Thg Regulatory News (THG)

25 Feb 2009 11:21



Within Terrace Hill Group PLC's final results announcement released today at 07:00 under RNS No 8345N, the date for payment of the final dividend should read 7 April 2009.  The remainder of announcement text is unchanged and is reproduced in full below.

25 February 2009

Terrace Hill Group plc

("Terrace Hill", the "Company" or the "Group")

PRELIMINARY RESULTS FOR THE YEAR ENDING 31 OCTOBER 2008

Terrace Hill Group plc (AIM: THG), a leading UK property development and investment group, today announces its preliminary results for the year to 31 October 2008.

Financial highlights

Triple Net Asset Value per share of 53.4p (31 October 2007: 83.7p)

Adjusted Diluted Net Asset Value per share of 58.0p (31 October 2007: 96.3p)

£108.2 million of debt refinanced since October 2007

Adjusted pre-tax profit (before property provisions) £1.0 million (31 October 2007: £4.7 million)

Pre-tax loss of £31.6 million (31 October 2007: profit £18.1 million)

Balance sheet loan to value gearing of 45.7%

Final dividend of 0.54 pence per share, bringing the total dividend for the year to 1.34 pence per share, demonstrating the Board's confidence in the Company's financial strength and long term prospects

Sale of Queens Wharf, Hammersmith completed for £30.75 million realising a profit of £11.1 million.

Operational highlights

Completed or contracted sales of £72.4 million

Contracted lettings with annual rent roll of £5.7 million

Gained detailed planning consent for 882,155 sq ft

Pre-let a 92,333 sq ft superstore in Bishop Auckland to Sainsbury's and contracted to sell a five-acre site to them in Helston

Planning applications submitted at four Scottish housebuilding sites for a total of 519 units.

Commenting, Robert Adair, Chairman of Terrace Hill, said:

"Despite the unprecedented economic difficulties and consequent rapid decline of property values, we have made good operational progress and been successful in managing and ameliorating the impact of these conditions. Our focus on risk management, tight control of capital and overhead expenditure, coupled with our drive towards long-term value creation, means that we are confident that we can weather the current turbulence and ultimately take advantage of the opportunities that will arise. In line with the rest of the sector, our financial results are, of course, greatly affected by the general economic situation. As a result, we have seen a fall in trading margins and volumes, increased funding costs and falls in triple net asset value as a result of asset value writedowns.

"Clearly the immediate future for our industry looks challenging and I anticipate further falls in asset values. Within our business, however, we have a range of abilities and expertise and, importantly, the experience of managing the business through previous downturns. Our goal has always been to produce superior relative returns for our shareholders through our undoubted skills and management of risk, and I am confident that we are well positioned to outperform our peers over the medium-term."

For further information:

Terrace Hill Group plc Tel: +44 (0)20 7631 1666

Robert Adair, Chairman

Philip Leech, Chief Executive

Jon Austen, Group Finance Director

Oriel Securities (Nominated Adviser) Tel: +44 (0)20 7710 7600

Richard Crawley

Daniel Conti

Financial Dynamics Tel: +44 (0)20 7831 3113

Stephanie Highett/Richard Sunderland

Jamie Robertson/Rachel Drysdale

terracehill@fd.com

  CHAIRMAN'S STATEMENT

I am pleased to report our financial results for the year ended 31 October 2008. Despite the unprecedented economic difficulties and consequent rapid decline of property values, we have made good operational progress and been successful in managing and ameliorating the impact of these conditions. Our focus on risk management, tight control of capital and overhead expenditure, coupled with our drive towards long-term value creation, means that we can weather the current turbulence and ultimately take advantage of the opportunities that will arise. In line with the rest of the sector, our financial results are, of course, greatly affected by the general economic situation. As a result, we have seen a fall in trading margins and volumes, increased funding costs and falls in triple net asset value (TNAV) as a result of asset value writedowns.

During the year our adjusted diluted NAV (ADNAV, as defined by EPRA) has decreased by 39.8% to 58.0 pence per share (31 October 2007: 96.3 pence per share) and our TNAV has fallen by 36.2% to 53.4 pence per share (31 October 2007: 83.7 pence per share). Adding back the dividend payments made during the year the underlying TNAV has decreased by 35.1%. The TNAV takes account of any valuation uplifts above book costs of assets held as trading stock, as well as contingent tax on prospective gains and adjustments for financial instruments.

In line with our dividend policy, the board is recommending a final dividend of 0.54 pence per share to be paid on 7 April 2009. This proposed final dividend is lower than last year's final dividend of 1.3 pence per share. We have adjusted the dividend in line with the movement in TNAV. Taken with the interim dividend of 0.8 pence per share paid in August, the total dividend in respect of the year to 31 October 2008 will be 1.34 pence per share. Our commitment to pay a final dividend is a demonstration of the confidence the board has in our financial strength and the Group's future.

The Group's loss before tax for the year amounted to £31.6 million, which is stated after accounting for changes in the value of our investment properties and reductions in the value of our trading stock. Excluding these, our operating profit before tax for the year was £1.0 million, compared with £4.7 million for the year ended 31 October 2007. The financial review contains further analyses of our performance in the period and a reconciliation of these amounts.

We have successfully dealt with all re-financings that fell due during the period and since the year end, totalling £84.8 million in respect of on-balance sheet loans and £23.4 million in respect of off-balance sheet loans. Our strong bank relationships have been essential in achieving this outcome. Most of these re-financings have been characterised by somewhat harsher terms, reflecting the lack of competition in the banking market. In 2009, we will have more re-financings to complete and our initial discussions with our lenders give us confidence that these will be completed satisfactorily, a position borne out by our successes to date. None of our existing loans is in default. 

Our focus is on our cash flow and preserving our cash resources. We constantly review our cost base and believe we have a lean operation. We have reduced our headcount by 7.1% since the year end and continue to exercise tight control over our discretionary expenditure.

Commercial property

We have continued to make good operational progress with a number of lettings. These include Biogen at Quantum in Maidenhead, Eon at 129 Wilton Road in Victoria, Hertel at Hudson Quay in Middlehaven, further lettings at Kean House in Covent Garden and a substantial pre-letting to Sainsbury's in Bishop Auckland.

We have also sold and forward sold a number of assets, including Queens Wharf in Hammersmith, a site to Sainsbury's in Helston, Cornwall, an office building to the Open University in Gateshead and the sale of smaller units to occupiers in Bristol, Farnborough and Eastbourne.

Residential property

Our residential investment properties have fallen in value by 8.9% in the year, largely out-performing the wider residential market where the Halifax HPI fell by 14.6% over the same period. We are particularly pleased with occupancy levels, now at 91.8%, and with rental levels which have very little delinquency. Rents have grown by approximately 4.0% per annum over the two years to June 2008 and remained stable since then. 

Our strategy, however, remains to sell residential units profitably, although the dearth of mortgages has made this difficult recently. In the meantime, we are managing the portfolios efficiently and have effected a reduction in operating costs equivalent to £2.9 million per annum.

We remain confident that our residential investment portfolios will produce good returns over the medium-term driven by: the low relative value of each unit (£138,000); the geographic diversity avoiding cluster risk; and the pent up demand for homes.

Clansman Homes, our Scottish housebuilding business, is consolidating its position with the sites it owns. We now control a land-bank with capacity to develop in excess of 1,300 units and have very little unsold stock, with those units that are built seeing signs of renewed interest. We continue to pursue planning consents where needed and, as mortgage availability improves, we will continue to make sales. In the longer-term, Clansman Homes offers a real opportunity to add to shareholder value through an ultimate demerger or trade sale.

Board

I am very happy to welcome Jon Austen to the Group as our new Group Finance Director. Jon brings a wealth of experience to us and his knowledge of property fund management and structuring will be invaluable. I am also pleased to report that Tom Walsh, his predecessor, has agreed to stay on as Deputy Finance Director. I am grateful to all the directors and staff for their hard work and dedication over the last year.

Outlook

Clearly the immediate future for our industry looks challenging and I anticipate further falls in asset values. Within our business, however, we have a range of abilities and expertise and, importantly, the experience of managing the business through previous downturns. We continue to add value through active management of our assets. Our continued focus on risk management and banking relationships makes us confident that we can survive the current difficulties and, ultimately, build on the opportunities presented by this market. Our goal has always been to produce superior relative returns for our shareholders through our undoubted skills and management of risk, and I am confident that we are well positioned to outperform our peers over the medium-term.

Robert FM Adair

Chairman

24 February 2009

REVIEW OF OPERATIONS

Commercial property

The main focus during the course of the year has been intensively managing existing assets and sites to maximise revenue. This has been achieved by letting vacant space, exploiting pre-letting opportunities, releasing capital through sales and adding value through gaining planning consents.

