Interim Results - Replace

Quintain Estates & Development PLC 30 November 2006 Correction - Amendment to date headings in financial highlights (Profit and Loss Account and Balance Sheet). Second column should read 2005. 30 November 2006 Quintain Estates and Development PLC ('Quintain'/'Company'/'Group') Interim Results for the six months ended 30 September 2006 Quintain reports good progress with 18% rise in pre-tax profits Highlights â€¢ Profit before tax excluding discontinued items up 18.3% to Â£5.6m (Â£4.7m) â€¢ Earnings per share before discontinued activities up 22.6% to 3.8p (3.1p) â€¢ Earnings per share after discontinued activities up 171.4% to 3.8p (1.4p) â€¢ Interim dividend up 7.7% to 3.5p (3.25p) â€¢ Good progress in the year to date across the Group's three business areas: o Special Projects â€¢ Construction commenced on first residential building at Wembley â€¢ First land sale at Greenwich â€¢ BioRegional Quintain: Agreement signed for first phase development at Middlehaven o Quintain Fund Management â€¢ Healthcare funds under management increased to Â£530.0m â€¢ Strong interest in proposed new student accommodation fund o Investment Portfolio â€¢ Â£24.1m of investment properties acquired â€¢ Â£15.3m proceeds from property disposals â€¢ John Plender to become Chairman from 1 April 2007 â€¢ Tonianne Dwyer, Head of Quintain Fund Management, appointed to the Board with immediate effect. Nigel Ellis, Chairman of Quintain, commented: 'This is the last statement I shall be making to shareholders and I am delighted to report that we have continued to make good progress in the six months under review. Our activity at Wembley continues to accelerate and we have made encouraging progress in our Fund Management division. We are confident that Quintain is strongly positioned to deliver significant growth in the future.' For further information, please contact: Quintain Estates and Development PLC Rebecca Worthington/Hilary Reid Evans 020 7495 8968 Financial Dynamics Stephanie Highett/Dido Laurimore 020 7831 3113 Financial highlights for the six months to 30 September 2006 Profit and Loss Account 30 Sept 30 Sept Annual Year to 2006 2005 change 31 March % 2006 Group turnover (Â£000) 20,253 20,509 (1.2) 42,051 Profit before tax and 5,583 4,721 18.3 64,953 discontinued operations (Â£000) Profit before tax and after 5,531 1,580 250.0 60,911 discontinued operations (Â£000) Basic earnings per share (pence) Before discontinued operations 3.8 3.1 22.6 46.1 After discontinued operations 3.8 1.4 171.4 43.9 Dividends per share (pence) 3.5 3.25 7.7 10.5 Balance Sheet 30 Sept 30 Sept Annual As at 2006 2005 change 31 March % 2006 Basic net asset value per share 525 431 21.8 526 (pence) Diluted net asset value per 516 424 21.7 516 share (pence) Gearing (%) 39 39 36 CHAIRMAN'S STATEMENT Our results for the six months to 30 September 2006 demonstrate that good progress continued to be made across the Group's divisions during the period under review. Our confidence in the Group's ongoing ability to deliver increased value is demonstrated by the fact that the Board is once again increasing the interim dividend, by 7.7% to 3.5p. Business overview We are, for the first time, including an Operating and Financial Review at the half-year stage. Although the detailed report on the progress of our activities is contained in this section, a commentary on the highlights of the period is included below. In our Special Projects division, we have moved from the planning to the implementation stage of our major regeneration projects. At Wembley, for example, we have started work on construction of our first building, which is primarily residential. Sales of the private residential units it contains have been highly successful with contracts having been exchanged for 116 of the 145 private apartments and a further 15 units reserved. Despite the challenge of finding deals offering good value in the current market conditions, we have invested Â£75.4m in the period on new property, including buildings for the planned new student accommodation fund, 'iQ'. The search for further opportunities is ongoing. Quintain Fund Management continues to expand its activities, not only growing its funds under management in the first half but also making good progress in the extension of its business into the specialist areas of student accommodation and science parks. Performance Although, as previously, we have not formally valued the property portfolio at the half year, the directors have, in conjunction with our valuers, undertaken an informal review of the portfolio, focusing on the most significant assets. This review resulted in the value of Wembley rising by Â£31.2m to Â£435m, an increase of 7.7%, after taking account of expenses in the period. Over the same period, the value of our investment at Greenwich increased by 19% or Â£27.7m, after allowing for additional expenditure, to Â£175m. From next year we will be carrying out a formal revaluation of the portfolio at the half year which will be included in the interim results. Overall, our approach to property valuation remains conservative, although market dynamics are taken into consideration when valuing our property portfolio. Share capital Our share buyback programme remains in place. During the period, we purchased a total of 1 million shares in the market, at an average price of 604p inclusive of costs, which are being treated as treasury shares. These purchases were effected in order to hedge a proportion of our liabilities in relation to various share incentive schemes. Share price During the six month period, our share price rose by 2.9% and closed at 700p on 30 September 2006. Since then, we have seen continued rises with the shares closing at 839p on 29 November 2006. Over the six months to 30 September 2006, our share price underperformed the FTSE Real Estate Index by 2.1% but outperformed the FTSE 350 Index by 2.78%. From 1 April 2006 to 28 November 2006, however, the Group's share price outperformed the FTSE Real Estate Index and the FTSE 350 Index by 7.0% and 18.9% respectively. The Board I have been Chairman of Quintain for over 11 years now. During this time, I believe that the Company has achieved excellent returns for its shareholders and positioned itself as one of the UK's leading development and regeneration companies. However, given the length of time I have been in office and the fact that I am 67 years old, I feel it is now time to stand down as Chairman and therefore will be doing so on 31 March 2007. Thereafter, I shall remain on the board as a non-executive director until the Annual General Meeting in 2007, at which time it is not my intention to seek re-election. I am delighted to report that John Plender, who has been a non-executive director of the Company since July 2002, will take over from me as Chairman from 1 April 2007. John, a Chartered Accountant by training, is a highly respected financial commentator and will bring to the role his wide experience of investment and corporate governance matters. I am immensely proud of all that the Group has achieved since listing in 1996 and will continue to watch its progress with enormous interest. As a reflection of Quintain Fund Management's success and its increasing significance to the Group, the Directors have asked Tonianne Dwyer to join