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Marylebone Warwick Balfour Grp PLC21 March 2007 FOR IMMEDIATE RELEASE21st March 2007 MARYLEBONE WARWICK BALFOUR GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE EIGHTEEN MONTHS ENDED 31st DECEMBER 2006 HIGHLIGHTS MWB GROUP PLC------------- • Share price increase to 243p, a rise of 127% over eighteen months to 31st December 2006, reflecting strong growth achieved by the Group. • Remaining realisation programme extended to December 2008. • 29.4m shares purchased by the Company, returning £56.6m to shareholders. • EBITDA from core operating businesses of £47.9m during eighteen months to 31st December 2006; £33.8m for year to December 2006 against £19.3m for year to June 2005. • Pre-tax profit of £11.4m for eighteen months to 31st December 2006 against loss of £15.6m for year to June 2005. • Net borrowings greatly reduced to £244m in comparison to £382m at 30th June 2005. • Adjusted equity attributable to shareholders, reflecting net unrealised surplus over book value of AIM listed subsidiaries amounts to £149m or 185p per share. • Equity attributable to shareholders increased by 22% to 123p per share at 31st December 2006, up from 101p at June 2005. "The past 18 months have been very satisfactory, with all parts of the Groupperforming well. Against this background I continue to view the future withconfidence". MALMAISON AND HOTEL DU VIN-------------------------- • 17 operating hotels at 31st December 2006: 9 Malmaison and 8 Hotel du Vin. • New opening at Liverpool in January 2007. • 7 further new hotels under refurbishment - 2 Malmaison and 5 HdV. • Revenue of £115.1m for the eighteen months to 31st December 2006; £79.1m for year to 31st December 2006 in comparison to £57.1m for the year to June 2005. • Revenue on like-for-like basis (ie excluding new hotel openings) for the year to December 2006 up 6% on comparative year. • EBITDA of £34.5m for eighteen months to December 2006. EBITDA of £23.4m for year to December 2006 shows significant increase over £16.2m for year to June 2005. • Average room rate for eighteen months and year to 31st December 2006 rose by 5% to £106 in comparison to £101 for year to June 2005. • Spend per available room for eighteen months was £165, representing a 7% increase over year to June 2005. • Average occupancy during eighteen months to 31st December 2006 advanced to 81% despite absorbing increased capacity from new operations at Oxford and Glasgow. "While the Board is always cautious about being over-optimistic, we do view thecurrent year with high expectations as the business continues to improve andinnovate". MWB BUSINESS EXCHANGE PLC------------------------- • Successful AIM Admission - raised £15m before costs through placing of 18.75m shares. • EBITDA for eighteen months to 31st December 2006 of £12m and for year to December 2006 of £9.3m. • Pre-tax profit of £10.2m for the eighteen months to 31st December 2006 and £8.0m for the twelve months to December 2006. • Annualised Revenue per Available Workstation (REVPAW) increased by 8% from £6,780 in June 2005 to £7,300 in December 2006. • Annualised Revenue per Occupied Workstation (REVPOW) increased from £8,400 in June 2005 to £9,500 in December 2006. • New Business Exchange centres opened at Cannon Street, Cavendish Square and Tottenham Court Road in London, as well as Leeds and Sheffield, while existing Birmingham centre has been doubled in size. • Since 31st December 2006, new centre opened at London Bridge and a further opening in Baker Street next month. "Our flotation enabled the company to lay foundations for a sustainableexpansion programme that will ensure the next stage of our development. Webelieve we have the right business model in place to enable us to continuegrowing the business and to deliver enhanced shareholder value both in the shortand medium term". LIBERTY PLC----------- • Group sales for eighteen months to December 2006 were £67.3m. For the year to December 2006, sales maintained at £45m, despite 20% less trading area following move out of Regent Street space. • Flagship store sales for year to December 2006 at £31.6m - up 6.4% compared to prior period. • Strong performance from Menswear up 14% to in year to December 2006 compared to prior period, with positive increases in Ladieswear and Accessories. • Liberty of London branded luxury goods sales continuing to advance. • Progression of international launch of Liberty of London brand - discussions regarding a Japanese distribution agreement are progressing with a view to launching the range in Autumn 2008. "We believe we are in the process of creating the team that will establishLiberty as a global luxury brand and a profitable business. That team is workingtogether to produce the right designs and products in an environment that isattractive to our increasingly expanding and loyal customer base. With that inmind, the Board of Liberty views the future with cautious optimism." CHAIRMAN'S STATEMENT-------------------- I am delighted to report on a period of further progress for the eighteen monthsended 31st December 2006. This has been a period where all divisions of thebusiness have made substantial advances, whilst at the Group level we haveprofitably sold two of our hotel investments and returned cash to shareholdersthrough our successful Tender Offer. This statement covers the audited accounts for the eighteen months to 31stDecember 2006 and the comparative period for the year ended 30th June 2005. Insome instances, where relevant, I have also commented on the year to December2006 and its performance relative to the previous 12 months to 31st December2005. I am pleased to report profits before tax for the eighteen months ended 31stDecember 2006 of £11.4m. This translated into pre-tax profits for the year to31st December 2006 of £8.7m compared to a pre-tax loss of £15.6m for theprevious audited year to 30th June 2005. The eighteen month's performance is, inthe main, attributable to improvements in the operating performance of ourbusinesses, some £11.9m of profits from property and subsidiary company salesand a substantial reduction in finance costs following repayment of nearly £140mof debt. After minority interests, earnings per share were 2.1p for the eighteenmonths ended 31st December 2006 and 0.9p for the year ended 31st December 2006,against losses per share of 13.8p for the year to June 2005. During the eighteen month period, equity attributable to shareholders of theCompany increased by 22% from 101p to 123p per share. This is before takingaccount of the uplift in value of the Group's shareholdings in its two AIMlisted subsidiaries, MWB Business Exchange Plc and Liberty Plc less incentivespayable on realisation. After taking into account this net uplift, Adjustedequity attributable to shareholders of MWB Group at 31st December 2006 was 185pper share, up from 169p on the same basis at 30th June 2006. Shareholders shouldalso be aware that this figure of 185p per share does not reflect the marketvalue of our Malmaison and Hotel du Vin businesses. The Board is confident thatthe value of the Group's 82.5% interest in the Malmaison and Hotel du Vinbusiness is significantly higher that the £106m, or 132p per share of equityattributable to MWB shareholders at the December 2006 year end. We successfully completed the sale of our two centrally held hotel investments,the Marriott International on Park Lane and the West India Quay MarriottInternational. These two sales generated cash proceeds totalling £215m and a netprofit to the Group above their revalued book values of £9.6m. Our remaininghotel portfolio is now all within our operating business of Malmaison and Hoteldu Vin. The other major corporate activity during this eighteen month period was oursuccessful Tender Offer in October 2006. As a result, the Group purchased forcancellation 14.4m shares at 208p per share for a total cost of £30.1m. Sincethe Tender Offer, MWB's share price has continued to perform strongly and iscurrently 243p reflecting strong investor confidence in our business. The Board believes that the Group's operating businesses are growing well andthere is merit in retaining them until 2008 rather than selling them in 2007. Bythen the businesses should also have completed their current expansion plans.Shareholders wishing to realise their investment, in addition to being able totrade their shares freely in the market, were able to participate in lastOctober's Tender Offer at prices in excess of the original 200p per share targetrealisation price. Shareholders who retained their shares can participate inrealisation of the Group's assets through to the end of 2008. The term of theGroup's Business Plan was therefore extended to 31st December 2008 to reflectthe extended Group strategy and was notified to shareholders at the time ofannouncement of the Second Interim Accounts in September 2006. We have delivered on our original commitment on the funds returned toshareholders to date. The programme has another 21 months to run and wetherefore continually examine opportunities to return funds to shareholdersearlier than originally planned if business opportunities arise. We are alsomindful of market conditions, both now and in the future, and of the expansionprogrammes of our operating businesses. Turning to the Group's operating businesses, it is pleasing to report thecontinued progress at Malmaison and Hotel du Vin where we have seen growth inoccupancy and revenues. Over the eighteen months to 31st December 2006 revenuewas £115m, with turnover of £79m for the year to December 2006 in comparison to£57m for the year to June 2005. This re-affirmed the strong growth beingachieved across our Malmaison and Hotel du Vin business. Like-for-like sales (ieexcluding new hotel openings) rose by a pleasing 6%. EBITDA was £34.5m for theeighteen months ended 31st December 2006 and it advanced to our highest annuallevel of EBITDA of £23.4m for the year ended 31st December 2006, against £16.2mfor the year to June 2005. These highly successful hotel brands are among the UK's leading four-star chainsthat consistently deliver both high quality service and value to a continuinglyloyal customer base. Our expansion programme is developing well and weanticipate that by the end of 2008 we will be operating a total of 27 hotelsthroughout the UK. I can also report on a similar success at our serviced office subsidiary, MWBBusiness Exchange, which was listed on AIM in December 2005. Its share pricesince has more than doubled to 174p and there has been a strong growth in itscash generation as measured by its EBITDA. For the eighteen months ended 31stDecember 2006 this totalled £12.0m and £9.3m for the year ended 31st December2006. This strong growth reflects the consolidation of our position as thesecond largest UK operator of flexible business space. The flotation alsoenabled Business Exchange to repay all its debt and today the company continuesto operate free of any debt finance. Our other listed subsidiary Liberty Plc continues to progress, maintaining salesacross its whole business of £67.3m for the eighteen months ended 31st December2006, equating to £44.6m for the year then ended. This is a credible performanceas the business is trading from over 20% less space following its move out ofRegent Street in early 2006. In the four week period running up to Christmas2006, sales volumes at Liberty were at record levels. The re-fit of the CentralAtrium for our Liberty of London luxury brand has received high acclaim, thebrand continues to be well received among customers and it is growing instrength as well as product depth. The past 18 months have been very satisfactory, with all parts of the Groupperforming well. Against this background I continue to view the future withconfidence. Eric SandersonChairman21st March 2007 MALMAISON AND HOTEL DU VIN OPERATING REVIEW------------------------------------------- The combined Malmaison and Hotel du Vin brands continue to go from strength tostrength and further enhance their reputation as the leading UK hotel lifestylebrands. The eighteen months to December 2006 produced record levels ofoccupancy, higher average room rates and increased guest total spend peravailable room, despite further hotel openings. Our stated expansion programme is well underway and new hotels have been openedin Oxford and Glasgow and, since the period end, in Liverpool. Following on fromits highly successful launch in November 2005, our Malmaison Oxford has beentrading extremely well throughout 2006. One Devonshire Gardens in Glasgow, one of the UK's first boutique hotel foundedin 1984, was acquired in July 2006 and acts as the catalyst for awareness ofHotel du Vin in the north of the country. We re-branded the hotel in Septemberas Hotel du Vin at One Devonshire Gardens and re-opened with the original 35rooms and bistro. Here we are currently implementing a refurbishment programmethat will expand the capacity to 49 rooms by the end of March 2007. The current financial year started well with another successful opening atMalmaison Liverpool in January. The outlook for the remainder of 2007 isexciting, as we anticipate new HdVs in Cambridge, Cheltenham and York, adding afurther 135 rooms to the inventory, and a new 75 room Malmaison in Reading,which was formerly the Great Western Hotel. In addition sites have been acquiredfor new Hotel du Vin in both Newcastle and Edinburgh, providing an additional 