Mucklow (A & J) Regulatory News (MKLW)

27 Feb 2008 07:00

Mucklow(A.& J.)Group PLC27 February 2008 Issued by Citigate Dewe Rogerson Ltd, BirminghamDate: 27 February 2008 Embargoed: 7.00am Mucklow (A&J) Group plc Interim Results to 31 December 2007 Half year summary • Interim dividend up 20% to 8.03p per share (2006: 6.69p) • Net rental income increased by 11% in the first six months • Adjusted profit before tax of £8.5m, up 14% (2006: £7.4m) (note 1) • Loss before taxation of £11.4m (2006 profit :£16.4m), after a revaluation deficit of £19.9m (2006 surplus: £11.7m) • Net asset value per share down 6% over the six month period to 406p (30 June 2007: 432p) Financial HighlightsSix Months Ended 31 December 2007 31 December 2007 31 December 2006 (Loss)/profit before tax £(11.42)m £16.42m Adjusted - note 1 £8.46m £7.42m Interim dividend per ordinary share 8.03p 6.69p Earnings per share (20.34)p 21.67p Adjusted - note 2 12.79p 8.90p Net asset value per share 406p 374p Adjusted - note 3 413p 449p Net assets £243.78m £224.24m Year end gearing (net of cash) 12% 9% The interim dividend of £4,817,357 will be paid on 1 July 2008 to holdersregistered on 30 May 2008. Notes1 Excluding gains/(losses) from the disposal and revaluation of investmentproperty and the premium on redemption of debenture stock. 2 Excluding gains/(losses) from the disposal and revaluation of investmentproperty (net of tax), deferred tax, REIT conversion charge and the premium onredemption of debenture stock (net of tax). 3 Excluding deferred tax and the mark to market on debt and including thesurplus on trading properties. See note 6 for details. For further information, please contact:Rupert Mucklow, Chairman Tel: 0121 504 2121 (direct) Mobile: 07815 151254 (mobile)David Wooldridge, Finance Director Tel: 0121 504 2108 (direct)A & J Mucklow Group plc Fiona Tooley Tel: 0121 455 8370Citigate Dewe Rogerson Ltd Mobile: 07785 703523 Mucklow (A&J) Group plc Interim Management StatementAfter several years of steady asset growth, property values peaked in the firsthalf of the financial year, as higher interest rates started to bite and changesin investor sentiment finally turned the market. The unexpected credit crunch inthe late summer caused further uncertainty in the property sector, which acceleratedthe decline in property values and our share price. Our investment portfolio fell in value during the first six months by 6%, whichhas had a negative impact on the Income Statement and reduced our net asset valueper share by 6%. However, I am pleased to report that your company remains in verygood health and continues to make good progress. Results for the six months to 31 December 2007Pre-tax loss for the first half year was £11.4m, compared with a profit of £16.4mfor the corresponding period last year. The loss is attributed to a £19.9m reductionin the market value of the Group's investment properties, as at 31 December 2007,compared with a surplus of £11.7m at 31 December 2006. The adjusted pre-tax profit,which excludes deficits on revaluation of the investment portfolio and profit onthe disposal of investment properties was £8.5m (2006: £7.4m). EPRA net asset value per share*, including the current value of our tradingproperties, fell during the first six months from 445p to 413p per share. Gearing(net of cash) was 12% (2006: 9%), while net rental income increased by 11% from£6.7m to £7.5m. The Directors have declared an interim dividend of 8.03p per Ordinary share(2006: 6.69p), an increase of 20% over last year. The dividend will be paid on 1July 2008 to Shareholders on the register at the close of business on 30 May 2008. The interim dividend will consist of two elements: a property income distribution(PID) of 6.42p and a non-PID of 1.61p. The allocation of the dividend between PID andnon-PID may vary over time and is subject to the deduction of withholding tax atthe basic rate (20% for 2008/09). Certain classes of shareholder can claim exemptionfrom the withholding tax. Forms are available from our website (www.mucklow.com).The non-PID element will be paid as a normal dividend. Property ReviewOur occupancy level increased during the first half year, from 94% to 95%, astenant demand remained buoyant. However, we are expecting our vacant space toincrease marginally, in the second half year, as new developments are completedand become available to let. Three speculative developments at Worcester (28,000 sq ft - offices), Dudley(41,000 sq ft - industrial) and Wednesbury (40,000 sq ft - industrial) will becompleted in the second half year. The anticipated rental income from thesebuildings, when fully let, is around £0.9m per annum. We have recently obtained detailed planning consent for a further 3 industrialunits, totalling 115,000 sq ft, on the remaining land at Dudley, with constructiondue to start shortly. The buildings have all been pre-let at a combined rent of£0.6m per annum, with a completed investment value in the region of £8m. We