the Board with immediate effect. Tonianne, who has headed Quintain's fund management business since she joined Quintain in June 2003, qualified as a solicitor and barrister in Western Australia. Prior to joining the Company, she was employed from 1987 to 2003 by SG Hambros Bank in their corporate finance division, latterly as a director. As ever, we are highly dependent on our people to deliver our success and are fortunate in having an outstanding team of executive directors and staff whom I would like to thank for their hard work. Outlook The Company has made good progress across the business in the first half. Our activity at Wembley continues to accelerate, our Investment Portfolio has made a number of acquisitions, where we perceive potential to enhance value, and we have made ongoing encouraging progress in our Fund Management division. We are confident that Quintain is strongly positioned to continue to deliver significant growth in the future. Nigel Ellis Chairman 30 November 2006 OPERATING AND FINANCIAL REVIEW Significant progress has been made on our major projects, yet Quintain remains ambitious. This is part of our culture. We continuously seek out sectors and situations where our particular skills can add value and where we can continue to be highly entrepreneurial. This is central to our strategy. During the period under review, the Group has made good progress across each of the three business areas in which we operate. Special Projects This business encompasses our major regeneration projects at Wembley and at Greenwich, as well as other significant development schemes including City Park Gate Birmingham, Emerson's Green Bristol and Silvertown London. We also have a joint venture, Bioregional Quintain, which seeks to lead the market in the creation of sustainable zero carbon communities. Quintain benefits from this association when presenting the increasingly important environmental impact aspects of our proposals for future regeneration projects. Investment Portfolio This business comprises an income producing secondary investment property portfolio with the potential to create capital value through active management including lease renewals, restructuring, marriage value and refurbishment. The portfolio is spread throughout the UK and is currently composed primarily of office and industrial properties. Quintain Fund Management Also known as QFM, Quintain Fund Management co-invests in specialist sectors such as healthcare, student accommodation and science parks. Quintain benefits through these funds from asset management, transaction and performance-related fees. Our objectives and our strategy Our objectives are straightforward - they are to outperform the Investment Property Databank ('IPD') benchmark and to make a real total shareholder return of at least 10%, measured by the increase in net asset value per share adding back the dividend. Over the ten years to 31 March 2006, Quintain's performance was in the top percentile of IPD. Our strategy is to continue to apply our rigorous stock-picking approach, focusing on the financial characteristics of properties to identify assets and special situations where we can use our skills to add value. With regard to our urban regeneration portfolio, we are pioneering the concept that ownership of freeholds or long leaseholds affords the opportunity to run towns as businesses, creating diverse income streams including the exploitation of non-rental commercial opportunities such as advertising, naming rights, telecommunications and power. While property market conditions remain ambiguous, we continue to exercise caution. Our strategy remains to sell when we judge we can no longer add value and to reinvest the proceeds into areas that offer the potential for greater returns. Performance As in previous years, we have not undertaken a formal valuation of the property portfolio at the half year. However, the directors have carried out, in conjunction with our valuers, an informal review of the portfolio, with particular focus on the major special projects. We are pleased to report that, on this basis, the total value of Wembley rose by Â£31.2m or 7.7% over the first half year to Â£435m. During the same period, the value of our landholding and participation in Meridian Delta Limited increased by Â£27.7m (19%) to Â£175m. As from next year we intend to carry out a formal revaluation of the portfolio at the interim stage which will be reflected in the accounts. Special Projects Wembley - We have continued to make good progress at Wembley. Construction began during the half year on the first residential development, currently known as W01. This mixed-use development will house a total of 286 apartments on the first floor and above, of which 86 will be shared ownership and 55 will be socially rented. A joint venture was signed with the Genesis and Family Housing Associations during August in relation to this block. Contracts for 116 of the 145 private apartments have been exchanged to date and a further 15 reserved. Discussions are ongoing with a number of prospective partners regarding the formation of joint ventures for a further four residential blocks. Following the success of W01, we have now made a reserved matters application to Brent Council for a further 636 apartments for those blocks known as W03 and W04. It is intended that W03 will be a 100% private residential development. Subject to the success of this application, we hope to begin construction of these buildings during the next calendar year. It is also anticipated that during the course of 2007 reserved matters applications will be made for a 4-star 400 room Hilton Hotel. This application is linked to the signing of a development agreement for approximately 660 student units. Both developments form part of the same structure and are at the design and costing stage. The acquisition of the 3-star Hilton Plaza Hotel, which is adjacent to Quintain's existing Wembley landholdings, took place during the six months to 30 September 2006. We are also in discussions with a number of parties regarding the formation of a retail joint venture. The Wembley development includes planning consent for 560,000 sq ft of retail, 350,000 sq ft of leisure facilities and 167,000 sq ft of bars and restaurants, with the first phase of the retail offer currently scheduled for opening by September 2010. We are exploring a number of innovative opportunities to exploit the commercial rights presented by our ownership at Wembley. For example, a 'request for proposal' was issued in September to a number of interested parties and partners are currently being sought for the various utilities required for the Wembley scheme. This will enable us to minimise the risks involved whilst gaining funding from the successful partners. Demolition of the Wembley Conference Centre, Elvin House and Exhibition Halls 1 and 2 began in late summer, with work scheduled for completion in mid-2007. Tenants from Elvin House have been relocated to the York House office building. Following the August 2006 decision by Brent Council to withdraw its application for consideration of the borough as a location for the one 'Super' casino, we have made good progress with our alternative plans and it is expected that a planning application for a further 1.6m to 2.2m sq ft of