The majority of our current developments have been carried out in financial joint ventures in which we hold minority equity stakes and all of which have been financed with limited recourse to the Group. Our financial exposure to these developments is, therefore, restricted to our original equity stake and to limited interest overrun guarantees. Where a development has been carried out in phases and part sold, the receipts have generally been used to reduce initial borrowings and project gearing. Properties that have been let or part-let, but not yet sold, provide an income which is used to help service the debt.

It is our usual practice with bare sites to own the whole of the equity until we have added value through planning and mitigated risk through pre-lets or fixed price building contracts, following which we sell down the majority of the equity to a joint venture partner. We recognise that in the current market we are unlikely to develop these sites without substantial pre-lets or forward sales. Further capital expenditure is therefore limited, however, we are still committed to adding additional value through the planning process.

Some of our operational highlights during the year and since the year end are set out below:

•	since 31 October 2007 we have completed or contracted sales of £72.4 million and have contracted lettings with an annual rent roll of £5.7 million;
•	letting of 53,584 sq ft of new offices at Quantum 2, Vanwall Business Park, Maidenhead to Biogen Idec on a 15 year lease at an initial rent of £1.6 million per annum;
•	pre-letting to Sainsbury's, conditional upon planning, of a 92,333 sq ft food superstore at the Group's retail park at Bishop Auckland, County Durham. Detailed planning has now been granted by the local authority pending a final decision by the Government Office;
•	Eon leased 19,857 sq ft at 129 Wilton Road, Victoria on an average rent of £70.85 per sq ft. In the same building, we let the ground floor retail unit to Prêt-a-Manger for £100,000 per annum. The sale of the private and affordable residential units was also completed for £14.5 million;
•	Hertel leased 15,000 sq ft in Hudson Quay at Middlehaven on Teesside making the building fully let. The remainder is let to the Crown Prosecution Service;
•	at Kean House in Covent Garden we have let all but one floor of the office accommodation, at rents up to £60.00 per sq ft;
•	within the Terrace Hill Development Partnership we sold three more units at Aeropark, Farnborough, let or sold three units at Brabazon Office Park, Bristol and sold seven units at Brampton Road, Eastbourne;
•	the completion of the sale of a 19,500 sq ft office building to the Open University at Baltic Business Quarter;
•	we completed the sale of Queens Wharf in Hammersmith for £30.75 million, realising a profit of £11.1 million; and
•	detailed planning consent has been granted for a 55,750 sq ft food store at Helston in Cornwall, which is contracted for sale to Sainsbury's.

We have also added significant value to a number of our sites by gaining new consents, or improving upon existing planning consents, at Southampton, Middlesbrough, Croydon, Bristol and, most recently, at Howick Place in Victoria, London for offices and residential.

In total, we have achieved detailed planning consent for 882,155 sq ft of new space since 31 October 2007.

Residential investment portfolios

At the year end, our residential investment portfolio under management totalled 1,957 units valued at £271 million. Out of this total, 1,714 units are within Terrace Hill Residential PLC in which we have a 49.0% stake.

The value of the portfolios has fallen by 8.9% since last year. Compared to the average fall in residential values across the UK, as measured by the Halifax HPI of 14.6%, our properties have performed well. 

Across the whole portfolio, occupancy levels have fallen slightly. At 31 October 2008 occupancy was 91.8% compared to 93.0% at the previous year end. This fall reflects our refurbishment programme where properties are vacant whilst building works are carried out. Demand for the units remains strong.

Rental growth is now largely static, as a consequence of an increased supply of properties to let. The rents from our properties remain very affordable and offer better value than much of the competition. As ever, we aim to maintain a careful balance between rental levels and occupancy rates.

As expected during the current economic climate, sales activity has been slow compared with previous years but we achieved the sale of some individual properties totalling £1.1 million in aggregate. 

During the year we also entered into a new management agreement with Allsop Residential Investment Management Limited, who are responsible for the letting and management of the Terrace Hill Residential PLC portfolio. This new agreement will significantly reduce our letting and management fees by £2.9 million per annum.

Clansman Homes

As a result of the weakness in the housing market, we have significantly scaled back plans for new builds and have concentrated on selling inventory stock. This has had some success and has been achieved without large discounts. We have, however, made limited use of part exchanges to facilitate some sales. Currently we have 24 completed and unsold units and have seen an encouraging growth in the number of visitors and enquiries since the beginning of 2009. We continue to pursue planning consents on our landbank and are confident of obtaining planning at our sites at Fenwick, Patna, Carluke and Kilmarnock during the course of the year. This will add 519 new units to the consented landbank. We have also submitted a planning application for the 65 acre site we own partially in joint venture, at Armadale, West Lothian which has capacity for 500 residential units, a food superstore and a neighbourhood centre. Our landbank has the capacity for in excess of 1,300 units and we will be able to accelerate turnover rapidly once market conditions improve.

Philip Leech

Chief Executive

24 February 2009

FINANCIAL REVIEW

Financial results and net asset value

The Group's NAV fell by 24.7% in the period to £103.0 million (48.6 pence per share) from £136.9 million (64.6 pence per share) at 31 October 2007 and our adjusted NAV (equivalent to that defined by EPRA) fell by 39.8% to £124.2 million (58.0 pence per share) from £210.9 million (96.3 pence per share) at 31 October 2007. 

The main reasons for the movement of 38.3 pence per share in the adjusted NAV are as follows:

•	a fall of 14.9 pence per share in the value of our properties as reflected on our balance sheet;
•	a fall of 22.0 pence per share in the value of our trading properties as included in our adjusted NAV;
•	earnings for the year (before property valuation adjustments) of 2.4 pence per share; and
•	dividends paid in the year of 2.1 pence per share.

Our triple net asset value (TNAV) is arrived at by including the effect of tax estimated to be payable on the profits arising if all the Group's properties were to be sold at the values used for adjusted NAV. We also write off all goodwill carried in the balance sheet and reverse any fair value adjustments of our financial instruments in arriving at our TNAV figures. The TNAV at 31 October 2008 fell by 36.2% to £114.3 million (53.4 pence per share) from the 2007 figure of £183.3 million (83.7 pence per share).

Calculation of ADNAV and TNAV (unaudited)

				31 October 2008					31 October 2007
					Number					Number
					of shares	Pence per				of shares	Pence per
	£'000				000s	share		£'000		000s	share
Audited net asset value	103,047				211,971	48.6		136,879		211,971	64.6
Revaluation of property held as current assets		20,324						68,560
Shares to be issued under the LTIP	41				2,038			140		6,965
Deferred taxation in respect of investment properties			781					5,301
Adjusted diluted net asset value	124,193				214,009	58.0		210,880		218,936	96.3
Decrease %						(39.8)%
Estimated taxation on revaluation of current assets, unrealized gains and availability of tax losses			(6,472)					(23,953)
Goodwill	(3,456)							(3,589)
Triple net asset value	114,265				214,009	53.4		183,338		218,936	83.7
Decrease %						(36.2)%

Income statement

Our income statement for 2008 contains adjustments in respect of our development properties which were not a feature of our 2007 results. The table set out below derives a figure for adjusted profit which strips out these adjustments and other items.

Adjusted profit
	October 2008	October 2007
	£m	£m
Reported (loss)/profit before tax	(31.6)	18.1
Write downs in respect of development properties	12.6	-
Write downs in respect of loans to joint ventures and associated companies	7.8	-
Deficits/(gains) from investment properties	3.8	(7.1)
Deficits/(gains) from joint ventures and associated companies	8.4	(6.3)
Adjusted profit before tax	1.0	4.7

Revenue in the period was £63.4 million (2007: £69.9 million), a decrease of 9.6%. The single most significant transaction in the period was the sale of a site at Hammersmith for £30.8 million. Also included in revenue are sales of houses at three Clansman Homes sites totalling £3.0 million (2007: £1.6 million) and the balance of the proceeds from pre-sold developments at Wokingham, Gateshead and Newcastle. We also completed the sale of the residential parts of our mixed use development in Victoria, London. 

The Group generated £4.8 million in rental income (2007: £4.2 million), an increase of 14.3%, while development management fees and other income contributed £2.6 million (2007: £2.4 million) an increase of 8.3%.

The Group recorded a gross loss for the period of £4.1 million (2007: profit £20.7 million). The principal reason for the loss is the inclusion of £12.6 million of write downs in respect of our development properties and £7.8 million in respect of provisions against loans to joint ventures and associated companies. The major contributor to profit in the period, as reported in our interim results, was the sale of the property at Hammersmith which generated a profit of £11.1 million.

Administrative expenses, which largely reflect the operational overheads of the Group, were £6.2 million compared with £9.6 million in 2007, a decrease of 35.4%. The main reason for the decrease is due to a credit of £1.0 million in respect of the Group's share-based payment scheme in 2008 compared with a charge of £1.5 million in 2007. Ignoring this, underlying administrative expenses have reduced from £8.1 million in 2007 to £7.2 million in 2008.

