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Marylebone Warwick Balfour Grp PLC19 September 2006 FOR IMMEDIATE RELEASE 19th September 2006 MARYLEBONE WARWICK BALFOUR GROUP PLC SECOND INTERIM RESULTS FOR SIX MONTHS ENDED 30th JUNE 2006 HIGHLIGHTS GROUP----- • Share price rise of 40% since beginning of 2006 to over 200p pershare reflecting the growth achieved by the Group. • Tender Offer at prices between 205p and 215p per share announced today.Enables shareholders to realise their shares in cash at pricein excess of original target of 200p per share and over 12 months earlier thanexpected. • Realisation programme for shareholders who do not participate in Tender Offerextended to 2008. • Turnover from three core businesses advances to £96.1m in comparison to£81.0m in six months to June 2005. • EBITDA from core businesses up 28% this period at £12.4m against £9.7mlast year. • Pre-tax profit of £1.3m against loss of £8.9m in comparable period. • Positive EPS of 1.9p compared to loss of 8.9p to June 2005. • Property assets stand at £436m despite disposals over past 18 monthstotalling nearly £500m. • Adjusted equity attributable to shareholders, reflecting unrealised surplusover book value of AIM listed subsidiaries and sale since 30th June 2006of West India Quay hotel, amounts to £176m or 186p per share. • Equity attributable to shareholders increased by 24% to 125p a share at30th June 2006, up from 101p at June 2005, and slightly higher than at31st December 2005. • West India Quay Marriott hotel sold for £110m since balance sheet datereducing net debt and generating profit of £6.75m (7p a share) over June 2006carrying value. • Group now entirely focused on three core operating businesses: o Malmaison and Hotel du Vin. o MWB Business Exchange Plc. o Liberty Plc. "I believe the Board's determination to create a highly focused business withthree very distinct and highly successful operations has met with approval fromshareholders specifically, and the investment community generally. Against thisbackground we view the future enthusiastically as we believe the threebusinesses within the Group have the ability to produce long-term growth and tocreate continuing shareholder value," Eric Sanderson, Chairman MWB Group Plc MALMAISON AND HOTEL DU VIN-------------------------- • Results for period reflect improving market conditions as well as continuingtight financial controls and impact of centralised management. • Revenue up 15% on a like-for-like basis and 25% higher at £36.6m. • EBITDA up by 20% at £9.7m from same period last year. • Pre-tax profit of £0.6m for the six months to 30th June 2006, showingsubstantial improvement from loss of £1.0m in comparative period. • Average room rate across group rose 3% over last six months to £108,while spend per available room was £155, a 5% increase over the lastsix months. • Total occupancy over the six months advanced to 79% despite increasedcapacity of Oxford and Henley. • 12% increase in food and beverage turnover reflecting both quality of ourrestaurants and brasseries and improved central cost controls and buyingstrategies. • Acquired One Devonshire Gardens, Glasgow in July 2006 for new HdV to openin September. • Further five new hotels - two Malmaison and three HdV - under constructionor refurbishment. • Further four properties at advanced stages of acquisition or planning consent. • Negotiating to acquire two further sites. • By mid-2008 the Malmaison group is expected to have 27 operational hotels,without the need for any further fundraising during that period. "The six months to 31st December 2006 have started well with recentinternational events encouraging more people to spend more leisure time here inthe UK rather than travelling abroad. Traditionally this period is stronger thanthe first half of the calendar year and we are currently on course to deliverfurther revenue growth. With that in mind I continue to view the future withgreat confidence." Robert B. Cook, Chief Executive Malmaison Group MWB BUSINESS EXCHANGE PLC------------------------- • Revenue grew to £39.3m - up 26% over comparable six month period to30th June 2005. • EBITDA grew to £3.9m, giving a 54% increase over six months to 30th June 2005. • Pre-tax profit of £3.4m for the six months to 30th June 2006, againsta loss of £1.1m. • Annualised Revenue per Available Workstation (REVPAW) increased 16% from£6,980 in December 2005 to £8,100 in June 2006. • Annualised Revenue per Occupied Workstation (REVPOW) rose 16% from £8,430in December 2005 to £9,800 in June 2006. • Meeting and Conference Room turnover grew by 28% to £3.4m in six monthsto June 2006. • Occupancy at end June 2006 increased to 83%, up from 80% a year ago despitegreatly expanded portfolio. • During the period a new Business Exchange centre was opened at Cannon Streetwhile the existing Birmingham centre has been doubled in size. • Since 30th June 2006, two further centres have been opened at CavendishSquare and Tottenham Court Road, London while terms have been agreed for newBusiness Exchange centres in Bristol and London Bridge. • In addition City Executive Centres has been expanded to 16 which includes afurther centre on London Wall. • When the above centres are fully trading, over 1,700 further workstationswill have been added; full impact to be felt during 2007 financial year. "Last December's AIM float has given MWB Business Exchange Plc a solid platformto take the company forward. Not only has the share price advanced by some 36%since float, giving us a market value of £75m at the date of this statement,but it has also enabled the business to operate totally debt free. This has beena very exciting period for the company during which we have grown and greatlyenhanced the offer to our customers. Having built a firm base from which togrow, we look forward to the remainder of the year with confidence". JohnSpencer, Chief Executive MWB Business Exchange Plc LIBERTY PLC----------- • Group sales steady at approx £20m despite 20% less trading area followingclosure of Regent Street space. • Flagship store sales 2% up at £18.8m despite reduced trading area. • Continuing to build on Liberty of London branded luxury goods sales. • Strong performance from ladies' fashions - up 7% - and beauty with maintainedsales from 27% less trading space. • Progression of international launch of Liberty of London brand - Japanese joint venture in place by beginning of 2007 and aiming for Spring 2008launch. • Total recognised income and expense, excluding property profits, shows strongimprovement to positive £0.6m against negative £2.0m in comparative period. "The consolidation of our flagship business is now delivering both efficienciesand an enhanced customer experience which, together with the ongoing investmentin the Liberty of London brand, gives us confidence that we will delivershareholder value over the medium term. We also believe we are laying thefoundations for the creation of a serious global luxury goods brand from anincreasingly successful and iconic London retail landmark. Against thisbackground we view the future with cautious, but positive, optimism." IainRenwick, Chief Executive Liberty Plc CHAIRMAN'S STATEMENT-------------------- This has been an extremely exciting period for the Group as we continue toachieve our stated aim of creating shareholder value through a highly focusedapproach to the businesses that comprise MWB. Since the beginning of 2006, the Company's share price has increased by 40% from148p to 208p per share at the date of this statement, reflecting the StockMarket's increasing appreciation of the Group's businesses and their managementteams. This continues the strong upward trend to 31st December 2005, when theshare price increased by 72% during the year. As the accompanying statementsfrom the individual Chief Executives of those businesses indicate, the past sixmonths have been extremely successful, both for the individual companies and forthe Group as a whole. We launched our realisation programme in early 2002 when our share price was 80pand we set ourselves the target of returning at least 200p per share in cash orcash equivalent to shareholders by the end of 2005. Relatively soon thereafter,there were significant changes in the market which impacted on the timing ofthis strategy and we extended the realisation period to 2007. Nevertheless,throughout this time the Board has remained highly focused in delivering theCash Distribution Programme in the manner originally envisaged. This hasinvolved over £600m of property sales, all at prices well in excess of originalcost. As a result, the Group has paid down the majority of its debt, our threecore operating businesses have been revitalised and we have created a strong andvibrant Group going forward. This has all been reflected in the underlying value of the business, and, as Imentioned above the share price is now in excess of our target level of 200p pershare. I am very pleased therefore to be able to report that the Board hasdelivered on the major elements of the strategy envisaged four years ago, andshareholders now have the opportunity to realise their shares in cash for morethan 200p per share. In addition to all that has been achieved, I am today also announcing that theCompany is launching a Tender Offer in the price range of 205p to 215p pershare, giving shareholders the ability to cash in part, or all, of theirholdings now at a price in excess of the original target price and over a yearearlier than expected. Our operating businesses are growing well. We believe there is merit inretaining these businesses within the Group until 2008, rather than selling themin 2007, as by that time they will have significantly advanced their majorexpansion plans. Therefore we will continue the development and close managementof these remaining businesses for a further year, through to the end of 2008. Shareholders who wish to cash out now, in part or in full, can participate inthe Tender Offer at prices in excess of our original target of 200p per share.Alternatively, if shareholders consider that further value could be realised byretaining their shares in the Company and not participating in the Tender Offer,then the realisation from the Company for their shareholding will be to the endof 2008. The Directors own a total of 15,654,280 shares in the Company. They areproposing to tender 3,618,000 shares between them under the Tender Offer,retaining a combined interest of 12,036,280 shares. The EGM to approve theTender Offer will be held on 18th October 2006. Whether or not shareholdersintend to be present at that meeting, I would encourage them to complete andsend in the green form of proxy in order that these proposals can be consideredby as many shareholders as possible. The Company recently changed its year end from 30th June to 31st December.Accordingly, these Second Interim Accounts have been prepared for the six monthsended 30th June 2006, with comparative information for the six months ended 30thJune 2005 and for the year ended 30th June 2006. This new date accords with theoperational cycle of our businesses and will therefore be of a greater value inassessing the performance of the Group in its current form. Returning to the period under review, turnover from our three core businessesfor the six months ended 30th June 2006 amounted to £96.1m in comparison to£81.0m for the six months ended 30th June 2005. This produced operating profitsof £9.9m against £4.3m for the comparative period. There was a strongimprovement in EBITDA from Malmaison, Liberty and MWB Business Exchange, up by29% this period to £12.4m, compared to £9.7m for the same period last year. Thisresulted in pre-tax profits of £1.3m against losses of £8.9m for the six monthsended 30th June 2005 and positive earnings per share of 1.9p against a loss of8.9p per share in the corresponding period. We have successfully disposed of our mature investments so that today we arecompletely focused on the three operational businesses. Our last two externallyoperated hotels have now been sold for a total of £215m, well in excess of ouroriginal purchase and development costs, as well as being above their December2005 valuations. In May we sold our five-star Park Lane Marriott for £105m and, since this periodend, we have sold our West India Quay hotel for £110m. These highly successfultransactions have taken our hotel sales over the past 18 months to more than£340m and our total property disposals during the same period to almost £500m.As a result of these sales, total net debt has been reduced to approximately£158m. This continued reduction in debt has greatly strengthened the Group'sfinancial position and further underpins our views for the future. At the dateof this statement, gearing is 97% and is expected to rise to up to 140% assumingfull implementation of the Tender Offer. The Group's two listed subsidiaries, MWB Business Exchange Plc and Liberty Plc,continue to be consolidated in our accounts. Both of these subsidiaries arelisted on the Alternative Investment Market of the London Stock Exchange and,therefore, a market value for the Group's shareholding in each of the twocompanies is readily available. In order that shareholders are kept fullyinformed of the Group's underlying value, we have evaluated Adjusted equityattributable to shareholders in the same manner as in our December 2005 InterimAccounts. This includes the surplus of stock market values at 30th June 2006 ofour two listed investments over the net value at which they are recorded in theaccounts and also includes the realised surplus arising on the sale of our WestIndia Quay hotel during July 2006. I am pleased to report that Adjusted equity attributable to shareholders at 30thJune 2006 calculated in this manner amounts to £176m or 186p per MWB share. Itis this value of 186p per share which is the benchmark used by the Board tovalue the Group and from which we plan to continue to demonstrate increases inshareholder value. In addition, Adjusted equity attributable to shareholders of 186p per share doesnot include any increase in value for our Malmaison and Hotel du Vin business,as this is not currently a separately listed company for which a market valuecan be readily demonstrated. The Board is confident that the value of theGroup's share in this business is significantly higher than the £88.2m or 93pper share at which it is included in Equity attributable to shareholders at 30thJune 2006, thus further underpinning the equity value of the Group. During the six months ended 30th June 2006, we bought back 15m shares at anaverage price of 175p per share. These share buy backs reduced Equityattributable to shareholders by reference to those accounts by 8p per share.Overall, our activity during this six month period has resulted in Equityattributable to shareholders of MWB in these accounts remaining broadly constantat 125p per share. However, the Adjusted equity attributable