International Public Partnerships Regulatory News (INPP)

18 Sep 2007 07:02

Babcock&Brown Public Ptnrships Ltd18 September 2007 Babcock & Brown Public Partnerships Limited Interim results announcement for the period 1 January to 30 June 2007 Results Teleconference Details Please note a teleconference for investors and analysts will take place at 9amtoday. Details are:Teleconference number: +44 (0)20 7162 0125Conference ID: 766518A copy of the results presentation will be available on the websitewww.bbpublicpartnerships.com Results Highlights H1 2007Profit before tax £8.1mNet Asset Value as at 30 June 2007(1) £322.4mNet Asset Value per share 107.5pIncrease in Net Asset Value(2) 5.2%Uncommitted cash available for investment(3) £61m Keith Dorrian, Chairman of the Board, said; "I am pleased to report that the Company has performed successfully during thesix months to 30 June 2007. The Company's competitiveness and pipeline ofopportunities has not been affected by the recent turbulence in capital marketsand the market for social infrastructure, whilst showing signs of maturing inthe United Kingdom, remains robust internationally as the historic underinvestment in a number of developed countries is addressed by PPP-styleinitiatives. The Board intends to pursue a policy which will result in theCompany developing a global reputation as a quality provider of PPP financingand it is through this initiative that we anticipate being able to provide ourShareholders with a sustainable superior return supported by a diversifiedinternational portfolio of high quality assets." For further information, please contact: Babcock & Brown Investment Management Limited - 020 7203 7300 Investors - Bianca FrancisMedia - Anthony Kennaway 1 The Net Asset Value ("NAV") referred to above differs from the basis ofrecording net assets as set out in the balance sheet included in the financialstatements. Net Asset Value as shown above is a fair market valuation of theGroup's economic interests (note 4), calculated utilising discounted cash flowmethodology, adjusted for European Private Equity and Venture CapitalAssociation (EVCA) guidelines, a methodology considered appropriate, given thespecial nature of infrastructure investments. Estimated future cash flowsaccruing to each economic interest have been discounted using discount ratesthat reflect the risks associated with that interest. The only current exception to this methodology is with respect to the valuationof the stapled units in RiverCity Motorway project. These have been valued usingthe closing share price at 30 June 2007 ('market value'). The Net Asset Value also includes cash, cash equivalents and assets andliabilities attributable to the Company and intermediate holding companies at 30June 2007. 2 The Net Asset Value per Ordinary Share represents an increase of 5.2 per centcompared to the Net Asset Value at 31 December 2006 of 102.2 pence per shareprepared on the basis referred to in Note 1 above. 3 Uncommitted cash available for investment is the balance of cash raised duringthe IPO, which, as at the date of these accounts, has not yet been committed. 4 The Group's economic interests at 30 June 2007 are set out in the PortfolioInterests section of this Report. Chairman's Statement I am pleased to report that the Company has performed successfully during thesix months to 30 June 2007. The individual economic interests that make up theportfolio have all performed at, or in excess of the Directors' projections. Inaccordance with the Directors' declared intent, the Company has commenced thebroadening of its international exposure with the acquisition of DurhamCourthouse in Canada. The considerable activity seen in 2006 in the market for social infrastructureassets has continued into 2007, with the acquisition of the PFI InfrastructureCompany by I2 and Land Securities acquisition of the AMEC PPP portfolio alongwith a number of other smaller transactions. As described in the InvestmentAdvisor's report, we have investigated the valuations applied in thesetransactions and the implications that these valuations have for our ownportfolio. The Board believes that the range of investments held by the Companyhave become relatively more attractive over the period and this improvedsentiment towards the asset class is reflected in the portfolio valuation. Financial results for the period On a consolidated basis the Group reported a profit before tax of £8.1 millionfor the period and earnings per share of 4.58 pence. The Net Asset Value of theGroup's investments is valued at £322.4 million which represents