3 Sep 2008 07:00
Mucklow (A & J) Group plc
3 September 2008 Embargoed: 7.00am
A & J Mucklow Group plc results for the year ended 30 June 2008
Underlying pre-tax profit*1 of £11.9m from property rental business (2007: £9.6m)
Net rental income up 12.1% at £15.2m (2007: £13.5m)
Occupancy level maintained around 93% (2007: 94%)
Loss before tax for the period reported under IFRS of £26.7m (2007 profit of £33.4m), taking into account a property portfolio write down of £41.2m (2007: surplus £16.3m)
Initial yield on investment portfolio now 6.5%, equivalent yield 7.2%
Adjusted net asset value per share*2 down 14.8% at 379p (2007: 445p)
Ordinary dividend per share*3 up 20% to 17.68p (2007: 14.73p)
Conservative financing with net gearing of only 13% (2007: 7%)
*1 See the property and financial review for details.
*2 EPRA (European Public Real Estate Association) net asset value, excluding deferred tax and including the surplus on trading properties and the mark to market of debenture stock; see note 7 for details.
*3 Recommended final dividend of 9.65p (2007: 8.04p), making the total paid and proposed for the year ended 30 June 2008 17.68p (2007: 14.73p).
| For further information please contact: | ||
| Rupert Mucklow, Chairman | Tel: | 0121 504 2121 (direct) |
| Mobile: | 07815 151254 | |
| David Wooldridge, Finance Director | Tel: | 0121 504 2108 (direct) |
| A & J Mucklow Group plc | ||
| Keith Gabriel | Tel: | 0121 455 8370 |
| Citigate Dewe Rogerson |
CHAIRMAN'S STATEMENT
Over the last 12 months there has been a significant adjustment in the pricing of land and commercial properties across the UK, as a result of tighter credit conditions and a change in investor attitude. After several years of steady capital growth, we have written down the value of our property portfolio by £41.2m through our income statement, for the year ending 30 June 2008, which has created a substantial loss for the period and reduced our net asset value per share by 14.8%.
A correction in property yields had been expected for some time, as the investment market became overheated and the returns from commercial property were below the cost of borrowing. However, the speed and severity of the decline in values has been far greater than anticipated, particularly towards the end of our financial year and although our business remains in good health, with low gearing and an increase in property rental profits, the reduction in the value of our assets has had a negative impact on these results.
Results
Pre-tax loss for the year ended 30 June 2008 under IFRS+ was £26.7m, compared with a profit of £33.4m for the corresponding period last year. The loss is attributed to a £41.2m reduction in the market value of the Group's investment properties and development land, compared with a surplus of £16.3m last year.
EPRA diluted earnings per share† increased during the period from 17.75p to 23.13p per share. The underlying rental profits before tax*, excluding deficits on the revaluation of the property portfolio, premium on the redemption of debenture stock and profit on the disposal of investment and trading properties, was 23.6% higher at £11.9m (2007: £9.6m). Net rental income rose by 12.1%, from £13.5m to £15.2m.
EPRA (adjusted) net asset value per share†, including the current value of our trading properties, fell during the year from 445p to 379p per share, as a result of the fall in property values. Shareholders' funds reduced to £222.7m (2007: £259.3m), while borrowings net of cash amounted to £29.2m (2007: £17.6m), representing 13% of Shareholders' funds (2007: 7%).
The Board is recommending the payment of a final dividend of 9.65p per Ordinary share, making a total for the year of 17.68p per share, an increase of 20% over last year's total of 14.73p per share. If approved by Shareholders, the dividend will be paid on 2 January 2009, to Shareholders on the register at the close of business on 28 November 2008.
Shareholders are reminded that the dividend consists of two elements: a property income distribution (PID) and a non-PID. The allocation of the dividend between PID and non-PID may vary over time. The allocation of the final dividend per share between PID and non-PID will be 7.72p PID and 1.93p non-PID. The PID dividend is subject to the deduction of withholding tax at the basic rate (20% for 2008/09). Certain classes of shareholder can claim exemption from the withholding tax. Forms are available from our website (www.mucklow.com). The non-PID element will be paid as a normal dividend.
The Board intend to seek shareholder approval for the authority to buy-back up to 15% of the Group's Ordinary share capital at an EGM to be held after the AGM on 11 November 2008. Our share price is currently at a significant discount to the revised net asset value. Further details will be provided in the EGM circular to Shareholders.
Property Review
Our strategy of selling secondary and non-core assets over the last few years, in a buoyant investment market, has proved to be the right decision, now that property values are falling in response to higher funding costs and a general economic slowdown. The majority of our remaining investment properties are very modern and securely let to strong covenants and continue to provide us with good long term growth prospects.
The development programme has also been successful, with approximately 70% of new space being reserved or let. We completed three speculative developments during the year at Worcester, Dudley and Wednesbury, totaling 109,000 sq ft and commenced construction on a further 115,000 sq ft at Dudley. We have also agreed terms to develop a pre-let, 128,500 sq ft building on one of our sites at Coventry, which is conditional on the outcome of a planning appeal, which may take some time to process.
The leasing market for good quality industrial space around the Midlands has remained fairly active throughout the year. We have maintained our vacancy levels at around 7%, including the new developments and managed to achieve rental growth of approximately 2% on the existing property portfolio.
The recent introduction of business rates on vacant industrial properties and the anticipated slowdown in occupier demand over the next 12 months has temporarily put a hold on any further speculative developments. However, we are continuing to market various commercial sites for pre-lets and exploring ways to add value through active management.
DTZ Debenham Tie Leung reviewed the value of our investment properties at 30 June 2008. The investment portfolio, including commercial land and new developments was valued at £264.4m, which showed a deficit for the year of £40.9m (13.4%). The average equivalent yield on our investment properties increased from 6.0% to 7.2% during the year and the value of our development land fell by 9.5%.
We sold 2.3 acres of residential land in the first half year for £2.7m, with a book value of £0.1m. No further sales were made in the second half year. The value of the trading properties was also reviewed by DTZ Debenham Tie Leung as at 30 June 2008. The total value was £5.7m (2007: £10.0m), which showed a surplus of £4.8m over book value, equivalent to 8p per share.
