 2010, the fair value adjustments on the Group's interest rate swaps were as follows:

Amount	Maturity date	Swap rate	Unaudited Six months ended 30 Sept 2010 Effective	Unaudited Six months ended 30 Sept 2010 Ineffective	Unaudited Six months ended 30 Sept 2009 Effective	Audited Year ended 31 March 2010 Effective	Audited Year ended 31 March 2010 Ineffective
£m		%	£m	£m	£m	£m	£m
100.0	05.05.10	3.02	-	0.2	0.2	0.4	0.9
75.0	22.04.13	4.96	(1.5)	-	0.8	(0.1)	-
75.0	22.04.13	4.99	(1.5)	-	0.8	(0.1)	-
50.0	03.01.14	4.94	(0.7)	-	0.7	(0.2)	-
50.0	03.01.14	4.97	(0.7)	-	0.8	(0.2)	-
50.0	03.01.14	5.00	(0.7)	-	0.8	(0.1)	-
400.0			(5.1)	0.2	4.1	(0.3)	0.9

ii) Interest rate caps   

None of the interest rate caps are designated as hedging instruments and therefore all fair value movements are taken to the Income Statement.

As at 30 September 2010, the fair value adjustments on the Group's interest rate caps were as follows:     

Amount	Maturity date	Strike rate	Unaudited Six months ended 30 Sept 2010	Unaudited Six months ended 30 Sept 2009	Audited Year ended 31 March 2010
£m		%	£m	£m	£m
25.0	03.01.13	5.50	-	0.1	-
25.0	03.01.13	5.75	-	0.1	(0.1)
150.0	22.04.13	7.50	(0.2)	0.4	-
50.0	22.07.13	6.50	(0.1)	0.2	-
250.0			(0.3)	0.8	(0.1)

iii) In the six months to 30 September 2009, basis swaps totalling £350m matured, giving rise to a negative fair value adjustment of £0.1m, which was reflected in the Income Statement. This adjustment was also reflected in the results for the year ended 31 March 2010.

iv) Financial instruments held in joint ventures

As at 30 September 2010, the Group's share of the fair value adjustments on the interest rate swaps held within Quercus, a joint venture, were as follows:   

Amount	Maturity date	Swap rate	Unaudited Six months ended 30 Sept 2010	Unaudited Six months ended 30 Sept 2009	Audited Year ended 31 March 2010
£m		%	£m	£m	£m
50.0	22.10.09	4.84	-	0.1	0.1
25.0	22.10.09	5.02	-	0.1	0.1
25.0	24.10.11	2.95	-	(0.1)	(0.1)
30.0	23.07.12	3.10	-	(0.1)	(0.2)
80.0	22.01.13	5.11	0.1	0.1	0.1
100.0	22.01.13	4.99	0.2	0.2	0.1
310.0			0.3	0.3	0.1

All the swaps held within Quercus were classified as effective and the Group's share of the fair value adjustments reflected in equity.

Notes to the accounts (continued)

    15. Financial instruments (continued)

As at 30 September 2010, the Group's share of the fair value adjustments on interest rate caps and collars shown within iQ were as follows:

Amount	Maturity date	Strike rate Floor	Strike  rate Cap	Unaudited Six months ended 30 Sept 2010 Income Statement	Unaudited Six months ended 30 Sept 2010 Equity	Unaudited Six months ended 30 Sept 2009 Income Statement	Unaudited Six months ended 30 Sept 2009 Equity	Audited Year ended 31 March 2010 Income Statement	Audited Year ended 31 March 2010 Equity
£m		%	%	£m	£m	£m	£m	£m	£m
26.4	31.12.12	5.28	5.75	-	-	-	-	-	(0.1)
52.8	31.12.12	5.28	5.75	-	-	-	0.2	-	-
52.8	31.12.12	5.08	6.00	-	-	-	0.1	(0.3)	(0.2)
25.9	04.10.12	4.89	6.25	-	-	-	-	-	(0.1)
51.8	04.10.12	4.89	6.25	-	-	-	0.1	-	-
51.8	04.10.12	4.69	6.50	-	-	0.1	-	(0.3)	-
261.5				-	-	0.1	0.4	(0.6)	(0.4)

    16. Issued capital

	Unaudited Number of shares m	Unaudited Nominal value £m
Allotted, called up and fully paid:
In issue as at 1 April 2009	130.0	32.5
Issue of shares under share-based payment schemes at between 25p and 155.3p per share	0.1	-
In issue at 30 September 2009	130.1	32.5
Issue of shares at 80.6p per share	0.2	0.1
Rights issue at 49p per share	390.2	97.5
In issue at 31 March 2010	520.5	130.1
Issue of shares under share-based payment schemes at 25p per share	0.1	-
In issue as at 30 September 2010	520.6	130.1

