Interim Results

Quintain Estates & Development PLC 29 November 2007 29 November 2007 Quintain Estates and Development PLC ('Quintain'/'Company'/'Group') Interim results for the six months ended 30 September 2007 QUINTAIN REPORTS STRONG PERFORMANCE Financial Highlights â€¢ Strong net asset value performance: o NAV per share up 6.1% to 700p (March 2007: 660p) o EPRA NAV per share up 5.7% to 829p (March 2007: 784p) o Diluted NAV per share up 5.8% to 693p (March 2007: 655p) â€¢ Strong valuation uplifts for Wembley and Greenwich Peninsula holdings: o Wembley up 5.7% to Â£595m o Greenwich up 20.4% to Â£278m â€¢ Total return* of 7.3%, or 7.0% on an EPRA basis â€¢ Pre-tax loss of Â£3.8m (2006 Pre-tax profit: Â£24.4m), largely due to decline in value of investment properties â€¢ Gearing of 39% (March 2007: 36%) â€¢ Interim dividend up 7.1% to 3.75p * as measured by the increase in net assets per share adding back the dividend paid Operational Highlights â€¢ Wembley o Expected completion of first residential building ahead of schedule and within budget. o Detailed planning consent for 441-bed Hilton hotel and 656-bed student accommodation scheme operated and funded by iQ fund. o Construction started on second building, comprising 233 homes, leisure facilities and 30,000 sq ft of retail space. o Acquisition of 13 acre Wembley Retail Park for Â£85m, offering significant opportunities for future development. â€¢ Greenwich Peninsula o Transport for London to become first major tenant of the business district in 2009, leasing 135,000 sq ft of office space for 20 years. o Detailed planning consent granted for Ravensbourne College, which will bring 1,500 students to Greenwich Peninsula. â€¢ Fund Management o Funds under management increased to Â£895m compared with Â£711m in March 2007. o iQ student accommodation fund opened two new schemes in Birmingham and Salford, with occupancy rates of 97% and rising. â€¢ Property disposals and acquisitions o Acquisition of Countryside Property PLC's interest in City Park Gate, Birmingham, providing Quintain with full control of the 1m sq ft development. â€¢ Finance o Â£150m of additional facilities raised. John Plender, Chairman of Quintain, commented: 'Quintain has made strong progress over the reporting period, driven by its proven management team and diversified business model. The growth achieved by Quintain Fund Management, excellent progress on our major projects at Greenwich Peninsula and Wembley, and the re-positioning of the Investment Portfolio over the last two years has ensured that the Company is well positioned to manage the impact of the current market and continue to create shareholder value. 'With substantial funds available to Quintain, we will continue to build out our pipeline of major schemes and consider a range of options to ensure the ongoing momentum of the development programme. We will also be looking to seize opportunities that are likely to emerge as the commercial property market moves to a more realistic valuation basis. Overall, we believe that Quintain is strongly placed to maintain its outstanding record of value creation and to continue to outperform in the future.' For further information, please contact: Quintain Estates and Development PLC Rebecca Worthington Tel: +44 (0) 20 7495 8968 Financial Dynamics Stephanie Highett/Dido Laurimore/Laurence Jones Tel: +44 (0)20 7831 3113 FINANCIAL HIGHLIGHTS Six months to Six months to Change Year to Change 30 Sept 30 Sept (%) 31 March 2007 (%) 2007 2006 (restated) (restated) Balance Sheet Investment and development properties (Â£000) 1,140,080 1,011,769 12.7 1,058,243 7.7 Net asset value per share (pence): basic 700 569 23.0 660 6.1 diluted 693 559 24.0 655 5.8 Adjusted diluted (EPRA) net asset value per share (pence): 829 653 27.0 784 5.7 Total return (%) 7.3 9.6 - 27.5 - Gearing (%) 39 36 - 36 - Dividend Dividend per share (pence) 3.75 3.50 7.1 8.25 Income Statement Group turnover (Â£000) 23,616 19,753 19.6 43,426 Gross profit (Â£000) 16,182 13,684 18.3 30,884 (Loss)/profit before tax (Â£000) (3,858) 24,406 - 48,633 Earnings per share (pence): basic 0.5 15.9 (96.9) 33.3 diluted 0.5 15.6 (96.8) 32.7 The results for the six months ended 30 September 2006 and for the year ended 31 March 2007 have been restated for a revised basis of preparation to include a full revaluation of the property portfolio at the Interim Balance Sheet date. A reconciliation of the previously reported figures is given in note 1 of the financial statements. CHAIRMAN'S STATEMENT I am pleased to report that the business has made significant progress in the six months to 30 September 2007. Performance at the half year has benefited from substantial valuation uplifts at our big urban regeneration schemes at Wembley and Greenwich, while fund management continues to grow in importance. Our confidence in the Group's diversified business model and continuing ability to deliver increased value is demonstrated by the Board's readiness once again to increase the interim dividend, by 7.1% to 3.75p. Business Overview In light of challenging conditions in the commercial property market, it is pleasing to note that the big mixed use development schemes in our Special Projects division, which include Wembley and Greenwich, go from strength to strength. On the basis of external valuations, Wembley has increased in value by 5.7% to Â£595m at the half year, while our investment in Greenwich is up 20.4% at Â£278m. There have been important advances at both sites. Quintain has taken more than one million square feet of Wembley from outline to detailed planning consents while, at the start of October, contracts were exchanged for the purchase of Wembley Retail Park for Â£85m, which will open up new opportunities for active management on the site. In our joint venture at Greenwich, as announced yesterday, we have agreed terms to pre-let 135,000 sq ft of offices to Transport for London. This is a noteworthy breakthrough in that it confirms the potential of Greenwich Peninsula to become a vibrant new specialist office market for London. Particularly encouraging has been the growth of our fund management operation ('QFM'), where our early decision to enter non-traditional markets such as healthcare, student accommodation and science parks has been vindicated. It is gratifying to record that fees from fund management are now making a significant contribution to the Group's income and that these specialist markets have proved immune from the malaise in the wider commercial property market. The widely reported slide in commercial property prices and the growing uncertainty about the future direction of the residential market has highlighted the strengths of our business model and justified our decision in 2004 to start decreasing the size of our Investment Portfolio. As a result, the net revaluation deficit of Â£14.2m on our investment properties is insignificant in relation to Quintain's gross property assets of Â£1.14bn and shareholders' funds of Â£897m at 30 September 2007, and has had substantially less impact than if we had maintained the size of our Investment Portfolio at prior levels. While a further decline in the second half is likely, we do not expect any serious impact on the business overall. Since August, there has also been a marked deterioration in the financial background. Yet the general tightening in credit conditions has not affected Quintain. Last month we agreed a new Â£150m corporate banking facility with Bank of Scotland Corporate and we are making good progress in seeking additional facilities from our other relationship banks. These facilities will be in line with our main corporate facilities, apart from the maturity which is likely to be two years rather than five years. They will be used to fund our big regeneration schemes and to provide us with ongoing flexibility to exploit the growing opportunities we expect to arise in the current property market. Net borrowings have risen from Â£302.8m at the year end to Â£350.5m at 30 September 2007 as funds have been deployed in our development programme. While gearing has risen from 36% to 39% in line with the expansion of the business, it remains relatively low and underlines our inherent financing flexibility. Performance Our figures for the half year incorporate for the first time a full external valuation of all our properties. Comparative figures have been restated for the same period last year and for the last financial year as a whole to take account of the September 2006 valuation. Full details are included in the Business Review. Over the half year the business achieved a total return, as measured by the increase in net assets per share adding back the dividend paid, of 7.3% against 9.6% in the comparable period last year. In the Investment Property Databank (IPD), the industry benchmark, our property return for the six months to 30 September 2007 was 9% compared with a return of 1.3% on the quarterly universe of funds. Net asset value per share rose 6.1% to 700p. The valuation deficit on investment properties was the major cause of the Group incurring a pre-tax loss of Â£3.9m, against a profit of Â£24.4m in the comparable period. Earnings per share were nonetheless positive at 0.5p against 15.9p at 30 September 2006 owing to a deferred tax credit arising from revaluation deficits reflected in the Income Statement and the reduction in the future rate of corporation tax. The market A climate of financial uncertainty calls for prudent management across the portfolio, which we will continue to apply through our proven investment and financial processes. However, we view the fall in commercial property prices as a healthy correction after a period in which the easy availability of credit caused the market to overheat. We look forward to taking opportunities to acquire assets that meet our stringent acquisition criteria as they arise. Our exposure to residential property is heavily biased towards London, which we expect to perform more strongly than the rest of the UK as the economy slows. In addition, the majority of our residential developments are targeted towards the middle market, which has tended to be more resilient, in relative terms. Outlook Quintain has made strong progress over the reporting period, driven by its proven management team and diversified business model. The growth achieved by QFM, excellent progress on our major projects at Greenwich Peninsula and Wembley, and the re-positioning of the Investment Portfolio over the last two years has ensured that the Company is well positioned to manage the impact of the current market and continue to create shareholder value. With substantial funds available to Quintain we will continue to build out our development pipeline, while freeing some of the capital in our major regeneration schemes where appropriate to keep up the momentum of the development programme. We will also look to seize opportunities that are likely to emerge as the commercial property market moves to a more realistic valuation basis. Overall, we believe that Quintain is strongly placed to maintain its outstanding record of value creation and to continue to outperform in the future. John Plender Chairman 29 November 2007 BUSINESS REVIEW Overview and Strategy The results for the six months to 30 September 2007 clearly demonstrate the inherent strength and resilience of Quintain's strategy, which is designed to create and enhance long term shareholder value through our development, fund management and property investment activities whilst insulating the Group from the full impact of