have also agreed terms, subject to planning, to develop a 128,500 sq ft bespokebuilding on our site at Torrington Avenue, Coventry. A planning application hasrecently been submitted for a change of use and may take a while to process. Thedevelopment will be let on completion to an exceptional covenant on a 25 year lease. DTZ Debenham Tie Leung reviewed the value of our investment properties at 31December 2007. The investment portfolio, including commercial land anddevelopments under construction, was valued at £281.6m, which showed a deficitin value for the period of £18.4m (6%). The average equivalent yield on ourinvestment properties increased during the six months from 6.0% to 6.7%. We acquired a modern industrial investment at the beginning of the financialyear for £3.7m. The property is located in Leamington Spa, adjacent to anexisting holding and comprises a 48,000 sq ft building, producing a rent of£0.25m per annum. We also completed the purchase of the remaining 6 acres ofland in Dudley for £0.9m. No other significant land or investment acquisitionswere made during the period. We completed the sale of the remaining 2.3 acres of residential land at MellingsFarm, Wigan for £2.6m in August 2007. No other land or property disposals weremade in the last 6 months. The value of the trading properties was also reviewedby DTZ Debenham Tie Leung as at 31 December 2007. The total value was £6.7m,which showed a surplus of £5.8m over book value. Principal risks and uncertaintiesThe main risks to our business relate to property and financing. Over the remaining six months of this financial year, the most significant riskis to the value of our property assets. The negative sentiment in the investmentmarket, and potential slowdown in occupier demand, could continue to impact uponthe value of our portfolio going forward, which would directly affect our netasset value. However, the quality and diversification of our portfolio betweenindustrial, office and retail properties, with different tenant profiles,covenants, building sizes and lease lengths should help to mitigate any furthersignificant decreases in value. All of our speculative developments are appraised to yield around 8% on totalcosts, allowing for a minimum period of 12 months from practical completion ofthe building works, to find tenants. This provides us with a sufficient profitmargin and level of comfort, when property yields are softening and borrowingcosts rising. It also provides us with high quality, long term investmentproperties, which are difficult to buy in the market place. Financing is not considered to be a major risk or uncertainty at the presenttime, given the Group's low gearing and current committed facilities. OutlookIt is difficult to forecast when and at what level industrial property yieldsand values will stabilise. There is no doubt that secondary properties are beinghit the hardest, as they are the least desirable to investors, but there is verylittle evidence of quality properties like ours being sold and yields arestarting to look attractive again, compared with the cost of borrowing. The lack of liquidity in the property market may force some unit trusts andprivate investors to sell over the next six months, potentially causing a glutof investment properties on the market. However, the prospect of lower interestrates and a number of lowly geared investors like ourselves waiting on thesidelines, should be sufficient to stop any further significant slide in values. We expect to see more suitable buying opportunities later this year and are wellpositioned to use our low gearing to take advantage of any distressed selling. Meanwhile, while there is still some good occupier demand for quality businessspace, we shall continue to process our sites for development and actively managethe investment portfolio. Rupert J MucklowChairman26 February 2008 *EPRA (European Public Real Estate Association) net asset value, excludingdeferred tax and including the surplus on trading properties and the mark tomarket of debenture stock. See note 6 for details. Mucklow (A&J) Group plcCONSOLIDATED INCOME STATEMENTfor the six months to 31 December 2007 Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 Notes £'000 £'000 £'000--------------------------------------------------------------------------------Revenue 2 10,421 9,797 24,965--------------------------------------------------------------------------------Gross rental income relating toinvestment properties 7,768 7,057 14,285Property outgoings (315) (347) (748)--------------------------------------------------------------------------------Net rental income relating toinvestment properties 7,453 6,710 13,537--------------------------------------------------------------------------------Proceeds on sale of tradingproperties 2,653 2,740 10,680Carrying value of tradingproperties sold (98) (95) (518)Property outgoings relating totrading properties (1) (3) (4)--------------------------------------------------------------------------------Net income from tradingproperties 2,554 2,642 10,158--------------------------------------------------------------------------------Administration expenses (1,301) (1,183) (2,996)--------------------------------------------------------------------------------Operating profit before net(losses)/gains on investments 8,706 8,169 20,699Profit on disposal of investmentproperties 48 2,247 2,247Net (losses)/gains onrevaluationof investment properties and (19,926) 11,701 16,322losses on development properties--------------------------------------------------------------------------------Operating (loss)/profit 3 (11,172) 22,117 39,268Finance income 4 43 182 209--------------------------------------------------------------------------------Finance costs (290) (929) (1,159)Exceptional loss on redemptionof - (4,949) (4,949)debenture--------------------------------------------------------------------------------Total finance costs 4 (290) (5,878) (6,108)--------------------------------------------------------------------------------(Loss)/profit before tax 3 (11,419) 16,421 33,369--------------------------------------------------------------------------------Current tax (782) (2,837) (6,494)Current tax - REIT entry charge - - (5,736)Deferred tax charge (3) (585) (579)Deferred tax released on REITconversion - - 31,409--------------------------------------------------------------------------------Total tax (charge)/credit 5 (785) (3,422) 18,600--------------------------------------------------------------------------------(Loss)/profit for the financialperiod (12,204) 12,999 51,969--------------------------------------------------------------------------------Earnings per share - Basic and diluted 6 (20.34)p 21.67p 86.62pAll operations are continuing. Mucklow (A&J) Group plc CONSOLIDATED BALANCE SHEETat 31 December 2007 Unaudited Unaudited Audited 31 December 31 December 30 June 2007 2006 2007 Notes £'000 £'000 £'000--------------------------------------------------------------------------------Non-current assetsInvestment and development properties 7 280,000 278,442 286,768Property, plant and equipment 1,720 1,713 1,726Trade and other receivables 358 368 370-------------------------------------------------------------------------------- 282,078 280,523 288,864Current assetsTrading properties 830 1,246 921Trade and other receivables 3,863 2,848 4,306Cash and cash equivalents 923 707 1,252-------------------------------------------------------------------------------- 5,616 4,801 6,479Total assets 287,694 285,324 295,343--------------------------------------------------------------------------------Current liabilitiesTrade and other payables (6,189) (5,523) (7,745)Borrowings (3,758) (15,710) -Tax Liabilities (7,970) (3,434) (9,295)-------------------------------------------------------------------------------- (17,917) (24,667) (17,040)--------------------------------------------------------------------------------Non-current liabilitiesBorrowings (25,878) (4,879) (18,878)Deferred tax (120) (31,540) (133)-------------------------------------------------------------------------------- (25,998) (36,419) (19,011)--------------------------------------------------------------------------------Total liabilities (43,915) (61,086) (36,051)--------------------------------------------------------------------------------Net assets 243,779 224,238 259,292--------------------------------------------------------------------------------EquityCalled up ordinary share capital 14,998 14,998 14,998Revaluation reserve 2,441 593 927Redemption reserve 11,162 11,162 11,162Retained earnings 215,178 197,485 232,205--------------------------------------------------------------------------------Total equity 243,779 224,238 259,292--------------------------------------------------------------------------------Net assets per ordinary share- Basic and diluted 6 406p 374p 432p- Adjusted 6 413p 449p 445p-------------------------------------------------------------------------------- Mucklow (A&J) Group plc CONSOLIDATED CASH FLOW STATEMENTfor the six months to 31 December 2007 Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000--------------------------------------------------------------------------------Cash flows from operating activitiesOperating (loss)/profit (11,172) 22,117 39,268Adjustments for non-cash items- Unrealised net revaluation losses/(gains) on investment and 19,926 (11,701) (16,322) development properties- Profit on disposal of investment properties (48) (2,247) (2,247)- Depreciation and other non-cash items 47 45 35- Profit on sale of fixed assets (21) - -Other movements arising from operations- Decrease in trading properties 91 36 361- Decrease/(increase) in receivables 467 (158) (1,608)- Decrease in payables (1,579) (1,975) (268)--------------------------------------------------------------------------------Net cash generated from operations 7,711 6,117 