The balance sheet remains in good shape with total borrowings of £31.4m and net gearing of only 13% at 30 June 2008. In May 2008, we agreed to borrow £20m from Lloyds TSB Bank plc, at a fixed rate of 5.59% for a period of 15 years. The funds have been used to pay off existing revolving credit facilities, providing additional cash to help fund any new investment or development opportunities that arise.
In May 2008 we also strengthened our Board with the appointment of Stephen Gilmore as an independent non-executive director. Stephen is a corporate lawyer and was previously Partner in charge of the Birmingham office of Cobbetts LLP.
Outlook
The economic indicators for the next 12 months do not look very favourable, which could impact on the UK occupier market and cause a further deterioration in property values. Fortunately, we are in a strong position of having low gearing and a modern portfolio of quality let properties, with very few leases expiring over the next few years.
We anticipate a challenging period ahead. Our main focus will be towards maintaining our occupancy levels and using our cash wisely, during these uncertain times. We shall continue to watch the investment market closely and when appropriate, we intend to use our strong financial position to start buying quality investment properties, on attractive terms, across the Midlands.
Rupert J Mucklow
Chairman
3 September 2008
+ International Financial Reporting Standards.
* See the property and financial review for the calculations.
† See note 7 for the calculations.
PROPERTY AND FINANCIAL REVIEW
The severe economic and property market declines over the last twelve months have lead to the most challenging conditions the Group has faced since the early 1990s. Despite this environment, the fundamentals of the Group remain strong, with low debt levels, a well let, quality portfolio with a high occupancy rate and a 12% increase in net rental income.
The Group remains lean, efficient and tightly managed.
Strategy
The Group's long-term investment strategy remains unchanged. Our objective is to maintain a balanced portfolio of modern, income producing properties with potential for future rental and capital growth. The three main areas of our strategy remain:
Selectively acquiring and disposing of investment properties;
Developing new properties for long-term investment; and
Actively managing our assets to enhance value.
We remain a selective developer of well located, quality property and a counter-cyclical investor in investment property. We believe that the precise timing of acquisitions and disposals is crucial in boosting returns from our existing property portfolio. In addition, the pro-active approach to the management of our assets allows us additional opportunity to enhance overall value.
Investment
Following our conversion to a REIT in July 2007 the decision was made to make the main geographical focus of our business the Midlands Region.
Given the recent dramatic readjustment of pricing in the UK property sector our decision to dispose of over £100m of secondary, ex-growth assets over the last few years has proved more than justified. This realigning of our investment portfolio to more quality stock has allowed us, to some extent, to insulate ourselves from the worst effects of the pricing readjustment that has decimated the secondary property market. Our portfolio now comprises mainly modern, securely let properties benefiting from the following characteristics:
No one tenant represents greater than 3% of current passing rent;
No one building or estate represents greater than 7% of the portfolio valuation;
Diversity of portfolio across the industrial, offices and retail sectors;
The retail element represents only 10% of the portfolio and comprises strategically located, single let investments with future development and asset management potential; and
Average unexpired lease length in excess of 7.1 years.
At the beginning of the financial year we purchased a modern 48,000 sq ft industrial investment located in Leamington Spa, adjoining our existing holding at Tachbrook Park, for £3.7m. The property is well let and produces a rent of £252,500 per annum.
Given the steep decline in property values across the UK over the course of the year we have adopted a cautious approach to the purchase of investments. We expect to encounter more suitable buying opportunities towards the end of this year and the beginning of next at which time we will utilise our position of low gearing to take advantage of any suitable investments.
Development
Our strategy of developing high quality, well located, modern business accommodation has proved fruitful over the course of the last year with 259,443 sq ft of space developed of which 71% is pre-let or reserved. These lettings represent an additional rent of £0.9m per annum. Developments over the year have included:
Three speculative developments at Apex Park, Worcester (28,000 sq ft - offices), Yorks Park, Dudley (41,000 sq ft - industrial) and Wednesbury One (40,000 sq ft - industrial) have been completed;
Following the purchase of 5.7 acres of land in December 2007, planning permission was also received for Phase 2 of Yorks Park, Dudley comprising three industrial units totalling 115,000 sq ft. This phase is due to complete in autumn 2008 and all three units have been pre-let at a combined rent of £0.6m per annum; and
An existing 32,000 sq ft industrial estate in Coleshill has been extensively refurbished to create a quality trade park.
In addition we have agreed terms to develop a 128,500 sq ft bespoke building, subject to a successful planning appeal, on our site at Torrington Avenue, Coventry. The development will be let on completion to an exceptional covenant on a 25 year lease.
All the remaining commercial development land, comprising approximately 30 acres, is being actively marketed to prospective tenants. Given the present uncertainty of the occupier market we feel it prudent to put on hold any further speculative development until a more confident and stable market returns.
Asset management
This aspect of our strategy forms a key focus for the Group. Through a systematic, hands-on approach we have sought to drive additional value in terms of both rental and capital growth. Despite the completion of an additional 259,443 sq ft of new developments and an increasingly challenging occupier market we have managed to maintain our occupancy level at around 93%.
We are continually reviewing our portfolio for value enhancing opportunities. During the last financial year we have agreed lease renewals on 91,500 sq ft, reviews on 333,367 sq ft and re-geared leases on 63,550 sq ft, with reviews increasing our rental income by £0.2m per annum, including a 20% increase in passing rent at our 24,681 sq ft Waitrose store in Harborne, Birmingham.
During the year we purchased a strategic corner site to enhance our overall land holding at Enterprise Trading Estate, Merry Hill for a price of £0.2m.
As at 30 June 2008 our investment portfolio, including commercial land and new developments, was valued at £264.4m by DTZ Debenham Tie Leung, which showed a deficit for the year of £40.9m (13.4%). The average equivalent yield on our investment properties increased during the year from 6.0% to 7.2%, with industrial at 7.3%, offices at 7.2% and retail at 6.5% at our year end.
Trading Properties
In August 2007 we completed the sale of 2.3 acres of residential land at Mellings Farm, Wigan for £2.6m. This reflected a surplus over book value of £2.5m.
