Preliminary Results

RNS Number : 0297W

Quintain Estates & Development PLC

05 June 2008

 



5 June 2008

Quintain Estates and Development PLC

('Quintain'/'Company'/'Group')

Preliminary results for the year ended 31 March 2008

Quintain well placed for long-term value creation

Financial Highlights

• Total return at property level of -3.9%, as measured by IPD vs March Universe of -8.5
• EPRA Net Asset Value (NAV) down 13.8% to 676p (2007: 784p)

• NAV per share down 11.5% to 584p (2007: 660p)

• EPRA earnings per share up to 2.5p (2007: -3.4p)

• Gross profit up 5.8% to £32.7m (2007: £30.9m)

• Gearing of 69% at the year-end

• Successful refinancing in March 2008, securing £620m of bank facilities; additional £95m raised post year-end

• Final dividend increased 0.25p to 8.5p

  • Total dividend for the year 12.25p (2006: 11.75p).

Operational Highlights

• Wembley 

  • Contracts exchanged with the London Borough of Brent for the sale of 1.75 acres, enabling the creation of a new Civic Centre, located in the Northern part of Wembley City

  • Acquisition of 21.4 acres during the year, taking the total scheme to 90 acres 

  • 96% of available private residential apartments already sold, with the first residents expected to move in this August  

  • Detailed planning consents obtained for Hilton Hotel and student scheme

  • Sixth consecutive unanimous consent received for W07, including 150,000 sq ft of retail and leisure

• Greenwich

  • 135,000 sq ft of office space pre-let to Transport for London, with further option on 60,000 sq ft: construction now underway

  • Detailed planning consent achieved for 894 homes

  • International success of The O2 driving footfall and generating good rental income for Quintain

• Fund Management

  • Funds under management increased from £711m to £1 billion

  • Fee income rose by 105%

  • Maintained focus on highly specialised and largely RPI linked income proving a major contributor to outperformance in a more challenging property market

• Investment Portfolio

  • Ongoing sales and lettings programmes during the year. 

 John Plender, Chairman of Quintain, commented:

'Quintain's focus on generating long term value for shareholders has this year been demonstrated by the significant increase in the potential of its unique urban regeneration schemes and the robust growth of fund management.

'While we will not be immune from a further deteriorating property market, our exposure to less cyclical sectors, such as healthcare and student accommodation, will continue to stand us in good stead. They have shown greater resilience to the property market downturn and enjoy returns linked to the RPI index, which is a huge advantage in a period when the cost of living is rising rapidly. With regard to our major schemes, the timing of the build-out is under our control and can be managed opportunistically to suit our balance sheet and prevailing market conditions.

'With a business model that has excellent defensive characteristics and improved liquidity, we have positioned the business well. With many rich opportunities before us and significant flexibility, the team at Quintain is nailing its colours firmly to the mast of a prudent but entrepreneurial approach to long-term value creation.'

Adrian Wyatt, Chief Executive, added:

'The Quintain team has exercised skill and judgement over the past year, resulting once again in a top quartile performance against the IPD.

'The strength of our business model is being proved in the current bear market. Our outperformance of 500 basis points relative to the IPD benchmark clearly demonstrates the synergistic, robust and defensive nature of our model and our ability to consistently deliver good results relative to the market.'

For further information, please contact:

Quintain Estates and Development PLC

Rebecca Worthington

020 7495 8968

Financial Dynamics

Stephanie Highett/Dido Laurimore

020 7831 3113

FINANCIAL HIGHLIGHTS 

		31 March   2008		31 March 2007		Change %
BALANCE SHEET
Net asset value per share (pence)		584		660		(11.5)
Diluted net asset value per share (pence)		578		655		(11.8)
EPRA net asset value per share (pence)		676		784		(13.8)
Total return (%)		(9.7)		27.5		-
EPRA total return (%)		(12.2)		29.9		-
DIVIDENDS
Total dividend per share (pence)		12.25		11.75		4.3
Final dividend per share (pence)		8.50		8.25		3.0
INCOME STATEMENT
Gross profit		32.7		30.9		5.8
(Loss) profit before tax (£m)		(54.7)		48.6
Earnings per share (pence)
Basic		(31.3)		33.3
Diluted		(31.3)		32.7
Earnings per share (EPRA) (pence)		2.5		(3.4)

  Chairman's Statement

Quintain's focus on generating long-term value for shareholders has this year been demonstrated by the significant increase in the potential of its unique urban regeneration schemes and the robust growth of fund management.

Results

During the year, the Company consolidated its strong operational and financial position in order to manage the impact of challenging market conditions. As a result it achieved a total return for the year, as measured by the Investment Property Databank, of -3.9%, substantially outperforming the March Universe of -8.5%.

During the reporting period the total return, measured by the movement in net assets per share and adding back the dividend, declined by 9.7% or 13.5% net of Retail Price Index (RPI) inflation. However, the average annualised nominal total return for the 12 years since the Company's flotation remains high at 17.9%.

Inevitably, the book values of our major schemes in London were affected by the adverse market conditions. Wembley declined 11% against the value reported at 31 March 2007, but we recorded a small valuation increase at Greenwich Peninsula of 2.5%.

The Group successfully refinanced its debt with £620m of bank facilities in March to extend the maturity of its borrowings, adding a further £95m after the year end, with only a relatively small increase in interest cost. In current circumstances this is a tribute to Quintain's standing in the credit markets. 

Our confidence in the Company's positioning and ability to deliver strong medium-term performance supports our dividend. The Board is recommending an increase in the final dividend of 0.25p to 8.5p, giving a total dividend for the year of 12.25p (2007: 11.75p), representing an increase of 4.3%. The final dividend will be paid on 8 September 2008. 

Business Delivery

A key highlight of the year was the strong growth and resilience of Quintain Fund Management, where fee income rose by 105% and funds under management grew from £711m to £1 billion. Wembley City and Greenwich Peninsula also saw good progress, with six detailed planning applications receiving approval. Particularly pleasing was the animation of Greenwich Peninsula created by the immediate success of The O2 at Greenwich (where, as landlords, we receive a turnover rent), and confirmation of the Peninsula's attractiveness as a new commercial centre with the 136,000 sq ft pre-let to Transport for London.

People

In a notably tougher climate, Quintain's management team has continued to deliver opportunities for long-term value creation and to retain a sharp focus on risk management. As the business has grown, important additions have been made to augment the Company's expertise and resources at all levels. Growth has been achieved without any perceptible loss of the entrepreneurial energy or innovative flair that make this Company unique. I would like to thank all our staff for their impressive performance.

We have recently added a further non-executive director to the Board through an independent external search process. Simon Laffin is an adviser to a leading private equity firm and was formerly finance director of a major food retailer. His financial background and wide commercial experience will be particularly valuable as the scale and scope of the Group's operations continue to expand.  

Sustainability 

The environmental leadership shown by Quintain in seeking to create sustainable communities is a growing source of pride. Our understanding of how to deploy the experience gained in our zero carbon schemes has grown significantly and we play an increasingly influential role in this area through the Sustainable Environment Foundation, a charity launched by Quintain in 2007. Leading and being seen to lead our peer group in sustainable urban development is a key component of our business strategy and a goal to which we are all personally committed.

Corporate Governance

Quintain takes its corporate governance responsibilities very seriously and is compliant with the Combined Code, except in relation to bonus arrangements where, under exceptional circumstances, there is no upper limit in the aggregate for share awards. The Board's explanation for this is given in the Corporate Governance Report of the Annual Report and Accounts. This year for the first time we sought external advice on board appraisal. Further details are included in the Corporate Governance Report. 

Outlook

Market conditions remain challenging. Investors and bankers are conspicuously risk averse and in the current macro-economic climate this is unlikely to change in the near future. However, with a business model that has excellent defensive characteristics and improved liquidity, we have positioned the business well. 

While we will not be immune from a further deteriorating property market, our exposure to less cyclical sectors, such as healthcare and student accommodation, will continue to stand us in good stead. They have shown greater resilience to the property market downturn and enjoy returns linked to the RPI index, which is a huge advantage in a period when the cost of living is rising rapidly. With regard to our major schemes, the timing of the build-out is under our control and can be managed opportunistically to suit our balance sheet and prevailing market conditions.

With many rich opportunities before us and significant flexibility, the team at Quintain is nailing its colours firmly to the mast of a prudent but entrepreneurial approach to long-term value creation. Our enthusiasm for the task remains very much intact and we look to the future with confidence.

John Plender

Chairman

5 June 2008

Chief Executive's Statement

The Quintain team has exercised skill and judgement over the past year, resulting once again in a top quartile performance against the Investment Property Databank (IPD) Index.

The strength of our business model is being proved in the current bear market. Our outperformance of 500 basis points relative to the IPD benchmark* clearly demonstrates the synergistic, robust and defensive nature of our model and our ability to consistently deliver good results relative to the market. (*The relative return is calculated: ((1+fund return)/(1+benchmark return)) - 1.

Our primary purpose is to optimise returns for shareholders in the medium and long term, evidenced by our position in the top decile of the IPD index over three and five year periods, and in the top percentile over ten and fifteen years.

As designed, the Group's growing success in fund management is proving a major contributor to outperformance in difficult markets. High barriers to entry, strong cashflow, long leases, RPI linkage, first class partners and a deep knowledge of the operational side of our tenants' business: all augur well for this division's ongoing growth and success. We now have almost £1 billion of funds under management and in the next few years we will continue to grow this side of our business as swiftly as circumstances permit.

The concept is to balance strong and rising cashflow from fund management, which has both opportunistic and defensive qualities, with building and running towns as businesses, exemplified in Greenwich and Wembley.

Turning to these major schemes, the success of The O2, the 135,000 sq ft let to Transport for London and occupier interest from telecoms, media, internet, public sector and banking organisations underpin Greenwich Peninsula's future as a dynamic new leisure, retail and commercial centre for London.

At Wembley City, the decision of the London Borough of Brent to locate their new Civic Centre in the heart of this scheme signifies that the regeneration is well underway, a fact that will be further emphasised when the first residents move in to W01 this autumn.  

Some three years ago we foresaw a fundamental shift in the commercial property sector and controlled risk through a strategic campaign of asset disposals as the market reached its peak. The proceeds were invested in expanding the fund management business and our major regeneration schemes, where we can generate exceptional value over the long term. While the remaining investment properties are not prime and we anticipate further near-term outward yield shift, material upside potential exists from new lettings, and hence improved cashflow. 

The extended level of consumer borrowing reached last year suggested prices would have to fall at some point and, having exchanged contracts on 96% of the available private residential apartments at Wembley City, we decided not to commit to further development of other residential opportunities in the short term. High deposits were secured for every apartment sold and prices have remained buoyant, offering robust protection against non-completions. 

Of the 20 million sq ft of outline consent we currently hold, 92% of this is secured in London. The City's continued dominance as a world-class financial centre, net immigration and the 2012 Olympics combine to underpin its medium to long-term future and our confidence in the exceptional value our Greenwich and Wembley schemes will release remains strong. 

The Group's portfolio includes numerous opportunities, but those which we are obliged to construct over the next two years are limited. As a result, our development exposure to the downturn in the commercial and residential markets is minimal. We will continue to add value to our assets through planning, design and commercial development during this period and will direct funds towards the opportunities that offer the best risk-adjusted returns.

Transforming the potential within our asset base into tangible value for shareholders can only be achieved by an extraordinary team. Quintain is a tightly run organisation populated by experts in key fields and it is through their commitment to our entrepreneurial culture of challenging traditional concepts that we have once again delivered a good performance relative to the market. My personal thanks go to them all.

Adrian Wyatt

Chief Executive

5 June 2008

OPERATING REVIEW

Business Review - Special Projects 

Our urban regeneration business creates and delivers a vision that has the power to transform a location. Scale and the right balance of retail, leisure and employment are the keys to achieving superior returns when allied to residential in the medium term, and, in maturity, revenue streams from service delivery. 

At Wembley City and Greenwich Peninsula we are creating near-towns, whilst owning, operating or influencing key motivational aspects, such as The O2 and Wembley Arena, that drive the transformational sense of place. 

Strategy

Quintain schemes are mixed use and typically delivered over five to fifteen years, enabling us to switch financial resources into sectors where the greatest returns can be delivered in the prevailing market. Exceptional value is delivered in two ways:

• A leap in residential price performance, commonly referred to as the 'Regeneration Effect' (see below), is created from the delivery of critical mass in leisure, retail and employment serviced by excellent public transport facilities.

• The scale of our schemes, which range from 500,000 to 13.3 million sq ft, delivers the capacity to drive significant non-property revenues from an integrated estate management business, including utilities, telecoms and media. We call this 'Running Towns as Businesses'.

Our propensity is to sell land or develop residential plots in joint venture or as principals, having first achieved a level of pre-sales. This minimises exposure to falls in residential prices. The same principle of achieving a level of pre-lets protects Quintain from over-exposure in the commercial property sector. 

Quantifying the Regeneration Effect

A report commissioned by the Company estimates that the Regeneration Effect mentioned above can be in excess of 10% once the retail element of such a scheme is launched, and add an additional 2% to local residential prices in each successive year during the scheme build-out. These numbers are borne out by Canary Wharf and Gunwharf Quays in Portsmouth, where prices rose quickly once critical mass was achieved.

Our Towns as Business model pushes the Regeneration Effect to a new level by embedding within each scheme the mechanics of future revenue generation such as optic fibre, triple-play services and prime advertising sites, and positions Quintain to deliver, and therefore create revenue from, the services offered to millions of visitors, residents and businesses.

Releasing the full potential of our schemes through the Regeneration Effect and our Towns as Businesses model remains our paramount objective. 

Performance

The current malaise in the residential markets caused by a prevailing absence of liquidity has tested our model. However, the robust nature it has displayed as we switched emphasis to promote the delivery of the commercial elements of our projects underpins our confidence.

An example is City Park Gate in Birmingham where, on acquiring control of the scheme in September, we responded quickly to changing conditions by increasing the commercial element of the scheme, incorporating a hotel and more offices, and increasing the total developable area by 40% to 1 million sq ft. This also delivered the scale appropriate for our Towns as Businesses model.

This re-focus on commercial property has been actioned across the portfolio. At Greenwich Peninsula, the pre-let of 135,000 sq ft to Transport for London (TfL) in November confirmed the location's attractiveness as a new commercial hub for London and construction is now underway. At Wembley City, detailed consent was secured in August for a major student accommodation scheme, which will be owned by Quintain's iQ Fund and service a sector largely isolated from the economic downturn, and a Hilton Hotel into which the business from the existing Plaza Hotel will be transferred.  

Priorities

While delivery success has been achieved during the year and the structure of the development pipeline affords flexibility for the duration of the current downturn, the adverse tide in the property market impacted the book value of Wembley, which fell 11.0%, and Greenwich where the uplift was limited to 2.5%, respective to their 31 March 2007 valuations. Detailed explanations of these valuation movements are provided in the Finance Review.

The launch of critical mass retail, leisure and employment, leading up to the 2012 Olympics - for which both Greenwich and Wembley are official venues - has the capacity to drive higher demand for residential units from wider areas and outperformance of the Central London Index. 

Sustainability is at the heart of our regeneration business and our schemes support a greener lifestyle. Whilst we do not yet expect to see a premium for a lower carbon footprint, we have no doubt that in today's market sustainability will be a key driver of the decision to buy or lease by both businesses and consumers. 

Although the next two to three years will undoubtedly be challenging, assets with the quality and environmental performance found within our major schemes are in short supply. As the market recovers we expect companies and consumers with foresight to identify the value opportunity on offer.

Valuations of Special Projects	Valuations as at 31 March 2008 £m
Wembley Complex	620.0
Greenwich Peninsula (see joint ventures below for total value)	187.6
Emerson's Green	31.0
Silvertown	17.5
Other Special Projects	8.7
Total direct property	864.8

Joint Ventures	Valuations as at 31 March 2008 £m
Greenwich Peninsula joint ventures	66.4
Deferred tax	(4.5)
Other joint ventures	17.4
Total	79.3

  - Wembley City

Our flagship Wembley City scheme now covers 90 acres around the National Stadium.

Strategy

Our method is to deliver plots within joint ventures or as principals after achieving a level of pre-sales, minimising exposure to falls in residential prices and aiding funding. 100% of homes within our first residential block, W01, and 90% within the second, W04, were sold ahead of valuations and largely prior to construction, with sizeable deposits funding interest.

Nearly 1 million sq ft of the Phase 1 consented scheme will form a unique leisure, entertainment and retail core around the Stadium, offering London's only designer outlet, bars, cafes and restaurants, Wembley Arena and a multi-screen cinema. Footfall is core to its success, and this in turn plays a major role in stimulating the Regeneration Effect and returns from Running Towns as Businesses. Wembley Stadium and Arena already draw in approximately six million visitors a year and thousands will occupy the 4,200 homes and 900,000 sq ft of commercial space which will be created. In addition, Wembley's position as a 2012 Olympic venue will further increase footfall and provide an international showcase for Wembley City. Phase 2, amounting to as much as 4 million sq ft, will add to this.

Performance 

We completed our strategic land assembly of the site during the year, increasing our holdings to 90 acres with the acquisition of Wembley Retail Park, Stadium Retail Park and a site at Second Way. The average price of these acquisitions was £5.7m an acre. After the year end we sold Fulton and Malcolm Houses, which cover half an acre, on the periphery of our holdings for £7.5m. The new scale provided by these deals enhances the value creation opportunity, and the masterplanning of the second stage, which we refer to as the Northern Lands and incorporates much of this area, has begun. This has the potential to increase the size of the overall scheme to more than 10 million sq ft.

During the year detailed consent was secured for a 656 bed student accommodation scheme to be funded and operated by Quintain's iQ Fund, and a 441 bed Hilton Hotel. The buildings will be located next to Wembley Arena, increasing the animation at the heart of the scheme.

Construction of W01 remains on budget and on schedule for completion this August and work began during the year on W04 and the 'Envac' underground waste removal system.  The sheer scale of the overall scheme will enable us to secure significant economies of scale in our baseline building cost and achieve consistently high quality and levels of sustainability, not least by securing satisfactory and visible terms for many years' work from contractors. A super-contract comprising the Hilton Hotel, student block, cinema and residential elements of these buildings is now under consideration, with several majors competing. Breaks will protect the Company, but exclusivity will encourage commitment and innovation from construction partners.

Exclusive negotiations regarding a retail joint venture are being progressed, but have not reached documentation stage. We have also augmented our in-house expertise with the appointment of Phil Cottingham, formerly Portfolio Director for Designer Outlets at Land Securities, as Managing Director of Retail, bringing expertise to a core experiential aspect of Wembley City.

We have today announced the exchange of contracts with the London Borough of Brent for the sale of 1.75 acres enabling the creation of their new Civic Centre on the north side of Engineers Way, together with 0.5 acres of public realm. This £10m deal is an endorsement of our vision for Wembley City. The transaction is conditional upon planning consent for a 250,000 sq ft building, which will form part of the Northern Lands masterplanning, with a 125 year leaseback of the retail to Quintain. 

Details of the financial performance of Wembley City can be found in the Finance Review.

Priorities

Our focus now is to build our bank of detailed consents, pending a return of liquidity to the residential market. A planning application for W07 comprising a 10 screen cinema, residential units and 80,000 sq ft of retail received consent after the year end. Consent for W03 has been granted and a parallel exercise encompassing E01 to facilitate the replacement of the pedway leading up to the National Stadium with the Olympic Steps has received support from CABE. Applications for W06, W08 and W10, are in preparation. On consent, these plots will increase our bank to in excess of 2,360 residential units.

- Greenwich Peninsula

Greenwich Peninsula Regeneration Limited, our 50:50 joint venture with Lend Lease (Europe), is creating a new district for London at Greenwich Peninsula. Crowned by The O2, this 194 acre site is one stop from Canary Wharf on the Jubilee Line and a 20 minute journey from London's West End.

Our strategy is to sell individual plots, develop many in joint venture, and to pre-let or pre-sell a percentage of space to investors within these buildings before construction as principals starts. This aligns delivery of each plot with market conditions and mitigates risk across the scheme.

Performance 

During the year major milestones were achieved at Greenwich Peninsula.