19,219Interest received 31 175 192Interest paid (877) (829) (1,535)Premium on redemption of debenturestock - (4,949) (4,949)Preference dividends paid (24) (24) (47)Corporation tax paid (2,108) (1,891) (4,919)--------------------------------------------------------------------------------Net cash inflow/(outflow) fromoperating activities 4,733 (1,401) 7,961Cash flows from investing activitiesAcquisition and property development (11,095) (21,188) (24,401)Sales of investment properties 48 14,075 14,136Sales of other tangible fixed assets 50 - -Expenditure on property, plant andequipment - (69) (11)--------------------------------------------------------------------------------Net cash outflow from investingactivities (10,997) (7,182) (10,276)Cash flows from financing activitiesNet increase in borrowings 10,758 3,301 2,301Equity dividends paid (4,823) (4,487) (8,501)--------------------------------------------------------------------------------Net cash inflow/(outflow) fromfinancing activities 5,935 (1,186) (6,200)Net decrease in cash and cashequivalents (329) (9,769) (8,515)Cash and cash equivalents at 1 July 1,252 9,767 9,767--------------------------------------------------------------------------------Cash and cash equivalents at end ofperiod 923 (2) 1,252-------------------------------------------------------------------------------- Mucklow (A&J) Group plc CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor six months to 31 December 2007 Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000--------------------------------------------------------------------------------Gains on revaluation of developmentand owner occupied 1,498 62 167propertiesDeferred tax asset/(liability) onitems taken to equity 16 (7) (34)Reversal of deferred tax on REITconversion - - 19--------------------------------------------------------------------------------Net gain recognised directly inequity 1,514 55 152(Loss)/profit for the period (12,204) 12,999 51,969--------------------------------------------------------------------------------Total recognised income and expensefor the period (10,690) 13,054 52,121 NOTES TO THE INTERIM REPORT 1 Accounting policiesBasis of preparation of interim financial informationThe interim report has been prepared using accounting policies consistent withIFRSs and in accordance with the requirements of IAS 34 Interim FinancialReporting and the recognition and measurement criterion of IFRSs, as adopted bythe European Union and the disclosure requirements of the Listing Rules. The Group's interim financial statements for the period ended 31 December 2007were authorised for issue by the Board of Directors on 26 February 2008. Theinterim financial information is unaudited but has been reviewed by Deloitte &Touche LLP and their report is attached. The information for the year ended 30 June 2007 does not constitute statutoryaccounts as defined in Section 240 of the Companies Act 1985. The statutory accounts for the year ended 30 June 2007 were unqualified by theGroup's auditors, and did not contain a statement under Section 237 (2) or (3)of the Companies Act 1985 and have been delivered to the Registrar of Companies. The financial statements are prepared under the historical cost convention,except for the revaluation of investment properties, development properties andowner occupied properties and deferred tax thereon. The Group financial statements consolidate the financial statements of theCompany and all its subsidiaries. Control is assumed where the parent companyhas the power to govern the financial and operational policies of the subsidiary. Unrealised gains and losses on intra-group transactions and intra-group balancesare eliminated from the consolidated results. Implementation of IFRS 7In the current financial year, the Group will adopt International FinancialReporting Standard 7 'Financial instruments: Disclosures' (IFRS 7) for the firsttime. As IFRS 7 is a disclosure standard, there is no impact of that change inaccounting policy on the half-yearly financial report. Full details of thechange will be disclosed in our annual report for the year ended 30 June 2008. Revenue recognitionRental incomeGross rental income represents rents receivable for the year. Rent increasesarising from rent reviews due during the year are taken into account only to theextent that such reviews have been agreed with tenants at the accounting date. Rental income from operating leases is recognised on a straight-line basis overthe 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 otherrecoverables are credited against the related expense. Revenue and profits on sale of investment and trading propertiesRevenue and profits on sale of investment properties and trading properties aretaken into account on the completion of contracts. The amount of profitrecognised is the difference between sale proceeds and the carrying amount. Dividends and interest incomeDividend income from investments in subsidiaries