The Group's trading properties mainly comprise residential land and were valued by DTZ Debenham Tie Leung as at 30 June 2008 at £5.7m (2007: £10.0m), which shows a surplus of £4.8m over book value.
Financial Performance
For the first time we have presented our income statement in three column format, showing the adjusted income and expense on a consistent basis with previous years, excluding the impact of revaluation movements, profits on the disposal of investment properties, debenture redemption premium, and their tax effects, deferred tax and the impact of REIT conversion. At a pre-tax level, the adjusted profit of £14.4m (2007: £19.7m) shows a decrease from the prior year of £5.3m. However, the decision to dispose of a significant amount of our trading properties (which remain taxable following our conversion to a REIT) increased the prior year pre-tax profits by £7.6m.
The requirement of International Financial Reporting Standards to include revaluation movements on the investment property portfolio in the income statement has resulted in a £41.2m charge in 2008, against a credit of £16.3m in the prior year. In addition, the Group's conversion to a Real Estate Investment Trust on 1 July 2007 led to a tax credit of £25.7m in the prior year, being £31.4m of deferred tax released, offset by a £5.7m REIT conversion charge. A reconciliation of the movement in our post tax results is shown below:
| £000 | |
| Profit for the financial year ended 30 June 2007 | 51,969 |
| Increase in net rental income | 1,644 |
| Reduction in profits realised from trading properties | (7,605) |
| Reduction in administration costs | 218 |
| Reduction in profit realised from investment properties | (2,199) |
| Change in property portfolio valuation | (57,491) |
| Reduction in net finance costs | 406 |
| Debenture premium realised in the prior year | 4,949 |
| Net tax release following REIT conversion | (25,673) |
| Reduction in current tax payable | 5,959 |
| Other deferred tax movements | 562 |
| Loss for the financial year ended 30 June 2008 | (27,261) |
The Group has also presented below an analysis of the underlying rental performance before tax, which excludes the impact of EPRA adjustments, premium on redemption of debenture and related tax and we have also presented separately the profit on sale of trading properties. The Directors consider that this further analysis of our income statement gives Shareholders a useful comparison of our underlying performance for the periods shown in the consolidated financial statements.
Our underlying rental performance has improved significantly over last year, with a 12% improvement in net rental income, reflecting the Group's focus on vacancy levels, the acquisition of an investment property, letting of completed development properties, and improvements in rent at review and on renewal. Only one investment property was acquired in the year, increasing passing rent by £0.3m, and no disposal of rent producing properties took place. Stripping out the trading profits, revaluation movements and other items, pre-tax profit rose by £2.3m, as shown below. As disclosed in note 7 to the preliminary announcement, EPRA adjusted earnings also rose by £3.2m, with EPRA adjusted earnings per share ("eps") rising 30.3%, from 17.75p in 2007 to 23.13p in 2008.
Underlying Financial Performance
| 2008 | Total | Investment/ | Trading | Other |
| development | properties | items | ||
| £000 | £000 | £000 | £000 | |
| Rental income | 15,772 | 15,772 | - | - |
| Property outgoings | (591) | (591) | - | - |
| Net rental income | 15,181 | 15,181 | - | - |
| Sale of trading properties | 2,653 | - | 2,653 | - |
| Carrying value of trading properties | (98) | - | (98) | - |
| Property outgoings on trading properties | (2) | - | (2) | - |
| Net income from trading properties | 2,553 | - | 2,553 | - |
| Administration expenses | (2,778) | (2,778) | - | - |
| Operating profit before net (losses)/gains | ||||
| on investment | 14,956 | 12,403 | 2,553 | - |
| Profit on disposal of investment property | 48 | - | - | 48 |
| Net losses on revaluation | (41,169) | - | - | (41,169) |
| Operating (loss)/profit | (26,165) | 12,403 | 2,553 | (41,121) |
| Finance income | 60 | 60 | - | - |
| Finance costs | (604) | (604) | - | - |
| Total finance costs | (604) | (604) | - | - |
| (Loss)/profit before tax | (26,709) | 11,859 | 2,553 | (41,121) |
| 2007 | Total | Investment/ | Trading | Other |
| development | properties | items | ||
| £000 | £000 | £000 | £000 | |
| Rental income | 14,285 | 14,285 | - | - |
| Property outgoings | (748) | (748) | - | - |
| Net rental income | 13,537 | 13,537 | - | - |
| Sale of trading properties | 10,680 | - | 10,680 | - |
| Carrying value of trading properties | (518) | - | (518) | - |
| Property outgoings on trading properties | (4) | - | (4) | - |
| Net income from trading properties | 10,158 | - | 10,158 | - |
| Administration expenses | (2,996) | (2,996) | - | - |
| Operating profit before net gains on investment | 20,699 | 10,541 | 10,158 | - |
| Profit on disposal of investment property | 2,247 | - | - | 2,247 |
| Net gain on revaluation | 16,322 | - | - | 16,322 |
| Operating profit | 39,268 | 10,541 | 10,158 | 18,569 |
| Finance income | 209 | 209 | - | - |
| Finance costs | (1,159) | (1,159) | - | - |
| Loss on redemption of debenture | (4,949) | - | - | (4,949) |
| Total finance costs | (6,108) | (1,159) | - | (4,949) |
| Profit before tax | 33,369 | 9,591 | 10,158 | 13,620 |
We have saved around £2.7m of corporation tax in the current financial year as a result of our conversion to a Real Estate Investment Trust and, in anticipation of this saving, we have previously announced an increase in the Ordinary dividend payable in respect of the current financial year by 20%, with the interim dividend of 8.03p per share paid on 1 July 2008 and the final dividend of 9.65p, if approved by Shareholders, payable on 2 January 2009.
The interim dividend was paid as 80% Property Income Distribution ("PID"), attracting a 20% withholding tax for Shareholders who are not eligible for gross payment, and 20% as a normal dividend. The final dividend of 9.65p will be paid as 7.72p per share (80%) being PID and the balance of 1.93p as a normal dividend. The level of dividend that must be distributed by way of a PID is determined by the tax legislation. Consequently, the phasing out of Industrial Building Allowances, the reduction in the rate of capital allowances on plant and machinery from 25% to 20% and the introduction of the lower 10% rate for integral features will reduce the adjustments required to profits in order to calculate the minimum PID obligation in future years.
