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Marylebone Warwick Balfour Grp PLC22 September 2005 FOR IMMEDIATE RELEASE22nd September 2005 MARYLEBONE WARWICK BALFOUR GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30th JUNE 2005 Contact:Marylebone Warwick Balfour Group Plc Tel: 020 7706 2121Richard Balfour-Lynn, Chief ExecutiveAndrew Blurton, Joint Finance Director Baron Phillips Associates Tel: 020 7920 3161Baron Phillips HIGHLIGHTS---------- GROUP •Equity Shareholders' Funds rise to 145p per share - an increase of 46% over the year •Equity Shareholders' Funds amount to £160m, up from £109m •Group net assets now stand at £211m - of which £89m is accounted for by enlarged Malmaison group •Gross property assets revalued to £583m following sales of over £150m and acquisitions of £65m (2004: £594m) £€44.3m property revaluation surplus attributable to shareholders for the second half of the year, equivalent to 40p a share. •Further reduction in net debt to £377m from £468m following strong operational cash flow and proceeds from property sales •Gearing nearly halved to 179% from 311% "We believe Shareholders are beginning to reap the rewards of the significanteffort across the Group and the solid foundations that have been laid in ourthree main business divisions. The potential for growth in these businesses isfurther underpinned by their excellent management teams, whose commitment tocreating strong, well-managed and well-funded companies gives the Board hugeconfidence in the future," Eric Sanderson, Chairman MALMAISON AND HOTEL DU VIN • £64.9m acquisition of Hotel du Vin in October 2004 which brought a further seven hotels to the Group, taking the current operating total to 15 • Acquisition has already delivered £1.3m of savings in only nine months • New Malmaison opened in Belfast in December 2004 and new HdV in Henley in March 2005 • Malmaison turnover up 15% on like-for-like basis to £37.6m rising to £38.7m including Belfast • Malmaison, and HdV since acquisition, produced combined EBITDA of £16.2m during the year, up 38% over the comparable period for the previous year • Malmaison average room rate broke through the £100 level for the whole year and average occupancy for the year increased to 78% • HdV saw room rate rise to £110 for the whole year and average occupancy for the year rose to 82% • Since year end £105m of new funding secured to expand group to 25 hotels. RBS takes 17.5% equity stake in Malmaison and HdV, providing £30m of equity finance • Three new Malmaison hotels in pipeline: Oxford, Liverpool and Reading; sites being sought in London and Dublin • Further HdV planned for Cambridge "With substantial funding in place we have the resource to take the group to thenext stage in its development and we are confident that during the next fiveyears Malmaison and HdV will become a 25-strong hotel group, cementing itsposition as the UK's leading lifestyle boutique hotel business," Robert Cook,Chief Executive, Malmaison. MWB BUSINESS EXCHANGE • Four-pronged business strategy: o Four-star MWB Business Exchange o Mid-market City Executive Centres o Corporate Property Partnerships - providing landlords and occupiers with property solutions o Meeting and Conference Rooms division - marketing existing serviced office facilities to external users • Operating losses before tax cut to £1.4m from £4.6m • £11.0m of property write-backs result in £9.0m pre-tax profit contribution from MWB Business Exchange • Like-for-like licence fee income steady at £40.6m while service income rose 17% to £13.8m. Other property related operating income totalled £5.4m • Strong increases in occupancy within core business - up from 65% at June 2004 to 80% at this year end, with further improvements since year end • Revenue per Available Workstation (REVPAW) up 25% to £6,781 • £13m net proceeds from sale of three centres repaid more than half of division's bank debt, reducing it to £8.8m • Signed first major OMA on 30,000 sq. ft. in Citigroup's Canary Wharf headquarters in November 2004 • Focusing on Small to Medium Sized companies (SMEs) and away from larger occupiers, protecting business from large move-outs • 53% of 2005/2006 budgeted licence fee income signed by 30th June 2005 • Acquisition of City Executive Centres provided further 12 centres and mid-market brand • Considering an AIM listing for the company as a further way of enabling MWB Business Exchange to raise finance as an independent company "We believe the market for flexible property solutions is maturing and thereforethat demand will increase for the services provided by MWB Business Exchange. Asa result, we look forward to the future with confidence," John Spencer, ChiefExecutive, MWB Business Exchange. LIBERTY • Turnover increased by 10% to £44.8m - bucking the downturn in consumer spending experienced by other major retailers • Positive operating EBITDA of £0.2m against a loss of £1.0m last year • Following property profits of £2.3m, pre-tax losses more than halved to £2.3m, down from £6.3m last year • Liberty now trading at break even at operating level • £66.5m of property sales entirely repaid debt - reducing annualised interest charges by £4m and rental income by a similar amount • Launch of "Liberty of London" brand following highly successful expansion of design studio • "Liberty of London" label spearheading transformation of Liberty into international luxury goods brand • Retailing activities to be focused into Tudor building on Great Marlborough Street and vacating existing Regent Street space "We believe the business has been transformed over the past 12 months and thepotential for future growth is substantial. Liberty is re-establishing itself asthe destination retail centre for cutting edge design and style as well as a newplayer in the international luxury goods market," Iain Renwick, Chief Executive,Liberty. CHAIRMAN'S STATEMENT-------------------- In my first statement to you as Chairman, I am pleased to report an improvedperformance over the year for the whole Group while at the same time statingthat prospects across our three areas of operation look far more promising. There has been something of a sea change in the Group's performance in the yearto 30th June 2005. Shareholders will be aware that the main thrust of ourbusiness, and the way in which value is being delivered, is through assetgrowth. It is, therefore, very pleasing to report a significant strengthening ofthe Group's balance sheet, underpinned by a near 50% increase in EquityShareholders' Funds to 145p a share from 99p last year. In addition to this,shareholders should be aware that these asset values do not include theincremental increase which is attributable to the underlying values of thebusinesses that we operate. The main contributors to the stronger Group balance sheet have been thelifestyle boutique hotel group Malmaison, which had an excellent year, and therepayment of debt arising from the sale of The Howard Hotel, and properties byour West End emporium, Liberty. At Malmaison there has been a dramatic expansion through its £64.9m acquisitionof the award winning Hotel du Vin group. This growth has been furtherunderpinned with two new hotel openings: a Malmaison in Belfast and a Hotel duVin in Henley. As a result the total number of operating hotels has nearlydoubled to 15 over the course of the year. Liberty has performed much better this year and bucked all retail trends byincreasing sales by 10% from £40.9m to £44.8m, at a time when most store groupsare reporting substantially lower sales. This has not yet translated intomaterially improved operating profitability as we continue to invest in itsfuture. Liberty's financial strength was also greatly improved by £66.5m ofproperty sales in April 2005, that left it totally debt free. In addition to Malmaison and Hotel du Vin we own three five-star hotelinvestments which we developed: The Marriott International at Park Lane; theMarriott International at West India Quay; and the Radisson SAS in ArgyleStreet, Glasgow. Each of these continued to make progress over the year,increasing both average occupancy levels and room rates. At the Park Lane Marriott, average occupancy levels are settling at 82% for theyear although June 2005 was up to 90%. Room rates have also risen from anaverage of £175 in 2004 to £190 in 2005. I am pleased to report that ourRadisson SAS hotel in Glasgow has been upgraded to five-star status during theyear and is becoming well established in the local conference and meetingsmarket. It has also seen an increase in occupancy from 68% to 70%, while roomrates have advanced from £67 in 2004 to £80 in 2005. Our West India Quay Marriott is making good progress and has improved averageoccupancy levels to 66% from 40% in 2004, although when we reported a year agothe hotel had only been open two months. Room rates have remained at £150 forthe year and during June 2005 we saw that rise to £158. Occupancy and room ratesduring weekdays are significantly higher than this but weekend business tends tobe lower. We are confident this spectacular hotel is becoming a key landmark inthe Canary Wharf area. In November 2004, we announced the sale of The Howard Hotel for £75m, a healthysurplus over the 30th June 2004 valuation of £69m. The Howard is a good exampleof MWB's philosophy of acquiring assets with potential for improvement andthereafter creating an uplift in value through hands on management which werealise for the benefit of shareholders. At MWB Business Exchange, our serviced office subsidiary, there has also been aturnaround: occupancy levels increased by almost 15% over the year from 65% to80% at the end of June 2005; there was a reduction in bank debt through £13.5mof property sales; and a strong management team has now been created. Thesefactors have all combined to create a strong cash flow and reduce pre-tax lossesfrom core operations to £1.4m, against pre-tax losses of £4.6m last year. The acquisition of City Executive Centres in January of this year increased thenumber of serviced offices centres that we own or manage to 48, bringing with itnot only an additional 12 operating centres but also a new mid-market servicedoffice brand aimed at a sector not previously targeted by MWB Business Exchange.Consequently, our overall offer has been strengthened and will benefit from itswider market offering. Turning to the Group's results, a revaluation of our property assets produced agross value of £583m against £594m last year, despite total sales of over £150mand acquisitions of £65m. The valuation at the June 2005 year end shows asurplus attributable to shareholders since our December 2004 revaluation of£44.3m, or 40p a share, which demonstrates the continuing recovery in the valuesof our assets. Property sales showed a healthy profit over the previous revaluation and made amajor contribution towards the reduction in overall net debt from £468m at 30thJune 2004 to £377m at this year end. As a result, gearing has nearly halved from311% last year to 179% at 30th June 2005. Group net assets at 30th June 2005 amounted to £211m, of which £89m is accountedfor by the enlarged Malmaison group. The principal components of the remainderare Liberty at £50m and our hotel investments - Park Lane, West India Quay andArgyle Street, Glasgow - totalling another £78m. Central debt, principally ourlisted Loan Stock less cash received from our new Loan Stock issue, amounted to£47m at 30th June 2005, a similar level to last year. After minorities of £51m,Equity Shareholders' Funds amount to £160m, being 145p a share, a near 50%uplift over the previous year. Excluding profits arising from property transactions, we achieved positiveEBITDA of £24.1m for the 12 months to 30th June 2005, compared to £15.9m lasttime. Within this year's EBITDA there was a strong contribution of £16.2m fromthe Malmaison and HdV group, up from £8.6m for Malmaison only in 2004, while MWBBusiness Exchange and Liberty also contributed improved