is recognised when theshareholders' rights to receive payment have been established. Interest incomeis recognised on an accruals basis when it falls due. Cost of propertiesAn amount equivalent to the total development outgoings, including interest,attributable to properties held for development is added to the cost of suchproperties. A property is regarded as being in the course of development untilPractical Completion. Interest associated with direct expenditure on investment properties which areundergoing development or major refurbishment and development properties iscapitalised. Direct expenditure includes the purchase cost of a site or propertyfor development properties, but does not include the original book cost ofinvestment property under development or refurbishment. Interest is capitalisedgross from the start of development work until the date of practical completion,but is suspended if there are prolonged periods when development activity isinterrupted. The rate used is the rate on specific associated borrowings or, forthat part of the development costs financed out of general funds, the averagerate. Valuation of propertiesInvestment properties are valued at the balance sheet date at open market value.Where investment properties are being redeveloped the property continues to betreated as an investment property. Surpluses and deficits attributable to theGroup arising from revaluation are recognised in the income statement. Valuationsurpluses reflected in retained earnings are not distributable until realised onsale. Properties under development, which were not previously classified as investmentproperties, are valued at open market value until practical completion, whenthey are transferred to investment properties. Valuation surpluses and deficitsattributable to properties under development are taken to revaluation reserveuntil completion, when they are transferred to retained earnings. Where thevaluation is below historic cost, the deficit is recognised in the income statement. Owner occupied properties are valued at the balance sheet date at open marketvalue. Valuation changes in owner occupied property are taken to revaluation reserve. Trading properties held for resale are stated at the lower of cost and net realisablevalue. Critical accounting judgements and key sources of estimation uncertaintyManagement have made judgements over the valuation of properties that has asignificant effect on the amounts recognised in the financial statements.Management have used the valuation performed by its independent valuers as thefair value of its investment, development, owner-occupied and tradingproperties. The valuation is based upon assumptions including future rentalincome and an appropriate discount rate. The valuers also use market evidence oftransaction prices for similar properties. Property, plant and equipmentLand 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 at the date of revaluation, lessany subsequent accumulated depreciation and subsequent accumulated impairmentlosses. Revaluations are performed with sufficient regularity such that thecarrying amount does not differ materially from that which would be determinedusing fair values at the balance sheet date. 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 a previous revaluation of that asset. Depreciation on revalued buildings is charged to income. On the subsequent saleor retirement of a revalued property, the attributable revaluation surplusremaining in the properties revaluation reserve is transferred directly toretained earnings. Plant and equipment is stated at cost less accumulated depreciation, less anyrecognised impairment. DepreciationDepreciation is provided on buildings, motor vehicles and fixtures and fittingson a straight-line basis over the estimated useful lives of between two andtwenty-five years. Investment properties are not depreciated. Government grantsCapital grants received relating to the cost of building or refurbishinginvestment properties are deducted from the cost of the relevant property.Revenue grants are deducted from the related expenditure. Share based paymentsThe cost of granting equity settled share options and other share basedremuneration is recognised in the income statement at their fair value at grantdate. They are expensed straight line over the vesting period, based onestimates of the shares or options that eventually vest. Options are valuedusing the Monte-Carlo simulation model. Deferred taxationDeferred taxation is provided in full on temporary differences that result in anobligation to pay more tax, or a right to pay less tax, at a future date, atrates expected to apply when they crystallise based on current tax rates andlaw. Temporary differences arise from the inclusion of items in taxationcomputations in periods different from when they are included in the financialstatements. Deferred tax is provided on temporary differences arising from therevaluation of fixed