to shareholders,reflecting the underlying value of MWB Business Exchange Plc and Liberty Plc byreference to their market values, amounts to 186p per share, and thus thesepurchases were at a valuable discount to this figure. In accordance with the Cash Distribution Programme approved by shareholders inMay 2002, the Board is continuing to direct disposal proceeds to the repaymentof net debt, thus strengthening the financial position of the Group. This inturn enables the Board to implement continuing cash distribution proposals atlevels significantly in excess of traditional annual dividends, such as theTender Offer. Although we have included full reviews from the Chief Executives of each of ouroperating businesses, I would like to highlight in this statement some of thekey financial and operational achievements over the six months to 30th June2006. Our lifestyle hotel business, Malmaison and Hotel du Vin, continues to go fromstrength to strength. The £105m we raised last year - a mixture of equity andloan finance - has enabled the Malmaison Group to aggressively expand in ahighly competitive property market. As shareholders will see, Malmaison'smanagement team has already met its medium term expansion plan. By mid 2008 thegroup is expected to have 27 operational hotels, without the need for anyfurther fundraising during that period. Malmaison and Hotel du Vin performed strongly with a 25% uplift in revenuecompared to the similar period last year, while EBITDA increased by 20%. Theseimpressive figures reflect the management team's ability to continue providingcustomers with a high level of service and product that is the envy of many inthe hotel sector, whilst at the same time producing considerable cost savings. MWB Business Exchange Plc has had a highly successful first six months as aseparately listed company. Since its float in December 2005 its share price hasrisen by 36% from the 80p listing price to 109p at the date of thisstatement, while it has delivered a 26% revenue increase and 54% uplift inEBITDA to £3.9m over the same period a year ago The results of MWB Business Exchange for the six months to 30th June 2006reflect its strategy of creating a sought after product, at a good value, in theright location. The company's controlled expansion programme is enabling it togrow at a rate that is meeting the demand for high quality short-term officeaccommodation not only in Central London but also in key cities throughout theUK. Despite this expansion, MWB Business Exchange is still maintaining high levelsof occupancy - around 83% at the period end - and its key performance indicatorssuch as REVPAW (revenue per available workstation) all show continued growth.Equally important is that MWB Business Exchange is delivering continued growthfrom its Meeting and Conference Room division - up 28% in this period comparedto the six months ended 31st December 2005 and 50% up over the comparable periodlast year. Over the course of MWB Business Exchange's current year it plans to add at least1,700 further workstations to its portfolio taking the total to more than 14,000and the number of centres to over 55. It is increasing not only its roster offive-star serviced office centres but also expanding its portfolio of three-starCity Executive Centres brand. The full impact of this current expansionprogramme will begin to be felt during 2007 and will build the foundations forcontinued growth in future years. Equally satisfying is the turnaround at Liberty which has bucked current adversetrends seen elsewhere in the retail sector. The impact of Liberty'sconsolidation programme - implemented as recently as March this year - isalready being felt; producing higher sales in this half year than it did in thecomparative period last year, even though it now has 20% less trading spacefollowing the closing of our Regent Street building. It is also delivering ahigher conversion rate from its footfall, together with a 12% uplift in averagetransaction values. All of this has been achieved at a time when the retailsector is enduring a difficult trading environment and I am, therefore, pleasedwith this performance. Earlier this year I reported on the successful launch of the Liberty of Londonluxury goods brand which continues to be well received by the media andcustomers alike; the Liberty team confidently believes it is laying thefoundations for a sustainable expansion of the brand over the next two years,both here and abroad. Liberty has once more become a design-based retaildestination that is attracting an increasingly wide and affluent customer base. I believe the Board's determination to create a highly focused business withthree very distinct and highly successful operations has met with approval fromshareholders specifically, and the investment community generally. Against thisbackground we view the future enthusiastically as we believe the threebusinesses within the Group have the ability to produce long term growth and tocreate continuing shareholder value. Eric SandersonChairman 19th September 2006 MALMAISON AND HOTEL DU VIN - CHIEF EXECUTIVE'S REVIEW----------------------------------------------------- This has been another exciting and successful period for the Malmaison Group.Advances were made on all fronts as Malmaison consolidated its position as theUK's leading lifestyle hotel group. As the group's financial position has continued to strengthen over the past 12months we have been able to increase our expansion rate both for Malmaison andHotel du Vin. Currently we have a further five new hotels - two Malmaison andthree Hotel du Vin - under construction or refurbishment and a further fourproperties where we are in advanced stages of acquisition or we are finalisingplanning consents. These alone will meet our original growth target of 25properties. In addition, we are in negotiations to acquire sites in a furthertwo cities where we believe there would be strong demand for our offering. We believe there is great scope for new HdV hotels in some of the cities wherean existing Malmaison is already firmly established, enabling us to takeadvantage of the different customer base that is attracted to HdV. The citieswhere we have secured sites for an HdV to complement an existing Malmaison areGlasgow, Newcastle and Edinburgh. We are also considering London on a leaseholdbasis, where we believe a number of properties, currently under review, wouldmake an excellent HdV. Out of those properties under development, the first new hotel to come on streamwill be the HdV in Glasgow. This follows our £9.4m acquisition in July 2006 ofOne Devonshire Gardens, which is an existing and highly regarded boutique hotel.Our planned refurbishment will increase the number of rooms from 36 to 49, withthe hotel re-opening in September 2006 as an HdV, and final conversion completedby next February. Our first new Malmaison since the highly successful launch of Oxford lastNovember, will be in Liverpool where we expect our new dockside 130 room hotelto open in January 2007. This will be followed in March 2007 by a 42 room HdV inCambridge and the 75 room Malmaison in Reading in July 2007. During 2007 we will open, or complete the refurbishment of seven new propertiescomprising a further two HdV hotels (Cheltenham and York) and another Malmaison(Aberdeen). By mid 2008, we expect the Malmaison group will have 27 operationalhotels, without the need for any further fundraising. Our results for the six months to 30th June 2006 continue to reflect improvingmarket conditions as well as continuing tight financial controls and thebenefits we achieve through a centralised management approach to the enlargedbusiness. Revenue over this first half rose by 15% on a like-for-like basis andwas approximately 25% higher at £36.6m than the comparable period last year. Thelatest period includes a full contribution from both the new Henley HdV and theOxford Malmaison but even without their contributions there was a like-for-likerevenue increase of almost £1.9m. Perhaps even more importantly, there has been a 20% uplift in EBITDA to £9.7mfrom £8.1m in the comparable period to 30th June 2005. The rise in EBITDA, evenexcluding the recently opened Henley and Oxford, is beginning to reflect theeconomies of scale we are achieving through more centralised buying andreservations systems and we see further benefits continuing in this area. Since we acquired HdV less than two years ago, we have been able to implementincreasingly more effective, and efficient, management controls that areenabling us to deliver even greater profitability. We always believed thatbringing the two businesses under one management team would deliver both costsavings and the ability to cross-market and it is pleasing to see this so wellreflected in the group's results. As a result of this approach, I am pleased to report that the average room rateacross the group for the six months to June 2006 has risen to £108, an increaseof £3 against the average for the six months to 31st December 2005. Similarly,spend per available room for the six months ended 30th June 2006 grew to £155,up by over £7 per room. Average occupancy for the six months ended 30th June2006 has also advanced to 79%, despite the additional capacity from Henley andOxford. There has also been a 12% increase in the group's food and beverage divisionthis time in comparison to the six months ended 30th June 2005. We believe thisreflects not only the quality of our restaurants and brasseries throughout theMalmaison group but also our improved central cost controls and buyingstrategies. We continue to invest in our people, as we regard all staff as a highlyimportant and integral ingredient to the group's success in delivering not onlya superior level of service but also as a key contributor to our long termprofitability. We focus on training and development of all staff with a view topromoting the most talented people to senior management positions. The six months to 31st December 2006 has started well with recent internationalevents encouraging more people to spend more leisure time here in the UK ratherthan travelling abroad. Traditionally this period is stronger than the firsthalf of the calendar year and we are currently on course to deliver furtherrevenue growth. With that in mind I continue to view the future with greatconfidence. Robert B. CookChief ExecutiveMalmaison Group 19th September 2006 MALMAISON AND HOTEL DU VIN OPERATING REVIEW------------------------------------------- Malmaison has expanded organically and by acquisition of further operatinghotels during the six months ended 30th June 2006. The key performanceindicators for the business, together with its trading and balance sheetperformance in recent periods, are summarised below:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 ---------- ---------- ---------Malmaison--------- Total turnover £'000 23,144 17,252 44,844Average occupancy for period % 78 76 79Average room rate for period £ 108 102 108EBITDA £'000 7,012 5,598 14,658Number of operating hotels at period end 9 8 9 ====== ====== ====== Hotel du Vin------------ Total turnover £'000 13,413 12,072 27,670Average occupancy for period % 84 81 86Average room rate for period £ 96 88 96EBITDA £'000 2,701 2,483 6,129Number of operating hotels 7 7 7 ====== ====== ====== Combined Malmaison and Hotel du Vin---------------------- £'000 £'000 £'000 ----- ----- ----- EBITDA 9,713 8,081 20,787Pre-tax profit 585 (1,001) 2,964Total recognised income and expense 10,262 15,228 17,784 ====== ====== ====== 30th June 30th June 31st DecemberBalance sheet composition 2006 2005 2005------------------------- £'000 £'000 £'000 --------- --------- ------------- Property assets 286,973 251,855 272,328Debt (181,187) (169,494) (184,931)Equity attributable to shareholders of MWB in Malmaison and Hotel du Vin 88,188 81,248 76,223Equity attributable to shareholders of MWB in Malmaison and Hotel du Vin in pence per MWB share 93p 74p 70p ======= ======= ======= MWB BUSINESS EXCHANGE PLC - CHIEF EXECUTIVE'S REVIEW---------------------------------------------------- This has been an exciting period in the company's development, as part of thefunds raised from last December's AIM flotation have been invested to expand thebusiness through a specific programme of new centre openings to underpin thegroup's financial strength. Between January 2006 and the date of this review, we have secured or are in theprocess of securing, a total of nine new centres - for both our BusinessExchange Centres and City Executive Centres brands. This expansion programme isplanned to take the number of centres to over 55 and total workstations to morethan 14,000. Over the six months to 30th June 2006 the business has benefited from arelatively stable economy that has resulted in increasing demand for qualityoffice accommodation, especially within Central London. This has been reinforcedin some areas by a shortage of Grade A space resulting in increases incommercial rents, which further demonstrates the value of our offer. Total revenue of £39.3m for the six months to 30th June 2006 advanced by 26%over the comparable period to 30th June 2005, with EBITDA of £3.9m being 54%higher than in the comparable six month period. Revenue increases have beenachieved during the six months to 30th June 2006 in both our leased operationsand through operating and management agreements. MWB Business Exchange Plc produced pre-tax profits of £3.4m in comparison to aloss of £1.1m for the comparable period. As we said at the time of oursuccessful AIM flotation in December last year, we will be following aprogressive and sustainable dividend policy within the company. This currentlycentres on the payment of a final dividend after the year end and I look forwardto advising shareholders of the amount of this dividend in my reviewaccompanying the accounts for the year ending 31st December 2006. What has been extremely pleasing over the course of the current year has beenthe strengthening of MWB Business Exchange's key performance indicators.Occupancy at the end of June 2006, in spite of the expanded portfolio, was 83%compared to 80% at the same point a year ago. Importantly, annualised Revenueper Available Workstation (REVPAW) in June 2006 was £8,100, a 16% advance from£6,980 in December 2005. Similarly, annualised Revenue per Occupied Workstation(REVPOW) in June 2006 was £9,800, a 16% increase from £8,430 in December 2005. As I have commented in previous reports, we continue to focus on our Meeting andConference Room division. Turnover from this division in the six months to 30thJune 2006 rose to £3.4m, an increase of 28% over the six months to December2005. The division has been streamlined and is increasingly attractive to hotel andconference booking agents as we have adopted a more flexible process and bookingstrategy rather than the more rigid half-day or full-day approach generallyadopted by hotels. This strategy has