Net assets have fallen from £259.3m to £222.7m, mostly reflecting the £41.2m property portfolio revaluation write down recognised in the income statement.
Our gearing has increased from 7% to 13%, reflecting £29.2m (2007: £17.6m) of net debt. This level of debt equates to only 11% of the DTZ valuation of our investment and development portfolio of £264.4m, a very low level of gearing compared to other REITs and quoted property companies. This has arisen as a direct result of our disposal programme in the last few years and provides us with significant headroom to raise additional debt, if required, for investment property acquisitions or to fund share buybacks.
During the year we took the opportunity to refinance some of our existing variable rate revolving credit drawdowns into longer term, fixed rate debt. £20.0m was raised from Lloyds TSB Bank plc until 2023. The money raised paid off existing revolving credit drawdowns with HSBC, which had increased during the year, freeing up those facilities to fund our working capital requirements, reducing our average cost of fixed rate debt from 10.9% to 6.6% and increasing the average expiry of fixed rate debt from 7 years to 14 years. Our HSBC facilities consist of a £10m overdraft, a £15m revolving credit facility expiring in 2010 and a £20m revolving credit facility expiring in 2012, of which £6.5m was utilised at 30 June 2008. All facilities are secured against specific properties held by the Group.
We have not acquired or disposed of any investment, development or trading properties since the year end, but once pricing for investment properties stabilises we intend to acquire modern, securely let properties, primarily located in the Midlands, at yields in excess of our cost of debt.
As noted in the Chairman's statement, we intend to seek approval from shareholders to acquire up to 15% of our Ordinary share capital. The equity market for REITs has been particularly difficult over the last twelve months. In common with other companies, we have seen a significant reduction in our share price, particularly in the second half of this calendar year, with our shares now trading at a significant discount to the 30 June 2008 net asset value, making share buy backs more attractive than in previous years. The Group has not bought back any shares for over six years.
| ANALYSIS OF BORROWNGS AT 30 JUNE | 2008 | 2007 |
| £000 | £000 | |
| 11.5% First Mortgage Debenture Stock 2014 | 4,203 | 4,203 |
| Preference Share Capital | 675 | 675 |
| Cash and Short-Term Deposits | (2,203) | (1,252) |
| Overdraft | 76 | - |
| Long term loan | 19,936 | - |
| Borrowings from revolving credit facility | 6,500 | 14,000 |
| Net Debt and Preference Share Capital | 29,187 | 17,626 |
| Net Assets | 222,680 | 259,292 |
| Gearing (net of cash) | 13% | 7% |
Outlook
It seems likely that the existing economic and property market conditions will remain testing for the foreseeable future. Against this backdrop it is paramount that we maintain a strong discipline in both the management of our business and the employment of our resources. We are, without doubt, well placed to take advantage of this current downturn from our position of low gearing supported by a modern, quality portfolio. When market conditions feel appropriate we intend to commence purchasing quality investment properties that show clear future growth potential.
Despite the current challenges and the recent write down in the value of the portfolio our aim remains to maximise long-term returns for Shareholders through actively managing income and keeping void levels low.
We remain confident in our strategy and are approaching the 2008/2009 Financial Year with determination and thoughtful consideration.
Justin Parker David Wooldridge
Managing Director Finance Director
3 September 2008
CONSOLIDATED INCOME STATEMENT
| For the year ended 30 June 2008 | 2008 | 2007 | |||||||
| Adjusted | Total | Adjusted | Total | ||||||
| income & | Adjust- | income & | income & | Adjust- | income & | ||||
| expense | ments | expense | expense | ments | expense | ||||
| Notes | £000 | £000 | £000 | £000 | £000 | £000 | |||
| Revenue | 2 | 18,425 | - | 18,425 | 24,965 | - | 24,965 | ||
| Gross rental income relating to investment properties | 2 | 15,772 | - | 15,772 | 14,285 | - | 14,285 | ||
| Property outgoings | (591) | - | (591) | (748) | - | (748) | |||
| Net rental income relating to investment properties | 15,181 | - | 15,181 | 13,537 | - | 13,537 | |||
| Proceeds on sale of trading properties | 2 | 2,653 | - | 2,653 | 10,680 | - | 10,680 | ||
| Carrying value of trading properties sold | (98) | - | (98) | (518) | - | (518) | |||
| Property outgoings relating to trading properties | (2) | - | (2) | (4) | - | (4) | |||
| Net income from trading properties | 2,553 | - | 2,553 | 10,158 | - | 10,158 | |||
| Administration expenses | (2,778) | - | (2,778) | (2,996) | - | (2,996) | |||
| Operating profit before net (losses)/gains on investment | 14,956 | - | 14,956 | 20,699 | - | 20,699 | |||
| Profit on disposal of investment properties | - | 48 | 48 | - | 2,247 | 2,247 | |||
| Net (losses)/gains on revaluation of investment and development properties | 3 | - | (41,169) | (41,169) | - | 16,322 | 16,322 | ||
| Operating profit/(loss) | 3 | 14,956 | (41,121) | (26,165) | 20,699 | 18,569 | 39,268 | ||
| Finance income | 4 | 60 | - | 60 | 209 | - | 209 | ||
| Finance costs | (604) | - | (604) | (1,159) | - | (1,159) | |||
| Exceptional loss on redemption of debenture | - | - | - | - | (4,949) | (4,949) | |||
| Total finance costs | 4 | (604) | - | (604) | (1,159) | (4,949) | (6,108) | ||
| Profit/(loss) before tax | 14,412 | (41,121) | (26,709) | 19,749 | 13,620 | 33,369 | |||
| Current tax | (535) | - | (535) | (4,154) | (2,340) | (6,494) | |||
| Current tax - REIT entry charge | - | - | - | - | (5,736) | (5,736) | |||
| Deferred tax (charge)/credit | - | (17) | (17) | 343 | (922) | (579) | |||
| Deferred tax released on REIT conversion | - | - | - | - | 31,409 | 31,409 | |||
| Total tax (charge)/credit | 5 | (535) | (17) | (552) | (3,811) | 22,411 | 18,600 | ||
| Profit/(loss) for the financial period | 13,877 | (41,138) | (27,261) | 15,938 | 36,031 | 51,969 | |||
| Basic and diluted (loss)/earnings per share | 7 | (45.44p) | 86.62p | ||||
| All operations are continuing. |
Notes
The Group has presented the income statement in a three-column format, so as to present adjusted amounts to exclude the impact of EPRA adjustments, premium on redemption of debenture and related tax. The Directors consider that the adjusted figures give a useful comparison for the periods shown in the consolidated financial statements.