89rooms, and a further 82 room Malmaison in Aberdeen. Other sites are undernegotiation in Chester and Poole and we are exploring further opportunities inDurham, Exeter and in the West End of London. When we have completed this current expansion programme by the end of 2008, theMalmaison Group will comprise a total of 27 operating hotels and we continue toseek out further opportunities. Our results reflect the increasing popularity of our hotels and a buoyanteconomy. Total revenue for the eighteen months to 31st December 2006 was £115m,with revenue for the twelve months to December 2006 of £79.1m in comparison to£57.1m for the year to 30th June 2005. On a like-for-like basis (ie excludingnew hotel openings), revenue in the 12 months to December 2006 rose by apleasing 6% over the same period last year. As a result, EBITDA was £34.5m forthe eighteen months ended 31st December 2006 and this advanced to our highestannual level of £23.4m for the year ended 31st December 2006, against £16.2m forthe June 2005 year. Importantly, average room rates across the group showed a further 5% increaseover the year to December 2006 of £106, in comparison to £101 for the year toJune 2005. At the same time spend per available room rose by 7% to £165,reflecting the increased demand for the group's food and beverage offer. Occupancy has also been increased during the eighteen months ended 31st December2006, up from 79% to 81%, in spite of the additional hotels opened during theperiod. There was a full year's contribution from Oxford and five months from thenew Hotel du Vin in Glasgow, One Devonshire Gardens. During the year ended 31stDecember 2006, occupancy on a like-for-like basis (ie excluding new hotelopenings) was more than 2% higher at 81% than during the same period last year. One of the most important aspects of any hospitality business is the quality ofthe staff and managers within it. It gives me great pleasure to report that overthe year to December 2006 the Malmaison Group has won no less than 26 nationaland international hotel and hospitality awards. These included Malmaison beingvoted the AA Hotel Group of the Year and Hotel du Vin being awarded theGuardian/Observer Travel Best UK Hotel Group. The Group also won awards for its staff training and development and was votedas the best company to work for in the hospitality sector, while Sean Wheelerour People Development Director received the Best Human Resources Director awardfrom the Hotel & Caterer magazine. This is true industry recognition that the group is one of the UK's leadinghotel businesses. But it is also recognition that the people who deliver theMalmaison service and the "dare to be different" philosophy we follow, continueto demonstrate their skill and expertise not only to our customers but also tothe broader hospitality industry. As such I would like to say a special thankyou to all Malmaison and Hotel du Vin staff and managers for their hard workover the 18 months under review and for making all our customers feel so specialthat they return to us on such a regular basis. We are very excited about the future for the Malmaison Group. We have asustainable expansion programme underway with 8 new hotels coming on stream overthe next 18 months. Our business is not dependent on either business orinternational leisure travellers, and I am pleased to say we attract a widerange of people as guests in our hotels. While the Board is always cautious about being over-optimistic, we do view thecurrent year with high expectations as the business continues to improve andinnovate. MALMAISON AND HOTEL DU VIN - KEY FINANCIAL HIGHLIGHTS----------------------------------------------------- Malmaison has expanded organically and by acquisition of further operatinghotels during the period under review. The key performance indicators for thebusiness, together with its trading and balance sheet performance in recentperiods, are summarised below:- Eighteen months ended Year ended Year ended 31st December 31st December 30th June 2006 2006 2005 ------------- ------------- ----------Malmaison---------Total turnover £'000 70,612 48,912 38,723Average occupancy for period % 79 79 78Average room rate for period £ 106 107 101EBITDA £'000 17,316 9,670 11,953Number of operating hotels at period end 9 9 8 ====== ====== ====== Hotel du Vin------------Total turnover £'000 44,446 30,189 18,382Average occupancy for period % 85 84 82Average room rate for period £ 116 118 110EBITDA £'000 17,147 13,719 4,230Number of operating hotels at period end 8 8 7 ====== ====== ====== Combined Malmaison and Hotel du Vin-----------------------------------EBITDA £'000 34,463 23,389 16,183Pre-tax profit £'000 7,480 5,101 333Total recognised income and expense £'000 24,085 25,946 23,639 ====== ====== ====== 31st December 31st December 30th June 2006 2005 2005 ------------- ------------- --------- Balance sheet composition -------------------------Property, plant and equipment £'000 336,958 272,328 251,855 Debt £'000 (199,093) (184,931) (169,494) Equity attributable to shareholders of MWB Group in Malmaison and Hotel du Vin £'000 106,380 76,223 81,248 Equity attributable to shareholders of MWB Group in Malmaison and Hotel du Vin, in pence per MWB Group share Pence 132p 70p 74p ====== ====== ====== MWB BUSINESS EXCHANGE PLC OPERATING REVIEW------------------------------------------ I am pleased to report on what is MWB Business Exchange's first year as a publiccompany. We gained our listing on the Alternative Investment Market in December2005 with a Placing at 80p per share and since then the share price has more thandoubled to its current level of 174p at the date of this report. The year to 31st December 2006, forming part of the 18 month results reportedtoday, has been a highly successful period for Business Exchange. Our strategyhas been to focus expansion and growth in the key Central London market togetherwith selected regional cities where there is known demand for the services thatBusiness Exchange provides. At the same time under performing regional centreshave been closed whilst we have continued to expand our increasingly successfulmeeting and conference rooms offer. Overall there has been a very satisfactory uplift in EBITDA to £12.0m for theeighteen months ended 31st December 2006. This resulted in EBITDA of £9.3m forthe year to December 2006, reflecting our position as the second largest UKoperator of flexible serviced space. Our results were produced from a healthyrise in income, which totalled £118.2m during the eighteen months ended 31stDecember 2006 and £82.3m for the year to December 2006, in comparison to £59.8mfor the year to 30th June 2005. In turn, pre-tax profits for the eighteen months to end December 2006 were£10.2m and £8.0m for the year then ended. We are also pleased to confirm thatMWB Business Exchange has today announced payment of its maiden dividend as apublic company, in line with indications given at the time of the Company'sAdmission to AIM in December 2005. This will total £1.2m, or 1.79p per MWBBusiness Exchange share, and is payable in May 2007. What is particularly pleasing is that this performance has been delivered by ourmature centres, which have been open a number of years. These give a clearindication, as well as comparison, of underlying performance during the period.Occupancy at 31st December 2006 in the mature centres has been maintained at thesame level of 80% at 30th June 2005 and all other key performance indicators areup on the previous year. One of the key financial benefits of our December 2005 AIM float was that themoney raised enabled us to repay the £5.8m of debt and £3.0m of intergroupfunding we had drawn at that time, whilst also providing us with finance forexpansion. We have also completed repayments of the £1.7m outstanding on ourleasing finance, so that we remain debt free right across the business. Apartfrom strengthening our finances, this also means that our strong EBITDA producesan equally strong cashflow. As a result, our financial position continues tostrengthen, thus enhancing opportunities for further growth. As I have indicated earlier, at the heart of our improving performance wasBusiness Exchange's increasing focus on the Central London market which haswitnessed a strong rental revival over the past year. This reflects increaseddemand for Central London offices, particularly in the West End, where we arewell represented, and also in the City. We are committed to expanding our Business Exchange four and five-star offer inthe right locations and at the right time. Elsewhere we are continuing to growour City Executive Centre three-star operation, which is gaining ground inregional locations. As I have stated before, our key target market is the smaller and medium sizedbusinesses, (the SMEs) while aiming to ensure that individual clients do notoccupy more than 15% of our total workstation inventory in any one building. While the market for Central London offices has been particularly buoyant during2006 we have been able to secure a number of buildings in excellent locationsboth in the West End and the City. Over the eighteen months ended 31st December2006, we opened new centres in London at 60 Cannon Street, which is replacingour existing centre at 78 Cannon Street when the lease expires in August 2007,Cavendish Square and Tottenham Court Road. We also opened further centres inLeeds and Sheffield. Since the year-end we have opened a new centre at LondonBridge and next month sees a further opening in Baker Street with furtherCentral London leases and regional Operating and Management contracts in thepipeline. All the new leases are Business Exchange four/five star centres whileour City Executive Centre three-star brand has also taken on managementcontracts in London Wall and Liverpool. During the period we closed a small number of older centres where the locationsor the buildings do not reflect our current offer. These closures includedManchester Deansgate and Edgware, where our leases were successfully assigned,and Bristol where the management contract ended. In the current year we expectto close 78 Cannon Street and end our management contract at Old Bailey, both ofwhich will be closed as a result of our landlords redeveloping their sites. As a result, at the year-end we operated 55 centres providing a total of over14,000 workstations. Our newer centres have established themselves very quicklyand we are confident that they will be earnings enhancing in the current year to31st December 2007. We have also implemented a number of initiatives reflecting our strategy ofcontinuing to work closely with our client base to provide an environment thatis ever more attractive to them. Typically, all our new centres are unbrandedand have been designed with a more contemporary feel. This approach is beingadopted throughout all Business Exchange centres and is proving very popularwith clients. The launch of the customer service initiative, "We're the business", has beensuccessful with both staff and customers alike. It re-emphasises the serviceorientation of our approach by adopting many of the best characteristics of thehospitality industry. In many ways it brings our frontline staff even closer, inservice delivery terms, to our clients in each centre. The success of theseinitiatives is reflected in the Group's key performance indicators such as the13% uplift in revenue per occupied workstation to £9,500 at the year end, from£8,400 at 30th June 2005. In addition we have strengthened our operationalmanagement team, as well as making further key appointments. Elsewhere we have continued to focus on lifting contributions from our meetingand conference room division. We have invested in improving our offering and theimpact has been a substantial advance in income generated from this source. Overthe year to 31st December 2006 the division generated a 57% rise in income to£7.7m from £4.9m in the year to December 2005 and we expect this to continue asour newer centres gain market penetration. Our flotation enabled the Company to lay foundations for a sustainable expansionprogramme that will ensure the next stage of our development. As a result,Business Exchange's first year as a listed company has been exciting and we areoptimistic about the future. We believe we have the right business model inplace to enable us to continue growing the business and to deliver enhancedshareholder value both in the short and medium term. MWB BUSINESS EXCHANGE PLC - KEY FINANCIAL HIGHLIGHTS---------------------------------------------------- MWB Business Exchange Plc operates in four distinct areas; four/five-star MWBBusiness Exchange Centres; mid-market City Executive Centres; Corporate PropertyPartnerships; and Meeting and Conference Rooms. The key performance indicatorsfor this business and the trading and balance sheet performance in recentperiods, are summarised below:- Eighteen months ended Year ended Year ended 31st December 31st December 30th June 2006 2006 2005 ------------- ------------- ----------Operating statistics--------------------Turnover £'000 118,157 82,306 59,806Occupancy at period end % 77* 77* 80REVPAW per month at period end £ 7,300 7,300 6,780REVPOW per month at period end £ 9,500 9,500 8,400EBITDA £'000 12,029 9,307 2,260Pre-tax profit/(loss) £'000 10,215 8,043 (4,090)Number of operating centres at period end Number 39 39 33Number of operating and management agreements at period end Number 16 16 13 ====== ====== ====== *Reduction in occupancy caused by new centres open less than 12 months (maturecentre occupancy at 80%). Financial performance---------------------Pre-tax profit/(loss) £'000 10,215 8,043 (4,090)Recognised income and expense £'000 10,161 8,048 (3,877) 31st December 31st December 30th June 2006 2005 2005 ------------- ------------- ---------Balance sheet composition------------------------- Property, plant and equipment £'000 30,691 17,102 15,688 Net cash/( debt) £'000 2,162 7,530 (14,009) Adjusted equity attributable to shareholders of MWB Group in MWB Business Exchange Plc £'000 68,212 42,632 (22,576) Adjusted equity attributable to shareholders of MWB Group in MWB Business Exchange Plc, in pence per MWB Group share Pence 85p 39p (20p) ====== ====== ====== LIBERTY PLC OPERATING REVIEW---------------------------- Liberty, the iconic London emporium, continued its upward progress that Ireported in September 2006 with strong sales growth in the second half of thecalendar year as the business shrugged off the difficulties seen in other partsof the retail sector. It is worth re-stating that this continued improvement hasbeen achieved against a background of 20% less sales space at Liberty, followingthe closure of the Regent Street frontage in March 2006, and a generally toughretailing climate. Before commenting on the business performance in more detail, it is worthremembering that during 2006 we changed our year end from 30th June to 31stDecember. For ease of understanding of our current underlying performance, wehave referred in this statement primarily to the proforma unaudited results forthe twelve months ended 31st December 2006 that are derived from the auditedeighteen months results and their comparison to the results for the year ended31st December 2005. Virtually all aspects of the business performed well, with flagship store salesat £47.9m for the eighteen months to 31st December 2006. Over the twelve monthsto 31st December 2006, flagship store sales were up an important 6.4% at £31.6mfrom £29.7m in the previous year. The Liberty group comprises three operating businesses - Retail, Fabric andLiberty of London (our luxury branded goods division). Across the group, EBITDAbefore exceptionals and brand investment for the eighteen months ended 31stDecember 2006 was £1.4m. For the year ended 31st December 2006, EBITDA beforeexceptionals and brand investment was £1.1m. Sales across the business totalled£67.2m for the eighteen months ended 31st December 2006 and £44.6m for the yearto 31st December 2006, the latter being in line with the £44.8m of sales revenuefor the year to 30th June 2005. Pre-tax results after brand expenditure for theeighteen months ended 31st December 2006 showed a loss of £2.3m, whichtranslates into a loss of £2.6m for the year ended 31st December 2006. Alongside this solid improvement in trading results has been a strong rentalgrowth combined with further yield compression in the West End of London whereLiberty is based. This has resulted in the valuation of our freehold property inGreat Marlborough Street (the Tudor Building) increasing from £26m at 30th June2005 to £35m at 31st December 2006. This extra value underpins the furthergrowth being achieved across the business. Within the flagship store, ladieswear and accessories continued to improveduring the eighteen months to December 2006. Menswear produced a dramatic 14%sales increase during the year to December 2006 in comparison to the same periodlast year, as the impact of our new merchandising and buying regimes was felt. I am also delighted to report that our luxury brand, Liberty of London,continues to make a tremendous impact among our customers. Sales of our Libertyof London product, now relocated to our central atrium, grew by nearly 40% to£1.3m for the year to December 2006, as our leather goods range continued tofind favour with a highly discerning retail public. One of this year's "musthave" handbags was our Carriage Bag with a £695 price tag, and this flew out ofthe store in impressive style. There is little doubt that our move into the luxury branded goods market hasbeen a great success and under the guidance and design flair of CreativeDirector Tamara Salman, the Liberty of London label is going from strength tostrength. This area of our business was reinforced in August 2006 with theappointment of James Crespo, recruited from Burberry Prorsum, as CommercialDirector, who is looking to expand the label outside our flagship store. Reflecting the importance of Liberty of London to our business, we re-opened thenew look central atrium in the flagship store in February 2007 devoted entirelyto our luxury label. Significantly this re-fit of the central atrium has beendesigned, and branded, in a way which enables it to be easily replicatedelsewhere. This could take the form of either a "store within a store" concept,or a stand-alone store devoted entirely to the Liberty of London range, eitherelsewhere in London or abroad. Discussions are ongoing regarding a distributionagreement in Japan, which we hope to conclude during the second half of theyear. This will allow us to capitalise on the significant Liberty brandawareness among local consumers. Our fabric business has been particularly successful with sales, including ourJapanese venture, at £12.0m for the year to end December 2006 against £12.1m forthe previous 12 month period. This was an extremely creditable performance asSterling strengthened by 12% against the Yen during the year under review. Thistranslated into EBITDA for our fabrics business of £2.0m for the 12 months to31st December 2006, against £1.8m for the comparative 2005 period. Over theeighteen months to 31st December 2006, fabric sales totalled £17.7m. Our Japanese venture expires this year and we have been actively organising thenext phase of our business there. In the future our global fabric business willbe run from London and as part of this re-organisation, I am delighted to reportthat we have recruited Kirstie Carey to head up the division's sales andmarketing activities. She is looking to open new markets for our fabricsbusiness, particularly for our high quality shirting fabrics, as well as lookingto diversify into new base cloths and special designs. Throughout the business we have been looking to strengthen our management andover the past year there have been a number of key appointments aimed atcreating an integrated team that will mastermind and oversee Liberty's continuedbusiness programme. It is particularly pleasing that we have also been able topromote a number of established executives from within the business to keymanagement positions during the past year. This includes Mandy Brooks who joined Liberty two and half years ago from LKBennett where she was Retail Director and before that joint managing director ofWhistles. Mandy is being appointed to the Liberty Retail board where she andJane Davies (previously at Selfridges) who has been our Buying and MerchandisingDirector for over three years, will focus on the continuing revival of theflagship store. At the same time Julia Reardon, who also joined us fromSelfridges, has been appointed Head of Retail Operations, and will concentrateon further development of our customer initiatives. Elsewhere I am pleased to report the appointment of Louise Gorringe as head ofLiberty Retail Marketing with overall responsibility for marketing and publicrelations initiatives for the flagship store, with particular emphasis oncustomer events and the increasingly successful Liberty Loyalty Card. Louisejoined the group from our loyalty card partner, Ikano. Also Paul Harris, whojoined the group in July 2006 from Selfridges and Kurt Geiger, has beenappointed Group Financial Controller to continue the improvement in ourfinancial management and performance reporting. Overall we are delighted with the progress being made at Liberty andparticularly as one of our key objectives during 2006 was to establish our pointof difference within our customers' minds and to make the flagship store a trulyretail destination. The extent to which we have achieved that objective can beseen from our sales in the run-up to Christmas when many retailers struggled toattract their normal level of customers. In the four week trading period runningup to Christmas 2006, sales rose by almost 6% in comparison to the same periodin 2005, and we recorded our highest ever normal day's trading, where over twoconsecutive days, sales totalled almost £1m. With our UK operations improving and with an enlarged and capable managementteam now in place, we have been concentrating on expanding our Liberty of Londonbrand. This involves taking the business forwards via an international expansionof the brand and by exploring new ways in which our product can be profitablysold in countries outside the UK. We look forward to reporting on this furtherexpansion in our June 2007 accounts. Liberty has been through a period of major change and re-structuring as we aimto transform the business into a vibrant and dynamic retailer capable ofcompeting globally as well as nationally. We have made tremendous progress inachieving our corporate objectives and, while there is still much work to do, wecould not have delivered that progress without the support, commitment andenergy of Liberty's staff and management. We believe we are in the process of creating the team that will establishLiberty as a global luxury brand and a profitable business. That team is workingtogether to produce the right designs and products in an environment that isattractive to our increasingly expanding and loyal customer base. With that inmind, the Board of Liberty views the future with cautious optimism. LIBERTY PLC - KEY FINANCIAL HIGHLIGHTS-------------------------------------- During the eighteen months ended 31st December 2006, Liberty Plc has continuedits transformation into a dynamic retail destination, underpinned by a strongand expanding retail brand. The historical trading and balance sheet performanceof Liberty Plc is summarised below:- Eighteen months ended Year ended Year ended 31st December 31st December 30th June 2006 2006 2005 ------------- ------------- ----------Financial performance---------------------Turnover £'000 67,250 44,575 44,829 Operating EBITDA before brand expenditure £'000 1,376 1,091 853 Operating loss before profit on sale of properties and trademark, and before brand expenditure £'000 (912) (451) (1,614) Profit on disposal of properties and minor trademark £'000 1,720 - 5,006 Brand expenditure £'000 (2,843) (1,971) (640) Pre-tax loss £'000 (2,293) (2,647) (380) Recognised income and expense £'000 9,854 8,859 3,753 ====== ====== ====== 31st December 31st December 30th June 2006 2005 2005 ------------- ------------- ---------Balance sheet composition------------------------- Intangible asset - brand £'000 18,200 18,200 18,200 Property, plant and equipment £'000 36,587 28,609 27,911 Cash/(debt) £'000 (1,191) 3,892 3,616 Adjusted equity attributable to shareholders of MWB Group in Liberty Plc £'000 44,887 41,009 37,048 Adjusted equity attributable to shareholders of MWB Group in Liberty Plc, in pence per MWB Group Plc share Pence 56p 37p 34p ====== ====== ====== FINANCIAL REVIEWfor the eighteen months ended 31st December 2006------------------------------------------------ INTRODUCTION------------ The Chairman's Statement and Operational Reviews above provide information onthe Group's principal operations and the Board's expectations for the future.This Financial Review covers in greater depth the more significant features ofthe accounts for the eighteen months ended 31st December 2006, which include anindependent valuation of the Group's properties at that date. EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MWB GROUP PLC---------------------------------------------------- During the eighteen months ended 31st December 2006, the Company bought backshares for a total cost of £56.4m, though the resulting reduction in equityattributable to shareholders was largely offset by growth achieved across allareas of the Group. As a result there was a net decrease of only £11.5m inEquity attributable to shareholders of MWB Group Plc. At the per share level,this resulted in a net increase in equity attributable to shareholders by 22pfrom 101p to 123p per share. The movement in Equity attributable to shareholders of MWB during the period issummarised in the following table:- Eighteen months ended 31st December 2006 Pence £'000 per share ----- ---------Equity attributable to shareholders of MWB Group Plc at 1st July 2005 110,802 101p Movements during the period:Revaluation surplus on Group property portfolio 29,009 36p Purchase of Ordinary Shares by the Company (56,437) (34p) Issue of Ordinary Shares by the Company 173 - Gain on minority interests in MWB Business Exchange Plc and Malmaison Holdings Limited 5,510 7p Retained profit 2,129 3p Changes in fair value of derivative financial instruments 4,745 6p Actuarial gain on defined benefit pension schemes 3,407 4p Deferred tax on properties at valuation 227 - Other movements (243) - ------ ---Equity attributable to shareholders of MWB Group Plc at 31st December 2006 99,322 123p ====== === ADJUSTED EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MWB GROUP PLC------------------------------------------------------------- Under Adopted IFRS, the Company's interests in its two listed subsidiaries, MWB Business Exchange Plc and Liberty Plc, continue to be consolidated in theGroup accounts inclusive of their freehold and long leasehold properties atcurrent valuation. However, these property valuations reflect only the valuesof the properties themselves and the accounts do not reflect the current marketvalue of the Group's shareholdings in these two listed subsidiaries. Both subsidiaries are listed on the Alternative Investment Market of the LondonStock Exchange and, therefore, a market value for the Group's shareholding ineach of the two companies is readily available. In order that shareholders are aware of the underlying value of the Group, theincrease in Equity attributable to shareholders of MWB Group Plc as a result ofassessing these two investments by reference to their market value at 31stDecember 2006 and 30th June 2006, are is set out below. 