uncertain market conditions. Our approach is to focus on the financial characteristics of property to extract long-term hidden value and identify opportunities for value creation. The success of this approach is highlighted in the Â£68.5m increase in the valuation of our development portfolio, the Â£127m growth of the Quercus healthcare fund and the launch of London's new commercial district at Greenwich Peninsula with the signing of a 20 year lease on 135,000 sq ft of office accommodation by Transport for London ('TfL'). Our objectives remain to deliver a minimum real total shareholder return of 10% per annum, measured by the increase in net asset value adding back the dividend, and to outperform the Investment Property Databank (IPD) benchmark. The six month period leaves us well on the way to delivering these, with a 7.3% total return and an IPD performance of 9%, well ahead of the benchmark at 1.3%. On a rolling twelve month basis, our total return is 25.1%, with our IPD return of 25.4% comparing extremely favourably with the IPD's benchmark figure of 7.7%, placing us in the first percentile. These objectives have also been delivered in the longer term, with Quintain's performance remaining in the top percentile of the IPD over five and ten years, and our average annualised total return over this ten year period being 22%. Our diversified business model ensures the Group is well positioned to outperform, both in terms of our core performance measures and relative to more traditional pure asset-collection businesses: - Special Projects At present Special Projects represents the largest proportion of the Group's assets by value, at 69.1% or Â£939.5m. This business manages our complex regeneration projects in London at Wembley and Greenwich, smaller development schemes outside London such as the 1m sq ft City Park Gate in Birmingham, and our national zero-carbon joint venture, BioRegional Quintain, which includes the 1m sq ft RiversideOne scheme. - Quintain Fund Management Quintain Fund Management ('QFM') co-invests in three specialist sectors: healthcare, science parks and student accommodation, and at 30 September 2007 funds under management stood at Â£895m. In addition to providing a significant revenue stream for the Group, it enables us to forward-fund and retain a strategic interest in some of the assets developed through Special Projects. - Investment Portfolio Currently, the Investment Portfolio is a relatively small element of the Group's asset base at 18% or Â£244m. It comprises an income-producing investment portfolio of secondary properties, 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 over the last two years has been strategically weighted towards offices. The Market The current, more volatile market conditions are testament to the inherent cyclicality of the property sector and the widely reported downward pressure on valuations, while long anticipated, has surprised some observers by its speed and extent. Forecasts imply that total returns for the next few years will be in low single figures, with some sub-sectors being negative. It is difficult to read how long and to what extent the market malaise, stimulated by the sub-prime loans crisis, will prevail. This uncertainty has extended to quoted property vehicles which now stand at significant discounts to NAV. However, for a company such as Quintain, with its diversified business model, uncertainty creates opportunity. The widening gap between base rate and LIBOR is a direct consequence of tightening credit provision, globally. Taking these conditions into account and consistent with the Company's prudent financial management, Quintain has raised a further Â£150m of facilities since the period end to ensure sufficient liquidity, operational flexibility and agility regarding emerging opportunities. Furthermore, we are making good progress in seeking additional facilities from our other relationship banks. Occupational demand remains reasonable and rental growth prospects are positive, albeit at low levels. The natural tendency of markets initially to over-react suggests that we should not expect a long-term bear market in real estate, although it would be no surprise for conditions to worsen before they improve. The Company's residential exposure is predominantly to mid-market housing which historically has been more resilient. Recent evidence of sales activity has supported our view that we have a cushion against any market retrenchment. Our policy of developing opportunities that create a dynamic balance between residential, retail, leisure and employment use, particularly on our two internationally important schemes in London, should create higher demand from a wider area. In 2007, this policy saw both Greenwich and Wembley outperform prime London areas. Despite current conditions, in the medium term we still consider that this market position should secure the ongoing out performance of our portfolio versus Greater London residential indices. Quintain has significant exposure outside traditional real estate sectors and in these areas different market dynamics apply. Within healthcare, the majority of funding is provided by the State and income is linked to RPI. An ageing population also gives confidence that demand for care home accommodation will continue to grow. Demand is also growing for high quality, well-located student accommodation, another key growth area for QFM. This is fuelled by an increasing proportion of school leavers seeking higher education and the continued worldwide recognition of the UK's universities as prestigious locations for gaining qualifications. Rising standards and issues over health and safety imply significant further demand for the type of modern accommodation that iQ, our joint venture fund with The Wellcome Trust, is delivering. Special Projects During the period, delivery has been accelerated across our large-scale, strategic projects. WEMBLEY At Wembley, the demolition programme across the western element of the site has concluded, the construction programme is within budget and we expect to complete the first residential building, W01, ahead of schedule. Construction of our second new building, W04, started this month. When finished, this mixed-use block will contain 233 homes, leisure facilities and 30,000 sq ft of retail space comprising local needs and designer outlet shopping. Residential values on the Wembley scheme have continued to rise during the period, with sales achieving an average of Â£525 per sq ft, with a high of Â£632 per sq ft for a studio (at Â£220,000), compared to an average of Â£424 per sq ft achieved in 2006/7. We have also now achieved detailed planning consent - our fifth at Wembley - for W05, which will contain a 441-bed hotel operated by Hilton and a 656-bed student accommodation scheme operated and funded by the iQ Fund. Construction work is due to start in summer 2008. A key element of Quintain's focus on delivering additional shareholder value is its aim to create revenue streams from its large scale projects over and above traditional development profits and capital growth. This is summarised as the Company's 'Running Towns as Businesses' concept. The core principle is to deliver shareholder benefit from an ongoing share of revenues generated by the provision of infrastructure and utilities to the residents and tenants of the buildings. This concept will also deliver benefits to occupiers through streamlined service delivery and cost reductions achieved through efficiency. We are delighted to report today that a further milestone in making this concept a reality has been reached with the appointment of global electronics expert, Philips, to supply lighting and display equipment across the development. This is the second such agreement achieved for Wembley and complements the deal achieved with Siemens earlier in 2007 to provide mechanical and electrical equipment. We also announced during the period that the Envac waste disposal system will be installed across the Wembley development. This system transports waste via underground pipes to a central depot, negating the requirement for transportation of waste by road and making recycling simple for residents. The system has been deployed successfully in 30 countries and this will be its first implementation in the UK. Envac will significantly enhance the environmental credentials of the scheme. We continue to exploit emerging opportunities and have consolidated our landholding at Wembley, acquiring the 13 acre Wembley Retail Park in October for Â£85m. This is a strategic site adjacent to our existing holdings and adds 162,000 sq ft of retail to the 37,400 sq ft within Quintain's Stadium Retail Park. Subsequent to the purchase, a further 6,800 sq ft has been let to Dreams plc at Â£27.50 per sq ft. Masterplanning for the Palace of Industry site ('POI') is well advanced and an outline application will be made during the calendar year 2008. It will now also incorporate the new retail park acquisitions. Combined, the POI and retail parks are within the existing Local Policy Framework for 2.91m sq ft, but the synergies extractable from a co-ordinated application should see the overall consent increase from 6.3m sq ft to as much as 10m sq ft. At the year end, the Company indicated that it was intending to joint-venture the retail elements of the Wembley scheme with a major retail developer that has particular experience in the designer outlet field. The Company has now been working exclusively for five months with a partner that fits this criterion, and is finalising designs with a view to numerous plot-specific planning applications early in the New Year. The work to date has endorsed the Company's retail strategy, which will be further enhanced by the retail provision on the 15 acre POI site and the redevelopment of the retail parks. Wembley Arena continues to perform well and, despite the opening of The O2 Arena on Greenwich Peninsula in June 2007, bookings remain strong with an expectation of 135 shows during 2008. Recent bookings include Gwen Stefani, the Stereophonics and The Police. The opening of the National Stadium at Wembley, continued success of the Arena, progress on retail negotiations and the opportunity virtually to double the size of the scheme position Wembley as one of the UK's most exciting regeneration projects. GREENWICH PENINSULA During the reporting period, Meridian Delta Ltd ('MDL'), our joint venture with Lend Lease, was re-formed to create a 50:50 vehicle in order to accelerate delivery on the Peninsula. We are pleased to report that the resulting performance over the half year demonstrates that this is being achieved. Most notable is our announcement to shareholders on 28 November that TfL will become the first major tenant of the business district in 2009, leasing 135,000 sq ft of office accommodation for 20 years. Under the terms of the agreement TfL will retain an option on a further 60,000 sq ft of space. A key component of this letting was MDL's ability to deliver upon the Mayor of London's climate change agenda, with cutting edge sustainability. The development will be a 50:50 joint venture between Lend Lease and Quintain and construction will begin early in the New Year. Detailed planning consent has been granted on the new facility for Ravensbourne College, situated between The O2 and TfL new office. The College will begin construction early in 2008. The creation of this facility will bring 1,500 students to Greenwich Peninsula, and investigations are taking place into the viability of expanding the proposed 