| CONSOLIDATED BALANCE SHEET | ||||
| at 30 June 2008 | ||||
| 2008 | 2007 | |||
| Notes | £000 | £000 | ||
| Non-current assets | ||||
| Investment and development properties | 8 | 262,991 | 286,768 | |
| Property, plant and equipment | 1,657 | 1,726 | ||
| Trade and other receivables | 332 | 370 | ||
| 264,980 | 288,864 | |||
| Current assets | ||||
| Trading properties | 912 | 921 | ||
| Trade and other receivables | 3,993 | 4,306 | ||
| Cash and cash equivalents | 2,203 | 1,252 | ||
| 7,108 | 6,479 | |||
| Total assets | 272,088 | 295,343 | ||
| Current liabilities | ||||
| Trade and other payables | (13,410) | (7,745) | ||
| Borrowings | (76) | - | ||
| Tax liabilities | (4,464) | (9,295) | ||
| (17,950) | (17,040) | |||
| Non-current liabilities | ||||
| Borrowings | (31,314) | (18,878) | ||
| Deferred tax | (144) | (133) | ||
| (31,458) | (19,011) | |||
| Total liabilities | (49,408) | (36,051) | ||
| Net assets | 222,680 | 259,292 | ||
| Equity | ||||
| Called up ordinary share capital | 14,998 | 14,998 | ||
| Revaluation reserve | 1,055 | 927 | ||
| Share based payment reserve | 48 | - | ||
| Redemption reserve | 11,162 | 11,162 | ||
| Retained earnings | 195,417 | 232,205 | ||
| Total equity | 9 | 222,680 | 259,292 | |
| Net assets per Ordinary share | ||||
| - Basic and diluted | 7 | 371p | 432p | |
| - Adjusted | 7 | 379p | 445p | |
| CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE | ||||||
| For the year ended 30 June 2008 | ||||||
| 2008 | 2007 | |||||
| Notes | £000 | £000 | ||||
| Gain on revaluation of development and owner occupied properties | 3 | 236 | 167 | |||
| Deferred tax liability on items taken to equity | 5 | 6 | (34) | |||
| Reversal of deferred tax on REIT conversion | - | 19 | ||||
| Net gain recognised directly in equity | 242 | 152 | ||||
| (Loss)/profit for the year | (27,261) | 51,969 | ||||
| Total recognised income and expense for the year | 9 | (27,019) | 52,121 | |||
| CONSOLIDATED CASH FLOW STATEMENT | |||
| For the year ended 30 June 2008 | |||
| 2008 | 2007 | ||
| £000 | £000 | ||
| Cash flows from operating activities | |||
| Operating (loss)/profit | (26,165) | 39,268 | |
| Adjustments for non-cash items | |||
| - Unrealised net revaluation losses/(gains) on investment and development properties | 41,169 | (16,322) | |
| - Profit on disposal of investment properties | (48) | (2,247) | |
| - Depreciation and other non-cash items | 93 | 35 | |
| - Profit on sale of fixed assets | (23) | - | |
| Other movements arising from operations | |||
| - Decrease in trading properties | 47 | 361 | |
| - Decrease/(increase) in receivables | 367 | (1,608) | |
| - Decrease in payables | (678) | (268) | |
| Net cash generated from operations | 14,762 | 19,219 | |
| Interest received | 42 | 192 | |
| Interest paid | (1,522) | (1,535) | |
| Premium on redemption of debenture stock | - | (4,949) | |
| Preference dividends paid | (47) | (47) | |
| Corporation tax paid | (5,367) | (4,919) | |
| Net cash inflow from operating activities | 7,868 | 7,961 | |
| Cash flows from investing activities | |||
| Acquisition and property development | (14,859) | (24,401) | |
| Grants received | 293 | - | |
| Sales of investment properties | 48 | 14,136 | |
| Expenditure on property, plant and equipment | (89) | (11) | |
| Net cash outflow from investing activities | (14,607) | (10,276) | |
| Cash flows from financing activities | |||
| Net increase in borrowings | 12,513 | 2,301 | |
| Equity dividends paid | (4,823) | (8,501) | |
| Net cash inflow/(outflow) from financing activities | 7,690 | (6,200) | |
| Net increase/(decrease) in cash and cash equivalents | 951 | (8,515) | |
| Cash and cash equivalents at 1 July | 1,252 | 9,767 | |
| Cash and cash equivalents at 30 June | 2,203 | 1,252 | |
NOTES TO THE ACCOUNTS
1 Accounting policies
Basis of preparation of financial information
The Group's full financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the European Union and therefore comply with Article 4 of the EU IAS regulation. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRSs, this announcement itself does not contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs on 1 October 2008.
The preliminary accounts were approved by the board of directors on 2 September 2008. The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 30 June 2008 or 2007 as defined under Section 240 of the Companies Act 1985. The financial information for the year ended 30 June 2007 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The audit of the statutory accounts for the year ended 30 June 2008 is not yet complete. The statutory accounts for the year ended 30 June 2008 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting.
The financial statements are prepared under the historical cost convention, except for the revaluation of investment properties, development properties and owner occupied properties and deferred tax thereon and certain financial assets, with consistent accounting policies to the prior year.
The preparation of financial statements requires the use of estimates and assumptions that affect reported amounts of assets and liabilities during the reporting period. These estimates and assumptions are based on management's best knowledge of the amount, events or actions. Actual results may differ from those amounts.