Movements in the carrying value of our developments and investment properties are included in various lines in our income statement, depending on whether the properties are wholly or partly owned. Unrealised losses arising from the revaluation of wholly owned trading and investment properties amounted to £16.4 million. This comprises £12.6 million in respect of our development properties and is included in the direct costs line of our income statement (as noted above) and £3.8 million, in respect of our on-balance sheet investment properties included in the income statement, in the line of the same description. In addition, included in direct costs is a provision of £7.8 million against loans to joint ventures and associates as a consequence of falling values in the underlying developments. Finally, included in the share of joint ventures and associated undertakings post tax loss is £8.4 million relating to reductions in the carrying value of those off-balance sheet development and investment properties. 

The operating loss for the period after the recognition of the unrealised losses referred to above (excluding those relating to the Group's share of joint ventures and associated undertakings) was £14.1 million, a reduction on the previous year's operating profit of £18.6 million, although it should be noted that the 2007 figure included valuation uplifts of £7.1 million in respect of investment properties.

Finance costs of £5.5 million (2007: £2.4 million) represents the cost of our on-balance sheet debt. The figure for 2008 includes £2.1 million in respect of a development funding agreement which will reverse in 2009. Our weighted average interest rate during the year was 6.1%.

Our investment in joint ventures and associated undertakings generated a loss for the period of £12.4 million (2007: profit £0.5 million). This is primarily due to the results of Terrace Hill Residential PLC, of which our share is 49.0%. The figure of £12.4 million comprises our share of the pre-tax loss on property revaluations of £11.8 million (2007: £5.9 million), a related taxation credit of £3.4 million (2007: £2.5 million) and a trading loss in the period £3.9 million (2007: £5.3 million). Other contributors to the results from joint ventures and associates are the Castlegate House Partnership where our share is 30.0% and Achadonn Limited, our land holding joint venture in Scotland, where our interest is 50.0%.

Balance sheet

The Group's total assets at 31 October 2008 were £232.4 million, a decrease of 15.3% on the 2007 amount of £274.3 million. The net assets, after deducting minority interests, were £103.0 million (2007: £136.9 million), a reduction of 24.8%.

Financial resources and capital management

The Group's financial resources are principally its cash balances and bank loans and facilities. Typically, the Group finances its projects with dedicated debt facilities where an individual project provides the security to the lender, making the project and debt ring-fenced. This results in a relatively large number of discrete bank facilities, which are also relatively short-term, thus reducing risk and maintaining flexibility for the Group. At any one time, therefore, the Group has a relatively high proportion of its overall debt due for repayment within one year. The majority of our committed commercial developments are financed in off-balance sheet associated or joint venture companies with limited recourse to the Group.

At 31 October 2008 our debt position is summarised in the table below.

Summary of debt position
	October 2008	October 2007
Net debt	£85.9m	£65.5m
Net gearing	69.1%	47.8%
Net debt including share of off-balance sheet debt	£231.1m	£222.5m
Total net gearing	186.1%	105.5%
Loan to value %	45.7%	29.6%
Loan to value % including share of off-balance sheet debt	63.3%	52.0%

The net gearing and loan to value percentages shown above are in relation to our adjusted NAV. The majority of off-balance sheet debt is of limited recourse to the Group.

At 31 October 2008, 16.8% of our on-balance sheet debt was subject to hedging arrangements with an average rate of interest of 5.9%. The percentage of our on-balance sheet debt subject to hedging arrangements is low, as typically such debt has short maturities and is used to finance early stage developments where we have needed to retain flexibility for the repayment of debt. By contrast, the percentage of our off-balance sheet debt that was subject to hedging arrangements was 74.8% at 31 October 2008. Our typical strategy with our off-balance sheet projects is to reduce interest rate risk by a significant degree.

We continually monitor our bank facilities and constantly update a rolling cash forecast for 24 months ahead. It is worth noting that the Group has no unfunded capital commitments in respect of its on-balance sheet development projects and all commercial development expenditure in respect of off-balance sheet projects is funded by related bank facilities.

The Group regularly stress tests the portfolio for falls in value and builds into its cash forecasts varying assumptions concerning margin calls or increased funding costs as a consequence of loan to value covenants being breached. The Group believes that it has sufficient resources to continue trading for the foreseeable future.

Since October 2007, £108.2 million of debt (including £23.4 million of off-balance sheet debt) has been successfully re-financed. With regard to our re-financings, in all cases they have been characterised by higher margins, but loan to value covenants have largely remained constant. Due to the recent falls in interest rates, funding costs to the Group have remained broadly level, notwithstanding the increase in margins on our revised facilities. 

The Group has a further £47.2 million of on-balance sheet debt requiring re-financing during 2009 and £289.4 million that requires re-financing in relation to our off-balance sheet projects. Our experience to date and our discussions with lenders in 2009 indicate a willingness to renew our loans. We borrow from a wide range of banks with whom we have good and long-established relationships. 

None of our existing loans is in default and our covenants are generally limited to loan to value covenants.  With regards to our off-balance sheet projects, the Group monitors loan to value ratios and, depending on the recourse to the Group and the overall status of the project, makes appropriate provisions against its investments.

Dividends

Dividends paid in the year to 31 October 2008 amounted to 2.1 pence (2007: 1.9 pence) and comprised the final dividend in respect of the year to 31 October 2007 of 1.3 pence per share and an interim dividend of 0.8 pence per share in respect of the year to 31 October 2008. The board is recommending to shareholders at the Annual General Meeting on 2 April 2009 a final dividend for the year to 31 October 2008 of 0.54 pence per share. The final dividend will be paid on 7 April 2009 to all shareholders on the register at 20 March 2009. 

Debt expiry profile
	On-balance	Off-balance
	sheet	sheet*
	£m	£m
Bank loans and overdraft repayable in one year	63.0	119.4
Bank loans repayable after more than one year	40.9	25.9
Total	103.9	145.3

* group share

Summary of loan to value ratios of on-balance sheet property
	Loan to value	Range of
	%	covenants
Commercial property	53.6%	50-60%
Residential property	71.4%	70-75%
Housebuilding property	34.3%	65-75%
All property	45.7%

Jon Austen

Group Finance Director

24 February 2009

Consolidated income statement

for the year ended 31 October 2008

		Year ended	Year ended
		31 October	31 October
		2008	2007
	Notes	£'000	£'000
Revenue	2	63,366	69,849
Direct costs		(67,438)	(49,142)
Gross (loss)/profit		(4,072)	20,707
Administrative expenses		(6,195)	(9,587)
(Loss)/profit on disposal of investment properties		(20)	404
(Loss)/gain on revaluation of investment properties		(3,846)	7,062
Operating (loss)/profit		(14,133)	18,586
Finance income	4	467	1,447
Finance costs	4	(5,488)	(2,400)
Share of joint venture and associated undertakings post tax (loss)/profit		(12,448)	505
(Loss)/profit before tax		(31,602)	18,138
Tax	6	4,327	(3,577)
(Loss)/profit from continuing operations		(27,275)	14,561
Attributable to
Equity holders of the parent		(27,253)	14,527
Minority interest		(22)	34
		(27,275)	14,561
Basic earnings per share	8	(12.90)p	7.33p
Diluted earnings per share	8	(12.90)p	7.09p

The notes below form part of this financial information

 

Consolidated statement of changes in equity

for the year ended 31 October 2008

						Capital		Unrealised
	Share			Share	Own	redemption	Merger	gains and	Retained		Minority
	capital			premium	Shares	reserve	reserve	losses	earnings	Total	interest	Total
	£'000			£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 October 2006	3,744			19,369	-	849	8,386	-	67,930	100,278	314	100,592
Profit for the year		-		-	-	-	-	-	14,527	14,527	34	14,561
Total recognised income and expense for the year			-	-	-	-	-	-	14,527	14,527	34	14,561
Acquisition of minority interest	-			-	-	-	-	-	-	-	(42)	(42)
Share-based payment	-			-	-	-	-	-	1,494	1,494	-	1,494
Interim ordinary dividends	-			-	-	-	-	-	(1,696)	(1,696)	-	(1,696)
Final ordinary dividends	-			-	-	-	-	-	(2,059)	(2,059)	-	(2,059)
Issue of share capital	496			23,839	-	-	-	-	-	24,335	-	24,335
Balance at 31 October 2007	4,240			43,208	-	849	8,386	-	80,196	136,879	306	137,185
Loss for the year		-		-	-	-	-	-	(27,253)	(27,253)	(22)	(27,275)
Unrealised losses on available-for-sale investments		-		-	-	-	-	(498)	-	(498)	-	(498)
Total recognised income and expense for the year			-	-	-	-	-	(498)	(27,253)	(27,751)	(22)	(27,773)
Acquisition of minority interest	-			-	-	-	-	-	-	-	(26)	(26)
Own shares	-			-	(609)	-	-	-	-	(609)	-	(609)
Share-based payment	-			-	-	-	-	-	(997)	(997)	-	(997)
Merger reserve release	-			-	-	-	(1,298)	-	1,298	-	-	-
Interim ordinary dividends	-			-	-	-	-	-	(1,684)	(1,684)	-	(1,684)
Final ordinary dividends	-			-	-	-	-	-	(2,791)	(2,791)	-	(2,791)
Balance at 31 October 2008	4,240			43,208	(609)	849	7,088	(498)	48,769	103,047	258	103,305