120-bed student accommodation scheme agreed within the existing masterplan. Good progress has also been made on the residential programme, with a significant increase in activity: â€¢ Designs for the first plot on the north west of the Peninsula overlooking Canary Wharf are near completion, following extensive consultation with the London Borough of Greenwich. We anticipate submission of an application for detailed planning consent early in 2008. â€¢ Following the sale of the M0102 plot on the south east of the site to Bellway Homes in the last financial year, planning consent was achieved in May. The finished building will contain 229 homes and Bellway will start construction of this block in January 2008. â€¢ 50% of the units within the adjacent building, M0116, have been allocated funding from English Partnerships under their First Time Buyers Initiative ('FTBI'). An application for planning consent will be submitted in January 2008. â€¢ On the eastern riverside, MDL has entered into a 50:50 partnership with Crest Nicholson to develop N0206, a 1.1 acre site that will contain 295 apartments and approximately 5,000 sq ft of retail space adjacent to TfL's new office. An application for planning consent will be submitted in December 2007. â€¢ As anticipated, a joint venture with two housing associations - Moat and London & Quadrant - has been formed regarding the inland plot at M0114. This building has a high affordable housing content and an application for planning consent will be submitted in December 2007. Footfall to The O2 has been impressive during the period, following the official opening of the complex in June. This has had a positive impact on the valuation of our ground lease. Up to 22,000 people visit The O2 Arena for every live show and 350,000 tickets were sold for the Tutankhamen exhibition before it opened. The success of this venue over the last five months underlines the accessibility of the Peninsula, and this has been further enhanced by the increase in frequency - from 40 minute intervals to every 15 minutes - of the Thames Clipper boat service to the City and West End. Securing a major tenant for the office quarter, acceleration of the planning pipeline and the rise in residential values on key developments close to the site, such as Pan Peninsula and Greenwich Reach, maintain our confidence in the ability of Greenwich Peninsula to deliver strong performance. BIOREGIONAL QUINTAIN Our zero carbon joint venture with BioRegional Properties Ltd, which creates communities founded on the principles of One Planet Living, has also achieved notable success in the period. As anticipated, construction started on our first scheme in Brighton. Developed in partnership with Crest Nicholson, this mixed-use project includes 24,000 sq ft of commercial space and 172 apartments and is due to complete in 2010. We were delighted to be granted detailed planning consent for the first two buildings on our 40 acre Middlesbrough site, now known as RiversideOne, in July. Combining 150 apartments and 13,000 sq ft of commercial space, these buildings are the first of nine that will transform the dockside location into a vibrant sustainable community for the North East. Heads of Terms have been agreed with Hilton for the integration of a 168-bed hotel into the development. We have also reached preliminary agreement with Communities for England to incorporate its FTBI within the development, leading to an early sale of 30 apartments. Construction of the marketing suite is due to complete in February 2008, with work beginning on the first two buildings in summer 2008. On completion, this is expected to be the largest zero carbon community in the UK. Earlier in November, a development agreement was completed with the London Development Agency to create London's first zero carbon community at Gallions Park in East London. The scheme is billed as the exemplar development for the Mayor of London's climate change strategy. An application for planning consent will be made in the first quarter of 2008, with construction work scheduled to begin early in 2009. Also in November it was announced that the BioRegional Quintain / Crest joint venture had been appointed preferred developer on a regeneration scheme in Rochester, one of the Thames Gateway's biggest brownfield sites. It is proposed that 200 homes adhering to the One Planet Living principles will be built under this agreement. CITY PARK GATE, BIRMINGHAM In September Quintain acquired Countryside Property PLC's interest in City Park Gate, thereby obtaining full control of this 1m sq ft development. The granting of the Section 106 agreement concluded the outline planning consent for 1m sq ft of mixed-use development on the scheme, including a 200-room hotel. Subsequent to the acquisition we have agreed terms with Marriott Renaissance for an operational agreement and are now re-masterplanning the scheme to increase the office component and environmental standards of the development. In relation to other major special projects, further progress is being achieved: â€¢ We continue to mature strategic planning issues associated with our holdings at Silvertown in East London in joint venture with the London Development Agency and in co-operation with the Urban Development Agency and the London Borough of Newham. â€¢ At Emersons Green, the synergies with our 800,000 sq ft science park (see QFM) are increasingly apparent. A hearing before the planning committee is due in Spring 2008. â€¢ At Beverley we have submitted with our partners, Wykeland Estates and CP Group, a 500,000 sq ft application for a mixed-use scheme comprising retail, residential, an hotel, a cinema, and community, social and leisure facilities. We anticipate a hearing before the planning committee within the next two months. Across the Special Projects business, reduced capacity and rising costs in the construction market are being mitigated as far as possible through a closely-managed programme that gives preferred contractors significant visibility into our development pipeline. Net immigration into London, the trend towards smaller household size and the regeneration impact stimulated by Quintain's approach to creating unique places to live, work and relax continue to support demand across our projects in the Capital. Our work over the past two years to develop a serious zero-carbon brand, founded on the results of the high-profile BedZed model and BioRegional's proprietary One Planet Living principles, has positioned BioRegional Quintain as a leader in this emerging sector. With public awareness growing about the built environment's high level of influence on climate change, we expect our developments to perform well in the long term. Quintain Fund Management Quintain Fund Management has continued to make strong progress during the period across all its activities. Funds under management at 30 September 2007 were Â£895m compared with Â£711m at the end of the last financial year. QUERCUS The continued success of our healthcare fund, Quercus, has resulted in funds under management rising 20% to Â£776m over the six month period. With 241 properties operated by 36 tenants, Quercus is now the fifth largest owner of care homes in the UK. Underlying demographics and the growing demand in the UK for professional, high quality nursing care continues to fuel this sector and provide substantial opportunity for further growth. Underlying operating performance in the industry remains strong and as a consequence the sector has not seen the outward yield shift experienced in the wider commercial market. RPI-linked rents and firm yields have contributed to a strong investment performance with a total return for the first six months of 8% which bodes well for returns for the full year. IQ iQ, our direct-let student accommodation fund in joint venture with The Wellcome Trust, successfully opened two new schemes in Birmingham and Salford in September, taking our total beds to 1,534 across four schemes. Occupancy rates across the portfolio currently sit at 97% and we expect this to rise to near 100% in the New Year when Salford's second intake of students arrives. These operational schemes have a combined value of Â£80m and a further four schemes are, or shortly will be, on site for delivery in 2008 and 2009. Terms have been agreed on a further Â£201m of schemes which we expect to sign in the next few months, taking the total funded and committed schemes to Â£430m. The student accommodation sector remains robust with demand continuing to outstrip supply in most locations. We have commenced marketing our schemes for the 2008/9 academic year and our expectation is for continued above RPI rental growth. The investment market still appears robust in popular university locations. QUANTUM Quantum, our joint venture with Morley Fund Management, is a specialist science park fund. Following the agreement with the South West of England Regional Development Agency to create an 800,000 sq ft science and technology park at Emersons Green in Bristol, the application to amend the masterplan will be heard by committee in December 2007 and we anticipate starting construction in late spring 2008. Earlier in November, an investment acquisition of Â£5.5m was made by Quantum at the Heriot-Watt Science Park near Edinburgh and we anticipate that the return to more sensible pricing in the wider commercial market will stimulate the emergence of further opportunities like this across the sector. By delivering strong investment returns as well as consistent fees from asset management, supplemented by performance fees, Quintain Fund Management is an increasing contributor to overall Group success. Investment Portfolio The anticipated downturn in commercial property has finally taken effect. Having been substantial net sellers over the past three years, the Portfolio now comprises 18% of Quintain's gross assets. Whilst tactically making up a relatively small proportion of our business, the Portfolio and the nature of its assets are strategically important to the Group. In addition to generating income, it presents value creation opportunities over time and acts as a stock warehouse for feeding other divisions and vice versa. The Portfolio has gross assets of Â£244m spread throughout the UK and principally comprises 64% offices, 22% industrial and 9% retail. The income derived from the Portfolio is Â£14m, reflecting a net initial yield of 5.4% and reversionary income of Â£19.4m giving a net reversionary yield of 7.5%. On a like-for-like basis the Portfolio has decreased in value by 8% over the reporting period. This may decline further should sentiment not improve by the year end. Notable transactions during the period include the sale of a 44,000 sq ft vacant office building in Harrow for Â£6.5m. Post the half year, contracts have been exchanged on an additional Â£500,000 of new lettings, including 22,000 sq ft in Smallbrook Queensway, Birmingham at a 15% premium to the highest historical rent achieved in the building. We are optimistic that, not having seen value opportunities for some time, these will now emerge over the next six months due to changing market conditions. Outlook Quintain has made strong progress over the reporting period, driven by its proven management team and diversified business model, the combination of which ensures the Group is well positioned to outperform, both in terms of our core performance measures and relative to more traditional pure asset-collection businesses. The growing synergies between the three elements of our business, strong growth driven by Special Projects and QFM, and our excellent performance against the IPD benchmark at 30 September 2007 underline our confidence that Quintain will continue to outperform. Adrian Wyatt Chief Executive 29 November 2007 Responsibility statement of the directors in respect of the half-yearly financial report We confirm that to the best of our knowledge: â€¢ the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; â€¢ the interim management report includes a fair review of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. By Order of the Board Rebecca Worthington Finance Director 29 November 2007 FINANCIAL REVIEW Headline Results We are pleased to report an uplift of 6.1% in the basic NAV per share at 30 September 2007 to 700p, from 660p per share at 31 March 2007. The increase for the 12 months since 30 September 2006 was 23.0%. On a diluted basis, the net asset value per share rose by 5.8% from 655p six months ago to 693p at 30 September 2007. Adjusted diluted net asset value per share, the measure recommended by The European Public Real Estates Association ('EPRA'), rose by 5.7% to 829p per share (31 March 2007: 784p). 