Interim Results

Terrace Hill Group PLC 23 January 2003 TERRACE HILL GROUP PLC ('THE GROUP') INTERIM RESULTS FOR 6 MONTH PERIOD TO 31 OCTOBER 2002 Chairman's statement I am pleased to present the Group's unaudited half yearly report to 31 October 2002. Results We are pleased to report that during the half year the Group earned a post tax profit of £107,000 (half year to 31 October 2001 loss £692,000 and year to 30 April 2002 profit £26,000). Net assets, after allowing for minority interests, increased to £40,824,000 from £25,159,000 at 30 April 2002. This increase was created primarily by the merger with Westview Group Limited (£10.243 million) which was completed on 19 September 2002 and from a residential portfolio revaluation (£5.47 million). Bank debt stood at 60% of gross assets. Our last published pre-merger results showed net debt at 69% of our residential portfolio value. Other long term creditors comprise primarily unsecured shareholders' loans, which have now been substantially reduced, and some development funding obligations. Strategy and Performance In our circular of 20 August 2002 with details of the merger with Westview Group we set out our strategy for the enlarged Group. Primarily, we were looking to add revenue profits to our valuable asset base. Already we have seen the beginning of this benefit. The post tax profit referred to above was attributable as to a post tax loss of £34,000 by the original CapitalTech Group and as to a positive contribution of £141,000 from Westview Group in only six weeks from 19 September 2002 to 31 October 2002. One has to bear in mind of course that profits from the commercial division are generally taken upon completion and sale of developments, and will depend on timing of these, but we do see this as an encouraging start. The results of the residential division reflect tight control of portfolio costs. Secondly, we are hopeful that increasing profits from the commercial division will help to reduce the discount to net asset value from which our share price has suffered. Since we struck the share price for the merger at 12.65p, we have seen an increase of 28% in our share price to 16.25p. We still have some way to go, net asset value per share now being 26.3p and the current price showing a discount of 38%. The further aspects of our strategy referred to in our circular were: additional profit opportunities for the commercial division; the greater ability to consider paying dividends; the possibility of residential development; the benefits of our in-house corporate finance and legal services to a larger group; the ability to consider further investment in commercial property; and, last but not least, the diversification of risk. On all of these aspects I am pleased to report that we consider that we have begun to see benefits or prospective benefits from the merger. Dividend Your directors have decided to pay an interim dividend for the half year under consideration of 0.125p per share. This will be paid on 19 March 2003 to shareholders on the register at 7 March 2003. This illustrates our confidence in the future and we hope to maintain a progressive dividend policy. Repurchase of Shares We also announce a proposed repurchase tender to be issued by the company this month of up to 750,000 shares at the price of 16.25p. This again provides an opportunity for small shareholders to realise at the mid-market price without costs, and may assist further in strengthening the share price. Current Trading In November and December 2002, by completing cash sales of £5.3 million, the residential division continued to reduce further our residential property holdings in England. The commercial division, at a price of £2.4 million, sold profitably an office building of 12,750 square feet developed by the Group at Teesdale Business Park near Middlesbrough. The Future We shall strive to progress all aspects of our strategy. This is a time of economic uncertainty with changes in exchange rates and interest rates accompanying a world slowdown of economic activity. Indeed as I write, Germany, the largest economy in the Eurozone, is likely to be slipping into deflation, and the prospect of recovery in the United States is probably deferred to 2004. Our residential property has recently shown substantial increases in value. I believe a consensus of forecasts is that we should expect to see further increases in 2003 but at a slower rate than 2002. In this regard you should be aware that our revaluation at 31 October 2002 by the directors has been effected conservatively(RA1) . Further, with our residential properties now principally in Scotland, and almost wholly excluding London and the South East, we believe we do not hold properties in the regions most likely to be adversely affected by cyclical changes. Turning to the commercial division, there have recently been rental falls in London and parts of the South East. We are concentrating our commitments in the near term primarily on new schemes to the North East and Bristol markets where demand looks more promising. I believe therefore that our diversification from solely holding residential property to also holding and developing commercial property should allow us to continue to enhance shareholder value despite the current period of economic uncertainty. Where appropriate we shall also seek further opportunities to expand by acquisition. Robert F M Adair Chairman 23 January 2003 UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT 6 months to 6 months to 12 months to 31-Oct 02 31-Oct-01 30-Apr-02 £000 £000 £000 (unaudited) (unaudited) (audited) TURNOVER Continuing operations 2,834 1,573 3,185 Acquisitions 1,854 240 1,658 Share of joint venture - 2 4 ----- ----- ----- 4,688 1,815 4,847 ----- ----- ----- GROUP OPERATING PROFIT