mixed use development will be submitted in relation to this site in autumn 2007. The refurbished Wembley Arena has successfully attracted a large number of artists since its reopening in April 2006. Managers Live Nation are reporting a running rate of 170 shows per annum, making this the busiest year for the Arena in over a decade. The completed Arena Square is also becoming a performance destination in its own right, with the Square of Fame concept proving popular with both artists and the public since its introduction in September 2006. Popular music icons Madonna and Cliff Richard have had their handprints immortalised in the Square and a number of other artists are expected to participate during the coming months. Since its opening Arena Square has hosted a number of other events including a Bollywood dance celebration. The valuation of the Group's holdings at Wembley remains largely land sales-based, with adjustments made to that valuation as and when joint ventures or developments crystallise. In the current market conditions, we believe that these valuations are both prudent and conservative. Greenwich - We believe that the rate of progress is now set to accelerate at Greenwich, where, in conjunction with our 51 per cent joint venture partner Lend Lease we are regenerating the 190 acre Peninsula. This scheme has an estimated gross development value of Â£5bn. We have secured the first land sale to Bellway Homes, which will deliver a high-quality block of 229 riverside apartments on the southern part of the site. Overlooking the Thames, the apartments will be adjacent to Greenwich Millennium Village and in close proximity to the retail and community facilities already on the Peninsula. Subject to reserved matters consent, Bellway anticipates starting on site in 2007 with the apartments ready for occupation in 2009. Meridian Delta Limited is currently in negotiations regarding two further plots, which lie to the south and to the north east of the Peninsula. In the north west of the area, Quintain and Lend Lease are progressing their intended joint venture to develop Peninsula Quays, as principals. We are in the process of selecting a Chief Executive for the joint venture to deliver this scheme. The land has consent for 3.2m sq ft of mainly residential space and represents the opportunity for the development of prime residential properties, with substantial river frontage, views across to Canary Wharf and the City, and within a short walk of the Underground and other transport links. The new Peninsula Square (previously known as Millennium Square) is expected to open in early 2007. A giant sculpture, the Peninsula Spire, which will form a focal point for the redevelopment of the area, was erected in the square in late October. Silvertown - The Carlsberg Tetley lease on this 330,000 sq ft mixed-use industrial estate expired in October, giving Quintain vacant possession. The 12 acre site is strategically located at the gateway to the Olympic lands and discussions are taking place with our partners, the London Development Agency, to combine this in a larger scheme, part of which is expected to provide space for occupiers relocated from the Olympics lands. The site, which has both wharfage and easy waterfront access to the Olympics construction areas, provides substantial potential for related development. We are also continuing our masterplanning initiatives for the delivery of a major mixed-use community, post 2012. City Park Gate, Birmingham - During 2005, Quintain signed a Development Agreement with Birmingham City Council, in joint venture with Countryside Properties plc , to develop out this four acre site, which is immediately to the east of the Bull Ring and Moor Street Station. Although the site has an existing outline consent, for 630,000 sq ft, we have filed a further outline application for a total of 1m sq ft, including up to 844 apartments. Enabling work has begun on site for this scheme. Emerson's Green, Bristol - Quintain owns 26 hectares (65 acres) of a 106 hectare site at Emerson's Green, which has been designated as mixed-use by the Local Authority. The current proposal includes the creation of 2,650 dwellings, employment, retail and supporting facilities. Quintain has delayed agreeing a revised planning application pending an equalisation agreement with adjoining landowners and clarity on S106 and affordable housing requirements. We are excited by the potential to exploit synergies with this development as Quantum, Quintain's specialist science park partnership with Morley Fund Management, is now close to signing an 800,000 sq ft development agreement, having been selected in April 2006 as the preferred developer for adjacent land at Emerson's Green by the South West of England Regional Development Agency. Gracechurch Street, London and Arundel Gate, Sheffield - After 31 March 2006, contracts were completed for the sale of 36-41 Gracechurch Street, EC3 for Â£24.75m, giving rise to a profit on valuation of Â£3.5m and on book cost of Â£5.4m. Contracts were also completed for the sale of Arundel Gate, Sheffield, a multi-let retail and leisure property, for Â£9.0m, giving rise to a profit on valuation of Â£0.4m and Â£2.1m on book cost. BioRegional Quintain - BioRegional Quintain continues to make good progress. BioRegional Quintain is a joint venture with BioRegional Properties Limited, whose objective is to build sustainable communities. Quintain has the right to fund all developments by way of loan stock. â€¢ Brighton - In joint venture with Crest Nicholson plc, BioRegional Quintain is expected to deliver 172 residential units, including affordable housing, 24,000 sq ft of commercial space and 10,000 sq ft of pre-let community space. The grant of planning consent is expected in early 2007. â€¢ Middlehaven, Middlesbrough - In November 2006 BioRegional Quintain signed a development agreement with English Partnerships and Tees Valley Regeneration for a first-phase mixed use development of 765 residential units, 200,000 sq ft of offices and 70,000 sq ft of leisure and retail space on a 40-acre site. We believe this will be the largest zero carbon development in the UK. Grant funding for the development has been approved by The Treasury. â€¢ West Molesley, Surrey - In joint venture with Crest Nicholson, BioRegional Quintain is the preferred developer for the delivery of 100 residential homes. Investment portfolio Of the Â£75.4m of acquisitions undertaken by the Group during the first half of the year, Â£24.1m were investment properties, purchased at an average net initial yield of 8.34%. Acquisitions on behalf of both Special Projects and Quintain Fund Management amounted to Â£51.3m. Investment portfolio property disposals in the period generated proceeds of Â£15.3m at an average yield of 4.1%, which generated profits of Â£0.9m over book value. We expect the sales rate to increase in the second half of the year. The letting market remains challenging except for good quality space in prime locations. Successes include Leamington Spa, Maldon, Birmingham, Colchester and Leeds. At the Royal Exchange, Manchester, practical completion has been received and we continue to target high quality retail operators on a flexible leasing basis. Quintain Fund Management Quintain Fund Management ('QFM') has continued to make good