30 September 2007 31 March 2007 % increase NAV per share basic 700p 660p 6.1% NAV per share diluted 693p 655p 5.8% NAV per share EPRA(1) 829p 784p 5.7% 30 September 2007 31 March 2007 Dividend per share 3.75p 3.5p 7.1% Total return per share(2) 7.3% 9.6% Total return per share EPRA 7.0% 7.9% Notes: 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. 2 The total return is calculated by the increase in net assets per the consolidated balance sheet adding back the dividend paid. Operating Performance Gross profit for the period increased by 18.3% to Â£16.2m (30 September 2006: Â£13.7m). Within this, gross rental income fell to Â£11.7m, down 15% from Â£13.7m in the same period last year. Income from acquisitions of Â£1.8m was more than offset by income lost through disposals of Â£2.6m and through demolition and lost site rental at Wembley of Â£0.9m. The disposal programme reduced cost of sales leaving net rent in line with last year at Â£9.8m. 30 September 2007 31 March 2007 Â£m Â£m Directly owned Within Total Directly Within Total properties Joint Owned joint ventures properties ventures Gross rental 11.7 7.2 18.9 29.7 10.7 40.4 income Contracted 20.8 17.4 38.2 21.0 13.4 34.4 annualised rent ERV* 27.1 22.5 49.6 27.4 13.7 41.1 *ERV is the estimated rental value During the period, the Company sold Westhome Caravan Park, one of its trading assets, for Â£3.0m giving a profit of Â£1.5m. There were no disposals of trading properties in the same period last year. Income from hotel operations relates to the Plaza hotel at Wembley. The gross profit for the period of Â£1.9m was significantly ahead of the Â£0.2m in the same period last year as the hotel was only acquired in August 2006. The administrative costs in relation to running the hotel of Â£1.2m are included within administrative expenses. Fees from fund management rose by 211.5% to Â£2.6m. The uplift was due to a first time contribution from iQ and increasing asset management fees from Quercus. Other income fell by 83.8% to Â£0.5m, the difference is explained by a surrender premium of Â£1.2m in relation to Smallbrook, Queensway and profit on property derivatives of Â£0.9m occurring in the prior period. Administrative expenses from continuing operations increased by 16.3% to Â£16.8m (30 September 2006: Â£14.5m). Â£1m of the increase related to a full period of operation for the Plaza hotel. Staff costs within Quintain also rose as our recruitment drive continued. This will be an ongoing feature as we build up the fund management business and deliver our 27m sq ft development pipeline. Further information is given in note 4 to the accounts. Exceptional costs of Â£1.5m relate to bid defence and valuation fees. Sale of non-current assets Sales of Â£9.3m of investment properties were neutral in profit terms compared with the Â£7.8m of profit realised on disposal proceeds of Â£56.7m in the six months to September 2006. This reflected the differing marketing conditions in the two periods. Revaluation surpluses and deficits The net revaluation deficit arising from directly held investment properties was Â£14.2m compared with a surplus of Â£12.3m in the same period last year. This devaluation reflects conditions in the commercial property market (with yields moving out between 50 and 100 basis points). In addition to this, deficits below cost of Â£1.1m were recorded against development properties. Revaluation surpluses of Â£15.8m (30 September 2006: Â£8.8m) are included within joint venture income and Â£69.6m (30 September 2006: Â£58.7m), relating to development properties, were reflected in equity. Profit from joint ventures The profit from joint ventures in the six months was Â£14.5m (30 September 2006: Â£8.4m). This excludes net fees receivable of Â£2.6m in relation to managing the funds. A summarised income statement split by joint venture is included in note 10i to the accounts. Finance expenses Net finance expenses have fallen by 73.5% to Â£0.9m. Interest payable has increased by 42.9% to Â£13.0m reflecting higher levels of drawn debt and an increase in the average cost of debt from 6.6% to 6.9%. This is discussed in more detail in the section on financing strategy and capital structure. Interest capitalised in the period of Â£5.5m relates mainly to Wembley (Â£4.3m) and Greenwich Peninsula (Â£1.0m). Interest receivable of Â£4.5m included Â£1.9m from a loan to a third party and Â£1.4m from loan notes to joint ventures where interest was received in the period. 30 September 2007 30 September Â£m 2006 Â£m Interest payable 13.0 9.1 Interest capitalised (5.5) (4.3) Interest receivable (4.5) (1.0) Change in fair value of ineffective interest rate swaps (0.1) (0.2) and caps Profit on termination of interest rate swaps (2.0) - Total net interest payable 0.9 3.6 Taxation A tax credit of Â£4.5m has been reflected in the income statement compared with a charge of Â£3.9m for the same period last year. This arises because of the revaluation deficits in relation to the Company's investment properties and a change in the future corporation tax rate from 30% to 28%, which has reduced the deferred tax provision. Balance Sheet At 30 September 2007, investment properties were valued at Â£280.8m including a net revaluation deficit of Â£14.2m. The development portfolio surplus was Â£68.5m giving a valuation of Â£859.3m. Wembley The valuation of our holdings at Wembley at 30 September 2007 was Â£595m compared with Â£524m at 31 March 2007. Of the increase, Â£39.0m related to capital expenditure and Â£32.0m to revaluation surplus. In assessing this holding, the valuer needs to give a view of what the market will pay at a particular point in time. This is backed up by a discounted cash flow model. The majority of inputs were in line with 31 March 2007 including a discount rate of 10% on the consented space. Values were supported by recent sales of sites of comparable quality in the local area, such as 0.9 acres that included Shubette House for Â£28m and 0.48 acres including Dexion House for Â£11.0m. Greenwich Our holdings at Greenwich contributed Â£47.1 m to the revaluation surplus giving a value at the period end of Â£278m. As with Wembley the majority of inputs have remained constant, particularly the discount rate of 12%. Residential areas in nearby locations such as Pan Peninsula and Greenwich Reach remain strong, achieving highs of Â£1,008 per sq ft and Â£1,100 per sq ft respectively. Also the value of our ground rent in The O2 has increased to Â£13.0m from Â£6.2m supported by trading performance to date. Joint ventures As at 30 September 2007, Quintain had net investment in joint ventures totalling Â£218.1m. A breakdown of this including movements in the period is set out in the table below and more detail is available in note 10i to these accounts. Joint venture Net investment Movements Transfers Revaluation Net investment 31 March 2007 Â£m Â£m surplus 30 September 2007 Â£m Â£m Â£m Quercus 112.6 9.5 - 8.4 130.5 Meridian Delta 31.1 2.4 4.4 6.8 44.7 Limited IQ 14.7 12.0 - 0.6 27.3 Quantum - 1.3 - - 1.3 Quintessential 5.6 - - - 5.6 Homes Quintain Birmingham 1.9 - (1.9) - - BioRegional 1.5 4.5 - - 6.0 Quintain Other joint 2.7 - - - 2.7 ventures 170.1 29.7 2.5 15.8 218.1 Capital commitments The table below sets out capital commitments including our share of any commitments within joint ventures. The acquisition of Wembley Retail Park completed in October with the payment for the site of Â£85m. 30 September 2007 Â£m Wembley - directly owned 7.7 Wembley Retail Park 88.4 Wembley - W01 13.3 BioRegional Quintain 3.0 iQ student accommodation fund 29.2 Quercus 5.5 Quantum science park fund 1.3 Meridian Delta Limited 0.8 Other 1.9 151.1 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 achieved through gearing. The gearing levels will vary depending on the profile of operational risks and the capital that is currently committed or expected to be committed in the future, as well as market circumstances. Our maximum internal level of gearing is 100%. During the period we increased our net debt by 15.8% to Â£350.5m. Gearing increased to 39% from 36% at 31 March 2007. In focusing on best use of capital we are continually re-evaluating our plans. If we build out the schemes at Wembley and Greenwich, as currently envisaged, using a combination of third party equity and debt, at its maximum point in March 2010, our gearing is currently forecast to be 92% which reflects a loan to value ratio of 44%. Quintain is funded through corporate loans. As at 30 September 2007 we had Â£495m of facilities with a maturity date of May 2012. Since then we have raised an additional Â£150m from Bank of Scotland Corporate on the same terms except maturity, which is two years. We are confident that our strong banking relationships will continue to deliver substantial firepower as required. 