At the commercial district, Peninsula Central, the pre-let of 136,000 sq ft of space to regulatory authority Transport for London launched the scheme's 3.5m sq ft commercial district and preceded the start of construction in the fourth quarter. Transport for London will take occupation next year and retains an option on a further 60,000 sq ft of space.

The 150,000 sq ft building for Ravensbourne College of Design and Communication received detailed planning consent in July 2007, securing its relocation from Kent in 2010. This will bring 1,700 students per day to the Peninsula, providing additional animation to the scheme and a new academic resource for the local community. 

Significant progress has also been achieved on the residential element of the project. Three plots comprising 741 homes received detailed consent during the year, with consent for a further 153 homes received in May 2008. Of these plots, one has been purchased by Bellway Homes, two are being developed in new joint ventures with Crest Nicholson and two Registered Social Landlords, and the fourth has been 50% pre-sold to English Partnerships' First Time Buyers Initiative.

In April 2008, a planning application for the first homes at Peninsula Quays was also submitted. This 22 acre site, 18.5 acres of which are owned by Quintain, on the Greenwich Meridian Line to the west of the Peninsula overlooks Canary Wharf and will command premium residential prices. Operating through the directly owned vehicle, Peninsula Quays Ltd, GPRL will only develop and market this landmark building when propitious conditions return.

The July 2007 launch of The O2, of which Quintain and Lend Lease are landlords and receive a turnover rent, won international acclaim. The music and entertainment venue has played host to high calibre acts such as Justin Timberlake, Take That, the Spice Girls and Prince, drawing an estimated 4 million people to the Peninsula in its first six months of operation. Subsequent success at the Pollstar and Music Week awards, at which it won the Best International Arena and Venue of the Year categories respectively, reinforce the superiority of the venue and its popularity with performers.

Details of the financial performance of Greenwich Peninsula can be found in the Finance Review.

Priorities 

The business model supporting this 20 year scheme has in-built flexibility, enabling us to align delivery with market conditions. Our focus on pre-lets, pre-sales and delivery in joint venture will continue to cement the prospects for individual plots prior to construction. 

The substantial pre-let to Transport for London, current scarcity of highly sustainable space in the London office market and environmental credentials of the district support our confidence in the unique commercial offering at Peninsula Central.

- BioRegional Quintain 

Strategy 

Leading and being seen to lead the development community's environmental evolution is a key component of Quintain's business strategy. Our joint venture with BioRegional Properties combines our development experience, financial expertise and entrepreneurial approach with the best knowledge and practical experience of environmentally friendly construction in the UK today, placing the Company at the forefront of zero carbon development.

BioRegional Quintain is the only UK company building zero carbon developments based on the One Planet Living principles. These communities will enable those who live and work within them to lead sustainable lifestyles, greatly reducing their use of the Earth's natural resources and production of carbon emissions.

Performance

In joint venture with Crest Nicholson, construction has started on the Brighton scheme which will create 172 apartments and 24,000 sq ft of commercial space. Early reservations have been achieved at an average selling price above the construction start appraisal. 

The RiversideOne scheme at Middlesbrough is the UK's largest zero carbon development, covering 40 acres on completion. Construction was completed on the unique marketing suite that clearly demonstrates the iconic design route being taken at the development. The scheme was launched directly after the year end and attracted sufficient attention to secure reservations on all available plots at prices slightly higher than forecast.

The One Gallions scheme in London is being developed in partnership with Crest Nicholson and Southern Housing Group, pursuant to a development agreement with the London Development Agency. The scheme will be a flagship development for the Thames Gateway. We anticipate submitting a planning application in late summer 2008.

Priorities

The year saw a marked alteration in Government and corporate attitudes towards the environment, reflecting growing pressure from consumers for evidence of sustainable operations and increased interest in associated products. BioRegional Quintain is already established as the UK's pre-eminent zero carbon developer and the reservations achieved at OneBrighton and RiversideOne in challenging market conditions clearly demonstrate that consumers will pay a premium for a high quality, sustainable product.

Signs of a residential market slowdown have emerged and we expect this reaction to the lack of liquidity to last longer than in the commercial property sector, making this a challenging time to seek sales. However, the above-expected prices already achieved at Brighton and Middlesbrough, their truly unique nature and proximity to public transport and vibrant city centres place both in strong positions to attract homebuyers. 

- Regions

In 2006/2007 we exited our Manchester and Sheffield schemes, where prices achieved reflected their upside potential. We have now replaced these prospects with 1 million sq ft of mixed use space in Birmingham and 500,000 sq ft in Yorkshire. These are supplemented by our existing holdings at Emerson's Green, Bristol and Silvertown, London.

City Park Gate, Birmingham

In September we acquired the outstanding 50% of the equity in our joint venture with Countryside Properties, giving Quintain sole control of this scheme. Since then we have moved quickly to reconfigure the scheme, which is located at the gateway to Birmingham's Eastside quarter and a stone's throw from Selfridges and the Bullring shopping centre. Our intention is to deliver it as 575,000 sq ft of offices, 250 apartments and a hotel, with a detailed application for the first 253,000 sq ft of offices being submitted next month.

Beverley, Yorkshire

With our partners, Wykeland Group, with whom we built the 300,000 sq ft Parishes Scheme, Scunthorpe in 2001, we obtained resolution to grant consent for this scheme in March. The development covers 485,000 sq ft, including 250,000 sq ft of retail, 184 homes, a hotel, cinema and facilities for East Riding College. This town centre scheme has flexibility and the scale for running our Towns as Businesses model in one of Yorkshire's most prosperous towns and the new leisure facilities that we have proposed will enhance the high quality attractions currently found.

Emersons Green, Bristol 

In alliance with Heron and Gallagher Estates, we have applied for up to 2,550 residential units and 1 million sq ft of employment space on this 300 acre site, of which we own 65 acres. Another 56 acres of this wider scheme are being developed by our science park fund, Quantum, into an 829,000 sq ft facility, demonstrating the synergistic nature of our business model and taking Quintain's total delivery area on this scheme to approximately 1.5 million sq ft.

Silvertown, London

Our 12.9 acre site sits directly across the River Thames from Greenwich Peninsula. It lies at the mouth of the River Lea, which will provide the proposed access point to the water link to the 2012 Olympic site in Stratford and is a strategic play on residential, logistics, waste and power solutions. The site was purchased uniquely in joint venture with the London Development Agency.

Business Review - Investment Portfolio 

Strategy 

Predominantly comprising secondary commercial assets across the UK, the Investment Portfolio fulfils three roles:

• To generate rental income and revenue from sales to support activity with higher long-term potential elsewhere in Quintain

• To identify, acquire and incubate assets with high regeneration potential, securing a viable revenue stream pending transformation 

• To augment the skill sets within Fund Management and Special Projects to maximise returns for the Group

Offices constitute two thirds of the portfolio, with the remainder mainly comprising industrial and retail properties. Assets where we identify latent value that can be unlocked through major refurbishment, leasing or marriage value are acquired by this business. 

Performance

In anticipation of challenging market conditions, this business remained a net seller over the last year, releasing reserves to fund opportunities with higher potential value in the Group and reducing Quintain's overall exposure to the commercial property sector. 

Whilst sales over the last three years have reduced the impact, the Investment Portfolio inevitably was not immune from falling commercial property prices and declined in value by £44.4m (20.8%) over the year to £178.8m. Financial pressures are reflected in the sector, where occupiers are finding conditions difficult and require support. However, we have successfully limited rent arrears to their historic norm of 1% and kept bad debts to £0.2m, representing less than 1% of the rent roll.

The aggressive stance towards voids has resulted in over £1.8 million of voids being removed from the void schedule either through lettings or sales over the last 12 months. Most notable was the sale of First National House in Harrow to Avanta. Other material transactions include The Forum Exeter where a programme of major refurbishment and marketing was undertaken, resulting in the letting of all the remaining refurbished void space to Parsons Brinkerhoff, Savills and Kitson Hutchings.  The Investment Team is currently in active discussions regarding the leasing of an additional £1.2m of voids within the Portfolio. 

We continued to exit locations where further asset upside could not be identified, securing increased value wherever possible prior to sale. At Smallbrook Queensway, a 22,000 sq ft pre-let to Virgin Rail was sourced at a record rent for the building and a £1.2m refurbishment programme successfully completed prior to agreeing the sale price and disposal of the entire asset to reduce the Company's exposure and deliver £8.0m of profit over cost.  

Increasingly, the property management skills held within this business are being used by the Group to create additional value for the Company's other divisions, particularly on the major Wembley City and Greenwich Peninsula schemes. At Wembley, the two retail parks and eight industrial units acquired during the year by Special Projects are being actively managed by this team until the regeneration scheme reaches the required stage of development. Rent uplifts ranging from 21% to 68% have been achieved within these assets since they were acquired. At Greenwich Peninsula, the Investment Portfolio team played a fundamental role in sourcing and executing the pre-let of 136,000 sq ft of commercial space to Transport for London. Minor assets within the science park fund, Quantum, are also being managed until the fund reaches a critical mass.

Priorities

We expect the current malaise in the financial sector to continue to be felt during the year to March 2009. With few near-term opportunities to create significant value expected to emerge, Quintain's focus will remain on more attractive opportunities elsewhere in the Group. An aggressive approach to voids will continue throughout the current downturn.

Driving cross-business collaboration to secure maximum value from the Group's wider assets will be an increasing focus for the Investment Portfolio team during the year and we remain well positioned to respond to opportunities when value emerges in the commercial property sector.

  Business Review - Quintain Fund Management 

Strategy

In our fund management business we leverage our skills and opportunities, recycle our equity and diversify our income base, delivering sustainable fund management fees alongside attractive investment returns.

We deliberately focus on specialist property sectors where there are higher barriers to entry and that offer resilient returns in countercyclical areas of the market. This creates a strong, separate source of income for the Group.

We expect to invest in the funds we create, typically at a level between 20 and 40 percent, creating a strong alignment of our interests with those of our co-investors.

Fund management, performance and transaction fees supplement our investment returns and enable us to operate in areas of the market where the base return might fall at the margins of the levels we would seek to target on our own account.

We currently have three funds: Quercus, our healthcare fund; Quantum, which invests in science parks; and iQ, our student accommodation fund. Through these we manage investments for a growing list of institutions including The Wellcome Trust and funds managed by Morley.

Performance

At 31 March 2008, overall funds under management were up 41% to £1.0 billion (2007: £711m), with contractual commitments and 'agreed terms' transactions of a further £400m demonstrating forward momentum.

The funds delivered strong returns. Quercus produced a total return of 14.2% at fund level, although the reduction in the portfolio premium reduced this to 4.1% in our accounts. iQ, which is in its second year of operation, produced an IPD total return of 1.1%. Our third fund, Quantum, only made its first investment in October and we will be reporting on financial performance next year.

With Quintain's share of gross assets in our funds at £327m, QFM is rapidly becoming a substantial business in its own right and making a significant contribution to the Group's income statement. In the year to 31 March 2008 QFM accounted for 50% of gross profit including fee income of £8.6m, up 105% from last year.

Priorities

The excellent relationships we are developing with some of the market's leading investors position us well to support Quintain's wider business: creating funds seeded from the investment product being developed by our regeneration business and opportunities emerging from our Investment Portfolio and the wider market. The synergies between the three businesses are now bearing fruit, most notably through the student accommodation scheme that iQ will fund at Wembley City.

Whilst markets are challenging, the combination of skills, experience and focus positions us well to continue to produce attractive returns both for our own shareholders and for our partners and investors.

  - Quantum

Strategy

Quantum, a 50:50 joint venture with Morley, is a specialist science park fund. It seeks to exploit the opportunity created by the Government's sharpening focus on research and development as a key contributor to economic growth against the background of under-investment in facilities appropriate to this community.

There is no typical science park tenant. The community ranges from lone entrepreneurs with the kernel of a concept through to some of the world's most established brands, but they have similar needs: flexible space on flexible terms, excellent technology, good transport links and access to a deep pool of highly skilled staff.

Quantum seeks to lead the market by developing and applying best practice in the science park industry to undermanaged parks and new developments.

Performance

Significant progress was achieved during the year at our major development, SPark, The Bristol and Bath Science Park, in terms of design and planning. 

In December, South Gloucestershire Council voted unanimously to accept amendments to the £300m masterplan for the development, and the scheme was formally launched at Bristol's inaugural Science City event after the year end. The enhanced scheme is focused on acting as a catalyst for the regional science and technology industries and achieving excellence in environmental sustainability. Subject to receiving reserved matters consent, expected shortly, and satisfying outstanding conditions, we expect to be on site late in the summer.

Away from SPark we also made investment purchases during the year, creating the beginnings of an income-producing portfolio. In October we acquired a small estate on Heriot Watt Science Park near Edinburgh for £5.5m. Since taking over we have improved the external features by upgrading the landscaping and access and have agreed terms on a new five year lease that moves the ERV from £13.00 psf to £14.50 psf. Since the year end we completed a £1.9m acquisition of a building on Cambridge Science Park. These investments demonstrate our credentials with the relevant universities and provide a platform for expansion.

Priorities

Demand for R&D facilities is driven by different factors to the mainstream commercial property market. The Government's R&D agenda, encapsulated in the March 2008 white paper 'Innovation Nation' spells out the Legislature's commitment to driving R&D at every level across Britain. Among its stated objectives is the commitment to make Britain the best place in the world to run an innovative business and for R&D companies to invest. 

The support programme is extensive and addresses every level, from entrepreneurs seeking to turn their ideas into commercial propositions through to global brands looking for a supportive environment to create a new base. 

The shortfall between the facilities on offer and the level of growth the Government wishes to stimulate through investment in R&D is significant and augurs well for Quantum.

  - iQ

Strategy 

A year after bringing The Wellcome Trust into our student accommodation business we are delighted to report healthy growth, excellent occupancy rates and an active pipeline against the backdrop of continued and increasing demand.

There are now 1.4m full-time higher education students in the UK. This figure continues to rise, underpinned by a positive Government agenda. 

The strength of iQ's product, which provides a variety of room types within each scheme with an emphasis on giving the accommodation a 'residential' feel, marks it out from competitors in an undersupplied market.

Performance

iQ this year reported a total return, as measured by IPD, of 1.1%, significantly outperforming the wider commercial property sector. 

The student accommodation market has continued to grow. The emergence of weaker economic conditions has reduced the competition from those that are less well financed, but has stimulated interest from new investors seeking better returns away from their traditional markets. The timing of iQ's entry into this sector and swift assembly of strong core relationships stands the Fund in good stead. 

Following the successful launch of schemes in Sheffield and Nottingham, two further schemes were opened during the year in Birmingham and Salford, taking the total number of beds to 1,534. The Fund achieved lettings in excess of 97% across the four schemes.

At 31 March 2008 the operational schemes were valued at £80.1m. iQ typically contracts with developers to buy accommodation blocks on practical completion, subject to delivery on time and to agreed quality. The end value of schemes currently contracted is £147.3m. Of these, three schemes will be completed for the start of the 2008 academic year and three further schemes will be opened in 2009. In addition to the contracted pipeline, further deals worth up to £127.8m are under consideration or being negotiated. 

Yields in the 'direct-let' sector have remained robust, supported by continued investor interest and strong rental growth. Our operational schemes were valued at 31 March 2008 on an average net initial yield of 5.5%. On iQ's existing schemes, we expect to see year on year rental growth of approximately 5% based on rent levels being marketed. The three schemes opening in September 2008 are being marketed at rents above appraised levels and two will benefit from university leases. Take-up to date is in line with expectations.

In March, Quintain entered into an agreement to purchase an attractive London student accommodation scheme in Corsham Street, EC1. The transaction is subject to planning and financing and the developer expects to submit an application for planning consent shortly. We elected to warehouse it on our own balance sheet pending the discharge of conditions, following which we have a number of options for its longer-term funding, including transferring it into iQ.  

Priorities

The priority this year is to get the new schemes operational with high occupancy levels, and it is therefore pleasing to note that our Kingston development has been 100% pre-let for the whole academic year to Kingston University. Construction is well underway on two of the 2009 schemes and the third will commence shortly. We expect that by the end of the decade there will be over 5,000 beds available to students through iQ.

- Quercus

Strategy 

Quercus operates in the long-term healthcare sector, providing sale and leaseback finance to operators of elderly care homes, specialist nursing facilities, private hospitals and homes for those with learning disabilities. 

The demographics underpinning these sectors strongly support the long-term prospects of the Fund. The level of the population aged 80 and over is projected to rise from 4 to 7 percent over the next two decades. Concurrently, a decreasing infant mortality rate means life expectancy for people with severe learning disabilities is expected to rise by 1% per annum for the next eight years, leading to increased demand for specialist care.

Performance 

During the year Quercus grew funds under management by 31.0% to £850.6m (2007: £648.1m) and delivered a fund level return for the 12 months of 14.2% (2007: £26.2%). Gearing in the fund was 45.8% at 31 March 2008. The fund's debt facility contains an LTV covenant of 60%.

Valuations remained robust. Properties managed by the larger operators offering investment grade covenants have seen some upward yield shift; however, in the mid-market - Quercus' core focus - yields have been supported by the strength of the occupational market and strong rent covers. At 31 March 2008 the net initial yield in the fund was 6.9%. 

In our accounts the return from Quercus was impacted by the reduction by our external valuers to 5% of the 'portfolio premium' that we have historically added to the underlying sum of the parts valuation. This reduced the revaluation reserve by £8.4m. However, even after this downward adjustment Quercus delivered Quintain an IPD total return of 4.1%: a significant outperformance of the market.

The portfolio remains balanced with a diversified tenant base - no single operator accounts for more than 7% of rent. Over the period, 41 properties worth £129.7m were acquired at an average net initial yield of 7.13%, taking the portfolio to 261 properties in total. 

At the year end Quintain held a 26.9% interest in Quercus. Asset management fees received during the year were £4.6m net, including performance fees from prior years. In line with our conservative accounting policy, the performance fee for 2007 of £7.1m has not been recognised in this year's accounts as it is subject to clawback until December 2009.

The continued robust performance of Quercus has led to £85m of a £120m target being raised from new and existing investors, with several more currently undertaking due diligence. Quintain has subscribed for £30m.

Priorities

The continuing strength of the underlying trading environment means the sector will remain attractive for investors. Demand for places in this sector is driven primarily by the need for care and therefore Quercus is shielded from the full effect of the current financial uncertainty. Some operators are finding debt more difficult to obtain encouraging them to seek alternative sources of funding such as sale and leaseback. 

Finance Review

Headline Results

The basic net asset value per share at 31 March 2008 was 584p, a decrease of 11.5% from 660p in the prior year. On a diluted basis, the net asset value per share fell 11.7% from 655p to 578p. Adjusted diluted net asset value per share, the measure recommended by The European Public Real Estate Association ('EPRA'), fell by 13.8% to 676p per share (2007: 784p).

	31 March 2008	31 March 2007	% change
NAV per share basic	584p	660p	(11.5)%
NAV per share diluted	578p	655p	(11.7)%
NAV per share EPRA¹	676p	784p	(13.8)%
Dividend per share	12.25p	11.75p	4.3%
Total return per share²	(9.7)%	27.5%
Total return per share EPRA³	(12.2)%	29.9%

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

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

³ This uses the net assets per EPRA as shown in the table below. 

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

	31 March 2008 £m	31 March 2007 £m
Balance sheet net assets	745.7	846.1
Deferred tax arising on revaluation movements, capital allowances and derivatives
Group	111.0	151.0
Joint ventures	14.5	14.1
Associates	0.3	0.4
Fair value adjustment on interest rate swaps
Group	0.5	4.4
Joint ventures	1.4	(0.6)
	873.4	1,015.4
Dilutive effect of options	9.1	9.6
EPRA net assets	882.5	1,025.0

Total Return

Quintain's objective is to maximise long-term total return to shareholders. In the year to 31 March 2008 the Company delivered a total return of minus 9.7%. This was set against a backdrop of very challenging market conditions. The total return at property level, as measured by IPD, was minus 3.9%, compared with a benchmark for the March Universe of minus 8.5%. This result would have placed us within the top 15% of funds in the benchmark.

Operating Performance

EPRA earnings per share for the 12 months to 31 March 2008 were a profit of 2.5p (2007: loss 3.4p). The table below reconciles these numbers to the reported diluted earnings per share of a loss of 31.3p (2007: profit 32.7p). The main reconciling item is the impact of unrealised revaluation surpluses and deficits in relation to investment properties and reflects the impact of challenging market conditions as set out in the Chief Executive's Statement.

