Interim Results
Terrace Hill Group PLC
04 July 2007
TERRACE HILL GROUP PLC ('Terrace Hill' or 'the Group')
INTERIM RESULTS
Terrace Hill Group Plc, the AIM listed property group, announces its results for
the six months ended 30 April 2007.
Overview
• ADNAV up 7.5% to 96.2p per share (October 2006: 89.5p per share)
• TNAV up 9.6% to 80.7p per share (October 2006: 73.6p per share).
• Profits before tax of £12.7 million (2006: £4.7 million) reflecting the
disposal of larger assets
• Interim dividend up 14.3% to 0.8p per share (2006: 0.7p)
• Raised £24.3 million, net of costs, through an over-subscribed placing
at a premium to market price, bringing in a number of new institutional
shareholders
• Increased commercial property development programme - end value of
£1.316bn (October 2006: £1.072bn)
• Continued adding value to development sites through enhancing planning
consents and pre-lettings of selected schemes
• Achieved lettings at rents above expectations due to strong occupier
demand of office developments
• Increased size of Scottish house building division's landbank - continue
to review the possibility of de-merging this business
• Strengthen board with the appointment of Bob Dyson, currently Chairman
for the North West Region of Jones Lang LaSalle
Chairman's Statement
I am very pleased to be able to present the group's unaudited results for the
six months to 30 April 2007 which once again highlight the strong progress being
made in all of our operations. The excellent quality of our portfolio whether
commercial developments, residential investment properties or Scottish
housebuilding, coupled with skillful and active management has resulted in the
excellent investment returns we continue to generate.
This is the first time we are presenting our consolidated financial statements
under International Financial Reporting Standards (IFRS) with the comparative
income statements and Balance Sheets for the period ended 30 April 2006 and year
ended 31 October 2006 being re-stated to reflect the new format and accounting
policies.
During the six month period our adjusted diluted net asset value (ADNAV) has
increased by 7.5% to 96.2p per share (31 October 2006: 89.5p per share) and the
triple net asset value (TNAV) has also increased in line with expectations by
9.6% to 80.7p per share (31 October 2006: 73.6 per share). The ADNAV and TNAV
amounts have been calculated from net asset values determined in accordance with
IFRS accounting rules.
The group's profits before tax for the six months were £12.7 million (six months
to 30 April 2006: £4.7 million) reflecting the gain on disposal of two large
assets. In line with our progressive dividend policy, where we expect dividends
to rise consistently with the growth of TNAV, the board is recommending an
interim dividend of 0.8p per share (six months to 30 April 2006: 0.7p) to be
paid on 24 August 2007 to shareholders on the Register at 10 August 2007.
We remain focused on delivering excellent returns on shareholders' funds
invested in the business across all our operational areas. In particular, we aim
to acquire sites for larger commercial developments where the market is less
competitive and we can utilise our expertise to generate higher margins. In
order to take advantage of these opportunities since the period end we
successfully raised £24.3 million of capital, net of costs, through the placing
of 24,752,475 new shares at 101p per share. We achieved a placing price at a
premium to the market share price at the time of issue and the placing was over
subscribed. While we are delighted that our existing institutional shareholders
participated in the placing, we are also very pleased to welcome a number of new
institutional shareholders to our register.
The strength and skill of our management in driving results from the development
process and stock picking of investment assets, together with an active
management approach gives me confidence that we will deliver superior returns
for the foreseeable future.
Finally, I am pleased to welcome Bob Dyson to our board as a non-executive
director. Bob has over 30 years' experience in the property industry and is now
chairman for the North West Region of Jones Lang LaSalle, having previously been
Executive Chairman of Dunlop Haywards Limited. He is already making an impact on
our business and will be instrumental in building our presence in the North West
where he has a proven track record and an outstanding reputation.
Robert F M Adair
Chairman
4 July 2007
Review of operations
Our commercial property development programme continues to grow with the
acquisition of new sites and now has a completed end value of £1.316 billion (31
October 2006: £1.072 billion). The high quality of our portfolio is endorsed by
the excellent returns we are achieving on the sale of completed developments. We
continue to succeed in adding value to our development sites through enhancing
planning consents and through the early letting of certain schemes.