been complemented by the development of a separate brandidentity for this part of our business, under the Meeting Venues name. The newbrand was launched during June 2006 to the end-user and conference bookingmarket, positioning it as a specialist provider of meeting, training andconference rooms in dedicated business environments. I am pleased to report thatresults to date have been most encouraging. This has enabled us to adopt a more proactive approach when engaging andcommunicating with our clients, allowing us to market and exploit the demand fornon-residential outsourced meeting and conference room facilities. In addition to the expansion programme embarked upon since last December'sflotation, we have also invested more than £2m upgrading and improving ourexisting centres. This is to ensure that some of our older centres meet thestandards that exist throughout the remainder of our portfolio and continue tomeet the changing requirements of our diverse client base. During the six months ended 30th June 2006, we have also invested in thedevelopment of our service delivery strategy, through a combination of internaltraining initiatives and the appointment of a new Client Service Director. Thefocus of this investment is on our clients and employees, in conjunction withthe contemporary look and feel of our locations. This activity represents thestart of our longer term brand development of the business. Our clients remain the focal point of the day to day centre operations and webelieve this focused approach towards client satisfaction enhances our abilityto retain and attract clients at favourable rates, as well as positivelydifferentiating us from other providers in the sector. Increasing our coverage both within Central London and the UK's key cities hasbeen the period's main highlight as we seek to consolidate our position as aleading national serviced office provider. During the first half of the currentyear we opened a new Business Exchange centre in London's Cannon Street. Inthe same period, at Birmingham we doubled the space in this prime city centrelocation. Since 30th June 2006, we have signed and are at various stages ofopening two further buildings in Cavendish Square and Tottenham Court Road. We have also expanded our three-star offering, City Executive Centres. In Julywe took over management control of the City of London Corporation's CityBusiness Centre on London Wall, EC2. This has taken the total number of CECcentres to 16 and we are actively seeking further management agreements toincrease our exposure to the three-star sector of the serviced office market. In addition, we have agreed terms for a new centre in Bristol and we are alsonegotiating to lease a City of London centre as well as a further centre inNewcastle. We anticipate these centres will come on stream during the secondhalf of the financial year and will further enhance our coverage in the Londonand the regional office markets. When all of the above centres have been opened, MWB Business Exchange'sworkstations will have increased by over 1,700 to over 14,000 workstations. Thefull impact of these new openings will be felt during the 2007 financial year. Last December's AIM float has given MWB Business Exchange Plc a solid platformto take the company forward. Not only has the share price advanced by some 36%since the float, giving us a market value of £75m at the date of thisstatement, but it has also enabled the business to operate totally debt free. Furthermore the float has ensured that MWB Business Exchange can consolidate itsposition as the UK's second largest provider of flexible office space. Webelieve that our increasingly national spread of centres provides a stablebusiness model against any short-term vagaries in localised office markets. Allpotential expansion opportunities are reviewed internally against rigorousfeasibility studies and analysis of specific market potential and only thosewith strong opportunities are pursued. We continue to minimise our dependency on clients who occupy over 15% of acentre's available space. At 30th June 2006, these major space users occupiedonly 18% of total workstations in our portfolio, remaining constant with theposition at 31st December 2005. We monitor our levels of reliance on specificindustries on a regular basis in order to control our dependency on any onesector of the economy. I would also like to take this opportunity of welcoming Steve Jude and GarySpellins to the Board, who were appointed as Non-Executive Directors of MWBBusiness Exchange Plc in March and May 2006 respectively. They bring a widerange of business experiences to the group and I am pleased to report they aremaking an important contribution to the management team. This has been a very exciting period for the company during which we have grownour business and greatly enhanced the offer to our customers. Having built afirm base from which to grow, we look forward to the remainder of the year withconfidence. John SpencerChief ExecutiveMWB Business Exchange Plc 19th September 2006 MWB BUSINESS EXCHANGE PLC OPERATING REVIEW------------------------------------------ MWB Business Exchange 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:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 ---------- ---------- --------- Operating statistics-------------------- Turnover £'000 39,285 31,204 75,138Occupancy at period end % 83 80 83REVPAW per month at period end £ 8,100 6,780 8,100REVPOW per month at period end £ 9,800 8,400 9,800EBITDA £'000 3,878 2,518 6,600Number of operating centres at period end 34 34 34Number of operating and management agreements at period end 16 14 16 ====== ====== ====== Three additional centres acquired since 30th June 2006, taking total number ofcentres to 53. Financial performance--------------------- Operating pre-tax profit/(loss) £'000 3,421 (1,138) 5,593Total recognised income and expense from ordinary activities £'000 3,426 (798) 5,598 ===== ===== ===== 30th June 30th June 31st DecemberBalance sheet composition 2006 2005 2005------------------------- £'000 £'000 £'000 --------- --------- ------------- Operating fixed assets £'000 20,711 15,688 17,102Net cash/( debt) £'000 7,398 (14,009) 7,530Adjusted equity attributable to shareholders of MWB in MWB Business Exchange £'000 44,369 (22,576) 42,632Adjusted equity attributable to shareholders of MWB in MWB Business Exchange in pence per MWB share 46p (20p) 39p ====== ====== ====== LIBERTY PLC - CHIEF EXECUTIVE'S REVIEW-------------------------------------- I am pleased to report that the improvement in sales at Liberty's flagship storein the last quarter of 2005 has continued through the six months to the end ofJune 2006. What is even more pleasing is that this increase in sales has beenachieved despite the closing of our Regent Street building, resulting in a 20%reduction in floorspace within the flagship store for the last four months ofthe period. Today we have a stable and dynamic management team that is capable of deliveringgrowth and profitability. Their achievements are reflected in the continuingimprovements in performance of the company that I comment on below. From an operational perspective, the past six months have been characterised byconsolidation. As noted above, during the period we withdrew from our RegentStreet space and consolidated all our activities into the Tudor Building inGreat Marlborough Street. This has enabled us to adopt a more focused approachand concentrate on products that more accurately reflect our strategy of being aluxury branded goods emporium. As part of that strategy we have continued tobuild on last Autumn's launch of Liberty of London branded luxury goods, whichwas enthusiastically greeted by both the fashion media and public alike. Across the business, total net sales were stable at nearly £20m against thecomparable period last year. We are particularly pleased with this performanceagainst the current retail climate and after taking into account the disruptionto trade caused by relocating part of the business from Regent Street to ouradjoining Tudor Building, with its resulting 20% reduction in floor space. Importantly, trading at the flagship store grew by 2%, with this six month'ssales in the Tudor Building being £18.8m against £18.4m for the same period lastyear. At the heart of this improvement was a 11% higher conversion rate offootfall into sales together with a 12% increase in average transaction value,reflecting the success of our merchandising strategy. At the EBITDA level, the group's business produced a negative £1.2m this time.This compares to a negative £1.5m for the same period a year ago after excludinglast year's rental income of £0.6m and property profits of £5.0m. Once again, weregard this as strong evidence of the improved financial performance which isbeginning to become apparent in our results. Brand development costs incurred during this and previous periods have all beenexpensed rather than being carried forward against forecast earnings to beproduced from the brand. Excluding these costs, Liberty improved operatingEBITDA by £0.25m for the period to an almost break-even position. During theperiod, the Group has also seen savings in interest costs of some £1.2m as aresult of the Regent Street sale completed in April 2005. Excluding the one-offprofit on sale of the Regent Street property last year, the Group's pre-tax lossimproved by 34% from a loss of £2.9m in the comparative period last year, to£1.9m this period. Looking more closely at our trading performance, it is worth noting that bothmenswear and ladies accessories produced impressive double-digit growth over thesame period last year, while ladies fashions also increased sales by 7%. Therewas an equally impressive out-turn from the beauty division which generated thesame level of sales but from 27% less trading space. While our Home business sales volume has been lower than last year, it isimportant to appreciate that in the comparable period a large number of largeticket sales were achieved, although margins this year have been significantlyhigher. I am delighted to report that we have continued to build on the success of ourLiberty of London luxury brand. Sales are already matching those of the luxurymulti-brand accessories that once occupied the central atrium and we believe weare laying the foundations for a sustainable expansion over the next two yearsof our Liberty of London brand, both at home and abroad. Our strategy is toallocate the whole of the central atrium on the ground floor of the store to theLiberty of London brand, thus reinforcing our customers' view that Liberty isonce more an important "fashion destination". With the Liberty of London brand becoming firmly established here in London, ourintention is to start rolling out this concept internationally. This will startin Japan where our aim is to replicate the feel and ambience of our flagshipstore in conjunction with our trading partners, where they will be providing thetrading locations and we will be providing our branded Liberty of Londonproduct. We aim to have our Japanese joint venture in place by the beginning of2007, enabling us to fully launch Liberty of London there in the Spring of 2008. While we appreciate there is still much work to be done we are confident thatthe key drivers are in place that will, once more, make Liberty a design focuseddestination retail centre that attracts a broader range of consumers than everbefore. The consolidation of our flagship business is now delivering both efficienciesand an enhanced customer experience which, together with the ongoing investmentin the Liberty of London brand, gives us confidence that we will delivershareholder value over the medium term. We also believe we are laying thefoundations for the creation of a serious global luxury goods brand from anincreasingly successful and iconic London retail landmark. Against thisbackground we view the future with cautious, but positive, optimism. Iain RenwickChief ExecutiveLiberty Plc 19th September 2006 LIBERTY PLC OPERATING REVIEW---------------------------- During the six months ended 30th June 2006, Liberty Plc continued itstransformation into a dynamic retail destination, underpinned by a strong andexpanding retail brand. The historical trading and balance sheet performance ofLiberty Plc are summarised below:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000 ---------- ---------- ---------Financial performance--------------------- Turnover 20,279 20,450 42,954Operating EBITDA before brand expenditure (68) (310) (90)Operating loss before profit on sale of properties and trademark, and before brand expenditure (821) (2,270) (1,622)Profit on disposal of properties and minor trademark - 5,006 1,720Brand expenditure (1,085) (624) (1,650)Total recognised income and expense 620 3,050 1,630 ====== ====== ====== 30th June 30th June 31st DecemberBalance sheet composition 2006 2005 2005------------------------- £'000 £'000 £'000 --------- --------- ------------- Property assets 30,083 27,911 28,609(Debt)/cash (882) 3,616 3,892Adjusted equity attributable to shareholders of MWB in Liberty Plc 40,164 39,381 41,009Adjusted equity attributable to shareholders of MWB in Liberty Plc in pence per MWB share 43p 36p 37p ====== ====== ====== FINANCIAL REVIEWfor the six months ended 30th June 2006--------------------------------------- INTRODUCTION------------ The Chairman's Statement and Operational Reviews on pages 5 to 23 provideinformation on the Group's principal operations and the Board's expectations forthe future. This Financial Review covers in greater depth the more significantfeatures of the accounts for the six months ended 30th June 2006, which includean independent valuation of the Group's properties at that date. All information in these accounts, including all comparative information, hasbeen prepared on the basis of International Financial Reporting Standards("IFRS"). EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MWB------------------------------------------ The £17m decrease in Equity attributable to shareholders of MWB during the sixmonths ended 30th June 2006 primarily reflects the shares bought back during theperiod. Although Equity attributable to shareholders has decreased as a resultof these share buy-backs, Equity attributable to shareholders in pence per sharehas remained broadly unaffected and is now 125p per share. This is summarised inthe following table:- Six months ended 30th June 2006 ------------------- Pence £'000 per share ----- ---------Equity attributable to shareholders of MWB at beginning of period 135,528 124p Movements during the period:Revaluation surplus on Group property portfolio 5,941 6pPurchase of Ordinary Shares by the Company (26,156) (8p)Issue of Ordinary Shares by the Company 173 -Retained profit 1,995 2pChanges in fair value of derivative financial instruments 1,362 1pActuarial gain on defined benefit pension schemes 1,150 1pDeferred tax on properties at valuation (1,280) (1p)Other movements (225) - ------- ---Equity attributable to shareholders of MWB at end of period 118,488 125p ======= === OTHER FINANCIAL INFORMATION--------------------------- Under IFRS, the Company's interests in its two listed subsidiaries, MWB BusinessExchange Plc and Liberty Plc, continue to be consolidated in the Group accountsinclusive of their freehold and long leasehold properties at current valuation.However, these property valuations reflect only the values of the propertiesthemselves and do not reflect the current market value of the Group'sshareholdings 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 as a result of assessingthese two investments by reference to their market value at 30th June 2006, andreflecting the surplus on sale of the Group's West India Quay hotel shortlyafter the year end, as referred to on page 68 is set out below. 