31st December 2006 30th June 2006 Pence Pence per per £'000 share £'000 share ----- ----- ----- -----Equity attributable to shareholders ofMWB Group Plc per accounts 99,322 123p 118,488 125p Unrealised surplus of market value of MWB Group's 67.9% shareholding in MWB Business Exchange Plc. This is based on share price of MWB Business Exchange Plc at 31st December 2006 of 179p per share, and is after deducting deferred consideration payable on realisation of the Group's investment in MWB Business Exchange and divisional bonuses payable on realisation at this value 60,378 75p 39,284 41p Unrealised surplus of market value of MWB Group's 68.3% shareholding in Liberty Plc. This is based on share price of Liberty Plc at 31st December 2006 of 295p per share, after deducting divisional bonuses payable on realisation at this value 11,431 14p 11,889 13p Realised surplus arising on sale of Group's West India Quay hotel announced on 24th July 2005 - - 6,750 7p ------- --- ------- --- 171,131 212p 176,411 186p Less Central Incentive Scheme and Bonus Plan amounts payable on realisation at this value (22,049) (27p) (15,840) (17p) ------- --- ------- ---Total Adjusted equity attributable to shareholders of MWB Group Plc 149,082 185p 160,571 169p ======= === ======= === In addition to the assessment above, shareholders should be aware that theAdjusted equity attributable to shareholders of MWB Group Plc of 185p per shareabove does not reflect the market value of the Malmaison and Hotel du Vinbusiness, as this is not a listed subsidiary for which a market value can bereadily confirmed. The Board is confident that the value of the Group's 82.5%interest in the Malmaison and Hotel du Vin business is significantly higher thanthe £106.4m or 132p per share for this business within Adjusted equityattributable to shareholders of MWB Group Plc, thus demonstrating a furtherenhancement in underlying equity value of the Group above the adjusted figure of185p per share in the table above. The above Adjusted equity attributable to shareholders of MWB Group Plc isanalysed as follows:- 31st December 2006 30th June 2006 Pence Pence per per £'000 share £'000 share ----- ----- ----- ----- Malmaison and Hotel du Vin 106,380 132p 88,188 93pMWB Business Exchange Plc 68,212 85p 44,369 47pLiberty Plc 44,887 56p 40,164 42pHotel investments and West India Quay apartments 4,173 5p 36,327 38pGroup debt and incentive payables, less cash and other assets (74,570) (93p) (48,477) (51p) ------- --- ------- ---Total Adjusted equity attributable to shareholders of MWB Group Plc 149,082 185p 160,571 169p ======= === ======= === PURCHASE OF ORDINARY SHARES BY THE COMPANY------------------------------------------ The Board is continuing to implement the Cash Distribution Programme, whichinvolves distributing surplus funds to Shareholders by means of buy-backs ofOrdinary Shares in the market, tender offers to Shareholders, cashdistributions, demergers, distributions of assets and similar value distributionprogrammes. During the eighteen months ended 31st December 2006, the Company purchased 15million shares in the market involving the payment of £25.8m to Shareholders. Inaddition, in October 2006, the Company purchased 14.4 million shares under theTender Offer, for a total purchase price of £30.1m. Overall the Company haspurchased approximately 60.5 million Ordinary Shares for cancellation under thisprogramme, representing approximately 43% of the issued share capital at thedate of its implementation, returning approximately £70.4 million in cash to Shareholders. The Tender Offer in October 2006 enabled the Company to broaden the return ofcash to include those Shareholders whose shares may not otherwise be purchasedby the Company by means of share buy-backs in the market and who may thereforenot have participated in the Company's returns of capital prior to that date. This has all been reflected in the underlying value of the business, and, theshare price of 243p per share at the date of announcement of these accounts isnow materially in excess of our target level of 200p per share, with overeighteen months still to go in the realisation process. NET ASSET VALUE--------------- The net assets of the Group are financed by Equity attributable to shareholdersof MWB Group Plc and minority interests. The sources of finance of the Group at31st December 2006 in the consolidated balance sheet and at previous period endswere as follows:- 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000 ------------- ------------- --------- Equity attributable to shareholders of MWB Group Plc 99,322 135,528 110,802Minority interests 53,963 53,390 48,890 ------- ------- -------Net asset value at period end 153,285 188,918 159,692 ======= ======= ======= The analysis of net assets in the consolidated balance sheet across the Group'soperations as revealed by the Consolidated Balance Sheet at 31st December 2006,and at previous period ends, is as follows:- Equity attributable to Net assets Less shareholders before (Net debt) Net minority of MWB net debt /cash assets interests Group Plc £'000 £'000 £'000 £'000 £'000 ---------- --------- ------- --------- ---------------At 31st December 2006---------------------Malmaison and Hotel du vin 335,956 (199,093) 136,863 (30,483) 106,380Hotel investments (660) 374 (286) (1,909) (2,195)Liberty Plc 52,423 (1,191) 51,232 (17,776) 33,456MWB Business Exchange Plc 9,515 2,162 11,677 (3,843) 7,834West India Quay apartments 2,721 3,647 6,368 - 6,368Group debt, less cash and other assets (2,297) (50,272) (52,569) 48 (52,521) ------- ------- ------- ------ ------- 397,658 (244,373) 153,285 (53,963) 99,322 ======= ======= ======= ====== ======= Equity attributable toshareholders of MWB Group Plcin pence per share 123p ======= Equity attributable to Net assets Less shareholders before (Net debt) Net minority of MWB net debt /cash assets interests Group Plc £'000 £'000 £'000 £'000 £'000 ---------- --------- ------- --------- ---------------At 31st December 2005---------------------Malmaison and Hotel du Vin 266,602 (184,931) 81,671 (5,448) 76,223Hotel investments 165,965 (105,970) 59,995 (30,182) 29,813Liberty Plc 38,841 3,892 42,733 (15,053) 27,680MWB Business Exchange Plc (2,702) 7,530 4,828 (1,366) 3,462West India Quay apartments 918 2,854 3,772 (1,257) 2,515Group debt, less cash and other assets 21,361 (25,442) (4,081) (84) (4,165) ------- ------- ------- ------ ------- 490,985 (302,067) 188,918 (53,390) 135,528 ======= ======= ======= ====== =======Equity attributable to shareholders of MWB Group Plc in pence per share 124p ======= Equity attributable to Net assets Less shareholders before (Net debt) Net minority of MWB net debt /cash assets interests Group Plc £'000 £'000 £'000 £'000 £'000 ---------- --------- ------- --------- ---------------At 30th June 2005-----------------Malmaison and Hotel du Vin 250,742 (169,494) 81,248 - 81,248Hotel investments 218,087 (140,500) 77,587 (18,566) 59,021Liberty Plc 39,376 3,616 42,992 (15,500) 27,492MWB Business Exchange Plc (8,567) (14,009) (22,576) - (22,576)West India Quay apartments 25,116 (132) 24,984 (14,757) 10,227Group debt, less cash and other assets 17,207 (61,750) (44,543) (67) (44,610) ------- ------- ------- ------ ------- 541,961 (382,269) 159,692 (48,890) 110,802 ======= ======= ======= ====== =======Equity attributable to shareholders of MWB Group Plc in pence per share 101p ======= Sales of properties during the period------------------------------------- In November 2005, we sold our five-star Radisson SAS hotel in Argyle Street,Glasgow for £52.5m, some eighteen months ahead of plan and at a price higherthan its June 2005 valuation. This was followed in May 2006 by the sale of ourfive-star Park Lane Marriott for £105m and in July 2006 by the sale of our WestIndia Quay hotel for £110m. These highly successful transactions have taken our hotel sales over the pasttwo years to more than £340m and our total property disposals during the sameperiod to almost £500m. As a result of these sales, total net debt has beenreduced by £137.9m from £382.3m at 30th June 2005 to £244.4m at 31st December2006. This continued reduction in debt has greatly strengthened the Group'sfinancial position and further underpins the Board's positive view for thefuture of the Group. REVIEW OF PROPERTIES, PLANT AND EQUIPMENT---------------------------------------- Valuation surplus on property portfolio at 31st December 2006------------------------------------------------------------- A valuation of the Group's freehold and long leasehold interests in its propertyat 31st December 2006 was undertaken by DTZ Debenham Tie Leung. This valuationwas performed on the basis of Market Value. The net surplus over previous bookvalue before minority interests for the eighteen months ended 31st December 2006totalled £38.0m, which has been included in these accounts. 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. The valuations exclude the value of any goodwill thatmay arise from the present occupation of the properties and this is not recordedseparately in the accounts of the Group. The valuation of the Group's retail interests includes value ascribed to plant,machinery and fittings forming part of the services and installation of thebuilding, but excludes moveable shop fittings. All property interests owned byMWB Business Exchange Plc are short leasehold interests; these interests are notrevalued at each period end and are recorded at the lower of cost and netrealisable value. Surpluses or deficits arising on valuation of the Group's operational propertiesare transferred to revaluation reserve, while impairment of operationalproperties to below their historical cost is charged directly to the incomestatement. Trading properties and operational properties in the course of construction arerecorded at the lower of cost and net realisable value and are therefore notrevalued upwards in the Group accounts. The reversal of prior period impairments credited to the income statement forthe eighteen months ended 31st December 2006 was £0.3m, and the valuationsurplus credited to the revaluation reserve for the same period was £16.2m.These arose as follows:- Less Net Credited Credited previous Less surplus to to Gross book Gross minority to the income revaluation valuation value surplus interests Group statement reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 --------- -------- ------- --------- ------- -------- ----------- Malmaison 226,880 (211,027) 15,853 (11,228) 4,625 305 4,320Hotel du Vin 21,710 (113,582) 8,128 (5,756) 2,372 - 2,372Hotel investments 193,000 (187,059) 5,941 (1,928) 4,013 - 4,013Liberty Plc 35,000 (26,926) 8,074 (2,558) 5,516 - 5,516Asset management 500 (500) - - - - - ------- ------- ------ ------ ------ --- ------ 577,090 (539,094) 37,996 (21,470) 16,526 305 16,221 ======= ======= ====== ====== ====== === ====== The valuation of the Group's properties at 31st December 2005 (being the date ofthe Group's first Interim Accounts) and at 30th June 2006 (being the date of itsSecond Interim Accounts) included properties that have been sold subsequently bythe Group prior to the end of the eighteen months ended 31st December 2006.Accordingly valuation surpluses that occurred on these properties during the sixmonth periods ended 31st December 2005 and 30th June 2006 increased their bookvalues at those dates and are included in the table above. On subsequent sale,this results in a reduced profit on disposal in the Income Statement and acorrespondingly increased transfer between revaluation reserve and Earningsattributable to shareholders of the Company. Portfolio analysis by division------------------------------ The Group holds its direct property interests principally as non-current assets,with smaller amounts held as trading properties. The Group's property interestsare disclosed in the consolidated balance sheet at 31st December 2006 asfollows:- 31st December 30th June 2006 2005 £'000 £'000 ------------- --------- Investment properties - 4,540Operational properties 336,150 465,859Operational properties in the course of construction 27,144 -Plant and equipment 43,558 66,305Trading properties - 4,099 ------- -------Total property interests at 31st December 2006 406,852 540,803 ======= ======= The above interests are analysed as follows:- Percentage of 31st December 31st December 30th June 2006 2006 2005 £'000 % £'000 ------------ ------------- --------- HotelsMalmaison 212,064 52 171,132Hotel du Vin 124,894 31 80,723 ------- --- ------- 336,958 83 251,855Hotel investments - - 237,796 ------- --- -------Total hotel portfolio 336,958 83 489,651 MWB Business Exchange Plc 30,691 8 15,688 Liberty Plc Liberty store, offices and other properties 36,587 9 27,911 Other 2,616 - 7,553 ------- --- -------Total property interests at31st December 2006 406,852 100 540,803 ======= === ======= REVIEW OF FUNDING AND LOAN FACILITIES------------------------------------- Funding policy-------------- The Group has three principal central facilities available for investment in alldivisions, providing a total of £52m of medium term funds. The balance of theGroup's total loans, amounting to £208m at 31st December 2006, is provided frombank facilities made available to the operating businesses of the Group, themajority of which has been drawn in recent years to acquire the freehold andlong leasehold properties in Malmaison and Hotel du Vin. The Group borrows from banks at fixed and floating rates of interest. Interestrate exposure from floating rate debt is hedged by financial derivativeinstruments where the Board considers that interest rate rises are expected tooccur in the medium term. At 31st December 2006, £72m of the Group's loans wereretained at variable rates and the balance of £189m was swapped into fixed ratefacilities. 