progress in the first half of the year. Quercus, our healthcare fund, continues to perform well, with results underpinned by the continuing strength of the healthcare market. Funds under management grew to Â£530.0m. Total properties purchased in the period were Â£25.7m. Since the period end we have acquired properties valued at a further Â£50.2m. The fund currently comprises 206 properties, which are leased to 33 tenants, who operate nursing homes, learning disability and specialist care facilities and private hospitals. Net asset management fees received during the half amounted to Â£0.7m, with performance fees to be determined during the second half year. During the the current financial year, Quintain has to date committed a further Â£7.3m of equity to Quercus. We anticipate investing additional equity during the first quarter of the next calendar year. Quantum Property Partnership, a science park fund which is operated as a joint venture with Morley Fund Management, is expected to sign a development agreement shortly with South West Regional Development Agency in relation to the Bristol and Bath Science Park. The science park will be located on 54 acres of land adjacent to Quintain's own landholding at Emerson's Green, Bristol. Quantum will fund and procure primary infrastructure and associated servicing for the first phase of the park, including a 35,000 sq ft innovation centre and 20,000 sq ft of 'grow on' space for companies as they expand. Later phases of the development will be market led. Several other interesting opportunities are also being pursued. Preparation for iQ, our proposed student accommodation fund, is progressing well. Development of the first schemes, in Sheffield and Nottingham, has been completed, with both properties opening on time and very well received by students and the Universities. Both properties are performing above expectations, with the Sheffield scheme running at full occupancy and the Nottingham scheme at 97.5%. Nottingham has a rent guarantee in place for the first year of operation. We have also exchanged on schemes in Birmingham, Salford and Kingston, which will have a combined value on completion of Â£73m. Construction is well underway on all sites with Birmingham and Salford due for completion in late summer 2007, and Kingston in late summer 2008. We have agreed terms on a further Â£195m of schemes for delivery over the next three years and have a strong pipeline of further opportunities. Our strategy, which is to build a pipeline of investments on our own balance sheet before seeking to launch a fund, has been rewarded by the strong interest shown in partnering with us. We have narrowed the field to three potential partners and expect to move into final negotiations in the short term. Longer term, consideration is being given to further fund opportunities, including in relation to residential property. People Nigel Ellis will stand down as Chairman at the end of this financial year. He has provided wise counsel and invaluable support to the Company over the last 11 years, a time which has seen significant change across the business. We owe him an immense debt of gratitude both corporately and personally for which I wish to convey my huge thanks. John Plender will step up from his non-executive position to take on this role from 1 April 2007. Since joining the Board in July 2002, John has gained the respect of all and I look forward to working with him in his new role as our Chairman. Outlook The Group has continued to make good progress during the first half. Activities at Wembley are progressing rapidly and developments are in line with our expectations. Both the investment portfolio and QFM are performing well and BioRegional Quintain is proving its potential with projects such as Brighton and Middlehaven. This performance underpins our belief we can continue to deliver shareholder value in the future. We consider that few companies have the opportunity to significantly enhance their net asset value against a background of stabilising total returns in the property market. We believe that Quintain is a notable exception and look forward to a continuing track-record of market out-performance. FINANCIAL REVIEW Headline results Earnings per share rose by 171% to 3.8p per share (30/9/05: 1.4p). Excluding discontinued items earnings per share of 3.8p were 23% ahead of last year's 3.1p per share. Profits before tax excluding discontinued items rose by 18% to Â£5.6m from Â£4.7m in the comparable period. Reported net assets per share were 525p per share (year to 31 March 2006: 526p). This reflects the dividend accounted for in the period in which it was paid. No revaluations are incorporated for the interim. From next year we intend to carry out a formal revaluation at the interim stage and reflect these in the accounts. Adjusted diluted net asset per share, the measure recommended by EPRA was 609p (year to 31 March 2006: 612p). Income Statement Gross rental income for the half year fell by 11.6% to Â£13.1m (30/9/05: Â£14.8m). This reflects the continued investment property sales programme. Income lost from sales was Â£3.9m against which purchases contributed Â£1.1m and the guaranteed payment from Wembley Arena added Â£1.8m. Rents passing at 30 September 2006 for the directly owned portfolio totalled Â£25.6m, with an estimated rental value (ERV) of Â£35.1m. Voids overall are marginally down, however the unintentional element has increased to 14.9% of ERV (31 March 2006: 8.0%). This includes properties that were previously being refurbished but are now available to be let such as the Royal Exchange at Manchester (Â£0.8m) and The Synergy Building in Sheffield (Â£0.9m). Planned voids in relation to development opportunities make up 6.7% of ERV (31 March 2006: 15.4%). Income from leisure operations related to the ongoing Wembley businesses, which delivered a profit of Â£0.7m (30/9/05: Â£0.5m), mainly from the Sunday market. The first-time income from hotel operations of Â£0.4m is for one month's contribution from the Plaza Hotel at Wembley. This is a Hilton operated hotel that was acquired as part of a strategic deal with Hilton to build a 4-star 400 bed hotel. Profit from other revenue rose to Â£3.5m from Â£1.5m. Of this fees after costs from Quercus generated Â£0.7m. A surrender premium of Â£1.7m was received in the period in relation to Smallbrook Queensway of which Â£0.5m is being invested in refurbishment. The property derivative contributed a profit of Â£0.9m. This Â£15m contract for difference runs to February 2007 with LIBOR swapped against the All Property IPD Index to 31 December 2006. Continuing administration expenses increased by 16% to Â£14.5m (30/9/05: Â£12.5m). Discontinued administration expenses were Â£0.6m (30/9/05: Â£1.4m). The major increases were professional fees (Â£0.4m), office costs (Â£0.4m) and bonuses (Â£0.3m) and related to the increased overall level of operational activity within the Group. Further information is given in note three to the accounts. Profit over valuation on the disposal of non-current assets was Â£7.8m (30/9/05: Â£6.9m). The largest contributors being Â£3.5m on the sale of 36-41 Gracechurch Street, London, EC3 and Â£3.0m on the disposal into a joint venture of the land for the first residential plot at Wembley. Proceeds on sales were Â£56.7m with a profit on historic cost of Â£16.6m. Net finance expenses were Â£3.6m (30/9/05: Â£6.1m). Of this, the change in fair value of our forward start swaps gave rise to a profit of Â£0.2m compared with a loss of Â£1.6m in the same period last year. Further details are given in the table below. Of the interest capitalised, Â£2.6m related to Wembley and Â£0.9m to Greenwich. 