Consolidated balance sheet

at 31 October 2008

		31 October	31 October
		2008	2007
	Notes	£'000	£'000
Non-current assets
Investment properties	10	49,160	53,887
Property, plant and equipment	9	590	594
Investments in equity accounted associates and joint ventures	11	7,145	18,619
Available-for-sale investments	11	442	-
Other investments	11	109	147
Intangible assets		3,456	3,589
Deferred tax assets	17	4,327	661
		65,229	77,497
Current assets
Property inventories	12	120,488	126,950
Trade and other receivables	13	28,612	42,888
Cash and cash equivalents		18,022	26,958
		167,122	196,796
Total assets		232,351	274,293
Non-current liabilities
Bank loans	16	(40,890)	(64,339)
Other payables	15	(3,370)	(7,480)
Deferred tax liabilities	17	(782)	(1,863)
		(45,042)	(73,682)
Current liabilities
Trade and other payables	14	(20,878)	(34,094)
Current tax liabilities		(153)	(1,190)
Bank overdrafts and loans	16	(62,973)	(28,142)
		(84,004)	(63,426)
Total liabilities		(129,046)	(137,108)
Net assets		103,305	137,185
Equity
Called up share capital	19	4,240	4,240
Share premium account	20	43,208	43,208
Own shares	20	(609)	-
Capital redemption reserve	20	849	849
Merger reserve	20	7,088	8,386
Unrealised losses	20	(498)	-
Retained earnings	20	48,769	80,196
Equity attributable to equity holders of the parent		103,047	136,879
Minority interests		258	306
Total equity		103,305	137,185

The financial information was approved and authorised for issue by the board of directors on 24 February 2009 and was signed on its behalf by:

P A J Leech J M Austen

Director Director

Consolidated cash flow statement

for the year ended 31 October 2008

	Year ended	Year ended
	31 October	31 October
	2008	2007
	£'000	£'000
Cash flows from operating activities
(Loss)/profit before taxation	(31,602)	18,138
Adjustments for:
Finance income	(467)	(1,447)
Finance costs	5,488	2,400
Share of joint venture and associated undertakings post tax loss/(profit)	12,448	(505)
Depreciation and impairment charge	20,777	598
Loss/(gain) on revaluation of investment properties	3,846	(7,062)
Loss/(profit) on disposal of investment properties	20	(404)
Share-based payment (credit)/charge	(997)	1,494
Cash flows from operating activities before change in working capital	9,513	13,212
Increase in property inventories	(3,634)	(34,026)
Decrease in trade and other receivables	6,419	5,565
Decrease in trade and other payables	(22,295)	(6,466)
Cash absorbed by operations	(9,997)	(21,715)
Income from investments	7	41
Finance costs	(4,087)	(2,745)
Finance income	1,615	1,155
Tax paid	(1,500)	(3,174)
Net cash flows from operating activities	(13,962)	(26,438)
Investing activities
Purchase of investment property	-	(4,491)
Sale of investment property	1,137	15,101
Purchase of investments	(4,011)	(100)
Sale of investments	1,982	1,207
Purchase of property, plant and equipment	(236)	(678)
Net cash flows from investing activities	(1,128)	11,039
Financing activities
Borrowings drawn down	39,813	58,827
Borrowings repaid	(34,516)	(46,022)
Purchase of own shares	(609)	-
Issue of shares
- gross receipts	-	25,001
- issue costs	-	(666)
Equity dividends paid	(4,475)	(3,755)
Net cash flows from financing activities	213	33,385
Net (decrease)/increase in cash and cash equivalents	(14,877)	17,986
Cash and cash equivalents at 1 November 2007	26,371	8,385
Cash and cash equivalents at 31 October 2008	11,494	26,371

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

for the year ended 31 October 2008

1 Accounting policies 

Basis of preparation

This financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretation) published by the International Accounting Standards Board (IASB) as adopted by the European Union ("EU adopted IFRSs") and with those parts of the Companies Act 1985 applicable to companies preparing its financial statements in accordance with IFRSs. 

Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except as follows:

The Group has adopted the following new and amended IFRSs during the year. Adoption of these revised standards did not have any effect on the financial performance or position of the Group in the current or prior periods. In certain cases, they did however give rise to additional disclosures.

IFRS 7 Financial Instruments: Disclosures

IAS 1 Amendment - Presentation of Financial Statements

Going concern

The directors are required to make an assessment of the Group's ability to continue to trade as a going concern. Because of the difficult market conditions prevailing, this assessment has been subject to more uncertainties than are usual. The directors have given this matter due consideration and have concluded that it is appropriate to prepare the Group financial statements on a going concern basis. The two main considerations were as follows:

Cash flow - the Group maintains a rolling 24 month cash forecast that takes account of all known inflows and outflows. The cash flow includes estimates of a number of key variables including the assumed dates and amounts relating to property disposals and amounts that may be required to reduce indebtedness as a consequence of falling property values and re-financing. The cash flow is regularly stress tested to ensure that the Group can withstand reasonable changes in circumstances that could adversely affect its cash flow. The key potential changes that the Group has considered include: possible falls in value of the portfolio which could result in margin calls or increased funding costs if future loan to value covenants were breached; possible delays in the timing and reductions in proceeds from portfolio sales given the current lack of liquidity in the market; and, possible reductions in anticipated cash flows from re-financing properties after planning permission has been obtained. After considering the potential cash flow sensitivities the Group believes that it has sufficient resources to continue trading for the foreseeable future.

Support of the Group's banks - the Group maintains a regular dialogue with its lenders and keeps them informed of how the Group is trading. The Group has re-financed £84.8 million of debt since October 2007 (including £28.7m since 1 November 2008) and has a further £47.2 million of debt and overdraft facilities due to be re-financed in 2009. Whilst the due dates for renewal of these facilities have not yet occurred, the Group has opened discussions with each lender to gauge their appetite for their renewal. In all cases the lenders concerned have been supportive and have indicated their desire to renew the facilities subject to mutually acceptable terms being agreed. Further information is contained in the financial review.

Investment property and inventory

In relation to the investment and development properties, the directors have relied upon the external valuations and advice provided by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. 

2 Revenue

	Total	Total
	2008	2007
	£'000	£'000
Sales of development properties	55,982	63,246
Rents receivable	4,777	4,211
Fees and other income	2,607	2,392
	63,366	69,849

  3 Segmental information 

The Group operates in three principal segments being commercial property development and investment, residential property investment and housebuilding. The Group does not operate outside the UK.

					House	Unallocated				House	Unallocated
	Residential			Commercial	building	items	Total	Residential	Commercial	building	items	Total
	2008			2008	2008	2008	2008	2007	2007	2007	2007	2007
Income statement		£'000		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	2,722			57,654	2,990	-	63,366	3,496	64,719	1,634	-	69,849
Direct costs	(1,266)			(57,176)	(8,996)	-	(67,438)	(2,009)	(45,726)	(1,407)	-	(49,142)
Gross (loss)/profit		1,456		478	(6,006)	-	(4,072)	1,487	18,993	227	-	20,707
Administrative expenses	-			-	-	(6,195)	(6,195)	-	-	-	(9,587)	(9,587)
(Loss)/profit on disposal of investment properties			(20)	-	-	-	(20)	244	160	-	-	404
(Loss)/gain on revaluation of investment properties	(2,182)			(1,664)	-	-	(3,846)	1,221	5,841	-	-	7,062
Operating (loss)/profit	(746)			(1,186)	(6,006)	(6,195)	(14,133)	2,952	24,994	227	(9,587)	18,586
Net finance costs	(1,580)			(3,576)	115	20	(5,021)	(1,379)	451	(25)	-	(953)
Share of results of joint venture before tax			-	-	(138)	-	(138)	-	-	(167)	-	(167)
Share of results of associated undertakings before tax	(16,200)			451	-	-	(15,749)	(1,954)	88	-	-	(1,866)
Associated undertakings tax		3,439		-	-	-	3,439	2,538	-	-	-	2,538
(Loss)/profit before tax	(15,087)			(4,311)	(6,029)	(6,175)	(31,602)	2,157	25,533	35	(9,587)	18,138