In the case of almost all of our office developments we are achieving lettings
at rents above those used in appraisals at the time of site purchase, reflecting
strong occupier demand in the markets we are active in. At our retail warehouse
schemes, we only commence development after having first secured a substantial
pre-let thus eliminating the letting risk. Our industrial developments continue
to let and sell in line with expectations supporting our practice of only
developing industrial properties in areas where there is strong supply and
demand imbalance.
Some of the trading highlights in the period include:
• the acquisition of a prominent 7.9 acre development site on the edge of
Bracknell with planning consent for three buildings totalling 260,000 sq ft.
The phased development is being carried out in joint venture with Hypo Real
Estate Bank International A.G. and will have an end value of around £120
million. The completed office buildings will be delivered into the
increasingly vibrant Thames Valley market, at a time when we predict that
there will be a shortage of good quality new office space coupled with
buoyant demand;
• the acquisition of Bristol Bridge House for £9.2 million, an office
refurbishment opportunity overlooking the floating harbour in one of
Bristol's most central and attractive locations;
• the sale of a 4.5 acre industrial site at Edmonton, north London, to an
owner/occupier for £7.75 million. The site was purchased three years earlier
for £4.5 million;
• the letting of the first 16,000 sq ft of offices at Hudson Quay,
Middlehaven on Teesside to the Crown Prosecution Service; and
• commencing the development of three office buildings totalling 35,000 sq
ft at Teesdale Business Park at Teesside, with an end value of around £10
million. Part of one of the buildings has been pre-let to HBOS.
Since the end of April 2007 we have also:
• obtained detailed planning consent for a 204,000 sq ft office building
at our site on George Street, Croydon, which should materially enhance site
value;
• pre-let four floors to Adecco at Kean House, our 24,600 sq ft office
refurbishment at Covent Garden, London;
• acquired a prominent 1.7 acre site in Southampton city centre for
£7.4 million. The development of 'Mayflower Plaza' is expected to have a
completed development value of around £70 million and will comprise 180
residential units, a 150 bedroom hotel and 105,000 sq ft of offices; and
• forward sold the first 19,400 sq ft new office development at Baltic
Business Quarter, Gateshead to the Open University for £5.25 million.
Elsewhere we continue to rationalise our residential investment assets. Within
the at.home Nationwide portfolio, held in a partnership where we have a 49%
interest, we have improved performance by increasing the occupancy rate from
88.7% at transfer to 91.7% at the half year end. Additionally, we continue to
increase rental levels and reduce maintenance costs. In the six months to
30 April 2007 the total sale price of properties sold, or under contract for
sale, was £40.8 million. On disposal, these properties show a 21.8% increase
over their purchase price having been acquired in July 2006 for £33.5 million
and demonstrates our skill in identifying value in this sector. Since the half
year end we have achieved further sales resulting in a total sold or under
contract for sale since the acquisition of the portfolio of £48 million.
Within the Scottish housebuilding division, now re-branded Clansman Homes, we
continue to make good progress on all fronts; by increasing the size of our
landbank, new site starts and the successful sale of completed units. Our
landbank now has the potential to deliver up to 1,380 units (31 October 2006:
1,200 units) of which we expect to complete 32 units by the end of 2007 and a
further 100 units by the end of 2008. It remains our intention to consider
de-merging the business from the group during the course of 2008 as we believe
this will realise considerable value for shareholders which is currently not
recognised in the Terrace Hill share price.
Financial review
Basis of accounting
The key figures for the six months to 30 April 2007 are summarised in the
financial highlights on page 1 of this report. These are the first results that
the group has prepared under International Financial Reporting Standards (IFRS).
All AIM listed companies are required to adopt IFRS for periods commencing on or
after 1 January 2007. However we have decided to adopt IFRS earlier than
required and present our interim financial statements under these regulations.
This has required the results of prior periods to be restated using IFRS so that
proper comparisons can be made with the results of the current period.
A reconciliation of profits and equity previously reported under UK GAAP for the
year ended 31 October 2006 and six months ended 30 April 2006 to IFRS is shown
in note 4.
The application of IFRS will not affect the economic value of the business but
it will lead to differences in the level of profits and net assets reported.
The principal differences between IFRS and UK GAAP are:
• valuation surpluses or deficits on investment properties during the
period are reported in the Income Statement rather than as a movement in the
revaluation reserve;
• the capital gains tax that would be payable if the investment properties
were sold at their current balance sheet valuation is included in the
Balance Sheet as a deferred tax liability.