30 September 30 September 2006 2005 Â£m Â£m Interest payable 9.1 8.8 Interest capitalised (4.3) (3.6) Interest receivable (1.0) (0.7) Change in fair value of ineffective interest rate swaps (0.2) 1.6 Net finance expenses 3.6 6.1 The profit from joint ventures in the six months was Â£2.0m (30/9/05: Â£2.3m). Of this Â£2.1m came from our 28.3% ownership in Quercus (30/9/05: Â£1.8m). The scheme at Merton Abbey Mills, which is now materially sold, contributed Â£0.5m in the prior period. Our effective tax charge has been included in the interim accounts at 20% based on our best estimate of the charge for the full year. This remains below the standard rate of 30% due to the availability of balancing allowances on properties sold, indexation and capitalised interest. Balance Sheet At 30 September, excluding directors' valuations, the book value of investment properties was Â£327.5m (30/9/05: Â£296.6m) and the book value of development properties was Â£612.5m (30/9/05: Â£489.4m). During the six months Â£18.0m of capital was invested and acquisitions of Â£75.4m made. Against this disposals with a book value of Â£46.6m gave sale proceeds of Â£56.7m. Capital commitments of Â£116m include Â£60m for student accommodation, where we have committed to buy properties currently under construction subject to their delivery on time and to an agreed quality. We anticipate these commitments will be passed on to the iQ fund before the end of the financial year. During the six months, the Employee Benefit Trust purchased 500,000 shares at an average price of 607p to cover allocations under the Executive Directors' Performance Share Plan. Quintain also purchased 500,000 treasury shares at an average price of 590p to cover obligations under various share incentive schemes. Of the Â£127.7m net investment in joint ventures, Â£90.3m relates to our 28.3% share in Quercus, the healthcare fund. Whilst our holding on the Greenwich Peninsula is included within development properties, Meridian Delta Limited, the company charged with overseeing the redevelopment of the Peninsula, which is owned 49% by Quintain and 51% by Lend Lease, is treated as a joint venture. Our current investment in this is Â£26.3m. Other joint ventures include Quintessential Homes (WO1), City Park Gate, BioRegional Quintain and South East Properties (Redhill) Limited. Our gearing level was 39% at 30 September 2006, compared with 36% at the previous year end. Of the Â£261.0m of net debt, 63% is hedged with swaps. During the period we amended some of the covenants on our Â£475m corporate loan. The banks removed the requirement for the loan to be matched 1:1 with investment properties and in return we reduced the maximum gearing limit from 130% to 110%. These changes give us the flexibility to use the funds for our regeneration projects. Cashflow Statement The increase in cash and cash equivalents of Â£13.9m mainly came from financing activities, with net investment offsetting the cash outflow from operating activities. Expenditure on property assets of Â£75.9m was less than the proceeds of Â£89.7m, partly reflecting the timing of sales, with Â£54.6m of cash received in relation to contracts for sale in place at the year end. Internal audit During the period we appointed Grant Thornton to act as independent internal auditors. A risk register has been agreed and a rolling schedule of audit work identified. Independent Review Report to Quintain Estates and Development Plc Introduction Review work performed We have been instructed by the Company to review the We conducted our review in accordance with guidance financial information for the six months ended 30 contained in Bulletin 1999/4: Review of interim September 2006 which comprises the Consolidated financial information issued by the Auditing Income Statement, the Consolidated Balance Sheet, Practices Board for use in the UK. A review the Consolidated Cash Flow Statement, the consists principally of making enquiries of Consolidated Statement of Recognised Income and management and applying analytical procedures to the Expense, the Consolidated Statement of Changes in financial information and underlying financial data Equity and the related notes. We have read the and, based thereon, assessing whether the accounting other information contained in the interim report policies and presentation have been consistently and considered whether it contains any apparent applied unless otherwise disclosed. A review misstatements or material inconsistencies with the excludes audit procedures such as tests of controls financial information. and verification of assets, liabilities and transactions. It is substantially less in scope that an audit performed in accordance with International Standards on Auditing (UK and Ireland) This report is made solely to the Company in and therefore provides a lower level of assurance accordance with the terms of our engagement to than an audit. Accordingly, we do not express an assist the company in meeting the requirements of audit opinion on the financial information. the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no Review conclusion other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to On the basis of our review we are not aware of any anyone other than the Company for our review work, material modifications that should be made to the for this report, or for the conclusions we have financial information as presented for the six reached. months ended 30 September 2006. Directors' responsibilities KPMG Audit Plc Chartered Accountants The interim report, including the financial 8 Salisbury Square information contained therein, is the responsibility London of, and has been approved by, the directors. The EC4Y 8BB 30 November 2006 Directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Consolidated income statement For the six months ended 30 September 2006 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2006 30 Sept 2005 31 March 2006 Notes Â£000 Â£000 Â£000 _______ _______ _______ Revenue from continuing operations 2 20,253 20,509 42,051 Cost of sales in respect of continuing operations 2 (6,569) (6,322) (15,295) _______ _______ _______ Gross profit from continuing operations 13,684 14,187 26,756 Administrative expenses 3 (14,474) (12,516) (22,660) _______ _______ _______ Operating (loss) profit before recognition of results from non-current asset sales and revaluation (790) 1,671 4,096 Profit from sale of non-current assets 7,801 6,933 14,188 Gains on revaluation of investment properties 177 - 23,911 Deficits on revaluation of investment properties - (58) (1,777) Deficits on revaluation of development properties - - (1,834) Reversal of deficits on revaluation of development properties - - 3,598 _______ _______ _______ Net operating profit before net finance 7,188 8,546 42,182 expenses Interest payable (4,776) (5,200) (9,041) Change in fair value of derivative financial instruments 150 (1,590) (2,994) Finance expenses (4,626) (6,790) (12,035) Finance