	31 March 2008 pence	31 March 2007 pence
IFRS fully diluted earnings per share	(31.3)	32.7
Revaluation movements
Group	38.6	(9.7)
Joint ventures	(0.6)	(20.8)
Loss on disposals	2.4	(11.6)
Deferred tax arising on revaluation movements, capital allowances and derivatives
Group	(5.1)	1.0
Joint ventures	(0.9)	6.1
Fair value adjustment on interest rate swaps
Group	(1.4)	(1.1)
Joint ventures	0.8	-
EPRA earnings per share fully diluted	2.5	(3.4)

Gross rental income, including our share of joint ventures, rose to £41.1m (2007: £40.4m) with the increased contribution from joint ventures more than compensating for the lower income within directly owned properties. The gross contractual annualised rent at 31 March 2008 of £40.7m (2007: £34.4m) is nearer to gross rental income as net disposals in the current year have been significantly lower than the prior year.

Within the directly owned portfolio, rent from acquisitions contributed £3.2m in the period, with new leases adding £0.9m. This was more than offset by the £5.7m of revenue lost as a result of disposals. Within joint ventures, net acquisitions contributed an additional £5.7m of income in the period.

	31 March 2008			31 March 2007
	Directly owned properties £m	Within joint ventures £m	Total £m	Directly owned properties £m	Within joint ventures £m	Total £m
Gross rental income	23.8	17.3	41.1	29.7	10.7	40.4
Gross contracted annualised rent	21.6	19.1	40.7	21.0	13.4	34.4
Gross ERV*	29.2	20.1	49.3	27.4	13.7	41.1
*Estimated Rental Value

Voids, as a proportion of ERV, remained constant at 23.4%. Of the £6.8m of potential rent only £1.3m, or 19%, remains intentional (2007: £0.6m, 9.4%). Those properties where short term lettings are being sought prior to development or where further refurbishment is being considered have been included within unintended voids and make up approximately 31% (2007: 45%) of the total.  A table of voids is set out below:

	ERV   £m
Royal Exchange, Manchester	1.0
York House, Wembley	0.8
Docklands Depot, Silvertown, EC3	0.8
54 Claybrook Drive, Redditch	0.7
The Synergy Building, Sheffield	0.6
Greenwich Peninsula, SE10	0.6
Wembley Retail Park, Wembley	0.4
Kansas Building, Liverpool	0.3
Hudson House, York	0.3
The Forum, Exeter	0.2
10 Farfield Park, Rotherham	0.2
Other	0.9
Total	6.8

The average unexpired lease term across the portfolio remained constant at 16 years and is supported by our share of nursing home income within the Quercus fund. These homes are typically let on 35 year RPI linked leases.

The table below sets out the lease expiries by gross contracted annualised rent, including our share of joint ventures across the Group:

	£m
Less than 1 year	6.2
1 to 2 years	2.9
2 to 5 years	4.4
5 to 15 years	2.6
Greater than 15 years	24.6
Total	40.7

Quintain aims to create a diverse tenant base in order to manage risk. Our tenant covenant strength has been measured by IPD using Experian and shows 66.6% of our rent roll (2007: 65.6%) is delivered from negligible, low and low/medium risk covenants. Live Nation, operating Wembley Arena, is by far the largest tenant, comprising 7.1% of contracted annualised rent. This exposure is reduced by receipts equating to approximately two thirds of the rent being received in Quintain controlled bank accounts before being passed on and also by Quintain's ability to step in to the business.

Gross profits rose by 5.8% to £32.7m (2007: £30.9m). This is analysed in note 2 to the accounts and, in addition to rental income from directly owned properties, comprises:

• Income from the sale of trading properties of £1.4m in relation to the sale of a caravan park. There was no equivalent income in the prior year.

• Income from hotel operations of £3.6m (2007: £1.4m) which reflects a full year of operations at the Plaza Hotel at Wembley following its acquisition in August 2006.

• Other income of £0.4m (2007: £3.7m). The previous period benefited from a £1.5m surrender premium and £1.2m from a property derivative contract that has now expired 

• Fees from fund management and other related services of £8.2m (2007: £3.0m). The main contributors are highlighted in the table below. Quercus benefited from increasing asset management fees and performance fees. In addition to the £1.6m recognised in the period, performance fees of £7.1m were received but the net impact was not recognised in the Income Statement as they remain subject to claw-back if the fund materially underperforms IPD in the period to December 2009. Following the formation of iQ in March 2007 we have received the first full year of asset management fees.

	31 March 2008 £m	31 March 2007 £m
Quercus Property Partnership	4.6	2.7
iQ Property Partnership	2.2	0.2
Greenwich Peninsula Regeneration Ltd	0.9	-
Other	0.5	0.1
Total	8.2	3.0

Administrative expenses before exceptional costs were £28.0m (2007: £25.8m). Of the increase, £1.2m reflected a full year's operations of the Plaza Hotel at Wembley, with the remainder arising from higher legal, professional and office costs. Further information is given in note 4 to the accounts. Administrative expenses include £0.3m of audit fees paid to KPMG and £0.1m for other services, the latter reflecting our policy of following best practice in corporate governance which recommends that non-audit fees should not be in excess of audit fees. 

The exceptional costs of £1.5m relate to bid defence fees and a one-off valuation exercise performed separately from the normal valuation process.

Sale of Non-Current Assets

Sales in the period with proceeds of £37.4m (2007: £138.7m) gave rise to a profit on historic cost of £13.3m (2007: £48.8m) and a loss against valuation of £3.3m (2007: profit £15.2m). The market conditions referred to in the Chief Executive's Statement resulted in significantly lower volumes being traded and, with values falling, the sales prices achieved were below historic valuation. The most significant disposal in the year was investment property, Smallbrook Queensway, Birmingham, for £28.0m.  

Revaluation Surpluses and Deficits

The net revaluation deficit arising from directly held investment properties was £44.3m (2007: surplus £11.7m). The revaluation movements on joint venture investments are incorporated within the share of profit from joint ventures which is discussed in more detail below. Development property surpluses are credited to equity except where deficits arise below cost, in which case the charge and any write back are included within the Income Statement. In the year to 31 March 2008 the deficit on development properties reflected in the Income Statement was £5.3m (2007: surplus £1.1m). Deficits of £77.2m (2007: surplus £182.3m) were reflected in equity.

Profit from Joint Ventures

The profit from joint ventures in the year was £5.5m (2007: £23.0m). The major variance in the two years is in revaluation, with a £0.9m surplus for the year to 31 March 2008 compared with £27.9m in the previous year. In challenging market conditions it is testament to the robust nature of these portfolios that net valuation surpluses were achieved.

The table below analyses the components of profit. The major increases in rental income arise from the iQ joint venture that was formed in March 2007 and the growth in assets within Quercus. Administrative expenses include our equity share of fees payable to Quintain in relation to asset management, transactions and performance. £8.2m (2007: £3.0m) of fees are accounted for separately within gross profit. Net finance costs have risen in line with the growth in funds and include a mark-to-market adjustment for hedges within iQ of £1.1m. A tax credit of £1.0m arises on the JV profit before tax of £4.5m. The significant factors that give rise to a net tax credit are that the current tax charge in Quercus and iQ has benefited from the availability of Quintain group losses for no consideration, and deferred tax on revaluation surpluses has been reduced by indexation allowances and the reduction in the UK corporate tax rate from 30% to 28%. A detailed breakdown of profit by joint venture is set out in note 12i to these accounts. An explanation of the activities of each joint venture is given below within the balance sheet section and a full analysis of key joint ventures is provided in the operating review.

	31 March 2008 £m	31 March 2007 £m
Net rent receivable	16.5	10.7
Administration expenses	(4.9)	(2.3)
Revaluation surplus Profit on disposals	0.9 0.2	27.9   -
Net finance costs	(8.2)	(3.6)
Profit before tax	4.5	32.7
Taxation	1.0	(9.7)
Profit after tax	5.5	23.0

Finance Expenses

Net finance expenses were £10.6m (2007: £6.9m). Of the increase, £2.8m was a write-off of loan costs on refinancing. Interest payable rose by £10.2 m with higher levels of drawn debt. This was partly offset by a £6.1m increase in interest receivable. In addition to interest on cash deposits, this included interest on loan notes to joint ventures and on a third party loan. Of the interest capitalised in the year, £9.4m related to the Wembley development and £2.1m to Greenwich.

	31 March 2008 £m	31 March 2007 £m
Interest payable	31.6	21.4
Interest capitalised	(12.0)	(9.2)
Interest receivable	(9.9)	(3.8)
Write-off of fees on refinancing	2.8	-
Profit on termination of interest swaps	(2.2)	-
Change in fair value of financial instruments	0.3	(1.5)
Total net finance expenses	10.6	6.9

Taxation

The Income Statement shows a tax credit for the year of £14.6m (2007: tax charge £5.9m). In addition to this a further £33.1m has been credited to reserves (2007: tax charge £45.2m) reflecting a reduction in the deferred tax provision in line with the valuation deficit for the year and the reduction in the Corporation Tax rate to 28% from 30% as of 1 April 2008. 

Balance Sheet

The Company comprises three divisions, the Investment Portfolio, Special Projects and Quintain Fund Management. Each of these divisions holds investment and development properties. Revaluation surpluses and deficits in relation to investment properties are charged to the Income Statement, whilst those for development properties are reflected in equity. Properties shown on the Balance Sheet are those held directly by the Group and are split between investment and development. In addition the Group owns a share of properties held by joint ventures which are included within the Group's share of the joint venture net assets. A small number of properties are held for trading and are valued at the lower of cost and net realisable value. The table below analyses the gross value of assets split between investment, development and trading as at 31 March 2008 and the net assets within joint ventures by division.

Value on balance sheet:	Investment Portfolio £m	Special Projects £m	Fund Management £m	Total £m
Investment	163.3	40.5	16.8	220.6
Development	15.5	824.3	3.7	843.5
Trading	-	15.5	-	15.5
Total	178.8	880.3	20.5	1,079.6

Net assets in joint venture

-

79.2

160.1

239.3

Total revaluation movements in the 12 months to 31 March 2008 gave rise to a deficit of £125.8m (2007: surplus £222.5m). Whilst market conditions were challenging for the whole period, there was a significant deterioration in the second six months of the year.

The directly owned investment properties fell in value by £44.3m of which £30.1m related to the second half of the year. Development properties fell in value by £82.4m, although in the first six months they rose in value with strong performances from the Greenwich and Wembley schemes. The movement for the second six months was a decline of £150.9m. 

The total revaluation of properties in joint ventures gave rise to a small surplus of £0.9m (2007: £27.9m). This strong performance compared with the market is indicative of the defensive qualities within these portfolios. 

For Wembley and Greenwich, the two largest assets in the portfolio, a greater analysis of the valuations and sensitivities is set out below.

Wembley City

	£m
As at 1 April 2007	524.0
Acquisitions:
Wembley Retail Park	89.0
Stadium Retail Park	22.9
Wembley Trading Estate	15.9
Capital expenditure	35.6
Capitalised interest	9.4
Valuation deficit	(76.8)
As at 31 March 2008	620.0

The valuation deficit for the 12 months of £76.8m was driven by upward yield shift on the commercial elements of the scheme and reduced expectations in the near term for residential prices. At the previous year end, growth rates for the subsequent three years had been 7.5% nominal or 1.5% real (net of 6% cost inflation). As this asset is not matur, the valuers anticipate achieving in excess of market growth rates albeit at a lower level than previously assumed. Growth rates are now incorporated at 5% nominal for the next three years or minus 0.5% real. The valuation methodology is explained below and the valuers' reports will be included in the Company's report and accounts. Savills, who have produced the year end valuation, used a discount rate of 10%. This is unchanged from last year end and reflects the balance of risks in the assumptions used in the valuation.

Whilst the valuation is a view of what the market may pay at any point in time, it is supported by a discounted cashflow model. This model is based on many assumptions and the table below is included to provide shareholders with a better understanding of the dynamics relating to some of these assumptions. It is a sensitivity analysis and is not necessarily an indication of the Company's view.

Valuation £m		Discount Rate
		11%	10%	9%	8%
Amendment to model	-3%	493	529	568	613
growth rates	-1%	550	590	633	681
	0%	579	620	665	715
	+1%	609	652	698	750
	+3%	674	720	770	826

Our internal model reflects current prices for residential units at £550 to £620 per sq ft.

In the creation of a regeneration impact there is the possibility of shifting these base prices. If the starting price was £100 per sq ft higher, the matrix set out above would then look as follows:

Valuation £m		Discount Rate
		11%	10%	9%	8%
Amendment to model	-3%	576	616	660	709
growth rates	-1%	636	680	728	781
	0%	669	714	764	819
	+1%	702	749	801	859
	+3%	773	825	881	943

Greenwich Peninsula

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

	£m
As at 1 April 2007	225.0
Capital expenditure	20.6
Capitalised interest	2.1
Valuation surplus	6.3
As at 31 March 2008	254.0

The valuation of Greenwich, which is shown partly in development properties and partly within joint ventures, held up very well in the period relative to the market, showing a £6.3m surplus for the 12 months. The 0.5% upward yield shift in the commercial elements and reduction in the growth rates, as per Wembley, were offset by growth in residential base prices, the office letting to TfL, which added credibility and sector diversification to the area as an office location, and improved income from The O2. The discount rate was unchanged at 12%. As for Wembley, varying the discount and growth rates gives the following sensitivities:

Valuation £m		Discount Rate
		12%	11%	10%	9%
Amendment to model	-3%	142	158	169	180
growth rates	-1%	216	234	250	267
	0%	254	273	292	312
	+1%	294	315	336	359
	+3%	384	406	434	465

Our internal model reflects current prices for residential units at £495 to £810 per sq ft. If the regeneration impact increased current prices by £100 per sq ft the matrix above would then look as follows:

Valuation £m		Discount Rate
		12%	11%	10%	9%
Amendment to model	-3%	220	239	255	271
growth rates	-1%	300	321	342	364
	0%	343	365	389	415
	+1%	389	413	440	469
	+3%	492	518	553	590

Capital Commitments

The table below sets out capital commitments including our share of any commitments within joint ventures. The largest, which is £44.6m in respect of iQ, is 50% of the forward funding agreements in relation to development pipelines. We anticipate 65% of this cost being met by undrawn debt facilities within iQ.

	31 March 2008 £m
Group:
Wembley	16.3
Others	0.4
Joint ventures:
iQ	44.6
BioRegional Quintain	6.4
Wembley - W01	5.6
Quercus	4.4
Quantum	2.1
Greenwich - MDL	0.7
	80.5

In addition to the above, we are progressing projects that are directly owned and unconditional which will require capital of £33.5m. We are also progressing joint venture projects with uncommitted capital requirements of £56.0m.

Joint Ventures

As at 31 March 2008, Quintain had net investment in joint ventures totalling £239.3m. A breakdown of this is included in the table below and more financial details are available in note 12i to these accounts.

Joint venture	Share of equity	Net investment £m
Quercus	26.9%	123.1
GPRL	49.0%	49.6
iQ	50.0%	32.3
Greenwich Peninsula N0204	50.0%	12.3
BioRegional Quintain	49.9%	9.2
Quintessential Homes	50.0%	5.6
Quantum	50.0%	4.7
Other joint ventures	N/A	2.5
		239.3

Quercus

This is a healthcare property fund, of which Quintain owns 26.9% of the equity and acts as asset manager. For this role Quintain receives asset management, transaction and performance fees. Details of the operations and activities of this Fund are set out in the QFM business review. 

Greenwich Peninsula Regeneration Ltd (GPRL)

This vehicle has a development agreement to draw down 194 acres at Greenwich Peninsula, for which it has gained a 13.2 m sq ft mixed use planning consent. It can either develop the land directly or sell it on to third party developers. The remaining 50% is owned by Lend Lease Europe Limited.

iQ

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

Greenwich Peninsula N0204

This is a 50/50 joint venture with Lend Lease Europe Limited to build the first commercial buildings at Greenwich Peninsula. The buildings comprise 308,000 sq ft of commercial space, of which TfL have leased 135,000 sq ft for 20 years. They have an option over the remaining office space in the first building, an additional 60,000 sq ft. The building also has 15,400 sq ft of retail space. Building work has commenced and is due to complete in the second half of 2009.

Quintessential Homes

Forum House is the first residential block at Wembley, also known as W01. The building contains 145 private apartments which are being funded 50% by Quintain and 25% by each of Genesis and Family Housing Associations. The housing associations are funding 100% of the 141 affordable housing units. All private apartments are pre-sold. Quintain receives development management fees.

BioRegional Quintain

This is a 50/50 joint venture between Quintain and BioRegional Properties Ltd. BioRegional is a private company that has a formal collaboration agreement with the World Wildlife Fund to promote 'One Planet Living'. The joint venture is aiming to be the leading sustainable property developer in the UK. It has schemes at various stages of progress, including a 172 apartment building in Brighton where development is on site (this in turn is owned in a 50/50 JV with Crest Nicholson); Middlehaven, where we have a development agreement for a 1m sq ft mixed use consent and have commenced initial infrastructure works and built a marketing suite; and Gallions Park, the Mayor's exemplar green development for London, where we are working up a detailed planning application.

Quantum

Quantum is a science park fund owned 50/50 with CGNU Life Assurance, managed by Morley. It has signed its first development agreement to build an 829,000 sq ft science and technology park, SPark at Emersons Green, Bristol and will look to acquire further investment and development opportunities. Details of this agreement and the plans for the Fund are set out in the QFM business review.

Financing Strategy and Capital Structure

Our financial strategy in the medium term is to manage a level of debt that balances the risks to the business with the higher returns on equity that, over time, will accrue due to the lower cost of debt. Gearing levels, being the proportion of debt compared with equity, will vary depending on the profile of operational risks, the capital that is currently committed or expected to be committed in the future and the cyclical high or low of property valuations. Last year we stated that our gearing level was below our long-run expected level due to significant anticipated expenditure. Capital expenditure over the last 12 months was £167.2m and this, together with a deficit on valuation, has increased gearing to 69% (2007: 36%). If deferred tax and marking to market of debt are removed, as per the definition within our banking covenants, gearing was 60% (2007: 30%) compared with a covenant limit of 110%. The Company therefore has significant headroom.

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

Towards the end of the year we refinanced all of the corporate debt. The key elements were an increase in maturity, the removal of the covenant limiting investment in joint ventures to 50% of net assets and an amendment to the 1.25 times interest cover covenant allowing capitalised interest to be deducted from interest payable in calculating cover, so recognising the nature of the business with a significant development programme and limited near-term income. Given the timing of the refinancing, and reflecting the improved facilities, the margin increased by 20 basis points to an average of 115 basis points. The Company initially raised £620m and since the year end has increased this to £715m. 

The weighted average rate of interest of the Group's debt at the year end was 7% (2007: 6.6%). Since the year end as noted below we switched some of our hedging into swaps bringing the average rate of interest down to 6.4%. In measuring the cost effectiveness criteria, whilst this rate is slightly ahead of the market, we believe this is a price worth paying for the flexibility we now have in our financing structure. 

	31 March 2008	31 March 2007
Net borrowings	£516.3m	£302.8m
Gearing	69%	36%
Gearing per banking covenants	60%	30%
Weighted average debt maturity	5.5 years	5 years
% of net debt hedged	84%	55%
Interest cover**	1.7 times	6.6 times
Undrawn committed facilities
Group	£81m*	£164m
Joint ventures	£101m	£1m
Capital commitments
Group	£16.7m	£15.7m
Joint ventures	£63.8m	£81.5m

* Since the year end this has increased with the raising of a further £95m of debt facilities

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

Interest cover for the year ended 31 March 2008 was 1.7 times (2007: 6.6 times). The significant difference in the two years was the realised revaluation surplus. In the prior year, sales of £138.7m achieved profits over historic cost of £48.8m compared with sales of £37.4m and a historic cost profit of £13.3m for the current period. This arose because of the timing of our projects, where no developments were completed during the year, and the low level of investment sales due to market conditions.