EBITDA before propertyprofits of £1.1m and £0.2m respectively. We are, therefore, particularly pleasedwith the results that have been achieved as the increase has been generated fromour core business operations. Additionally, both years' results have benefited from property profits arisingfrom the sales of West India Quay apartments, the disposal of investmentproperties and the write-back of MWB Business Exchange property provisions madein earlier years. These additional property profits totalled £22.6m this yearand £33.8m last year. Therefore, as a result of these reduced property profits,the Group is reporting pre-tax losses of £9.8m compared to losses of £3.3m lastyear. Shortly before the year end we issued £30m of new 9.75% Unsecured Loan Stock2009/12 which provided the majority of the funds to redeem the Group's £34.1m ofUnsecured Loan Stock 2005/6, which carried an effective coupon of 15% per annum.This issue of new Unsecured Loan Stock has given the Group increased flexibilityby providing longer term funds and at a lower coupon. Since the year end we secured £105m of new funding for expansion of theMalmaison and HdV group, of which £30m was in the form of new equity provided byThe Royal Bank of Scotland, giving RBS a 17.5% shareholding in the Malmaisongroup. The remaining £75m was provided by Bank of Scotland, a long termfinancier of Malmaison, in conjunction with RBS. This will enable Malmaison toachieve its anticipated expansion to 25 hotels during the next five years. I would like to take the opportunity of thanking Brian Myerson for hiscontribution to the Group as Chairman over the past three years. Brian retiredas Chairman in April 2005 and remains a Non-Executive Director of MWB. At thesame time two long standing and founder Executive Directors, John Harrison andJoe Shashou, also stepped down from the Board. They will continue to be involvedin the management of the Group and its subsidiaries and I would like to expressmy sincere thanks to them for their major contribution to MWB's development overthe past decade. Additionally at this year's Annual General Meeting, Michael Robotham, having nowpassed his 72nd birthday, will not be seeking re-election. Michael has been aNon-Executive Director for 21 years and we would like to thank him for hissupport over that period. We also welcome Robert Burrow to the Board; I am surethat his legal and commercial experience will be very valuable to the Group. Shareholders will be heartened by the dramatically improved underlyingperformance of the Group, which puts us on course to achieve our objective ofreturning cash or cash equivalents to shareholders by the end of 2007. It isalso clear there is renewed confidence in the investment community that thisobjective is within our grasp, and shareholders will have seen the significantrise in MWB's share price over the past year. Since we reported our 2004 yearend results last September, the Group's share price has risen by 162% from 53pto 139p per share at the date of this report, giving a market capitalisationof £152m for the Group as a whole. We believe shareholders are beginning to reap the rewards of the significanteffort across the Group and the solid foundations that have been laid in ourthree main business divisions. The potential for growth in these businesses isfurther underpinned by their excellent management teams, whose commitment tocreating strong, well-managed and well-funded companies gives the Board hugeconfidence in the future. Eric SandersonChairman22nd September 2005 MALMAISON AND HOTEL DU VIN CHIEF EXECUTIVE'S REPORT--------------------------------------------------- The past 12 months have seen a rapid expansion of the Malmaison group. While thebusiness has grown in size it has also grown enormously in stature and isrecognised as the UK's leading lifestyle boutique hotel group. It is pleasing to report that during this period of growth, standards of serviceand the overall Malmaison offer have more than kept pace with the expansion.This has been recognised by our ever increasing customer base and is reflectedin higher occupancy levels and improved room rates. The highlight of the year, without a doubt, was our acquisition of the Hotel duVin chain in October 2004 for £64.9m. HdV complements the existing Malmaisonbusiness while at the same time providing an offer aimed at a slightly differentcustomer base. At the time of acquisition, which added a further six operating hotels to thebusiness, we believed considerable savings would be made by bringing the twobusinesses under one management team. Our objective was to deliver costreductions of £1.8m annually within 18 months through joint sales, marketing andprocurement programmes. I am delighted to report that by the end of June 2005,only nine months after the HdV acquisition, we have already achieved savings of£1.3m, underlining our confidence that substantial cost reductions can bedelivered by bringing both operations within one organisation. Today there are a total of 15 operating Malmaison and HdV hotels. During theyear we opened a new Malmaison hotel in Belfast (December 2004) and a new HdV inHenley (March 2005). Both hotels have been well received and are operating inline with our expectations. A feature of both Malmaison and HdV is that both businesses consistently deliverfood and beverage income significantly higher than is typical in the hospitalityindustry. Malmaison's food and beverage income represents 35% of its totalincome while HdV generates 65% of its income from food and beverage. These bothcompare favourably with an industry norm of 25% for hotel restaurants and bars,demonstrating the strong brand value of both Malmaison and HdV. I am pleased to report that total Malmaison turnover during the period increasedby 15% on a like-for-like basis from £32.6m to £37.6m. This has been augmentedby the opening of Belfast taking the total for the year to 30th June 2005 to£38.7m, a 19% advance on the previous year. Like-for-like EBITDA increased from£8.6m to £11.9m, representing an impressive 38% uplift. Belfast added a further£0.1m of EBITDA increasing the total for the year to £12.0m, an overall increaseof 40%. Malmaison also achieved another milestone in that its average room rate for theyear broke through the £100 level for the first time at £101 from £95 last year,while average occupancy for the year increased from 76% to 78%. At the same time, HdV delivered a 3% increase in turnover since our acquisitionon a like-for-like basis in comparison with the previous year. After theincreased turnover arising from our new hotel at Henley, turnover increased to£18.4m for the nine month period. During the same period, EBITDA of HdVincreased by 34% on a like-for-like basis. Total EBITDA for HdV sinceacquisition rose to £4.2m, following the rationalisation programme I referred toearlier. HdV continued its strong room rate and occupancy performance throughoutthe whole year, producing an average room rate of £110, up from £106 last yearand occupancy up from 81% to 82%. After depreciation of £5.0m, which is a non-cash item, and finance costs of£10.7m, the combined business of Malmaison and HdV produced pre-tax profits of£0.3m for the year against a loss last year by Malmaison alone of £2.8m. There is little doubt that the growth we have achieved has come from themanagement team's efforts in revitalising the Malmaison brand by investing inboth product and people. We have done much to improve the look and feel ofMalmaison rooms by introducing better linen and bedding, as well as providingcomplimentary broadband access and flat screen televisions. Great strides havebeen made in enhancing our food and beverage offer with the introduction ofindividual sommeliers and focusing on the re-branding of each restaurant orbrasserie so they become local destination restaurants. We have also refreshed our e-media marketing activities with an improved websiteenabling more efficient on-line booking. This has resulted in a 40% growth inon-line bookings, all of which contributes to an improved operating performance. Additionally, we have established a central reservations operation in Birminghamgiving us greater control over this important aspect of our business as well asexerting more control over pricing. By running our own reservations searchengine we have cut transaction costs and, at the same time, improvedprofitability. An important aspect of the enlarged group is that it provides greater and widercareer opportunities for our people. At Malmaison and HdV we take great pride ineveryone who works for the group and we invest considerably in their training,with great emphasis on customer service. We believe in promoting from within,whenever we can and as a result, we have a dedicated and loyal team throughoutall levels of the business. Since the year end we secured £105m of new funding for expansion, of which £30mwas in the form of new equity provided by The Royal Bank of Scotland, giving RBSa 17.5% shareholding in Malmaison and HdV. The remaining £75m was provided byBank of Scotland, a long term financier of Malmaison, in conjunction with RBS.Our aim is to increase the number of hotels from the present 15 to 25 within thenext five years, expanding both the Malmaison and HdV chains. There are already three new Malmaison hotels in the pipeline: at Oxford we areopening a 94 room hotel in the former prison towards the end of 2005; inLiverpool construction has already started on a 130 room hotel in the docks areaand will open at the end of 2006; and in Reading we have planning consent toconvert the Great Western station hotel into a 75 room Malmaison and weanticipate this opening during the first half of 2007. At HdV we have secured a property in Cambridge for a 41 room hotel that, subjectto obtaining planning permission, should also open during the first half of2007. Further new HdV hotels are being sought, particularly in the north ofEngland where we believe the brand can be successfully expanded. We are also aiming to open a second London Malmaison. Our existing hotel inCharterhouse Square, on the edge of the City, has been a tremendous success andwe believe the Malmaison format would work well in London's West End. At thesame time we are looking for our second Malmaison in Ireland, probably inDublin. Once we finalise these acquisitions we will be well on our way to delivering theexpansion programme outlined at the time of the fund raising. With fourproperties already secured, at least one more under negotiation, and a furthertwo locations identified we will only need to find three more to deliver ourinitial target of 25 hotels. Despite uncertainties in the economy generally and consumer spendingspecifically, it is hard not to be anything other than positive about the futurefor Malmaison and HdV. With substantial funding in place we have the resource totake the group to the next stage in its development and we are confident thatduring the next five years Malmaison and HdV will become a 25-strong hotel groupcementing its position as the UK's leading lifestyle boutique hotel business. Robert CookChief ExecutiveMalmaison Group22nd September 2005 MWB BUSINESS EXCHANGE CHIEF EXECUTIVE'S REPORT---------------------------------------------- It is pleasing to report solid progress in MWB Business Exchange over the past12 months, laying the foundations for future growth and performance. Since becoming Chief Executive in April 2004, the MWB Business Exchangemanagement team and I have worked diligently to develop a sustainable strategycapable of delivering profits and shareholder value. We believe this strategyis now firmly in place and is already producing results. Today MWB Business Exchange has a clear four-pronged development strategyenabling us to create differing but complementary income streams. In addition toour original four-star serviced offices offering, our acquisition of CityExecutive Centres now enables us to also provide a mid-market brand. We havedeveloped