income 1,043 671 1,549 Net finance expenses 4 (3,583) (6,119) (10,486) Share of profit from joint ventures 1,978 2,294 32,864 Share of profit from associates - - 393 _______ _______ _______ Profit before tax 5,583 4,721 64,953 Current tax (1,690) (591) (3,033) Deferred tax 1,035 (154) (2,429) Tax charge for the period 5 (655) (745) (5,462) _______ _______ _______ Profit after tax but before results from discontinued operations 4,928 3,976 59,491 Loss from discontinued operations, net of tax 6 (37) (2,199) (2,829) _______ _______ _______ Profit for the financial period 4,891 1,777 56,662 ====== ====== ====== Earnings per share before discontinued 7(a) operations: basic 3.8p 3.1p 46.1p ====== ====== ====== diluted 3.8p 3.1p 45.2p ====== ====== ====== Earnings per share after discontinued 7(b) operations: basic 3.8p 1.4p 43.9p ====== ====== ====== diluted 3.8p 1.4p 43.0p ====== ====== ====== The Board has proposed an interim dividend of 3.50p per share (interim dividend for the year ended 31 March 2006: 3.25p) which will be paid on 18 January 2007 to shareholders who are on the register on 15 December 2006. Consolidated statement of recognised income and expense For the six months ended 30 September 2006 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2006 30 Sept 2005 31 March 2006 Â£000 Â£000 Â£000 _______ _______ _______ Foreign currency translation differences (377) (6) 278 (Deficit) gain on revaluation of development properties (65) (5) 100,798 Effective portion of changes in fair value of cashflow hedges, net of recycling 2,477 (4,499) (1,676) Share of recognised income and expense in joint ventures, net of tax - - (102) Tax on income and expense recognised directly in equity (75) 1,350 (31,435) _______ _______ _______ Net income and expense recognised directly in equity 1,960 (3,160) 67,863 Profit for the financial period 4,891 1,777 56,662 _______ _______ _______ Total recognised income and expense for the financial period 6,851 (1,383) 124,525 ====== ====== ====== Consolidated statement of changes in equity For the six months ended 30 September 2006 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2006 30 Sept 2005 31 March 2006 Â£000 Â£000 Â£000 _______ _______ _______ Opening shareholders' funds 676,675 565,653 565,653 Recognised income and expense for the period 6,851 (1,383) 124,525 Issue of shares less costs 951 178 247 Purchase of own shares for cancellation - (107) (108) Purchase of own shares as treasury shares (6,034) (1,063) (1,955) Cost relating to share-based payment schemes 711 629 1,180 Cost relating to share-based element of bonus schemes 2,342 - - Dividends paid in period (9,299) (8,683) (12,867) _______ _______ _______ Closing shareholders' funds 672,197 555,224 676,675 ====== ====== ====== Consolidated balance sheet As at 30 September 2006 Unaudited Unaudited Audited As at As at As at 30 Sept 2006 30 Sept 2005 31 March 2006 Notes Â£000 Â£000 Â£000 ________ ________ ________ Non-current assets Investment properties 9 327,480 296,604 290,088 Development properties 9 612,516 489,366 599,455 Owner-occupied properties, plant and equipment 750 8,658 942 Investment in joint ventures 127,675 82,809 120,076 Investment in associates 1,677 1,800 1,677 Other non-current investments 2,402 188 2,716 ________ ________ ________ Total non-current assets 1,072,500 879,425 1,014,954 ________ ________ ________ Current assets Trading properties 6,834 8,796 6,814 Trade and other receivables 32,284 36,309 72,312 Current investments 4 19 7 Cash and cash equivalents 21,778 17,494 7,954 ________ ________ ________ Total current assets 60,900 62,618 87,087 ________ ________ ________ Total assets 1,133,400 942,043 1,102,041 ======= ======= ======= Current liabilities Bank loans and other borrowings 10 (2,947) (48) (4,432) Trade and other payables (55,182) (49,080) (49,104) Current tax liability 5 (2,688) (804) (1,521) ________ ________ ________ Total current liabilities (60,817) (49,932) (55,057) ________ ________ ________ Non-current liabilities Bank loans and other borrowings (including convertible debt) 10 (277,701) (233,701) (246,626) Deferred tax liability 5 (105,260) (77,789) (106,800) Obligations under finance leases (12,381) (20,587) (12,213) Other payables (5,044) (4,810) (4,670) ________ ________ ________ Total non-current liabilities (400,386) (336,887) (370,309) ________ ________ ________ Total liabilities (461,203) (386,819) (425,366) ======= ======= ======= Net assets 672,197 555,224 676,675 ======= ======= ======= Equity Issued capital 11 32,432 32,316 32,324 Share premium account 12 49,963 47,065 47,265 Revaluation reserve 12 246,323 168,618 248,836 Other capital reserves 12 108,922 113,225 113,227 Cashflow hedge reserve 12 (3,076) (6,682) (4,808) Translation reserve 12 28 121 405 Retained earnings 12 246,923 203,163 242,920 Investment in own shares 13 (9,318) (2,602) (3,494) ________ ________ ________ Equity shareholders' funds 672,197 555,224 676,675 ======= ======= ======= Net asset value per share: 14 basic 525p 431p 526p ====== ====== ====== diluted 516p 424p 516p ====== ====== ====== Consolidated cashflow statement For the six months ended 30 September 2006 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2006 30 Sept 2005 31 March 2006 Notes Â£000 Â£000 Â£000 ________ ________ ________ Operating activities Profit for the financial period 4,891 1,777 56,662 Adjustments: Short leasehold amortisation 248 232 408 Depreciation of plant and equipment 247 131 441 Cost relating to share-based payment schemes 711 629 1,180 Cost relating to share-based element of bonus schemes 2,342 - - Net finance expenses 3,583 6,119 10,486 Profit from sale of non-current (7,801) (6,933) (14,188) assets Gains on revaluation of investment properties (177) - (23,911) Deficits on revaluation of investment properties - 58 1,777 Deficits on revaluation of development properties - - 1,834 Reversal of deficits on revaluation of development properties - - (3,598) Share of profit from joint ventures (1,978) (2,294) (32,864) Share of profit from associates - - (393) (Profit) loss on sale of plant and equipment (10) 6 30 Impairment of other investments 379 - 632 Tax on continuing operations 655 745 5,462 Tax on discontinued operations (15) (942) (1,213) ________ ________ ________ 3,075 (472) 2,745 (Increase) decrease in trade and other receivables (4,439) 5,785 7,830 (Decrease) increase in trade and other payables (9,807) 1,106 430 (Increase) decrease in trading (20) 1,487 3,313 properties ________ ________ ________ Cash generated from operations (11,191) 7,906 14,318 Interest paid (7,884) (6,778) (15,395) Interest received 297 207 1,526 Tax paid (64) (2,003) (231) ________ ________ ________ Net cash from operating activities (18,842) (668) 218 ======= ======= ======= Investing activities Purchase and development of property assets (75,949) (57,247) (112,058) Purchase of property, plant and (54) (1,093) (2,365) equipment Proceeds from property sales 89,660 35,914 88,390 Tax paid on property sales (1,024) (2,750) (5,486) Acquisition of subsidiary companies - (7,232) (7,335) Proceeds from sale of interest in 6,776 - - subsidiary Acquisition of investment in joint (1,042) - (553) ventures Loans to joint ventures (5,505) (11,325) (24,474) Distributions received from joint 5,389 1,933 3,002 ventures Acquisition of other