30 September 2007 31 March 2007 Net borrowings Â£350.5m Â£302.8m Gearing 39% 36% Weighted average debt maturity 5 years 5 years % of net debt hedged 66% 55% Interest cover - banking covenants 2.2 3.4 Undrawn committed facilities Â£119m Â£164m Interest cover is defined as profit before tax and net finance expenses, together with realised revaluation surpluses divided by net interest payable. The interest cover of 2.2 times is a reduction from 3.4 times at the year end due to lower realised profits arising from disposals, however this still leaves us well covered. Hedging As part of our continuing review of funding, during the period we altered our hedging strategy to manage better the financial risks to the business. We cancelled all our swaps and replaced them with Â£225m of caps at 6.5%. As the majority of our income is no longer fixed on long term leases, but is due to arise through realising development surpluses, we have removed the fixing of our interest cost and instead capped our cost, thereby limiting the cost implications from a rise in rates but allowing us to take full advantage of falls in interest rates. As at 30 September 2007 66% of our outstanding debt was capped. Our weighted average rate of interest was 6.9% (31 March 2007: 6.6%). The increase reflects LIBOR and our higher average rate of fixed debt. Cashflow Net cashflow from operating activities was an outflow of Â£15.4m, compared with Â£18.8m for the same period last year, the movement being explained by a net inflow from working capital. The cash outflow from investing activities was Â£21.4m. Purchases and capital expenditure on properties of Â£80.2m offset proceeds received in the period from disposals of Â£56.5m and distributions from joint ventures of Â£2.3m. Business risks The major risks to the business remain as set out in the Report and Accounts for the year to 31 March 2007. The variable is that those risks should be viewed in light of changing economic circumstances. Credit markets remain uncertain. Whilst Quintain has very little by way of development obligations, its ambitions require not only third party equity but also debt. Availability of debt will therefore have an impact on our ability to progress with the build out of Wembley and Greenwich in line with the currently envisaged timetable. We mitigate this risk by maintaining between Â£100m and Â£200m of committed but undrawn facilities on our balance sheet at any one time and through strong relationships with our lending banks. Due to uncertainty over credit markets - and also the opportunities that this creates - we raised an additional Â£150m facility after the period end and thus remain well positioned in terms of financial backing for the Company's near term requirements. INDEPENDENT REVIEW REPORT TO QUINTAIN ESTATES AND DEVELOPMENT PLC Introduction We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007 which comprises the Consolidated Income Statement, Consolidated Statement of Recognised Income and Expense, Consolidated Balance Sheet, Consolidated Cashflow Statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA. KPMG Audit Plc Chartered Accountants 8 Salisbury Square London EC4Y 8BB 29 November 2007 Quintain Estates and Development PLC Consolidated Income Statement for the six months ended 30 September 2007 Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 (restated) (restated) Notes Â£000 Â£000 Â£000 _______ _______ _______ Revenue from continuing operations 2 23,616 19,753 43,426 Cost of sales in respect of continuing 2 (7,434) (6,069) (12,542) operations _______ _______ _______ Gross profit from continuing operations 16,182 13,684 30,884 Administrative expenses 4 (16,829) (14,474) (25,819) Exceptional costs 4 (1,479) - - _______ _______ _______ Operating (loss) profit before recognition of results from non-current asset sales and revaluation (2,126) (790) 5,065 (Loss) profit from sale of non-current property assets (76) 4,833 8,383 Profit from sale of shares in subsidiaries - 2,968 6,786 Gain on revaluation of investment properties 3,848 13,270 12,616 Deficit on revaluation of investment (18,030) (1,019) (924) properties Deficit on revaluation of development (1,071) - (182) properties Reversal of deficit on revaluation of development properties - 977 1,255 Share of profit from joint ventures 10i 14,546 8,440 23,011 Share of loss from associates - (690) (455) _______ _______ _______ Operating (loss) profit before net finance expenses (2,909) 27,989 55,555 _______ _______ _______ Finance expenses (7,533) (4,776) (12,174) Finance income 6,584 1,193 5,252 _______ _______ _______ Net finance expenses 5 (949) (3,583) (6,922) _______ _______ _______ (Loss) profit before tax (3,858) 24,406 48,633 _______ _______ _______ Current tax (134) (1,690) (8,347) Deferred tax 4,663 (2,189) 2,410 _______ _______ _______ Tax credit (charge) for the period 6i 4,529 (3,879) (5,937) _______ _______ _______ Profit after tax but before result from discontinued operations 671 20,527 42,696 Loss from discontinued operations, net of tax - (37) (34) _______ _______ _______ Profit for the financial period attributable to shareholders of the Company 671 20,490 42,662 ====== ====== ====== Earnings per share from continuing operations 7i(a) (pence): basic 0.5 16.0 33.3 ====== ====== ====== diluted 0.5 15.7 32.7 ====== ====== ====== Earnings per share from total operations 7i(b) (pence): basic 0.5 15.9 33.3 ====== ====== ====== diluted 0.5 15.6 32.7 ====== ====== ====== The results for the six months ended 30 September 2006 and for the year ended 31 March 2007 have been restated for a revised basis of preparation to include a full revaluation of the property portfolio at the Interim Balance Sheet date. A reconciliation of the previously reported figures is given in note 1. The previously reported figures for the year ended 31 March 2007 were audited. Consolidated Statement of Recognised Income and Expense for the six months ended 30 September 2007 Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 (restated) (restated) Notes Â£000 Â£000 Â£000 ________ ________ ________ Foreign currency translation differences 184 (377) (319) Gain on revaluation of development properties 69,574 58,657 182,289 Gain (deficit) on revaluation of other non- current investments 295 - (882) Effective portion of changes in fair value of cashflow hedges, net of recycling (259) 2,477 7,047 Share of recognised income and expense in joint ventures, net of tax 10i (101) - 546 Tax on income and expense recognised directly in equity 6ii (11,843) (17,664) (45,230) ________ ________ ________ Net income recognised directly in equity 57,850 43,093 143,451 Profit for the financial period 671 20,490 42,662 ________ ________ ________ Total recognised income and expense for the financial period 58,521 63,583 186,113 ======= ======= ======= Consolidated Balance Sheet as at 30 September 2007 Unaudited Unaudited Unaudited As at As at As at 30 Sept 2007 30 Sept 2006 31 March 2007 (restated) Notes Â£000 Â£000 Â£000 ________ ________ ________ Non-current assets Investment properties 9 280,768 339,554 288,938 Development properties 9 859,312 672,215 769,305 Owner-occupied properties, plant and equipment 1,753 750 1,470 Investment in joint ventures 10i 218,075 134,137 170,099 Investment in associates 1,222 987 1,222 Other non-current investments 10ii 13,624 2,402 3,044 Non-current receivables 11 42,987 - 45,349 ________ ________ ________ Total non-current assets 1,417,741 1,150,045 1,279,427 ________ ________ ________ Current assets Trading properties 14,239 6,834 6,831 Trade and other receivables 12 31,723 32,284 73,667 Current investments 4 4 4 Cash and cash equivalents 30,307 21,778 36,048 ________ ________ ________ Total current assets 76,273 60,900 116,550 ________ ________ ________ Total assets 1,494,014 1,210,945 1,395,977 ======= ======= ======= Current liabilities Bank loans and other borrowings 14 - (2,947) (3,000) Trade and other payables 13 (40,727) (55,182) (37,466) Current tax liability (9,267) (2,688) (9,216) ________ ________ ________ Total current liabilities (49,994) (60,817) (49,682) ________ ________ ________ Non-current liabilities Bank loans and other borrowings 14 (378,888) (277,701) (333,924) Deferred tax liability 6iii (156,341) (126,073) (149,620) Obligations under finance leases (11,731) (12,381) (11,734) Other payables - (5,044) (4,919) ________ ________ ________ Total non-current liabilities (546,960) (421,199) (500,197) ________ ________ ________ Total liabilities (596,954) (482,016) (549,879) ======= ======= ======= Net assets 897,060 728,929 846,098 ======= ======= ======= Equity Issued capital 17 32,460 32,432 32,457 Share premium account 16 50,895 49,963 50,797 Revaluation reserve 16 424,370 287,456 370,814 Other capital reserves 16 108,136 108,922 108,136 Cashflow hedge reserve 16 311 (3,076) 671 Translation reserve 16 270 28 86 Retained earnings 16 289,962 262,522 292,481 Own shares held reserve 16 (9,344) (9,318) (9,344) ________ ________ ________ Equity shareholders' funds 897,060 728,929 846,098 ======= ======= ======= Net asset value per share (pence): 7ii basic 700 569 660 ======= ======= ======= diluted 693 559 655 ======= ======= ======= Consolidated Cashflow Statement for the six months ended 30 September 2007 Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 (restated) (restated) Â£000 Â£000 Â£000 ________ ________ ________ Operating activities Profit for the financial period 671 20,490 42,662 Adjustments for: Short leasehold amortisation - 248 248 Depreciation of plant and equipment 306 247 472 Cost relating to share-based payment schemes 2,958 3,053 3,718 Net finance expenses 949 3,583 6,922 Loss (profit) on sale of properties held as non-current assets and shares in subsidiaries 76 (7,801) (15,169) Gain on revaluation of investment properties (3,848) (13,270) (12,616) Deficit on revaluation of investment properties 18,030 1,019 924 Deficit on revaluation of development properties 1,071 - 182 Reversal of deficit on revaluation of development properties - (977) (1,255) Share of profit from joint ventures (14,546) (8,440) (23,011) Share of loss from associates - 690 455 Loss (profit) from sale of plant and equipment 2 (10) 61 Impairment of other investments - 379 69 Tax on continuing operations (4,529) 3,879 5,937 Tax on discontinued operations - (15) (14) ________ ________ ________ 1,140 3,075 9,585 (Increase) decrease in trade and other receivables (4,248) (4,439) 1,870 Increase (decrease) in trade and other payables 3,094 (9,807) (7,061) Increase in trading properties (3,963) (20) (17) ________ ________ ________ Cash generated from operations (3,977) (11,191) 4,377 Interest paid (15,742) (7,884) (18,930) Interest received 4,472 297 3,587 Tax paid (162) (64) (520) ________ ________ ________ Net cashflow from operating activities (15,409) (18,842) (11,486) ======= ======= ======= Investing activities Purchase and development of property assets (36,102) (75,949) (133,096) Purchase of plant and equipment (557) (54) (1,010) Proceeds from sales of non-current assets 53,999 89,660 117,595 Tax paid on sales of non-current assets - (1,024) (3,230) Proceeds from sale of current investments - - 3 Proceeds from sale of shares in subsidiary companies - 6,776 20,476 Acquisition of investment in joint ventures - (1,042) (2,335) Loans to joint ventures and associates (33,225) (5,505) (17,588) Distributions received from joint ventures 2,283 5,389 8,400 Acquisition of other investments (10,284) - (54,962) Proceeds from sale of other investments 2,461 - 7,851 ________ ________ ________ Net cashflow from investing activities (21,425) 18,251 (57,896) ======= ======= ======= Financing activities Issue of shares 59 951 1,120 Investment in own shares - (6,034) (6,060) Proceeds from new borrowings 183,000 156,000 315,000 Repayment of borrowings (141,000) (126,432) (197,432) Payment of loan issue costs (248) (288) (431) Payment of finance lease liabilities (410) (440) (873) Equity dividends paid (10,576) (9,299) (13,744) ________ ________ ________ Net cashflow from financing activities 30,825 14,458 97,580 ======= ======= ======= Net (decrease) increase in cash and cash equivalents (6,009) 13,867 28,198 Cash and cash equivalents at start of period 36,048 7,954 7,954 Effect of exchange rate fluctuations on cash held 268 (43) (104) ________ ________ ________ Cash and cash equivalents at end of period 30,307 21,778 36,048 ======= ======= ======= Notes to the accounts for the six months ended 30 September 2007 1. Accounting policies These condensed consolidated Interim Financial Statements are unaudited and do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The statutory accounts for 2007, which received an unqualified report from the Auditors, did not contain a statement under section 237 (2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies and are available on the Company's website (www.quintain-estates.com). The interim results have been prepared in accordance with IAS 34, 'Interim Financial Reporting', and except as described below, with the significant accounting policies set out on pages 79 to 82 of the 2007 Annual Report and Accounts. The Group prepared its interim report for the six months to 30 September 2006 in accordance with the