					House	Unallocated				House	Unallocated
	Residential			Commercial	building	items	Total	Residential	Commercial	building	items	Total
	2008			2008	2008	2008	2008	2007	2007	2007	2007	2007
Balance sheet	£'000			£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment properties	28,633			20,262	265	-	49,160	31,962	21,925	-	-	53,887
Property, plant and equipment	-			34	67	489	590	23	45	22	504	594
Investments - associates and joint ventures		3,938		2,437	770	-	7,145	16,700	2,066	(147)	-	18,619
Other investments	3			449	-	99	551		147	-	-	147
Goodwill	975			2,481	-	-	3,456	992	2,597	-	-	3,589
Deferred tax assets	-			-	-	4,327	4,327	-	-	-	661	661
	33,549			25,663	1,102	4,915	65,229	49,677	26,780	(125)	1,165	77,497
Property inventories	-			92,372	28,116	-	120,488	-	105,269	21,681	-	126,950
Trade and other receivables	14,554			11,278	1,903	877	28,612	12,803	30,085	-	-	42,888
Cash	102			17,024	896	-	18,022	702	26,256	-	-	26,958
	48,205			146,337	32,017	5,792	232,351	63,182	188,390	21,556	1,165	274,293
Borrowings	(20,444)			(72,878)	(10,541)	-	(103,863)	(29,545)	(59,199)	(3,737)	-	(92,481)
Trade and other payables			(515)	(18,331)	(4,282)	(1,120)	(24,248)	(1,129)	(38,619)	(681)	(1,145)	(41,574)
Current tax	-			-	-	(153)	(153)	-	(1,190)	-	-	(1,190)
Deferred tax liabilities			-	-	-	(782)	(782)	(464)	(1,399)	-	-	(1,863)
	(20,959)			(91,209)	(14,823)	(2,055)	(129,046)	(31,138)	(100,407)	(4,418)	(1,145)	(137,108)
Net assets	27,246			55,128	17,194	3,737	103,305	32,044	87,983	17,138	20	137,185

Other segmental information

	Investment	Developments	Total	Investment	Developments	Total
	2008	2008	2008	2007	2007	2007
	£'000	£'000	£'000	£'000	£'000	£'000
Depreciation	194	10	204	95	-	95
Goodwill impairment	133	-	133	438	14	452
Capital expenditure	235	-	235	653	25	678

4 Finance costs and finance income

	2008	2007
	£'000	£'000
Interest payable on borrowings	7,558	5,025
Interest payable under a development funding agreement	2,050	-
Interest capitalised	(4,120)	(2,625)
Finance costs	5,488	2,400
Interest receivable from cash deposits and other financial assets	467	1,447
Finance income	467	1,447

Interest is capitalised at the same rate as the Group is charged on the respective borrowings. Fair value adjustments to financial liabilities totalled £nil (2007: £nil) and gains on interest rate swaps totalled £nil (2007: £nil).

5 Administrative expenses

	2008	2007
	£'000	£'000
Depreciation of property, plant and equipment	204	95
Loss on disposal of property, plant and equipment	5	6
Operating lease charges - rent of properties	1,311	1,276
Impairment of goodwill	133	452
Share-based payment remuneration	(997)	1,494
Fees paid to BDO Stoy Hayward LLP in respect of:
- audit of the company's annual accounts	125	117
- audit of the company's subsidiaries	50	75
- other services	29	19

6 Tax on (loss)/profit on ordinary activities

(a) Analysis of charge in year

	2008	2007
	£'000	£'000
Current tax
UK corporation tax on (loss)/profit for the year	376	3,943
Adjustment in respect of prior periods	44	(354)
Total current tax	420	3,589
Deferred tax
Origination and reversal of temporary differences	(4,747)	(12)
Total deferred tax credit	(4,747)	(12)
Total tax (credit)/expense	(4,327)	3,577

b) Factors affecting the tax (credit)/expense for the year

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 28% (2007: 30%). The differences are explained below:

	2008	2007
	£'000	£'000
(Loss)/profit before tax	(31,602)	18,138
Less joint ventures and associates	12,448	(505)
(Loss)/profit attributable to the Group before tax	(19,154)	17,633
(Loss)/profit multiplied by the average rate of UK corporation tax of 28.83% (2007: 30%)	(5,522)	5,290
Disallowables	376	253
Other temporary differences	(397)	(394)
Consortium loss relief utilised	-	(2,168)
Utilisation of losses	1,172	950
	(4,371)	3,931
Adjustments in respect of prior periods	44	(354)
Total tax (credit)/expense	(4,327)	3,577

(c) Associates and joint ventures

The Group's share of tax on the associates is £3,439,000 credit (2007: £2,538,000 credit). No tax charge arises on the results of the joint ventures.

  

7 Dividends

	2008	2007
	£'000	£'000
Ordinary shares
Final dividend of 1.3 pence (2007: final dividend for 2006 of 1.1 pence) per share for the year ended 31 October 2007	2,756	2,059
Interim dividend paid of 0.8 pence (2007: interim dividend for 2007 of 0.8 pence) per share for the year ended 31 October 2008	1,684	1,696
	4,440	3,755
Final dividend after the year of 0.54 pence (2007: 1.3 pence) per share	1,139	2,756

The proposed final dividend has not been accrued at the balance sheet date.

8 Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on a loss of £27,253,000 (2007 profit: £14,527,000) and on 211,187,902 (2007: 198,069,224) ordinary shares, being the weighted average number of shares in issue during the period.

The calculation of diluted earnings per ordinary share for 2008 is the same as the calculation of basic earnings per ordinary share. For 2007, the calculation of diluted earnings per ordinary share is based on a profit of £14,527,000 and on 204,787,224 ordinary shares, being the weighted average number of shares in issue during the period adjusted to allow for the issue of shares in relation to all performance related share awards.

9 Property, plant and equipment

	Leasehold	Motor	Office	Furniture
	improvements	vehicles	equipment	and fittings	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 November 2006	-	6	82	55	143
Additions	151	315	78	134	678
Disposals	-	(25)	(74)	-	(99)
At 1 November 2007	151	296	86	189	722
Additions	8	109	32	86	235
Disposals	-	(35)	(5)	(14)	(54)
At 31 October 2008	159	370	113	261	903
Depreciation
At 1 November 2006	-	4	72	31	107
Charge for period	9	39	17	30	95
Disposals	-	-	(74)	-	(74)
At 1 November 2007	9	43	15	61	128
Charge for period	14	84	45	61	204
Disposals	-	(7)	(5)	(7)	(19)
At 31 October 2008	23	120	55	115	313
Net book value:
At 31 October 2008	136	250	58	146	590
At 31 October 2007	142	253	71	128	594

At the year end there were no assets held under finance leases. At 31 October 2007, the net book value of assets under finance leases was £87,000.

Acquisitions in the year to 31 October 2007 comprised assets acquired by the Group from Terrace Hill Partnership on its cessation of activities on 31 March 2007.

10 Investment properties

	£'000
Valuation
At 1 November 2006	56,967
Additions	4,491
Disposals	(14,486)
Surplus on revaluation	6,915
At 31 October 2007	53,887
Transfer from inventory	220
Disposals	(1,101)
Loss on revaluation	(3,846)
At 31 October 2008	49,160

Included in additions for the year is capitalised interest of £nil (2007: £431,000).

The investment properties situated in Scotland owned by the Group have been valued as at 31 October 2008 by qualified valuers from Allied Surveyors, an independent firm of Chartered Surveyors, on the basis of open market value. The valuations were carried out in accordance with guidance issued by the Royal Institution of Chartered Surveyors.

The commercial investment properties situated in England owned by the Group have been valued as at 31 October 2008 by qualified valuers from CB Richard Ellis, and independent form of Chartered Surveyors, on the basis of open market value. The valuations were carried out and in accordance with guidance issued by the Royal Institution of Chartered Surveyors.

Residential investment properties situated in England owned by the Group have been valued at open market value by directors, who are suitably qualified or experienced, at 31 October 2008 having regard to professional advice and/or sales evidence during the period. The value of these properties was £5,387,000 (2007: £7,172,000)

11 Investments

Associates and joint venture

		Joint
	Associates	venture	Total
	£'000	£'000	£'000
Cost or valuation
At 1 November 2006	18,068	20	18,088
Additions	26	-	26
Share of results	672	(167)	505
At 31 October 2007	18,766	(147)	18,619
Investment write off	(81)	-	(81)
Share of results	(12,310)	(138)	(12,448)
Unrealised profit	-	1,055	1,055
At 31 October 2008	6,375	770	7,145

The Group's interest in its principal associates which have been equity accounted in the consolidated financial statements were as follows:

Terrace Hill Residential PLC	49%	Property investment
Castlegate House Partnership	30%	Property development
Devcap 2 Partnership	26%	Property development
Terrace Hill Development Partnership	20%	Property development
Howick Place JV S.a.r.l.	20%	Investment holding company
Two Orchards Limited	20%	Property development

Terrace Hill Residential PLC was incorporated in Scotland and Howick Place JV S.a.r.l. is resident in Luxemburg.