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. The Group doesnot use hedging arrangements to speculate on interest rate movements. Derivativeinstruments used by the Board principally comprise interest rate swaps, floorsand collars. The Group's treasury policies are designed to ensure that:- (i) sufficient committed loan facilities are available to support current andfuture business requirements. Cash and loan management is a core feature of theBoard's business model and two year rolling cash flow forecasts, updated on amonthly basis, are controlled by the Executive Directors to manage theserequirements. (ii) the interest cost on Group debt is supported as much as possible frommaintainable income flows, with the retirement of debt matched against forecastcapital inflows over short and medium term capital programmes. (iii) interest rate exposure is managed through a combination of fixed rate debtand interest rate swaps, thus fixing interest rates as much as possible byreference to passing income at the date of drawdown. Net debt-------- In May and July 2006, the Company announced the sales of its Park Lane hotel andits West India Quay hotel subsidiaries, for a gross consideration of £215m.These sales substantially reduced Group debt and strengthened the financialcovenant of the Company. This reduction is demonstrated in the tables below. The Group's loans, borrowings and cash are included in the consolidated balancesheet at 31st December 2006 as follows:- 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000 ------------- ------------- ---------Composition at period end------------------------- Total loans and overdrafts 260,832 338,574 413,225Finance lease obligations - 1,804 3,583Fair value of derivative financial instruments (1,462) 2,535 4,280Long leasehold obligations 710 715 718 ------- ------- -------Total loans 260,080 343,628 421,806Less net cash and overdrafts (15,707) (41,561) (39,537) ------- ------- -------Total net debt at period end 244,373 302,067 382,269 ======= ======= ======= Analysis by operating business------------------------------ Malmaison and Hotel du Vin 199,093 184,931 169,494Hotel investments - net cash (374) 105,970 140,500Liberty Plc 1,191 (3,892) (3,616)MWB Business Exchange Plc - net cash (2,162) (7,530) 14,009Central debt 46,625 22,588 61,882 ------- ------- ------- 244,373 302,067 382,269 ======= ======= ======= Reduction in net debt during the period--------------------------------------- The reduction in total net debt during the eighteen months ended 31st December2006 arose as follows:- Eighteen months ended Six months ended Year ended 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000 --------------- ---------------- ----------Total net debt at start of the period 382,269 382,269 472,499 Debt drawn on expansion of Malmaison and Hotel du Vin 35,184 20,281 69,018 Net (decrease)/increase in listed Loan Stock (34,101) (34,101) 33,715 Net proceeds received from sales of properties, including Argyle Street and Park Lane (210,558) (52,500) (104,405) Net debt repaid on West India Quay development (50,606) (3,710) (66,860) Buy back of ordinary shares 56,382 - - Net cash outflow/(inflow) from other Group operations during the period 65,803 (10,172) (21,698) ------- ------- ------- Total net debt at period end 244,373 302,067 382,269 ======= ======= ======= Average cost of borrowings at period end, inclusive of margin 6.4% 6.4% 7.2% ======= ======= ======= The reduction in average cost of borrowing reflects the repayment of higherinterest rate loans during the period. Net debt relating to Adjusted equity attributable to shareholders of MWB-------------------------------------------------------------------- Certain elements of the Group's net debt have been drawn by subsidiaries thatare not wholly owned by the Group. At 31st December 2006, these comprised theGroup's majority interests in its three operating businesses of MalmaisonHoldings Limited, MWB Business Exchange Plc and Liberty Plc. The net debt relating to Adjusted equity attributable to shareholders of MWBGroup Plc at 31st December 2006 amounted to £211m (30th June 2005: £346m),calculated as follows:- 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000 ------------- ------------- --------- Total net debt as above 244,373 302,067 382,269 Less net debt attributable to minority interests (33,310) (62,590) (36,718) ------- ------- ------- Total net debt attributable to Adjusted equity attributable to shareholders of MWB Group 211,063 239,477 345,551 ======= ======= ======= Gearing------- At 31st December 2006, gearing was 159%, calculated as follows:- 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000 ------------- ------------- --------- Total net debt 244,373 302,067 382,269Net assets 153,285 188,918 159,692Gearing - total net debt divided by net assets 159% 160% 239% ======= ======= ======= REVIEW OF EARNINGS------------------ Results------- The total recognised income and expense for the eighteen months ended 31stDecember 2006, analysed between the share attributable to shareholders of MWBGroup Plc and the share attributable to minority interests, is as follows:- Equity Shareholders Total for Minority of MWB the period interest Group Plc £'000 £'000 £'000 ---------- -------- ------------Eighteen months ended 31st December 2006---------------------------------------Income statement Profit for the period 11,506 9,377 2,129 Credited to equity Revaluation surplus credited to reserves 37,627 8,618 29,009 Deferred tax released on sale of properties 324 97 227 Actuarial gain on defined benefit pension schemes 4,977 1,577 3,400 Change in fair value of derivative financial instruments 5,753 1,008 4,745 All other items (234) (386) 152 ------ ------ ------Total recognised income and expense for the period 59,953 20,291 39,662 ====== ====== ====== Equity Shareholders Total for Minority of MWB the period interest Group Plc £'000 £'000 £'000 ---------- -------- ------------Year ended 31st December 2006-----------------------------Income statement Profit for the period 9,013 8,031 982 Credited to equity Revaluation surplus credited to reserves 19,949 4,402 15,547 Deferred tax released on sale of properties 8,462 7,350 1,112 Actuarial gain on defined benefit pension schemes 4,935 1,577 3,358 Change in fair value of derivative financial instruments 3,997 701 3,296 All other items (169) (208) 39 ------ ------ ------Total recognised income and expense for the period 46,187 21,853 24,334 ====== ====== ====== 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 before minority interests for the eighteenmonths ended 31st December 2006, together with comparative information forprevious periods is summarised below:- Recognised Group Profit/(loss) income and Eighteen months ended revenue EBITDA EBIT before tax expense31st December 2006 £'000 £'000 £'000 £'000 £'000--------------------- ------- ------ ----- ------------- ----------Malmaison and Hotel du Vin Operating income 115,058 34,463 26,401 7,480 24,085 ------- ------ ------ ------ ------Hotel investments Operating income 39,820 13,060 8,098 (571) (247) Sale of Argyle Street hotel - 2,770 2,770 2,770 2,770 Sale of Park Lane hotel - 3,729 3,729 3,729 5,318 Sale of West India Quay hotel - 5,825 5,825 5,825 10,177 ------- ------ ------ ------ ------ 39,820 25,384 20,422 11,753 18,018 ------- ------ ------ ------ ------Liberty Plc Operating income 67,250 1,376 (912) (1,170) 10,977 Sale of minor trademark - 1,720 1,720 1,720 1,720 Expenditure on brand - (2,843) (2,843) (2,843) (2,843) ------- ------ ------ ------ ------ 67,250 253 (2,035) (2,293) 9,854 ------- ------ ------ ------ ------MWB Business Exchange Plc Operating results - leased properties 110,274 11,692 10,083 9,878 9,824 Operating results - operating and management agreements 7,883 337 337 337 337 ------- ------ ------ ------ ------ 118,157 12,029 10,420 10,215 10,161 ------- ------ ------ ------ ------ West India Quay - apartment sales 14,457 4,350 4,350 4,000 4,000Others 4,759 358 163 104 104Group debt less cash and other assets - - - (6,694) (6,694) ------- ------ ------ ------ ------ 359,501 76,837 59,721 24,565 59,528Head office administration - (12,956) (13,169) (13,169) 425 ------- ------ ------ ------ ------ 359,501 63,881 46,552 11,396 59,953 ======= ====== ====== ====== ====== Notes----- 1. The components of the total recognised income and expense are shown in theGroup primary statement. 2. EBITDA = Earnings before interest, taxation, depreciation and amortisation. 3. EBIT = Earnings before interest and taxation. Recognised Group Profit/(loss) income and revenue EBITDA EBIT before tax expenseYear ended 31st December 2006 £'000 £'000 £'000 £'000 £'000----------------------------- ------- ------ ----- ------------- ----------Malmaison and Hotel du Vin Operating income 79,101 23,389 17,598 5,101 25,946 ------- ------ ------ ----- ------Hotel investments Operating income 16,563 5,825 3,653 (11) (1,495) Sale of Park Lane hotel - 3,729 3,729 3,729 5,318 Sale of West India Quay hotel - 5,825 5,825 5,825 10,177 ------- ------ ------ ----- ------ 16,563 15,379 13,207 9,543 14,000 ------- ------ ------ ----- ------Liberty Plc Operating income 44,575 1,091 (451) (676) 10,830 Expenditure on Brand - (1,971) (1,971) (1,971) (1,971) ------- ------ ------ ----- ------ 44,575 (880) (2,422) (2,647) 8,859 ------- ------ ------ ----- ------MWB Business Exchange Plc Operating results - leased properties 76,773 9,265 7,785 8,001 8,006 Operating results - operating and management agreements 5,533 42 42 42 42 ------- ------ ------ ----- ------ 82,306 9,307 7,827 8,043 8,048 ------- ------ ------ ----- ------West India Quay - apartment sales 9,364 3,320 3,320 2,970 2,909 Others 3,305 (1,680) (1,836) (1,843) 103Group debt less cash and other assets - - - (3,213) (3,213) ------- ------ ------ ----- ------ 235,214 48,835 37,694 17,954 56,652Head office administration - (9,148) (9,288) (9,288) (10,465) ------- ------ ------ ----- ------ 235,214 39,687 28,406 8,666 46,187 ======= ====== ====== ===== ====== Recognised Group Profit/(loss) income and revenue EBITDA EBIT before tax expenseYear ended 30th June 2005 £'000 £'000 £'000 £'000 £'000------------------------- ------- ------ ----- ------------- ----------Malmaison and Hotel du Vin Operating income 57,105 16,183 11,080 333 23,639 ------- ------ ------ ------ ------Hotel investments Operating income 42,110 12,799 7,078 (5,249) 29,829 Pre-opening costs - (587) (587) (587) (587) Sale of Howard hotel - 7,921 7,921 7,921 7,921 ------- ------ ------ ------ ------ 42,110 20,133 14,412 2,085 37,163 ------- ------ ------ ------ ------Liberty Plc Operating income 44,829 853 (1,614) (4,746) (613) Expenditure on brand - (640) (640) (640) (640) Sale of Lasenby and Regent House - 5,006 5,006 5,006 5,006 ------- ------ ------ ------ ------ 44,829 5,219 2,752 (380) 3,753 ------- ------ ------ ------ ------MWB Business Exchange Plc Operating results - leased properties 58,972 2,236 (2,489) (3,435) (3,222) Operating results - operating and management agreements 834 24 24 (272) (272)Sales of properties - (383) (383) (383) (383) ------- ------ ------ ------ ------ 59,806 1,877 (2,848) (4,090) (3,877) ------- ------ ------ ------ ------West India Quay - apartment sales 28,550 2,659 2,659 2,659 1,331Others 1,051 252 462 580 1,061Group debt less cash and other assets 3,009 - - (9,899) (9,844) ------- ------ ------ ------ ------ 236,460 46,323 28,517 (8,712) 53,226Head office administration - (6,606) (6,748) (6,874) (6,826) ------- ------ ------ ------ ------ 236,460 39,717 21,769 (15,586) 46,400 ======= ====== ====== ====== ====== Taxation-------- The net tax credit for each of the three periods under review primarily reflectsthe agreement of prior period tax liabilities, net of MWB Group's share of taxincurred on profits in the Group's minority interest in Japan. These arose asfollows:- Eighteen months ended Year ended Year ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000 --------------- ------------- ---------- Net tax credit earned by the Group per income statement 110 347 171 49% minority interest in tax charge of Japanese subsidiary of Liberty Plc 328 214 212 --- --- --- 438 561 38332% minority interest in tax charge of Liberty Plc 109 71 71 --- --- --- Net tax