Ongoing operations 1,071 394 634 Acquisitions 237 200 1,256 ----- ----- ----- 1,308 594 1,890 Share of operating profit of joint venture - 1 1 ----- ----- ----- TOTAL OPERATING PROFIT 1,308 595 1,891 Continuing operations: Provision for unlisted investments (21) (83) (102) Gain / (Loss) on disposal of other fixed asset investment - 1 (7) Net gain/(loss) on disposal of investment properties 382 (72) 1,090 Discontinued operations 5 3 3 Net interest payable (1,599) (1,141) (2,821) ----- ----- ----- PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAX 75 (697) 54 Taxation 45 5 (28) ----- ----- ----- PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAX 120 (692) 26 Minority interest (13) - - ----- ----- ----- PROFIT/(LOSS) ATTRIBUTABLE TO 107 (692) 26 MEMBERS OF PARENT COMPANY ----- ----- ----- Profit / (Loss) per share - basic and diluted 0.115p (1.17p) 0.038p ----- ----- ----- UNAUDITED SUMMARISED CONSOLIDATED BALANCE SHEET 31-Oct-02 31-Oct-01 30-Apr-02 £000 £000 £000 FIXED ASSETS (unaudited) (unaudited) (audited) Intangible assets Positive goodwill 2,707 433 371 Negative goodwill (3,767) (1,178) (4,167) ------- ------ ------ (1,060) (745) (3,796) Tangible assets Investment properties 106,562 51,786 74,931 Other 223 31 12 ------- ------ ------ 106,785 51,817 74,943 Investments Joint venture - share of gross assets - 48 47 - share of gross liabilities - (39) (40) ------- ------ ------ - 9 7 Other 1,434 788 279 ------- ------ ------ 1,434 797 286 ------- ------ ------ 107,159 51,869 71,433 CURRENT ASSETS Work in Progress 36,965 - - Debtors 15,526 1,515 7,038 Cash at bank and in hand 1,627 2,589 1,905 ------- ------ ------ 54,118 4,104 8,943 CREDITORS: amounts falling due within one year Borrowings (26,107) - (2,675) Other creditors (13,995) 1,467 (1,507) ------- ------ ------ (40,102) 1,467 (4,182) ------- ------ ------ NET CURRENT ASSETS 14,016 2,637 4,761 ------- ------ ------ TOTAL ASSETS LESS CURRENT LIABILITIES 121,175 54,506 76,194 CREDITORS: amounts falling due after more than one year (79,893) (35,319) (51,035) ------- ------ ------ 41,282 19,187 25,159 ------- ------ ------ CAPITAL AND RESERVES Called up share capital 3,109 1,487 1,487 Deferred consideration 193 193 193 Share premium account 11,823 9,937 9,908 Revaluation reserve - investment properties 13,993 4,658 9,487 other 4 3 4 Capital redemption reserve 792 792 792 Merger reserve 15,800 9,282 9,282 Profit and loss account (4,890) (7,165) (5,994) ------- ------ ------ 40,824 19,187 25,159 Minority interests 458 - - ------- ------ ------ 41,282 19,187 25,159 ------- ------ ------ STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 6 months to 6 months to 12 months to 31-Oct-02 31-Oct-01 30-Apr-02 £000 £000 £000 (unaudited) (unaudited) (audited) Profit/(Loss) attributable to members of the parent company 107 (692) 26 Unrealised surplus on revaluation of properties 5,504 - 5,282 Unrealised deficit on revaluation of unlisted investments - (35) (34) ----- ----- ----- Total recognised gains and losses relating to period 5,611 (727) 5,274 ----- ----- ----- GROUP RECONCILIATION OF SHAREHOLDERS' FUNDS 6 months to 6 months to 12 months to 31-Oct-02 31-Oct-01 30-Apr-02 £000 £000 £000 (unaudited) (unaudited) (audited) Total recognised gains and losses 5,611 (727) 5,274 New shares issued 1,658 400 340 Share premium arising on new shares issued 2,111 1,544 1,515 Merger reserve arising on new shares issued 6,519 - - Purchase of ordinary shares (234) (298) (238) ------ ------ ------ Total movements during the year 15,665 919 6,891 Opening shareholders' funds 25,159 18,268 18,268 ------ ------ ------ Closing shareholders' funds 40,824 19,187 25,159 ------ ------ ------ NOTES BASIS OF PREPARATION The interim financial statements are unaudited and do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. These statements have been prepared on the basis of the accounting policies set out in the Group's 2002 Annual Report and Accounts and were approved by the board of directors on 23 January 2003. Financial statements for the year ended 30 April 2002 are abridged statements; full accounts with an unqualified audit report have been lodged with the Registrar of Companies. PROFIT/(LOSS) PER ORDINARY SHARE The calculation of basic and diluted loss per ordinary share is based on the following: 6 months to 6 months to 12 months to 31-Oct-02 31-Oct-01 30-Apr-02 £000 £000 £000 Surplus/(Deficit) 107 (692) 26 ---------- ---------- ---------- The weighted average number of ordinary shares in issue during the period: Basic 93,303,027 59,046,527 66,637,201 Dilutive potential ordinary shares arising from share option schemes - - - ---------- ---------- ---------- 93,303,027 59,046,527 66,637,201 ---------- ---------- ---------- DIVIDEND The company intends to pay an interim dividend of 0.125p per share. HALF-YEARLY REPORT The half-yearly report will be posted to shareholders shortly and copies will be available, free of charge for one month, from the Company Secretary, Terrace Hill Group plc, James Sellars House, 144 West George Street, Glasgow, G2 2HG. INDEPENDENT REVIEW REPORT TO TERRACE HILL GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 31 October 2002 set out on pages 4 to 7 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. Where a company is fully listed, the directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. The directors of Terrace Hill Group plc have voluntarily complied with this requirement in preparing the interim review report. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 October 2002. BDO Stoy Hayward Chartered Accountants Glasgow 23 January 2003 END -------------------------- (RA1)HOW? This information is provided by RNS The company news service from the London Stock Exchange

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