our Corporate Property Partnerships division to work closely with bothpotential occupiers and landlords to provide property solutions, includingOperating and Management Agreements (OMAs) within the framework of the servicedoffice business. And, of equal importance, our Meeting and Conference Roomsdivision, which is generating excellent cash flow and contribution to profit bymarketing our serviced office facilities to users who are not licensees in ourbuildings. I comment in greater detail on all these developments below. There has been a significant turnaround in MWB Business Exchange over the pastyear. Losses before tax from operations, which is our principal measure ofperformance, improved to £1.4m, against pre-tax losses of £4.6m last year. Our£1.4m operating pre-tax loss this year is before £11.0m of property provisionswritten back, resulting in a recorded pre-tax profit contribution from MWBBusiness Exchange of £9.0m for the year. As a result of property sales, bankdebt has been substantially reduced which will have a positive impact on futureinterest costs. Overall, therefore this year's figures show a dramaticunderlying improvement in our performance. I am also pleased to report that this year's turnover has shown a solidperformance in our core business areas. In the year to June 2005, afteradjusting for the three centres sold during the year, licence fee income wassteady with last year at £40.6m, while service income on a like for like basisrose 17% from £11.8m to £13.8m. Rental income improved from £3.0m to £3.4m, ouroperating and management agreements generated £0.8m in their first year andincome from properties that were subsequently sold amounted to a further £1.2m.Overall, turnover was £59.8m, up from last year's £58.6m, despite the sales ofproperties during the year. Driving this improved performance has been strong increases in occupancy withinthe core business. We began the year with only 65% of work stations occupiedbut, by the end of June 2005, occupancy was running at 80% and there have beenfurther improvements since the year end. As a result of higher occupancy levels, after excluding sub-let properties,Revenue per Available Workstation (REVPAW) increased during the year to 30thJune 2005 by 25% from £5,410 at last year end to £6,781 at June 2005. Revenueper Occupied Workstation (REVPOW), excluding sub-let properties, advanced from£7,900 to £8,402, reflecting consistent pricing and improved service revenue. Behind our higher occupancy levels was a 35% increase in market leads and a 44%increase in conversions from enquiries into successful deals. This demonstratesthe increased professionalism and skill that is being developed across our corearea of income generation. Over and above this greatly improved operating performance, two major eventsduring the year impacted positively on the improved balance sheet and structureof MWB Business Exchange. Firstly we sold three centres, Harrow, Hayes andKingston, for £13.5m which did not fit within our future strategy. The net cashgenerated from this sale of £13.0m repaid more than half of our bank debt, sothat it now stands at only £8.8m, significantly strengthening our balance sheet. Secondly, in January 2005 we acquired City Executive Centres Limited. Thisacquisition enabled us to achieve two key objectives: increasing critical masswith an additional 12 centres in areas where we were under represented andproviding us with an additional brand appealing to the mid-market sector. Also we signed our first major Operating and Management Agreement on 30,000sq ftof space in Citigroup's new Canary Wharf headquarters building in November 2004.This represents an important and major step forward for MWB Business Exchangeand forms the bedrock of our future strategy of working in joint venture withlandlords, occupiers and property developers. Simply put, the Citigroup deal provides us with a template whereby we operateand manage the whole or part of a building as a serviced office centre inconjunction with the owner. Working with the owner we use our property, financeand management expertise to generate revenue and participate on a profit-sharingbasis but without incurring any significant financial, property or operatingrisk. This has led us to launch our Corporate Property Partnerships division where weaim to work closely with corporate occupiers, owners and agents. Acting forCorporates with short to medium term property needs, we find suitable buildings,agree terms and fit out the space to their requirements in a far shorter timeframe than most occupiers are able to do. The two deals we concluded in Leeds in the second half of our financial yearwith the NHS and Centrica, are prime examples of our Corporate PropertyPartnership division. In the case of the NHS, it had a five year propertyrequirement which we satisfied through the acquisition of the leasehold interestin a 28,000 sq ft office building. We acquired the building on favourable termsthat include back-to-back break options with the landlord and the NHS, therebyeliminating any contingent liability for ourselves as the operator. Using ourexpertise we were able to implement a fit-out programme specifically designedfor the NHS' needs enabling occupation far more quickly than would normally havebeen the case. MWB Business Exchange was also able to satisfy Centrica's need for space in thecity by acquiring a two year lease on approximately 19,000 sq ft in Leeds CityOffice Park. Centrica has taken on a licence on half the space and the remainingaccommodation has provided us with a much needed additional serviced officecentre in Leeds. We also work closely with property agents and their clients where we can helpsolve short term property problems, ranging from helping landlords re-balance aportfolio and enhancing income return, to working with an owner to identifysuitable buildings for serviced office centres which we then manage on a jointventure non-recourse basis. Another significant area of development is our Meeting and Conference Roomsdivision. Here we look to make the 200 meeting and conference rooms across allour centres work harder by selling a meeting/conference room service tonon-centre users and conference agents. We have developed a highly efficient andintegrated group-wide booking service and I am pleased to report that over theyear there was a 41% increase in annual revenue generated by our Meeting andConference Rooms division to almost £4m. These moves demonstrate the increasingly sophisticated nature of our servicedoffice business, as well as its sustainability. Today MWB Business Exchange hasa greatly reduced exposure to long term leases in large properties, with aconsequent reduction in exposure to any market downturns. At the same time, our strategy has been to move away from dependence on asmaller number of large corporates occupying traditional serviced office spaceand, instead, focus on attracting small to medium sized businesses into ourcentres. We aim to ensure that no single client occupies more than 15% of thegross available space in any one building, unless our interests are back-to-backwith those of our licencees. This strategy has been successfully implemented andwe are now far less reliant on larger corporate occupiers than in the past, andthus occupancy levels are not adversely affected at the end of licence periods. We aim to continue increasing the number of our serviced business centres, whichcurrently stand at 35 leased properties and 13 managed under OMAs, as we believethat critical mass is important. MWB Business Exchange will continue to bedeveloped along the lines outlined above, and we will ensure that we are notburdened with onerous long term leases. Our forward licence fee position has continued to improve with 53% of ourbudgeted licence fee income for the year to June 2006 already signed by 30thJune 2005, which represents a valuable increase of 8% over the forward positionwe recorded at June 2004. With future growth in mind, we are considering an AIM listing for the company asa further way of enabling MWB Business Exchange to raise finance as anindependent company, while at the same time delivering increased value to MWBGroup shareholders. We believe that the market for flexible property solutions is maturing andtherefore that demand will increase for the services provided by MWB BusinessExchange. As a result, we look forward to the future with confidence. John SpencerChief ExecutiveMWB Business Exchange UK Limited22nd September 2005 LIBERTY CHIEF EXECUTIVE'S REPORT-------------------------------- This year has seen Liberty transformed into a vibrant and dynamic retaildestination that is reversing its fortunes and becoming an international luxurygoods brand. The dramatic change that has occurred reflects the determined effort ofLiberty's experienced management team and is a result of almost two years ofhard and, often, difficult work. Liberty is, once more, the home of cutting edgefashion and design and is receiving the approval of the buying public. Unlike almost every other major retailer, either in London's West End or HighStreets across the country, Liberty has bucked the downturn in consumerspending. During the 12 months to 30th June 2005 Liberty's turnover increased byalmost 10% to £44.8m, producing operating EBITDA of £0.2m in comparison to aloss of £1.0m last year. I am pleased to report that at the operating levelLiberty is now trading at break-even, which augurs well for the future. Afterrealising £2.3m of profits on property sales this year, pre-tax losses have beenreduced to £2.3m against £6.3m last year. This pleasing performance demonstrates that Liberty has succeeded in offeringdiscerning consumers a point of difference from other luxury goods retailers. Webelieve that our highly edited ranges - both in fashion and in other categories- are attracting customers looking to maintain their individuality, rather thanacquiring goods merely with mass appeal. We have dared to be different and weare not offering high street conformity. Customers are also discovering, or, in many cases, re-discovering, that Libertyis a far easier place in which to shop than has been the case in the past.Wayfinding has improved and the store's layout is more logical and shopperfriendly. Today there is much more to tempt London's high net worth individualsto cross Liberty's threshold. Apart from the strength of the underlying performance there have been twonotable events during the year. In April 2005 we concluded the sale of £66.5mworth of property, which entirely repaid our debt and, as a result,significantly strengthened Liberty's balance sheet. The sale of Lasenby House inKingly Street and the Liberty Island site on Regent Street, generated a pre-taxsurplus of £2.3m after sale costs. By eliminating our £62m of debt, we will savealmost £4m of annualised interest charges, although we will lose a similaramount of net annual rental income previously generated from these properties. Looking to the future we have spent much of the year under review designingin-house a range of luxury goods under the "Liberty of London" label. Ourgreatly expanded design studio has created the first of what we plan will becomean extensive range of "Liberty of London" goods which we believe will reflectboth the store's deep design heritage as well as its ability to producebeautiful "must have" items. The product development programme is producing new ranges of fashionaccessories, such as bags and small leather goods, scarves, luggage and travelaccessories, soft home furnishing, nightwear and stationery. The design team has successfully distilled the essence of Liberty while stayingtrue to our uniquely English provenance and design heritage. We believe theseluxury goods under the "Liberty of London" brand will reflect our pioneeringdesign spirit, showcasing the best in design while fusing fashion and thedecorative arts. This is something Liberty's reputation was founded upon over acentury ago. The