Accounting Standards Board's statement on 'Interim Reports', which did not require the valuation of the Group's properties to be revised. That interim report disclosed information on valuation movements in the portfolio whilst the accounts themselves included property valuations on the same basis as the previous annual financial statements. As these Interim Financial Statements are the first prepared in accordance with IAS 34, the Directors have revised the basis of preparation so as to include a full revaluation of the property portfolio as at 30 September 2007, the Interim Balance Sheet date, and to restate the Balance Sheet as at 30 September 2006 using a comparable basis of preparation. As a result, revaluation gains of Â£18,823,000 have been recognised in the Income Statement and Â£58,722,000 in the Statement of Recognised Income and Expense for the period ended 30 September 2006 and consequently, a gain on disposal of Â£3,440,000 previously presented in the Income Statement has been reclassified to the Statement of Recognised Income and Expense in the restated comparatives for the year ended 31 March 2007. The impact of the restatement is set out in the tables below. Whilst last year's interim valuations are described as directors' valuations, they are based upon valuation exercises conducted by external valuers. Income Statement Unaudited Unaudited Six months ended Year ended 30 Sept 2006 31 March 2007 Â£000 Â£000 ________ ________ Profit before tax before restatement 5,583 51,638 Effect of restatement 18,823 (3,005) ________ ________ Restated profit before tax 24,406 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 13,093 435 Deficit on revaluation of investment properties (1,019) - Reversal of deficit on revaluation of development properties 977 - Share of profit from joint ventures, net of tax 6,462 - Share of loss from associates, net of tax (690) - ________ ________ Effect of restatement on profit before tax 18,823 (3,005) Effect of restatement on deferred tax (3,224) 902 ________ ________ Effect of restatement on profit for the financial period 15,599 (2,103) ======= ======= Effect of restatement on earnings per share from continuing operations (pence): basic 12.2 (1.7) ======= ======= diluted 11.9 (1.6) ======= ======= Effect of restatement on earnings per share from total operations (pence): basic 12.2 (1.6) ======= ======= diluted 11.9 (1.6) ======= ======= Consolidated Statement of Recognised Income and Expense Unaudited Unaudited Six months ended Year ended 30 Sept 2006 31 March 2007 Â£000 Â£000 ________ ________ Total recognised income and expense for the financial period before restatement 6,851 186,113 Effect of restatement 56,732 - ________ ________ Restated total recognised income and expense for the financial period 63,583 186,113 ======= ======= The restatement may be analysed as follows: Gain on revaluation of development properties 58,722 3,005 Tax on income and expense recognised directly in equity (17,589) (902) ________ ________ Net income recognised directly in equity 41,133 2,103 Effect of restatement on profit for the financial period 15,599 (2,103) ________ ________ Effect of restatement on total recognised income and expense for the financial period 56,732 - ======= ======= Consolidated Balance Sheet Unaudited Unaudited As at As at 30 Sept 2006 31 March 2007 Â£000 Â£000 ________ ________ Net assets before restatement 672,197 846,098 Effect of restatement 56,732 - ________ ________ Net assets after restatement 728,929 846,098 ======= ======= The restatement may be analysed as follows: Non-current assets Investment properties 12,074 - Development properties 59,699 - Investment in joint ventures 6,462 - Investment in associates (690) - ________ ________ Total non-current assets 77,545 - Deferred tax liability (20,813) - ________ ________ Effect of restatement on net assets 56,732 - ======= ======= Equity Revaluation reserve 41,133 - Retained earnings 15,599 - ________ ________ Effect of restatement on equity shareholders' 56,732 - funds ======= ======= Effect of restatement on net asset value per share (pence): basic 44 - ======= ======= diluted 43 - ======= ======= Consolidated Cashflow Statement The change affected the reconciliation of profit for the financial period to net cashflow from operating activities, but had no impact on the main subtotals and totals presented in the Cashflow Statement. The Group has adopted IFRS 7, 'Financial Instruments: Disclosure' in the current period. This has had no impact on the comparative numbers. The Group's financial performance does not suffer materially from seasonal fluctuations. There have been no changes in estimates of amounts reported in prior periods which have a material impact on these interim results. There have been no material changes in reportable contingent liabilities since 31 March 2007. These condensed consolidated Interim Financial Statements were approved by the Board of Directors on 29 November 2007. 2. Revenue, cost of sales and gross profit Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 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 2007 2007 2007 2006 2006 2006 2007 2007 2007 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 11,659 (1,878) 9,781 13,725 (3,959) 9,766 29,661 (6,821) 22,840 Income from sale of trading properties 3,000 (1,546) 1,454 - - - 28 - 28 Income from hotel operations 3,546 (1,634) 1,912 443 (210) 233 3,376 (2,019) 1,357 Fees from fund management 3,557 (984) 2,573 1,414 (588) 826 4,650 (1,661) 2,989 Other income 1,854 (1,392) 462 4,171 (1,312) 2,859 5,711 (2,041) 3,670 _______ _______ _______ _______ _______ _______ _______ _______ _______ Continuing operations 23,616 (7,434) 16,182 19,753 (6,069) 13,684 43,426 (12,542) 30,884 Discontinued operations - - - 1,295 (726) 569 1,295 (716) 579 _______ _______ _______ _______ _______ _______ _______ _______ _______ 23,616 (7,434) 16,182 21,048 (6,795) 14,253 44,721 (13,258) 31,463 ====== ====== ====== ====== ====== ====== ====== ====== ====== Other income related to: Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 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 2007 2007 2007 2006 2006 2006 2007 2007 2007 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 _______ _______ _______ _______ _______ _______ _______ _______ _______ Income from property derivatives - - - 1,623 (693) 930 2,056 (826) 1,230 Surrender premiums 92 - 92 1,361 - 1,361 1,608 (108) 1,500 Management fees and commissions 1,114 (758) 356 730 (138) 592 1,175 (410) 765 Car parking income 386 (105) 281 334 (99) 235 724 (255) 469 Impairment of other non- current - - - (316) (316) - - - investments Abortive project costs - (419) (419) - (66) (66) - (325) (325) Sundry 262 (110) 152 123 - 123 148 (117) 31 income _______ _______ _______ _______ _______ _______ _______ _______ _______ 1,854 (1,392) 462 4,171 (1,312) 2,859 5,711 (2,041) 3,670 ====== ====== ====== ====== ====== ====== ====== ====== ====== 3. Segmental analysis The Group's primary segments are its business segments, the results of which were as follows: Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 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 2007 2007 2007 2006 2006 2006 2007 2007 2007 Revenue Gross Operating Revenue Gross Operating Revenue Gross Operating profit profit profit profit profit profit before before before net finance net finance net finance expenses expenses expenses Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ _______ _______ Investment portfolio 7,497 5,846 (12,305) 8,558 6,696 18,245 16,690 12,450 24,644 Special 9,045 6,193 15,008 8,860 5,521 12,612 19,800 13,597 23,402 projects Fund management 7,074 4,143 12,696 2,335 1,467 11,606 6,936 4,837 33,328 _______ _______ _______ _______ _______ _______ _______ _______ _______ 23,616 16,182 15,399 19,753 13,684 42,463 43,426 30,884 81,374 ====== ====== ====== ====== ====== ====== Administrative (16,829) (14,474) (25,819) expenses Exceptional (1,479) - - costs _______ _______ _______ (2,909) 27,989 55,555 ====== ====== ====== Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 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 2007 2007 2007 2006 2006 2006 2007 2007 2007 Investment Joint Total Investment Joint Total Investment Joint Total and ventures revaluation and ventures revaluation and ventures revaluation development and uplift development and uplift development and uplift properties associates properties associates properties associates Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ _______ _______ Investment portfolio 244,039 - (18,473) 282,285 - 10,880 252,534 - 10,994 Special 880,556 58,952 80,157 672,508 38,592 60,299 789,674 42,758 184,943 projects Fund management 15,485 160,345 8,391 56,976 96,532 8,586 16,035 128,563 26,383 _________ ________ _______ _________ _______ _______ _________ _______ _______ 1,140,080 219,297 70,075 1,011,769 135,124 79,765 1,058,243 171,321 222,320 ======== ======= ====== ======== ====== ====== ======== ====== ====== 4. Administrative expenses Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 Â£000 Â£000 Â£000 _______ _______ _______ Directors' remuneration 3,556 2,931 3,793 Staff costs 7,619 7,780 13,145 Cost relating to employee share-based payment schemes 835 711 1,439 _______ _______ _______ Total staff costs 12,010 11,422 18,377 Legal and other professional fees 1,532 1,400 2,615 Office costs 2,282 1,336 3,548 Loss (profit) on sale of plant and equipment 2 (10) 61 Depreciation of plant and equipment 306 247 472 Operating lease payments 429 448 880 General expenses 268 252 493 _______ _______ _______ Total administrative expenses 16,829 15,095 26,446 ====== ====== ====== Continuing operations 16,829 14,474 25,819 Discontinued operations - 621 627 _______ _______ _______ 16,829 15,095 26,446 ====== ====== ====== The exceptional costs of Â£1,479,000 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. 5. Net finance expenses Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 Â£000 Â£000 Â£000 _______ _______ _______ Finance expenses: Interest payable on bank loans and overdrafts 12,296 8,051 18,606 Interest payable on other loans 284 606 1,912 Interest on obligations under finance leases 410 434 865 _______ _______ _____ 12,990 9,091 21,383 Interest capitalised (5,457) (4,315) (9,209) _______ _______ _______ 7,533 4,776 12,174 _______ _______ _______ Finance income: Interest receivable (4,458) (1,043) (3,759) Change in fair value of interest rate swaps and caps (2,126) (150) (1,493) _______ _______ _______ (6,584) (1,193) (5,252) _______ _______ _______ Net finance expenses 949 3,583 6,922 ====== ====== ====== Of interest capitalised in the period, the amount capitalised to development properties was Â£5,457,000 (2006: Â£4,086,000) and investment properties Â£nil (2006: Â£229,000). In accordance with IAS 39, 'Financial Instruments: Recognition and Measurement', the Group has reviewed its interest rate caps together with the interest rate hedges within its joint ventures in existence as at 30 September 2007. 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. The movement in the current period in the fair value of interest rate swaps and caps includes a gain of Â£1,986,000 realised on the termination of the Group's interest rate swaps (note 15). 