Summarised information 2008

		Terrace Hill					Castlegate	Terrace Hill
		Development				Devcap 2	House	Residential	Howick	Two
		Partnership				Partnership	Partnership	PLC	Place	Orchards	Other	Total
		£'000				£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue		7,012				308	610	12,265	1,502	-	-	21,697
(Loss)/profit after taxation				(2,119)		(1,793)	92	(26,043)	(1,708)	-	-	(31,571)
Total assets		56,285				46,367	9,398	247,724	72,278	59,805	-	491,857
Bank debt		(27,604)				(38,962)	(8,558)	(207,502)	(50,523)	(52,273)	-	(385,422)
Other liabilities		(16,602)				(9,190)	(2,355)	(32,184)	(25,530)	(7,531)	-	(93,392)
Total liabilities		(44,206)				(48,152)	(10,913)	(239,686)	(76,053)	(59,804)	-	(478,814)
Net assets/(liabilities)	12,079					(1,785)	(1,515)	8,038	(3,775)	1	-	13,043
Share of results for period					-	-	451	(12,761)	-	-	-	(12,310)
Share of net assets		2,416				-	-	3,938	20	1	-	6,375
Capital commitments			2,424			-	-	-	-	13,485	-	15,909

Summarised information 2007

	Terrace Hill					Castlegate	Terrace Hill
	Development				Devcap 2	House	Residential	Howick	Two
	Partnership				Partnership	Partnership	PLC	Place	Orchards	Other	Total
	£'000				£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	31,550				-	702	14,268	1,922	-	-	48,442
Profit/(loss) after taxation		2,765			-	(1,550)	1,192	(2,167)	-	-	240
Total assets	46,527				37,255	9,747	276,947	66,348	28,391	-	465,215
Bank debt	(24,906)				(26,544)	(8,558)	(211,737)	(48,785)	(4,607)	-	(325,137)
Other liabilities	(9,542)				(10,703)	(2,642)	(31,128)	(19,630)	(23,783)	-	(97,478)
Total liabilities	(34,448)				(37,247)	(11,250)	(242,865)	(68,415)	(28,390)	-	(422,615)
Net assets/(liabilities)		12,079			8	(1,503)	34,082	(2,067)	1	-	42,600
Share of results for period			553		-	(465)	584	-	-	-	672
Share of net assets/(liabilities)				2,416	2	(451)	16,700	20	1	78	18,766
Capital commitments			831		4,836	-	-	-	-	-	5,667

  The Group's interest in its joint venture which has been equity accounted in the consolidated financial statements was as follows:

Achadonn Limited

50%

Property development

Summarised information

	2008	2007
	Achadonn	Achadonn
	Limited	Limited
	£'000	£'000
Revenue	2,803	39
Profit/(loss)	1,834	(334)
Total assets	14,332	11,420
Bank debt	(9,436)	(9,536)
Other liabilities	(3,356)	(2,178)
Total liabilities	(12,792)	(11,714)
Net assets/(liabilities)	1,540	(294)
Share of results for period	917	(167)
Share of net assets/(liabilities)	770	(147)

Available-for-sale investments and other investments

	Available-for-sale	Other
	investments	investments	Total
	£'000	£'000	£'000
Valuation
At 1 November 2006	-	1,338	1,338
Additions	-	1	1
Disposals	-	(1,250)	(1,250)
Increase in fair value	-	58	58
At 31 October 2007	-	147	147
Additions	3,987	1	3,988
Disposals	(3,047)	(15)	(3,062)
Decrease in fair value	(498)	(24)	(522)
At 31 October 2008	442	109	551

		2008	2007
		£'000	£'000
UK unlisted investments at fair value		45	1
UK listed investments at fair value		506	146
		551	147

12 Property inventories

	2008	2007
	£'000	£'000
At 1 November 2007	126,950	75,693
Additions	43,301	100,399
Disposals	(36,978)	(49,142)
Transfers to investment properties	(220)	-
Amounts written off the value of inventories	(12,565)	-
At 31 October 2008	120,488	126,950
Included in these figures is capitalised interest of	8,269	4,162

13 Trade and other receivables

	2008	2007
	£'000	£'000
Trade receivables	1,915	2,299
Other receivables	2,553	4,277
Trade and other receivables	4,468	6,576
Prepayments and accrued income	2,247	12,261
Amounts due from associates and joint ventures	29,673	24,051
Provision for amounts due from associates and joint ventures	(7,776)	-
	28,612	42,888

Included in the amount due from associate and joint ventures is a balance due from Howick Place JV S.a.r.l. of £3.4 million that has a final maturity date of 31 December 2014.

  The ageing of trade and other receivables was as follows:

	2008	2007
	£'000	£'000
Up to 30 days	1,676	2,397
31 to 60 days	1,504	843
61 to 90 days	107	22
Over 90 days	451	1,251
Total	3,738	4,513
Amounts not yet due	730	2,063
Closing balance	4,468	6,576

No amounts were overdue at the year end.

The movement in the allowance for impairment in respect of amounts due from associates and joint ventures during the year was as follows:

	2008	2007
	£'000	£'000
At 1 November 2007	-	-
Amounts written off in year	-	-
Increase in allowance on amounts due from associates	7,776	-
Closing balance	7,776	-

The allowance is based on falling asset values in the associates.

  14 Trade and other payables

	2008	2007
	£'000	£'000
Trade payables	2,452	3,398
Other taxation and social security costs	650	1,499
Accruals and deferred income	8,168	27,384
Other payables	9,608	1,813
	20,878	34,094

15 Other payables (non-current)

	2008	2007
	£'000	£'000
Other payables	3,370	7,480

16 Bank overdrafts and loans

	2008	2007
	£'000	£'000
Bank loans	97,680	92,410
Bank overdrafts	6,528	587
	104,208	92,997
Unamortised loan issue costs	(345)	(516)
	103,863	92,481
Amounts due:
Within one year	62,973	28,142
After more than one year	40,890	64,339
	103,863	92,481

An analysis of interest rates and information on fair value and security is given in note 18.

17 Deferred tax

Details of the deferred tax (credited)/charged to the Consolidated income statement are as follows:

	2008	2007
	£'000	£'000
Investment property revaluations	(1,515)	521
Trade losses	(3,084)	-
Share-based payments	279	(413)
Short-term timing differences	(427)	(120)
	(4,747)	(12)

The Consolidated balance sheet deferred tax assets and liabilities are as follows:

	2008	2007
	£'000	£'000
Deferred tax provision
Investment property revaluations	(782)	(1,863)
	(782)	(1,863)
Deferred tax asset
Share option scheme	221	501
Investment property revaluations	434	-
Trade losses	3,084	-
Other timing differences	588	160
	4,327	661

Under IAS 12, deferred tax is recognised for tax potentially payable on the realisation of investment properties at fair values at the balance sheet date. No deferred tax asset is recognised in respect of losses if there is uncertainty over future recoverability.

18 Financial instruments

The Group's principal financial instruments comprise loans, overdrafts, cash and short-term deposits. The main purpose of these financial instruments is to provide finance for the Group's operations. Further information on the group's financial resources and capital management is given in the Financial review.

The Group has various other financial instruments such as trade receivables and trade payables that arise directly from its operations, listed and unlisted investments.

The main risks arising from the Group's financial instruments are interest rate risk, credit risk and liquidity risk. The board reviews and agrees policies for managing each of these risks and they are summarised below. The magnitude of the risk that has arisen over the period is detailed below.

Interest rate risk

The Group holds cash balances on short-term deposit. The Group's policy is to monitor the level of these balances to ensure that funds are available as required, recognising that interest earnings will be subject to interest rate fluctuations.

The Group borrows cash in the form of loans and overdrafts, which are subject to interest at floating rates, recognising that rates will fluctuate according to changes in the bank base rate. The Group is cognisant at all times of movements in interest rates and will, as appropriate, enter into interest rate swaps to maintain a balance between borrowings that are subject to floating and fixed rates.

Credit risk

The Group's principal financial assets are cash and trade receivables. Our cash deposits are placed with a range of banks to minimise the risk to the Group. The principal risk therefore arises from trade receivables. Trade receivables from the sale of properties are secured against those properties until the proceeds are received. Rental receivables are unsecured but the Group's exposure to tenant default is limited as no tenant accounts for more than 10% of total rent. Rental cash deposits and third party guarantees are obtained as a means of mitigating financial loss from defaults.

Liquidity risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank balances and loans. Cash flow and funding needs are regularly monitored. Further information is given in note 1.

Categories of financial assets and financial liabilities

	2008	2007
	£'000	£'000
Current financial assets
Available-for-sale investments	442	-
Other investments	109	147
Trade and other receivables	4,468	6,576
Amounts due from associates and joint ventures	21,879	24,051
Cash and cash equivalent	18,022	26,958
	44,920	57,732

The maximum exposure to credit risk in financial assets is £44,920,000 (2007: £57,732,000). The maximum amount due from any single party is £14,403,000 (2007: £10,196,000) included in amounts due from associates and joint ventures.