full impact of our initial "Liberty of London" collection will be feltduring the course of the current year as our first range has only just beenlaunched. This first collection has been well received by the fashion press andwas launched in-store earlier this month. This has given the team great encouragement and confidence and we are looking tobuild the label and provide an extensive range of luxury accessories that willspearhead the drive to establish "Liberty of London" as a truly internationalluxury brand. We have a clear strategy for focusing on the international expansion of the"Liberty of London" brand. Our priorities are the North American, Japanese andSouth East Asian markets, with key routes to market and distributionpartnerships being identified. This will enable us to market the brand on aglobal basis without the need for a substantial capital investment programme. At the same time we have worked hard on a programme of improving both the Londonstore and the range of products we now offer. The sales figures demonstrate thesuccess we have already had in Ladieswear, Menswear, Beauty and Accessories.During the second half of the year we unveiled our new look furnishing fabricsdepartment with a more commercial focus and re-arranging of our home offer. I am pleased to report that both these areas are trading in line with ourexpectations and are, once more, establishing Liberty as a destination for homepurchases. The impact of this success should not be underestimated as there isextensive competition in this area of our business and it is rewarding to seecustomers coming back to Liberty to purchase our furniture and related products. As part of our overall strategy of revitalising the Liberty brand, we intendfocusing retailing activities into the Tudor building in Great MarlboroughStreet and vacating our existing Regent Street sales space. Under the terms ofthe sale agreement for the Regent Street property referred to earlier, we canachieve this without any residual rental liability to Liberty. This will resultin the relocation of four key product areas from Regent Street: menswear, ladiesshoes, lingerie and beauty. They will all be accommodated within the Tudorbuilding but in a more tightly focused format to provide an improved productoffering. We clearly see the Tudor building as the iconic brand home, which trulysynthesises all the unique attributes of the Liberty brand. The focus on theTudor building will enable us to develop innovative retailing strategies thatadd value to our luxury goods development, while creating a unique lifestyledestination in London's West End. We are excited about the potential. It is also important to sound a note of caution. Although we have performed wellduring a period of poor consumer confidence, London retailing has been affectedby the terrorist events during July 2005. As a consequence, our tradingperformance in the flagship store during the first eleven weeks of our newfinancial year to 17th September 2005 was initially affected and turnover forthat period was 5% lower than last year. However, our current turnover on aweekly basis is now almost back to the record trading levels of last year. Whileit is too early to be certain of the long-term impact of the summer's events weare adopting a cautious approach to current year trading. We are concerned that there has been virtually no co-ordination between CentralGovernment, the Mayor of London's Office, and Westminster Council to provide aunified strategy aimed at encouraging consumers back to the West End. We believeone of the most effective methods of re-building consumer confidence is eitherthe complete suspension of the Congestion Charge or suspending it during thepeak pre-Christmas trading periods. Unfortunately simply raising the CongestionCharge, as is occurring at present, will do little to attract people back intothe West End. Putting these issues to one side, we believe the business has been transformedover the past 12 months and the potential for future growth is substantial.Liberty is re-establishing itself as the destination retail centre for cuttingedge design and style as well as a new player in the international luxury goodsmarket. Iain RenwickChief ExecutiveLiberty Plc22nd September 2005 ACCOUNTS REVIEWfor the year ended 30th June 2005--------------------------------- INTRODUCTION------------ The Chairman's Statement and Divisional Reviews provide information on theGroup's principal operations and the Board's expectations for the future. ThisAccounts Review covers in greater depth the more significant features of theaccounts for the year ended 30th June 2005, which include an independentvaluation of the Group's properties at that date. EQUITY SHAREHOLDERS' FUNDS-------------------------- During the year ended 30th June 2005 there has been an increase in shareholders'funds from £108.9m at 30th June 2004 to £159.5m at this year end. As a result,equity shareholders funds per share have increased during the year by 46p to145p per share. This is summarised as follows:- Year ended 6 months 6 months Year 30th June ended ended ended 2005 31st December 30th June 30th June pence per 2004 2005 2005 share £'000 £'000 £'000 £'000 Equity shareholders'funds at beginning ofthe year 108,873 125,841 108,873 99p Revaluation surplus onGroup property portfolio 20,728 38,593 59,321 54p Retained loss for the year (3,304) (5,321) (8,625) (8p) Issue of ordinary shares - 400 400 - Purchase of ordinary sharesfor cancellation (456) 15 (441) - Currency translationdifferences - (6) (6) - ------- ------- ------- ---Equity shareholders'funds at end of the period 125,841 159,522 159,522 145p ======= ======= ======= === NET ASSET VALUE--------------- The net assets of the Group are financed primarily by equity shareholders' fundsand equity minority interests. At 30th June 2005, and at the previous year end,these sources of finance were as follows:- 30th June 2005 30th June 2004 £'000 £'000 Equity shareholders' funds 159,522 108,873Equity minority interests 50,042 40,753Preference share minority interests 1,109 1,155 ------- -------Net asset value at 30th June 2005 210,673 150,781 ======= ======= The analysis of net assets across the Group's operations at 30th June 2005, andat the previous year end, is as follows:- Total assets less current Equity liabilities and (Net debt) Minority shareholders' provisions /cash Net assets interests funds £'000 £'000 £'000 £'000 £'000 At 30th June 2005 Hotels Malmaison and Hotel du Vin 253,186 (164,495) 88,691 - 88,691 Hotel investments 218,418 (140,508) 77,910 (18,665) 59,245Liberty 46,185 3,630 49,815 (17,663) 32,152Business Exchange 27,831 (14,009) 13,822 - 13,822West India Quay 25,116 (132) 24,984 (14,757) 10,227Group debt, less cash and other assets 17,208 (61,757) (44,549) (66) (44,615) ------- ------- ------- ------ ------- 587,944 (377,271) 210,673 (51,151) 159,522 ======= ======= ======= ====== ======= Total assets less current Equity liabilities and (Net debt) Minority shareholders' provisions /cash Net assets interests funds £'000 £'000 £'000 £'000 £'000 At 30th June 2004 Hotels Malmaison 147,767 (91,920) 55,847 - 55,847 Hotel investments 259,453 (184,667) 74,786 (12,520) 62,266Liberty 98,720 (45,229) 53,491 (17,159) 36,332Business Exchange 22,180 (28,045) (5,865) - (5,865)West India Quay 91,150 (68,307) 22,843 (12,295) 10,548Group debt, less cash and other assets (219) (50,102) (50,321) 66 (50,255) ------- ------- ------- ------ ------- 619,051 (468,270) 150,781 (41,908) 108,873 ======= ======= ======= ====== ======= 30th June 2005 30th June 2004 Pence per Pence per £'000 share £'000 share Equity shareholders' funds Hotels Malmaison and Hotel du Vin 88,691 81p 55,847 50p Hotel investments 59,245 54p 62,266 57pLiberty 32,152 29p 36,332 33pBusiness Exchange 13,822 13p (5,865) (5p)West India Quay 10,227 9p 10,548 10pGroup debt, less cash and other assets (44,615) (41p) (50,255) (46p) ------ ---- ------- ---Total Equity shareholders' funds 159,522 145p 108,873 99p ====== ==== ======= === REVIEW OF FIXED ASSETS---------------------- Portfolio analysis by division------------------------------ The Group holds its direct property interests principally as tangible fixedassets, with smaller amounts held as developments in progress and propertiesheld for resale. The Group's property interests are disclosed in theconsolidated balance sheet at 30th June 2005 as follows:- 30th June 30th June 2005 2004 £'000 £'000Tangible fixed assets 579,043 571,598Developments in progress - 21,265Properties held for resale 4,099 1,113 ------- -------Total property interests at 30th June 2005 583,142 593,976 ======= ======= The above interests are analysed as follows:- Percentage 30th June of 30th June 30th June 2005 2005 2004 £'000 % £'000Hotels Nine Malmaison hotels 173,307 30 149,534 Seven Hotel du Vin hotels 80,994 14 - Hotel investments at Park Lane, West India Quay and Argyle Street Glasgow* 237,796 40 276,663 ------- --- -------Total hotel portfolio 492,097 84 426,197 ------- --- ------- Liberty Liberty store and offices 26,403 5 79,250 Other properties 1,508 - 1,856 ------- --- ------- Total Liberty portfolio 27,911 5 81,106 ------- --- -------Business Exchange 55,581 10 60,871 ------- --- -------Asset management 4,550 1 4,537 ------- --- -------West India Quay 3,003 - 21,265 ------- --- ------- Total property interests at 30th June 2005 583,142 100 593,976 ======= === ======= *30th June 2004 includes the Howard Hotel Due to the onerous cost of their related lease obligations, certain of theGroup's short leasehold interests in the Business Exchange division had negativevalues at 30th June 2005 and at the previous year end. These amounted to £9.0mat 30th June 2005 and £14.8m at the previous year end. These are included inprovisions for liabilities and charges in the consolidated Balance Sheet. At 30th June 2005 and at the previous year end, the Group's net interests inproperties in the Business Centre division therefore amounted to £46.6m (2004:£46.1m) and are summarised as follows:- 2005 2004 £'000 £'000 Property values in table above 55,581 60,871Less provisions for onerous leasehold interests in note 11 (8,960) (14,799) ------ ------Net interest in Business Centre properties 46,621 46,072 ====== ====== Property valuation surplus arising in the year---------------------------------------------- A valuation of the Group's fixed asset property portfolio at 30th June 2005 wasundertaken by DTZ Debenham Tie Leung on the basis of Market Value for theGroup's Investment Properties and Existing Use for the Group's OperationalProperties. The net surplus, after deducting minority interests, totalled £70.5m, which hasbeen included in the accounts for the year ended 30th June 2005. Surpluses ortemporary deficits arising on valuation of the Group's investment andoperational properties are transferred to revaluation reserve, while impairmentof investment and operational properties to below their historical cost ischarged directly to the profit and loss account. Further details of therevaluation are set out in note 7 to the accounts. Developments in progress and properties held for resale are recorded at thelower of cost and net realisable value and are, therefore, not revalued in theGroup accounts. During the years ended 30th June 2002 and 30th June 2003, impairments ofoperational properties, principally in relation to the Group's business centreproperties, totalled £86m. As a result of the revaluation at 30th June 2005referred to above, certain of these impairments which were charged to the profitand loss account in those years have now been reversed, resulting in a credit tothe profit and loss account this year in the Business Exchange division,totalling £11.0m. Other business centres were valued at 30th June 2005 at higherthan their historical cost and their previous book values, and this resulted ina credit to the revaluation reserve in respect of those business centres of£5.2m. The valuation surplus credited