• Previously this has been disclosed as a note to the accounts. Where this
liability arises in an associate then the carrying value of the associate is
reduced;
• negative goodwill is taken to the Income Statement at initial
recognition; and
• recognition of derivatives as financial assets or liabilities in the
Balance Sheet with movements in fair value between balance sheet dates being
accounted for in the Income Statement.
Triple net asset value (TNAV) and adjusted diluted net asset value (ADNAV)
In line with many publicly quoted property companies, we highlight both TNAV and
ADNAV as the principal measures of the group's performance, publishing these
figures at 30 April 2007 and 31 October 2006. The following adjustments are made
to the net asset value figure in arriving at the TNAV:
1. Property revaluation: properties and rights to properties held as current
assets are revalued from cost (or realisable value if less) to market value.
The valuation has been performed by relevant directors qualified as
chartered surveyors based on advice from CB Richard Ellis and takes account
of development costs to complete and whether or not the property has been
let and/or sold;
2. Share dilution: the nominal value of shares to be issued under the employee
long-term incentive plans is added to net assets;
3. Goodwill: positive goodwill is excluded; and
4. Taxation: the amount of taxation estimated to be payable were all of
the group's properties held as current assets to be sold at the value used
for the TNAV calculation has been deducted.
The TNAV per share calculated in accordance with IFRS at 30 April 2007 was 80.7p
(31 October 2006: 73.6p) an increase of 9.6%. The TNAV calculated under UK GAAP
for the same dates were 80.4p (73.6p) an increase of 9.3%.
The following adjustments are made to TNAV in arriving at ADNAV:
(5) Deferred tax: the amount of taxation on revaluations surplus on investment
properties which has been included in arriving at net assets is added back along
with the taxation estimated to be payable were all of the group's properties
held as current assets to be sold at the value used for the TNAV calculation.
The ADNAV per share calculated in accordance with IFRS at 30 April 2007 was
96.2p (31 October 2006: 89.5p) an increase of 7.5%. The ADNAV calculated under
UK GAAP for the same dates were 95.7p (89.0p) an increase of 7.5%.
Income statement
Turnover in the period was £46.6 million (six months to 30 April 2006: £23.3
million) an increase of 100%. Of particular note were the sale of properties at
Wokingham for £17.9 million and the additional consideration for Maidenhead of
£8.5 million following the receipt of planning consent.
Operating profit for the period was £11.6 million (six months to April 2006:
£6.2 million) an increase of 86.1%. The operating profit margin for the period
was 24.9% (six months to April 2006: 26.6%).
The revaluation of investment properties owned by the group produced a gain of
£0.9 million (six months to 30 April 2006: £0.7 million).
Our investment in associated undertakings generated a profit of £2.3 million
(six months to 30 April 2006: £Nil). This is primarily due to the results from
Terrace Hill Residential plc, the company that owns the at.home Nationwide
residential portfolio of which our share is 49%. The figure of £2.3 million
comprises our share of the gains on property revaluations of £3.5 million, a
taxation credit of £1.0 million, a fair value adjustment for financial
instruments of £0.3 million and a trading loss in the period of £2.5 million.
Balance sheet
Total group assets were £220.7 million (31 October 2006: £211.7 million) an
increase of 4.25%.
The net assets at the end of the period before deducting minority interests were
£110.7 million (31 October 2006: £100.3 million) an increase of 10.37%.
Gearing
Bank debt at the period end was £62.6 million (31 October 2006: £70.4 million)
net of cash of £15.2 million (31 October 2006: £8.6 million). This represented
56.5% of equity (31 October 2006: 70.0%). Of this 73.0% (31 October 2006: 60.8%)
was with limited or no recourse to the parent company.
The bank debt primarily relates to the group's development assets which are
generally held for relatively short periods, hence the group is not exposed to
medium- or long-term movements in interest rates. Interest rate hedging is in
place for much of the debt used to finance the acquisition of the at.home
Nationwide residential investment portfolio by our associate company Terrace
Hill Residential plc.