Hedging

As at 31 March 2008, Quintain's interest rate risk was 83.7% hedged (2007: 54.8%). The fair value adjustment on these interest rate hedging instruments was a deficit of £0.5m (2007: deficit £4.4m). Of the movement during the year, £0.4m was debited to the Income Statement, being the element relating to non-cashflow hedges and £0.1m directly to equity.

Quintain manages its risk in relation to interest rate movements by hedging at least 50% of the exposure and managing these positions to shareholders' benefit whilst not taking market risk. In April 2007 we took out £225m of six year caps at 6.5%, cancelling the outstanding £157m of swaps and £50m of forward start swaps, recognising a profit of £2.1m. As we drew down debt during the year we added a further £50m of five year caps at average rates of 5.6% and £150m of five year swaps at average rates of 4.97%.

Since the year end, as the five year swap rate reduced, we cancelled £225m of caps and replaced them with five year swaps at an average rate of 4.96%. The length of the positions reflects the length of the loans outstanding.

A 50 basis point increase or decrease during the year would have changed interest payable by £1.8m. Whilst at this level it is symmetric, when interest rates reach a level where the caps become effective then increasing rates have a lesser impact on the cost than reducing rates do on cost savings.

The Quercus fund has floating rate non-recourse debt of which 76% was hedged by swaps at 31 March 2008. Quintain's share of the fair value deficit was £0.5m. This is reflected in equity. 

The iQ joint venture also has floating rate non-recourse debt of which 80% was hedged with caps and floors at 31 March 2008. Of the fair value deficit, Quintain recognised £1.0m in the Income Statement and £0.5m in equity. Details of these are set out in note 21iii to the accounts.

Cashflow

Net cash outflow from operating activities was £33.9m (2007: £11.5m). The major reconciling differences in the two years were net interest paid which increased by £12.9m reflecting higher levels of drawn debt being used to fund development opportunities and the purchase of the remaining interest in City Park Gate, a trading property, for £5.5m. The former is reflected in the cash outflow from investment activities of £159.5m. The major constituent of the purchases and development of property activities of £168.4m was acquisitions at Wembley and a table of these and the capital expenditure on site is included in the finance section under the heading Wembley City. £64.7m of funding was provided to joint ventures, the largest being £18.3m to our student accommodation fund iQ, £13.3m to Quercus, the healthcare fund, and £7.0m to GPRL, the vehicle managing the development of the Greenwich Peninsula. Partly offsetting these were receipts of £81.4m from sales. These proceeds are split between sales in the current year of £30.1m and sales relating to the previous year where cash was received post year end of £51.3m. 

Accounting

These accounts include the first time adoption of IFRS 7. The only impact is on the provision of additional disclosure. 

The year to 31 March 2008 was the first year in which a formal revaluation was carried out at the interim stage and reflected in the interim accounts. The comparative numbers have been restated to incorporate a Directors' valuation for the prior interim period.

Key Performance Indicators

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

Financial Performance Indicator	Target	One year	Five years
Total return*	10% Real	-9.7%	16.0%
IPD Performance**	Top quartile	13th percentile	2nd percentile

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

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

As a listed property company, it is also appropriate to measure our performance in ways other than financial, thus recognising the impact of our activities on stakeholders. We have set two key measures against which we will now report:

	2008	2007
Staff retention and motivation
% of staff that feel 'very happy at work'	81%	81%

Environmental Sustainability:

A cumulative saving of 50,000 tonnes of carbon over 10 years, assuming current build out rate

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.

In delivering high long-run returns to shareholders, the identification and monitoring of risk is crucial. A detailed risk register is updated regularly and those responsible for managing areas of risk are required to report on them every six months and by exception. Our internal audit function reviews the risk register for completeness and accuracy. In addition, the risk register is considered by the Audit Committee. The Risk Committee debates key risks and mitigation on a regular basis. Those risks judged to be critical to the business, as shown by the risk scores attributed by a combination of likelihood and impact, are set out below.

Descriptions and implications of risk	Mitigation
Reputation Good stakeholder relationships are important in winning new business, funding and favourable planning consents.	Ongoing senior management engagement with stakeholders. High level, market leading focus on environmental, social and economic sustainability. Employment of highly skilled teams with a track record of delivery and communication skills.
Personnel  The quality of Quintain's team is crucial to the Company's success. Failure to retain existing talent or recruit the right personnel for key positions could affect delivery of the business strategy.	Focus on nurturing Quintain's culture of empowerment, support and accountability. Annual employee survey to identify issues which are then openly addressed. Engagement of employees through regular formal staff meetings, fortnightly informal events and weekly transmission of news. Introduction of a share incentive plan and enhanced pension scheme, and long-term incentive and remuneration packages for key employees.
Succession planning is required to guard against the sudden emergence of skill gaps.	Given the impact of a few key individuals this is challenging, however we have a continuous programme of recruiting high performers directly below board level.
Development  With a strong development pipeline, visibility into and control of construction costs is vital to prevent overspend or delays.	Quintain's in-house project management team transfers risk to contractors where possible and encourages a culture of no changes once the design is agreed. The supply chain management initiative is creating increasing visibility into opportunities for cost control and reduction, whilst standardisation across Quintain's projects will increase predictability and provide economies of scale.
Financial  Financial overtrading resulting in insufficient liquidity or a breach of banking covenants.	Tight control over expenditure through budgeting and capital approval process. Regular monitoring of banking covenants and scenario testing including cashflows. Strong relationships with banks.
Inadequate financial information and forecasting for decision making, resulting in inappropriate decisions.	Employment of a high quality financial team who provide comprehensive budgeting and historical financial information to understand impact of decision making. Rigorous development appraisal and development control process
Market Risk A deterioration in the key markets of residential and commercial property will adversely impact the Balance Sheet.	Whilst we have a considerable quantity of planning consents we have few development obligations. The majority of the on-site development is either pre-let or pre-sold. Significant sales of commercial property over the last three years have materially reduced the impact of an adverse movement in commercial yields.

The detailed assessment of financial risk management covering credit, liquidity and market risk is set out in note 20 to the accounts.

Developments on site:

Development	Ownership	Content	GDV (1)	Practical Completion
N0204	50%	308,000 sq ft commercial	£174.6m	July-December 2009
W01	50%	145 apartments, retail & commercial	£46.7m	August 2008
W04	100%	233 apartments, retail & community	£52.0m	December 2009
Brighton	25%	172 apartments + 24,000 sq ft commercial	£28.9m	December 2009

(1)Gross Development Value excludes affordable housing element and reflects 100% of the scheme

Development Pipeline:

Project	Sector	Share	Area	GDV £m (1)	Planning	Proposed Timing
Wembley  (Phase 1)	Mixed use	100%	6.3m sq ft	2,500	Outline	Now-2017
Greenwich Peninsula (2)	Mixed use	50%	13.2m sq ft	5,000	Outline	Now-2023
Bristol and Bath Science Park (2)	Science Park	50%	829,000 sq ft	222	Outline	2008-2020
Middlehaven, Phase 1 (2)	Mixed use	50%	1.0m sq ft	200	Outline	2008-2015
City Park Gate, Birmingham (2)	Mixed use	100%	1.0m sq ft	230	Resolution to grant	2009-2017
Beverley	Mixed use	19%	485,000 sq ft	102	Resolution to grant	2009-2014
Emersons Green, Bristol	Mixed use. 65 acres of 275 acre site	25%	2,550 units		Submitted	2008 onwards
Wembley (Phase 2)	Mixed use	100%	39 acres		Being prepared	2010-2025
Dorset House, Oxford	Student scheme	100%	82,000 sq ft		Being prepared	2009-2011
Gallions Park	Residential	25%	3 acres		Being prepared	2008-2010
Docklands Depot, Silvertown	Mixed use	66.7%	12.6 acres			2012 onwards

• Gross Development Value is only shown where planning has been received and reflects 100% of the scheme.

• These properties are subject to a development agreement

  QUINTAIN ESTATES AND DEVELOPMENT PLC

Consolidated Income Statement

for the year ended 31 March 2008

	Notes	2008 £000	2007 restated £000
Revenue from continuing operations	2	46,676	43,426
Cost of sales in respect of continuing operations	2	(13,986)	(12,542)
Gross profit from continuing operations		32,690	30,884
Administrative expenses (before exceptional administrative expenses)	4	(27,972)	(25,819)
Exceptional administrative expenses	4	(1,485)	-
Operating profit before recognition of results from non-current   asset sales and revaluation		3,233	5,065
(Loss) profit from the sale of non-current property assets		(3,289)	8,383
Profit from the sale of shares in subsidiaries	28	-	6,786
Gain on revaluation of investment properties		338	12,616
Deficit on revaluation of investment properties		(44,661)	(924)
Deficit on revaluation of development properties		(5,265)	(182)
Reversal of deficit on revaluation of development properties		-	1,255
Share of profit from joint ventures	12i	5,532	23,011
Share of loss from associate	12ii	(65)	(455)
Operating (loss) profit		(44,177)	55,555
Interest payable		(22,335)	(12,174)
Change in fair value of derivative financial instruments		1,851	1,493
Finance expenses		(20,484)	(10,681)
Finance income		9,921	3,759
Net finance expenses	5	(10,563)	(6,922)
(Loss) profit before tax from continuing operations		(54,740)	48,633
Current tax		2,105	(8,347)
Deferred tax		12,511	2,410
Tax credit (charge) for the year	6i	14,616	(5,937)
(Loss) profit after tax but before result from discontinued operations		(40,124)	42,696
Loss from discontinued operations, net of tax	7	-	(34)
(Loss) profit for the financial year attributable to equity shareholders		(40,124)	42,662
Earnings per share from continuing operations (pence):	8i(a)
Basic		(31.3)	33.3
Diluted		(31.3)	32.7
Earnings per share from total operations (pence):	8i(b)
Basic		(31.3)	33.3
Diluted		(31.3)	32.7
Dividends per share (pence):	9
Interim (paid)		3.75	3.50
Final (proposed)		8.50	8.25
Total		12.25	11.75

In accordance with IAS 10, 'Events after the Balance Sheet Date', the Consolidated Balance Sheet reflects dividends which have been paid in the year. Proposed dividends are shown for information purposes only.

Consolidated Statement of Recognised Income and Expense 

for the year ended 31 March 2008

	Notes	2008 £000	2007 restated £000
Foreign currency translation differences		232	(319)
Gain on revaluation of development properties		1,838	182,289
Deficit on revaluation of development properties		(79,006)	-
Gain (deficit) on revaluation of other non-current investments		757	(882)
Effective portion of changes in fair value of cashflow hedges, net of recycling		(416)	7,047
Share of recognised income and expense in joint ventures, net of tax	12i	(702)	546
Tax recognised on income and expense recognised directly in equity	6iii	33,082	(45,230)
Net (expense) income recognised directly in equity		(44,215)	143,451
(Loss) profit for the financial year		(40,124)	42,662
Total recognised income and expense for the financial year		(84,339)	186,113

Consolidated Balance Sheet as at 31 March 2008
	Notes	2008 £000	2007 £000
Non-current assets
Investment properties	10	220,624	288,938
Development properties	10	843,536	769,305
Owner-occupied properties, plant and equipment	11	2,757	1,470
Investment in joint ventures	12i	239,340	170,099
Investment in associate	12ii	1,157	1,222
Other non-current investments	12iii	15,196	3,044
Non-current receivable	13	42,987	45,349
Total non-current assets		1,365,597	1,279,427
Current assets
Trading properties	14	15,518	6,831
Trade and other receivables	15	39,617	73,667
Current investments	16	4	4
Cash and cash equivalents	20iii	27,982	36,048
Total current assets		83,121	116,550
Total assets		1,448,718	1,395,977
Current liabilities
Bank loans and other borrowings	18	-	(3,000)
Trade and other payables	17	(36,354)	(37,466)
Current tax liability		(7,269)	(9,216)
Total current liabilities		(43,623)	(49,682)
Non-current liabilities
Bank loans and other borrowings	18	(541,637)	(333,924)
Deferred tax liability	6iv	(103,638)	(149,620)
Obligations under finance leases	19	(11,727)	(11,734)
Other payables		(2,392)	(4,919)
Total non-current liabilities		(659,394)	(500,197)
Total liabilities		(703,017)	(549,879)
Net assets		745,701	846,098
Equity
Issued capital	23	32,483	32,457
Share premium account	22	51,343	50,797
Revaluation reserve	22	327,360	370,814
Other capital reserves	22	108,136	108,136
Cashflow hedge reserve	22	(322)	671
Translation reserve	22	318	86
Retained earnings	22	238,805	292,481
Own shares held reserve	22	(12,422)	(9,344)
Equity shareholders' funds		745,701	846,098
Net asset value per share (pence):	8ii
Basic		584	660
Diluted		578	655

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

ADRIAN WYATT	REBECCA WORTHINGTON
Director	Director

Consolidated Cashflow Statement

for the year ended 31 March 2008

	Notes	2008 £000	2007 restated £000
Operating activities
(Loss) profit for the financial year		(40,124)	42,662
Adjustments for:
Short leasehold amortisation		-	248
Depreciation of plant and equipment		622	472
Cost relating to share-based payment schemes		2,147	3,718
Net finance expenses		10,563	6,922
Loss (profit) on sale of properties held as non-current assets		3,289	(8,383)
Profit on sale of trading property		(1,558)	-
Profit on sale of shares in subsidiaries		-	(6,786)
Gain on revaluation of investment properties		(338)	(12,616)
Deficit on revaluation of investment properties		44,661	924
Deficit on revaluation of development properties		5,265	182
Reversal of deficit on revaluation of development properties		-	(1,255)
Share of profit from joint ventures		(5,532)	(23,011)
Share of loss from associate		65	455
Loss on sale of plant and equipment		2	61
Impairment of other investments		-	69
Tax on continuing operations		(14,616)	5,937
Tax on discontinued operations		-	(14)
		4,446	9,585
(Increase) decrease in trade and other receivables		(8,352)	1,870
Increase (decrease) in trade and other payables		1,915	(7,061)
Increase in trading properties		(3,417)	(17)
Cash generated from operations		(5,408)	4,377
Interest paid		(36,753)	(18,930)
Interest received		8,527	3,587
Tax paid		(310)	(520)
Net cashflow from operating activities		(33,944)	(11,486)
Investing activities
Purchase and development of property assets		(168,362)	(133,096)
Purchase of owner-occupied properties, plant and equipment		(1,911)	(1,010)
Proceeds from sales of non-current assets		81,403	117,595
Tax paid on sales of non-current assets		-	(3,230)
Proceeds from sales of current investments		-	3
Proceeds from sales of shares in subsidiary companies		-	20,476
Acquisition of investment in joint ventures		-	(2,335)
Loans to joint ventures		(64,718)	(17,588)
Distributions received from joint ventures		3,130	8,400
Acquisition of other investments		(11,398)	(54,962)
Repayment of non-current receivable		2,362	7,851
Net cashflow from investing activities		(159,494)	(57,896)
Financing activities
Issue of shares		239	1,120
Investment in own shares		(3,078)	(6,060)
Proceeds from new borrowings		980,769	315,000
Repayment of borrowings		(775,269)	(197,432)
Payment of loan issue costs		(3,276)	(431)
Payment of finance lease liabilities		(819)	(873)
Equity dividends paid		(15,366)	(13,744)
Net cashflow from financing activities		183,200	97,580
Net (decrease) increase in cash and cash equivalents		(10,238)	28,198
Cash and cash equivalents at start of year		36,048	7,954
Effect of exchange rate fluctuations on cash held		2,172	(104)
Cash and cash equivalents at end of year		27,982	36,048
Net cashflow from discontinued operations included in net cashflow from operating    activities	7	-	(489)

A cash outflow of £5,451,000 included in Increase in trading properties represents the purchase of shares in a single purpose vehicle which holds a trading property. This transaction is outlined in more detail in note 27.

 1 ACCOUNTING POLICIES

i)    BASIS OF PREPARATION

The Group's financial statements have been prepared and approved by the Board in accordance with International Financial Reporting Standards and interpretations issued by the International Financial Reporting Interpretations Committee as adopted by the European Union ('IFRS') and those parts of the Companies Act 1985 applicable to companies reporting under IFRS.

The financial statements are presented in Sterling and have been prepared on an historical cost basis except that investment and development properties, other non-current investments and certain financial instruments as described in section xvii below, have been stated at fair value.

The interim report presented by the Group during the year was the first to be prepared in accordance with IAS 34 'Interim Financial Reporting' and included a full revaluation of the property portfolio as at 30 September 2007. The report also included a restatement of the Balance Sheet as at 30 September 2006 using a directors' valuation as at that date, though this was based upon the valuation exercises conducted by external valuers. As a result of increased valuations being incorporated at 30 September 2007, gains previously calculated as at 31 March 2007 were in part incorporated as part of that valuation. Therefore the comparatives for the year ended 31 March 2007 have been restated to reclassify a gain on disposal of £3,440,000 previously presented in the Income Statement to the Statement of Recognised Income and Expense.

The effect of the restatement was as follows:

Income Statement

			Year ended 31 March 2007 £000
Profit before tax before restatement			51,638
Effect of restatement			(3,005)
Restated profit before tax			48,633
The restatement may be analysed as follows:
Profit from sale of non-current property assets			(3,440)
Gain on revaluation of investment properties			435
Effect of restatement on profit before tax			(3,005)
Effect of restatement on deferred tax			902
Effect of restatement on profit for the financial year			(2,103)
Effect of restatement on earnings per share from continuing operations (pence): Basic			(1.7)
Diluted			(1.6)
Effect of restatement on earnings per share from total operations (pence):
Basic			(1.6)
Diluted			(1.6)
Consolidated Statement of Recognised Income and Expense
			Year ended 31 March 2007 £000
Total recognised income and expense for the financial year before restatement			186,113
Effect of restatement			-
Restated total income and expense for the financial year			186,113
The restatement may be analysed as follows:
Gain on revaluation of development properties			3,005
Tax on income and expense recognised directly in equity			(902)
Effect of restatement on net income recognised directly in equity			2,103
Effect of restatement on profit for the financial year			(2,103)
Effect of restatement on total recognised income and expense for the financial year			-

Consolidated Balance Sheet

There was no impact upon the Group's Balance Sheet and basic and diluted net asset value per share as at 31 March 2007.

Consolidated Cashflow Statement

The change affected the reconciliation of profit for the financial year to net cashflow from operating activities, but had no impact on the main subtotals and totals presented in the Cashflow Statement.

IFRS 7,'Financial Instruments: Disclosure' and the complementary amendments to IAS 1, 'Presentation of Financial Statements - Capital Disclosures' have been adopted for the first time in these accounts, introducing new disclosures relating to financial instruments but having no impact on the classification or valuation of these instruments.

At the date of approval of these financial statements, it is not anticipated that any standards or interpretations in issue but not yet effective will have a material impact on the accounts.

ii) SIGNIFICANT JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of financial statements under IFRS requires the Board to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities as at the date of the financial statements and the reported amount of 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 judgements that are not readily apparent from other sources. However, the actual results may differ from these estimates.

The measurement of fair value constitutes the main area of judgement exercised by the Board in respect of the Group's results. In relation to the Group's investment and development 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. Copies of the valuation reports of Savills Commercial Limited and Jones Lang LaSalle Limited, which together account for 98.4% of these categories of non-current assets, and of Christie + Co, which values the investment properties within Quercus, currently the Group's principal joint venture, are in the annual report.

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

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

In respect of derivative financial instruments, the Board has relied on the valuation carried out by JC Rathbone Associates Limited, financial risk consultants, and the basis for this exercise is referred to below in section xvii of this note and in note 21.

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

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

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

iii)    BASIS OF CONSOLIDATION

The Group's financial statements consolidate those of the Company and its subsidiaries, together referred to as the Group, and equity account the Group's interest in its joint ventures and associate. The parent company financial statements present information about the Company as a separate entity and not about its Group. The Company has elected to prepare its parent company financial statements in accordance with UK GAAP. 

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

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

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

iv)    FOREIGN CURRENCY

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

£1=		Year end 2008	Year end  2007	Average 2008	Average 2007
France		€1.26	€1.47	€1.42	€1.48
United States		$1.99	$1.96	$2.01	$1.89

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

  v)    REVENUE AND COST OF SALES

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

Rental income from investment and development properties leased out under operating leases is recognised in the Income Statement on a straight-line basis over the term of the lease. Contingent rents which comprise turnover rents are recognised as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants.