to the profit and loss account for the year of£11.2m, and the valuation surplus credited to the revaluation reserve for theyear of £59.3m, arose as follows:- Less Net Taken to previous Less surplus profit Taken to Gross book Gross minority to the & loss revaluation valuation value surplus interests Group account reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 Malmaison 172,438 157,165 15,273 - 15,273 (152) 15,425Hotel du Vin 80,930 71,067 9,863 - 9,863 - 9,863Hotel investments 236,700 202,946 33,754 (8,728) 25,026 - 25,026Liberty 26,250 20,625 5,625 (1,782) 3,843 - 3,843Business Exchange 46,621 30,420 16,201 - 16,201 11,031 5,170Asset management 4,550 4,280 270 22 292 298 (6) ------- ------- ------ ------ ------ ------ ------ 567,489 486,503 80,986 (10,488) 70,498 11,177 59,321 ======= ======= ====== ====== ======Minority interests 4 10,484 ------ ------ 11,181 69,805 ====== ====== Gross surplusReflected in the accounts: As an increase in tangible fixed assets in note 7 75,924As a reduction in provisions in note 11 5,062 ------Gross surplus 80,986 ====== The valuations of the Group's hotel interests include value ascribed for plant,machinery, fixtures and fittings forming part of the service installations ofthe building. They therefore represent a valuation of the total interest of theGroup in those properties and no further amount is included in respect of thebook value of such plant and fittings. However, the valuations exclude the valueof any goodwill that may arise from the present occupation of the properties.The valuation of the Group's retail interests includes value ascribed for plant,machinery and fittings forming part of the service, installation of thebuilding, but excludes moveable shop fittings. The Group's Business Centres are of a type normally sold as fully equipped andoperational entities and are therefore required by the RICS Valuation Manual tobe valued by reference to their trading potential. These values include land andbuildings and also trade fixtures, fittings, furniture, furnishings andequipment of the properties, rather than valuing the property and including anadditional element for the net book value of the fixtures and equipment. Thevaluation excludes consumables, stock in trade and any goodwill that may arisefrom the present occupation of the properties. Brand value----------- A review of the Liberty brand was conducted at 30th June 2005 which confirmedits value at not less than the carrying value of £18.2m at which it is includedin the accounts. REVIEW OF FUNDING AND LOAN FACILITIES------------------------------------- Funding policy-------------- Following the successful issue of £30m of Unsecured Loan Stock 2009/2012 in June2005, which replaced a shorter dated loan stock of a similar amount, the Grouphas two principal central facilities available for investment in all divisions,providing a total of £42m of medium term funds to the Group. The balance of theGroup's total loans, amounting to £371m at 30th June 2005, is provided from bankfacilities made available to individual divisions of the Group. The Group borrows from banks at fixed and floating rates of interest, with theinterest rate exposure from floating rate debt hedged by financial derivativeinstruments. The principal purpose of the Group's hedging arrangements is toprotect the Group against adverse interest rate movements and to retain someopportunity to benefit from falls in short term interest rates; they are notused to speculate on interest rate movements. Derivative instruments used by theBoard principally comprise interest rate swaps, floors and collars. The Group's treasury policies are designed to ensure that:- (i) sufficient committed loan facilities are available to support current and future business requirements. Cash and loan management is a core feature of the Board's business model and two year rolling cash flow forecasts, updated on a monthly basis, are controlled by the Executive Directors to manage these requirements. (ii) the interest cost on Group debt is supported as much as possible from maintainable income flows, with the retirement of debt matched against forecast capital inflows over short and medium term capital programmes. (iii) interest rate exposure is managed through a combination of fixed rate debt and interest rate swaps, thus fixing interest rates as much as possible by reference to passing income at the date of drawdown. The majority of the Group's borrowings are non-recourse to the holding company,ring-fenced, and with medium term repayment profiles. Net debt-------- The Group's loans, borrowings and cash are included in the consolidated balancesheet at 30th June 2005 as follows:- 30th June 30th June 2005 2004 £'000 £'000Composition at year end Total loans and overdrafts 413,225 509,800Hire purchase and leasing contracts 3,583 7,485 ------- -------Total loans 416,808 517,285Less cash (39,537) (49,015) ------- -------Total net debt at year end 377,271 468,270 ======= ======= The Group's loans, borrowings and cash at 30th June 2005, and at the previousyear end, had the following maturity profiles:- 30th June 30th June 2005 2004 £'000 £'000Repayable:Within one year or on demand 46,069 57,063Between one and two years 124,018 43,516Between two and five years 99,530 296,035After more than five years 147,191 120,671 ------- -------Total loans 416,808 517,285Less cash (39,537) (49,015) ------- -------Total net debt at year end 377,271 468,270 ======= ======= Movement in net debt during the year------------------------------------ The decrease in total net debt during the year arose as follows:- 30th June 30th June 2005 2004 £'000 £'000 Total net debt at start of the year 468,270 432,796Debt drawn/(repaid) on West India Quay development (66,860) 57,957Debt drawn on acquisition of Hotel du Vin 64,908 -Debt drawn on development of hotel portfolio 4,110 36,003Increase in listed Unsecured Loan Stock 33,715 15,000Net proceeds received on sale of properties (104,405) (71,443)Net cash inflow from other Group operations during the year (22,467) (2,043) ------- -------Total net debt at year end 377,271 468,270 ======= ======= Net debt attributable to Equity Shareholders' Funds--------------------------------------------------- Certain elements of the Group's net debt have been drawn by subsidiaries thatare not wholly owned by the Group. At 30th June 2005, these principally comprisethe Group's Park Lane hotel and West India Quay, whilst at 30th June 2004 theyalso included Liberty and Business Exchange. The net debt attributable to EquityShareholders' Funds at 30th June 2005 amounted to £341m (2004: £366m),calculated as follows:- 30th June 30th June 2005 2004 £'000 £'000 Total net debt as above 377,271 468,270Less net debt attributable to minority interests (36,725) (102,043) ------- -------Total net debt attributable to Equity Shareholders' Funds 340,546 366,227 ======= ======= Gearing------- At 30th June 2005, gearing was 179% based on net assets, and 213% based onEquity Shareholders' Funds, calculated as follows:- 30th June 30th June 2005 2004 £'000 £'000 Total net debt 377,271 468,270Net assets 210,673 150,781Gearing based on net assets 179% 311% ======= ======= Total net debt attributable to Equity Shareholders' Funds 340,546 366,227Equity Shareholders' Funds 159,522 108,873Gearing based on Equity Shareholders' Funds 213% 336% ======= ======= REVIEW OF EARNINGS------------------ Results------- The total recognised gains and losses of the Group for the year attributable toshareholders, are summarised as follows:- 30th June 30th June 2005 2004 £'000 £'000Profit and loss account Loss for the year (8,625) (11,760)Credited to reserves Revaluation reserve 59,321 18,290 Other items (6) 2 ------- -------Total recognised gains and losses for the year 50,690 6,532 ======= ======= Per share, based on weighted average number of shares in issue during the year 46.3p 5.9p ======= ======= Summary of earnings------------------- The Board's prime measure of return used to monitor the results of the operatingdivisions is the level of earnings before interest, taxation, depreciation andamortisation, or EBITDA. The results for the year ended 30th June 2005 can besummarised as follows:- Profit/(loss) Total on ordinary recognised Group activities gains andYear ended 30th June 2005 turnover EBITDA EBIT before tax losses £'000 £'000 £'000 £'000 £'000 Malmaison 38,723 11,953 7,784 43 15,468Hotel du Vin (9 months from October 2004) 18,382 4,230 3,296 290 10,152Hotel investments Operating income 42,110 12,799 7,078 (6,350) 20,873 Pre-opening costs - (587) (587) (587) (587) Sale of the Howard Hotel - 3,533 3,533 3,533 3,533Liberty Operating income 44,829 213 (1,960) (4,639) (561) Sale of Lasenby and Regent House - 2,326 2,326 2,326 2,326Business Exchange Operating results - leased properties 58,972 1,440 (335) (1,400) (1,187) Operating results - operating and management agreements 834 24 24 (272) (272)Sale of properties - (383) (383) (383) (383)Property revaluation surplus - - 11,031 11,031 16,200Asset management Operating income 1,051 252 462 580 1,058West India Quay 28,550 2,659 2,659 2,659 584Group debt less cash and other assets 3,009 - - (9,899) (9,756) ------- ------ ------ ----- ------ 236,460 38,459 34,928 (3,068) 57,448Head office administration - (6,606) (6,745) (6,758) (6,758) ------- ------ ------ ----- ------ 236,460 31,853 28,183 (9,826) 50,690 ======= ====== ====== ====== ======Notes----- 1. Total recognised gains and losses are shown in the Group primary statement. These comprise the revaluation surplus on the Group's fixed assets for the year, less the retained loss in the Profit and Loss Account. 2. EBITDA = Earnings before interest, taxation, depreciation and amortisation 3. EBIT = Earnings before interest and tax Profit/(loss) Total on ordinary recognised Group activities gains andYear ended 30th June 2004 turnover EBITDA EBIT before tax losses £'000 £'000 £'000 £'000 £'000 Malmaison 32,628 8,568 4,802 (2,766) (879)Hotel investments Operating income 32,136 11,147 7,961 (3,779) 7,212 Pre-opening costs - (995) (995) (995) (995) Apartment sales 2,590 109 109 109 109Liberty 40,891 (1,047) (3,492) (6,266) (2,478)Business Exchange Operating results - leased properties 58,625 4,692 (1,290) (4,566) (9,545) Previous write-downs of properties now written back - - 5,546 5,546 5,546Asset management Operating income 5,980 3,401 2,738 (437) (39) Sales of properties - 6,852 6,852 6,852 6,852West India Quay 64,713 21,373 21,373 21,390 18,029Group debt less cash and other assets 3,347 - - (8,203) (7,112) ------- ------ ------ ----- ------ 240,910 54,100 43,604 6,885 16,700Head office administration - (9,929) (10,658) (10,168) (10,168) ------- ------ ------ ----- ------ 240,910 44,171 32,946 (3,283) 6,532 ======= ====== ====== ====== ====== Interest payable---------------- Net interest payable by the Group during the year was £40.2m (2004: £43.8m). Ofthis amount, £2.2m (2004: £7.6m) was capitalised in respect of developmentexpenditure, leaving a net charge to the profit and loss account of £38m (2004:£36.2m). The average cost of borrowing on the Group's loans at 30th June 2005, inclusiveof margin, was 7.2% per annum. This is an improvement over the average rate of7.6% at 30th June 2004, due to the lower rate that we secured in October 2004 onthe facility for the acquisition of Hotel du Vin. Taxation-------- The net tax credit of £0.1m (2004: £1.1m) for the year ended 30th June 2005reflects repayments received from the Inland Revenue, the use of brought forwardtax reliefs and increased capital allowances resulting from the Group's capitalexpenditure programmes. The tax incurred on the Liberty Japanese operations amounted to £0.7m (2004:£0.7m). Of this amount, 49% is incurred by the minority interest in the Japaneseoperations of Liberty, who participate in the after tax profits of theseoperations. The Group has a 68% interest in Liberty and thus the net cost to theGroup is only 33% of this tax charge, or £0.2m (2004: £0.2m). Earnings per share------------------ The loss per share shown through the profit and loss account for the year ended30th June 2005 was 7.9p per share, compared with a loss of 10.7p per share forthe year ended 30th June 2004. After taking account of the unrealised surplusarising on the Group's property portfolio, the Group produced net earnings of46.3p per share, up from 5.9p per share for the year ended 30th June 2004. Dividend-------- Shareholders approved implementation of the Cash Distribution Programme andassociated cessation of annual revenue distributions at a meeting ofshareholders held in May 2002. The Board is continuing to implement the CashDistribution Programme and to direct disposal proceeds to the repayment of debt.By repaying increased levels of debt now, the Board expects to be able todistribute increased amounts to shareholders from asset sales in future yearsonce debt levels have been reduced to lower levels. The Directors envisagedistributing further surplus funds to shareholders by means of buy-backs ofordinary shares, cash distributions, demergers, distributions of assets andsimilar value distribution programmes. Cash flow--------- The consolidated cash flow statement shows the funds generated by the Group,those raised from external sources, the investments made and the effect thereofon the Group's net debt. During the year ended 30th June 2005, the Group spent £64.9m on the acquisitionof Hotel du Vin. The profitable sale of the Howard Hotel for £75m, and Lasenbyand Regent House for £67m, comprise the majority of the disposals totalling£155m for the year ended 30th June 2005. Net debt reduced by £91m to £377m during the year ended 30th June 2005. Furtherdetails of the Group's loans and the principal components of this increase areset out in the section entitled "Net debt". International Financial Reporting Standards------------------------------------------- The reporting of accounts by listed companies in accordance with InternationalFinancial Reporting Standards ("IFRS") came into effect for accounting periodscommencing on or after 1st January 2005. The first audited accounts of the Group prepared in accordance with IFRS will bethose for the year ending 30th June 2006. These will include information forthat year and for the year ending 30th June 2005 prepared in accordance withIFRS. We anticipate re-issuing these accounts for the year ending 30th June2005, calculated in accordance with IFRS, in approximately November 2005. Theunaudited interim accounts for the six months ending 31st December 2005 willalso be prepared in accordance with IFRS. The Group's IFRS Committee comprising Head Office and Divisional Finance Teams,has ensured that the necessary information required for the further disclosureand new accounting treatments arising under IFRS is available to the Group. Andrew Blurton JOINT FINANCE DIRECTORLondon 22nd September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 30th June 2005------------------------------------ Year ended Year ended 30th June 30th June 2005 2004 Notes £'000 £'000------------------------------------------------------------------------------Turnover 1 236,460 240,910 Cost of sales (201,142) (199,387)------------------------------------------------------------------------------Gross profit 35,318 41,523 Administrative expenses (12,675) (15,429)------------------------------------------------------------------------------Group operating profit 22,643 26,094 Profit on disposal of investment properties and other fixed assets 2 5,540 6,852------------------------------------------------------------------------------Profit on ordinary activities before interest 28,183 32,946 Net interest payable and similar items 3 (38,009) (36,229)------------------------------------------------------------------------------Loss on ordinary activities before taxation (9,826) (3,283) Taxation credit on loss on ordinary activities 4 177 1,066------------------------------------------------------------------------------Loss on ordinary activities after taxation (9,649) (2,217) Equity minority interests 5 1,102 (9,608)Non-equity minority interests (78) 65------------------------------------------------------------------------------ Loss attributable to ordinary shareholders retained for the year (8,625) (11,760)============================================================================== Loss per share (basic and diluted) 6 (7.9p) (10.7p)============================================================================== All results relate to continuing operations. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the year ended 30th June 2005----------------------------------------------------------- Year ended Year ended 30th June 30th June 2005 2004 £'000 £'000------------------------------------------------------------------------------ Loss retained for the financial year (8,625) (11,760) Net revaluation surplus on fixed assets credited to revaluation reserve 59,321 18,290 Currency translation differences on foreign currency net investments (6) 2------------------------------------------------------------------------------Total recognised gains and losses for the year 50,690 6,532============================================================================== All recognised gains and losses are attributable to equity shareholders'interests. RECONCILIATIONS OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDSfor the year ended 30th June 2005---------------------------------------------------------- Year ended Year ended 30th June 30th June 2005 2004 £'000 £'000------------------------------------------------------------------------------ Opening equity shareholders' funds 108,873 102,341Loss for the financial year (8,625) (11,760)Net revaluation surplus on fixed assets credited to revaluation reserve 59,321 18,290Purchase of own shares for cancellation during the year (441) -Issue of shares during the year 400 -Currency translation differences on foreign currency net investments (6) 2------------------------------------------------------------------------------Closing equity shareholders' funds 159,522 108,873============================================================================== CONSOLIDATED BALANCE SHEETat 30th June 2005-------------------------- 2005 2004 Notes £'000 £'000------------------------------------------------------------------------------ Fixed assets Intangible asset 18,200 18,200Tangible assets 7 579,043 571,598------------------------------------------------------------------------------ 597,243 589,798------------------------------------------------------------------------------Current assets Developments in progress - 21,265Properties held for resale 4,099 1,113Stocks 8,366 7,054Debtors 8 64,104 91,763Cash 39,537 49,015------------------------------------------------------------------------------ 116,106 170,210Creditors: amounts falling due within one year 9 (115,985) (126,633)------------------------------------------------------------------------------Net current assets 121 43,577------------------------------------------------------------------------------Total assets less current liabilities 597,364 633,375Creditors: amounts falling due after more than one year 10 (372,485) (462,013)Provisions for liabilities and charges 11 (14,206) (20,581)------------------------------------------------------------------------------Net assets 210,673 150,781============================================================================== Capital and reserves Called up share capital 54,825 54,900Share premium account 12 79,514 79,364Capital redemption reserve 12 15,975 15,650Revaluation reserve 12 130,067 105,535Merger reserve 12 9,403 9,403Other reserves 12 1,783 1,379Profit and loss account 12 (132,045) (157,358)------------------------------------------------------------------------------Equity shareholders' funds 159,522 108,873Equity minority interests 13 50,042 40,753Non-equity minority interests 1,109 1,155------------------------------------------------------------------------------ 210,673 150,781============================================================================== Equity shareholders' funds per share 14 145p 99p============================================================================== CONSOLIDATED CASH FLOW STATEMENTfor the year ended 30th June 2005--------------------------------- 2005 2004 Notes £'000 £'000------------------------------------------------------------------------------ Net cash inflow/(outflow) from operating 15 62,279 (19,453) activities Returns on investments and servicing of finance 16 (39,807) (43,858) Corporation tax paid (808) (686) Capital expenditure and financial investment, less sales of fixed assets 17 134,654 40,030 Acquisitions and disposals 18 (64,908) (8,651)------------------------------------------------------------------------------Net cash inflow/(outflow) before financing 91,410 (32,618) Financing 19 (100,888) 29,274------------------------------------------------------------------------------Decrease in cash during the year (9,478) (3,344)============================================================================== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBTfor the year ended 30th June 2005------------------------------------------------------- 2005 2004 Notes £'000 £'000------------------------------------------------------------------------------ Decrease in cash during the year 20 (9,478) (3,344) Net decrease in hire purchase and leasing contracts 20 3,902 10,767 Net decrease/(increase) in loans during the year 20 96,575 (42,897)------------------------------------------------------------------------------Decrease/(Increase) in net debt during the year 20 90,999 (35,474) Opening net debt 20 (468,270) (432,796)------------------------------------------------------------------------------Closing net debt 20 (377,271) (468,270)============================================================================== NOTES TO THE ACCOUNTS--------------------- 1. DIVISIONAL ANALYSIS---------------------- The analysis of Group turnover is as follows:- Year ended Year ended 30th June 30th June 2005 2004Turnover £'000 £'000------------------------------------------------------------------------------HotelsMalmaison 38,723 32,628Hotel du Vin (9 months from October 2004) 18,382 -Hotel investments Operating income 42,110 32,136 Apartment sales - 2,590Liberty 44,829 40,891Business Exchange Leased properties 58,972 58,625 Operating and management agreements 834 -Asset management 1,051 5,980West India Quay - apartment sales 28,550 64,713Other 3,009 3,347 ------- ------- 236,460 240,910 ======= =======By geographical origin:United Kingdom 231,575 235,325Japan 4,885 5,585 ------- ------- 236,460 240,910 ======= ======= Year ended Year ended 30th June 30th JuneEarnings before interest, taxation, 2005 2004depreciation and amortisation ("EBITDA") £'000 £'000------------------------------------------------------------------------------ The EBITDA of the Group is calculated as follows:- Profit on ordinary activities before interest for the year 28,183 32,946Add depreciation and amortisation 14,851 16,032Less write-back of property provisions made in earlier years (11,181) (4,807) ------- ------Total EBITDA for the year 31,853 44,171 ======= ====== Year ended Year ended 30th June 30th June 2005 2004Analysis of EBITDA £'000 £'000------------------------------------------------------------------------------ The analysis of the EBITDA for the year is as follows:- Malmaison Operating income 11,953 8,568Hotel du Vin Operating income (9 months from October 2004) 4,230 -Hotel investments Operating income 12,799 11,147 Pre-opening costs (587) (995) Sale of Howard Hotel 3,533 - Apartment sales - 109Liberty Operating income 213 (1,047) Sale of Lasenby and Regent House 2,326 -Business Exchange Operating income - leased properties 1,440 4,692 Operating income - operating and management agreements 24 - Sale of properties (383) -Asset management 252 10,253West India Quay - apartment sales 2,659 21,373 ------ ------Total EBITDA for the year 38,459 54,100Head office administration (6,606) (9,929) ------ ------ 31,853 44,171 ====== ====== Year ended Year ended 30th June 30th June 2005 2004Loss on ordinary activities before taxation £'000 £'000------------------------------------------------------------------------------ The analysis of the Group profit/(loss) on ordinaryactivities before taxation is as follows:- Malmaison and Hotel du Vin Operating income (HdV: 9 months from October 2004) 333 (2,766)Hotel investments Operating income (6,350) (3,779) Pre-opening costs (587) (995) Sale of Howard Hotel 3,533 - Apartment sales - 109Liberty Operating income (4,639) (6,266) Sale of Lasenby and Regent House 2,326 -Business Exchange Operating income - leased properties (1,400) (4,566) Operating income - operating and management agreements (272) - Sale of properties (383) - Previous writedown of properties written back 11,031 5,546Asset management Operating income 580 (437) Sales of properties - 6,852West India Quay - apartment sales 2,659 21,390Group debt less cash and other assets (9,899) (8,203) ------ ------ (3,068) 6,885Head office administration (6,758) (10,168) ------ ------Loss on ordinary activities before taxation (9,826) (3,283) ====== ======By geographical origin:United Kingdom (10,698) (4,471)Japan 872 1,188 ------ ------ (9,826) (3,283) ====== ====== The analysis of the Equity Shareholders' funds, minority interests and netassets of the Group are as follows:- Net assets Equity Non-equity Equity 30th June minority minority Shareholders' 2005 interests interests funds £'000 £'000 £'000 £'00030th June 2005----------------------------------------------------------------------------------------- Malmaison and Hotel du Vin 88,691 - - 88,691Hotel investments 77,910 18,665 - 59,245Liberty 49,815 16,558 1,105 32,152Business Exchange 13,822 - - 13,822West India Quay 24,984 14,757 - 10,227Group debt less cash and other assets (44,549) 62 4 (44,615) ------- ------ ----- ------- 210,673 50,042 1,109 159,522 ======= ====== ===== ======= Equity shareholders' funds per share 145p Net assets Equity Non-equity Equity 30th June minority minority Shareholders' 2005 interests interests funds £'000 £'000 £'000 £'00030th June 2004----------------------------------------------------------------------------------------- Malmaison 55,847 - - 55,847Hotel investments 74,786 12,520 - 62,266Liberty 53,491 16,008 1,151 36,332Business Exchange (5,865) - - (5,865)Asset management 101 (167) 4 264West India Quay 22,843 12,295 - 10,548Group debt less cash and other assets (50,422) 97 - (50,519) ------- ------ ----- ------- 150,781 40,753 1,155 108,873 ======= ====== ===== ======= Equity shareholders' funds per share 99p 2. PROFIT ON DISPOSAL OF INVESTMENT PROPERTIES AND OTHER FIXED ASSETS--------------------------------------------------------------------- Year Year ended ended 30th June 30th June 2005 2004 £'000 £'000 The profit on disposal of investment properties and otherfixed assets arose as follows:- Profit on disposal of The Howard Hotel 3,533 -Profit on disposal of Lasenby and Regent House 2,326 -Profit on disposal of other fixed assets 64 -Loss on disposal of Business Centre properties (383) -Profit on disposal of Marble Arch Tower - 6,852 ----- ----- 5,540 6,852 ===== ===== 3. NET INTEREST PAYABLE AND SIMILAR ITEMS----------------------------------------- Year Year ended ended 30th June 30th June 2005 2004 £'000 £'000 The net interest payable and similar charges arose asfollows:- Unsecured Loan Stock 2005/2006, including 5,814 3,931 redemption premiumBank loans and overdrafts 32,476 38,149Finance leases and hire purchase contracts 400 645Bank charges, debt issue and debt repayment costs 2,697 2,714 ----- ----- 41,387 45,439Less interest receivable and similar income (1,187) (1,577) ----- ----- 40,200 43,862Less interest capitalised before tax relief (2,191) (7,633) ------ ------Total net interest payable and similar charges 38,009 36,229 ====== ====== Interest payable is sourced from the Group's operating cash flows and from itsavailable bank facilities. Payments and receipts from hedging arrangements areincluded above with the financing facility to which they relate. 4. TAXATION CREDIT ON LOSS ON ORDINARY ACTIVITIES------------------------------------------------- Year Year ended ended 30th June 30th June 2005 2004 £'000 £'000 The taxation credit for the year arose as follows:- UK Corporation taxUtilisation of current year losses in reducing liabilities of earlier years and adjustments in respect of prior years 610 1,748 Foreign taxTax on profit for the year (402) (483)Adjustment in respect of prior years (31) (199) ------ ------Total corporation tax and similar taxes credited to profit and loss account 177 1,066 ====== ====== The taxation credit on the loss on ordinary activities has been decreased (2004:increased) from the amount that would arise from applying the prevailingcorporation tax rate to the loss before taxation in the consolidated profit andloss account as follows:- Year Year ended ended 30th June 30th June 2005 2004 £'000 £'000 UK corporation tax at 30% (2004: 30%) on loss before taxation in consolidated profit and loss account 2,948 985Excess of depreciation charged over capital allowances claimed (1,087) (2,689)Expenditure permanently disallowed for taxation purposes and unrelieved tax losses (712) (4,709)Difference between taxation on chargeable gains on disposals of properties and accounting profits on such disposals (7,266) 1,978Taxation on overseas earnings at a higher rate than UK corporation tax (139) (126)Profits that are not taxable and capitalised expenditure deductible for taxation purposes 2,996 1,137Tax losses brought forward from earlier years utilised in current year 2,858 2,941 ------ ------Total corporation tax and similar taxes charge for the year (402) (483) Utilisation of current year losses in reducing liabilities of earlier years and reduction in taxation provisions in respect of prior years 579 1,549 ------ ------Total corporation tax and similar taxes credited to profit and loss account 177 1,066 ====== ====== No deferred tax has required to be charged for the year ended 30th June 2005 orfor the previous year. In accordance with FRS19, deferred taxation of £10.2m(2004: £5.4m) in relation to potential tax on property revaluation surpluses,which is eligible for rollover relief, is included in deferred taxation notprovided at 30th June 2005 in note 11 to the accounts. 5. EQUITY MINORITY INTERESTS---------------------------- Equity minority interests in the loss on ordinary activities after taxationarose in the following divisions of the Group:- Year Year ended ended 30th June 30th June 2005 2004 £'000 £'000 Equity minority interests in loss/(profit) after taxation: Hotel investments - 140 Park Lane Limited 473 570Hotel investments - West India Quay 899 331Liberty Plc 971 1,998West India Quay apartments (1,251) (12,705)Others 10 198 ------ ------ 1,102 (9,608) ====== ====== 6. LOSS PER SHARE----------------- The loss per share figures are calculated by dividing the loss after taxationand minority interests for the year, by the weighted average number of shares inissue during the year, as follows:- Year Year ended ended 30th June 30th June 2005 2004 £'000 £'000Loss on ordinary activities after taxation and minority interests (8,625) (11,760) ====== ====== '000 '000Weighted average number of ordinary shares in issue during the year 109,598 109,800 ====== ====== Loss per share (basic and diluted) (7.9p) (10.7p) ====== ====== 7. TANGIBLE FIXED ASSETS------------------------ Investment -----------properties------------ ----Operational properties----- Plant, machinery, Long Short Long Short fixtures & Freehold leasehold leasehold Freehold leasehold leasehold equipment Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Group Cost or valuationAt 1st July 2004 2,500 - 8,500 325,156 111,302 80,651 72,090 600,199Additions - 2,040 - 10,362 955 169 7,627 21,153Acquisition of subsidiaries - - - 49,953 10,695 - 6,837 67,485Reclassifications - - - (18,086) - (85) 18,134 (37)Disposals - - (9,450) (26,773) (67,823) (35,603) (6,485) (146,134)Transfer from/(to) provisions - - - - - 673 (4,525) (3,852)Revaluation - - 950 49,274 7,443 9,935 (32) 67,570 ----- ----- ------ ------- ------- ------ ------ -------At 30th June 2005 2,500 2,040 - 389,886 62,572 55,740 93,646 606,384 ===== ===== ====== ======= ======= ====== ====== ======= DepreciationAt 1st July 2004 - - - - - (116) (28,485) (28,601)Charge for the year - - - (4,310) (1,162) (3,389) (8,349) (17,210)Reclassifications - - - - - 37 - 37Disposals - - - 269 - 316 5,134 5,719Transfer from/(to) provisions - - - - - - 4,360 4,360Revaluation - - - 4,041 1,162 3,152 (1) 8,354 ----- ----- ------ ------- ------- ------ ------ ------- At 30th June 2005 - - - - - - (27,341) (27,341) ===== ===== ====== ======= ======= ====== ====== ======= Net book value At 30th June 2005 2,500 2,040 - 389,886 62,572 55,740 66,305 579,043 ===== ===== ====== ======= ======= ====== ====== ======= At 30th June 2004 2,500 - 8,500 325,156 111,302 80,535 43,605 571,598 ===== ===== ====== ======= ======= ====== ====== ======= Analysis of valuation surplus for the year Reflected in fixed assets (note 7) Surplus credited to profit and loss account - - - (152) 291 5,906 - 6,045Surplus credited to revaluation reserve (note 12) - - 755 43,884 8,314 6,471 (33) 59,391Surplus credited to minority interests(note 13) - - 195 9,583 - 710 - 10,488 ----- ----- ------ ------- ------- ------ ------ -------Net revaluation surplus reflected in fixed assets - - 950 53,315 8,605 13,087 (33) 75,924 ----- ----- ------ ------- ------- ------ ------ ------- Reflected in provisions (note 11) Surplus credited to profit and loss account - - - - - 5,395 (263) 5,132Deficit charged to revaluation reserve (note 12) - - - - - (70) - (70) ----- ----- ------ ------- ------- ------ ------ -------Net revaluation surplus reflected in provisions - - - - - 5,325 (263) 5,062 ----- ----- ------ ------- ------- ------ ------ -------Total revaluation surplus - - 950 53,315 8,605 18,412 (296) 80,986 ===== ===== ====== ======= ======= ====== ====== ======= Valuation--------- The Group's Investment and Operational properties were valued at 30th June 2005by qualified professional valuers working for the company of DTZ Debenham TieLeung, Chartered Surveyors, ("DTZ"), acting in the capacity of External Valuers.All such valuers are Chartered Surveyors, being members of the Royal Institutionof Chartered Surveyors ("RICS"). All valuations were carried out in accordance with the RICS Appraisal andValuation Standards 5th Edition ("the Manual") and the properties were valued onthe basis of Market Value or Existing Use Value of the Properties asappropriate. Market Value is defined in the Manual as the estimated amount forwhich a property should exchange on the date of valuation between a willingbuyer and a willing seller in an arm's-length transaction after propermarketing, where the parties had each acted knowledgeably, prudently and withoutcompulsion. The DTZ valuation is not qualified by any reference to existing oralternative use and implies the value to which a property will derive, havingregard to its most valuable use. Existing Use Value equates to the value asoperating properties of the Group's properties. The valuations of the business centres and leisure properties are based onestimates of the annual maintainable earnings before interest, tax, depreciationand amortisation ("EBITDA") for each property over a ten year cash flow period.These estimates are based on the historic, current and budgeted tradinginformation provided by the Group to DTZ. DTZ also apply a multiplier to theEBITDA at the end of the cashflow forecast to establish an exit value whichreflects the characteristics of the property at that date. The multiplieradopted