Unaudited Consolidated Income Statement
for the six months ended 30 April 2007
Six months to Year to Six months to
30 April 31 October 30 April
2007 2006 2006
£'000 £'000 £'000
Note (Unaudited) (Unaudited) (Unaudited)
------------------------ ----- --------- --------- ---------
Revenue 46,612 80,493 23,342
Direct costs (28,900) (65,941) (14,738)
------------------------ ----- --------- --------- ---------
Gross profit 17,712 14,552 8,604
Administrative expenses (7,239) (6,708) (4,118)
Profit/(loss) on disposal of
investment properties 206 (118) (73)
Gain on revaluation of
investment properties 852 4,343 749
Income/gain from fixed asset
and other investments 34 645 475
Gain on disposal of
subsidiaries - 575 575
------------------------ ----- --------- --------- ---------
Operating profit 11,565 13,289 6,212
Finance revenue 379 386 135
Finance costs (1,481) (3,555) (1,490)
Share of associated
undertaking post tax profit 2,273 15,847 -
Share of joint venture post
tax loss (84) (135) (119)
------------------------ ----- --------- --------- ---------
Profit on ordinary activities
before taxation 12,652 25,832 4,738
Income tax (749) (1,551) (761)
------------------------ ----- --------- --------- ---------
Profit for the period 11,903 24,281 3,977
------------------------ ----- --------- --------- ---------
Attributable to
Equity shareholders of the
parent 11,879 24,283 3,975
Minority interest 24 (2) 2
------------------------ ----- --------- --------- ---------
11,903 24,281 3,977
------------------------ ----- --------- --------- ---------
Basic earnings per share 1 6.34p 12.97p 2.12p
Diluted earnings per share 1 6.15p 12.78p 2.12p
------------------------ ----- --------- --------- ---------
Unaudited Consolidated Balance Sheet
as at 30 April 2007
30 April 31 October 30 April
2007 2006 2006
Note £'000 £'000 £'000
-------------------------- ----- --------- -------- --------
Non-current assets
Investment properties 49,845 56,967 57,359
Property plant and equipment 585 36 43
Investments - associates and joint
ventures 20,361 18,088 2,000
Investments - other 97 1,338 2,027
Goodwill 3,795 4,149 4,486
-------------------------- ----- --------- -------- --------
74,683 80,578 65,915
-------------------------- ----- --------- -------- --------
Current assets
Land, development and trading
properties 86,419 75,693 97,518
Trade and other receivables 44,405 46,828 27,343
Cash and cash equivalents 15,197 8,591 8,289
-------------------------- ----- --------- -------- --------
146,021 131,112 133,150
-------------------------- ----- --------- -------- --------
Total assets 220,704 211,690 199,065
-------------------------- ----- --------- -------- --------
Current liabilities
Trade and other payables (22,078) (22,915) (28,071)
Current tax liabilities (2,567) (875) -
Bank overdrafts and loans (9,465) (25,969) (6,476)
-------------------------- ----- --------- -------- --------
(34,110) (49,759) (34,547)
-------------------------- ----- --------- -------- --------
Non-current liabilities
Bank loans (68,330) (52,997) (77,408)
Other payables (7,000) (7,000) (5,466)
Deferred tax liabilities (230) (1,342) (308)
-------------------------- ----- --------- -------- --------
(75,560) (61,339) (83,182)
-------------------------- ----- --------- -------- --------
Total liabilities (109,670) (111,098) (117,729)
-------------------------- ----- --------- -------- --------
Net assets 111,034 100,592 81,336
-------------------------- ----- --------- -------- --------
Equity
Called up share capital 3,744 3,744 3,744
Share premium account 19,369 19,369 19,369
Capital redemption reserve 849 849 849
Merger reserve 8,386 8,386 8,386
Retained earnings 78,391 67,930 48,639
-------------------------- ----- --------- -------- --------
Equity attributable to equity holders
of the parent 2 110,739 100,278 80,987
-------------------------- ----- --------- -------- --------
Minority interests 295 314 349
-------------------------- ----- --------- -------- --------
Total equity 111,034 100,592 81,336
-------------------------- ----- --------- -------- --------
Unaudited Consolidated Statement of Cash Flows
for the six months ended 30 April 2007
Six months to Year to Six months to
30 April 31 October 30 April
2007 2006 2006
Note £'000 £'000 £'000
------------------------- ------ --------- -------- --------
Cash flows from operating
activities before change
in working capital 3 10,720 8,436 4,712
Decrease/(increase) in
property 1,042 (7,689) (24,217)
inventories
Decrease/(increase) in
receivables 5,095 (23,787) (14,290)
(Decrease)/increase in (10,855) 10,007 31,137
payables
------------------------- ------ --------- -------- --------
Cash generated from operations 6,002 (13,033) (2,658)
Income from investments 37 193 89
Finance costs (2,981) (6,007) (2,412)
Finance revenue 379 355 129
Tax paid (475) (585) (255)