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

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

Sales of trading properties are recognised on the unconditional exchange of contracts by the balance sheet date.

Income from hotel operations represents income receivable from the Plaza Hotel, Wembley, prior to the redevelopment of the site, for which outline planning permission has been obtained.

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

Other income comprises income receivable from property derivative instruments entered into by the Group, tenant lease surrender premiums, insurance commission, car parking receipts, property management fees and miscellaneous income.

vi)    PURCHASE AND DISPOSAL OF PROPERTIES HELD AS NON-CURRENT ASSETS

Property purchases and sales are recognised in the accounts on the date of unconditional exchange or where an exchange is conditional, on the date that conditions have been satisfied. Profits or losses arising on disposal are calculated by reference to the carrying value of the asset at the date of the last revaluation, adjusted for subsequent capital expenditure.

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

vii)    IMPAIRMENT

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

The recoverable amount of an asset is the greater of its net selling price and its value-in-use. The value-in-use is determined as the net present value of the future cashflows expected to be derived from the asset, discounted using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Any impairment of financial assets is based on the original effective interest rate attributable to the financial asset on acquisition.

viii)    EMPLOYEE BENEFITS

Pensions

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

Share-based payment schemes

The fair value of equity rights is estimated using the Black-Scholes and binomial models at the date of grant to directors and staff and is dependent on factors such as the exercise price, expected volatility, option price and risk free interest rate. The fair value is then amortised through the Income Statement on a straight-line basis over the vesting period. Expected volatility is determined based on the historic share price volatility (market price) for the Company on the grant date over a period matched to the expected life of the awards. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest, except where forfeiture is only due to the share price not achieving the threshold for vesting.

ix)    CAPITALISATION OF BORROWING COSTS

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

x)    TAX

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

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

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

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

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

xi)    DISCONTINUED OPERATIONS

In accordance with IFRS 5, 'Non-current Assets Held for Sale and Discontinued Operations', the loss from these discontinued operations is shown in the Income Statement net of tax.

xii)    INVESTMENT PROPERTIES

Investment properties are properties owned or leased by the Group which are held either for long term rental growth or for capital appreciation or both. Investment properties are initially recognised at cost including related transaction costs and valued bi-annually by professionally qualified external valuers.

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

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

Investment properties are independently valued bi-annually by external valuers at market value. The valuations are prepared by considering the aggregate of the net annual rents receivable from the properties and where relevant, associated costs. A yield which reflects the specific risks inherent in the net cashflows is then applied to the net annual rentals to arrive at the property valuation. Gains or losses arising from changes in the fair value of investment properties are included in the Income Statement of the year in which they arise. When the Group redevelops an existing investment property for continued future use as an investment property, the property remains an investment property and is not reclassified.

xiii)    DEVELOPMENT PROPERTIES

Properties acquired with the intention of redevelopment are classified as development properties and stated at fair value in accordance with IAS 16, 'Property, Plant and Equipment'. Changes in fair value are recognised through equity in the revaluation reserve. However, a deficit on revaluation of a development property is recognised in the Income Statement to the extent it exceeds the surplus in the revaluation reserve relating to a previous revaluation of that property. Similarly, a surplus on revaluation is credited to the Income Statement to the extent of a deficit previously charged.

All costs directly associated with the purchase and construction of a development property are capitalised. When development properties are completed, they are reclassified as investment and any accumulated balance on revaluation is transferred to retained earnings. Development properties, which are independently valued bi-annually by external professional valuers, are stated at estimated market value on completion less estimated costs to complete.

xiv)    LEASES

a) Group company is the lessee

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

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

b) Group company is the lessor

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

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

xv)    OWNER-OCCUPIED PROPERTIES, PLANT AND EQUIPMENT

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

xvi)    TRADING PROPERTIES

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

xvii)    FINANCIAL INSTRUMENTS

Non-current receivables

Non-current receivables are held at amortised cost.

Other non-current investments

Other non-current investments are non-derivative investments that are designated as available for sale and are shown at fair value.

Trade and other receivables

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

Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, deposits with banks and other short term highly liquid investments with original maturities of three months or less.

Interest-bearing borrowings

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

Trade and other payables

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

Derivative financial instruments

The Group uses derivative financial instruments to manage its interest rate risk. These financial instruments are recognised initially at fair value and subsequently re-measured. The gain or loss on re-measurement to fair value is recognised immediately in the Income Statement, unless the derivatives qualify for hedge accounting as cashflow hedges, in which case the effective element of the gain or loss is recognised directly through equity in a hedging reserve.

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

Other derivative instruments

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

xviii)    OWN SHARES HELD BY ESOP TRUSTS AND TREASURY SHARES

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

2 REVENUE, COST OF SALES AND GROSS PROFIT

	2008 Revenue £000	2008 Cost of sales £000	2008 Gross profit £000	2007 Revenue £000	2007 Cost of sales £000	2007 Gross profit £000
Rental income	23,843	(4,804)	19,039	29,661	(6,821)	22,840
Income from sales of trading properties	3,000	(1,580)	1,420	28	-	28
Income from hotel operations	6,926	(3,350)	3,576	3,376	(2,019)	1,357
Fees from fund management and    other services provided to related parties	10,120	(1,910)	8,210	4,650	(1,661)	2,989
Other income	2,787	(2,342)	445	5,711	(2,041)	3,670
Continuing operations	46,676	(13,986)	32,690	43,426	(12,542)	30,884
Discontinued leisure operations (note 7)	-	-	-	1,295	(716)	579
	46,676	(13,986)	32,690	44,721	(13,258)	31,463

Rental income included contingent rents of £344,000 (2007: £1,574,000).

The cost of sales in relation to rental income comprised:

		2008 £000	2007 £000
Service charge expenditure		3,331	3,613
Service charge recovery		(2,187)	(2,224)
Irrecoverable service charges		1,144	1,389
Rents payable		43	223
Property management fees		586	632
Legal and professional fees		658	883
Short leasehold amortisation		-	248
Allowance for impairment in respect of trade receivables		518	142
Other property costs		1,855	3,304
		4,804	6,821

  The analysis of rental income and the related cost of sales (direct operating expenses) between investment and development properties was as follows:

	2008 Revenue £000	2008 Cost of  sales £000	2008 Gross  profit £000	2007 Revenue  £000	2007 Cost of  sales £000	2007 Gross  profit  £000
Investment properties	17,584	(2,232)	15,352	21,867	(3,451)	18,416
Development properties	6,259	(2,572)	3,687	7,794	(3,370)	4,424
	23,843	(4,804)	19,039	29,661	(6,821)	22,840
Direct operating expenses relating to investment properties which are not income producing amounted to £334,000 (2007: £174,000). Other income related to:
	2008 Revenue £000	2008 Cost of  sales £000	2008 Gross  profit £000	2007 Revenue  £000	2007 Cost of  sales £000	2007 Gross  profit  £000
Income from property derivatives	-	-	-	2,056	(826)	1,230
Surrender premiums	356	-	356	1,608	(108)	1,500
Management fees and commissions	1,378	(942)	436	1,175	(410)	765
Car parking income	731	(202)	529	724	(255)	469
Abortive project costs	-	(826)	(826)	-	(325)	(325)
Sundry income	322	(372)	(50)	148	(117)	31
	2,787	(2,342)	445	5,711	(2,041)	3,670

The split of the Group's revenue and cost of sales by sector was as follows:

	2008 Revenue £000	2008 Cost of  sales £000	2008 Gross  profit £000	2007 Revenue  £000	2007 Cost of  sales £000	2007 Gross  profit  £000
Healthcare	7,013	(1,899)	5,114	5,016	(1,658)	3,358
Hotels	7,285	(3,394)	3,891	4,735	(2,146)	2,589
Industrial	3,544	(473)	3,071	4,144	(476)	3,668
Land	3,173	(2,438)	735	4,474	(2,469)	2,005
Leisure	6,300	(1,661)	4,639	6,172	(81)	6,091
Offices	12,554	(2,656)	9,898	14,464	(3,696)	10,768
Retail	4,417	(544)	3,873	1,369	(451)	918
Student accommodation	2,189	(277)	1,912	1,313	(285)	1,028
Other	201	(644)	(443)	1,739	(1,280)	459
Total	46,676	(13,986)	32,690	43,426	(12,542)	30,884

This analysis is provided for information only as it does not form part of the disclosure for the purposes of segmental reporting.

3 SEGMENTAL ANALYSIS

The analysis of the Group's results by business segment for the year ended 31 March 2008, which are discussed in the Operating and Financial Review, was as follows:

			Investment  portfolio  £000	Special projects £000	Fund management £000	Unallocated £000	Total  £000
Revenue from continuing operations			14,555	19,222	12,899	-	46,676
Cost of sales in respect of continuing operations			(3,323)	(6,313)	(4,350)	-	(13,986)
Gross profit from continuing operations			11,232	12,909	8,549	-	32,690
Administrative expenses (before exceptional   administrative expenses)			-	-	-	(27,972)	(27,972)
Exceptional administrative expenses			-	-	-	(1,485)	(1,485)
Operating profit (loss) before recognition of results     from non-current asset sales and revaluation			11,232	12,909	8,549	(29,457)	3,233
(Loss) profit from the sale of non-current property   assets			(3,229)	54	(114)	-	(3,289)
Gain on revaluation of investment properties			121	-	217	-	338
Deficit on revaluation of investment properties			(41,858)	(2,000)	(803)	-	(44,661)
Deficit on revaluation of development properties			(2,688)	-	(2,577)	-	(5,265)
Share of profit (loss) from joint ventures			-	5,884	(352)	-	5,532
Share of loss from associate			-	(65)	-	-	(65)
Operating (loss) profit			(36,422)	16,782	4,920	(29,457)	(44,177)
Net finance expenses			-	-	-	(10,563)	(10,563)
(Loss) profit before tax from continuing operations			(36,422)	16,782	4,920	(40,020)	(54,740)
The segmental analysis of the Group's results for the year ended 31 March 2007 was as follows:
			Investment  portfolio  £000	Special projects £000	Fund management £000	Unallocated £000	Total  £000
Revenue from continuing operations			16,690	19,800	6,936	-	43,426
Cost of sales in respect of continuing operations			(4,240)	(6,203)	(2,099)	-	(12,542)
Gross profit from continuing operations			12,450	13,597	4,837	-	30,884
Administrative expenses (before exceptional    administrative expenses)			-	-	-	(25,819)	(25,819)
Exceptional administrative expenses			-	-	-	-	-
Operating profit (loss) before recognition of results    from non-current asset sales and revaluation			12,450	13,597	4,837	(25,819)	5,065
Profit from the sale of non-current property assets			3,461	2,970	1,952	-	8,383
Profit from the sale of shares in subsidiaries			-	2,946	3,840	-	6,786
Gain on revaluation of investment properties			10,674	400	1,542	-	12,616
Deficit on revaluation of investment properties			(564)	-	(360)	-	(924)
Deficit on revaluation of development properties			-	-	(182)	-	(182)
Reversal of deficit on revaluation of development    properties			87	1,168	-	-	1,255
Share of (loss) profit from joint ventures			-	(803)	23,814	-	23,011
Share of loss from associate			-	(455)	-	-	(455)
Operating profit (loss)			26,108	19,823	35,443	(25,819)	55,555
Net finance expenses			-	-	-	(6,922)	(6,922)
Profit (loss) before tax from continuing operations			26,108	19,823	35,443	(32,741)	48,633
Loss from discontinued operations			-	(48)	-	-	(48)
Profit (loss) before tax attributable to equity    shareholders			26,108	19,775	35,443	(32,741)	48,585

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

	2008  Investment  portfolio  £000	2007  Investment  portfolio  £000	2008  Special projects £000	2007 Special projects £000	2008  Fund management £000	2007  Fund management £000	2008 Total £000	2007 Total £000
	-	(1,760)	(77,168)	184,543	-	(494)	(77,168)	182,289

Short leasehold amortisation of £248,000 included in cost of sales (note 2) in 2007 arose in the Special Projects segment in relation to a property which was sold in that year. There was no amortisation in the current year. Depreciation of £622,000 (2007: £472,000) is included in administrative expenses (before exceptional administrative expenses) (note 4) and has not been allocated.

The segmental analysis of the Group's Balance Sheet as at 31 March 2008, which is discussed in the Operating and Financial Review, was as follows:

	Investment  portfolio  £000	Special projects  £000	Fund management £000	Unallocated  £000	Total  £000
Non-current assets
Investment properties	163,349	40,500	16,775	-	220,624
Development properties	15,506	824,280	3,750	-	843,536
Owner-occupied properties, plant and equipment	-	-	-	2,757	2,757
Investment in joint ventures	-	79,254	160,086	-	239,340
Investment in associate	-	-	1,157	-	1,157
Other non-current investments	-	15,196	-	-	15,196
Non-current receivable	-	42,987	-	-	42,987
Total non-current assets	178,855	1,002,217	181,768	2,757	1,365,597
Current assets
Trading properties	-	15,518	-	-	15,518
Trade and other receivables	9,955	9,714	17,514	2,434	39,617
Current investments	-	-	-	4	4
Cash and cash equivalents	-	-	-	27,982	27,982
Total current assets	9,955	25,232	17,514	30,420	83,121
Total assets	188,810	1,027,449	199,282	33,177	1,448,718
Current liabilities
Trade and other payables	(5,808)	(18,193)	(8,095)	(4,258)	(36,354)
Current tax liability	-	-	-	(7,269)	(7,269)
Total current liabilities	(5,808)	(18,193)	(8,095)	(11,527)	(43,623)
Non-current liabilities
Bank loans and other borrowings	-	-	-	(541,637)	(541,637)
Deferred tax liability	-	-	-	(103,638)	(103,638)
Obligations under finance leases	(11,727)	-	-	-	(11,727)
Other payables	-	(2,392)	-	-	(2,392)
Total non-current liabilities	(11,727)	(2,392)	-	(645,275)	(659,394)
Total liabilities	(17,535)	(20,585)	(8,095)	(656,802)	(703,017)
Net assets	171,275	1,006,864	191,187	(623,625)	745,701
Capital expenditure	1,105	166,037	25	-	167,167

The segmental analysis of the Group's Balance Sheet as at 31 March 2007 was as follows:

	Investment  portfolio  £000	Special  projects £000	Fund management £000	Unallocated  £000	Total  £000
Non-current assets
Investment properties	228,053	51,150	9,735	-	288,938
Development properties	24,481	738,524	6,300	-	769,305
Owner-occupied properties, plant and equipment	-	-	-	1,470	1,470
Investment in joint ventures	-	42,758	127,341	-	170,099
Investment in associate	-	-	1,222	-	1,222
Other non-current investments	-	3,044	-	-	3,044
Non-current receivable	-	45,349	-	-	45,349
Total non-current assets	252,534	880,825	144,598	1,470	1,279,427
Current assets
Trading properties	-	5,389	1,442	-	6,831
Trade and other receivables	31,092	31,951	8,417	2,207	73,667
Current investments	-	-	-	4	4
Cash and cash equivalents	-	-	-	36,048	36,048
Total current assets	31,092	37,340	9,859	38,259	116,550
Total assets	283,626	918,165	154,457	39,729	1,395,977
Current liabilities
Bank loans and other borrowings	-	-	-	(3,000)	(3,000)
Trade and other payables	(10,386)	(13,539)	(2,950)	(10,591)	(37,466)
Current tax liability	-	-	-	(9,216)	(9,216)
Total current liabilities	(10,386)	(13,539)	(2,950)	(22,807)	(49,682)
Non-current liabilities
Bank loans and other borrowings	-	-	-	(333,924)	(333,924)
Deferred tax liability	-	-	-	(149,620)	(149,620)
Obligations under finance leases	(11,734)	-	-	-	(11,734)
Other payables	-	(4,919)	-	-	(4,919)
Total non-current liabilities	(11,734)	(4,919)	-	(483,544)	(500,197)
Total liabilities	(22,120)	(18,458)	(2,950)	(506,351)	(549,879)
Net assets	261,506	899,707	151,507	(466,622)	846,098
Capital expenditure	27,217	46,714	55,698	-	129,629

4 ADMINISTRATIVE EXPENSES 

The analysis of the Group's ongoing administrative expenses was as follows:

		2008 £000	2007 £000
Directors' remuneration		3,829	3,792
Other staff costs		13,784	14,585
Total staff costs		17,613	18,377
Legal and other professional fees		3,632	2,615
Office costs		4,645	3,548
Loss on sale of plant and equipment		2	61
Depreciation of tangible fixed assets		622	472
Operating lease payments		944	880
General expenses		514	493
Total administrative expenses (before exceptional administrative expenses)		27,972	26,446
Continuing operations		27,972	25,819
Discontinued operations (note 7)		-	627
		27,972	26,446

In addition to the depreciation charge disclosed above, short leasehold amortisation of £nil (2007: £248,000) was charged under cost of sales and shown in note 2.

The exceptional expenses of £1,485,000 shown in the Income Statement relate to bid defence fees and fees in relation to advice on the valuation of the Group's assets in addition to its normal valuation fees.

i)    FEES PAID TO AUDITORS AND THEIR AFFILIATES

		2008 £000	2007 £000
Fees payable to the Company's auditor for the audit of the Company's annual accounts		240	240
Fees payable to the Company's auditor and its associates for other services:
The audit of the Company's subsidiaries pursuant to legislation		52	64
Other services pursuant to legislation		5	32
Tax services		14	8
Other services		92	40

Fees paid to other accountancy firms, mainly for tax advisory and internal audit services, amounted to £638,000 (2007: £431,000) of which £246,000 of the advisory fees (2007: £140,000) were capitalised. 

ii)    STAFF COSTS 

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

		2008 £000	2007 £000
Wages and salaries		14,272	11,138
Cost relating to share-based payment schemes		2,147	3,718
Movement in provision for national insurance on unexercised share options and rights		(1,095)	628
Social security costs		1,442	2,044
Pension costs		1,073	830
Other employment costs		1,224	778
		19,063	19,136
Cost of sales		1,450	759
Administrative expenses		17,613	18,377
		19,063	19,136

Of the total cost relating to share-based payment schemes, £742,000 (2007: £641,000) related to the Executive Directors' Performance Share Plan and £1,405,000 

(2007: £3,077,000) related to other share-based incentive schemes.

Details of directors' emoluments, pensions and entitlements to share options and rights are contained in the Remuneration Report. Details of directors' interests in

the share capital of the Company are contained in the Report of the Directors. This information forms part of these financial statements.

iii)    STAFF NUMBERS

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

		2008	2007
Property portfolio management and administration		126	120
Leisure operations		-	11
Hotel operations		113	68
		239	199

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

		2008	2007
Cost of sales		98	59
Administrative expenses		141	140
		239	199

5 NET FINANCE EXPENSES

		2008 £000	2007 £000
Interest payable on bank loans and overdrafts		30,205	19,661
Interest payable on other loans		542	857
Loan costs written-off on refinancing		2,798	-
Interest on obligations under finance leases		812	865
		34,357	21,383
Interest capitalised		(12,022)	(9,209)
		22,335	12,174
Change in fair value of derivative financial instruments		(2,221)	(1,493)
Recycling of swap adjustment		370	-
Finance expenses		20,484	10,681
Finance income: interest receivable		(9,921)	(3,759)
Net finance expenses		10,563	6,922

The change in the fair value of the Group's financial instruments in the current year included a gain of £2,149,000 realised on the termination of interest rate swaps (2007: £nil). This amount has been realised as the borrowings on which these interest rate swaps were designated were subject to refinancing during the year.

Of interest capitalised in the year, the amount capitalised to development properties was £11,592,000 (2007: £8,980,000), investment properties £nil 

(2007: £229,000) and trading properties £430,000 (2007: £nil). The average interest rate used for capitalisation was 7.0% (2007: 6.6%).

In accordance with IAS 39, 'Financial Instruments: Recognition and Measurement', the Group has reviewed its interest rate hedges in existence as at 

31 March 2008 along with those in its joint ventures. As assessed by JC Rathbone Associates Limited, movements in fair value of the elements of those viewed as effective have been recognised through equity while all other movements, including those relating to the ineffective elements of effective hedges, are reflected in the Income Statement.