Financial liabilities measured at amortised cost

	2008	2007
	£'000	£'000
Current financial liabilities
Trade and other payables	20,228	32,595
Loans and borrowings	63,099	28,258
Total current financial liabilities	83,327	60,853
Non-current financial liabilities
Other payables	3,370	7,480
Loans and borrowings	41,109	64,739
Total non-current financial liabilities	44,479	72,219
Total financial liabilities	127,806	133,072

Interest rate risk profile of financial assets and liabilities

The interest rate profile of financial assets and liabilities of the Group at 31 October 2008 was as follows:

				Financial
		Floating		assets on
		rate	Fixed rate	which no
		financial	financial	interest
	Total	assets	assets	is earned
	£'000	£'000	£'000	£'000
Sterling	44,920	18,022	3,480	23,418
				Financial
		Floating		liabilities on
		rate	Fixed rate	which no
		financial	Financial	interest
	Total	liabilities	Liabilities	is charged
	£'000	£'000	£'000	£'000
Sterling	127,806	104,208	-	23,598

Floating rate financial liabilities bear interest at LIBOR or base rate plus margins of between 1% and 2.5%.

Included in floating rate financial liabilities is £17,517,000 (2007: £nil) subject to interest rate swaps entered into on 28 October 2008.

  

The interest rate profile of financial assets and liabilities of the Group at 31 October 2007 was as follows:

				Financial
		Floating		assets on
		rate	Fixed rate	which no
		financial	financial	interest
	Total	assets	assets	is earned
	£'000	£'000	£'000	£'000
Sterling	57,732	26,958	3,480	27,294
				Financial
		Floating		liabilities on
		rate	Fixed rate	which no
		financial	financial	interest
	Total	liabilities	liabilities	is charged
	£'000	£'000	£'000	£'000
Sterling	133,072	92,997	-	40,075

The floating rate financial assets comprise:

cash on deposit.

The floating rate financial liabilities comprise:

sterling denominated bank loans that bear interest based on LIBOR and bank base rates; and

sterling denominated bank overdrafts that bear interest based on bank base rates.

The fair value of the financial assets and liabilities is equal to the book value.

Borrowings

The Group's bank borrowings and overdrafts are repayable as follows:

	2008	2007
	£'000	£'000
On demand or within one year	63,099	28,258
In more than one year but less than two	8,924	51,361
In more than two years but less than five	32,185	13,378
	104,208	92,997

The bank overdraft is secured by way of debenture and cross guarantee from certain subsidiaries. 

The bank loans are secured by legal charges over the Group's investment and development properties together with guarantees from certain subsidiary undertakings with a limited guarantee from the parent company and in one case a floating charge from the parent company.

Borrowing facilities

The Group has the following undrawn committed bank borrowing facilities available to it at the year end:

	2008	2007
	£'000	£'000
Expiring in one year or less:	5,375	8,782
Expiring in more than one year but not more than two:	12,756	24,877
Expiring in more than two years but not more than five:	8,187	4,000
	26,318	37,659

Guarantees

The Group has given a guarantee of £15.0 million as part of the security arrangements for the bank facilities of Terrace Hill Residential PLC, one of its associated undertakings.

Market rate sensitivity analysis

Financial instruments affected by market risk include borrowings, deposits and derivative financial instruments. The analysis below shows the sensitivity of the income statement and net assets to a 0.5% change in interest rates on the Group's financial instruments.

The sensitivity analysis is based on the sensitivity of interest to movements in interest rates and is calculated on net floating rate exposure on debt and deposits.

	0.5% decrease	0.5% increase
	in interest rates	in interest rates
	£'000	£'000
Impact on interest payable - gain/(loss)	266	(266)
Impact on interest receivable - (loss)/gain	(144)	152
Total impact on pre tax (loss)/profit and equity	122	(114)

  

19 Called up share capital

	2008	2007
	£'000	£'000
Authorised:
500,000,000 (2007: 500,000,000) ordinary shares of 2 pence each	10,000	10,000
200,000 cumulative 8% redeemable preference shares of £1 each	200	200
44,859 convertible shares of 20 pence each	9	9
32,551,410 deferred shares of 2 pence each	651	651
	10,860	10,860
	£'000	£'000
Allotted, called up, and fully paid:
211,971,299 (2007: 211,971,299) ordinary shares of 2 pence each	4,240	4,240

  20 Reserves

			Capital		Unrealised
	Share	Own	redemption	Merger	gains and	Retained
	premium	shares	reserve	reserve	losses	earnings
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 November 2006	19,369	-	849	8,386	-	67,930
Profit for the year	-	-	-	-	-	14,527
Share-based payment	-	-	-	-	-	1,494
Interim ordinary dividends	-	-	-	-	-	(1,696)
Final ordinary dividends	-	-	-	-	-	(2,059)
Issue of ordinary share capital
- gross proceeds	24,505	-	-	-	-	-
- issue costs	(666)	-	-	-	-	-
At 31 October 2007	43,208	-	849	8,386	-	80,196
Loss for the year	-	-	-	-	-	(27,253)
Unrealised losses on available-for-sale investments	-	-	-	-	(498)	-
Own shares	-	(609)	-	-	-	-
Share-based payment	-	-	-	-	-	(997)
Merger reserve release	-	-	-	(1,298)	-	1,298
Interim ordinary dividends	-	-	-	-	-	(1,684)
Final ordinary dividends	-	-	-	-	-	(2,791)
At 31 October 2008	43,208	(609)	849	7,088	(498)	48,769

The following describes the nature and purpose of each reserve within owners' equity:

Share premium - represents the excess of value of shares issued over their nominal amount

Own shares - represents amount paid to purchase issued shares for the employee share-based payment plan

Capital redemption reserve - represents amount paid to purchase issued shares for cancellation at their nominal value

Merger reserve - the Merger reserve has arisen following acquisitions where the Group's equity has formed all or part of the consideration and represents the premium on the issued shares less costs

Unrealised gains and losses - represents unrealised loss on available-for-sale investments.

Retained earnings - represents cumulative net gains and losses recognised in the consolidated income statement

21 Contingent liabilities and capital commitments

On the acquisition by Terrace Hill Group PLC of a subsidiary company, amounts were repayable in the event of:

(a)	disposal of the property/ies prior to an agreed cut-off point; or
(b)	the discontinuation of rental income from the property/ies.

The directors are of the opinion that neither of these contingencies will crystallise, since the principal activity of the subsidiary concerned is the letting of the properties for rental income and it is not anticipated that the properties will be disposed of within the timeframe of (a) above. In the event of crystallisation of (a) and/or (b), the subsidiary concerned will be obligated to pay an amount calculated with reference to the properties disposed of/not let out. The maximum sum repayable is £381,000 (2007: £442,000).

Capital commitments relating to development sites are as follows:

	2008	2007
	£'000	£'000
Contracted but not provided for	-	13,772

22 Leases

Operating lease commitments where the Group is the lessee

The future aggregate minimum lease rentals payable under non-cancellable operating leases are as follows:

	Land and	Land and
	buildings	buildings
	2008	2007
	£'000	£'000
In one year or less	1,373	1,373
Between two and five years	5,490	5,492
In five years or more	6,982	8,358
	13,845	15,223

Operating lease commitments where the Group is the lessor

The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

	Land and	Land and
	buildings	buildings
	2008	2007
	£'000	£'000
In one year or less	1,997	1,463
Between two and five years	7,746	5,565
In five years or more	8,346	1,584
	18,089	8,612

Statutory information The financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 31 October 2008 but is derived from those financial statements. The financial information is extracted from the audited financial statements of the Group for the year ended 31 October 2008 which were approved by the board of directors on 24 February 2009.  The Company's auditors, BDO Stoy Hayward LLP, have reported on the accounts for the period ended 31 October 2008 under section 235(1) of the Companies Act 1985 ("Act").  Their report was not qualified within the meaning of section 235(2) of the Act and did not contain statements made under section 237(2) and section 237(3) of the Act. Copies of the full financial statements will be posted to shareholders as soon as possible and will also be available on the company's website, www.terracehill.co.uk.  The financial statements for the year ended 31 October 2008 will be delivered to the Registrar of Companies following the Annual General Meeting.