an increase of5.2% since the last reporting period. Distributions At the time of listing the Directors announced their intention to target aninitial annualised distribution payment of 5.25 pence per share and accordinglythe Directors have approved an interim distribution of 3.35 pence per sharewhich will be paid on 26 October 2007 to shareholders on the register as at 28September 2007. As intended, this distribution will take account of the periodfrom listing to 30 June 2007. Going forward, it is the Company's intention tomaintain the initial yield in real terms. Gearing As at 30 June 2007 the Company had no gearing. Borrowings of the Group relate tothe underlying project vehicles and are non-recourse to Group entities exceptthe project vehicle to which the borrowing applies. All such interest paymentsassociated with the borrowings are hedged and the Board considers that theCompany has minimal exposure to interest rate volatility. Outlook The Board believes that the Company's outlook is positive. The Company and itsInvestment Advisor continue to review a large number of possible investmentopportunities and since the date of these accounts the Company has entered intoan agreement to acquire a 49% stake in BeNEX, a German Local Public PassengerTransportation (LPPT) company in Germany. We believe that, in the longer term,opportunities within the public infrastructure sector will increase in numberand size in most developed countries and the Board believes that the Company iswell placed to take advantage of these opportunities. The Board is pleased toreport that the association with the Investment Advisor has benefited theCompany substantially in that we are able to consider a wide range ofopportunities which would otherwise be very difficult and expensive to identifyand review. The Company's competitiveness and pipeline of opportunities has not beenaffected by the recent turbulence in capital markets and the market for socialinfrastructure, whilst showing signs of maturing in the United Kingdom, remainsrobust internationally as the historic under-investment in a number of developedcountries is addressed by PPP-style initiatives. The Board intends to pursue apolicy which will result in the Company developing a globalreputation as a quality provider of PPP financing and it is through thisinitiative that we anticipate being able to provide our Shareholders with asustainable superior return supported by a diversified international portfolioof high quality assets. The Company is currently reviewing a number of potentialinvestment opportunities around the world both in its own right and throughBabcock & Brown and the Board remains confident that the Company will besubstantially invested by year end. I am therefore satisfied that the Companywill continue to perform in line with expectations. Portfolio InterestsThe Company held economic interests in the following projects at 30 June 2007(1). Project Name % economic Status interest(1) held by the (scheduled completion date) Group Abingdon Police Station 100% OperationalBootle Government Offices 100% OperationalDerbyshire Magistrates Courts 100% OperationalDerbyshire Schools Phase 1 100% OperationalHereford & Worcester Magistrates Courts 100% OperationalNorfolk Police HQ 100% OperationalNorth Wales Police HQ 100% OperationalStrathclyde Police Training Centre 100% OperationalSt Thomas More School 100% OperationalDerbyshire Schools Phase 2 100% OperationalCalderdale Schools 100% OperationalNorthamptonshire Schools 100% Construction (completion due April 2008) (2)Tower Hamlets ls 100% OperationalLong Bay Forensic and Prison Hospitals Project 50% Construction (completion due mid 2008)RiverCity Motorway Project 4.86% Construction (completion due mid 2010)Royal Melbourne ShowgroundsRedevelopment Project 50% OperationalReliance Rail 12.75% Construction (rolling stock completion starting in 2010 through 2013) Interests acquired during the period Durham Courthouse 100% Construction (completion due late 2009) (1) Economic interests reflect an investment in the capital of the underlyingproject limited partnership.