6 TAX

i)    TAX (CREDIT) CHARGE ON (LOSS) PROFIT

			2008 £000		2007 £000
UK current tax at 30% (2007: 30%)			-		3,207
Adjustment to prior years' UK corporation tax			(2,439)		1,382
			(2,439)		4,589
Overseas tax			334		3,758
Total current tax (credit) charge			(2,105)		8,347
Deferred tax:
On investment properties				(10,211)	44
On derivative financial instruments				1,384	(450)
On other temporary differences				(3,684)	(2,004)
Total deferred tax credit				(12,511)	(2,410)
Tax (credit) charge				(14,616)	5,937

ii)    TAX RECONCILIATION

		2008 £000	2007 £000
(Loss) profit before tax		(54,740)	48,633
Tax applied at UK corporation tax rate of 30%		(16,422)	14,590
Locked-in capital allowances		(543)	(1,984)
Use of losses and differing tax rates in respect of overseas results		321	83
Use of tax losses		-	(1,265)
Indexation relief on UK investment properties		(1,012)	(2,194)
Adjustment to prior years' current and deferred tax		(1,527)	1,883
Tax charge taken to share of income from joint ventures and associate		1,100	(6,643)
Effect of rate change on deferred tax		(1,024)	-
Other movements		4,491	1,467
Tax (credit) charge		(14,616)	5,937

iii)    TAX RECOGNISED DIRECTLY IN EQUITY

		2008 £000	2007 £000
Deferred tax (credit) charge on revaluation of development properties		(32,957)	43,116
Deferred tax (credit) charge on effective element of interest rate swaps		(125)	2,114
		(33,082)	45,230

iv)    DEFERRED TAX MOVEMENTS

	1 April 2007 £000	Transfer to joint venture  £000	Acquired balance  £000	Recognised in income £000	Recognised in equity £000	31 March 2008 £000
Capital gains less capital losses	148,417	(1,750)	1,361	(10,212)	(32,957)	104,859
Capital allowances	3,886	-	-	2,314	-	6,200
Derivative financial instruments	(1,322)	-	-	1,384	(125)	(63)
Other temporary differences	1,059	-	-	(814)	-	245
Revenue tax losses	(2,420)	-	-	(5,183)	-	(7,603)
Deferred tax provision	149,620	(1,750)	1,361	(12,511)	(33,082)	103,638

Deferred tax assets estimated at £10,759,000 (2007: £11,528,000) have not been recognised due to a higher degree of uncertainty over both the amount and timing of the utilisation of the underlying tax losses, which amounted to £38,425,000 (2007: £38,427,000). Under current tax legislation, there is no expiry date associated with the unprovided deferred tax assets.

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

v)    TOTAL TAX (CREDIT) CHARGE

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

			2008 £000	2007 £000
Tax (credit) charge on profit as above			(14,616)	5,937
Tax credit on discontinued operations			-	(14)
Tax (credit) charge on share of profit in joint ventures (note 12i(c))			(1,027)	9,686
Tax credit on share of profit in associate			(60)	(195)
Tax (credit) charge on income and expenses recognised directly in equity			(33,082)	45,230
Tax (credit) charge on share of income and expenses in joint ventures recognised directly in equity			(273)	234
			(49,058)	60,878

7 DISCONTINUED OPERATIONS

In 2005, the decision taken by the Board to cease to be involved in the business of operating the Arena as well as to terminate its conference and exhibition activities at Wembley led to the classification of the results from these operations, which together constituted the Group's leisure activities, as discontinued. The Arena has been leased to a third party as from April 2006 with the income generated being shown as rent while the Conference Hall and Exhibition Centres, which ceased to trade by July 2006, have been demolished prior to the redevelopment of the sites.

As a consequence, the results from the Arena, Conference Hall and Exhibition Centres at Wembley were classified in the 2007 financial statements as discontinued. The breakdown of the numbers disclosed in the Income Statement in relation to these activities was as follows:

			2007 £000
Revenue			1,295
Cost of sales			(716)
Gross profit			579
Administrative expenses			(627)
Loss before tax on discontinued operations			(48)
Tax credit			14
Loss after tax on discontinued operations			(34)

The impact upon cashflow of discontinued operations was as follows:

			2007 £000
Loss after tax on discontinued operations as above			(34)
Decrease in provision for reorganisation costs, net of tax			(455)
Net cashflow from discontinued operations included in net cashflow from operating activities			(489)

There was no impact on earnings per share in either year.

8 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE

i)    EARNINGS PER SHARE

a) From continuing operations

	2008 Loss after tax  and before discontinued operations  £000	2008  Weighted average number of shares  000	2008  Earnings  per share pence	2007 Profit after tax and before discontinued operations  £000	2007 Weighted average number of shares  000	2007 Earnings per share pence
Basic	(40,124)	128,184	(31.3)	42,696	128,169	33.3
Adjustments:
Interest on 8% convertible unsecured
loan stock	-	-		243	2,000
Employee share-based payment schemes	-	-		-	1,225
Diluted	(40,124)	128,184	(31.3)	42,939	131,394	32.7

  b) From total operations

	2008 Loss after tax and after  discontinued operations  £000	2008 Weighted average number of shares  000	2008 Earnings  per share pence	2007 Profit after tax and after discontinued operations  £000	2007 Weighted average number of shares  000	2007 Earnings per share pence
Basic	(40,124)	128,184	(31.3)	42,662	128,169	33.3
Adjustments:
Interest on 8% convertible unsecured
loan stock	-	-		243	2,000
Employee share-based payment schemes	-	-		-	1,225
Diluted	(40,124)	128,184	(31.3)	42,905	131,394	32.7

ii)    NET ASSET VALUE PER SHARE

	2008  Equity shareholders' funds   £000	2008  Number of shares 000	2008  Net asset value per share  pence	2007 Equity shareholders' funds  £000	2007 Number  of shares 000	2007 Net asset value per share  pence
Basic	745,701	127,790	584	846,098	128,199	660
Adjustments:
Employee share-based payment schemes	9,156	2,807		9,642	2,520
Diluted	754,857	130,597	578	855,740	130,719	655

The number of shares in issue has been adjusted for the 2,139,973 (2007: 1,627,414) shares held by ESOP Trusts and by the Group as treasury shares.

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

Entitlements under the Executive Directors' Performance Share Plan have been excluded from the calculation in both i) and ii) above as the commitments relate to contingently issuable shares where the conditions had not been met at the balance sheet date.

9 DIVIDENDS

The proposed final dividend of 8.50 pence per share (2007: 8.25 pence per share) was approved by the Board on 5 June 2008 and is payable on 8 September 2008

to shareholders on the register at the close of business on 25 July 2008. The dividend has not been included as a liability as at 31 March 2008. The total dividend for the year ended 31 March 2008 amounts to 12.25 pence per share (2007: 11.75 pence per share). The dividend of £15,366,000 included in the Reconciliation of Equity in note 22 comprises the 2007 final dividend of £10,576,000, which was paid on 7 September 2007, together with the interim dividend of £4,790,000 paid on 18 January 2008.

10 INVESTMENT AND DEVELOPMENT PROPERTIES

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

	Investment properties Freehold £000	Investment properties Long leasehold £000	Investment properties Short  leasehold £000	Investment properties Total £000	Development properties Freehold £000	Development properties Long leasehold £000	Development properties Short leasehold £000	Development properties Total £000
Cost or valuation:
Balance 1 April 2006	190,860	89,165	10,063	290,088	544,337	49,189	5,929	599,455
Transfer between    categories	18,804	2,899	-	21,703	(16,338)	(5,365)	-	(21,703)
Foreign exchange    movement	(259)	-	-	(259)	-	-	-	-
Transfer to joint ventures	(10,154)	(2,899)	-	(13,053)	(16,672)	-	-	(16,672)
Additions	26,877	3,912	-	30,789	97,650	1,023	167	98,840
Interest capitalised	229	-	-	229	8,865	115	-	8,980
Disposals	(34,560)	(17,256)	-	(51,816)	(56,885)	(19,976)	(5,848)	(82,709)
Short leasehold    amortisation	-	-	-	-	-	-	(248)	(248)
Revaluation surplus    (deficit)	6,504	4,601	152	11,257	183,867	(505)	-	183,362
Balance 31 March 2007	198,301	80,422	10,215	288,938	744,824	24,481	-	769,305
Transfers between    categories	8,479	-	-	8,479	(8,479)	-	-	(8,479)
Transfer to joint venture	-	-	-	-	(6,250)	-	-	(6,250)
Additions	369	621	-	990	166,090	87	-	166,177
Interest capitalised	-	-	-	-	11,592	-	-	11,592
Disposals	-	(33,461)	-	(33,461)	-	(6,375)	-	(6,375)
Revaluation deficit	(30,239)	(11,568)	(2,515)	(44,322)	(79,747)	(2,687)	-	(82,434)
Balance 31 March 2008	176,910	36,014	7,700	220,624	828,030	15,506	-	843,536

Of the additions shown above, £128,640,000 (2007: £92,388,000) related to acquisition of properties with £39,331,000 (2007: £37,241,000) representing expenditure on improvements to existing properties.

During the year, the Group through its joint venture Meridian Delta Dome Limited, was granted a lease over the Millennium Dome at Greenwich and transferred its share of the interest in this asset previously shown as part of the overall valuation of its Greenwich property to its investment in joint ventures (note 12ia).

Under the cost model, the historical cost of the Group's investment properties as at 31 March 2008 was £213,391,000 (2007: £234,322,000) and included capitalised interest of £1,050,000 (2007: £933,000).

Under the cost model, the historical cost of the Group's development properties as at 31 March 2008 representing the cost of assets in the course of construction was £424,758,000 (2007: £256,354,000) and included capitalised interest of £34,308,000 (2007: £22,833,000).

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

All of the Group's properties were externally valued as at 31 March 2008 on the basis of market value by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors.

The Group's land holdings in Greenwich and the Wembley development have been valued by Savills Commercial Limited. The discount rates which have been applied in relation to these developments were 12% and 10% respectively. Savills have also valued the Group's property at Silvertown. Other properties in the United Kingdom have been valued by Jones Lang LaSalle Limited and Christie + Co. The Group's 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:

	2008 Investment  properties £000	2008 Development properties £000	2008 Total £000	2007 Investment properties  £000	2007 Development properties £000	2007 Total £000
Investment and development properties at market    value as determined by valuers	219,144	833,860	1,053,004	287,374	759,588	1,046,962
Adjustment in respect of rent-free periods and other    tenant incentives	(486)	(105)	(591)	(402)	(64)	(466)
Adjustment in respect of minimum payment under    head leases separately included as a liability in the   Balance Sheet	1,966	9,781	11,747	1,966	9,781	11,747
As shown in the Balance Sheet	220,624	843,536	1,064,160	288,938	769,305	1,058,243

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

		2008 Per valuers' reports £000	2008  Adjustment for properties held in joint ventures and the associate £000	2008  Properties held as investment and development properties  £000	2008 Percentage valued by  each valuer  %	2007 Percentage valued by each valuer  %
Savills Commercial Limited		891,650	(66,721)	824,929	78.3	70.3
Jones Lang LaSalle Limited		213,100	(1,475)	211,625	20.1	28.2
Other valuers		16,450	-	16,450	1.6	1.5
		1,121,200	(68,196)	1,053,004	100.0	100.0

Copies of the valuation reports of Savills Commercial Limited and Jones Lang LaSalle Limited are included in the annual report.

The split of the valuation of the Group's investment and development properties by sector was as follows:

	2008 Investment  properties £000	2008 Development properties £000	2008 Total £000	2007 Investment properties  £000	2007 Development properties £000	2007 Total £000
Healthcare	9,975	-	9,975	9,735	-	9,735
Hotels	4,202	10,582	14,784	4,700	10,580	15,280
Industrial	50,032	115,895	165,927	46,059	81,223	127,282
Land	40,500	568,085	608,585	-	615,088	615,088
Leisure	726	-	726	43,316	-	43,316
Offices	101,509	28,504	130,013	167,493	33,633	201,126
Retail	12,495	116,720	129,215	16,035	22,481	38,516
Other	1,185	3,750	4,935	1,600	6,300	7,900
Total	220,624	843,536	1,064,160	288,938	769,305	1,058,243

This analysis is provided for information only as it does not form part of the disclosure for purposes of segmental reporting.

11 OWNER-OCCUPIED PROPERTIES, PLANT AND EQUIPMENT

	Long leasehold £000	Short leasehold £000	Fixtures, fittings  & equipment  £000	Total  £000
Cost:
Balance 1 April 2006	-	271	1,746	2,017
Additions	-	-	1,010	1,010
Disposals	-	(271)	(1,007)	(1,278)
Balance 31 March 2007	-	-	1,749	1,749
Additions	727	-	1,182	1,909
Disposals	-	-	(69)	(69)
Balance 31 March 2008	727	-	2,862	3,589
Depreciation:
Balance 1 April 2006	-	(271)	(804)	(1,075)
Charge for year	-	-	(472)	(472)
Disposals	-	271	997	1,268
Balance 31 March 2007	-	-	(279)	(279)
Charge for year	-	-	(622)	(622)
Disposals	-	-	69	69
Balance 31 March 2008	-	-	(832)	(832)

Net book value:

31 March 2008	727	-	2,030	2,757
31 March 2007	-	-	1,470	1,470
31 March 2006	-	-	942	942

12 NON-CURRENT INVESTMENTS

i)    INVESTMENT IN JOINT VENTURES

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

	Share of net  assets  £000	Advances £000	Total  £000
Balance 1 April 2006	44,692	75,384	120,076
Additions	1,179	-	1,179
Transfer of interests from subsidiaries (note 28)	4,573	10,426	14,999
Amounts advanced	-	18,688	18,688
Distributions	(8,400)	-	(8,400)
Share of profit, net of tax	23,011	-	23,011
Share of effective portion of changes in fair value of cashflow hedges, net of tax	546	-	546
Balance 31 March 2007	65,601	104,498	170,099
Transfer from development properties (note 10)	6,250	-	6,250
Deferred tax on transfer	(1,750)	-	(1,750)
Transfer to trading properties	(159)	(1,850)	(2,009)
Additions	500	-	500
Amounts advanced	-	64,718	64,718
Amount written-off	(168)	-	(168)
Distributions	(3,130)	-	(3,130)
Share of profit, net of tax	5,532	-	5,532
Share of effective portion of changes in fair value of cashflow hedges, net of tax	(702)	-	(702)
Balance 31 March 2008	71,974	167,366	239,340

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

	% of share capital held	Country of incorporation	Joint venture partner
Quercus Healthcare Property Unit Trust (Quercus)	26.92	Channel Islands	Norwich Union Life & Pensions Limited
Greenwich Peninsula Regeneration Limited (GPRL)	50.00	United Kingdom	Lend Lease Europe Limited
Meridian Delta Dome Limited (MDDL)	49.00	United Kingdom	Lend Lease Europe Limited
Greenwich Peninsula N0204 Blocks A&B Unit Trusts   (Greenwich Peninsula N0204)	50.00	Channel Islands	Lend Lease N0204 Block A Limited/ Lend Lease N0204 Block B Limited
iQ Unit Trust (iQ)	50.00	Channel Islands	Wellcome Trust Investment Limited Partnership
Quantum Unit Trust (Quantum)	50.00	Channel Islands	CGNU Life Assurance Limited
Quintessential Homes (Wembley) LLP (Quintessential)	50.02	United Kingdom	Geninvest Limited Family Housing Development Company Limited
BioRegional Quintain Limited (BioRegional Quintain)	49.90	United Kingdom	BioRegional Properties Limited
South East Properties (Redhill) Limited	50.00	United Kingdom	South East Properties Limited

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

Summarised income statements for the year ended 31 March 2008	Quercus £000	GPRL/ MDDL £000	Greenwich Peninsula N0204 £000	iQ  £000	Quantum £000	Quintessential £000	BioRegional Quintain £000	Other joint ventures £000	Group share in joint ventures £000
Rents receivable	14,426	479	-	2,341	82	-	-	-	17,328
Other income	-	70	-	-	-	-	54	-	124
Revenue	14,426	549	-	2,341	82	-	54	-	17,452
Cost of sales	-	(64)	-	(795)	(10)	-	(26)	(76)	(971)
Gross profit	14,426	485	-	1,546	72	-	28	(76)	16,481
Administrative expenses	(2,355)	(482)	(13)	(1,344)	(43)	(74)	(315)	(270)	(4,896)
Operating profit (loss)	12,071	3	(13)	202	29	(74)	(287)	(346)	11,585
Profit from sale of non-   current property assets	185	-	-	-	-	-	-	-	185
(Deficit) gain on    revaluation    of investment properties	(8,360)	9,626	-	(55)	(277)	-	-	-	934
Profit (loss) before net    finance expenses and
taxation	3,896	9,629	(13)	147	(248)	(74)	(287)	(346)	12,704
Finance expenses	(6,021)	-	-	(2,501)	-	(50)	(222)	(2)	(8,796)
Finance income	304	2	-	135	63	84	8	1	597
(Loss) profit before    taxation	(1,821)	9,631	(13)	(2,219)	(185)	(40)	(501)	(347)	4,505
Taxation	2,490	(2,846)	-	1,370	13	-	-	-	1,027
Profit (loss) after taxation	669	6,785	(13)	(849)	(172)	(40)	(501)	(347)	5,532
Share of recognised income   and expense recognised   directly in equity	353	-	-	349	-	-	-	-	702

Summarised balance  sheets as at  31 March 2008	Quercus £000	GPRL/ MDDL £000	Greenwich Peninsula  N0204 £000	iQ £000	Quantum £000	Quintessential  £000	BioRegional Quintain £000	Other joint ventures £000	Group  share in joint ventures  £000
Investment properties	235,285	15,876	12,337	66,617	4,548	-	-	-	334,663
Other non-current assets	-	260	-	-	-	-	1,457	-	1,717
Trading properties	-	32,193	-	-	-	25,169	1,717	-	59,079
Other assets	10,873	10,300	-	2,183	470	2,461	7,197	3,358	36,842
Gross assets	246,158	58,629	12,337	68,800	5,018	27,630	10,371	3,358	432,301
Current liabilities:
Bank loans and other      borrowings	-	-	-	-	-	(5,584)	-	-	(5,584)
Current tax	(1,338)	(74)	-	-	(28)	-	-	-	(1,440)
Non-current liabilities:
Bank loans and other     borrowings	(103,567)	-	-	(34,159)	-	-	-	-	(137,726)
Deferred tax liability	(9,324)	(4,523)	-	(328)	41	-	-	(318)	(14,452)
Other liabilities	(8,773)	(4,468)	-	(2,037)	(377)	(16,426)	(1,213)	(465)	(33,759)
Net external assets	123,156	49,564	12,337	32,276	4,654	5,620	9,158	2,575	239,340

Represented by:

Capital	49,614	12,345	3	3,230	(196)	5,620	(826)	2,184	71,974
Loans	73,542	37,219	12,334	29,046	4,850	-	9,984	391	167,366
Total investment	123,156	49,564	12,337	32,276	4,654	5,620	9,158	2,575	239,340

Summarised income statements for the year ended 31 March 2007				Quercus £000	Meridian  Delta £000	iQ £000	Quantum £000	Quintessential  £000	BioRegional Quintain £000	Quintain Birmingham  £000	Other  joint ventures £000	Group share in joint ventures £000
Rents receivable				10,669	-	38	-	-	-	-	-	10,707
Other income				-	-	-	-	-	-	-	(6)	(6)
Revenue				10,669	-	38	-	-	-	-	(6)	10,701
Cost of sales				-	-	(11)	-	-	-	-	-	(11)
Gross profit				10,669	-	27	-	-	-	-	(6)	10,690
Administrative    expenses				(1,608)	(235)	(88)	(32)	(85)	(271)	(23)	9	(2,333)
Operating profit (loss)				9,061	(235)	(61)	(32)	(85)	(271)	(23)	3	8,357
Share of gain on    revaluation of    investment    properties				21,717	-	6,199	-	-	-	-	-	27,916
Profit (loss) before   net finance expenses    and taxation				30,778	(235)	6,138	(32)	(85)	(271)	(23)	3	36,273
Finance expenses			(3,674)		(16)	(9)	-	-	(93)	-	(13)	(3,805)
Finance income			171		-	-	-	34	2	-	22	229
Profit (loss) before    taxation			27,275		(251)	6,129	(32)	(51)	(362)	(23)	12	32,697
Taxation			(7,725)		-	(1,833)	-	-	-	-	(128)	(9,686)
Profit (loss) after    taxation			19,550		(251)	4,296	(32)	(51)	(362)	(23)	(116)	23,011
Share of recognised    income and expense   recognised directly   in equity			546		-	-	-	-	-	-	-	546
Summarised balance sheets as at  31 March 2007		Quercus £000			Meridian  Delta £000	iQ £000	Quantum  £000	Quintessential  £000	BioRegional Quintain  £000	Quintain Birmingham £000	Other  joint ventures  £000	Group share in joint ventures £000
Investment    properties	203,051				-	31,600	-	-	-	-	-	234,651
Other non-current   assets		-			-	-	-	-	-	-	2,812	2,812
Trading properties	-				30,686	-	-	10,470	952	1,655	102	43,865
Other assets	7,112				2,438	1,537	449	-	1,403	271	667	13,877
Gross assets	210,163				33,124	33,137	449	10,470	2,355	1,926	3,581	295,205
Current liabilities:
Bank loans and     other     borrowings	-				-	(16,000)	-	-	-	-	-	(16,000)
Current tax     liability	(1,353)				-	-	-	-	-	-	-	(1,353)
Non-current    liabilities:
Bank loans and     other     borrowings	(76,366)				-	-	-	-	-	-	-	(76,366)
Deferred tax     liability	(11,951)				-	(1,833)	-	-	-	-	(318)	(14,102)
Other liabilities	(7,864)				(2,057)	(581)	(460)	(4,835)	(834)	(66)	(588)	(17,285)
Net external assets	112,629				31,067	14,723	(11)	5,635	1,521	1,860	2,675	170,099
Represented by:
Capital	52,349				825	4,297	(11)	5,635	(332)	163	2,675	65,601
Loans	60,280				30,242	10,426	-	-	1,853	1,697	-	104,498
Total investment	112,629				31,067	14,723	(11)	5,635	1,521	1,860	2,675	170,099

During the year, the remaining 50% of the shares in Countryside Quintain Birmingham Limited (Quintain Birmingham) were acquired by the Group (note 27) and 

the Group's investment in Meridian Delta Limited was exchanged for an investment in Greenwich Peninsula Regeneration Limited (GPRL).