30th June 2006 31st December 2005 --------------- ------------------ Pence Pence per per £'000 share £'000 share ----- ----- ----- ----- Equity attributable to shareholders of MWB per accounts 118,488 125p 135,528 124p Unrealised surplus based on the market value of MWB Group's 67.9% shareholding in MWB Business Exchange Plc, based on the share price of MWB Business Exchange Plc at 30th June 2006 39,284 41p 39,170 36p Unrealised surplus based on the market value of MWB Group's 68.3% shareholding in Liberty Plc, based on the share price of Liberty Plc at 30th June 2006 11,889 13p 13,329 12p Realised surplus arising on sale of Group's West India Quay hotel announced on 24th July 2006 6,750 7p - - ------- --- ------- ---Adjusted equity attributable to shareholders of MWB at 30th June 2006 176,411 186p 188,027 172p ======= === ======= === In addition to the assessment above, shareholders should be aware that theAdjusted equity attributable to shareholders of MWB of 186p per share above doesnot reflect the market value of the Malmaison and Hotel du Vin business, as thisis not a listed subsidiary for which a market value can be readily confirmed.The Board is confident however that the value of the Group's 821/2% share in theMalmaison and Hotel du Vin business is significantly higher than the £88.2m or93p per share for this business within Equity attributable to shareholders ofMWB, thus demonstrating a further enhancement in underlying equity value of theGroup above the adjusted figure of 186p per share in the table above. NET ASSET VALUE--------------- The net assets of the Group are financed by Equity attributable to shareholdersof MWB and minority interests. The sources of finance of the Group at 30th June2006 in the consolidated balance sheet and at previous period ends were asfollows:- 30th June 30th June 31st December 2006 2005 2005 £'000 £'000 £'000 --------- --------- -------------Equity attributable to shareholders of MWB 118,488 110,802 135,528Minority interests 57,988 48,890 53,390 ------- ------- -------Net asset value at period end 176,476 159,692 188,918 ======= ======= ======= The analysis of net assets in the consolidated balance sheet across the Group'soperations as revealed by the Consolidated Balance Sheet at 30th June 2006, andat previous period ends, is as follows:- Total assets Equity less current Less Less attributable to liabilities and (net debt) Net minority shareholders provisions /cash assets interests of MWB £'000 £'000 £'000 £'000 £'000 --------------- ---------- ------ --------- --------------- At 30th June 2006----------------- Malmaison and Hotel du Vin 285,141 (181,187) 103,954 (15,766) 88,188Hotel investments 71,592 (45,197) 26,395 (17,536) 8,859Liberty Plc 44,516 (882) 43,634 (15,359) 28,275MWB Business Exchange Plc (120) 7,398 7,278 (2,193) 5,085West India Quay apartments 28,255 (541) 27,714 (6,996) 20,718Group debt, less cash and other assets (4,820) (27,679) (32,499) (138) (32,637) ------- ------- ------- ------ ------- 424,564 (248,088) 176,476 (57,988) 118,488 ======= ======= ======= ====== =======Equity attributable to shareholders of MWB in pence per share 125p ======= Total assets Equity less current Less Less attributable to liabilities and (net debt) Net minority shareholders provisions /cash assets interests of MWB £'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 in pence per share 101p ======= Total assets Equity less current Less Less attributable to liabilities and (net debt) Net minority shareholders provisions /cash assets interests of MWB £'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 in pence per share 124p ======= 30th June 2006 31st December 2005 --------------- ------------------ Pence Pence per per £'000 share £'000 share ----- ----- ----- -----Equity attributable to shareholders ofMWB-------------------------------------- Malmaison and Hotel du Vin 88,188 93p 76,223 70pHotel investments 8,859 9p 29,813 27pLiberty Plc 28,275 30p 27,680 25pMWB Business Exchange Plc 5,085 5p 3,462 3pWest India Quay apartments 20,718 22p 2,515 2pGroup debt, less cash and other assets (32,637) (34p) (4,165) (3p) ------- --- ------- ---Total Equity attributable to shareholders of MWB 118,488 125p 135,528 124p ======= === ======= === In order that shareholders are aware of the underlying value of the Group, theEquity attributable to shareholders of MWB after assessing the Company'sinvestments in its two listed subsidiaries MWB Business Exchange Plc and LibertyPlc by reference to their market value at 30th June 2006, and by reflecting thesurplus on sale of the Group's West India Quay hotel shortly after the year end,is set out below:- 30th June 2006 31st December 2005 --------------- ------------------ Pence Pence per per £'000 share £'000 share ----- ----- ----- -----Adjusted equity attributable toshareholders of MWB------------------------------- Malmaison and Hotel du Vin 88,188 93p 76,223 70pHotel investments 15,609 16p 29,813 27pLiberty Plc 40,164 43p 41,009 37pMWB Business Exchange Plc 44,369 46p 42,632 39pWest India Quay apartments 20,718 22p 2,515 2pGroup debt, less cash and other assets (32,637) (34p) (4,165) (3p) ------- --- ------- ---Total Adjusted equity attributable to shareholders of MWB 176,411 186p 188,027 172p ======= === ======= === REVIEW OF PROPERTIES, PLANT AND EQUIPMENT----------------------------------------- Portfolio analysis by division------------------------------ The Group holds its direct property interests principally as tangible fixedassets, with smaller amounts held as trading properties. The Group's propertyinterests are disclosed in the consolidated balance sheet at 30th June 2006 asfollows:- 30th June 31st December 2006 2005 £'000 £'000 --------- ------------- Operational properties 304,496 455,212Plant and equipment 35,705 58,430Trading properties 2,221 3,772Asset classified as held for sale 93,805 - ------- -------Total property interests at 30th June 2006 436,227 517,414 ======= ======= The above interests are analysed as follows:- Percentage of 30th June 30th June 31st December 2006 2006 2005 £'000 % £'000 --------- ------------- -------------Hotels------Eleven Malmaison hotels 197,599 45 186,458Ten (31st December 2005: eight) Hotel du Vin hotels 89,374 21 85,870 ------- --- ------- 286,973 66 272,328 Hotel investment(31st December 2005 includes Park Lane) 93,805 21 193,000 ------- --- -------Total hotel portfolio 380,778 87 465,328 Liberty Plc-----------Liberty store, offices and other properties 30,083 7 28,609 MWB Business Exchange Plc 20,711 5 17,102------------------------- West India Quay apartments 2,221 - 3,772-------------------------- Asset management 2,434 1 2,603---------------- ------- --- ------- Total property interests at 30th June 2006 436,227 100 517,414 ======= === ======= Property valuation surplus arising in the six months ended 30th June 2006------------------------------------------------------------------------- A valuation of the Group's freehold and long leasehold interests in its fixedasset property portfolio at 30th June 2006 was undertaken by DTZ Debenham TieLeung. This valuation was performed on the basis of Market Value. The netsurplus over previous book value before minority interests for the six monthsended 30th June 2006 totalled £7.4m, 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 and no further amount is included in the accounts inrespect of the book value of such plant and fittings. The valuations exclude thevalue of any goodwill that may arise from the present occupation of theproperties and this is not recorded separately 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 are short leasehold interests; accordingly, theseinterests are not revalued at each period end and are recorded at the lower ofcost and net realisable value. Trading properties are recorded at the lower of cost and net realisable valueand are therefore not revalued upwards in the Group accounts. Surpluses or temporary deficits arising on valuation of the Group's operationalproperties are transferred to revaluation reserve, while impairment ofoperational properties to below their historical cost is charged directly to theincome statement. Further details of the revaluation are set out in note 9 tothe accounts. The valuation surplus credited to the revaluation reserve for the six monthperiod of £5.9m arose as follows:- Less previous Less Taken to Gross book Gross minority revaluation valuation value surplus interests reserve £'000 £'000 £'000 £'000 £'000 --------- -------- ------- --------- ----------- Malmaison 170,117 (163,411) 6,706 (1,174) 5,532Hotel du Vin 80,938 (81,282) (344) 60 (284)Liberty Plc 28,500 (27,486) 1,014 (321) 693 ------- ------- ----- ----- ----- 279,555 (272,179) 7,376 (1,435) 5,941 ======= ======= ===== ===== ===== REVIEW OF FUNDING AND LOAN FACILITIES------------------------------------- Net debt-------- On 24th July 2006, the Company announced exchange and simultaneous completion ofthe sale of its West India Quay subsidiary and related companies which owned thefive-star West India Quay Marriott international hotel, for a cash considerationof £110m. In order that shareholders are fully appraised of the current levelsof indebtedness and gearing within the Group at the date of approval of thisreport, the analyses below include additional information entitled "Proforma30th June 2006". This comprises the 30th June 2006 debt analysis as revealed bythe attached accounts, less the Group's share of the £110m received on sale ofthe West India Quay operations shortly after the period end. The Group's loans, borrowings and cash are included in the consolidated balancesheet at 30th June 2006 as follows:- Pro forma Composition at period end 30th June 30th June 31st December 2006 2006 2005 £'000 £'000 £'000 --------- --------- ------------- Total loans and overdrafts in note 11 222,414 272,699 338,574Hire purchase and leasing contracts in note 10 284 284 1,804Fair value of derivative financial instruments in note 11 883 883 2,535Long leasehold obligations in note 11 712 712 715 ------- ------- -------Total loans 224,293 274,578 343,628Less cash (65,912) (26,490) (41,561) ------- ------- -------Total net debt at period end 158,381 248,088 302,067 ======= ======= ======= The Group's loans, borrowings and cash at 30th June 2006, and at the previousperiod end, had the following maturity profiles:- Pro forma 30th June 30th June 31st December 2006 2006 2005 £'000 £'000 £'000 --------- --------- ------------- Repayable:Within one year or on demand 5,033 55,318 57,001Between one and two years 6,210 6,210 32,971Between two and five years 53,833 53,833 89,496After more than five years 159,217 159,217 164,160 ------- ------- -------Total loans 224,293 274,578 343,628Less cash (65,912) (26,490) (41,561) ------- ------- -------Total net debt at period end 158,381 248,088 302,067 ======= ======= ======= Movement in net debt during the period-------------------------------------- The movement in total net debt during the six month period ended 30th June 2006arose as follows:- Pro forma 30th June 30th June 31st December 2006 2006 2005 £'000 £'000 £'000 --------- --------- ------------- Total net debt at start of the period 302,067 302,067 382,269Debt drawn on expansion of Malmaison and Hotel du Vin 8,074 8,074 20,281Decrease in listed Unsecured Loan Stock - - (34,101)Net proceeds received from sales of properties (111,672) (72,250) (52,500)Debt repaid on West India Quay development (52,367) (2,082) (3,710)Net cash inflow/(outflow) from other Group operations during the period 12,279 12,279 (10,172) ------- ------- -------Total net debt at period end 158,381 248,088 302,067 ======= ======= ======= Net debt relating to 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 30th June 2006, these comprised theGroup's West India Quay hotel, and its majority interests in MWB BusinessExchange Plc and Malmaison Holdings Limited. The Group's West India Quay hotelwas sold shortly after the year end and the reduction in net debt arising fromthe sale is reflected in the pro forma information below. The net debt relating to Equity attributable to shareholders of MWB at 30th June2006 amounted to £203m (31st December 2005: £239m), calculated as follows:- Pro forma 30th June 30th June 31st December 2006 2006 2005 £'000 £'000 £'000 --------- --------- ------------- Total net debt as above 158,381 248,088 302,067Less net debt attributable to minority interests (29,685) (45,080) (62,590) ------- ------- -------Total net debt relating to Equity attributable to shareholders of MWB 128,696 203,008 239,477 ======= ======= ======= Gearing------- At 30th June 2006, gearing was 141%, and 97% on a pro forma basis, calculated asfollows:- Pro forma 30th June 30th June 31st December 2006 2006 2005 £'000 £'000 £'000 --------- --------- ------------- Total net debt 158,381 248,088 302,067Net assets 163,226 176,476 188,918Gearing - total net debt divided by net assets 97% 141% 160% ======= ======= ======= REVIEW OF EARNINGS------------------ Results------- An analysis by division of the total recognised gains and losses for the sixmonths ended 30th June 2006, with comparatives for the six months ended 30thJune 2005 and the year ended 30th June 2006, is shown on pages 35 to 37. The total recognised income and expense for the six months ended 30th June 2006,analysed between the share attributable to shareholders of MWB and the shareattributable to minority interests, is as follows:- Equity Shareholders Minority Total for of MWB interest the periodSix months ended 30th June 2006 £'000 £'000 £'000---------------------------------------------------------------------------------Income statement Profit/(loss) for the period 1,995 (923) 1,072Credited to equity Revaluation surplus credited to reserves 5,941 1,437 7,378 Deferred tax released on sale of properties 1,117 7,345 8,462 Gain on minority interests in Business Exchange and Malmaison (2,309) (97) (2,406) Change in fair value of financial derivatives 1,362 290 1,652 Actuarial gain/(loss) on defined