(2) Operational services are also being provided at all schools. The Company also owns subordinated debt provided to finance certain projectsdeveloped under the NHS LIFT initiative as set out below. The Company'sinterests in NHS LIFT subordinated debt are estimated to comprise approximately2% by value of the portfolio. Project Name Issuer Status (scheduled completion date)Beckenham Hospital BBG Lift Accommodation Services Construction Limited (completion due January 2009)Garland Road Health BBG Lift Accommodation Services OperationalCentre LimitedAlexandra Avenue BHH Lift Accommodation Services OperationalPrimary Care LimitedCentreMonks Park Health BHH Lift Accommodation Services OperationalCentre LimitedGem Centre Bentley Wolverhampton City and Walsall Lift OperationalBridge Accommodation Services LimitedPhoenix Centre Wolverhampton City and Walsall Lift Operational Accommodation Services Limited Investment Advisor's Report Introduction Babcock & Brown Investment Management Ltd (BBIML) is a wholly owned subsidiaryof Babcock & Brown, a global investment and advisory firm with longstandingcapabilities in structured finance and the creation, syndication and managementof asset and cash flow based investments. Babcock & Brown was founded in 1977and is listed on the Australian Stock Exchange. BBIML acts as Investment Advisorto the Company and as Operator to Babcock & Brown Public Partnerships LP (BBPPLP). BBIML is part of the Babcock & Brown group of companies. Babcock & Brownoperates from 29 offices across Australia, North America, Europe, Asia, UnitedArab Emirates and Africa and has in excess of 1,250 employees worldwide. BBIMLwas incorporated in England and Wales on 14 September 2000 and is authorised andregulated by the Financial Services Authority. Portfolio Investment Performance Each of the underlying businesses within the Portfolio performed at least inline with expectations during the period, ensuring the Company is in a positionto meet its stated distribution target. Construction was completed at theGarland Road Health Centre as well as at the remaining sites on the TowerHamlets Schools project and the Portfolio remains balanced with approximately25% of assets in their construction phase and the remaining 75% already inoperation. During the period the first investment was made in a Canadian PPP project. Theproject comprises a 100% economic interest in Durham Courthouse and involves thedesign, build and subsequent operation and maintenance of the 33 courtroompublic courthouse for a period of 30 years. The acquisition supports theCompany's policy of seeking investment in international markets and offersprojected returns that meet or exceed the Company's stated investment criteria.Construction commenced in May 2007 and is anticipated to take approximatelythree years. A number of operational initiatives in order to enhance the long-termperformance of the Portfolio are being examined. The fact that the Portfolioconsists substantially of 100% interests in individual projects providessignificant influence over the decisions made at the underlying asset level andshould allow realisation of greater returns from the portfolio over time.Initiatives completed during the period included the re-pricing of severalfacilities management contracts, a pooling of the operational project insurancesresulting in significant premium reductions, and the ability to bring to market(having completed construction works) surplus land at Tower Hamlets Schoolswhich should be realised at a premium to our valuation. Limited performance oravailability deductions were made against the projects, and those levied werepassed through to the facilities management providers. In addition, six sites atthe largest project in the portfolio, Northamptonshire Schools, were completedduring the period ensuring that the project remains on schedule for finalcompletion in 2008. On 15 August 2007, the Company entered into an agreement to acquire an economicinterest in 49% of BeNEX, a company holding interests in German local publicpassenger transportation companies (LPPTs). BeNEX is a subsidiary of HamburgerHochbahn AG, the second largest LPPT company in Germany and comprises all theexisting expansion activities in the LPPT sector outside the metropolitan regionof Hamburg. The transaction represents the Company's first investment in theGerman market and is expected to combine Hamburger Hochbahn's experience andstrong track record in the German LPPT market and BBPP's experience ininvestment in public private partnerships, creating a powerful partnership inthe recently deregulated German transport market. BBPP, through BeNEX, hopes toparticipate actively in future local bus and rail tenders and, in doing so, mayalso examine the potential acquisition of other LPPT businesses across Germany. Valuation The Administrator (Heritage International Fund Managers Limited), calculates theNet Asset Value of an Ordinary Share with the assistance of BBIML, who producefair market valuations of the Group's investments on a six-monthly basis as at30 June and 31 