Details of the floating rate debt within Quercus and iQ and of interest rate swaps entered into by the former are given in note 21iii.

The valuation of properties held within Quercus as at 31 March 2008 has been based on the exercise carried out by Christie + Co, Chartered Surveyors, as external valuers, on the basis of market value and in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. Properties within the Greenwich joint ventures and the iQ Unit Trust were valued by Savills Commercial Limited and within the Quantum Unit Trust by CBRE Richard Ellis.

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

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

	2008 Quercus £000	2007  Quercus £000	2008 GPRL/ MDDL £000	2007 Meridian Delta £000	2008 Greenwich Peninsula N0204 £000	2008 iQ  £000	2007  iQ £000
Income statements
Revenue	51,812	116,433	20,765	-	-	4,682	12,475
Expenses	(58,270)	(18,039)	(1,110)	(511)	(26)	(9,120)	(217)
Loss (profit) before taxation	(6,458)	98,394	19,655	(511)	(26)	(4,438)	12,258
Balance sheets
Non-current assets	874,015	726,220	32,931	-	34,948	133,234	63,201
Current assets	40,390	25,436	86,719	67,600	5,424	4,366	3,073
Total assets	914,405	751,656	119,650	67,600	40,372	137,600	66,274
Current liabilities	(37,555)	(75,708)	(9,269)	(4,198)	(15,698)	(4,074)	(36,828)
Non-current liabilities	(419,361)	(273,126)	(9,230)	-	-	(68,975)	-
Net external assets	457,489	402,822	101,151	63,402	24,674	64,551	29,446
Percentage share held by Group	26.92%	27.96%	49.00%	49.00%	50.00%	50.00%	50.00%
Group share of net external assets	123,156	112,629	49,564	31,067	12,337	32,276	14,723

	2008 Quantum   £000	2007 Quantum   £000		2008 Quintessential   £000			2007 Quintessential   £000		2008 BioRegional Quintain £000	2007 BioRegional Quintain £000	2007 Quintain Birmingham £000
Income statements
Revenue	164	-			-		67		108	100	-
Expenses	(534)	(63)			(79)		(169)		(1,112)	(825)	(45)
Loss before taxation	(370)	(63)			(79)		(102)		(1,004)	(725)	(45)
Balance sheets
Non-current assets	9,096		-			-		-	2,920	-	-
Current assets	940		898			55,239		16,302	17,863	4,720	3,852
Total assets	10,036		898			55,239		16,302	20,783	4,720	3,852
Current liabilities	(810)		(920)			(44,003)		(5,037)	(2,430)	(1,671)	(132)
Non-current liabilities	82		-			-		-	-	-	-
	9,308		(22)			11,236		11,265	18,353	3,049	3,720
Percentage share held by the Group	50.00%		50.00%			50.02%		50.02%	49.90%	49.90%	50.00%
Group share of net external assets	4,654		(11)			5,620		5,635	9,158	1,521	1,860

ii)    INVESTMENT IN ASSOCIATE

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

			£000
Balance 1 April 2006			1,677
Share of loss, net of tax			(455)
Balance 31 March 2007			1,222
Share of loss, net of tax			(65)
Balance 31 March 2008			1,157

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

		% of equity held	Other member
Aqua Trust		50	Norwich Union  Annuity Limited

The principal asset of the associate consists of a reversionary interest in three properties, which has been valued as at 31 March 2008 by Jones Lang LaSalle Limited.

c) The Group's share of the summarised income statement for the associate for the year ended 31 March 2008 was as follows:

		2008 £000	2007 £000
Share of loss on revaluation of investment properties		(125)	(650)
Deferred tax credit for the year		60	195
Loss after taxation		(65)	(455)

d) The Group's share of the summarised balance sheet for the associate as at 31 March 2008 was as follows: 

		2008 £000	2007 £000
Investment properties		1,475	1,600
Deferred tax liability		(318)	(378)
Net external assets		1,157	1,222

Represented by:

Capital

1,157

1,222

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

			£000
Cost 1 April 2006			3,348
Impairment			(632)
Net book value 1 April 2006			2,716
Additions			1,248
Disposals			(38)
Deficit on revaluation			(882)
Fair value 31 March 2007			3,044
Additions			11,395
Gain on revaluation			757
Fair value 31 March 2008			15,196

During the year, the Group invested in the Iceberg Alternative Real Estate II Fund, which is listed on the Irish Stock Exchange, and in the Ludgate Environmental Fund, which is listed on AIM. The Group added to its investment in Serrastone SA, a company based in France, which is researching and developing a substitute for natural stone for building purposes. The investment in Serrastone SA is shown at a directors' valuation.

13 NON-CURRENT RECEIVABLE

The non-current receivable, which is secured, carries a coupon of LIBOR plus 2.5% and has a maximum term of 16 years. This receivable is shown in the Balance Sheet at amortised cost. Further details are given in note 20.

14 TRADING PROPERTIES

As at 31 March 2008, two properties are held for resale and are shown at the lower of cost and net realisable value and include capitalised interest of £430,000 (2007: £nil). As at that date, trading properties were fair valued by the Directors at £15,518,000 (2007: £10,300,000).

15 TRADE AND OTHER RECEIVABLES

		2008 £000	2007 £000
Trade receivables		20,660	12,175
Other receivables		6,898	7,047
Amounts due under contracts for sale		6,500	51,275
Trade and other receivables		34,058	70,497
Prepayments and accrued income		5,559	3,170
		39,617	73,667

  The aging of trade and other receivables was as follows: 

	2008  Gross  £000	2008  Impairment  £000	2008  Net  £000	2007  Gross £000	2007  Impairment  £000	2007 Net  £000
Not past due	32,755	(250)	32,505	66,402	-	66,402
Past due less than one month	280	-	280	3,576	-	3,576
Past due one month to three months	1,068	(68)	1,000	232	(21)	211
Past due three to six months	264	(161)	103	159	-	159
Past due over six months	225	(55)	170	168	(19)	149
	34,592	(534)	34,058	70,537	(40)	70,497

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

				£000
Balance as at 1 April 2007				40
Amounts written-off in year				(24)
Increase in allowance				518
Balance 31 March 2008				534

16 CURRENT INVESTMENTS

		2008 £000	2007 £000
Treasury stock		4	4

The nominal value of the Treasury stock as at 31 March 2008 was £4,000 (2007: £4,000).

17 TRADE AND OTHER PAYABLES

		2008 £000	2007  £000
Trade payables		2,809	6,751
Other payables		10,963	7,535
Accruals		22,536	18,774
Interest rate swaps		46	4,406
		36,354	37,466

18 BANK LOANS AND OTHER BORROWINGS

		2008 £000	2007  £000
Current liabilities:
Other loan		-	3,000
Non-current liabilities:
Bank loans		536,830	329,054
10% First Mortgage Debenture Stock 2011 (secured)		4,807	4,870
		541,637	333,924
Total borrowings		541,637	336,924

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 £9,234,000 and has a redemption value of £4,617,000. The premium over par arising from fair valuing the debenture on acquisition is amortised over its remaining life.

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

	2008  Bank loans and overdrafts £000	2008  Other loans £000	2008 Total debt £000	2007  Total debt  £000	2008  Undrawn facilities  £000	2007  Undrawn facilities £000
Within one year	-	-	-	3,000	-	-
From two to five years	219,031	4,807	223,838	333,924	5,000	164,000
After five years	317,799	-	317,799	-	75,500	-
	536,830	4,807	541,637	336,924	80,500	164,000

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

	2008  Fixed or capped  £000	2008  Floating  £000	2008  Total  debt  £000	2007  Fixed  £000	2007 Floating  £000	2007 Total  debt  £000
Sterling	429,807	111,830	541,637	164,877	172,047	336,924

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

Percent		2008 £000	2007 £000
4.0 - 5.0		100,000	-
5.0 - 6.0		100,000	157,007
6.0 - 7.0		225,000	-
7.0 - 8.0		-	3,000
9.0 - 10.0		4,807	4,870
		429,807	164,877

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

	2008 %	2007 %	2008 years	2007 years
Sterling	6.0	5.6	5	6

The maturity profile of the Group's share of floating rate debt held within its joint ventures as at 31 March 2008 was as follows:

		2008 £000	2007 £000
Within one year		5,584	16,000
From two to five years		34,159	-
After five years		103,567	76,366
		143,310	92,366

19 OBLIGATIONS UNDER FINANCE LEASES

The Group has entered into a number of leases in relation to its investment and development properties, the carrying amounts of which are disclosed in note 10.

These leases are for fixed terms and subject to regular rent reviews. They contain no material provisions for contingent rents, renewal or purchase options and escalation clauses or any restrictions outside of the normal lease terms.

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

	2008 Minimum lease payments £000	2008  Interest £000	2008  Present value of minimum lease payments £000	2007  Minimum  lease payments £000	2007  Interest £000	2007  Present value  of minimum  lease payments  £000
Within one year	819	(812)	7	815	(809)	6
From two to five years	3,277	(3,243)	34	3,277	(3,245)	32
From five to 25 years	16,387	(15,974)	413	16,387	(16,002)	385
After 25 years	42,751	(31,478)	11,273	43,628	(32,317)	11,311
	63,234	(51,507)	11,727	64,107	(52,373)	11,734

20 FINANCIAL ASSETS AND LIABILITIES

OVERVIEW

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

Credit risk

Liquidity risk

Market risk

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

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

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

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

Credit risk

The Group's exposure to credit risk arises from the potential financial loss if a tenant or counterparty to a financial instrument fails to meet its contractual obligations. It relates principally to the Group's receivables from tenants and other third parties. Counterparties to financial instruments all have at least an AA- rating by Standard & Poor's.

Non-current receivable

In 2007, the Company took the strategic decision to invest in a corporate loan to a private company in order to advance the strength of the Group's position in relation to one of its own properties. The Company paid £53.2 million plus legal costs and arrangement fees for the loan which has a maximum term of 16 years but can be repaid in full or in part at the issuer's option at any time. Interest is payable on the roll-over dates at Libor plus 2.5%. The borrower has met all its interest payments to date and has repaid capital of £7,851,000 in 2006/07 and £2,362,000 in 2007/08. The loan is secured on a property asset with a commercially acceptable loan to value ratio. Whilst the loan represents a concentration of risk in a single counterparty, the Group has no reason to believe that it will not be repaid in full.

Trade and other receivables

The Group's activities are focused exclusively in Great Britain and the Channel Islands and within this geographical area, its exposure to credit risk arising from trade and other receivables is influenced by the individual characteristics of each tenant. As at 31 March 2008, the Group's 20 largest tenants within its directly held properties and its joint ventures account for 36.0% (2007: 41.5%) of the passing rents from these properties.

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

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

Outstanding tenant balances are reviewed on a quarterly basis for impairment with an allowance of £518,000 being made in the current year (2007: £142,000) as shown in note 2.

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

In relation to iQ, the Student Accommodation Fund in which the Group has a 50% interest, rents are either guaranteed by the universities or collected in advance of each term from students.

Guarantees

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

Liquidity risk

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

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

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

During the year, the Group terminated its existing bank facilities and refinanced these with a new £620 million facility with a number of relationship banks with an average maturity of 5.5 years and an interest rate of LIBOR plus a margin of 115 basis points, an increase of 20 basis points over the original facility. Since the year end, available facilities have increased to £715 million.

The key elements of the refinancing were the removal of a covenant limiting investment in joint ventures to 50% of net assets, an amendment to the interest cover covenant allowing a deduction for capitalised interest in arriving at the amount of interest to be covered and a ceiling of 110% to gearing based on net assets as shown on the Group's Balance Sheet as adjusted by deferred tax on revaluation and on the marking-to-market of financial instruments.

Interest cover is reviewed by the Board on a regular basis to monitor compliance with banking covenants. To ensure compliance, the Board would identify property sales in order to release historic revaluation surpluses and in addition, identify and manage discretionary expenditure.

Market risk

In relation to the Group, market risk arises mainly from the impact that changes in interest rates might have on the Group's cost of borrowing. The weighted average rate of interest of the Group's debt as at 31 March 2008 was 7.0% (2007: 6.6%).

The Group does not speculate in treasury products but uses these only to limit potential interest rate fluctuations. It usually borrows at floating rates of interest and uses hedging instruments to achieve an interest rate profile where the majority of borrowings are fixed or capped. As at 31 March 2008, 83.7% (2007: 54.8%) of the Group's net debt was fixed or protected.

With the intention of taking advantage of a fall in interest rates, all the Group's interest rate swaps in existence at the start of the year were cancelled and replaced with £225 million of interest rate caps at 6.5% with a maturity date of April 2013. During the year, these were augmented by a further £50 million of caps at rates between 5.50% and 5.75% with a maturity date of January 2013. The cost of the caps is being amortised over the period of their life through the Income Statement which also reflects a negative mark-to-market adjustment of £403,000. Further information on the Group's interest rate caps is given in note 21.

During the year, the Group purchased £150 million of interest rate swaps with a maturity date of January 2013 and an average swap rate of 4.97%. One of these, a  swap for £50 million, has a start date of 3 April 2008. Further information on the Group's interest rate swaps is given in note 21.

The Group is also exposed to market rate risk through the activities of its joint ventures, which borrow at variable rates and use financial instruments to safeguard against market movements in rates. This is disclosed in note 21 in respect of the Group's interests in its Quercus and iQ Funds.

In addition, the Group has exposure to currency rate fluctuations through its Euro cash deposit of €20.1 million following the sale of its sole French property at the beginning of 2007. In order to limit the Group's exposure to any downward exchange rate movements in Sterling against the Euro, a forward exchange contract on Euros for an amount of €13.5 million was entered into at a rate of £1 : €1.45. At the balance sheet date, this has resulted in an actual cash revaluation gain of £1,555,000 being reduced to a gain of £105,000 due to the recognition of a liability arising from the Euro forward exchange contract. The unhedged portion of the deposit is retained to meet local liabilities, the most material item being taxation relating to the sale of the property.

Capital management

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

In the interest of the shareholders, the Board pursues a progressive dividend policy, subject to the Group's cash requirements.

The Board also encourages employees to participate in the share ownership structure through savings investment plans, the share-based element of bonus arrangements and the various performance related employee share option schemes, all of which it considers best aligns the interest of employees with those of the Group and its shareholders.

From time to time, the Group purchases its own shares on the market. Such purchases can take the form of treasury shares with the aim of using these as treasury shares to cover entitlements under bonus arrangements and options schemes but also for cancellation on occasions when the Board considers that this course of action would enhance the value of the Group for the shareholders.

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

i)    Financial income and expense

		2008 £000	2007 £000
Recognised in Income Statement:
Interest expense on financial liabilities measured at amortised cost		30,747	20,518
Loan costs written-off on refinancing		2,798	-
Finance expenses on liabilities not recognised at fair value in the Income Statement		33,545	20,518
Interest on obligations under finance leases		812	865
Financial expenses		34,357	21,383
Finance income on assets not recognised at fair value in the Income Statement		(9,161)	(3,511)
Finance income on assets recognised at fair value in Income Statement
Interest income from available for sale investments held at fair value		(760)	(248)
Change in fair value of interest rate swaps and caps		(1,851)	(1,493)
		(2,611)	(1,741)
Financial income		(11,772)	(5,252)
Net financial income and expense		22,585	16,131
Capitalised interest		(12,022)	(9,209)
Net finance expenses (note 5)		10,563	6,922
Recognised directly in equity:
Gain (deficit) on revaluation of other non-current investments		757	(882)
Effective portion of changes in fair value of cash flow hedges		(416)	7,047
Foreign currency translation differences		232	(319)
		573	5,846

  ii)    Sensitivity analysis

As at 31 March 2008, it is estimated that an increase of 50 basis points in interest rates would have increased the Group's loss before tax by £1,789,000

(2007: reduction in profit before tax of £592,000) and that a decrease of 50 basis points would have decreased the Group's loss before tax by £1,789,000 

(2007: increase in profit before tax of £592,000). There would have been no effect on amounts recognised directly in equity.