------------------------- ------ --------- -------- --------
Cash flow from operating
activities 2,962 (19,077) (5,107)
------------------------- ------ --------- -------- --------
Cash flow from investing
activities
Purchase of investment (4,012) (6,570) (4,418)
property
Sale of investment property 10,946 11,316 -
Purchase of investments (77) (221) -
Sale of investments 1,197 1,714 991
Sale of tangible fixed assets - - 413
Purchase of tangible fixed (1,117) (5) (187)
assets
------------------------- ------ --------- -------- --------
6,937 6,234 (3,201)
------------------------- ------ --------- -------- --------
Cash flows from financing
activities
Borrowings drawn down 39,660 38,807 31,839
Borrowings repaid (42,806) (25,927) (26,233)
Equity dividends paid (2,059) (2,621) (1,311)
------------------------- ------ --------- -------- --------
(5,205) 10,259 4,295
------------------------- ------ --------- -------- --------
Net increase in cash and cash
equivalents 4,694 (2,584) (4,013)
Cash and cash equivalents at 1
November 2006 8,385 10,969 10,969
------------------------- ------ --------- -------- --------
Cash and cash equivalents at
30 April 2007 13,079 8,385 6,956
------------------------- ------ --------- -------- --------
Notes to the Interim Financial Statements
for the six months ended 30 April 2007
1. Earnings per ordinary share
The calculation of basic earnings per ordinary share is based on a profit of
£11,879,159 (31 October 2006: £24,283,312 and 30 April 2006: £3,974,900) and on
187,218,824 (31 October 2006 and 30 April 2006) ordinary shares, being the
weighted average number of shares in issue during the period.
The calculation of diluted earnings per ordinary share is based on a profit of
£11,879,159 (31 October 2006: £24,283,312 and 30 April 2006: £3,974,900) and on
193,088,035 (31 October 2006: 190,055,289 and 30 April 2006:187,218,824)
ordinary shares, being the weighted average number of shares in issue during the
period adjusted to allow for the issue of shares in relation to all performance
related share awards.
2. Reconciliation of changes in equity
Six months to Year to Six months to
30 April 31 October 30 April
2007 2006 2006
£'000 £'000 £'000
---------------------------- ---------- -------- --------
Opening equity 100,278 78,322 78,322
Profit for the period 11,879 24,283 3,975
Dividends (2,059) (2,621) (1,310)
Share-based payment 641 294 -
---------------------------- ---------- -------- --------
Closing equity 110,739 100,278 80,987
---------------------------- ---------- -------- --------
3. Notes to statement of cash flows
Six months to Year to Six months to
30 April 31 October 30 April
2007 2006 2006
Reconciliation of cash flows from operating £'000 £'000 £'000
activities
---------------------------- ---------- -------- --------
Profit before taxation 12,652 25,832 4,738
Income/gain from fixed asset and
other investments (34) (645) (475)
Finance revenue (379) (386) (135)
Finance costs 1,481 3,555 1,490
Share of associated undertakings
post tax profit (2,273) (15,847) -
Depreciation and impairment charge 247 592 227
Gain on revaluation of investment
properties (852) (4,343) (749)
Profit/(loss) on disposal of
investment properties (206) 118 73
Gain on disposal of subsidiary - (575) (575)
Share of joint venture post tax
loss 84 135 118
---------------------------- ---------- -------- --------
Cash flows from operating
activities before change in
working capital 10,720 8,436 4,712
------------------------------ ------- -------- --------
4. Transition to International Financial Reporting Standards ('IFRS')
Reconciliation of profit after tax reported under UK GAAP to profit after tax
reported under IFRS
Year to Six months to
31 October 30 April
2006 2006
Note £'000 £'000
------------------------------- ------ -------- ---------
Profit after tax for the period under UK GAAP
As reported 4,016 2,789
IFRS adjustments - associates
Revaluation gains on investment properties a) 22,645 -
Deferred tax on gains on investment b) (5,977) -
properties
Fair value adjustments of financial c) 82 -
instruments
Total IFRS adjustments - associates 16,750 -
IFRS adjustments - group
Revaluation gains on investment properties a) 4,343 749
Revaluation gains on investments a) 328 354
Deferred tax on gains on investment b) (841) 193
properties
Negative goodwill d) (315) (108)
Total IFRS adjustments 20,265 1,186
------------------------------- ------ -------- ---------
Profit after tax for the period under IFRS 24,281 3,977
------------------------------- ------ -------- ---------
Reconciliation of equity reported under UK GAAP to equity under IFRS
Year to Six months to
31 October 30 April
2006 2006
Note £'000 £'000
----------------------------- --------- ------- ---------
Equity under UK GAAP as reported 106,965 80,574
IFRS adjustments - associates