credit received by Equity shareholders of MWB Group Plc 547 632 454 === === === Earnings per share and recognised income and expense per share-------------------------------------------------------------- The earnings per share and recognised income and expense per share figures havebeen calculated as follows:- Eighteen months ended Year ended Year ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000 --------------- ------------- ----------Earnings/(loss) per Income Statement attributable to shareholders of £'000 2,129 982 (15,157) MWB Group Plc Weighted average number of shares in issue during period '000 100,768 106,486 109,598 Earnings/(loss) per share based on Income Statement Pence 2.1p 0.9p (13.8p) ======= ======= =======Recognised income and expense attributable to shareholders of MWB Group Plc £'000 39,662 24,334 36,469 ======= ======= =======Weighted average number of shares in issue during period '000 100,768 106,486 109,598 Recognised income per share based on recognised income and expense Pence 39.4p 22.8p 33.3p ======= ======= ======= 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 netdebt and to the buy-back of shares by the Company, thus returning cash toshareholders. During the eighteen months ended 31st December 2006, repayment of debt by theGroup totalled £138m. During the same period, the Company returned £56m toshareholders by means of share buy-backs in March and April 2006 and by a TenderOffer to all shareholders completed in October 2006. The Directors envisage distributing further funds to shareholders by means ofbuy-backs of ordinary shares, tender offers to shareholders, cash distributions,demergers, distributions of assets and similar value distribution programmes inthe years ahead. Cash flow--------- The consolidated cash flow statement above shows the funds generated by theGroup, those raised from external sources, the investments made and the effectthereof on the Group's cash position. This can be summarised as follows:- Eighteen months ended Year ended Year ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000 --------------- ------------- ---------- Net cash inflow from operations 23,724 3,834 19,363 Net cash inflow from sales of properties, less investments in property, plant and equipment 174,472 132,341 71,329 Net cash outflow from repayment of loans (222,026) (162,029) (100,170) ------- ------- -------Net decrease in cash and cash equivalents (23,830) (25,854) (9,478) Opening cash and cash equivalents 39,537 41,561 49,015 ------- ------- -------Closing cash and cash equivalents 15,707 15,707 39,537 ======= ======= ======= Conclusion---------- The eighteen months ended 31st December 2006 have been a highly successfulperiod for the Group. Sales of properties, all at significant surpluses torecent valuations, have reduced debt levels to only half of the levels two yearsago. Adjusted equity attributable to shareholders at £149m or 185p per share,represents a 50% surplus over consolidated values. In addition to this, theBoard is confident that the value of the Group's 82.5% equity interest in theMalmaison and Hotel du Vin business is significantly higher than the £106.4m atwhich this is included in the accounts. The share price at the date of approval of these accounts is 243p, representingan increase of 127% since 1st July 2005. This is after the significant increaseof 162% in the share price during the year ended 30th June 2005. The assetrealisation process is well advanced and the Board expects this to be completedby the end of December 2008. Andrew BlurtonGroup Finance Director21st March 2007 CONSOLIDATED INCOME STATEMENTfor the eighteen months ended 31st December 2006------------------------------------------------ Pro-forma unaudited Eighteen months year Year ended ended ended 31st December 31st December 30th June 2006 2006 2005 Notes £'000 £'000 £'000-----------------------------------------------------------------------------------------Revenue 1 359,501 235,214 236,460 Cost of sales (303,554) (200,270) (214,303)-----------------------------------------------------------------------------------------Gross profit 55,947 34,944 22,157 Administrative expenses (22,995) (15,424) (12,996)-----------------------------------------------------------------------------------------Operating profit 32,952 19,520 9,161 Profit/(loss) on disposal of property, plant and equipment 3 2,326 (668) 12,608 Profit on disposal of subsidiary companies 4 9,554 9,554 - Profit on disposal of trademark 1,720 - - Finance income 2,665 2,240 1,953Finance expense (37,821) (21,980) (39,308)-----------------------------------------------------------------------------------------Profit/(loss) before taxation 11,396 8,666 (15,586) Taxation 5 110 347 171-----------------------------------------------------------------------------------------Profit/(loss) for the period 1 11,506 9,013 (15,415)========================================================================================= Attributable to:Equity shareholders of the Company 2,129 982 (15,157)Minority interests 6 9,377 8,031 (258)-----------------------------------------------------------------------------------------Profit/(loss) for the period 11,506 9,013 (15,415)========================================================================================= Earnings/(loss) per share(basic and diluted) 7 2.1p 0.9p (13.8p)========================================================================================= All results relate to continuing operations. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the eighteen months ended 31st December 2006------------------------------------------------------- Pro-forma unaudited Eighteen months year Year ended ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000-----------------------------------------------------------------------------------------Unrealised gains on property revaluations net of tax 37,627 19,949 64,636 Deferred tax released on sale of properties 324 8,462 - Actuarial gain/(loss) on defined benefit pension schemes net of tax 4,977 4,935 (811) Effective portion of changes in fair value of derivative financial hedges 5,753 3,997 (1,981) Net foreign exchange translation differences (234) (169) (29)-----------------------------------------------------------------------------------------Income and expense recognised directly to equity 48,447 37,174 61,815 Profit/(loss) for the period 11,506 9,013 (15,415)-----------------------------------------------------------------------------------------Total recognised income and expense for the period 59,953 46,187 46,400========================================================================================= Attributable to: Equity shareholders of the Company 39,662 24,334 36,469 Minority interests 20,291 21,853 9,931-----------------------------------------------------------------------------------------Total recognised income and expense for the period 59,953 46,187 46,400========================================================================================= Total recognised income and expense attributable to shareholders of MWB Group in pence per share (note 7) 39.4p 22.8p 33.3p========================================================================================= CONSOLIDATED BALANCE SHEETat 31st December 2006-------------------------- Pro-forma unaudited 31st December 31st December 30th June 2006 2005 2005 Notes £'000 £'000 £'000----------------------------------------------------------------------------------------Non-current assets Intangible asset 18,200 18,200 18,200Investment properties 8 - 9,260 4,540Operational properties 8 336,150 445,952 465,859Operational properties in the course of construction 8 27,144 - -Plant and equipment 8 43,558 58,430 66,305Derivative financial instruments 1,462 - ----------------------------------------------------------------------------------------- 426,514 531,842 554,904----------------------------------------------------------------------------------------Current assets Trading properties - 3,772 4,099Inventories 9,126 8,538 8,366Trade and other receivables 9 41,751 40,572 64,104Cash and cash equivalents 16,898 41,561 41,566---------------------------------------------------------------------------------------- 67,775 94,443 118,135----------------------------------------------------------------------------------------Total assets 494,289 626,285 673,039----------------------------------------------------------------------------------------Current liabilities Trade and other payables 10 (64,566) (63,721) (68,383)Tax payable (783) (1,543) (1,533)Overdrafts (1,191) - (2,029)Loans and borrowings 11 (23,239) (57,001) (46,069)---------------------------------------------------------------------------------------- (89,779) (122,265) (118,014)----------------------------------------------------------------------------------------Non-current liabilities Loans and borrowings 12 (238,303) (284,092) (371,457)Derivative financial instruments - (2,535) (4,280)Deferred tax provision - (8,468) (330)Employee benefits (1,548) (6,630) (6,863)Other provisions (3,400) (5,157) (5,191)Other payables and accruals (7,974) (8,220) (7,212)---------------------------------------------------------------------------------------- (251,225) (315,102) (395,333)----------------------------------------------------------------------------------------Total liabilities (341,004) (437,367) (513,347)----------------------------------------------------------------------------------------Net assets 153,285 188,918 159,692========================================================================================Equity Called up share capital 40,261 54,825 54,825Share premium account 13 79,563 79,514 79,514Capital redemption reserve 13 30,663 15,975 15,975Revaluation reserve 13 66,715 100,370 96,237Hedging reserve 13 1,462 (2,535) (4,291)Translation reserve 13 (220) 612 134Merger reserve 13 9,403 9,403 9,403Other reserves 13 1,783 1,783 1,783Retained earnings 13 (130,308) (124,419) (142,778)----------------------------------------------------------------------------------------Equity attributable to shareholders of the Company 15 99,322 135,528 110,802Minority interests 14 53,963 53,390 48,890----------------------------------------------------------------------------------------Total equity 153,285 188,918 159,692========================================================================================Equity attributable to shareholders of the Company in pence per share 15 123p 124p 101p======================================================================================== CONSOLIDATED CASH FLOW STATEMENTfor the eighteen months ended 31st December 2006------------------------------------------------ Pro-forma unaudited Eighteen months year Year ended ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000-----------------------------------------------------------------------------------------Profit/(loss) for the period 11,506 9,013 (15,415) Adjustments for non-cash items Taxation (110) (347) (171) Change in fair value of derivative financial instruments - - (766) Finance cost 37,821 21,980 39,308 Finance income (2,665) (2,240) (1,187) (Profit)/loss on disposal of property, plant and equipment (2,326) 668 (12,608) Profit on disposal of subsidiary companies (9,554) (9,554) - Profit on disposal of trademark (1,720) - - Depreciation and amortisation 17,329 11,281 17,948 Currency translation differences (462) (462) (22)-----------------------------------------------------------------------------------------Cash flows from operations before changes in working capital 49,819 30,339 27,087 Change in trading properties 4,099 3,750 19,681 Change in inventories (845) (552) (423) Change in trade and other receivables 8,872 (12,992) 28,870 Change in trade and other payables 7,252 12,085 (20,405) Change in provisions and employee benefits (5,315) (4,812) 6,863-----------------------------------------------------------------------------------------Cash generated from operations 63,882 27,818 61,673 Interest paid (39,409) (23,505) (41,502) Tax paid (749) (479) (808)-----------------------------------------------------------------------------------------Net cash from operating activities 23,724 3,834 19,363-----------------------------------------------------------------------------------------Cash flows from investing activities Interest received 2,661 2,229 1,583 Proceeds from sale of property, plant and equipment 52,500 - 154,578 Cash receipts from sale of subsidiary companies, net of cash sold 208,664 208,664 - Proceeds from sale of trademark 1,720 - - Purchase of interests in subsidiary companies, net of cash acquired - - (64,908) Purchase of property, plant and equipment (91,073) (78,552) (19,924)-----------------------------------------------------------------------------------------Net cash from investing activities 174,472 132,341 71,329-----------------------------------------------------------------------------------------Cash flows from financing activities Purchase of own shares (56,555) (56,555) (441)Issue of shares 173 173 400Borrowings drawn 89,987 69,706 134,520Borrowings repaid (242,380) (148,181) (231,095)Payments to minority interests (9,669) (25,462) (370)Decrease in hire purchase and leasing contracts (3,582) (1,710) (3,184)-----------------------------------------------------------------------------------------Net cash used in financing activities (222,026) (162,029) (100,170)-----------------------------------------------------------------------------------------Net decrease in cash and cash equivalents (23,830) (25,854) (9,478)Opening cash and cash equivalents 39,537 41,561 49,015-----------------------------------------------------------------------------------------Closing cash and cash equivalents 15,707 15,707 39,537========================================================================================= NOTES ----- 1. SEGMENTAL REPORTING - BUSINESS DIVISIONS------------------------------------------- Segmental information is presented in respect of the Group's businesses andgeographical segments, The primary format is based on the Group's management andinternal reporting structure. Segment results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.Inter-segment pricing is determined on an arm's length basis. Unallocated itemscomprise mainly activities that have now been sold, central loans and borrowingsand related expenses, corporate assets (primarily the Company's head officeoperations) and tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period toacquire property, plant and equipment. Business segments----------------- The Group comprises the following main business segments: • Malmaison and Hotel du Vin - The ownership and operation of branded hotels, summarised in further detail in the Operating Review. • MWB Business Exchange Plc - The Group's AIM listed serviced office subsidiary, summarised in further detail in the Operating Review. • Liberty Plc - The Group's AIM listed retail operating subsidiary, summarised in further detail in the Operating Review. • Central and hotel investments - The central costs incurred by the Group and the Group's hotel investments which were sold during the eighteen months ended 31st December 2006. In presenting information on the basis of geographical segments, segmentalrevenue and assets are based on the geographical location of the assets. Consolidated Income Statement analysis-------------------------------------- _______Malmaison and Hotel du Vin__________ _________MWB Business Exchange Plc_________ Pro-forma Pro-forma Eighteen months unaudited Year Eighteen months unaudited Year ended year ended ended ended year ended ended 31st December 31st December 30th June 31st December 31st December 30th June 2006 2006 2005 2006 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------------------------Total external revenues Licence fee income - - - 118,157 82,306 59,806 Retail income - - - - - - Hotel income 115,058 79,101 57,105 - - - Proceeds from sale of trading properties - - - - - - ------- ------ ------ ------- ------ ------Revenue per the Consolidated Income Statement 115,058 79,101 57,105 118,157 82,306 59,806 Inter-divisional revenue - - - - - - ------- ------ ------ ------- ------ ------Total divisional revenue 115,058 79,101 57,105 118,157 82,306 59,806 Total divisional revenue bygeographical origin United Kingdom 115,058 79,101 57,105 118,157 82,306 59,806 Japan - - - - - - ------- ------ ------ ------- ------ ------ 115,058 79,101 57,105 118,157 82,306 59,806 ======= ====== ====== ======= ====== ======Divisional result 26,401 17,598 11,080 10,420 7,827 (2,848) ======= ====== ====== ======= ====== ====== ________________Liberty Plc________________ _______Central and hotel investments_______ Pro-forma Pro-forma Eighteen months unaudited Year Eighteen months unaudited Year ended year ended ended ended year ended ended 31st December 31st December 30th June 31st December 31st December 30th June 2006 2006 2005 2006 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------------------------Total external revenues Licence fee income - - - - - - Retail income 67,250 44,575 44,829 - - - Hotel income - - - 44,579 19,868 46,170 Proceeds from sale of trading properties - - - 14,457 9,364 28,550 ------ ------ ------ ------ ------ ------Revenue per the Consolidated Income Statement 67,250 44,575 44,829 59,036 29,232 74,720 Inter-divisional revenue 66 59 1,641 75 60 40 ------ ------ ------ ------ ------ ------Total divisional revenue 67,316 44,634 46,470 59,111 29,292 74,760 ====== ====== ====== ====== ====== ======Total divisional revenue bygeographical origin United Kingdom 60,291 39,658 41,585 59,111 29,292 74,760 Japan 7,025 4,976 4,885 - - - ------ ------ ------ ------ ------ ------ 67,316 44,634 46,470 59,111 29,292 74,760 ====== ====== ====== ====== ====== ======Divisional result (2,035) (2,422) 2,752 24,826 14,730 17,601 ====== ====== ====== ====== ====== ====== ________________Consolidated_______________ Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000-------------------------------------------------------------------------Total external revenues Licence fee income 118,157 82,306 59,806 Retail income 67,250 44,575 44,829 Hotel income 159,637 98,969 103,275 Proceeds from sale of trading properties 14,457 9,364 28,550 ------- ------- -------Revenue per the Consolidated Income Statement 359,501 235,214 236,460 Inter-divisional revenue 141 119 1,681 ------- ------- -------Total divisional revenue 359,642 235,333 238,141 ======= ======= =======Total divisional revenue bygeographical origin United Kingdom 352,617 230,357 233,256 Japan 7,025 4,976 4,885 ------- ------- ------- 359,642 235,333 238,141 ======= ======= =======Divisional result 59,612 37,733 28,585Project start-up expenses (700) (582) -Unallocated expenses (12,360) (8,745) (6,816) ------- ------- -------Results from operating activities 46,552 28,406 21,769Net finance costs (35,156) (19,740) (37,355)Corporation tax 110 347 171 ------- ------- -------Profit/(loss) for the period 11,506 9,013 (15,415) ======= ======= ======= Consolidated Balance Sheet analysis----------------------------------- _Malmaison and Hotel du Vin_ _MWB Business Exchange Plc_ _______Liberty Plc_______ 31st December 30th June 31st December 30th June 31st December 30th June 2006 2005 2006 2005 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------------------------Divisional assets 357,588 265,467 46,821 25,931 69,156 64,570Divisional liabilities (220,725) (184,219) (35,144) (48,507) (17,924) (21,578) ------- ------- ------ ------ ------ ------Divisional net assets 136,863 81,248 11,677 (22,576) 51,232 42,992 ======= ======= ====== ====== ====== ======Capital expenditure 67,095 - 17,230 - 2,890 1,282 ======= ======= ====== ====== ====== ======Depreciation and amortisation (8,062) (4,951) (1,609) (4,522) (2,288) (2,173) ======= ======= ====== ====== ====== ====== Central and Hotel investments ________Consolidated_______ 31st December 30th June 31st December 30th June 2006 2005 2006 2005 £'000 £'000 £'000 £'000-------------------------------------------------------------------------------------------Divisional assets 20,724 317,071 494,289 673,039Divisional liabilities (67,211) (259,043) (341,004) (513,347) ------ ------- ------- -------Divisional net assets (46,487) 58,028 153,285 159,692 ====== ======= ======= =======Capital expenditure 3,858 18,642 91,073 19,924 ====== ======= ======= =======Depreciation and amortisation (5,370) (5,802) (17,329) (17,948) ====== ======= ======= ======= 2. EARNINGS BEFORE INTEREST, TAXATION, DEPRECIATION AND AMORTISATION ("EBITDA")------------------------------------------------------------------------------- Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000-----------------------------------------------------------------------------The EBITDA of the Group is calculated asfollows:- Profit before finance income, finance expense and taxation 46,552 28,406 21,769 Add back depreciation and amortisation for the period 17,329 11,281 17,948 ------ ------ ------Total EBITDA for the period 63,881 39,687 39,717 ====== ====== ====== 3. PROFIT ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT------------------------------------------------------ Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000-----------------------------------------------------------------------------The profit on disposal of property, plant and equipment arose as follows:- Profit on disposal of Argyle Street hotel, Glasgow 2,770 - - Profit on disposal of the Howard hotel - - 7,921 Profit on disposal of Lasenby House and Regent House - - 5,006 Loss on disposal of other property, plant and equipment (444) (668) (319) ----- --- ------ Profit/(loss) on disposal of property, plant and equipment 2,326 (668) 12,608 ===== === ====== 4. PROFIT ON DISPOSAL OF SUBSIDIARY COMPANIES--------------------------------------------- The profit on disposal of subsidiary companies arose as follows:- Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000-----------------------------------------------------------------------------Profit on disposal of subsidiary owning the Group's Park Lane hotel, London 3,729 3,729 - Profit on disposal of subsidiary owning the Group's West India Quay hotel 5,825 5,825 - ----- ----- ---- 9,554 9,554 - ===== ===== ====Disposal of subsidiaries------------------------ On 31st May 2006 the Company completed the disposal of the entire issued sharecapital of its subsidiary MWB Park Lane Hotel Limited and its subsidiary MWBPark Lane Hotel No. 2 Limited (collectively "PLH"). PLH owned the freeholdinterest in a Marriott operated hotel at 140 Park Lane, London W1 and was owned70% by the Company and 30% by minority interests. On 21st July 2006, the Company disposed of the entire issued share capital ofits subsidiary MWB West India Quay (Eastern) Limited, related companies to MWBWest India Quay (Eastern) Limited and their partnership interests (collectively"West India Quay Eastern"). West India Quay Eastern owned the freehold interestin a Marriott operated hotel at West India Quay, London E14. West India QuayEastern was owned 66.67% by the Company and 33.33% by minority interests. The profit before tax of PLH and West India Quay Eastern, excluding the profitarising on the sales of these companies, was as follows:- Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000-----------------------------------------------------------------------------PLH (1,283) (1,128) (1,472)West India Quay Eastern 5,115 4,062 (1,259) ----- ----- ----- 3,832 2,934 (2,731) ===== ===== ===== Financial effect of disposals----------------------------- The disposals of PLH and West India Quay Eastern had the following effect on theGroup's assets and liabilities:- West India PLH Quay Eastern Total £'000 £'000 £'000-----------------------------------------------------------------------------Assets and liabilities disposed of in transactions:- Property, plant and equipment 99,506 93,640 193,146Inventory 25 59 84Trade and other receivables 1,662 9,855 11,517Cash 1,815 2,787 4,602Trade and other payables (1,971) (3,666) (5,637) ------- ------- ------- 101,037 102,675 203,712Net consideration received in cash 104,766 108,500 213,266 ------- ------- -------Profit on disposal of subsidiary 3,729 5,825 9,554 ======= ======= ======= Net cash inflow from disposals being net consideration received less cash sold 102,951 105,713 208,664 ======= ======= ======= 5. TAXATION----------- Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000---------------------------------------------------------------------------------The current taxation for the period arose as follows:- UK Corporation tax Adjustment in respect of prior periods following agreement of tax liabilities 779 784 604 Foreign tax Tax on profit for the period (611) (386) (402) Adjustment in respect of prior periods (58) (51) (31) --- --- ---Taxation credit 110 347 171 === === === No deferred tax was required to be recognised in the Consolidated IncomeStatement during the eighteen months ended 31st December 2006. 