The Group financial statements consolidate the financial statements of the Company and all its subsidiaries. Control is assumed where the parent company has the power to govern the financial and operational policies of the subsidiary.
Unrealised gains and losses on intra-group transactions and intra-group balances are eliminated from the consolidated results.
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:
| IFRS 8 | Operating segments |
| IFRIC 4 | Determining whether an Arrangement contains a lease |
| IFRIC 5 | Rights to Interests Arising from Decommissioning Restoration and Environmental Rehabilitation Funds |
| IFRIC 7 | Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies |
| IFRIC 8 | Scope of IFRS 2 |
| IFRIC 9 | Reassessment of embedded derivatives |
| IFRIC 10 | Interim reporting and impairments |
| IFRIC 11 | IFRS 2 - Group and Treasury Share Transactions |
| IFRIC 12 | Service Concession Arrangements |
| IFRIC 13 | Customer Loyalty Programmes |
| IFRIC 14 | IAS 19 - The limit on a Defined Benefit Asset, minimum funding requirement and their interaction |
| IFRIC 15 | Agreements for the Construction of Real Estate |
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.
Implementation of IFRS 7
In the current financial year the Group adopted International Financial Reporting Standard 7 'Financial Instruments: Disclosures' (IFRS 7) which is effective for annual reporting periods beginning on or after 1 January 2007, and the related amendment to IAS 1 'Presentation of Financial Statements' (IAS 1). The impact of the adoption of IFRS 7 and the changes to IAS 1 has been to expand the disclosures provided in the full financial statements regarding the Group's financial instruments and management of capital.
Revenue recognition
Rental income
Gross rental income represents rents receivable for the year. Rent increases arising from rent reviews due during the year are taken into account only to the extent that such reviews have been agreed with tenants at the accounting date.
Rental income from operating leases is recognised on a straight-line basis over the term of the lease.
Lease incentives are amortised on a straight-line basis over the lease term.
Property operating expenses are expensed as incurred. Service charges and other recoverables are credited against the related expense.
Revenue and profits on sale of investment and trading properties
Revenue and profits on sale of investment properties and trading properties are taken into account on the completion of contracts. The amount of profit recognised is the difference between sale proceeds and the carrying amount.
Dividend and interest income
Dividend income from investments in subsidiaries is recognised when shareholders' rights to received payment have been established.
Interest income is recognised on an accruals basis when it falls due.
Cost of properties
An amount equivalent to the total development outgoings, including interest, attributable to properties held for development is added to the cost of such properties. A property is regarded as being in the course of development until Practical Completion.
Interest associated with direct expenditure on investment properties which are undergoing development or major refurbishment and development properties is capitalised. Direct expenditure includes the purchase cost of a site or property for development properties, but does not include the original book cost of investment property under development or refurbishment. Interest is capitalised gross from the start of the development work until the date of practical completion, but is suspended if there are prolonged periods when development activity is interrupted. The rate used is the rate on specific associated borrowings or, for that part of the development costs financed out of general funds, the average rate.
Valuation of properties
Investment properties are valued at the balance sheet date at market value. Where investment properties are being redeveloped the property continues to be treated as an investment property. Surpluses and deficits attributable to the Group arising from revaluation are recognised in the income statement. Valuation surpluses reflected in retained earnings are not distributable until realised on sale.
Properties under development, which were not previously classified as investment properties, are valued at market value until practical completion, when they are transferred to investment properties. Valuation surpluses and deficits attributable to properties under development are taken to revaluation reserve until completion, when they are transferred to retained earnings. Where the valuation is below historic cost, the deficit is recognised in the income statement.
Owner occupied properties are valued at the balance sheet date at market value. Valuation changes in owner occupied property are taken to revaluation reserve. Where the valuation is below historic cost, the deficit is recognised in the income statement.
Trading properties held for resale are stated at the lower of cost and net realisable value.
Critical accounting judgements and key sources of estimation uncertainty
Management have made judgements over the valuation of properties that has a significant effect on the amounts recognised in the financial statements. Management have used the valuation performed by its independent valuers as the fair value of its investment, development, owner-occupied and trading properties. The valuation is based upon assumptions including future rental income and an appropriate discount rate. The valuers also use market evidence of transaction prices for similar properties.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.
Any revaluation increase arising on the revaluation of such land and buildings is credited to the properties revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to income. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings.
Plant and equipment is stated at cost less accumulated depreciation, less any recognised impairment.
Depreciation
Depreciation is provided on buildings, motor vehicles and fixtures and fittings on a straight-line basis over the estimated useful lives of between two and twenty-five years. Investment properties are not depreciated.
Government grants
Capital grants received relating to the cost of building or refurbishing investment properties are deducted from the cost of the relevant property. Revenue grants are deducted from the related expenditure.
Share based payment
The cost of granting equity settled share options and other share based remuneration is recognised in the income statement at their fair value at grant date. They are expensed straight line over the vesting period, based on estimates of the shares or options that eventually vest. Options are valued using the Monte-Carlo simulation model.
Deferred taxation
Deferred taxation is provided in full on temporary differences that result in an obligation to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Temporary differences arise from the inclusion of items in taxation computations in periods different from when they are included in the financial statements. Deferred tax is provided on temporary differences arising from the revaluation of fixed assets. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Tax is recognised in the income statement except for items that are reflected directly in equity, where the tax is also recognised in equity.
Pension costs
The cost to the Group of contributions made to defined contribution plans is expensed when the contributions fall due.
Acquisitions
On the acquisition of a business, including an interest in an associated undertaking, fair values are attributed to the Group's share of separable net assets. Where the fair value of the cost of acquisition exceeds the fair value attributable to such assets, the difference is treated as purchased goodwill and capitalised in the balance sheet in the year of acquisition.
Goodwill is reviewed annually for impairment. Under the Group's previous policy, £134,728 of goodwill has been written off directly to reserves as a matter of accounting policy. This would be credited to the income statement on disposal of the business to which it related.
Group undertakings
Investments are included in the balance sheet at cost less any permanent diminution in value.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for any amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. The Group derecognises financial liabilities when, and only when, the Groups obligations are discharged, cancelled, or they expire.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of future cash flows discounted at the effective rate computed at initial recognition.