6. Tax i) Tax charge on profit Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 (restated) (restated) Â£000 Â£000 Â£000 _______ _______ _______ UK current tax at 30% (2006: 30%) - 1,675 3,193 Adjustments to prior years' UK corporation - - 1,382 tax _______ _______ _______ - 1,675 4,575 Overseas tax 134 - 3,758 _______ _______ _______ Total current tax charge 134 1,675 8,333 _______ _______ _______ Deferred tax (note 6 iii) (4,663) 2,189 (2,410) _______ _______ _______ Tax (credit) charge (4,529) 3,864 5,923 ====== ====== ====== Continuing operations (4,529) 3,879 5,937 Discontinued operations - (15) (14) _______ _______ _______ (4,529) 3,864 5,923 ====== ====== ====== ii) Tax recognised directly in equity Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 30 Sept 31 March 2007 2006 2007 (restated) (restated) Â£000 Â£000 Â£000 _______ _______ _______ Current tax - 580 - Deferred tax charge on revaluation of development properties 11,843 16,339 43,116 Deferred tax charge on effective element of interest rate swaps - 745 2,114 _______ _______ _______ 11,843 17,664 45,230 ====== ====== ====== iii) Deferred tax Unaudited Unaudited Unaudited 1 April Transfer Recognised Recognised Acquired 30 Sept 30 Sept 2007 to joint in income in equity in period 2007 2006 ventures (note 20) (restated) Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ Capital gains less capital 148,417 (1,820) (4,471) 11,843 1,361 155,330 123,452 losses Capital allowances 3,886 - 691 - - 4,577 6,414 Derivative financial instruments (1,322) - 1,233 - - (89) (2,241) Other temporary differences 1,059 - (786) - - 273 868 Revenue tax losses (2,420) - (1,330) - - (3,750) (2,420) _______ _______ _______ _______ _______ _______ _______ Deferred tax provision 149,620 (1,820) (4,663) 11,843 1,361 156,341 126,073 ====== ====== ====== ====== ====== ====== ====== The UK corporation tax rate will be reduced from 30% to 28% with effect from 1 April 2008. As a result of the rate change, the deferred tax balance as at 30 September 2007 has been reduced as follows: Unaudited Â£000 _______ Recognised in Income Statement 900 Recognised directly in equity 9,155 _______ 10,055 ====== 7. Earnings per share and net asset value per share i) Earnings per share a) From continuing operations Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Six months Six months Six Six months Six Six Year Year Year ended ended months ended months months ended ended ended 30 Sept 30 Sept ended 30 Sept ended ended 31 March 31 March 31 March 2007 2007 30 Sept 2006 30 Sept 30 Sept 2007 2007 2007 Profit Weighted 2007 Profit 2006 2006 Profit Weighted Earnings after average Earnings after Weighted Earnings after average per share tax and number per share tax and average per tax and number before of shares before number share before of shares discontinued discontinued of shares discontinued operations operations operations (restated) (restated) (restated) Â£000 000 pence Â£000 000 (restated) Â£000 000 pence pence _______ _______ _______ _______ _______ _______ _______ _______ _______ Basic 671 128,200 0.5 20,527 128,512 16.0 42,696 128,169 33.3 === === === Adjustments: Interest on 8% convertible unsecured loan stock - - 122 2,000 243 2,000 Employee share-based payment schemes - 1,287 - 1,197 - 1,225 _______ _______ _______ _______ _______ _______ Diluted 671 129,487 0.5 20,649 131,709 15.7 42,939 131,394 32.7 ====== ====== === ====== ====== === ====== ====== === b) From total operations Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Six months Six months Six Six months Six Six Year Year Year ended ended months ended months months ended ended ended 30 Sept 30 Sept ended 30 Sept ended ended 31 March 31 March 31 March 2007 2007 30 Sept 2006 30 Sept 30 Sept 2007 2007 2007 Profit Weighted 2007 Profit 2006 2006 Profit Weighted Earnings after average Earnings after Weighted Earnings after average per share tax and number per share tax and average per tax and number discontinued of shares discontinued number share discontinued of shares operations operations of shares operations (restated) (restated) (restated) Â£000 000 pence Â£000 000 (restated) Â£000 000 pence pence _______ _______ ______ _______ _______ _______ _______ _______ _______ Basic 671 128,200 0.5 20,490 128,512 15.9 42,662 128,169 33.3 === === === Adjustments: Interest on 8% convertible unsecured loan stock - - 122 2,000 243 2,000 Employee share-based payment schemes - 1,287 - 1,197 - 1,225 _______ _______ _______ _______ _______ _______ Diluted 671 129,487 0.5 20,612 131,709 15.6 42,905 131,394 32.7 ====== ====== === ====== ====== === ====== ====== === ii) Net asset value per share Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 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 2007 2007 2007 2006 2006 2006 2007 2007 2007 Equity Number Net asset Equity Number Net Equity Number Net asset shareholders' of shares value shareholders' of shares asset shareholders' of shares value funds per share funds value funds per share (restated) per Â£000 000 pence Â£000 000 share Â£000 000 pence (restated) pence _______ _______ ____ _______ _______ ____ _______ _______ ____ Basic 897,060 128,212 700 728,929 128,107 569 846,098 128,199 660 === === === Adjustments: 8% convertible unsecured loan stock - - 2,947 2,000 - - Employee share-based payment schemes 10,418 2,646 9,732 2,640 9,642 2,520 _______ _______ _______ _______ __ _______ _______ Diluted 907,478 130,858 693 741,608 132,747 559 855,740 130,719 655 ====== ====== === ====== ====== === ====== ====== === The number of shares in issue has been adjusted for the 1,627,414 (30 September 2006: 1,622,198, 31 March 2007: 1,627,414) shares held by ESOP Trusts and by the Group as treasury shares. 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. 8. Dividends The proposed interim dividend of 3.75p (2006: 3.50p) per ordinary share was approved by the Board on 29 November 2007 and is payable on 18 January 2008 to shareholders on the register at the close of business on 14 December 2007. The dividend has not been included as a liability as at 30 September 2007. The final dividend of Â£10,576,000 for the year ended 31 March 2007, representing 8.25p per share, was paid on 7 September 2007 and is included in the reconciliation of movements in equity (note 16). 9. Investment and development properties The movements in the period in investment and development properties were as follows: Unaudited Unaudited Investment Development properties properties Â£000 Â£000 _______ _______ Cost or valuation: Balance 1 April 2007 288,938 769,305 Transfer between categories 8,479 (8,479) Transfer to joint venture - (6,250) Additions 433 37,176 Interest capitalised - 5,457 Disposals (2,900) (6,400) Revaluation (deficit) surplus (14,182) 68,503 _______ _______ Balance 30 September 2007 280,768 859,312 ====== ====== All of the Group's properties were externally valued as at 30 September 2007 and 31 March 2007 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 Wembley have been valued by Savills Commercial Limited. The discount rates which have been applied in relation to these developments were 12% for the Greenwich interests, 10% for the parts of the Wembley development subject to the Stage 1 outline planning consent and 12.5% for the other parts of the Wembley holding for which an application is being prepared for future submission. Other properties in the United Kingdom have been valued by Jones Lang LaSalle Limited and Christie + Co. Properties in the Channel Islands have been valued by Guy Gothard & Co. A reconciliation of the valuations carried out by the external valuers to the carrying values shown in the Balance Sheet was as follows: Unaudited Unaudited As at As at 30 Sept 2007 31 March 2007 Â£000 Â£000 _______ _______ Investment and development properties at market value as determined by valuers 1,128,497 1,046,962 Adjustments in respect of rent-free periods and other tenant incentives (164) (466) Adjustment in respect of minimum payments under head leases separately included as a liability in the 11,747 11,747 Balance Sheet _________ _________ As shown in the Balance Sheet 1,140,080 1,058,243 ======== ======== 10. Non-current investments i) Investment in joint ventures a) The movement in investment in joint ventures was as follows: Unaudited Share of Advances Total net assets Â£000 Â£000 Â£000 _______ _______ _______ Balance 1 April 2007 65,601 104,498 170,099 Transfer from development properties 6,250 - 6,250 Deferred tax on transfer (1,820) - (1,820) Transfer to trading properties (note 20) (159) (1,850) (2,009) Additions 168 - 168 Amounts advanced - 33,225 33,225 Distributions (2,283) - (2,283) Share of profit, net of tax 14,546 - 14,546 Share of effective portion of changes in fair value of cashflow hedges, net of tax (101) - (101) _______ _______ _______ Balance 30 September 2007 82,202 135,873 218,075 ====== ====== ====== b) The Group's interest in its principal joint ventures was as follows: % of equity Country of Joint venture partners held incorporation _________ ___________ __________________ Quercus Healthcare Property Unit Trust 27.96 Channel Islands Norwich Union Life & Pensions Limited Greenwich Peninsula Regeneration Limited ('GPRL') 50.00 United Kingdom Lend Lease Europe Limited Meridian Delta Dome Limited 49.00 United Kingdom Lend Lease Europe Limited iQ Unit Trust 50.00 Channel Islands Wellcome Trust Investment Limited Partnership Quantum Unit Trust 50.00 Channel Islands CGNU Life Assurance Limited Quintessential Homes (Wembley) LLP 50.02 United Kingdom Geninvest Limited Family Housing Development Company Limited BioRegional Quintain Limited 49.90 United Kingdom BioRegional Properties Limited c) The Group's share of the results of its joint venture operations was as follows: Summarised income statements for the six months ended 30 September 2007 Unaudited Quercus GPRL/ iQ Quantum Quintessential BioRegional Other Group share Meridian Homes Quintain joint in joint Delta ventures ventures Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ _______ Rents receivable 6,595 95 542 - - - - 7,232 Cost of sales - (96) (293) (4) - - (2) (395) _______ _______ ______ _______ _______ _______ _______ _______ Gross profit 6,595 (1) 249 (4) - - (2) 6,837 Other income - - - - - 5 - 5 Administrative (782) (65) (691) (2) (34) (138) (167) (1,879) expenses _______ _______ ______ _______ _______ _______ _______ _______ Operating profit 5,813 (66) (442) (6) (34) (133) (169) 4,963 (loss) Profit from sale of non-current property assets 185 - - - - - - 185 Gain on revaluation of investment 8,355 6,763 636 - - - - 15,754 properties _______ _______ _______ _______ _______ _______ _______ _______ Profit (loss) before net finance expenses and 14,353 6,697 194 (6) (34) (133) (169) 20,902 taxation Finance expenses (2,675) - (383) - - (63) (2) (3,123) Finance income 129 - 49 10 42 4 - 234 _______ _______ ______ _______ _______ _______ _______ _______ Profit (loss) before taxation 11,807 6,697 (140) 4 8 (192) (171) 18,013 Taxation (1,839) (1,488) (140) - - - - (3,467) _______ _______ _______ _______ _______ _______ _______ _______ Profit (loss) after taxation 9,968 5,209 (280) 4 8 (192) (171) 14,546 ====== ====== ===== ====== ====== ====== ====== ====== Summarised balance sheets as at 30 September 2007 Unaudited Quercus GPRL/ iQ Quantum Quintessential BioRegional Other Group share Meridian Homes Quintain joint in joint Delta ventures ventures Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ _______ Investment properties at valuation 238,079 13,013 59,742 1,216 - - - 312,050 Trading properties - 34,472 - - 17,352 2,735 - 54,559 Other assets 13,262 3,810 4,325 371 - 4,691 3,094 29,553 _______ _______ _______ _______ _______ _______ _______ _______ Gross assets 251,341 51,295 64,067 1,587 17,352 7,426 3,094 396,162 Current tax (1,353) - - - - - - (1,353) liability Non-current liabilities: bank loans and other borrowings (98,569) - (30,905) - - (602) - (130,076) Deferred tax (13,735) (3,308) (1,973) - - - (318) (19,334) liability Other liabilities (7,159) (3,272) (3,939) (239) (11,809) (787) (119) (27,324) _______ ________ ______ _______ _________ _______ ______ _________ Net external assets 130,525 44,715 27,250 1,348 5,543 6,037 2,657 218,075 ====== ======= ====== ====== ======== ====== ====== ======== Represented by: Capital 59,988 10,602 4,079 28 5,543 (517) 2,479 82,202 Loans 70,537 34,113 23,171 1,320 - 6,554 178 135,873 _______ _______ ______ _______ _______ _______ _______ _______ Total investment 130,525 44,715 27,250 1,348 5,543 6,037 2,657 218,075 ====== ====== ====== ====== ====== ====== ====== ====== The valuation of investment properties held within Quercus as at 30 September 2007 has been based on the exercise carried out by Christie + Co, Chartered Surveyors, as external valuers, on the basis of open market value and in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. Investment properties in Meridian Delta Dome Limited and the iQ Unit Trust have been valued by Savills on a similar basis. ii) Other non-current investments The movement in other non-current investments, all of which have been classified as available for sale, was as follows: Unaudited Â£000 _______ Unquoted investments: Balance as at 1 April 2007 3,044 Additions 10,285 Revaluation surplus 295 _______ Balance as at 30 September 2007 13,624 ====== During the period, 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 also 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. 