TERRACE HILL'S PORTFOLIO

Office development portfolio

Current schemes

Developments completed or under construction 

Development	Region	Size (sq ft)	Description	Timing	Terrace Hill share
Victoria, SW1 129 Wilton Road	London	60,407	Substantial mixed-use development comprising 60,407 sq ft of grade A office accommodation part let to Eon and Prêt à Manger. The residential elements of the scheme have all been sold.	Completed	50%
Bracknell Maxis I & II, Western Road	South East	194,210	Prominent 7.9 acre site with planning for three buildings.  Phase 1 comprises two buildings, totalling 194,210 sq ft.	On site Completes May 2009	20%
Farnborough Phrase 1 Aeropark Cirrus	South East	36,300	Development of 15 small office units ranging in size from 1,793 - 2,975 sq ft. Located adjacent to Farnborough Airfield and Aerospace Business Park. Five units sold.	Completed	20%
Maidenhead  Quantum 1 & 2 Vanwall Business Park	South East	120,000	Prime office park development of two buildings. Quantum 2 let to Biogen Idec.	Completed	26%
Teesside Phase 1, 3 Acre Site, Teesdale  Business Park	North East	32,955	Office scheme of five buildings. Phase 1, Buildings 1, 2 and 4, completed. Building 1 part-let to HBoS.	Completed	20%
Gateshead Baltimore House Baltic Business Quarter	North East	24,500	The second of three Phase 1 office buildings, Baltimore House, is adjacent to the pre-sold Open University HQ building, Chalk Hill, and is being marketed to let or for sale.	Completed	100%
Filton, Bristol Phase 1 & 2 Brabazon Office Park	South West	44,600	Small unit office scheme for owner occupation or to let.  Phase 1 completed. Phase 2 on site, with one building pre-sold.	Phase 2 Completes June 2009	20%

Consented schemes

Sites with detailed planning permission

Development	Region	Size (sq ft)	Description	Terrace Hill share
Bracknell  Maxis III, Western Road	South East	78,895	Prominent 7.9 acre site with planning for three buildings. Phase 1, Maxis I & II, on site. Phase 2, Maxis III, pending.	20%
Teesside Resolution, Teesdale Business Park	North East	60,000	Prime development site on Teesdale Business Park.	100%
Teesside Phase 2, 3 Acre Site, Teesdale Business Park	North East	22,828	Office scheme of five buildings. Phase 1 completed. Phase 2, Buildings 3 & 5 fully serviced plots.	100%
Gateshead Admiral House Baltic Business Quarter	North East	31,545	The third and final Phase 1 office building, Admiral House is adjacent to the new Open University building, Chalk Hill, and the Baltic Business Quarter completed Baltimore House.	100%
Victoria, SW1 Howick Place	London	135,368	Substantial mixed use development, with resolution to grant detailed planning consent.	20%
Welwyn Garden City Broadwater Road	South East	15,810	Site with detailed planning for small unit office scheme of seven units. Located close to railway station.	100%
Croydon Chroma, George Street	South East	260,133	Office development site in prime location opposite East Croydon railway station. Consent for HQ office increased to 258,056 sq ft, plus 2,077 sq ft of retail on ground floor.	100%
Bristol Bristol Bridge House 138/143 Redcliff Street	South West	53,143	Existing city centre office building, with detailed planning consent secured to provide 53,141 sq ft.	100%
Southampton Mayflower Plaza	South East	116,000	Mixed-use scheme, including offices, hotel and a forward sold residential site.	100%

Pending schemes

Medium-term developments held prior to detailed planning

Development	Region	Size (sq ft)	Description	Terrace Hill share
Teesside Phase 2-5, Hudson Quay Middlehaven	North East	99,500	Office park with option to drawdown sites under preferred developer agreement with English Partnership.	50%
Gateshead Balance of site at Baltic Business Quarter	North East	34 acres	Unserviced land with benefit of OPP. Whole 50 acre site has planning consent for 1.5 million sq ft of business use.	100%
Stevenage Knebworth Innovation Park	South East	40 acres	Ten year option from March 2002 for employment use (such as business or science park). Currently negotiating planning consents.	100%
Farnborough Aerospace Park	South East	273,000	Site comprising 11.5 acres with OPP for mixed use.	100%
Middlesbrough Central Gardens	North East	130,000	Preferred developer for town centre urban regeneration scheme to include offices and hotel.	100%

Retail development portfolio

Consented schemes

Sites with detailed planning permission

Development	Region	Size (sq ft)	Description	Terrace Hill share
Bishop Auckland Phase 1, Food Store	North East	93,000	Site with detailed planning consent for a foodstore, pre-let to Sainsbury's supermarket.	100%
Bishop Auckland Phase 2	North East	65,000	Leisure complex with multiplex cinema, ten-pin bowling and bingo, together with two drive-through restaurant facilities.	100%
Middlesbrough Gateway, Middlehaven	North East	128,000	16.8 acre cleared site with existing consent for a mixed-use scheme; non-food retail warehouse and leisure uses.	100%
Blyth, Northumberland Phase 2, Blyth Retail Park	North East	15,000	Adjacent to Phase 1. Detailed bulky goods planning consent for further 15,000 sq ft in three units.	100%
Helston  Retail Warehouse Site	South West	55,750	Site with detailed planning consent. Contracted for sale to Sainsbury's.	100%

Pending schemes

Medium-term developments held prior to detailed planning

Development	Region	Size (sq ft)	Description	Terrace Hill share
Galashiels  Phase 2, Gala Retail Park	Scotland	15,000	Small parcel of land held for strategic ownership, forming access to Phase 2 land. Site assembly and planning consent required.	100%
Ashington Town Centre Retail warehouse site	North East	30,000	Conditional contract to acquire town centre retail warehouse site.	100%

Industrial development portfolio

Current schemes

Developments completed or under construction

Development	Region	Size (sq ft)	Description	Timing	Terrace Hill share
Eastbourne Brampton Business Park	South East	103,000	Industrial and trade counter scheme. Industrial now fully sold or let. Trade park unit marketing ongoing	Completed	20%

Consented schemes

Sites with detailed planning permission

Development	Region	Size (sq ft)	Description	Terrace Hill share
Welwyn Garden City Broadwater Road	South East	42,151	Site with detailed planning for small unit industrial scheme of 13 units.	100%

  

Pending schemes

Medium-term developments held prior to detailed planning

Development	Region	Size	Description		Terrace Hill share
Christchurch Site at Grange Road	South West	9.1 acres	Proposed mixed-use scheme, to include industrial, care home and residential uses.		100%

Commercial investment portfolio

Development	Sector	Region	Size (sq ft)	Description	Terrace Hill share
Platts Eyot, TW12	Mixed use	London	12 acres	Listed island on the Thames, at Hampton, with residential potential.	100%
Sheffield Castle Gate House and 22-22 Haymarket	Mixed use	North	110,000	Vacant department store, let on long lease to BHS, together with adjacent, occupied corner retail unit. Redevelopment potential for mixed-use scheme.	30%
Bristol Canningford House 38 Victoria Street	Offices	South West	20,500	Multi-let office building with future redevelopment potential.	100%
Teesside Phase 1,  Hudson Quay Middlehaven	Offices	North East	30,700	First office building on a planned 160,000 sq ft office park.  Fully let to the Crown Prosecution Service and Hertel Limited.	50%
Kean House 11 Kingsway, WC1	Offices	London	25,200	Substantial refurbishment of an existing office building arranged over nine floors.	100%
Redditch REDD 42, Ravensbank Business Park	Industrial	Midlands	232,680	High bay distribution warehouse. Let to iForce Limited, the e-fulfilment provider for John Lewis PLC.	20%

Residential investment portfolio

Property Portfolio	No. of units	Description	Terrace Hill share
TH "Portfolio One"	243	Mixed portfolio of residential units, principally in Scotland, with small representation in England.	100%
TH Residential plc	1,714	Portfolio of residential properties located across the UK.	49%

Scottish housebuilding sites

Sites completed, under construction or with detailed planning permission

Development	Size (acres)	Description	Timing
Carnshalloch Avenue, Patna	2	Development of 16 units.	Completed
Wellington Square, Ayr	0.5	Refurbishment of a former hotel into 16 flats and three storey office building.	Completed
Cairn Road, Cumnock	1.6	Development of 18 units.	Completed
Bertram House, Carnwath	11.5	Former country house and grounds. Development comprises  Phase 1 conversion of country house into 11 flats and Phase 2 construction of 20 detached houses in the grounds.	Phase 1 completed
Torbothie Road, Shotts	22	Former brickwork site. Development of 173 units. Phase 1 comprises 20 units.	Phase 1 completes 2009

Sites held prior to pending detailed planning

Development	Size (acres)		Description		Timing
Kersewell Avenue, Carnwarth		3	Site with planning consent for nine units. Revised application being submitted to increase density.	Anticipated planning consent 2009.
Irvine Road, Kilmarnock	18		Former brickwork site. Planning application submitted for 182 units.		Anticipated planning consent 2009
Patna Caravan Park, Patna	30		Former caravan park. Potential for 250 units.		Anticipated planning consent 2009
Boghall Road, Carluke	12		Industrial brownfield land with potential for 67 units.		Anticipated planning consent 2009
"Dunselma", Fenwick	3		Former Church of Scotland home. Planning application submitted for 20 detached houses.		Anticipated planning consent 2009.
Lower Bathville, Armadale	65		Industrial brownfield land. Partly owned in JV. Potential for 500 units and a neighbourhood shopping centre.		Anticipated planning consent 2010.
Mayfield Brickworks, Carluke	10.9		Industrial brownfield land. Currently owned in JV. Potential for 90 units.		Anticipated planning consent 2010

 

ENDFR ILFILFDIEFIA