for leasehold properties reflects the term remaining before leaseexpiry, the obligations contained within the leases and the possibility that thelandlord might seek repossession on statutory grounds at the expiry of thecontracted term. DTZ apply a market discount rate to the cashflow forecast of the businesscentres and leisure properties to assess the net present value of each propertyasset. This is in line with the method used by the market for the valuation ofthis type of property. In valuing the business centres, leisure properties and hotels, DTZ have hadregard to the valuation of the properties as fully equipped operationalentities, and to their trading potential. The valuation therefore includes theland and buildings; the trade fixtures, fittings, furniture, furnishings andequipment; and the market's perception of the trading potential excludingpersonal goodwill; together with an assumed ability to renew existing licences,consents, certificates and permits. The value excludes consumables and stock intrade. The valuation excludes any goodwill associated with the management by theCompany or its subsidiaries but recognises that the business centre and hotelproperty assets would probably be sold as trading entities. The valuation alsorepresents individual property values and does not reflect any premium valuewhich may be attributable to an acquisition of the properties as a portfolio. Fixed asset properties valued by DTZ at 30th June 2005 totalled £567.5m. Certainother minor fixed assets with a net book value of £2.5m are also included in thetable above. The DTZ valuation is reflected in the net book value of fixedassets of £579.0m and in the onerous short term lease liabilities of £9.0m innote 11 to the accounts. The valuation resulted in a net surplus for the year of£70.5m, of which £65.4m is reflected in fixed assets above and £5.1m isreflected in the movement in provisions in note 11. The Group's tangible fixed assets are located within the United Kingdom. Thehistoric cost of the Group's properties at 30th June 2005 includes capitalisedinterest of £28.0m (2004: £31.1m). 8. DEBTORS---------- 2005 2004 £'000 £'000Due within one yearTrade debtors 14,011 9,742Amounts due on issue of Unsecured Loan Stock 15,481 -Amounts due on property disposals 977 53,738Amounts due from external related parties 4,413 3,170Other debtorsOther taxes and social security 3,608 1,498Other debtors 5,941 4,129Prepayments and accrued income 17,399 18,360Due after more than one yearSecured deposits 83 63Other 2,191 1,063 ------ ------ 64,104 91,763 ====== ====== 9. CREDITORS : amounts falling due within one year-------------------------------------------------- 2005 2004 £'000 £'000 Current portion of secured bank and other loans 8,705 52,9057.5% Unsecured Loan Stock 2005/2006 34,101 -Hire purchase and leasing contracts 3,263 4,158Trade creditors 13,508 13,207Amounts due to related parties - 227Other creditorsCorporation tax 1,533 1,992Other taxes and social security 6,760 3,155Other creditors 21,116 22,320Accruals 24,976 27,245Deferred income 2,023 1,424 ------- ------- 115,985 126,633 ======= ======= 10. CREDITORS : amounts falling due after more than one year------------------------------------------------------------ 2005 2004 £'000 £'000 9.75% Unsecured Loan Stock 2009/2012 30,000 -7.50% Unsecured Loan Stock 2005/2006 - 30,386Bank loans (secured) 338,671 424,012Other loan borrowings 4,855 6,475Less issue costs (3,107) (3,978) -------- ------- 370,419 456,895Hire purchase and leasing contracts 320 3,327Amount due to related parties - 1,725Other creditors 1,746 66 -------- ------- 372,485 462,013 ======== ======= Analysed as:Loans due after more than one year 370,419 456,895Other long term liabilities 2,066 5,118 -------- ------- 372,485 462,013 ======== ======= 11. PROVISIONS FOR LIABILITIES AND CHARGES------------------------------------------ The movements on provisions for liabilities and charges during the year ended30th June 2005 were as follows:- -----------------------30th June 2005------------------------ Properties held at European 30th June Deferred negative closure Other 2004 Taxation values provision Provisions Total Total £'000 £'000 £'000 £'000 £'000 £'000Group At 1st July 2004 - 14,799 4,900 882 20,581 37,814 Potential tax on short-term timing differences (46) - - - (46) 3,012 Trading tax losses and accelerated capital allowances 46 - - - 46 (3,012) Transfer from tangible fixed assets for properties previously carried at positive values - 508 - - 508 (5,994) Disposals of European properties - - - - - (8,224) Net revaluations surplus on properties held at negative values - (5,062) - - (5,062) (2,948) Amortisation during year of provision for properties held at negative values - (1,268) - - (1,268) (1,661) Net increase/(decrease) in other provisions during the year - (17) - (536) (553) 1,594 ---- ----- ----- --- ------ ------At 30th June 2005 - 8,960 4,900 346 14,206 20,581 ==== ===== ===== === ====== ====== Certain short leasehold interests in the Group's Business Centre division havenegative values and are included in the table above. These principally reflectthe onerous cost of future lease obligations and are therefore recorded asprovisions at the year end. The deferred taxation balances at 30th June 2005 and at the previous year endarose as follows:- Amount Amount Amount not Amount not provided provided provided provided 2005 2005 2004 2004 £'000 £'000 £'000 £'000 Group Short term timing differences 5,384 - 5,430 -Accelerated capital allowances 1,873 (6,543) 835 (6,388)Trading tax losses (7,257) (14,175) (6,265) (22,832)Potential tax on property valuation surplus eligible for rollover relief - 10,157 - 5,365 ----- ------ ----- ------At 30th June 2005 - (10,561) - (23,855) ===== ====== ===== ====== 12. MOVEMENT ON RESERVES------------------------ Share Capital Profit premium redemption Revaluation Other and loss account reserve reserve reserves account £'000 £'000 £'000 £'000 £'000Group At 1st July 2004 79,364 15,650 105,535 1,379 (157,358)Loss retained for the year - - - - (8,625)Revaluation surplus for the year - - 59,321 -Transfer on sale of properties during the year - - (33,136) - 33,136Transfer of depreciation on revalued tangible fixed assets - - (1,653) - 1,653Issue of ordinary shares 150 - - - -Purchase of ordinary shares for cancellation - 325 - - (441)Goodwill crystallised during the year - - - 404 (404)Currency translation differences - - - - (6) ------ ------ ------- ----- -------At 30th June 2005 79,514 15,975 130,067 1,783 (132,045) ====== ====== ======= ===== ======= During the year ended 30th June 2005 there was no movement on the merger reserveof the Group. 13. EQUITY MINORITY INTERESTS----------------------------- The movements in equity minority interests of the Group during the year ended30th June 2005 arose as follows:- Add minority Less Add/(less) share of distributions minority valuation and other At share of surplus movements At 1st July profit/(loss) for the during the 30th June 2004 for the year year year 2005 £'000 £'000 £'000 £'000 £'000Group Hotel Investments - 140 Park Lane Limited 6,868 (473) 5,824 - 12,219 Hotel Investments - West India Quay 4,441 (899) 2,904 - 6,446 Liberty Plc 16,008 (971) 1,782 (261) 16,558 West India Quay apartments 13,506 1,251 - - 14,757 Others (70) (10) (22) 164 62 ------ ----- ------ --- ------ 40,753 (1,102) 10,488 (97) 50,042 ====== ===== ====== === ====== 14. EQUITY SHAREHOLDERS' FUNDS PER SHARE---------------------------------------- The equity shareholders' funds per share figures of the Group are calculated bydividing the equity shareholders' funds at the year end by the number of sharesin issue at that date. They are calculated as follows:- 2005 2004 £'000 £'000 Equity shareholders' funds per consolidated balance sheet 159,522 108,873 ======= ======= '000 '000 Number of ordinary shares in issue at year end 109,650 109,800 ======= ======= Equity shareholders' funds per share 145p 99p 15. NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES------------------------------------------------------- Year ended Year ended 30th June 30th June 2005 2004 £'000 £'000 Group operating profit 22,643 26,094Write back of provisions against fixed assets made in earlier years (11,181) (4,805)Depreciation of fixed assets, less amortisation of provisions for properties held at negative values 15,942 16,032Currency translation differences (22) -Decrease in properties held for resale and 19,681 19,634 developments in progressDecrease/(increase) in debtors 28,870 (45,866)Increase in stock (423) (807)Decrease in creditors (13,231) (29,735) ------ ------ 62,279 (19,453) ====== ====== The net cash inflow from operating activities attributable to the Hotel du Vinbusiness acquired during the year was £3.4m. 16. RETURNS ON INVESTMENTS AND SERVICING OF FINANCE--------------------------------------------------- Year ended Year ended 30th June 30th June 2005 2004 £'000 £'000 Interest received 1,583 1,581Interest paid (41,390) (45,439) ------ ------ (39,807) (43,858) ====== ====== 17. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT, LESS SALES OF FIXED ASSETS---------------------------------------------------------------------------- Year ended Year ended 30th June 30th June 2005 2004 £'000 £'000 Purchase of tangible fixed assets (19,924) (33,520)Sale of tangible fixed assets 154,578 73,550 ------- ------ 134,654 40,030 ======= ====== 18. ACQUISITIONS AND DISPOSALS------------------------------ Year ended Year ended 30th June 30th June 2005 2004 £'000 £'000 Acquisition of Hotel du Vin Limited (64,908) -Closure of MWB Business Exchange Europe Limited - (8,651) ------ ----- (64,908) (8,651) ====== ===== 19. FINANCING------------- Year ended Year ended 30th June 30th June 2005 2004 £'000 £'000 Loans drawn down 134,520 161,412Loans repaid (231,095) (121,076)Net decrease in hire purchase and leasing contracts (3,902) (10,767)Issue of ordinary shares 400 -Purchase of ordinary shares in the Company (441) -Distributions to equity minority interests (246) (305)Investment/(distributions) to non-equity minority interests (124) 10 ------- ------ (100,888) 29,274 ======= ====== 20. INCREASE/(DECREASE) IN CASH DURING THE YEAR----------------------------------------------- Movement Movement 30th June during 30th June during 30th June 2005 year 2004 year 2003 £'000 £'000 £'000 £'000 £'000 Cash 39,537 (9,478) 49,015 (3,344) 52,359Hire purchase andleasing contracts (3,583) 3,902 (7,485) 10,767 (18,252)Bank loans (342,649) 122,170 (464,819) (33,904) (430,915)Unsecured Loan Stock (64,101) (33,715) (30,386) (16,898) (13,488)Other loan borrowings (6,475) 8,120 (14,595) 7,905 (22,500) ------- ------ ------- ------ -------Net debt (377,271) 90,999 (468,270) (35,474) (432,796) ======= ====== ======= ====== ======= 21. FINANCIAL INFORMATION------------------------- The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 30th June 2005 or 2004 but is derivedfrom those accounts. Statutory accounts for 2004 have been delivered to theRegistrar of Companies, and those for 2005 will be delivered following theCompany's Annual General Meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. 22. DESPATCH OF ACCOUNTS------------------------ A copy of the above document has been submitted to the UK Listing Authority, andwill be available for inspection at the UK Listing Authority's Document ViewingFacility, which is situated at the Financial Services Authority, 25 The NorthColonnade, Canary Wharf, London E14 5HS, telephone number 020 7676 1000. The audited accounts of the Company are expected to be sent to shareholdersduring October 2005. Thereafter copies will be available from the CompanySecretary, City Group P.L.C. at the Company's registered office, 30 City Road,London EC1Y 2AG. This information is provided by RNS The company news service from the London Stock Exchange
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Share Price:
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