benefit pension schemes 1,150 347 1,497 Write back of option costs through equity 41 18 59 Other items 27 157 184 ----- ----- ------Total recognised income and expense for the period 9,324 8,574 17,898 ===== ===== ====== The total recognised income and expense attributable to Equity shareholders ofMWB for the six months ended 30th June 2006, with comparatives for the previousperiods, is summarised below:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000--------------------------------------------------------------------------------Income statement Profit/(loss) for the period 1,995 (9,738) 3,142Credited to equity Revaluation surplus credited to reserves 5,941 33,217 19,512 Deferred tax provided on properties at 1,117 - 227 Valuation Gain on minority interests in Business (2,309) - 7,092 Exchange and Malmaison Change in fair value of financial derivatives 1,362 (1,249) 2,810 Actuarial gain/(loss) on defined benefit 1,150 (3) 1,179 pension schemes Write back of option costs through equity 41 35 51 Other items 27 (5) 37 ----- ------ ------Total recognised income and expense for the period 9,324 22,257 34,050 ===== ====== ======Per share, based on weighted average number of shares in issue during the period 9.0p 20.3p 32.0p ===== ====== ====== 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 sixmonths ended 30th June 2006, together with comparative information for previousperiods is summarised below:- Total recognised Group Profit/(loss) income and turnover EBITDA EBIT before tax expenseSix months ended 30th June 2006 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------ Malmaison 23,144 7,012 4,900 595 11,177 Hotel du Vin 13,413 2,701 2,000 (10) (915) Hotel investments Operating income 14,086 3,542 1,535 (2,130) 2,941 Sale of Park Lane hotel - 3,729 3,729 3,729 3,729 Liberty Plc Operating income 20,279 (68) (818) (821) 1,705 Expenditure on brand - (1,085) (1,085) (1,085) (1,085) MWB Business Exchange Plc Operating results - leased properties 35,784 3,204 2,633 2,747 2,882 Operating results - operating and management agreements 3,501 674 674 674 544 West India Quay - apartment sales 5,093 4,012 4,012 3,858 3,181 Others 1,579 241 130 117 117Group debt less cash and other assets - - - (2,285) (2,350) ------- ------ ------ ----- ------ 116,879 23,962 17,710 5,389 21,926 Head office administration - (4,005) (4,077) (4,077) (4,028) ------- ------ ------ ----- ------ 116,879 19,957 13,633 1,312 17,898 ======= ====== ====== ===== ====== Profit/(loss) Total on ordinary recognised Group activities income and turnover EBITDA EBIT before tax expenseSix months ended 30th June 2005 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------ Malmaison 17,252 5,598 3,283 (1,044) 7,275 Hotel du Vin 12,072 2,483 1,875 43 7,953 Hotel investments Operating income 19,589 5,513 2,768 (2,883) 17,226 Liberty Plc Operating income 20,450 (310) (1,037) (2,270) (1,332) Sale of Lasenby House and Regent House - 5,006 5,006 5,006 5,006Expenditure on brand - (624) (624) (624) (624) MWB Business Exchange Plc Operating results - leased properties 30,370 2,494 (786) (866) (526) Operating results - operating and management agreements 834 24 24 (272) (272) West India Quay - apartment sales 22,030 2,172 2,172 2,215 1,239 Others 1,556 (190) (68) (86) 264 Group debt less cash and other assets - - - (4,787) (4,732) ------- ------ ------ ----- ------ 124,153 22,166 12,613 (5,568) 31,477 Head office administration - (3,269) (3,374) (3,381) (3,437) ------- ------ ------ ----- ------ 124,153 18,897 9,239 (8,949) 28,040 ======= ====== ====== ===== ====== Profit/(loss) Total on ordinary recognised Group activities income and turnover EBITDA EBIT before tax expenseYear ended 30th June 2006 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------ Malmaison 44,844 14,658 10,958 2,310 15,142 Hotel du Vin 27,670 6,129 4,745 654 2,642 Hotel investments Operating income 38,337 10,777 5,980 (2,537) 4,252 Sale of Argyle Street hotel - 2,770 2,770 2,770 2,770 Sale of Park Lane hotel - 3,729 3,729 3,729 3,729 Liberty Plc Operating income 42,954 (90) (1,586) (1,622) 1,560 Sale of minor trademark - 1,720 1,720 1,720 1,720 Expenditure on brand - (1,650) (1,650) (1,650) (1,650) MWB Business Exchange Plc Operating results - leased properties 69,616 5,761 5,061 4,754 4,759 Operating results - operating and management agreements 5,522 839 839 839 839 West India Quay - apartment sales 9,192 5,042 5,042 4,735 4,211 Others 3,033 2,279 2,129 2,064 2,064 Group debt less cash and other assets - - - (5,766) (5,766) ------- ------ ------ ------ ------ 241,168 51,964 39,737 12,000 36,272 Head office administration - (7,813) (7,958) (7,958) 4,790 ------- ------ ------ ------ ------ 241,168 44,151 31,779 4,042 41,062 ======= ====== ====== ====== ======Notes----- 1. The components of the total recognised income and expense is shown in theGroup primary statement on page 41 of the accounts. 2. EBITDA = Earnings before interest, taxation, depreciation and amortisation 3. EBIT = Earnings before interest and taxation Interest payable---------------- Net interest payable by the Group during the six months ended 30th June 2006 was£12.7m (six months ended 30th June 2005: £18.6m; year ended 30th June 2006:£28.2m). Of this amount, £0.4m (six months ended 30th June 2005: £0.4m; yearended 30th June 2006: £0.5m) was capitalised in respect of developmentexpenditure, leaving a net charge to the income statement of £12.3m (six monthsended 30th June 2005: £18.2m; year ended 30th June 2006: £27.7m). The average cost of borrowing on the Group's loans at 30th June 2006, inclusiveof margin, was 6.36% per annum in comparison to 6.4% per annum at 31st December2005 and 7.2% at 30th June 2005. The reduction in average cost reflects thepayment down of loans drawn by the Group in earlier years at higher prevailingrates. Taxation-------- The net tax charge of £0.2m for the six months ended 30th June 2006 (credit of£0.3m for the six months ended 30th June 2005; and £0.5m for the year ended 30thJune 2006) primarily reflects the tax incurred on profits at the Group'soperations in Japan. The tax incurred on the Liberty Japanese operations amounted to £0.2m for thesix months ended 30th June 2006 (£0.2m for the six months ended 30th June 2005;and £0.5m for the year ended 30th June 2006). Of this amount, 49% is incurred bythe minority interest in the Japanese operations of Liberty Plc, who participatein the after tax profits of these operations. The Group has a 68% interest inLiberty Plc and thus the net cost to the Group is only 33% of this tax charge,or £70,000 for the six months ended 30th June 2006 (£70,000 for the six monthsended 30th June 2005; and £165,000 for the year ended 30th June 2006). Earnings per share------------------ The earnings per share shown through the income statement was 1.9p for the sixmonths ended 30th June 2006 (loss of 8.9p for the six months ended 30th June2005; and 3.0p for the year ended 30th June 2006). 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. During the six months ended 30th June 2006, repayment of debt by the Grouptotalled £2m, with a further reduction of £50m arising from the sale of theGroup's West India Quay hotel on 24th July 2006. The Board also returned £26m toshareholders by means of a series of share buy-backs in March and April 2006. By repaying increased levels of debt now, the Board expects to be able todistribute increased amounts to shareholders from asset sales in future years.The Directors envisage distributing further surplus funds to shareholders bymeans of buy-backs of ordinary shares, tender offers to shareholders, cashdistributions, demergers, distributions of assets and similar value distributionprogrammes over the next few years. Cash flow--------- The consolidated cash flow statement on page 43 shows the funds generated by theGroup, those raised from external sources, the investments made and the effectthereof on the Group's net debt. During the six months ended 30th June 2006, the Group spent £12.5m (£4.6m forthe six months ended 30th June 2005; £22.0m for the year ended 30th June 2006)on capital expenditure in the hotel division, which comprised the majority ofthe capital expenditure incurred by the Group. The disposal proceeds of £105mduring the six months ended 30th June 2006 derive from the sale in May 2006 ofthe Group's London Park Lane hotel. Net debt reduced by a further £54m during the six months ended 30th June 2006.Further details of the Group's loans and the principal components of thisincrease are set out in the section entitled "Net debt" commencing on page 30above. Andrew BlurtonGroup Finance Director 19th September 2006 CONSOLIDATED INCOME STATEMENT (UNAUDITED)for the six months ended 30th June 2006----------------------------------------- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 Notes £'000 £'000 £'000--------------------------------------------------------------------------------Turnover 2 116,879 124,153 241,168 Cost of sales (99,728) (113,056) (203,014)--------------------------------------------------------------------------------Gross profit 17,151 11,097 38,154 Administrative expenses (7,233) (6,784) (14,804)--------------------------------------------------------------------------------Operating profit before profit ondisposal of properties 9,918 4,313 23,350 Profit on disposal of properties and other fixed assets 3 3,715 4,926 8,429--------------------------------------------------------------------------------Operating profit before financing costs 13,633 9,239 31,779 Interest income 799 424 1,235Interest cost 5 (13,120) (18,862) (28,961)Change in fair value of derivative financial instruments - 250 (11)--------------------------------------------------------------------------------Profit/(loss) before taxation for the period 2 1,312 (8,949) 4,042 Current taxation on ordinary activities 6 (240) 260 (477)--------------------------------------------------------------------------------Profit/(loss) for the period 1,072 (8,689) 3,565================================================================================Attributable to:Equity shareholders of the Parent 1,995 (9,738) 3,142Minority interests 7 (923) 1,049 423--------------------------------------------------------------------------------Profit/(loss) for the period 1,072 (8,689) 3,565================================================================================Earnings/(loss) per share (basic and diluted) 8 1.9p (8.9p) 3.0p================================================================================ All results relate to continuing operations. The notes on pages 44 to 69 formpart of these accounts. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)for the six months ended 30th June 2006------------------------------------------------------------------- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000--------------------------------------------------------------------------------Gains on property revaluations 7,378 37,990 25,057 Deferred tax released on sale of properties 8,462 - 324 Minority interest in Malmaison Holdings Limited and MWB Business Exchange Plc (2,406) - 6,975 Actuarial gain/(loss) on defined benefit pension schemes 1,497 (20) 1,755 Change in fair value of derivativefinancial instruments taken directly to equity 1,652 (1,249) 3,408 Write back of option costs through equity 59 13 74 Net exchange translation differences and other movements 184 (5) (96)--------------------------------------------------------------------------------Income and expense recognised directly to equity 16,826 36,729 37,497 Profit/(loss) for the financial period 1,072 (8,689) 3,565--------------------------------------------------------------------------------Total recognised income and expense for the period 17,898 28,040 41,062================================================================================Attributable to:Equity shareholders of the Parent 9,324 22,257 34,050Minority interests 8,574 5,783 7,012--------------------------------------------------------------------------------Total recognised income and expense for the period 17,898 28,040 41,062================================================================================ CONSOLIDATED BALANCE SHEET (UNAUDITED)at 30th June 2006-------------------------------------- 30th June 30th June 31st December 2006 2005 2005 Notes £'000 £'000 £'000--------------------------------------------------------------------------------Fixed assets Brand 18,200 18,200 18,200Investment properties - 4,540 9,260Operational properties 9 304,496 465,859 445,952Plant and equipment 9 35,705 66,305 58,430-------------------------------------------------------------------------------- 358,401 554,904 531,842--------------------------------------------------------------------------------Current assets Trading properties 2,221 4,099 3,772Stocks 8,704 8,366 8,538Trade and other receivables 45,161 64,104 40,572Cash and cash equivalents 26,490 39,537 41,561-------------------------------------------------------------------------------- 82,576 116,106 94,443--------------------------------------------------------------------------------Asset classified as held for sale 16 93,805 - ---------------------------------------------------------------------------------Total assets 534,782 671,010 626,285--------------------------------------------------------------------------------Current liabilities Trade and other payables 10 (58,582) (61,623) (59,151)Tax liabilities 10 (6,175) (8,293) (6,113)Borrowings, including finance leases 10 (55,318) (46,069) (57,001)-------------------------------------------------------------------------------- (120,075) (115,985) (122,265)--------------------------------------------------------------------------------Non current liabilities Borrowings including finance leases 11 (218,377) (371,457) (284,092)Derivative financial instruments 11 (883) (4,280) (2,535)Deferred tax provision 11 - (330) (8,468)Other provisions 12 (16,775) (17,520) (17,525)Other payables 11 (2,196) (1,746) (2,482)-------------------------------------------------------------------------------- (238,231) (395,333) (315,102)--------------------------------------------------------------------------------Total liabilities (358,306) (511,318) (437,367)--------------------------------------------------------------------------------Net assets 176,476 159,692 188,918================================================================================Equity Called up share capital 47,446 54,825 54,825Share premium account 13 79,563 79,514 79,514Capital redemption reserve 13 23,478 15,975 15,975Revaluation reserve 13 88,115 96,237 100,370Hedging and translation reserve 13 (604) (4,157) (1,925)Merger reserve 9,403 9,403 9,403Other reserves 1,783 1,783 1,783Retained earnings attributable to shareholders of the Parent 13 (130,696) (142,778) (124,417)--------------------------------------------------------------------------------Equity attributable