Taxation of gains on investment properties b) (5,977) -
Fair value adjustments of financial c) 82 -
instruments
Total IFRS adjustments - associates (5,895) -
IFRS adjustments - group
Taxation of gains on investment properties b) (1,343) (308)
Negative goodwill d) 865 1,070
Total IFRS adjustments (6,373) 762
----------------------------- --------- ------- ---------
Equity under IFRS 100,592 81,336
----------------------------- --------- ------- ---------
The group has taken advantage of the following exemptions available under IFRS 1
when adopting IFRS for the first time:
Business combinations - the provisions of IFRS 3 'Business combinations' have
been applied prospectively from 1 November 2005 and the group has chosen not to
restate business combinations that took place before the transition date
The principal reasons for the adjustments shown in the reconciliations between
UK GAAP and IFRS are set
out below:
a) Under UK GAAP gains on revaluation of investments and investment properties
are included as a revaluation reserve. Under IFRS these gains are taken to the
income statement.
b) Under UK GAAP deferred taxation on the revaluation gains of investment
properties are disclosed in the accounts. Under IFRS the tax on these
revaluation gains are included on the income statement.
c) Under IFRS the fair value of interest rate swaps entered into by our 49%
associate are accounted for through the income statement.
d) Under UK GAAP negative goodwill is carried in the balance sheet. Under IFRS
it is credited to the
income statement.
5. Accounting policies
Basis of preparation
The interim financial information on the group has been prepared in accordance
with International Financial Reporting Standards (IFRS), which comprise
standards and interpretations approved by the International Accounting Standards
Board, and International Accounting Standards and Standing Interpretations
Committee interpretations approved by the International Accounting Standards
Committee that remain in effect.
The comparative figures representing the group's results and cash flows for the
six months ending 30 April 2006 and for the year ending 31 October 2006,
previously presented under UK GAAP, have been restated under IFRS.
The abridged financial information relating to the year ended 31 October 2006 is
based on an extract from the latest financial statements for that period, which
were prepared under UK GAAP and which have been filed with the Registrar of
Companies. The auditors' report on those accounts was unqualified, did not
include references to any matters to which the auditors drew attention by way of
emphasis without qualifying their report(s) and did not contain a statement
under section 237(2)-(3) of the Companies Act 1985. The financial information
summarised above does not constitute statutory accounts within the meaning of
section 240 of the Companies Act 1985.
Transition to IFRS
All AIM listed companies are required to present their consolidated financial
statements for accounting periods beginning on or after 1 January 2007 in
accordance with IFRS. Therefore, the group's consolidated financial statements
for the year ended 31 October 2007 will be presented on this basis with IFRS
comparative figures. These interim financial statements have been prepared on
the basis of the IFRS accounting policies expected to be adopted in the year end
consolidate financial statements.
Basis of consolidation
The consolidated financial information includes financial information in respect
of the company and its subsidiary and associated undertakings. The group's
interest in jointly controlled entities is accounted for using the equity method
of accounting.
Joint ventures
An entity is treated as a joint venture where the group holds a long-term
interest and shares control under a contractual agreement.
In the group financial statements interests in joint ventures are accounted for
using the equity method of accounting. The group Income Statement includes the
group's share of the entity income and expenditure and the group's share of the
assets and the liabilities of the joint venture entity is included in the
group's Balance Sheet.
Where there is a joint arrangement that is not an entity (JANE) as defined by
IAS 31, the group accounts for its share of assets, liabilities and cash flows
according to the underlying joint agreement.
Associates
The group's investment in associates is accounted for under the equity method of
accounting. An associate is an entity in which the group has significant
influence and which is neither a subsidiary or joint venture.
Goodwill
Positive goodwill arising on acquisition of group undertakings is carried as an
intangible asset at cost less accumulated impairment losses.
Negative goodwill is taken to the income statement at initial recognition.