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

In relation to foreign exchange, the Group has a Euro deposit of €20.1 million. Of this, €13.5 million is fully hedged. The balance is retained to meet local liabilities and so the Group has no exposure to foreign exchange movements.

iii)    Financial assets

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

		2008  £000	2007  £000
Sterling		11,785	22,364
Euros		15,979	13,439
United States dollars		218	245
		27,982	36,048

Details of the Group's other financial assets are shown in the table below.

iv)    Fair value of financial instruments

The fair value of the Group's financial assets and liabilities was as follows:

			2008  Book value £000	2008  Fair value £000	2008  Fair value adjustment £000	2007  Book value £000	2007  Fair value £000	2007  Fair value adjustment £000
Other non-current investments			15,196	15,196	-	3,044	3,044	-
Non-current receivable			42,987	42,987	-	45,349	45,349	-
Trade and other receivables
Trade receivables			20,660	20,660	-	12,175	12,175	-
Other receivables			6,898	6,898	-	7,047	7,047	-
Amounts due under contracts for sale			6,500	6,500	-	51,275	51,275	-
Interest rate caps			1,546	1,546	-	-	-	-
Current investments			4	4		4	4	-
Cash and cash equivalents			27,982	27,982	-	36,048	36,048	-
Total financial assets			121,773	121,773	-	154,942	154,942	-
Current liabilities: bank loans and other    borrowings			-	-	-	(3,000)	(3,000)	-
Trade and other payables
Trade payables			(2,809)	(2,809)	-	(6,751)	(6,751)	-
Other payables			(10,963)	(10,963)	-	(7,535)	(7,535)	-
Accruals			(22,536)	(22,536)	-	(18,774)	(18,774)	-
Interest rate swaps			(46)	(46)	-	(4,406)	(4,406)	-
Current tax liability			(7,269)	(7,269)	-	(9,216)	(9,216)	-
Non-current liabilities: bank loans and    other borrowings			(541,637)	(541,906)	(269)	(333,924)	(333,959)	(35)
Obligations under finance leases			(11,727)	(11,727)	-	(11,734)	(11,734)	-
Other payables			(2,392)	(2,392)	-	(4,919)	(4,919)	-
Total financial liabilities			(599,379)	(599,648)	(269)	(400,259)	(400,294)	(35)
Total net financial liabilities			(477,606)	(477,875)	(269)	(245,317)	(245,352)	(35)
Fair value on a post-tax basis					(194)			(25)

The fair values of non-current liabilities: bank loans and other borrowings were calculated by JC Rathbone Associates Limited as at 31 March 2008 and reflect the replacement values of the financial instruments used to manage the Group's exposure as at that date.

  v)    Maturity of financial liabilities

The maturity analysis of financial liabilities was as follows:

As at 31 March 2008					Bank loans £000	10% first mortgage debenture stock £000	Interest £000	Unamortised borrowing costs £000	Financial liability cashflows £000
Within one year					-	-	36,926	-	36,926
From one to two years					-	-	36,926	-	36,926
From two to five years					219,031	4,807	108,822	969	333,629
From five to 25 years					317,799	-	27,270	1,701	346,770
After 25 years					-	-	-	-	-
					536,830	4,807	209,944	2,670	754,251

	Financial liability cash flows (as above) £000	Current liabilities Trade payables £000	Current liabilities Other payables £000	Current liabilities Accruals £000	Current liabilities Interest rate swaps £000	Current liabilities Current tax liability £000	Obligations under finance leases £000	Non-current liabilities Other payables £000	Total £000
Within one year	36,926	2,809	10,963	22,536	-	7,269	819	-	81,322
From one to two years	36,926	-	-	-	-	-	-	-	36,926
From two to five years	333,629	-	-	-	46	-	3,277	2,392	339,344
From five to 25 years	346,770	-	-	-	-	-	16,387	-	363,157
After 25 years	-	-	-	-	-	-	42,751	-	42,751
	754,251	2,809	10,963	22,536	46	7,269	63,234	2,392	863,500

As at 31 March 2007			Bank loans £000	10% first mortgage debenture stock £000	Other loans £000	Interest £000	Unamortised borrowing costs £000	Financial liability cashflows £000
Within one year			-	-	3,000	22,556	-	25,556
From one to two years			-	-	-	22,556	-	22,556
From two to five years			329,054	4,870	-	48,865	1,946	384,735
From five to 25 years			-	-	-	-	-	-
After 25 years			-	-	-	-	-	-
			329,054	4,870	3,000	93,977	1,946	432,847

	Financial liability cash flows (as above) £000	Current liabilities Trade payables £000	Current liabilities Other payables £000	Current liabilities Accruals £000	Current liabilities Interest rate swaps £000	Current liabilities Current tax liability  £000	Obligations under  finance leases £000	Non-current liabilities Other  payables £000	Total £000
Within one year	25,556	6,751	7,535	18,774	4,406	9,216	815	-	73,053
From one to two years	22,556	-	-	-	-	-	-	4,919	27,475
From two to five years	384,735	-	-	-	-	-	3,277	-	388,012
From five to 25 years	-	-	-	-	-	-	16,387	-	16,387
After 25 years	-	-	-	-	-	-	43,628	-	43,628
	432,847	6,751	7,535	18,774	4,406	9,216	64,107	4,919	548,555

21 FINANCIAL INSTRUMENTS

i)    Effective cashflow hedges

The profile of the Group's interest swaps which were entered into during the year, were in existence as at 31 March 2008 and for the purpose of these financial statements were classified as effective cashflow hedges with the fair value adjustments reflected in equity, was as follows:

Amount £000	Maturity date	Swap rate			2008 Fair value adjustments £000
50,000	03.01.13	4.97%			(11)
50,000	03.01.13	4.94%			50
50,000	03.01.13	5.01%			(85)
150,000					(46)

These swaps were valued as at 31 March 2008 by JC Rathbone Associates Limited.

ii)    Interest rate caps

As at 31 March 2008, the Group has entered into the following interest rate caps, the cost of which is being amortised over the life of the caps. The adjustment arising from restating the amortised cost as at 31 March 2008 to fair value as estimated by JC Rathbone Associates Limited has been classified as ineffective and reflected in the Income Statement.

Amount £000	Maturity date	Strike rate		Fair value at  inception  £000	Fair value as at  31.03.08 £000	2008  Fair value adjustments £000
225,000	20.04.13	6.50%		1,490	996	(494)
25,000	03.01.13	5.50%		264	314	50
25,000	03.01.13	5.75%		195	236	41
275,000				1,949	1,546	(403)

iii)    Joint venture financial instruments

As at 31 March 2008, the following interest rate swaps shown at the full amount, were held within Quercus, a joint venture in which the Group has a 26.92% interest (2007: 27.96%).

Amount £000	Maturity date	Swap rate		2008  Fair value adjustments £000	2007 Fair value adjustments £000	Quintain share reflected in equity £000
50,000	22.10.07	5.32%		-	100	(29)
40,000	22.01.09	4.86%		179	570	(112)
50,000	22.10.09	4.84%		252	1,006	(216)
25,000	25.11.09	5.02%		548	404	41
80,000	22.01.13	5.11%		(498)	-	(143)
100,000	22.01.13	4.99%		(112)	-	(31)
345,000				369	2,080	(490)

As at 31 March 2008, the following accreting interest rate caps and collars, entered into during the year and shown at full amount, were held within iQ, a joint venture in which the Group has a 50.00% interest.

Amount         £000	Maturity date	Strike rate Floor	Strike rate Cap	Fair value at inception       £000	Fair value as at  31.03.08     £000	2008  Fair value adjustments     £000	Quintain share reflected in Income Statement £000	Quintain share reflected in equity   £000
12,951	04.10.12	5.08%	6.00%	77	(861)	(784)	(392)	-
12,951	04.10.12	5.28%	5.75%	42	(1,010)	(968)	-	(484)
12,951	04.10.12	4.89%	6.25%	88	(798)	(710)	(355)	-
12,952	04.10.12	4.69%	6.50%	89	(679)	(590)	(295)	-
51,805				296	(3,348)	(3,052)	(1,042)	(484)

22 RECONCILIATION OF MOVEMENTS IN EQUITY

	Issued capital £000	Share  premium account £000	Revaluation reserve £000	Other  capital reserves £000	Cashflow hedge reserve £000	Translation reserve £000	Retained earnings £000	Own  shares held  reserve £000	Equity share- holders' funds £000
Balance 1 April 2006	32,324	47,265	248,836	113,227	(4,808)	405	242,920	(3,494)	676,675
Recognised income and   expense for the year	-	-	138,291	-	5,479	(319)	42,662	-	186,113
Transfer between   reserves	-	-	-	(5,091)	-	-	5,091	-	-
Issue of shares less costs	133	3,532	-	-	-	-	(2,545)	-	1,120
Purchase of own shares as    treasury shares	-	-	-	-	-	-	-	(6,060)	(6,060)
Cost relating to share-based   payment schemes	-	-	-	-	-	-	3,718	-	3,718
Shares awarded to    employees   under bonus scheme	-	-	-	-	-	-	(210)	210	-
Short leasehold amortisation	-	-	(102)	-	-	-	102	-	-
Realisation of revaluation   gains on sale	-	-	(16,211)	-	-	-	16,211	-	-
Tax on realised gains	-	-	-	-	-	-	(1,724)	-	(1,724)
Dividends paid in year	-	-	-	-	-	-	(13,744)	-	(13,744)
Balance 31 March 2007	32,457	50,797	370,814	108,136	671	86	292,481	(9,344)	846,098
Recognised income and    expense for the year	-	-	(43,454)	-	(993)	232	(40,124)	-	(84,339)
Issue of shares less costs	26	546	-	-	-	-	(333)	-	239
Purchase of own shares as    treasury shares	-	-	-	-	-	-	-	(3,078)	(3,078)
Cost relating to share-   based payment schemes	-	-	-	-	-	-	2,147	-	2,147
Dividends paid in year	-	-	-	-	-	-	(15,366)	-	(15,366)
Balance 31 March 2008	32,483	51,343	327,360	108,136	(322)	318	238,805	(12,422)	745,701

Part of the gain on the revaluation of investment and development properties is recognised in the Income Statement and part directly through equity.

		2008 £000	2007  £000
Recognised in Income Statement:
Gains on revaluation of investment properties		338	12,616
Deficits on revaluation of investment properties		(44,661)	(924)
Deficits on revaluation of development properties		(5,265)	(182)
Reversal of deficits on revaluation of development properties		-	1,255
Gains on revaluation of investment properties in joint ventures		934	27,916
Deficits on revaluation of investment properties in associate		(125)	(650)
Recognised directly in equity:
Gains on revaluation of development properties		1,838	182,289
Deficits on revaluation of development properties		(79,006)	-
		(125,947)	222,320

The movement in the Group's Other capital reserves was as follows:

	Capital  redemption  reserve  £000	Convertible loan stock  reserve  £000	Merger  reserve £000	Capital reserve £000	Total Other capital reserves  £000
Balance 1 April 2006	2,074	786	106,062	4,305	113,227
Transfer to retained earnings	-	(786)	-	(4,305)	(5,091)
Balance 31 March 2007 and 31 March 2008	2,074	-	106,062	-	108,136

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

As at 31 March 2008, ESOP Trusts held 2,134,739 (2007: 1,359,774) shares in the Company which had been purchased in the market at a cost of £12,390,000 (2007: £7,714,000). The purpose of the Trusts is to acquire and hold shares which will be transferred to employees to meet future obligations under the Group employee share-based payment schemes as set out in note 23 and share-based bonus entitlements. As at 31 March 2008, these shares had a market value of £9,622,000 (2007: £12,177,000). The Quintain Group Employee Benefit Trust has waived the right to receive dividends.

As at 31 March 2008, the Company also held 5,234 (2007: 267,640) of its own shares which had been purchased in the market at a cost of £32,000 

(2007: £1,630,000). As at that date, these shares had a market value of £24,000 (2007: £2,397,000).

CAPITAL REDEMPTION RESERVE

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

MERGER RESERVE

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

CASHFLOW HEDGE RESERVE

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

TRANSLATION RESERVE

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

  23 SHARE CAPITAL

		Number of shares 000	Nominal  value £000
Authorised as at 31 March 2007 and 2008:
Ordinary shares of 25p each		200,000	50,000
Allotted, called up and fully paid:
In issue at 1 April 2006		129,295	32,324
Issue of shares under share-based payment schemes at between 25p and 556.3p		531	133
In issue at 31 March 2007		129,826	32,457
Issue of shares under share-based payment schemes at between 25p and 460p		104	26
In issue at 31 March 2008		129,930	32,483

As at 31 March 2008, share capital included 2,134,749 (2007: 1,359,774) shares held by ESOP Trusts. These shares had a nominal value of £533,687 

(2007: £339,944). The Company also held 5,234 (2007: 267,640) of its own shares with a nominal value of £1,309 (2007: £66,910).

As at 31 March 2008, the following commitments to issue shares to employees under various share-based payment schemes remained outstanding:

Date of grant	Number of shares	Exercise price  per share  pence	Exercise period  from	Exercise period  to
Executive Directors' Performance Share Plan (LTIP)
26.09.03	1,000,000	-	26.09.12	27.09.12
12.07.05	375,000	-	12.07.14	13.07.14
27.06.07	125,000	-	27.06.16	28.06.16
	1,500,000
1996 Approved Executive Share Option Scheme (1996 Approved)
22.02.99	6,040	151.5	22.02.02	21.02.09
13.06.00	29,151	155.3	13.06.03	12.06.10
04.09.01	1,504	199.5	04.09.04	03.09.11
17.06.02	13,043	271.0	17.06.05	16.06.12
13.06.03	63,540	287.0	13.06.06	12.06.13
02.02.04	8,720	344.0	02.02.07	01.02.14
13.09.04	69,087	460.0	13.09.07	12.09.14
12.07.05	36,878	556.3	12.07.08	11.07.15
09.01.06	9,450	634.8	09.01.09	08.01.16
	237,413
2005 Share Option Plan (2005 Plan)
10.07.06	32,976	653.0	10.07.09	09.07.16
27.06.07	36,147	798.2	27.06.10	26.06.17
	69,123
1996 Executive Share Option (No.2) Scheme (1996 Unapproved)
04.09.01	79,845	155.3	04.09.04	03.09.08
04.09.01	132,833	199.5	04.09.04	03.09.08
17.06.02	84,982	155.3	17.06.05	16.06.09
17.06.02	892,741	271.0	17.06.05	16.06.09
13.06.03	14,373	271.0	13.06.06	12.06.10
13.06.03	399,066	287.0	13.06.06	12.06.10
	1,603,840
2004 Unapproved Share Plan (2004 Unapproved)
13.06.03	12,290	25.0	13.06.06	12.06.10
02.02.04	7,450	25.0	02.04.07	01.02.14
02.02.04	10,551	25.0	02.04.08	01.02.14
02.02.04	11,729	25.0	02.04.09	01.02.14
13.09.04	160,109	25.0	13.09.07	12.09.14
12.07.05	183,663	25.0	12.07.08	11.07.15
09.01.06	1,566	25.0	09.01.09	09.01.16
10.07.06	117,398	25.0	10.07.09	09.07.16
27.06.07	137,538	25.0	27.06.10	26.06.17
	642,294
Deferred Bonus Plan
19.06.07	254,780	-	19.06.10	19.06.10
Total	4,307,450

The Group's share-based payments are all equity settled. The following share based payment schemes are operated by the Group:

Executive Directors' Performance Share Plan

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

i) participation in the plan is confined to executive directors of the Company

ii) individual awards to directors are restricted to 1% of the Company's issued share capital on the date of award and an aggregate of 2.5% of the Company's  issued share capital

iii) awards are granted at nil cost to participants

iv) vesting occurs, subject to the achievement of performance conditions, over years 5,6,7,8 and 9. No release of shares shall take place until the ninth anniversary of the award date.

1996 Approved Executive Share Option Scheme

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

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

ii) individual awards are restricted to £30,000

No awards have been made under the scheme since 2005.

2005 Share Option Plan

The Scheme is an HMRC approved scheme and has expired as to new awards. It has the following provisions:

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

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

Executive Share Option (No.2) Scheme

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

i) options do not have any performance conditions attached

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

Aggregate awards are restricted to:

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

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

2004 Unapproved Share Plan

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

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

ii) individual awards are restricted to annual earnings. Aggregate awards are restricted to 5% of the issued share capital of the Company on the date of issue.

Deferred Bonus Plan

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

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

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

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

	2008 Number of  shares	2008  Weighted average  exercise  price  (pence)	2007 Number of shares	2007 Weighted Average exercise price  (pence)
In issue as at 1 April	3,895,358	147.3	4,300,080	155.8
Options granted	553,465	62.2	172,232	383.1
Options exercised	(103,994)	(230.0)	(531,031)	(210.8)
Options lapsed	(37,379)	(383.9)	(45,923)	(232.4)
In issue as at 31 March	4,307,450	131.8	3,895,358	147.3

The weighted average share price at the date of exercise for share options exercised during the year was 550p (2007: 690p). The options outstanding as at 31 March 2008 had a weighted average remaining contingent life of 4.1 years (2007: 4.7 years).

Options granted during the current and previous year have been valued using the Black-Scholes and binomial models on the basis of the following main assumptions:

Date of grant		10.07.06 Approved	10.07.06 2004 Unapproved	19.06.07 Deferred Bonus Plan	27.06.07 LTIP	27.06.07 2005 Plan	27.06.07 2004 Unapproved
Number		42,416	129,816	254,780	125,000	36,147	137,538
Exercise price (pence)		653.0	25.0	-	-	798.2	25.0
Term of option (years)		10	7	3	9	10	7
Expected volatility (%)		22	22	22	22	22	22
Expected annual dividend yield (%)		1.6	1.6	1.4	1.4	1.4	1.4
Risk free rate (%)		4.7	4.7	5.6	5.6	5.6	5.6
Fair value (pence)		135.0	561.0	705.0	715.0	184.0	718.0

  24 CAPITAL COMMITMENTS

As at 31 March 2008, the Group had capital commitments of £16,475,000 (2007: £15,669,000) in relation to its own development properties and £130,000 

(2007: £nil) in respect of contractual commitments for repairs, maintenance and enhancement in relation to its investment properties. The Group's share of capital commitments in relation to its joint ventures was £63,939,000 (2007: £81,450,000).

25 OPERATING LEASE ARRANGEMENTS

i) GROUP AS LESSEE

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

		2008 £000	2007 £000
Operating leases which expire:
From two to five years		365	22
After five years		6,310	7,144
		6,675	7,166

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

ii) GROUP AS LESSOR

The Group earns rental income by leasing its investment properties to tenants under non-cancellable operating leases.

The majority of properties are let for terms from five to 35 years at a market rent. Standard lease provisions include service charge recovery and upward only rent reviews every five years. On review, rents are increased either by a contractual formula or to current market rent (estimated rental value or ERV). Typically, single

let properties are leased on terms where the tenant is responsible for repair, insurance and running costs while multi-let properties are leased on terms which include recovery of a share of service charge expenditure and insurance. Only one of the Group's properties is let on terms which include a turnover based element.

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

		2008 £000	2007 £000
Operating leases which expire:
Within one year		1,388	1,785
From two to five years		18,781	14,199
After five years		147,480	128,577
		167,649	144,561

In addition, the Group's share of minimum lease payments receivable under non-cancellable operating leases contained within the Group's joint ventures was £472,742,000 (2007: £377,222,000).

26 RELATED PARTY DISCLOSURES

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

		2008 £000	2007 £000
Quercus Property Partnership		6,416	4,014
iQ Property Partnership		2,188	177
Meridian Delta Limited		944	71
BioRegional Quintain Limited		277	192
Quintessential Homes (Wembley) LLP		260	161
Quantum Property Partnership		20	10
Quart Property Partnership		15	25
		10,120	4,650

The Group also received interest on loan notes amounting to £2,733,000 (2007: £1,741,000) from Meridian Delta Limited and £691,000 (2007: £108,000) from BioRegional Quintain Limited, which are included in finance income.

The following amounts due from related parties are included in other receivables in note 15.

		2008 £000	2007  £000
Quercus Property Partnership		11,447	6,281
iQ Property Partnership		589	504
Meridian Delta Limited		303	77
BioRegional Quintain Limited		1,278	353
Quintessential Homes (Wembley) LLP		-	185
Quantum Property Partnership		73	5
Quart Property Partnership		29	12
		13,719	7,417

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

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

		2008 £000	2007 £000
Short-term employee benefits		3,608	3,576
Post-employment benefits		221	216
Directors remuneration included in administrative expenses (note 4)		3,829	3,792
Share-based payments		289	911
		4,118	4,703

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

27 ACQUISITION OF SUBSIDIARY

During the year, the Group acquired for cash the remaining 50% of Countryside Quintain Birmingham Limited, which was classified as a joint venture undertaking as at 31 March 2007, for a consideration of £5,451,000. This was treated as the acquisition of a trading property which was the sole asset of the company together with a deferred tax liability of £1,361,000 (note 6). This was treated as the acquisition of a trading property for £6,812,000.

28 DISPOSAL OF INTEREST IN SUBSIDIARIES

In the year ended 31 March 2007, the Company sold for cash to two unrelated parties a 50% interest in two subsidiary undertakings, the main assets of which were investment and development properties. Following the sales, the two entities were accounted for as joint ventures. The balance sheets of the two subsidiaries and the impact of the sales on the Income Statement of the Group were as follows:

		IQ Unit Trust £000	Quintessential Homes (Wembley) LLP  £000
Investment / development properties		50,502	8,952
Current assets: trade receivables		2,037	-
Cash and cash equivalents		579	1,040
Current liabilities: trade payables		(282)	(850)
Non-current liabilities: bank loans and other borrowings		(31,984)	-
Net assets		20,852	9,142
Net assets transferred to joint ventures (note 12i (a))		(10,426)	(4,573)
Share of net assets sold		10,426	4,569
Proceeds from sale		14,523	7,572
Share of net assets sold		(10,426)	(4,569)
Gross profit		4,097	3,003
Expenses of sale		(231)	(83)
Profit from sale of shares in subsidiaries		3,866	2,920

Apart from the investment and development properties, all other assets and liabilities were valued at disposal at their carrying value. 

There were no disposals of such interests in the year to 31 March 2008.

 

END

 

 

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