December. The valuation methodology used is based on discountedcash flow methodology, with the exception of the Company's investment in theAustralian Stock Exchange listed RiverCity Motorway project which is valued atmark to market. The discount rates used for valuing each economic interest arebased on an analysis of the appropriate risk premium that applies to eachproject in excess of the risk free rate. The risk premium applied by the Directors of the Company in valuing theCompany's economic interest is based on the advice of the Investment Advisor,market knowledge and information in the public domain from comparabletransactions. Construction completion at Garland Road Health Centre and Tower Hamlets Schools,as well as significant construction progress at our largest project,Northamptonshire Schools, and the general maturing of the overall portfolio hascaused us to lower the discount rate applied to the portfolio slightly. We willcontinue to monitor the discount rates applied to the portfolio to ensure wecontinue to report fair market valuations. The discount rates used for valuing the Group's economic interests as at 30 June2007 range from 7.0% to 9.4% and the weighted average discount rate is 7.7%. Asat 31 December 2006 the weighted average discount rate utilised for valuationpurposes was 8.0%. The Company's portfolio was valued at £322.4 million at 30 June 2007, up from£306.6 million at 31 December 2006. Net Asset Value The Net Asset Value per Ordinary Share, as defined on page 2, as at 30 June 2007was 107.5 pence. This represents an increase of 5.2% compared to the Net AssetValue at 31 December 2006 of 102.2 pence per Ordinary Share. Gearing As at 30 June 2007 the Company had no gearing. Borrowings of the Group relate tothe underlying project vehicles and are non-recourse to Group entities exceptthe project vehicle to which the borrowing applies. Currently each of theoperating projects are meeting their debt service obligations. In addition, thedebt in the Company's underlying investments is currently fully hedged inrespect of interest rate risk, therefore minimising any exposure to fluctuationsin underlying interest rates. Outlook The acquisition of Durham Courthouse and the investment in BeNEX demonstratesthe ability of the Investment Advisor to source attractive assets for theCompany internationally and is a further demonstration of the benefits of therelationship of the Investment Advisor with the wider Babcock & Brown group,which provides substantial resources in the origination and execution ofinvestment opportunities for the Company. Through Babcock & Brown we arereviewing a number of opportunities across the globe. We remain confident thatthese opportunities will offer attractive value for shareholders and lookforward to updating you on each of these projects at the appropriate time. We believe this solid pipeline of investment opportunities, together with theongoing performance of the existing assets, will provide continued share priceperformance for the Company's investors. Babcock & Brown Investment Management Limited18 September 2007 Independent Review Report to the members ofBabcock & Brown Public Partnerships Limited Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprise the consolidated incomestatement, the consolidated statement of changes in equity, the consolidatedbalance sheet, the consolidated cash flow statement and related notes 1 to 15.We have read the other information contained in the half yearly financial reportand considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which requires that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) 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 thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Deloitte & Touche LLPChartered AccountantsGuernsey, Channel Islands18 September 2007 Consolidated Income Statement (unaudited)Six months ended 30 June 2007 Notes Six months ended 30 June 2007 £'000s Continuing operationsRevenue 3 59,482Cost of sales (56,472) Gross profit 3,010 Investment income 20,642Other gains and losses 541Share of results from associates 411Other operating income 651 Total other income 22,245 Finance costs 4 (10,925)Operating expenses 4 (2,698)Administrative expenses 4 (3,501) Total other expenses 4 (17,124) Profit before tax 8,131Tax 5 5,615 Profit for the period from continuingoperations 13,746 Attributable to:Equity holders of the parent 13,746 PenceEarnings per shareFrom continuing operationsBasic 8 4.58 =====Diluted 8 4.58 ===== Consolidated Statement of Changes in Equity (unaudited)Six months ended 30 June 