Available for sale assets
Mortgages receivable held by the Group are classified as being available for sale and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity in the investments revaluation reserve with the exception of impairment losses, which are recognised directly in the income statement. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss recognised in the investments revaluation reserve is included in profit or loss for the period.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlements or redemption and direct issue costs, are accounted for on an accrual basis in the income statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
| 2 | Revenue | |||
| 2008 | 2007 | |||
| £000 | £000 | |||
| Total rental income from investment and development properties | 15,772 | 14,285 | ||
| Proceeds on sale of trading properties | 2,653 | 10,680 | ||
| 18,425 | 24,965 | |||
| Finance income (note 4) | 60 | 209 | ||
| Total revenue | 18,485 | 25,174 |
| 3 | Segmental analysis - primary segments | |||
| 2008 | 2007 | |||
| £000 | £000 | |||
| Investment and development properties | ||||
| - Net rental income | 15,181 | 13,537 | ||
| - Profit on disposal | 48 | 2,247 | ||
| - (Deficit)/gain on revaluation of investment properties | (38,440) | 16,754 | ||
| - Deficit on revaluation of development properties | (2,729) | (432) | ||
| (25,940) | 32,106 | |||
| Trading properties | ||||
| - Proceeds on sales | 2,653 | 10,680 | ||
| - Carrying value on sales | (98) | (518) | ||
| - Property outgoings | (2) | (4) | ||
| 2,553 | 10,158 | |||
| Administration expenses | (2,778) | (2,996) | ||
| Operating (loss)/profit | (26,165) | 39,268 | ||
| Net financing costs - ordinary | (544) | (950) | ||
| - exceptional | - | (4,949) | ||
| (Loss)/profit before tax | (26,709) | 33,369 | ||
| The property revaluation (deficit)/surplus has been recognised as follows: | ||||
| Income statement | ||||
| - Investment properties | (38,440) | 16,754 | ||
| - Development properties | (2,729) | (432) | ||
| (41,169) | 16,322 | |||
| Statement of recognised income and expense | ||||
| - Development and owner occupied properties | 236 | 167 | ||
| Total revaluation (deficit)/surplus for the period | (40,933) | 16,489 | ||
| All operations and income are derived from the United Kingdom. | ||||
| 4 | Net financing costs | |||
| 2008 | 2007 | |||
| £000 | £000 | |||
| Finance costs on: | ||||
| Debenture stock | 483 | 1,068 | ||
| Preference share dividend | 47 | 47 | ||
| Capitalised interest | (1,432) | (508) | ||
| Bank overdraft and loan interest payable | 1,506 | 552 | ||
| Total finance costs - ordinary | 604 | 1,159 | ||
| Premium on redemption of debenture stock | - | 4,949 | ||
| Total finance costs | 604 | 6,108 | ||
| Finance income on: | ||||
| Short-term deposits | 6 | 13 | ||
| Bank and other interest receivable | 54 | 196 | ||
| Total finance income | 60 | 209 | ||
| Net finance costs | 544 | 5,899 | ||
| In December 2006 the Group redeemed £11.70m of its 11.5% First Mortgage Debenture Stock 2014 at a price of £141.81 per £100 of stock. | ||||
| The total cost of redemption was £16.65m, leading to a premium on redemption of £4.95m. This exceptional premium reduced the reported tax charge for 2007 by £1.48m. | ||||
| 5 | Taxation | |||
| 2008 | 2007 | |||
| £000 | £000 | |||
| Tax charge | ||||
| Current tax | ||||
| - Corporation tax charged at 29.5% (2007: 30%) | 877 | 4,154 | ||
| - Prior year adjustment | (342) | - | ||
| - Tax in respect of property disposals | - | 2,340 | ||
| 535 | 6,494 | |||
| Current tax - REIT conversion charge | - | 5,736 | ||
| Total current tax | 535 | 12,230 | ||
| Deferred tax | ||||
| - Deferred tax on property revaluations | - | 922 | ||
| - Other deferred tax | 17 | (166) | ||
| - Prior year adjustment | - | (177) | ||
| - Release on conversion to REIT | - | (31,409) | ||
| Deferred tax charge/(credit) | 17 | (30,830) | ||
| Total tax charge/(credit) in the income statement | 552 | (18,600) | ||
| Tax recognised in equity | ||||
| Deferred tax | (6) | 15 | ||
| 6 | Dividends | |||||
| 2008 | 2007 | |||||
| £000 | £000 | |||||
| Amounts recognised as distributions to equity holders in the year: | ||||||
| Final dividend for the year ended 30 June 2007 of 8.04p (2006: 7.48p) per share | 4,823 | 4,487 | ||||
| Interim dividend for the year ended 30 June 2008 of 8.03p (2007: 6.69p) per share | 4,818 | 4,014 | ||||
| 9,641 | 8,501 | |||||
| The directors propose a final dividend for the year ended 30 June 2008 of 9.65p (2007: 8.04p) per Ordinary share, totalling £5,789,227. | ||||||
| The proposed final dividend is subject to approval by Shareholders at the Annual General Meeting and has therefore not been included as a liability in these financial statements. The final dividend, if approved, will be paid on 2 January 2009 to Shareholders on the register at the close of business on 28 November 2008. | ||||||
| 7 | (Loss)/profit, earnings per share and net asset value per share | |||||
| (Loss)/profit | ||||||
| The adjusted (loss)/profit before tax has been amended from the (loss)/profit before tax as follows: | ||||||
| 2008 | 2007 | |||||
| £000 | £000 | |||||
| (Loss)/profit before tax | (26,709) | 33,369 | ||||
| Premium on redemption of debenture stock | - | 4,949 | ||||
| Profit on disposal of investment properties | (48) | (2,247) | ||||
| Net losses/(gains) on revaluation of investment and development properties | 41,169 | (16,322) | ||||
| Adjusted profit before tax | 14,412 | 19,749 | ||||
| Earnings per share | ||||||
| The basic and diluted loss per share of 45.44p (2007 earnings: 86.62p) has been calculated on the basis of the weighted average of 59,991,990 Ordinary shares and loss of £27.26m (2007 earnings: £51.97m). The adjusted earnings per share has been amended from the basic and diluted earnings per share by the following: | ||||||