6. MINORITY INTERESTS--------------------- Minority interests in the profit/(loss) on ordinary activities after taxationfor the period arose in the following divisions of the Group:- Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Malmaison and Hotel du Vin 1,898 1,442 -MWB Business Exchange Plc 2,522 2,459 -Liberty Plc (571) (706) (281)Central - West India Quay 2,313 2,191 (881)Central - 140 Park Lane Limited 222 290 (337)Other central 2,993 2,355 1,241 ----- ----- ----- 9,377 8,031 (258) ===== ===== ===== 7. EARNINGS/(LOSS) PER SHARE AND RECOGNISED INCOME AND EXPENSE PER SHARE------------------------------------------------------------------------ Earnings/(loss) per share------------------------- The earnings/(loss) per share figures are calculated by dividing the profit/(loss) attributable to equity shareholders of the Company for the period, by theweighted average number of shares in issue during the period, as follows:- Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Profit/(loss) for the period attributable to equity shareholders of the Company £'000 2,129 982 (15,157) ======== ======= =======Weighted average number of ordinary shares in issue during the period '000 100,768 106,486 109,598 ======== ======= =======Earnings/(loss) per share (basic and diluted) Pence 2.1p 0.9p (13.8p) ======== ======= ======= Recognised income and expense per share--------------------------------------- The figures for recognised income and expense attributable to shareholders ofthe Company in pence per share are calculated by dividing the recognised incomeand expense attributable to equity shareholders of the Company for the period,by the weighted average number of shares in issue during the period, as follows:- Pro-forma Eighteen months unaudited Year ended year ended ended 31st December 31st December 30th June 2006 2006 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Recognised income and expense for the period attributable to equity shareholders of the Company £'000 39,662 24,334 36,469 ======= ======= =======Weighted average number of ordinary shares in issue during the period '000 100,768 106,486 109,598 ======= ======= =======Recognised income and expense attributable to equity Shareholders of the Company, in pence per share Pence 39.4p 22.8p 33.3p ======= ======= ======= 8. PROPERTY, PLANT AND EQUIPMENT-------------------------------- -----------------------------Operational properties-------------------------- Freehold and long Plant, leasehold In the Operating machinery, investment Long course of leasehold fixtures & properties Freehold leasehold construction improvements equipment Total £'000 £'000 £'000 £'000 £'000 £'000 £'000-------------------------------------------------------------------------------------------------------------------Cost or valuation At 1st July 2005 4,540 388,915 60,597 - 16,347 93,646 564,045 Additions - 16,440 17,283 27,144 11,911 19,931 92,709 Reclassification (4,540) 2,500 1,753 - 287 - - Disposals - (210,230) - - (2,560) (31,638) (244,428) Revaluation - 25,248 8,577 - - - 33,825Reversal of prior period impairments - 369 - - - - 369 ----- ------- ------ ------ ------ ------ -------At 31st December 2006 - 223,242 88,210 27,144 25,985 81,939 446,520 ----- ------- ------ ------ ------ ------ -------Depreciation At 1st July 2005 - - - - - (27,341) (27,341) Charge for the period - (4,500) (601) - (1,427) (11,467) (17,995) Disposals - 1,299 - - 140 427 1,866 Revaluation - 3,201 601 - - - 3,802 ----- ------- ------ ------ ------ ------ -------At 31st December 2006 - - - - (1,287) (38,381) (39,668) ----- ------- ------ ------ ------ ------ -------Net book value at 31st December 2006 - 223,242 88,210 27,144 24,698 43,558 406,852 ===== ======= ====== ====== ====== ====== ======= Analysis of valuation surplus for the period Surplus credited to income statement - 305 - - - - 305 Surplus credited to revaluation reserve - 8,727 7,494 - - - 16,221 Surplus credited to minority interests through income statement - 64 - - - - 64 Surplus credited to minority interests through revaluation reserve - 19,722 1,684 - - - 21,406 ----- ------- ------ ------ ------ ------ -------Net revaluation surplus reflected in property, plant and equipment - 28,818 9,178 - - - 37,996 ===== ======= ====== ====== ====== ====== ======= Valuation--------- The Group's property, plant and equipment is all located in the United Kingdom.The Group's Operational properties were valued at 31st December 2006 byqualified 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 of the Properties. Market Value is defined in theManual as the estimated amount for which a property should exchange on the dateof valuation between a willing buyer and a willing seller in an arm's lengthtransaction after proper marketing, where the parties had each actedknowledgeably, prudently and without compulsion. The valuations of the hotels are based on estimates of annual maintainableearnings before interest, tax, depreciation and amortisation ("EBITDA") for eachproperty over a 10 year cash flow period. These estimates are based on thehistoric, current and budgeted trading information provided by the Group to DTZ.DTZ apply a market discount rate to the cashflow forecast of the hotels toassess the net present value of each property asset. This is in line with themethod used by the market for the valuation of this type of property. In valuing the Group's hotels, DTZ have had regard to the valuation of theproperties as fully equipped operational entities, and to their tradingpotential. The valuation therefore includes the land and buildings; the tradefixtures, fittings, furniture, furnishings and equipment; and the market'sperception of the trading potential excluding personal goodwill; together withan assumed ability to renew existing licences, consents, certificates andpermits. The value excludes consumables and stock in trade. The valuation excludes any goodwill associated with the management by theCompany or its subsidiaries but recognises that the hotel property assets wouldprobably be sold as trading entities. The valuation also represents individualproperty values and does not reflect any premium value which may be attributableto an acquisition of the properties as a portfolio. Properties valued by DTZ at 31st December 2006 totalled £384.1m. Other minorproperties, the short leasehold properties of MWB Business Exchange Plc, andplant and equipment, are carried at the lower of cost and realisable value inthe table above. These assets had a net book value of £22.8m at 31st December2006. The historic cost of the Group's properties at 31st December 2006 includescapitalised interest of £5.1m (30th June 2005: £28.0m). 9. TRADE AND OTHER RECEIVABLES------------------------------ Unaudited 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Trade receivables 11,949 12,181 14,011 Amounts due on issue of Unsecured Loan Stock - - 15,481 Amounts due on property disposals - - 977 Amounts due from related parties - 4,483 4,413 Other receivables Other taxes and social security 832 621 3,608 Other debtors 13,348 6,891 8,215 Prepayments and accrued income 15,622 16,396 17,399 ------ ------ ------ 41,751 40,572 64,104 ====== ====== ====== 10. TRADE AND OTHER PAYABLES---------------------------- Unaudited 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Trade payables 13,036 13,085 13,508Amounts due to related parties - 87 -Other payables 19,778 19,185 21,116Accruals 24,401 24,887 24,976PAYE, NIC and VAT 4,203 4,570 6,760Deferred income 3,148 1,907 2,023 ------ ------ ------ 64,566 63,721 68,383 ====== ====== ====== 11. CURRENT LIABILITIES - LOANS AND BORROWINGS---------------------------------------------- Unaudited 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Secured bank loans 21,619 53,577 7,085Other loans 1,620 1,620 1,6207.50% Unsecured Loan Stock 2005/2006 - - 34,101 ------ ------ ------ 23,239 55,197 42,806Current portion of finance lease liabilities - 1,804 3,263 ------ ------ ------Total other interest bearing loans and borrowings 23,239 57,001 46,069 ====== ====== ====== 12. NON-CURRENT LIABILITIES - LOANS AND BORROWINGS-------------------------------------------------- Unaudited 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Non-current liability loans, and borrowings net of issue costs: 9.75% Unsecured Loan Stock 2009/2012 29,602 29,278 28,989Bank loans (secured) 205,566 250,054 336,575Other loan borrowings 2,425 4,045 4,855 ------- ------- ------- 237,593 283,377 370,419Finance lease liabilities - - 320Long leasehold obligations 710 715 718 ------- ------- -------Total non-current liabilities -loans and borrowings 238,303 284,092 371,457 ======= ======= ======= Summary of loans---------------- Unaudited 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Repayable within one year:Current portion of bank loans 21,619 52,577 8,705Current portion of other loan borrowings 1,620 2,620 34,101 ------- ------- ------- 23,239 55,197 42,806 ------- ------- -------Repayable:In more than one year but not more than two years 7,620 32,971 123,698In more than two years but not more than five years 229,973 89,496 99,530In more than five years - 160,910 147,191 ------- ------- ------- 237,593 283,377 370,419 ------- ------- -------Total loans and borrowings 260,832 338,574 413,225 ======= ======= ======= Analysis by operating business------------------------------ Unaudited 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Malmaison and Hotel du Vin 208,524 184,639 165,990Central - Hotel investments - 110,721 145,170MWB Business Exchange Plc - 4,847 8,677Central debt 52,308 38,367 93,388 ------- ------- ------- 260,832 338,574 413,225 ======= ======= ======= Movement of loans during the period----------------------------------- Eighteen months Unaudited ended year ended Year ended 31st December 31st December 30th June 2006 2005 2005 £'000 £'000 £'000---------------------------------------------------------------------------------At start of period 413,225 459,403 509,800Loans drawn down 89,987 83,429 134,520Loans repaid (242,380) (204,258) (231,095) ------- ------- -------At end of period 260,832 338,574 413,225 ======= ======= =======Security analysisSecured 227,185 303,631 342,649Unsecured 33,647 34,943 70,576 ------- ------- ------- 260,832 338,574 413,225 ======= ======= ======= 13. MOVEMENT ON RESERVES------------------------ During the eighteen months ended 31st December 2006 there was no movement on themerger reserve of £9,403,000 or the other reserves of £1,783,000 of the Group. Capital Share Share redemption Revaluation Hedging Translation Retained capital premium reserve reserve reserve reserve earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------------------At 1st July 2005 54,825 79,514 15,975 96,237 (4,291) 134 (142,778) Movements during period: Profit for the period - - - - - - 2,129 Revaluation surplus - - - 29,009 - - - Transfer on increase in minority interests in Malmaison Holdings Ltd and MWB Business Exchange Plc - - - (12,788) - - 18,183 Issue and purchase of ordinary shares (14,564) 49 14,688 - - - (56,437) Actuarial gain on Liberty Plc defined benefit pension scheme - - - - - - 3,407 Deferred tax released on sale of properties - - - - - - 227 Change in fair value of financial derivatives - - - - 5,753 - - Transfer on sale of properties - - - (44,756) - - 44,756 Transfer of depreciation on revalued properties - - - (987) - - 987 Write back of option cost through equity - - - - - - 196 Currency translation and other differences - - - - - (354) (978) ------ ------ ------ ------ ----- --- -------At 31st December 2006 40,261 79,563 30,663 66,715 1,462 (220) (130,308) ====== ====== ====== ====== ===== === ======= Retained earnings at 31st December 2006 comprise the following:- Accumulated net loss in Consolidated Income Statements to 31st December 2006 (72,355) Purchase by the Company of ordinary shares that have subsequently been cancelled (57,953) -------At 31st December 2006 (130,308) ======= 14. MINORITY INTERESTS---------------------- The movements in minority interests of the Group during the eighteen monthsended 31st December 2006 arose as follows:- Add Add minority minority share of Other At share of valuation movements At 1st July profit for surplus for during 31st December 2005 the period the period the period 2006 £'000 £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------MWB Business Exchange Plc - 2,522 - 1,321 3,843MWB Malmaison Holdings Limited - 1,898 16,920 11,665 30,483Liberty Plc 15,500 (571) 2,558 289 17,776Hotel Investments 32,751 2,536 1,928 (35,306) 1,909West India Quay apartments 572 2,818 - (3,390) -Others 67 174 - (289) (48) ------ ----- ------ ------ ------ 48,890 9,377 21,406 (25,710) 53,963 ====== ===== ====== ====== ====== During the eighteen months ended 31st December 2006, the Group's hotelinvestments at Park Lane and West India Quay were profitably sold. Furtherdetails of these sales are set out in note 4. As a result, repayments of equityand profit share were made to minority interests in these properties totalling£35.3m, which are included in the table above. During the same period, the Groupdrew down further funds from the minority shareholder in MWB Malmaison HoldingsLimited, resulting in minority interests increasing by the amounts drawn down,plus an amount equal to the share of equity attributable to each increasedamount subscribed. 15. EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MWB GROUP IN PENCE PER SHARE----------------------------------------------------------------------- The Equity attributable to shareholders of MWB Group in pence per share iscalculated by dividing the Equity attributable to shareholders of MWB Group ateach period end by the number of ordinary shares in issue at such period end.The relevant figures are as follows:- Unaudited 31st December 31st December 30th June 2006 2005 2005-------------------------------------------------------------------------------------------Equity attributable to shareholders of MWB Group per consolidated balance sheet £'000 99,322 135,528 110,802 ====== ======= ======= Number of ordinary shares in issue at period end '000 80,522 109,650 109,650 ====== ======= ======= Equity attributable to shareholders of MWB Group in pence per share Pence 123p 124p 101p ====== ======= ======= 16. FINANCIAL INFORMATION------------------------- The financial information set out above does not constitute the Company's statutoryaccounts for the period ended 31st December 2006 or the year ended 30th June2005. Statutory accounts for the year ended 30th June 2005, which were preparedunder UK GAAP, have been delivered to the Registrar of Companies, and those for2006, prepared under International Financial Reporting Standards as adopted bythe EU, will be delivered following the Company's Annual General Meeting. Theauditors have reported on those accounts; their reports were unqualified and didnot include references to any matters to which the auditors drew attention byway of emphasis without qualifying their reports and did not contain statementsunder section 237(2) or (3) of the Companies Act 1985. 17. 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 April 2007. 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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