2007 Share capital Share premium Hedging and Revaluation Other Retained Total account translation reserves distributable earnings reserves reserves £'000s £'000s £'000s £'000s £'000s £'000s £'000sBalance at31 December 2006 30 293,601 1,549 572 - 1,616 297,368 Net increase in fairvalue of hedging derivatives - - 15,145 - - - 15,145Net increase in fairvalue of hedgingderivatives from associates - - 1,043 - - - 1,043Exchange differenceon translation of foreign operations - - 388 - - - 388Net increase in fairvalue of financial assets heldas availablefor sale - - - 357 - - 357 -------- -------- -------- -------- -------- -------- -------Net income recogniseddirectly in equity - - 16,576 357 - - 16,933Net profitfor the period - - - - - 13,746 13,746 -------- -------- -------- -------- -------- -------- -------Total recognisedincome and expense - - 16,576 357 - 13,746 30,679Issue fees applied toshare premium account - (95) - - - - (95)Transfer of sharepremium account - (293,506) - - 293,506 - - ======== ======== ======== ======== ========= ======== =======Balance 30 - 18,125 929 293,506 15,362 327,952at 30 June 2007 ======== ======== ======== ======== ========= ======== ======= Consolidated Balance Sheet (unaudited)As at 30 June 2007 (continued) Notes 30 June 31 December 2007 2006 £'000s £'000sNon-current assetsIntangible assets 10 119,350 90,173Property, plant andequipment 9,535 9,742Interests in associates 9,244 7,681Available for saleinvestments 13,950 13,153Derivative financialinstruments 21,015 -Financial asset loansand receivables 11 414,642 232,222 Total non-current assets 587,736 352,971 Current assetsFinancial asset loansand receivables 11 27,306 22,946Trade and otherreceivables 11,475 6,987Current tax asset 452 -Cash and cashequivalents 272,338 188,107 Total current assets 311,571 218,040 Total assets 899,307 571,011 Current liabilitiesTrade and other payables 17,090 22,181Current tax liabilities - 3Bank loans 6,241 4,764 Total currentliabilities 23,331 26,948 Non-current liabilitiesBank loans 452,686 153,434Derivative financialinstruments 1,034 7,198Deferred tax liabilities 93,747 85,506Long-term provisions 557 557 Total non-currentliabilities 548,024 246,695 Total liabilities 571,355 273,643 Net assets 327,952 297,368 Note 30 June 2007 31 December 2006 £'000s £'000sEquityShare capital 30 30Share premium account - 293,601Revaluation reserves 929 572Hedging and translationreserves 18,125 1,549Other distributablereserves 12 293,506 -Retained earnings 15,362 1,616 ------- -------Equity attributable toequity holders of theparent 327,952 297,368 ------- -------Total equity 327,952 297,368 ======= ======= The half yearly financial report was approved by the Board of Directors on 18September 2007. Keith Dorrian Rupert DoreyChairman Director18 September 2007 18 September 2007 Consolidated Cash Flow Statement (unaudited)Six months ended 30 June 2007 Notes Six months ended 30 June 2007 £'000s Net cash used in operating activities 13 (5) Investing ActivitiesInterest received 4,173Acquisition of subsidiaries (net of cash acquired) 9 472Investment in financial asset loans & receivables (49,888) ------ Net cash used in investing activities (45,243) ------ Financing ActivitiesFlotation expenses paid (95)Proceeds from borrowings 129,574 ------Net cash provided by financing activities 129,479 ------ Net increase in cash and cash equivalents 84,231Cash and cash equivalents at beginning of period 188,107 ------Cash and cash equivalents at end of period 272,338 ====== Cash and cash equivalents of £272.3 million at 30 June 2007 include £149 millionheld by non-recourse PFI project entities (£74.8 million at 31 December 2006). Notes to the Consolidated Accounts (unaudited)Six months ended 30 June 2007 1. General information Babcock & Brown Public Partnerships Limited is a closed ended investment companyincorporated in Guernsey under The Companies (Guernsey) Law, 1994. The addressof the registered office is given on page 1. The nature of the Group'soperations and its principal activities are set out in the Investment Advisor'sReport on pages 8 to 10. These financial statements are presented in pounds sterling as the currency ofthe primary economic environment in which the Group operates and represents thefunctional currency of the Group. The financial information for the period ended 31 December 2006 is derived fromthe financial statements delivered to the UK Listing Authority. The Auditorsreported on those accounts; their report was unqualified and did not contain astatement under section 65(3) of The Companies (Guernsey) Law, 1994. 