to shareholders of the Parent 118,488 110,802 135,528Minority interests 14 57,988 48,890 53,390--------------------------------------------------------------------------------Total equity 176,476 159,692 188,918================================================================================Equity attributable to shareholders of MWB in pence per share 15 125p 101p 124p================================================================================ CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)for the six months ended 30th June 2006-------------------------------------------- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000--------------------------------------------------------------------------------Operating profit before profit on disposal of properties 9,918 4,313 23,350 Adjustments for non-cash items Depreciation and amortisation 6,324 9,953 12,372Currency translation differences (192) (22) (192) ------- ------- -------Cash flows from operations before changes in working capital 16,050 14,244 35,530 Change in trade and other receivables (3,618) (20,192) 18,246Change in stocks (46) 1,091 (339)Change in trade and other payables (3,586) (13,885) (7,202) ------- ------- -------Cash generated from operations 8,800 (18,742) 46,235 Interest paid (13,520) (19,229) (29,424)Interest received 806 425 1,238Tax paid (18) (585) (288) ------- ------- -------Cash flows from operating activities (3,932) (38,131) 17,761 ------- ------- -------Cash flows from investing activitiesDecrease in trading properties 1,528 17,027 1,877Sale of properties 105,000 66,507 157,500Purchase of investments and other fixed (16,848) (5,217) (29,369) assetsPayments to minority interests (6,732) (123) 9,061 ------- ------- -------Cash flows from investing activities 82,948 78,194 139,069 ------- ------- -------Cash flows from financing activitiesPurchase of own shares (26,156) - (26,156)Issue of shares 173 400 173Borrowings drawn 20,585 63,148 40,866Borrowings repaid (87,261) (106,637) (181,460)Decrease in hire purchase and leasing contracts (1,428) (1,426) (3,300) ------- ------- -------Cash flows from financing activities (94,087) (44,515) (169,877) ------- ------- -------Net decrease in cash and cash equivalents (15,071) (4,452) (13,047)Opening cash and cash equivalents 41,561 43,989 39,537 ------- ------- -------Closing cash and cash equivalents 26,490 39,537 26,490 ======= ======= ======= NOTES TO THE UNAUDITED CONSOLIDATED SECOND INTERIM ACCOUNTS----------------------------------------------------------- 1. BASIS OF CONSOLIDATION AND ACCOUNTING POLICIES-------------------------------------------------- On 31st July 2006, the Company announced its decision to change its accountingreference date from 30th June to 31st December. Accordingly, these SecondInterim Accounts have been prepared for the six months ended 30th June 2006,with comparative information for the six months ended 30th June 2005 and theyear ended 30th June 2006. Marylebone Warwick Balfour Group Plc ("the Company" or "MWB") is a companydomiciled in The United Kingdom. These unaudited consolidated Second InterimAccounts for the six months ended 30th June 2006 comprise the accounts of theCompany and its subsidiaries (together referred to as "the Group") and have beenprepared in accordance with International Financial Reporting Standards.("IFRS"). On 28th March 2006, the Company published unaudited results for the six monthsended 31st December 2005, with comparative information for the year ended 30thJune 2005 prepared in accordance with IFRS ("the IFRS restatement"). Thecomparative figures for the six months ended 30th June 2005 have been extractedfrom the IFRS restatement. The accounts are prepared on the historical cost basis except that the followingassets and liabilities are stated at their fair value: • Investment and operational properties • Property held under finance leases • Interest rate swaps In accordance with IFRS 1 - "First Time Adoption of International FinancialReporting Standards", the Group has taken advantage of the following exemptionsat 1st July 2004, the date of transition to IFRS: • Business combinations occurring prior to transition have not been restated • Share options granted before 7th November 2002 or vested prior to 1st January 2005 have not been recognised in accordance with IFRS 2 The Group has chosen not to take the exemption permitted under IFRS 1 fromapplying IAS 32 and 39 for its comparative periods and accordingly these havebeen adopted in the comparative information in the interim accounts. Where necessary, adjustments are made to the information included in theaccounts of subsidiaries to bring their accounting policies in line with thoseused by the Group and so reflect that information on a consistent basis with therest of the Group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Brands------ In accordance with IFRS 3, brands are initially included in the accounts attheir fair value. The Directors consider that the Group's brands have indefinitelives due to the durability of their underlying businesses which has beendemonstrated over many years. Accordingly, the brands have not been amortisedbut have instead been subject to an impairment assessment conducted at eachfinancial year end. Where this reveals a surplus, the value of the brand isretained, where it reveals a deficit, the brand is written down and the deficitis charged to the income statement. Goodwill-------- In accordance with IFRS 1, goodwill written off to reserves under UK GAAP priorto 1998 has not been reinstated and is not included in determining anysubsequent profit or loss on disposal. Minority interests------------------ Dilution gains and losses on increases in minority interest, where no change ofcontrol results, are recognised directly in equity. Operational properties---------------------- Land and buildings held for use in the production or supply of goods orservices, or for administrative purposes, are stated in the balance sheet attheir revalued amounts, being the fair value, determined from market-basedevidence and appraisals undertaken by professional valuers at the balance sheetdate. Tangible fixed assets - plant and equipment------------------------------------------- Any revaluation increase arising on the revaluation of such land and buildingsis credited to the properties revaluation reserve, except to the extent that itreverses a revaluation decrease for the same asset previously recognised as anexpense, in which case the increase is credited to the income statement to theextent of the decrease previously charged. A decrease in carrying amount arisingon the revaluation of such land and buildings is charged as an expense to theextent that it exceeds the balance, if any, held in the properties revaluationreserve relating to previous revaluations of that asset. Depreciation on revalued buildings is charged to income. On a subsequent sale orretirement of a revalued property, the attributable revaluation surplusremaining in the properties revaluation reserve is transferred directly toaccumulated profits. Properties in the course of construction are carried at cost, less anyrecognised impairment loss. Cost includes professional fees and, for qualifyingassets, borrowing costs capitalised in accordance with the Group's accountingpolicy. Depreciation of these assets, on the same basis as other propertyassets, commences when the assets are ready for their intended use. Fixtures and equipment are stated at cost less accumulated depreciation and anyimpairment loss. Depreciation is charged so as to write off the cost or valuation of fixedassets, other than land and property under construction, over their estimateduseful lives, using the straight line method, over the following periods: Freehold and long leasehold listed The shorter of 100 years and theoperational properties term of the lease Other freehold operational properties 50 years Other long leasehold properties and related 50 yearsleasehold improvements Short leasehold properties The shorter of 50 years and the term of the lease Building surface finishes and services 30 years Plant and machinery 15 to 20 years Fixtures and equipment 3 to 10 years The gain or loss on the disposal or retirement of a fixed asset is determined asthe difference between the sales proceeds and the carrying amount of the assetat the date of disposal or retirement, and is recognised in income. Investment properties--------------------- Investment property, which is property held to earn rentals and/or capitalappreciation, is stated at its fair value at the balance sheet date, determinedfrom market-based evidence and appraisals undertaken by professional valuers atthe balance sheet date. Gains or losses arising from changes in the fair valueof investment property are included in the income statement for the period inwhich they arise. Leases------ Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease payments,each determined at the inception of the lease. The corresponding liability tothe lessor is included in the balance sheet as a finance lease obligation. Leasepayments are apportioned between finance charges and reduction of the financelease obligation, so as to achieve a constant rate of interest on the remainingbalance of the liability. Finance charges are charged directly against income,unless they are directly attributable to assets which are not yet ready fortheir intended use, in which case they are capitalised into the costs of thoseassets. Benefits receivable on the entry into operating leases are spread on astraight line basis over the entire term of the lease. Rentals payable and incentive fees received under operating leases are charged/amortised to income on a straight-line basis over the entire term of therelevant lease. Trading properties------------------ Trading properties are measured at the lower of carrying amount and fair valueless costs to sell. Stocks------ Stocks are stated at the lower of cost and net realisable value. Provisionsagainst book values are recorded principally by reference to the age of stock.Cost comprises direct materials and, where applicable, direct labour costs andthose overheads that have been incurred in bringing the stocks to their presentlocation and condition. Cost is calculated using the weighted average method inthe retail division and FIFO for the hotels. Net realisable value represents theestimated selling price less all estimated costs of completion and costs to beincurred in marketing, selling and distribution. Debt and financial instruments------------------------------ Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Interest bearing bank loans and overdrafts and the Group's unsecured loan stockare recorded at the proceeds received, net of direct issue costs. The net amountof any premium or discount over the nominal value, less issue costs, isamortised over the life of the instrument and charged or credited to interestpayable in the income statement, thus producing a constant cost of financingover the life of the instrument. Trade receivables----------------- Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Trade payables------------- Trade payables do not carry any interest and are stated at their nominal value. Derivative financial instruments and hedge accounting----------------------------------------------------- The Group's activities expose it primarily to the financial risk of changes ininterest rates. The Group uses interest rate swaps, swaptions, caps, floors andcollars to hedge these exposures. The Group does not use derivative instrumentsfor speculative purposes. Changes in the fair values of derivative financial instruments that aredesignated and effective as hedges of future cash flows are recognised directlyin equity and the ineffective portion is recognised immediately in the incomestatement. If the cash flow hedge of a firm commitment or a forecast transactionresults in the recognition of an asset or a liability, then, at the time theasset or liability is recognised, the associated gains or losses on thederivative that had previously been recognised in equity are included in theinitial measurement of the asset or liability. For hedges that do not result inthe recognition of an asset or a liability, amounts deferred in equity arerecognised in the income statement in the same period in which the hedged itemaffects net income. Changes in the fair value of derivative financial instruments that do notqualify for hedge accounting are recognised in the income statement as theyarise. Hedge accounting is discontinued when the hedging instrument expires or is sold,terminated, exercised or no longer qualifies for hedge accounting. At that time,any cumulative gain or loss on the hedging instrument recognised in equity isretained in equity until the forecasted transaction occurs. If a hedgedtransaction is no longer expected to occur, the net cumulative gain or lossrecognised in equity is transferred to net profit or loss for the period. Foreign exchange---------------- Monetary assets and liabilities denominated in foreign currencies are translatedinto Sterling at rates of exchange prevailing at the balance sheet date.Transactions denominated in foreign currencies are recorded in Sterling at therates ruling on the date of those transactions. Exchange differences in thenormal course of trading are included in the income statement. For the purposes of consolidation, the balance sheet and income statements ofsubsidiary undertakings that are denominated in foreign currencies, aretranslated at the rates of exchange ruling on the balance sheet date. The incomestatements are translated at an average rate for the accounting period. Exchangedifferences arising from the translation at the closing rates of the opening netassets of subsidiary undertakings denominated in foreign currencies anddifferences arising between the average rates used and the closing rate, arerecorded as a movement on the Group's translation reserve. Such translationdifferences are recognised as income or as expenses in the period in which theoperation is disposed of. Turnover and revenue recognition-------------------------------- Revenue is measured at the fair value of the consideration received orreceivable and represents rent, the amounts receivable from sales of propertyheld for resale, fees, hotel billings and amounts charged to customers for goodsand services provided by the Group, net of discounts and VAT. Sales of properties are recognised on exchange of contracts where thesignificant risks and rewards of ownership have been transferred to the buyer. Interest income is accrued on a time basis by reference to the principleoutstanding and at the effective interest rate applicable. Dividend income from investments is recognised when the shareholders' rights toreceive payments have been established. Cost of sales------------ Cost of sales comprises the book value of disposals of operational properties,properties held for resale and developments in progress, together with thedirect costs incurred in managing and operating the Group's property activities,net of recoveries charged to tenants. Retirement benefit costs------------------------ Payments to defined contribution retirement benefit schemes are charged as anexpense as they fall due. For defined benefit retirement benefit schemes, the cost of providing benefitsis determined using the Projected Unit Credit Method, with actuarial valuationsconducted every three years. Actuarial gains and losses are recognised in fullin the period in which they occur. They are recognised outside the incomestatement and presented in the statement of recognised income and expense. The retirement benefit obligation recognised in the balance sheet represents thepresent value of the defined benefit obligation as adjusted for unrecognisedpast service cost, and as reduced by the fair value of scheme assets. Any assetresulting from this calculation is limited to past service cost, plus thepresent value of available refunds and reductions in future contributions to theplan. Interest payable---------------- Interest incurred on loans specific to properties in the course of developmentis capitalised during the development phase but ceases to be capitalised oncethe development is completed and ready for occupation. Where such interest isallowable in computing the taxation liabilities of the Group, this is used toreduce the tax charge in the income statement. All other interest payable ischarged to the income statement. Corporation tax and deferred taxation------------------------------------- The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the period. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income and expense that are taxable in other years and itfurther excludes items that are never taxable or deductible. The Group'sliability for current tax is calculated using tax rates that have been enactedor substantively enacted by the balance sheet date. Deferred tax is the tax that is expected to be payable or recoverable ondifferences between the carrying amount of assets and liabilities in theaccounts and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition of other assetsand liabilities in a transaction that affects neither the tax profit nor theaccounting profit. Deferred tax liabilities are recognised for temporary differences arising oninvestments in subsidiaries, except where the Group is able to control thereversal of the temporary difference and it is probable that the temporarydifference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply duringthe period when the liability is settled or the asset is realised. Deferred taxis charged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Dividends--------- Dividends that have been approved by shareholders at previous Annual GeneralMeetings are included within liabilities. Dividends proposed at the balance sheet date that are subject to approval byshareholders at the annual general meeting are not included as a liability inthe current period's accounts. 2. DIVISIONAL ANALYSIS---------------------- The analysis of Group turnover is as follows:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006Turnover £'000 £'000 £'000------------------------------------------------------------------------------Malmaison 23,144 17,252 44,844Hotel du Vin 13,413 12,072 27,670Hotel investments 14,086 19,589 38,337MWB Business Exchange Plc Leased properties 35,784 30,370 69,616 Operating and management agreements 3,501 834 5,522Liberty Plc 20,279 20,450 42,954West India Quay - apartment sales 5,093 22,030 9,192Other 1,579 1,556 3,033 ------- ------- ------- 116,879 124,153 241,168 ======= ======= =======By geographical origin:United Kingdom 113,808 121,446 236,048Japan 3,071 2,707 5,120 ------- ------- ------- 116,879 124,153 241,168 ======= ======= ======= Six months Six months Year ended ended ended 30th June 30th June 30th JuneEarnings before interest, taxation, 2006 2005 2006depreciation and amortisation ("EBITDA") £'000 £'000 £'000------------------------------------------------------------------------------The EBITDA of the Group is calculated as follows:- Net operating profit before financing expenses 13,633 9,239 31,779Add depreciation and amortisation for the period 6,324 9,658 12,372 ------ ------ ------Total EBITDA for the period 19,957 18,897 44,151 ====== ====== ====== Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006Analysis of EBITDA £'000 £'000 £'000------------------------------------------------------------------------------The analysis of EBITDA for the period is as follows:- Malmaison Operating income 7,012 5,598 14,658 Hotel du Vin Operating income 2,701 2,483 6,129 Hotel investments Operating income 3,542 5,630 10,777 Pre-opening costs - (117) - Profit on sale of Park Lane hotel 3,729 - 3,729 Profit on sale of Argyle Street hotel - - 2,770 MWB Business Exchange Plc Operating income - leased properties 3,204 2,494 5,761 Operating income - operating and management agreements 674 24 839 Liberty Plc Operating income (68) (310) (90) Expenditure on brand (1,085) (624) (1,650) Profit on sale of Lasenby House and Regent House - 5,006 - Profit on sale of minor trademark - - 1,720 West India Quay - apartment sales 4,012 2,172 5,042 Other 241 (190) 2,279 ------ ------ ------ 23,962 22,166 51,964Head office administration (4,005) (3,269) (7,813) ------ ------ ------Total EBITDA for the period 19,957 18,897 44,151 ====== ====== ====== Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006Profit/(loss) before taxation £'000 £'000 £'000------------------------------------------------------------------------------The analysis of Group profit/(loss) before taxation for the period is as follows:- Malmaison and Hotel du Vin Operating income 585 (1,001) 2,964 Hotel investments Operating income (2,130) (2,766) (2,537) Pre-opening costs - (117) - Profit on sale of Park Lane hotel 3,729 - 3,729 Profit on sale of Argyle Street hotel - - 2,770 MWB Business Exchange Plc Operating income - leased properties 2,747 (866) 4,754 Operating income - operating and management agreements 674 (272) 839 Liberty Plc Operating income (821) (2,270) (1,622) Expenditure on brand 1,085) (624) (1,650) Profit on sale of Lasenby House and Regent House - 5,006 - Profit on sale of minor trademark - - 1,720 West India Quay - apartment sales 3,858 2,215 4,735 Other 117 (86) 2,064 Group debt less cash and other assets (2,285) (4,787) (5,766) ----- ----- ----- 5,389 (5,568) 12,000Head office administration (4,077) (3,381) (7,958) ----- ----- -----Profit/(loss) on ordinary activities before taxation for the period 1,312 (8,949) 4,042 ===== ===== =====By geographical origin:United Kingdom 704 (9,451) 3,097Japan 608 502 945 ----- ----- ----- 1,312 (8,949) 4,042 ===== ===== ===== The analysis of net assets, equity minority interests and Equity attributable toshareholders of MWB at 30th June 2006, with comparatives for previous periods,is as follows:- Equity attributable to Minority shareholders Net assets Interests of MWB30th June 2006 £'000 £'000 £'000---------------------------------------------------------------------------------Malmaison and Hotel du Vin 103,954 15,766 88,188Hotel investments 26,395 17,536 8,859Liberty Plc 43,634 15,359 28,275MWB Business Exchange Plc 7,278 2,193 5,085West India Quay - apartments 27,714 6,996 20,718Group debt less cash and other assets (32,499) 138 (32,637) ------- ------ ------- 176,476 57,988 118,488 ======= ====== =======Equity attributable to shareholders of MWB in pence per share 125p Equity attributable to Minority shareholders Net assets Interests of MWB30th June 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Malmaison and Hotel du Vin 81,248 - 81,248Hotel investments 77,587 18,566 59,021Liberty Plc 42,992 15,500 27,492MWB Business Exchange Plc (22,576) - (22,576)West India Quay - apartments 24,984 14,757 10,227Group debt less cash and other assets (44,543) 67 (44,610) ------- ------ ------- 159,692 48,890 110,802 ======= ====== =======Equity attributable to shareholders of MWB in pence per share 101p Equity attributable to Minority shareholders Net assets Interests of MWB31st December 2005 £'000 £'000 £'000---------------------------------------------------------------------------------Malmaison and Hotel du Vin 81,671 5,448 76,223Hotel investments 59,995 30,182 29,813Liberty Plc 42,733 15,053 27,680MWB Business Exchange Plc 4,828 1,366 3,462West India Quay - apartments 3,772 1,257 2,515Group debt less cash and other assets (4,081) 84 (4,165) ------- ------ ------- 188,918 53,390 135,528 ======= ====== =======Equity attributable to shareholders of MWB in pence per share 124p 3. PROFIT ON DISPOSAL OF PROPERTIES AND OTHER FIXED ASSETS----------------------------------------------------------- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000-------------------------------------------------------------------------------------The profit on disposal of investment propertiesand other fixed assets arose as follows:- Profit on disposal of Park Lane hotel, London 3,729 - 3,729Profit on disposal of Argyle Street hotel, Glasgow - - 2,770Profit on disposal of Lasenby House, Regent House - 5,006 -Profit on disposal of minor Liberty trademark - - 1,720Profit/(loss) on disposal of other fixed assets (14) (80) 210 ----- ----- ----- 3,715 4,926 8,429 ===== ===== ===== 4. PENSIONS------------ Overall summary--------------- MWB operates defined contribution pension schemes in most areas of the Group. Italso has two defined benefit pension schemes in its 68.3% owned subsidiaryLiberty Plc. One of these is for certain UK employees of its subsidiary LibertyRetail Plc and has been closed to new entrants since February 2002. The other isa minor scheme for the Japanese subsidiary of Liberty Plc. The assets of all pension schemes of the Group are held in separate trustadministered funds. The total pension charge of the Group for the six monthsended 30th June 2006 was £0.5m (six months ended 30th June 2005: £0.4m; yearended 30th June 2006: £0.9m). UK defined benefit scheme of Liberty Retail Plc----------------------------------------------- The Group contributions to the UK defined benefit scheme of Liberty Retail Plcduring the six months ended 30th June 2006 amounted to £0.2m (six months ended30th June 2005: £0.2m; year ended 30th June 2006: £0.4m). The agreedcontribution rate for future years payable by Liberty Retail Plc is 23% ofContribution Earnings. The contribution rate is determined by an independentqualified actuary, using the projected unit method, on the basis of triennialvaluations. For this scheme, which is closed to new entrants, the currentservice cost is expected to increase as members of the scheme approachretirement. Movement of deficit in the UK defined benefit pension scheme of Liberty Retail Plc---------------------------------------------------------------------------------- The movement in the UK defined benefit pension scheme during the six months wasas follows:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000-----------------------------------------------------------------------------------Deficit in scheme at beginning of period (6,552) (6,805) (6,822) Movements in period:- Contributions received 183 180 366 Current service cost (129) (123) (265) Net finance income/(costs) 8 (54) (27) Increase in value of scheme assets less increase in actuarial valuation of current scheme liabilities 1,497 (20) 1,755 ----- ----- ----- Deficit in scheme at the end of the period (4,993) (6,822) (4,993) ===== ===== ===== The fair values of the scheme's assets are not intended to be realised in theshort term and may be subject to significant change before they are realised.The present value of the scheme's liabilities is derived from cash flowprojections over long periods of time and is thus inherently uncertain. However,the table above represents the Trustee's and the Actuary's best estimate of thedeficit in the scheme at the dates referred to. Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000-----------------------------------------------------------------------------------Analysis of amount recognised in ConsolidatedStatement of Recognised Income and Expense Actual return less expected return on pension scheme assets in UK (462) 446 650 Experience gains and losses arising on scheme liabilities in UK - (6) 1 Changes in assumptions underlying present value of scheme liabilities in UK 1,959 (460) 1,104 ----- --- -----Actuarial gain/(loss) in consolidated statement of recognised income and expense 1,497 (20) 1,755 ===== === ===== 5. INTEREST COST----------------- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000-----------------------------------------------------------------------------------The interest payable and similar charges arose as follows:- Unsecured Loan Stock 2009/2012 1,462 - 2,953 Unsecured Loan Stock 2005/2006, including redemption premium - 3,729 173 Bank loans and overdrafts 10,905 14,558 23,330 Finance leases and hire purchase contracts 31 156 123 Bank charges, debt issue and debt repayment costs 1,125 766 2,805 Defined benefit pension scheme financing costs (8) 54 27 ------ ------ ------ 13,515 19,263 29,411Less interest capitalised before tax relief (395) (401) (450) ------ ------ ------Total interest cost for the period 13,120 18,862 28,961 ====== ====== ====== 6. CURRENT TAXATION ON ORDINARY ACTIVITIES------------------------------------------- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000-----------------------------------------------------------------------------------The current taxation on ordinary activities for the period arose as follows:- UK Corporation tax Utilisation of current period losses in reducing liabilities of earlier years and adjustments in respect of prior periods (1) 476 (6) Foreign tax Tax on profit for the period (239) (216) (464) Adjustment in respect of prior periods - - (7) --- --- ---Current taxation on ordinary activities (240) 260 (477) === === === The current taxation on ordinary activities has been decreased from the amountthat would arise from applying the prevailing corporation tax rate to the profit/(loss)before taxation in the consolidated income statement, as follows:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000-----------------------------------------------------------------------------------UK corporation tax at 30% for each period on the profit/(loss) before taxation in consolidated income statement (394) 2,684 (1,213) Excess of capital allowances claimed over depreciation charged 1,091 1,132 1,103 Expenditure permanently disallowed for taxation purposes and unrelieved tax losses (232) (305) (420) Difference between taxation on chargeable gains on disposals of properties and accounting profits on such disposals (6,383) (1,969) (9,013) Taxation on overseas earnings at a higher rate than UK corporation tax (56) (68) (180) Profits that are not taxable and capitalised expenditure deductible for taxation purposes 489 1,555 1,384 Tax losses brought forward from earlier periods utilised in current period 5,246 (3,245) 7,875 ----- ----- -----Total corporation tax and similar taxes charge for the period (239) (216) (464) Utilisation of current year losses in reducing liabilities of earlier periods and reduction/(increase) in taxation provisions in respect of prior periods (1) 476 (13) ----- ----- -----Current taxation on ordinary activities (240) 260 (477) ===== ===== ===== At 30th June 2006, the Group had unrelieved capital expenditure and interestpayments from current and prior periods of approximately £210 million. At thesame date, it had trading losses carried forwards in certain parts of the Groupof approximately £50 million. These tax assets are available for offset againstfuture capital gains and trading profits of the Group. 