assets. Deferred tax assets are recognised to the extentthat it is regarded as more likely than not that they will be recovered. TaxationThe tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income and expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantially enacted by the balance sheet date. Tax is recognised in the income statement except for items that are reflecteddirectly in equity, where the tax is also recognised in equity. Pension costsThe cost to the Group of contributions made to defined contribution plans isexpensed when the contributions fall due. AcquisitionsOn the acquisition of a business, including an interest in an associatedundertaking, fair values are attributed to the Group's share of separable netassets. Where the fair value of the cost of acquisition exceeds the fair valueattributable to such assets, the difference is treated as purchased goodwill andcapitalised 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 ofaccounting policy. This would be credited to the income statement on disposal ofthe business to which it related. Group undertakingsInvestments are included in the balance sheet at cost less any permanentdiminution in value. Financial instrumentsFinancial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of the instrument. Trade receivablesTrade receivables are measured at initial recognition at fair value, and aresubsequently measured at amortised cost using the effective interest ratemethod. Appropriate allowances for estimated irrecoverable amounts arerecognised in the income statement when there is objective evidence that theasset is impaired. The allowance recognised is measured as the differencebetween the asset's carrying amount and the present value of future cash flowsdiscounted at the effective rate computed at initial recognition. Cash and cash equivalentsCash and cash equivalents comprise cash in hand and demand deposits, and othershort-term highly liquid investments that are readily convertible to a knownamount of cash and are subject to an insignificant risk of changes in value. Financial liabilities and equityFinancial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the Group afterdeducting all of its liabilities. Bank borrowingsInterest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlements or redemption and direct issue costs, are accounted for on anaccrual basis in profit and loss using the effective interest rate method andare added to the carrying amount of the instrument to the extent that they arenot settled in the period in which they arise. Trade payablesTrade payables are initially measured at fair value, and are subsequentlymeasured at amortised cost, using the effective interest rate method. Equity instrumentsEquity instruments issued by the Company are recorded at the proceeds received,net of direct issue costs. 2 Revenue Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000-------------------------------------------------------------------------------Total rental income from investmentand development properties 7,768 7,057 14,285Proceeds on sale of trading properties 2,653 2,740 10,680------------------------------------------------------------------------------- 10,421 9,797 24,965Finance income (note 4) 43 182 209-------------------------------------------------------------------------------Total revenue 10,464 9,979 25,174------------------------------------------------------------------------------- No further disposals of trading properties are proposed to take place in thesecond half of the financial year. 3 Segmental analysis - primary segments Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000-------------------------------------------------------------------------------Investment and development properties- Net rental income 7,453 6,710 13,537- Profit on disposal 48 2,247 2,247- (Deficit)/gain on revaluation of investment properties (19,473) 12,100 16,754- Deficit on revaluation of development properties (453) (399) (432)------------------------------------------------------------------------------- (12,425) 20,658 32,106-------------------------------------------------------------------------------Trading properties- Proceeds on sales 2,653 2,740 10,680- Carrying value on sales (98) (95) (518)- Property outgoings (1) (3) (4)------------------------------------------------------------------------------- 2,554 2,642 10,158-------------------------------------------------------------------------------Administration expenses (1,301) (1,183) (2,996)-------------------------------------------------------------------------------Operating (loss)/profit (11,172) 22,117 39,268Net financing costs - ordinary (247) (747) (950) - exceptional - (4,949) (4,949)-------------------------------------------------------------------------------(Loss)/profit before tax (11,419) 16,421 33,369------------------------------------------------------------------------------- The property revaluation (deficit)/surplus has been recognised as follows:Income statement- Investment properties (19,473) 12,100 16,754- Development properties (453) (399) (432)Statement of recognised income and expense- Development and owner occupied properties 1,498 62 167-------------------------------------------------------------------------------Total revaluation (deficit)/surplusfor the period (18,428) 11,763 16,489-------------------------------------------------------------------------------All operations and income are derived from the United Kingdom. 