11. Non-current receivables These comprise a loan which carries a coupon of LIBOR + 2.5%, has a maximum term of approximately 11 years and is shown in the Balance Sheet at amortised cost. 12. Trade and other receivables Unaudited Unaudited Unaudited 30 Sept 2007 30 Sept 2006 31 March 2007 Â£000 Â£000 Â£000 _______ _______ _______ Trade receivables 14,562 7,808 12,175 Amounts due under contracts for sale 6,500 12,230 51,275 Other receivables 6,676 7,745 7,047 Prepayments and accrued income 3,985 4,501 3,170 _______ _______ _______ 31,723 32,284 73,667 ====== ====== ====== 13. Trade and other payables Unaudited Unaudited Unaudited 30 Sept 2007 30 Sept 2006 31 March 2007 Â£000 Â£000 Â£000 _______ _______ _______ Trade payables 6,433 4,072 6,751 Other payables 11,864 20,255 7,535 Accruals 22,430 20,541 18,774 Interest rate swaps - 10,314 4,406 _______ _______ _______ 40,727 55,182 37,466 ====== ====== ====== 14. Bank loans and other borrowings Unaudited Unaudited Unaudited 30 Sept 2007 30 Sept 2006 31 March 2007 Â£000 Â£000 Â£000 _______ _______ _______ Current liabilities: 8% convertible unsecured loan stock - 2,947 - Other loans - - 3,000 _______ _______ _______ - 2,947 3,000 _______ _______ _______ Non-current liabilities: Bank loans (secured) 374,050 272,831 329,054 10% first mortgage debenture stock 2011 (secured) 4,838 4,870 4,870 _______ _______ _______ 378,888 277,701 333,924 _______ _______ _______ Total borrowings 378,888 280,648 336,924 ====== ====== ====== The weighted average tenure of the Group's debt is five years (31 March 2007: five years) and the weighted average cost of debt was 6.9% (31 March 2007: 6.6%). The loans are secured by floating charges over assets owned by subsidiary undertakings. The 10% first mortgage debenture stock 2011 issued by Estates Property Investment Company Limited is secured by fixed and floating charges over the assets of the subsidiary undertaking and has a redemption value of Â£4,617,000. The premium over par arising from fair valuing the debenture on acquisition is amortised over its remaining life. a) The maturity profile of the Group's debt was as follows: Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 30 Sept 30 Sept 30 Sept 30 Sept 31 March 30 Sept 30 Sept 31 March 2007 2007 2007 2006 2007 2007 2006 2007 Bank loans Other Total debt Total debt Total debt Undrawn Undrawn Undrawn and loans facilities facilities facilities overdrafts Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ _______ Within one year - - - 2,947 3,000 - - - From two to five years 374,050 4,838 378,888 277,701 333,924 119,000 220,000 254,000 _______ _______ _______ _______ _______ _______ _______ _______ 374,050 4,838 378,888 280,648 336,924 119,000 220,000 254,000 ====== ====== ====== ====== ====== ====== ====== ====== b) After taking account of interest rate swaps and caps, the risk profile of the Group's borrowings was as follows: Unaudited Unaudited Unaudited 30 Sept 30 Sept 31 March 2007 2006 2007 Â£000 Â£000 Â£000 _______ _______ _______ Fixed or capped 229,838 164,824 164,877 Floating 149,050 115,824 172,047 _______ _______ _______ 378,888 280,648 336,924 ====== ====== ====== c) The interest rate profile of the Group's fixed rate debt was as follows: Unaudited Unaudited Unaudited 30 Sept 30 Sept 31 March 2007 2006 2007 Percent Â£000 Â£000 Â£000 _______ _______ _______ _______ 5.0 - 6.0 - 157,007 157,007 6.0 - 7.0 225,000 - - 7.0 - 8.0 - 2,947 3,000 9.0 - 10.0 4,838 4,870 4,870 _______ _______ _______ 229,838 164,824 164,877 ====== ====== ====== d) The weighted average rate and the weighted average period of the Group's fixed rate debt were as follows: Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited 30 Sept 30 Sept 31 March 30 Sept 30 Sept 31 March 2007 2006 2007 2007 2006 2007 % % % years years years _______ _______ _______ _______ _______ _______ 6.5 5.6 5.6 5 5 5 ====== ====== ====== ====== ====== ====== 15. Financial instruments The Group's policy is to finance its activities with equity and long term debt, the proportions depending on the profile of the operational and financial risks to the business. The Group does not speculate in treasury products but uses these only to limit potential interest rate fluctuations. It usually borrows at floating rates of interest based on LIBOR and uses hedging to achieve an interest rate profile where the majority of borrowings are fixed or capped. During the period, the Group terminated its interest rate swaps and replaced these with caps providing cover of Â£225,000,000. As at 30 September 2007, 65.6% (31 March 2007: 54.8%) of the Group's net debt was fixed or capped. 16. Reconciliation of movements in equity Unaudited Share Share Revaluation Other Cashflow Translation Retained Own Equity capital premium reserve capital hedge reserve earnings shares shareholders' account reserves reserve held funds reserve Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 _______ _______ _______ _______ _______ _______ _______ _______ _______ Balance 1 April 2007 32,457 50,797 370,814 108,136 671 86 292,481 (9,344) 846,098 Recognised income and expense for - the period - - 58,026 (360) 184 671 - 58,521 Transfer between - - reserves - - (4,470) - 4,470 - - Issue of shares less costs 3 98 - - - - (42) - 59 Cost relating to share-based payment schemes - - - - - - 835 - 835 Cost relating to share-based bonus scheme - - - - - - 2,123 - 2,123 Dividends paid in period - - - - - - (10,576) - (10,576) ______ ______ ______ ______ ______ _______ _______ ______ ______ Balance 30 Sept 2007 32,460 50,895 424,370 108,136 311 270 289,962 (9,344) 897,060 ====== ====== ====== ====== ====== ====== ====== ====== ====== Part of the gain on the revaluation of investment and development properties is recognised in the Income Statement and part directly through equity. Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 (restated) (restated) Â£000 Â£000 Â£000 _______ _______ _______ Recognised in Income Statement: Gains (deficits) on revaluation of investment properties in: Group 3,848 13,270 12,616 Joint ventures 15,754 8,800 27,916 Associates - (920) (650) Deficits on revaluation of investment (18,030) (1,019) (924) properties Deficits on revaluation of development (1,071) - (182) properties Reversal of deficits on revaluation of development properties - 977 1,255 Recognised directly in equity: Gains on revaluation of development 69,574 58,657 182,289 properties _______ _______ _______ 70,075 79,765 222,320 ====== ====== ====== As at 30 September 2007, ESOP Trusts held 1,622,180 (31 March 2007: 1,359,774) shares in the Company which had been purchased in the market at a cost of Â£9,312,000 (31 March 2007: Â£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 and share-based bonus entitlements. As at 30 September 2007, these shares had a market value of Â£12,000,000 (31 March 2007: Â£12,177,000). The Quintain Group Employee Benefit Trust has waived the right to receive dividends. As at 30 September 2007, the Company also held 5,234 (31 March 2007: 267,640) of its own shares which had been purchased in the market at a cost of Â£32,000 (31 March 2007: Â£1,630,000). As at that date, these shares had a market value of Â£39,000 (31 March 2007: Â£2,397,000). 17. Share capital Unaudited Unaudited Number of Nominal shares value 000 Â£000 _______ _______ Authorised as at 30 September 2007 Ordinary shares of 25p each 200,000 50,000 ====== ====== Allotted, called up and fully paid In issue as at 1 April 2007 129,826 32,457 Issue of shares under share-based payment schemes at between 25p and 556.3p 13 3 _______ _______ In issue as at 30 September 2007 129,839 32,460 ====== ====== As at 30 September 2007, share capital included 1,622,180 (31 March 2007: 1,359,774) shares held by ESOP Trusts. These shares had a nominal value of Â£405,295 (31 March 2007: Â£339,944). The Company also held 5,234 (31 March 2007: 267,640) of its own shares with a nominal value of Â£1,309 (31 March 2007: Â£66,910). 18. Capital commitments As at 30 September 2007, the Group had capital commitments of Â£98,078,000 (31 March 2007: Â£15,669,000) in relation to its own properties and Â£53,010,000 (31 March 2007: Â£81,450,000) in relation to its joint ventures. 19. Related party disclosures During the period, the Group received the following fees in respect of services provided to its joint ventures: Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 30 Sept 2007 30 Sept 2006 31 March 2007 Â£000 Â£000 Â£000 _______ _______ _______ Quercus Property Partnership 2,235 1,306 4,014 BioRegional Quintain Limited 96 96 192 iQ Property Partnership 1,086 - 177 Quintessential Homes LLP 130 - 161 Meridian Delta Limited - - 71 Quart Property Partnership - 12 25 Quantum Property Partnership 10 - 10 _______ _______ _______ 3,557 1,414 4,650 ====== ====== ====== The Group also received interest on loan notes amounting to Â£1,218,000 (2006: Â£725,000) from Meridian Delta Limited and Â£206,000 (2006: Â£47,000) from BioRegional Quintain Limited, which are included in finance income. Amounts due from joint venture undertakings as at 30 September 2007 are shown in note 10. 20. Acquisition of subsidiary During the period, the Group acquired 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 Â£5,451,000. This was treated as the acquisition of a trading property which was the sole asset of the company. 21. Post Balance Sheet events On 30 September 2007, the Group entered into a conditional contract to purchase the Wembley Retail Park, Wembley from the Junction Limited Partnership for Â£85,000,000. The conditions were satisfied following the period end and the purchase has been completed. Post the Balance Sheet date, the Group entered into a Â£150,000,000 corporate banking facility with the Bank of Scotland Corporate to fund further investment in urban regeneration projects and to strengthen Quintain's existing financial flexibility to exploit opportunities arising from current market conditions. This information is provided by RNS The company news service from the London Stock Exchange

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