investments - - (3,160) Proceeds from sales of current - - 12 investments ________ ________ ________ Net cash from investing activities 18,251 (41,800) (64,027) ======= ======= ======= Financing activities Issue of shares 951 178 247 Purchase of own shares for cancellation - (107) (108) Investment in own shares (6,034) (1,063) (1,955) Proceeds from new borrowings 156,000 127,004 281,004 Repayment of borrowings (126,432) (68,053) (205,150) Payment of loan issue costs (288) (273) (400) Payment of finance lease liabilities (440) (149) (190) Equity dividends paid (9,299) (8,683) (12,867) ________ ________ ________ Net cash from financing activities 14,458 48,854 60,581 ======= ======= ======= Net increase (decrease) in cash and cash equivalents 13,867 6,386 (3,228) Cash and cash equivalents at start of 7,954 11,090 11,090 period Effect of foreign exchange fluctuations on cash held (43) 18 92 ________ ________ ________ Cash and cash equivalents at end of 21,778 17,494 7,954 period ======= ======= ======= Net cash from discontinued operations included in net cash from operating activities 6 (403) (2,199) (2,374) ======= ======= ======= Notes to the accounts For the six months ended 30 September 2006 1. Accounting policies These interim results are unaudited and do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The statutory accounts for 2005/06, which were prepared in accordance with International Financial Reporting Standards as endorsed by the European Union (IFRS) and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain a statement made under section 237(2) or 237(3) of the Companies Act 1985. The financial information contained in these interim results has been prepared in accordance with the Listing Rules of the Financial Services Authority and the significant accounting policies set out in pages 62 to 65 of the 2005/06 Annual Report and Accounts which is available on the Company's website (www.quintain-estates.com). The accounting policies have been consistently applied to all periods presented in the interim results. 2. Revenue, cost of sales and gross profit Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited Audited Six months Six months Six months Six months Six months Six months Year Year Year ended ended ended ended ended ended ended ended ended 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 31 March 31 March 31 March 2006 2006 2006 2005 2005 2005 2006 2006 2006 Revenue Cost of Gross Revenue Cost of Gross Revenue Cost of Gross sales profit sales profit sales profit Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ _______ _______ Rental income 13,098 (3,783) 9,315 14,809 (2,792) 12,017 29,075 (7,580) 21,495 Income from sale of trading properties - - - 2,245 (2,048) 197 4,065 (3,687) 378 Income from leisure operations 1,141 (466) 675 1,087 (610) 477 1,686 (833) 853 Income from hotel operations 443 (210) 233 - - - - - - Fees, commissions and other income 5,571 (2,110) 3,461 2,368 (872) 1,496 7,225 (3,195) 4,030 _______ _______ _______ _______ _______ _______ _______ _______ _______ Continuing operations 20,253 (6,569) 13,684 20,509 (6,322) 14,187 42,051 (15,295) 26,756 Discontinued operations (note 6) 1,295 (726) 569 2,894 (4,671) (1,777) 5,848 (6,738) (890) _______ _______ _______ _______ _______ _______ _______ _______ _______ 21,548 (7,295) 14,253 23,403 (10,993) 12,410 47,899 (22,033) 25,866 ====== ====== ====== ====== ====== ====== ====== ====== ====== Income from hotel and leisure operations is incidental to the Group's development activities. 3. Administrative expenses Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2006 30 Sept 2005 31 March 2006 Â£000 Â£000 Â£000 _______ _______ _______ Directors' remuneration 2,931 2,579 4,148 Staff costs 7,780 8,326 13,857 Cost relating to share-based payment schemes 711 638 1,180 Reorganisation provision for discontinued - - 650 operations Legal and professional fees 1,400 977 1,817 Office costs 1,336 941 2,817 Depreciation 247 166 441 (Profit) loss on disposal of plant and (10) 6 30 equipment Operating lease payments 448 102 480 General expenses 252 145 392 _______ _______ _______ 15,095 13,880 25,812 ====== ====== ====== Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2006 30 Sept 2005 31 March 2006 Â£000 Â£000 Â£000 _______ _______ _______ Continuing operations 14,474 12,516 22,660 Discontinued operations (note 6) 621 1,364 3,152 _______ _______ _______ 15,095 13,880 25,812 ====== ====== ====== 4. Net finance expenses Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2006 30 Sept 2005 31 March 2006 Â£000 Â£000 Â£000 _______ _______ _______ Interest payable on bank loans and overdrafts 8,051 8,104 15,328 Interest payable on other loans 606 597 1,307 Interest on obligations under finance leases 434 106 230 _______ _______ _____ 9,091 8,807 16,865 Interest capitalised (4,315) (3,607) (7,824) _______ _______ _____ Interest payable 4,776 5,200 9,041 Change in fair value of interest rate swaps (150) 1,590 2,994 Finance income (1,043) (671) (1,549) _______ _______ _______ 3,583 6,119 10,486 ====== ====== ====== 5. Tax Audited Unaudited as at as at 31 March 2006 30 Sept 2006 Tax Payments Tax liabilities in Recognised Recognised liabilities period in income in equity Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ Current tax 1,521 (1,088) 1,675 580 2,688 ====== ====== ====== ====== ====== Deferred tax: Capital gains less capital 105,257 - (1,368) (1,250) 102,639 losses Capital allowances 5,776 - 638 - 6,414 Derivative financial instruments (2,986) - - 745 (2,241) Other items (1,247) - (305) - (1,552) _______ _______ _______ _______ _______ 106,800 - (1,035) (505) 105,260 ====== ====== ====== ====== ====== Total tax 108,321 (1,088) 640 75 107,948 ====== ====== ====== ====== ====== Continuing operations 655 Discontinued operations (note 6) (15) _____ 640 ==== 6. Discontinued operations The results in the six months relating to the Conference Centre and Exhibition Halls at Wembley, which ceased operation at the end of July 2006, have been classified as discontinued. This treatment is consistent with that adopted in the 2005/06 Annual Report and Accounts, which also identified the operation of the Wembley Pavilion, a temporary structure, as a discontinued operation. The Conference Centre and Exhibition Halls are scheduled for demolition and the Pavilion was dismantled in January 2006. An analysis of the results from discontinued operations for the period was as follows: Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2006 30 Sept 2005 31 March 2006 Â£000 Â£000 Â£000 _______ _______ _______ Revenue 1,295 2,894 5,848 Cost of sales (726) (4,671) (6,738) _______ _______ _______ Gross profit (loss) 569 (1,777) (890) Administrative expenses (621) (1,364) (3,152) _______ _______ _______ Loss before tax on discontinued operations (52) (3,141) (4,042) Tax credit 15 942 1,213 _______ _______ _______ Loss from discontinued operations, net of tax (37) (2,199) (2,829) ====== ====== ====== During the period, the Group paid reorganisation costs of Â£523,000 which had been provided for as at 31 March 2006 and which, after adjusting for tax, is reflected in the Consolidated cash flow statement for the current period. There was no impact on basic and diluted earnings per share of the loss from discontinued operations. In the comparative period, the loss from discontinued