4 Net financing costs Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000-------------------------------------------------------------------------------Finance cost on:Debenture stock 242 827 1,068Preference share dividend 24 24 47Capitalised interest (635) - (508)Revolving credit facility 632 - -Other interest payable 27 78 552-------------------------------------------------------------------------------Total finance - ordinary 290 929 1,159Premium on redemption of debenture stock - 4,949 4,949-------------------------------------------------------------------------------Total finance costs 290 5,878 6,108-------------------------------------------------------------------------------Finance income on:Short-term deposits 4 11 13Other interest receivable 39 171 196-------------------------------------------------------------------------------Total finance income 43 182 209-------------------------------------------------------------------------------Net finance costs 247 5,696 5,899------------------------------------------------------------------------------- 5 Taxation Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000-------------------------------------------------------------------------------Tax chargeCurrent tax- Corporation tax charged at 29.5% (2006: 30%) 782 598 4,154- Tax in respect of property disposals - 2,239 2,340------------------------------------------------------------------------------- 782 2,837 6,494-------------------------------------------------------------------------------Current tax- REIT conversion charge - - 5,736-------------------------------------------------------------------------------Total current tax 782 2,837 12,230-------------------------------------------------------------------------------Deferred tax- Deferred tax on property revaluations 3 609 922- Other deferred tax - (24) (166)- Prior year adjustment - - (177)- Release on conversion to REIT - - (31,409)-------------------------------------------------------------------------------Deferred tax charge/(credit) 3 585 (30,830)-------------------------------------------------------------------------------Total tax recognised in the incomestatement 785 3,422 (18,600)-------------------------------------------------------------------------------Tax recognised in equityDeferred tax (credit)/charge (16) 7 15------------------------------------------------------------------------------- The Company elected to become a Real Estate Investment Trust (REIT) with effectfrom 1 July 2007. As a result of this, rental income and capital gains of theREIT business are not subject to tax. The tax charge for the six months ending31 December 2007 shown above represents the tax payable on the non-REITbusiness, mainly the sale of trading properties and interest receivable. 6 Profit, earnings per share and net asset value per shareProfitThe adjusted profit before tax has been amended from the profit before tax asfollows: Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000-------------------------------------------------------------------------------(Loss)/profit before tax (11,419) 16,421 33,369Premium on redemption of debenture stock - 4,949 4,949Profit on disposal of investmentproperties (48) (2,247) (2,247)Net losses/(gains) on revaluation ofinvestment properties and losses ondevelopment properties 19,926 (11,701) (16,322)-------------------------------------------------------------------------------Adjusted profit before tax 8,459 7,422 19,749------------------------------------------------------------------------------- Earnings per share The basic and diluted loss per share of (20.34)p (2006 earnings: 21.67p) hasbeen calculated on the basis of the weighted average of 59,991,990 ordinaryshares and a loss of £12.20m (2006 earnings: £13.00m). The adjusted (loss)/earnings per share has been amended from the basic and diluted earnings pershare by the following: Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000-------------------------------------------------------------------------------Earnings (12,204) 12,999 51,969Profit on disposal of investment properties (48) (2,247) (2,247)Tax charged on profit on disposal ofinvestment properties - 2,239 2,340Net losses/(gains) on revaluation ofinvestment properties and losses ondevelopment properties 19,926 (11,701) (16,322)REIT conversion charge - - 5,736Deferred tax 3 585 (30,830)-------------------------------------------------------------------------------EPRA