7. MINORITY INTERESTS---------------------- Minority interests in the profit/(loss) on ordinary activities after taxationfor the period arose in the following divisions of the Group:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000----------------------------------------------------------------------------------- MWB Business Exchange Plc 828 - 891Malmaison Holdings Limited 230 - 686Hotel investments - West India Quay (272) (32) (215)Hotel investments - 140 Park Lane Limited (2,627) (163) (2,695)Liberty Plc (543) 674 (408)West India Quay apartments 1,407 572 2,091Others 54 (2) 73 ----- ----- ----- (923) 1,049 423 ===== ===== ===== 8. EARNINGS/(LOSS) PER SHARE----------------------------- The earnings/(loss) per share figures are calculated by dividing the profit/(loss) attributable to equity shareholders of MWB for the period, by theweighted average number of shares in issue during the period, as follows:- Six months Six months Year ended ended ended 30th June 30th June 30th June 2006 2005 2006 £'000 £'000 £'000-----------------------------------------------------------------------------------Profit/(loss) for the period attributable to equity shareholders of MWB 1,995 (9,738) 3,142 ====== ======= ======= '000 '000 '000Weighted average number of ordinary shares in issue during the period 103,271 109,506 106,486 ======= ======= =======Earnings/(loss) per share (basic and diluted) 1.9p (8.9p) 3.0p ======= ======= ======= 9. PROPERTIES, PLANT AND EQUIPMENT----------------------------------- --Investment properties-- -------Operational properties------- Plant, machinery, Long Long Short fixtures & Freehold leasehold Freehold leasehold leasehold equipment Total £'000 £'000 £'000 £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------------------------Cost or valuation At 1st January 2006 2,639 6,621 365,178 62,821 18,360 87,019 542,638 Additions 8,164 4,641 1,700 10 2,515 5,978 23,008 Reclassification (10,803) (11,262) 10,803 10,762 500 - - Disposals - - (94,501) 483 (637) (3,782) (98,437) Transfer to assets classified as held for sale (note 16) - - (79,055) - - (18,404) (97,459) Revaluation - - (496) 6,932 - - 6,436 ------ ------ ------- ------ ------ ------ -------At 30th June 2006 - - 203,629 81,008 20,738 70,811 376,186 ------ ------ ------- ------ ------ ------ -------Depreciation At 1st January 2006 - - - - (407) (28,589) (28,996) Charge for the period - - (1,711) (158) (472) (3,927) (6,268) Disposals - - 256 (23) - (5,548) (5,315) Transfer to assets classified as held for sale (note 16) - - 696 - - 2,958 3,654 Revaluation - - 759 181 - - 940 ------ ------ ------- ------ ------ ------ -------At 30th June 2006 - - - - (879) (35,106) (35,985) ------ ------ ------- ------ ------ ------ -------Net book valueAt 30th June 2006 - - 203,629 81,008 19,859 35,705 340,201 ====== ====== ======= ====== ====== ====== =======At 31st December 2005 2,639 6,621 365,178 62,821 17,953 58,430 513,642 ====== ====== ======= ====== ====== ====== ======= Analysis of valuation surplus for the period Reflected in fixed assets Surplus credited to revaluation reserve (note 13) - - 73 5,868 - - 5,941 Surplus credited to minority interests (note 14) - - 190 1,245 - - 1,435 ------ ------ ------- ------ ------ ------ -------Net revaluation surplus reflected in fixed assets - - 263 7,113 - - 7,376 ====== ====== ======= ====== ====== ====== ======= Valuation--------- The Group's tangible fixed assets are all located in the United Kingdom. TheGroup's Operational properties were valued at 30th June 2006 by qualifiedprofessional valuers working for the company of DTZ Debenham Tie Leung,Chartered Surveyors, ("DTZ"), acting in the capacity of External Valuers. Allsuch valuers are Chartered Surveyors, being members of the Royal Institution ofChartered 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 DTZ valuation is notqualified by any reference to existing or alternative use and implies the valueto which a property will derive, having regard to its most valuable use. 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. Fixed asset properties valued by DTZ at 30th June 2006 totalled £321m. Otherminor fixed assets, and the short leasehold properties of MWB Business ExchangePlc are carried at the lower of cost and realisable value in the table above.These fixed assets had a net book value of £19m at 30th June 2006. The historic cost of the Group's properties at 30th June 2006 includescapitalised interest of £4m (30th June 2005: £28.0m, 31st December 2005:£25.2m). 10. CURRENT LIABILITIES------------------------ 30th June 30th June 31st December 2006 2005 2005 £'000 £'000 £'000-------------------------------------------------------------------------------Trade and other payables Trade creditors 13,052 13,508 13,085 Amounts due to related parties 49 - 87 Other creditors 19,058 21,116 19,185 Accruals 24,781 24,976 24,887 Deferred income 1,642 2,023 1,907 ------- ------- ------- 58,582 61,623 59,151 ------- ------- -------Tax liabilities Corporation tax 1,762 1,533 1,543 Other taxes and social security 4,413 6,760 4,570 ------- ------- ------- 6,175 8,293 6,113 ------- ------- -------Borrowings, including finance leases Current portion of bank loans 53,414 7,085 53,577 Current portion of other loans 1,620 1,620 1,620 7.50% Unsecured Loan Stock 2005/2006 - 34,101 - Hire purchase and leasing contracts 284 3,263 1,804 ------- ------- ------- 55,318 46,069 57,001 ------- ------- ------- 120,075 115,985 122,265 ======= ======= ======= 11. NON CURRENT LIABILITIES---------------------------- 30th June 30th June 31st December 2006 2005 2005 £'000 £'000 £'000-------------------------------------------------------------------------------Borrowings, including finance leases 9.75% Unsecured Loan Stock 2009/2012 30,000 30,000 30,000 Bank loans (secured) 188,570 338,671 253,476 Other loan borrowings 3,235 4,855 4,045 Less debt issue costs (4,140) (3,107) (4,144) ------- ------- ------- 217,665 370,419 283,377 Hire purchase and leasing contracts - 320 - Long leasehold obligations 712 718 715 ------- ------- ------- 218,377 371,457 284,092 Fair value of derivative financial instruments 883 4,280 2,535 ------- ------- ------- 219,260 375,737 286,627Deferred tax provision - 330 8,468Other provisions (note 12) 16,775 17,520 17,525Other payables 2,196 1,746 2,482 ------- ------- ------- 238,231 395,333 315,102 ======= ======= ======= Summary of borrowings, including finance leases, at period end-------------------------------------------------------------- 30th June 30th June 31st December 2006 2005 2005 £'000 £'000 £'000-------------------------------------------------------------------------------Repayable within one year: Current portion of bank loans 53,414 7,085 53,577 Current portion of other loan borrowings 1,904 38,984 3,424 ------- ------- ------- 55,318 46,069 57,001 ------- ------- -------Repayable: In more than one year but not more than two years 6,210 124,018 32,971 In more than two years but not more than five years 53,833 99,530 89,496 In more than five years 158,334 147,909 161,625 ------- ------- ------- 218,377 371,457 284,092 ------- ------- -------Total loans and overdrafts 273,695 417,526 341,093 ======= ======= ======= 30th June 30th June 31st December 2006 2005 2005 £'000 £'000 £'000-------------------------------------------------------------------------------Analysis by division Malmaison and Hotel du Vin 186,876 166,986 185,481Hotel investments 50,000 145,170 110,721Liberty Plc 882 - -MWB Business Exchange Plc 258 11,982 6,524West India Quay apartments 498 6,024 2,446Central debt 35,181 87,364 35,921 ------- ------- ------- 273,695 417,526 341,093 ======= ======= ======= 12. PROVISIONS--------------- The movements on provisions during the six months ended 30th June 2006 were asfollows:- ---------------------------30th June 2006------------------------- 31st Operating European December lease Employee closure Other 2005 incentives benefits provision provisions Total Total £'000 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------------------------At 1st January 2006 5,738 6,588 4,900 299 17,525 17,520 Decrease in operating lease incentives (8) - - - (8) 272 Reduction in deficit on Liberty Plc defined benefit pension scheme - (1,650) - - (1,650) (233) Net decrease in other provisions during period - - (350) 1,258 908 (34) ----- ----- ----- ----- ------ ------At 30th June 2006 5,730 4,938 4,550 1,557 16,775 17,525 ===== ===== ===== ===== ====== ====== 13. MOVEMENT ON RESERVES------------------------- Share Capital Hedging and premium redemption Revaluation translation Retained account reserve reserve reserve earnings £'000 £'000 £'000 £'000 £'000----------------------------------------------------------------------------------------------------At 1st January 2006 79,514 15,975 100,370 (1,925) (124,417) Movements during period: Profit retained - - - - 1,995 Revaluation surplus - - 5,941 - - Issue and purchase of ordinary shares 49 7,503 - - (26,156) Actuarial gain on Liberty Plc defined benefit pension scheme - - - - 1,150 Deferred tax released on sale of properties - - - - 758 Transfer to minority interest - - - - (2,397) Change in fair value of financial derivatives - - - 1,362 - Transfer on sale of properties - - (17,887) - 17,887 Transfer of depreciation on revalued tangible - - (309) - 309 fixed assets Currency translation and other differences - - - (41) 175 ------ ------ ------ ---- -------At 30th June 2006 79,563 23,478 88,115 (604) (130,696) ====== ====== ====== ==== ======= The balance on retained earnings at 30th June 2006 comprises the following:- Accumulated net loss in consolidated income statements to 30th June 2006 (90,069)Purchase of Company's ordinary shares for cancellation to 30th June 2006 (40,627) ------- Retained earnings at 30th June 2006 (130,696) ======= During the six months ended 30th June 2006 there was no movement on either themerger reserve or the other reserves of the Group. Revaluation reserve------------------- The revaluation reserve has arisen in the following divisions of the Group:- Valuation Revaluation surplus Less reserve at on tangible minority 30th June Fixed assets interests 2006 £'000 £'000 £'000------------------------------------------------------------------------------Malmaison and Hotel du Vin 75,117 (10,141) 64,976Hotel investments 27,041 (9,174) 17,867Liberty Plc 7,612 (2,410) 5,202Others 70 - 70 ------- ------- ------At 30th June 2006 109,840 (21,725) 88,115 ======= ======= ====== 14. MINORITY INTERESTS----------------------- The movements in minority interests of the Group during the six months ended30th June 2006 arose as follows:- Add Add minority minority share of Other At share of valuation movements At 30th 1st January profit for surplus for during June 2006 the period the period the period 2006 £'000 £'000 £'000 £'000 £'000--------------------------------------------------------------------------------------------MWB Business Exchange Plc 1,366 828 - - 2,194Malmaison Holdings Limited 5,448 230 1,114 8,974 15,766Hotel Investments 30,182 (2,899) - (9,747) 17,536Liberty Plc 15,053 (543) 321 528 15,359West India Quay apartments 1,257 1,407 - 4,331 6,995Others 84 54 - - 138 ------ ----- ----- ----- ------ 53,390 (923) 1,435 4,086 57,988 ====== ===== ===== ===== ====== 15. EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MWB IN PENCE PER SHARE------------------------------------------------------------------ The Equity attributable to shareholders of MWB in pence per share is calculatedby dividing the Equity attributable to shareholders of MWB at each period end bythe number of ordinary shares in issue at such period end. The relevant figuresare as follows:- 30th June 30th June 31st December 2006 2005 2005 £'000 £'000 £'000------------------------------------------------------------------------------ Equity attributable to shareholders of MWB per consolidated balance sheet on page 42 of the accounts 118,488 110,802 135,528 ======= ======= ======= '000 '000 '000 Number of ordinary shares in issue at period end 94,891 109,650 109,650 ======= ======= ======= Equity attributable to shareholders of MWB in pence per share 125p 101p 124p ======= ======= ======= 16. ASSET CLASSIFIED AS HELD FOR SALE AND POST BALANCE SHEET EVENT------------------------------------------------------------------- On 24th July 2006, the Company announced exchange and simultaneous completion ofthe sale of its West India Quay subsidiary and related companies which owned thefive-star West India Quay Marriott International hotel, for a cash considerationof £110m. As the property was in an advanced stage of negotiation for sale at30th June 2006, it has been transferred in the consolidated balance sheet to"Asset classified as held for sale" at its fair value on transfer, which equatedto the independent valuation at 31st December 2005 plus subsequent capitalexpenditure at cost. The disposal produced a net surplus attributable toshareholders of MWB of approximately £6.75m over book value, which will bereflected in the accounts for the period ended 31st December 2006. The gross proceeds receivable from this sale were used to repay £50.6m securedon the hotel. The balance of £59.4m was used in part to pay the minorityinterest to the Group's partner in the project, with the remainder beingavailable for use within the Group. 17. ACCOUNTS AND SECOND INTERIM REPORT--------------------------------------- A copy of this document has been submitted to the UK Listing Authority and willbe 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. These unaudited Second Interim Accounts of Marylebone Warwick Balfour Group Plcfor the six months ended 30th June 2006, the unaudited interim accounts of theGroup for the six months ended 31st December 2005 and the audited accounts ofthe Group for the year ended 30th June 2005, are available from the CompanySecretary, City Group P.L.C. at the Company's registered office of 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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