2. Accounting policies In accordance with the Listing Rules of the Financial Services Authority, thehalf yearly financial report has been prepared on the basis of the accountingpolicies set out in the Group's Annual Report and Financial Statements for theperiod ended 31 December 2006. 3. Business and geographical segments Geographical segmentsFor management purposes, the Group is currently organised into threegeographical segments in Europe, Asia Pacific and North America. Thesegeographical segments are the basis on which the Group reports its primarysegment information. Segment information about these businesses is presented below. Six months ended 30 June 2007 Europe Asia Pacific North America Total £'000s £'000s £'000s £'000s Revenue 48,400 - 11,082 59,482 ====== ====== ====== ====== No inter-segment sales were made for the six months ended 30 June 2007. Notes to the Consolidated Accounts (unaudited)Six months ended 30 June 2007 (continued) Business and geographical segments (continued) Results Europe Asia Pacific North America Six months ended 30 June 2007 30 June 2007 30 June 2007 30 June 2007 £'000s £'000s £'000s £'000sShare ofassociatesearnings - 411 - 411Segment result 7,101 998 (379) 7,720 ----- ----- ----- -----Profit before tax 7,101 1,409 (379) 8,131Taxation 5,615 ------Profit after tax 13,746 ====== Balance Sheet Europe Asia Pacific North America 30 June 2007 30 June 2007 30 June 2007 30 June 2007 £'000s £'000s £'000s £'000s AssetsSegment assets 770,363 1,107 104,643 876,113Interests inassociates - 9,244 - 9,244Available for saleinvestments - 13,950 - 13,950 ----- ----- ----- -----Consolidated totalassets 770,363 24,301 104,643 899,307 ======= ====== ======= ======= LiabilitiesSegmentliabilities 466,343 - 105,012 571,355 ----- ----- ----- -----Consolidated totalliabilities 466,343 - 105,012 571,355 ----- ----- ----- -----Net assets 304,020 24,301 (369) 327,952 ======= ====== ======= ======= Depreciation of £207,000 and amortisation of £3,360,000 relates to the Europesegment. 4. Profit before tax Profit before tax for the period has been arrived at after charging/(crediting): Six months ended 30 June 2007 £'000s Asset management fees 1,683Other operating expenses 1,015 ------Operating expenses 2,698 Audit & accounting 253Amortisation of intangible assets 2,761Legal fees 186Bank service charges 45Other administrative expenses 256 ------Administrative expenses 3,501 ------ Total finance costs 10,925 ------Total other expenses 17,124 ====== 5. Tax Income tax for the six month period includes a current period tax charge of £0.4million, a prior year deferred tax charge of £0.2 million off-set by a £6.2million adjustment due to the change in the UK corporate tax rate from 30% to28%. The current period charge of £0.4 million is a charge at 5% representingthe best estimate of the average annual effective income tax rate expected forthe full year, applied to the pre-tax income of the six month period. 6. Seasonality of interim operations The nature of operations is such that there is unlikely to be any factorconsistently impacting the weighting of operating results between the first andsecond six months of the calendar year. 7. Distributions The Board approved the proposed interim distribution of 3.35 pence per share on18 September 2007. The distribution will be paid to shareholders on the registeras at 28 September 2007 and will be paid on 26 October 2007. The total amount of£10.050 million will be paid and this will be for the period from listing to 30June 2007. 8. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data:Earnings Six months ended 30 June 2007 £'000sEarnings for the purposes of basic and dilutedearnings per share being net profit attributable to 13,746equity holders of the parent ------ NumberNumber of sharesWeighted average number of Ordinary Shares for the 300,000,000purposes of basic and diluted earnings per share =========== The weighted average number of shares is based on the period from 1 January 2007to 30 June 2007. The denominator for the purposes of calculating both basic and diluted earningsper share are the same as the Company had not issued any share options or otherinstruments that would cause dilution. Six months ended 30 June 2007 pence/share Basic 4.58 =====Diluted 4.58 ===== 9. Acquisition of subsidiaries On 31 January 2007, the Group acquired 100% of the issued share capital ofBabcock & Brown (PPP) Limited for cash consideration of £36.6 million includingthe costs of acquisition of £0.2 million. Babcock & Brown (PPP) Limited is the parent company of the entities holding thePFI concessions