As at 30 September 2010, issued capital included 2.8m (30 September 2009: 1.9m and 31 March 2010: 2.8m) shares held by ESOP Trusts. At that date, these shares had a market value of £1.2m (30 September 2009: £4.0m and 31 March 2010: £1.6m), a cost of £9.6m

(30 September 2009: £10.7m and 31 March 2010: £9.6m) and a nominal value of £0.7m (30 September 2009: £0.5m and 31 March 2010: £0.7m).

17. Property revaluation movements

				Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Recognised in Income Statement:
(Deficit) gain on revaluation of investment properties				(63.6)	27.9	7.5
Gain (deficit) on revaluation of investment properties
	in joint ventures			6.4	(7.7)	(1.1)
(Deficit) gain on revaluation of investment properties in associate				(0.1)	0.2	0.5
				(57.3)	20.4	6.9

Notes to the accounts (continued)

18. Capital commitments

As at 30 September 2010, the Group had capital commitments of £110.6m (30 September 2009: £28.4m and 31 March 2010: £122.3m) in relation to its own investment properties and £nil (30 September 2009: £0.1m and 31 March 2010: £nil) in respect of contractual commitments for repairs, maintenance and enhancements in relation to its income producing investment properties.

Capital commitments in relation to investment properties in the course of development are shown gross of government grants recoverable of £3.1m (30 September 2009: £nil; 31 March 2010: £3.3m).

The Group's share of capital commitments in relation to its joint ventures was £16.4m (30 September 2009: £29.8m and 31 March 2010: £20.8m).

19. Related party disclosures

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

		Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Quercus Healthcare Property Unit Trust		2.0	1.8	9.5
iQ Unit Trust		1.3	1.2	2.3
Greenwich Peninsula Regeneration Limited		0.2	0.4	0.6
BioRegional Quintain Limited		-	0.1	0.2
Quantum Unit Trust		0.1	-	-
Quintessential Homes (Wembley) LLP		0.1	-	0.1
		3.7	3.5	12.7

The Group also received interest on loan notes amounting to £0.8m (six months ended 30 September 2009: £0.8m and year ended 31 March 2010: £1.5m) from Greenwich Peninsula Regeneration Limited, £0.4m (six months ended 30 September 2009: £0.3m and year ended

31 March 2010: £0.6m) from Greenwich N0204, £0.1m (six months ended 30 September 2009: £0.2m and year ended 31 March 2010: £0.5m) from Wembley City HIX Limited and £nil (six months ended 30 September 2009: £0.9m and year ended 31 March 2010: £1.6m) from BioRegional Quintain Limited, which are included in finance income.

On 15 March 2010, the Company acquired the remaining 50.1% of the share capital of BioRegional Quintain Limited which it did not own.

The following amounts due from related parties are included in trade and other receivables in note 11:

		Unaudited Six months ended 30 Sept 2010 £m	Unaudited Six months ended 30 Sept 2009 £m	Audited Year ended 31 March 2010 £m
Quercus Healthcare Property Unit Trust		2.7	-	2.5
iQ Unit Trust		-	2.0	-
Greenwich Peninsula Regeneration Limited		0.8	0.7	0.9
BioRegional Quintain Limited		0.6	0.3	0.2
Quantum Unit Trust		0.1	0.1	-
Quintessential Homes (Wembley) LLP		0.1	-	-
		4.3	3.1	3.6

20. Post balance sheet event

Following the period end, the Group disposed of its interest in its property in Corsham Street, London N1 to its joint venture, iQ Unit Trust, for a consideration of £15m.  As a consequence, the Group's capital commitments in respect of its own investment properties fell by £85m and commitments in respect of its joint ventures increased by £60.5m, although £18m of this commitment is to be repaid to the Group on the refinancing of the property following practical completion in 2012.

Also following the period end, the Group agreed with the Lloyds Banking Group, its largest lending bank, to extend the maturity date for its two facilities totalling £275m under a structured transaction, which links maturity extension to a partial amortisation.  In January of each of the next three years, Quintain can request an extension of both facilities first to 1 April 2014, secondly to 1 April 2015 and finally to 1 April 2016.  If the bank agrees to the extension, it will be entitled to request a facility reduction of £25m in June of each of those years.  The margin on the facility will increase to 1.7%.

 

END

 

 

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