Investment properties
Investment properties are properties owned or leased by the group which are held
for long-term rental income and for capital appreciation. Investment property is
initially recognised at cost and revalued at the balance sheet date to fair
value as determined by professionally qualified external valuers.
Gains or losses arising from changes in the fair value of investment property
are included in other operating income in the income statement for the period in
which they arise.
When the group redevelops an existing investment property for continued future
use as investment property, the property remains an investment property measured
at fair value and is not reclassified. Interest is capitalised from commencement
to the date of practical completion.
Leases
Assets leased out under operating leases are included in investment property,
with rental income recognised on
a straight-line basis over the lease term.
Rentals paid under operating leases are charged to income on a straight-line
basis over the term of the lease.
Depreciation
Depreciation is provided on all tangible fixed assets other than investment
properties at rates calculated to write off the cost less estimated residual
value based on prices prevailing at the date of acquisition of each asset over
its expected useful life.
Trading properties
Properties and land held for sale are included in the balance sheet at the lower
of cost and net realisable value.
Investments
Investments are classified as available-for-sale investments or trading
investments dependent on the purpose for which they were acquired.
Available-for-sale investments, being investments intended to be held for an
indefinite period, are revalued to fair value at the balance sheet date. For
listed investments, fair value is the bid market listed value ruling at the
balance sheet date. Gains or losses arising from changes in fair value are
included in the revaluation reserve except to the extent that losses are
attributable to impairment, in which case they are recognised in the Income
Statement. Upon disposal, accumulated fair value adjustments are included in the
Income Statement.
Trading investments, acquired principally for the purpose of generating a profit
from short-term fluctuations in price, are included in current assets and
revalued to fair value. Realised and unrealised gains or losses arising from
changes in fair value are included in the Income Statement in the period in
which they arise.
Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the
purposes of the cash flow statement, cash and cash equivalents comprise cash in
hand, deposits with banks, net of bank overdrafts.
Revenue recognition
Property revenue consists of gross rental income on an accruals basis, together
with sales of trading and development properties, excluding sales of investment
properties.
Revenue in respect of investment and other income represents investment income,
fees and commissions earned on an accruals basis and profits or losses
recognised on investments held for the short term. Dividends are recognised when
the shareholders' right to receive payment has been established. Interest income
is accrued
on a time basis, by reference to the principal outstanding and the effective
interest rate.
A property is regarded as sold when the significant risks and returns have been
transferred to the buyer.
For conditional exchanges, sales are recognised as the conditions are satisfied.
Income tax
The charge for current taxation is based on the results for the year as adjusted
for items which are non-assessable or disallowed. It is calculated using rates
that have been enacted or substantively enacted by the balance sheet date. Tax
payable upon realisation of revaluation gains recognised in prior periods is
recorded
as a current tax charge with a release of the associated deferred taxation.
Deferred tax is provided using the balance sheet liability method in respect of
temporary differences between the carrying amount of assets and liabilities in
the financial statements and the corresponding tax bases used in computation of
tax profit with the exception of deferred tax on the revaluation surpluses where
the tax basis used is the accounts historical cost.
Deferred tax is provided on all temporary differences. Deferred tax is
determined using tax rates that have been enacted or substantively enacted by
the balance sheet date and are expected to apply when the related deferred tax
asset is realised or the deferred tax liability is settled. It is recognised in
the Income Statement except when it relates to items credited or charged
directly to equity, in which case the deferred tax is also dealt with in equity.
Share-based payments
The cost of granting share awards under the performance share plan and the other
share-based remuneration to directors and other employees is recognised through
the Income Statement. The company uses a discounted share pricing valuation
model and the resulting value is amortised through the Income Statement over the
vesting period of the awards and shares.
Dividends
Dividend distributions to the company's shareholders are recognised as a
liability in the financial statements in the period in which dividends are
declared.
Half-yearly report
The half-yearly report will be posted to shareholders shortly and copies will be
available, free of charge, from the Company Secretary, Terrace Hill Group PLC,
James Sellars House, 144 West George Street, Glasgow G2 2HG.
* * ENDS * *
For further information visit www.terracehill.co.uk or contact:
Philip Leech, Group Managing Director Tel: 01642 243444
Alasdair Robinson, Noble & Company Limited Tel: 0131 225 9677
Isabel Crossley, St Brides Media & Finance Ltd Tel: 020 7242 4477
This information is provided by RNS
The company news service from the London Stock Exchange
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