of Calderdale Schools, Derbyshire Schools Phase II andNorthamptonshire Schools that form part of the consolidated Group. Thistransaction has been accounted for by the purchase method of accounting. Total £'000sAssetsIntangible assets 29,932Property, plant and equipment 10Financial assets loans and receivables 148,814Trade and other receivables 800Cash and cash equivalents 37,061Derivative financial instruments 6,089 -------Total Assets acquired 222,706 ------- 9. Acquisition of subsidiaries (continued) Total £'000sLiabilitiesTrade and other payables 8,490Bank Loans 170,559Tax liabilities 90Deferred tax liabilities 6,978 -------Total Liabilities acquired 186,117 -------Net Book Value 36,589 ======Total consideration 36,589 ======Net cash inflow on acquisition Cash (36,589)Cash acquired at acquisition 37,061 ======Net cash inflow 472 ====== The acquiree's identified assets, liabilities and contingent liabilities thatmeet the conditions for recognition under IFRS 3 are recognised at fair value atthe acquisition date. The excess amount arising on acquisition is recognised asan intangible asset and initially carried at fair value at acquisition. The fair values used have been determined on a provisional basis pending thefinalisation of the fair value of Intangible assets and financial asset loansand receivables. The intangible asset arising on acquisition is attributable to the right tofuture profits on the services element of the related concessions acquired. All amounts shown above are at book and fair value. Babcock & Brown (PPP) Limited contributed £36.7 million revenue and £1.2 millionprofit before tax of the Group for the period between the date of acquisitionand 30 June 2007. 10. Intangible assets The increase in intangible assets from £90.2 million at 31 December 2006 to£119.4 million at 30 June 2007 reflects intangible assets acquired as part ofthe Babcock & Brown (PPP) Limited acquisition of £29.9 million, an additionalintangible asset recognised in Tower Hamlets Holding Limited of £2.0 millionoffset by amortisation for the period to 30 June 2007 of £2.7 million. 11. Financial asset loans and receivables The increase in the total financial asset loans and receivables balance from£255.2 million at 31 December 2006 to £441.9 million at 30 June 2007 reflectsthe acquisition of £148.8 million financial asset loans and receivables inBabcock & Brown (PPP) Limited and construction costs of £43.8 million on theNorthamptonshire Schools and Durham Courthouse projects, off-set by principlerepayments of £5.9 million. 12. Distribution reserve On 19 January 2007 the Company applied to the Royal Court of Guernsey, followingthe placing of the Ordinary Shares, to reduce its share premium account in orderto provide a distributable reserve to repurchase its shares if and when it isconsidered beneficial to do so by the Directors. As such, the share premiumaccount, after deducting all preliminary costs, was reduced by £293,506 and adistributable reserve created for this amount. 13. Notes to the cash flow statement Six months ended 30 June 2007 £'000s Profit for the period after taxation 13,746Adjusted for: Investment revenue recognised in profit and loss (4,173)Share of profit from associates (411)Finance costs 10,925Depreciation of plant property and equipment 207Amortisation of intangible assets 2,761Dividends received from associates 314Other gains (18)Income tax benefit (5,615) ------Operating cash flows before movements in working capital 17,736 Increase in receivables (3,715)Decrease in payables (3,131) ------Cash generated by operations 10,890 Interest paid (10,302)Income taxes paid (593) ------Net cash outflow from operating activities (5) ====== Cash and cash equivalents held by the Group and short-term bank deposits with anoriginal maturity of three months or less. The carrying value of these assetsapproximates their fair value. 14. Contingent liabilities The Directors have not identified any contingent liabilities at the date of thisreport. 15. Events after the balance sheet date On 15 August 2007, the Company entered into an agreement to acquire a 49% stakein the newly established Hochbahn AG subsidiary named BeNEX GmbH. Hochbahn AG isthe second largest Local Public Passenger Transportation (LPPT) company inGermany and placed all its existing expansion activities in the LPPT sectoroutside the metropolitan region of Hamburg into BeNEX. BeNEX has shares in fourrail transportation companies and in four bus transportation companies. This information is provided by RNS The company news service from the London Stock Exchange