operations reduced basic and diluted earnings per share by 1.7p. 7. Earnings per share a) Before discontinued operations Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited Audited Six Six Six Six Six Six Year Year Year months months months months months months ended ended ended ended ended ended ended ended ended 31 March 31 March 31 March 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 2006 2006 2006 2006 2006 2006 2005 2005 2005 Profit after Weighted Earnings Profit after Weighted Earnings Profit after Weighted Earnings tax and average per tax and average per tax and average per before number share before number share before number share discontinued of shares pence discontinued of shares pence discontinued of shares pence operations 000 operations 000 operations 000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ _______ _______ Basic 4,928 128,512 3.8 3,976 128,903 3.1 59,491 128,937 46.1 ====== ====== ====== Adjustments: Interest on 8% Convertible unsecured loan stock 122 2,000 118 2,000 235 2,000 Employee share -based payment schemes - 1,197 - 1,121 - 1,237 _______ _______ _______ _______ _______ _______ Diluted 5,050 131,709 3.8 4,094 132,024 3.1 59,726 132,174 45.2 ====== ====== ====== ====== ====== ====== ====== ====== ====== b) After discontinued operations Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited Audited Six Six Six Six Six Six Year Year Year months months months months months months ended ended ended ended ended ended ended ended ended 31 March 31 March 31 March 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 2006 2006 2006 2006 2006 2006 2005 2005 2005 Profit after Weighted Earnings Profit after Weighted Earnings Profit after Weighted Earnings tax and average per tax and average per tax and average per discontinued number share discontinued number share discontinued number share operations of shares pence operations of shares pence operations of shares pence Â£000 000 Â£000 000 Â£000 000 _______ _______ _______ _______ _______ _______ _______ _______ _______ Basic 4,891 128,512 3.8 1,777 128,903 1.4 56,662 128,937 43.9 ====== ====== ====== Adjustments: Interest on 8% Convertible unsecured loan stock 122 2,000 118 2,000 235 2,000 Employee share -based payment schemes - 1,197 - 1,121 - 1,237 _______ _______ _______ _______ _______ _______ Diluted 5,013 131,709 3.8 1,895 132,024 1.4 56,897 132,174 43.0 ====== ====== ====== ====== ====== ====== ====== ====== ====== The weighted average number of shares above excludes the number of shares held by Group-sponsored ESOP Trusts, which has been treated as cancelled. 8. Dividends The proposed interim dividend of 3.50p (2005: 3.25p) per ordinary share was approved by the Board on 28 November 2006 and is payable on 18 January 2007 to shareholders on the register at the close of business on 15 December 2006. The dividend has not been included as a liability as at 30 September 2006. The final dividend of Â£9,299,000 for the year ended 31 March 2006, representing 7.25p per share, was paid on 8 September 2006 and is included in the reconciliation of movements in equity. 9. Investment and development properties Investment and development properties are valued annually at the end of each financial year and are shown in the balance sheet as at 30 September 2006 at the previous year end valuations adjusted for subsequent expenditure at cost and disposals, and movements on lease incentives per SIC 15, 'Operating Leases: Incentives'. Investment Development Total properties properties properties Â£000 Â£000 Â£000 _______ _______ _______ Balance 1 April 2006 290,088 599,455 889,543 Foreign exchange adjustment (344) - (344) Additions 51,867 41,508 93,375 Interest capitalised 229 4,086 4,315 Disposals (14,360) (32,285) (46,645) Short leasehold amortisation - (248) (248) _______ _______ _______ Balance 30 September 2006 327,480 612,516 939,996 ====== ====== ====== 10. Bank loans and other borrowings The maturity profile of the Group's debt was as follows: 30 Sept 2006 30 Sept 2005 31 March 2006 Â£000 Â£000 Â£000 _______ _______ _______ Within one year 2,947 48 4,432 Between one and two years - 7,172 2,893 Between two and five years 277,701 221,659 238,863 Over five years - 4,870 4,870 _______ _______ _______ 280,648 233,749 251,058 ====== ====== ====== Undrawn committed facilities were as follows: 30 Sept 2006 30 Sept 2005 31 March 2006 Â£000 Â£000 Â£000 _______ _______ _______ Between two and five years 220,000 271,000 254,000 ====== ====== ====== 11. Share capital Number Nominal of shares value 000 Â£000 _______ _______ Shares in issue as at 1 April 2006 129,295 32,324 Issue of shares under share-based payment schemes 435 108 _______ _______ Shares in issue as at 30 September 2006 129,730 32,432 ====== ====== 12. Reserves Share Revaluation Other Cashflow Translation Retained premium reserve capital hedge reserve earnings account reserves reserve Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ Balance 1 April 2006 47,265 248,836 113,227 (4,808) 405 242,920 Recognised income and expense in period - (65) - 1,732 (377) 5,561 Issue of shares less costs 2,698 - - - - (1,855) Cost relating to share-based payment schemes - - - - - 711 Cost relating to share-based element of bonus schemes - - - - - 2,342 Cost of shares awarded to employees under bonus schemes - - - - - (210) Short leasehold amortisation - (12) - - - 12 Realisation of revaluation gains in period - (2,436) - - - 2,436 Transfer between reserves - - (4,305) - - 4,305 Dividends paid in period - - - - - (9,299) _______ _______ _______ _______ _______ _______ Balance 30 September 2006 49,963 246,323 108,922 (3,076) 28 246,923 ====== ====== ====== ====== ====== ====== 13. Investment in own shares Â£000 _______ Balance 1 April 2006 3,494 Purchase of own shares 6,034 Cost of shares awarded to employees under bonus schemes (210) _______ Balance 30 September 2006 9,318 ====== During the period, 1,000,000 of Quintain's own shares were purchased and held by Group-sponsored ESOP Trusts and 37,398 shares held in the Trusts were used to discharge bonus commitments. The number of shares held in the Trusts at the end of the period was 1,622,198. 14. Net asset value per share Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited Audited As at As at As at As at As at As at As at As at As at 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 31 March 31 March 31 March 2006 2006 2006 2005 2005 2005 2006 2006 2006 Equity Number Net asset Equity Number Net asset Equity Number Net asset shareholders' of shares value shareholders' of shares value shareholders' of shares value funds per share funds per share funds per share Â£000 000 pence Â£000 000 pence Â£000 000 pence _______ _______ ____ _______ _______ ____ _______ _______ ____ Basic 672,197 128,107 525 555,224 128,764 431 676,675 128,635 526 === === === Adjustments: 8% Convertible unsecured loan stock 2,947 2,000 2,845 2,000 2,893 2,000 Employee share -based payment schemes 9,732 2,640 10,364 3,180 9,766 2,925 _______ _______ _______ _______ _______ _______ Diluted 684,876 132,747 516 568,433 133,944 424 689,334 133,560 516 ====== ====== === ====== ====== === ====== ====== === The number of shares in issue has been adjusted for 1,622,198 (2005: 500,000) shares held by Group-sponsored ESOP Trusts. 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