| 2008 | 2007 | |||||
| £000 | £000 | |||||
| Earnings | (27,261) | 51,969 | ||||
| Profit on disposal of investment properties | (48) | (2,247) | ||||
| Tax charged on profit on disposal of investment properties (note 5) | - | 2,340 | ||||
| Net losses/(gains) on revaluation of investment and development properties | 41,169 | (16,322) | ||||
| REIT conversion charge | - | 5,736 | ||||
| Deferred tax | 17 | (30,830) | ||||
| EPRA adjusted earnings | 13,877 | 10,646 | ||||
| Premium on redemption of debenture stock | - | 4,949 | ||||
| Tax thereon at 30% | - | (1,485) | ||||
| Adjusted earnings | 13,877 | 14,110 | ||||
| EPRA diluted earnings per share | 23.13p | 17.75p | ||||
| Adjusted (and adjusted diluted) earnings per share | 23.13p | 23.52p | ||||
| The Group presents an adjusted earnings per share figure as the directors consider that this is a better indicator of the performance of the Group. | ||||||
| There are no dilutive shares. Options over 176,628 Ordinary shares were granted in the year as part of the first award under the 2007 Performance Share Plan. The vesting conditions for these shares have not been met, so they have not been treated as dilutive in these calculations. | ||||||
| 7 | (Loss)/profit, earnings per share and net asset value per share (continued) | |||||
| Net asset value per share | ||||||
| The net asset value per share of 371p (2007: 432p) has been calculated on the basis of the number of equity shares in issue of 59,991,990 and net assets of £222.68m (2007: £259.29m). The adjusted net asset value per share has been calculated as follows: | ||||||
| 2008 | 2007 | |||||
| £000 | £000 | |||||
| Equity shareholders funds | 222,680 | 259,292 | ||||
| Valuation of land held as trading properties | 5,748 | 9,995 | ||||
| Mark to market on debt | (500) | (1,341) | ||||
| Book value of land held as trading properties | (912) | (921) | ||||
| Deferred tax | 144 | 133 | ||||
| 227,160 | 267,158 | |||||
| EPRA (adjusted) net asset value per share | 379p | 445p | ||||
| 8 | Investment and development properties | |||||
| Investment | Development | Total | ||||
| £000 | £000 | £000 | ||||
| At 1 July 2007 | 258,631 | 28,137 | 286,768 | |||
| Acquisitions | 4,139 | 959 | 5,098 | |||
| Additions | 2,538 | 8,293 | 10,831 | |||
| Capitalised interest | 42 | 1,390 | 1,432 | |||
| Transfer | 7,774 | (7,774) | - | |||
| Grant | (293) | - | (293) | |||
| Revaluation deficit | (38,440) | (2,405) | (40,845) | |||
| At 30 June 2008 | 234,391 | 28,600 | 262,991 | |||
| The above comprises £248.0m (2007: £270.0m) of freehold and £15.0m (2007: £16.8m) of leasehold properties. | ||||||
| Freehold | Leasehold | Total | ||||
| £000 | £000 | £000 | ||||
| Properties held at valuation: | ||||||
| Cost | 144,579 | 13,461 | 158,040 | |||
| Valuation surplus | 103,402 | 1,549 | 104,951 | |||
| Valuation | 247,981 | 15,010 | 262,991 | |||
| Investment and development properties have been included at market value after having deducted an amount of £0.19m (2007: £0.22m) in respect of lease incentives and letting fees included in trade and other receivables. | ||||||
| The properties are stated at their 30 June 2008 market value and are valued by DTZ Debenham Tie Leung, professionally qualified external valuers, in accordance with the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors. DTZ Debenham Tie Leung have recent experience in the relevant location and category of the properties being valued. A reconciliation to the amount included above is set out below. | ||||||
| £000 | ||||||
| DTZ valuation as at 30 June 2008 | 264,415 | |||||
| Owner-occupied property included in property, plant and equipment | (1,221) | |||||
| Lease inducements | (193) | |||||
| Other adjustments | (10) | |||||
| Investment and development properties as at 30 June 2008 | 262,991 | |||||
| Additions to freehold and leasehold properties include capitalised interest of £1.43m (2007: £0.51m). The capitalisation rate used was 6.5% (2007: 6.1%). The total amount of interest capitalised included in freehold and leasehold properties is £4.28m (2007: £2.85m). | ||||||
| Properties valued at £107.24m (2007: £87.9m) were subject to a security interest. | ||||||
| 9 | Reconciliation of movements in equity | |||
| 2008 | 2007 | |||
| £000 | £000 | |||
| Opening net assets | 259,292 | 215,672 | ||
| Total recognised income and expense | (27,019) | 52,121 | ||
| Shares to be issued | 48 | - | ||
| Dividends | (9,641) | (8,501) | ||
| Closing net assets | 222,680 | 259,292 |
| 10 | Directors and Company Secretary | ||
| Rupert J Mucklow BSc | - | Chairman | |
| Justin Parker BSc MRICS | - | Managing Director | |
| David Wooldridge FCCA ACIS | - | Finance Director and Company Secretary (appointed 1 July 2007) | |
| David F Austin FRICS* | - | Senior Independent Non-Executive | |
| David C Groom FCIB | - | Independent Non-Executive (retired 31 October 2007) | |
| Paul A Ludlow FRICS* | - | Independent Non-Executive | |
| Stephen Gilmore LLB* | - | Independent Non-Executive (appointed 13 May 2008) | |
| *Member of Remuneration Committee and Audit Committee. | |||
DATES
Annual General Meeting
The Annual General Meeting will be held on Tuesday 11 November 2008 at the Birmingham Botanical Gardens, Westbourne Road, Edgbaston, Birmingham, B15 3TR.
Dividend
The final dividend, if approved, will be paid on 2 January 2009 to Ordinary shareholders on the register on 28 November 2008.
Report and Accounts
The full report and accounts for the year ended 30 June 2008 will be available on 1 October 2008.
A copy of this document is available on the Company's website, www.mucklow.com.