adjusted earnings 7,677 1,875 10,646Premium on redemption of debenture stock - 4,949 4,949Tax thereon at 30% - (1,485) (1,485)-------------------------------------------------------------------------------Adjusted earnings 7,677 5,339 14,110-------------------------------------------------------------------------------EPRA diluted earnings per share 12.79p 3.13p 17.75pAdjusted (and adjusted diluted)earnings per share 12.79p 8.90p 23.52p The Group presents an adjusted earnings per share figure as the Directorsconsider that this is a better indicator of the performance of the Group. There are no dilutive shares. Net asset value per shareThe net asset value per share of 406p (2006: 374p) has been calculated on thebasis of the number of equity shares in issue of 59,991,990 and equityshareholders' funds of £243.78m (2006: £224.24m). The EPRA (adjusted) net assetvalue per share has been amended as follows: Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000-------------------------------------------------------------------------------Equity shareholders' funds 243,779 224,238 259,292Valuation of land held as tradingproperties 6,667 16,507 9,995Mark to market on debt (1,534) (1,637) (1,341)Book value of land held as tradingproperties (830) (1,246) (921)Deferred tax 120 31,540 133------------------------------------------------------------------------------- 248,202 269,402 267,158-------------------------------------------------------------------------------EPRA (adjusted) net asset value pershare 413p 449p 445p------------------------------------------------------------------------------- 7 Properties Unaudited £'000-------------------------------------------------------------------------------DTZ valuation as at 31 December 2007 281,550Owner-occupied property included in property, plant and equipment (1,283)Lease inducements (213)Other adjustments (54)-------------------------------------------------------------------------------Investment and development properties as at 31 December 2007 280,000------------------------------------------------------------------------------- The properties are stated at market value as at 31 December 2007 and are valuedby professionally qualified external valuers in accordance with the RICSAppraisal and Valuation Standards published by the Royal Institution ofChartered Surveyors. 8 Reconciliation of movements in equity Unaudited Unaudited Audited Six months to Six months to Year to 31 December 31 December 30 June 2007 2006 2007 £'000 £'000 £'000-------------------------------------------------------------------------------Opening net assets 259,292 215,672 215,672Total recognised income and expense (10,690) 13,054 52,121Dividends (4,823) (4,488) (8,501)-------------------------------------------------------------------------------Closing net assets 243,779 224,238 259,292------------------------------------------------------------------------------- The dividend paid in the period represents 8.04p per ordinary share. 9 Related party transactions Transactions between the company and its subsidiaries, which are relatedparties, have been eliminated on consolidation and are not disclosed in thisnote. Responsibility statement We confirm to the best of our knowledge: (a) the condensed set of financial statements has been prepared in accordance with IAS 34; and (b) the interim management report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R and 4.2.8R of the United Kingdom Financial Services Authority. Signed on behalf of the Board who approved the half yearly financial report on26 February 2008. Rupert J Mucklow David WooldridgeChairman Finance Director INDEPENDENT REVIEW REPORT TO A & J MUCKLOW GROUP PLCWe have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 31December 2007 which comprises the consolidated income statement, theconsolidated balance sheet, the consolidated cash flow statement, theconsolidated statement of recognised income and expense and related notes 1 to9. We have read the other information contained in the half-yearly financialreport and considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. This report is made solely to the company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company, for our review work, for thisreport, or for the conclusions we have formed. Directors' responsibilitiesThe half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdoms' Financial Services Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union. Our responsibilityOur responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of reviewWe conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. ConclusionBased on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 31 December 2007 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. Deloitte & Touche LLPChartered Accountants and Registered AuditorBirmingham, UK26 February 2008 This information is provided by RNS The company news service from the London Stock Exchange