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Market Cap
£139.03m
Change Today
Share Price
231.75p
Interim Results
Mucklow(A.& J.)Group PLC
27 February 2008
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: 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 Highlights
Six 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 holders
registered on 30 May 2008.
Notes
1 Excluding gains/(losses) from the disposal and revaluation of investment
property and the premium on redemption of debenture stock.
2 Excluding gains/(losses) from the disposal and revaluation of investment
property (net of tax), deferred tax, REIT conversion charge and the premium on
redemption of debenture stock (net of tax).
3 Excluding deferred tax and the mark to market on debt and including the
surplus 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 8370
Citigate Dewe Rogerson Ltd Mobile: 07785 703523
Mucklow (A&J) Group plc
Interim Management Statement
After several years of steady asset growth, property values peaked in the first
half of the financial year, as higher interest rates started to bite and changes
in investor sentiment finally turned the market. The unexpected credit crunch in
the late summer caused further uncertainty in the property sector, which accelerated
the decline in property values and our share price.
Our investment portfolio fell in value during the first six months by 6%, which
has had a negative impact on the Income Statement and reduced our net asset value
per share by 6%. However, I am pleased to report that your company remains in very
good health and continues to make good progress.
Results for the six months to 31 December 2007
Pre-tax loss for the first half year was £11.4m, compared with a profit of £16.4m
for the corresponding period last year. The loss is attributed to a £19.9m reduction
in 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 on
the disposal of investment properties was £8.5m (2006: £7.4m).
EPRA net asset value per share*, including the current value of our trading
properties, 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 1
July 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 and
non-PID may vary over time and is subject to the deduction of withholding tax at
the basic rate (20% for 2008/09). Certain classes of shareholder can claim exemption
from the withholding tax. Forms are available from our website (www.mucklow.com).
The non-PID element will be paid as a normal dividend.
Property Review
Our occupancy level increased during the first half year, from 94% to 95%, as
tenant demand remained buoyant. However, we are expecting our vacant space to
increase marginally, in the second half year, as new developments are completed
and 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 be
completed in the second half year. The anticipated rental income from these
buildings, when fully let, is around £0.9m per annum.
We have recently obtained detailed planning consent for a further 3 industrial
units, totalling 115,000 sq ft, on the remaining land at Dudley, with construction
due 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 bespoke
building on our site at Torrington Avenue, Coventry. A planning application has
recently been submitted for a change of use and may take a while to process. The
development 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 31
December 2007. The investment portfolio, including commercial land and
developments under construction, was valued at £281.6m, which showed a deficit
in value for the period of £18.4m (6%). The average equivalent yield on our
investment properties increased during the six months from 6.0% to 6.7%.
We acquired a modern industrial investment at the beginning of the financial
year for £3.7m. The property is located in Leamington Spa, adjacent to an
existing 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 of
land in Dudley for £0.9m. No other significant land or investment acquisitions
were made during the period.
We completed the sale of the remaining 2.3 acres of residential land at Mellings
Farm, Wigan for £2.6m in August 2007. No other land or property disposals were
made in the last 6 months. The value of the trading properties was also reviewed
by 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 uncertainties
The main risks to our business relate to property and financing.
Over the remaining six months of this financial year, the most significant risk
is to the value of our property assets. The negative sentiment in the investment
market, and potential slowdown in occupier demand, could continue to impact upon
the value of our portfolio going forward, which would directly affect our net
asset value. However, the quality and diversification of our portfolio between
industrial, office and retail properties, with different tenant profiles,
covenants, building sizes and lease lengths should help to mitigate any further
significant decreases in value.
All of our speculative developments are appraised to yield around 8% on total
costs, allowing for a minimum period of 12 months from practical completion of
the building works, to find tenants. This provides us with a sufficient profit
margin and level of comfort, when property yields are softening and borrowing
costs rising. It also provides us with high quality, long term investment
properties, which are difficult to buy in the market place.
Financing is not considered to be a major risk or uncertainty at the present
time, given the Group's low gearing and current committed facilities.
Outlook
It is difficult to forecast when and at what level industrial property yields
and values will stabilise. There is no doubt that secondary properties are being
hit the hardest, as they are the least desirable to investors, but there is very
little evidence of quality properties like ours being sold and yields are
starting to look attractive again, compared with the cost of borrowing.
The lack of liquidity in the property market may force some unit trusts and
private investors to sell over the next six months, potentially causing a glut
of investment properties on the market. However, the prospect of lower interest
rates and a number of lowly geared investors like ourselves waiting on the
sidelines, should be sufficient to stop any further significant slide in values.
We expect to see more suitable buying opportunities later this year and are well
positioned to use our low gearing to take advantage of any distressed selling.
Meanwhile, while there is still some good occupier demand for quality business
space, we shall continue to process our sites for development and actively manage
the investment portfolio.
Rupert J Mucklow
Chairman
26 February 2008
*EPRA (European Public Real Estate Association) net asset value, excluding
deferred tax and including the surplus on trading properties and the mark to
market of debenture stock. See note 6 for details.
Mucklow (A&J) Group plc
CONSOLIDATED INCOME STATEMENT
for 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 to
investment properties 7,768 7,057 14,285
Property outgoings (315) (347) (748)
--------------------------------------------------------------------------------
Net rental income relating to
investment properties 7,453 6,710 13,537
--------------------------------------------------------------------------------
Proceeds on sale of trading
properties 2,653 2,740 10,680
Carrying value of trading
properties sold (98) (95) (518)
Property outgoings relating to
trading properties (1) (3) (4)
--------------------------------------------------------------------------------
Net income from trading
properties 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 20,699
Profit on disposal of investment
properties 48 2,247 2,247
Net (losses)/gains on
revaluation
of investment properties and (19,926) 11,701 16,322
losses on development properties
--------------------------------------------------------------------------------
Operating (loss)/profit 3 (11,172) 22,117 39,268
Finance income 4 43 182 209
--------------------------------------------------------------------------------
Finance costs (290) (929) (1,159)
Exceptional loss on redemption
of - (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 REIT
conversion - - 31,409
--------------------------------------------------------------------------------
Total tax (charge)/credit 5 (785) (3,422) 18,600
--------------------------------------------------------------------------------
(Loss)/profit for the financial
period (12,204) 12,999 51,969
--------------------------------------------------------------------------------
Earnings per share
- Basic and diluted 6 (20.34)p 21.67p 86.62p
All operations are continuing.
Mucklow (A&J) Group plc
CONSOLIDATED BALANCE SHEET
at 31 December 2007
Unaudited Unaudited Audited
31 December 31 December 30 June
2007 2006 2007
Notes £'000 £'000 £'000
--------------------------------------------------------------------------------
Non-current assets
Investment and development properties 7 280,000 278,442 286,768
Property, plant and equipment 1,720 1,713 1,726
Trade and other receivables 358 368 370
--------------------------------------------------------------------------------
282,078 280,523 288,864
Current assets
Trading properties 830 1,246 921
Trade and other receivables 3,863 2,848 4,306
Cash and cash equivalents 923 707 1,252
--------------------------------------------------------------------------------
5,616 4,801 6,479
Total assets 287,694 285,324 295,343
--------------------------------------------------------------------------------
Current liabilities
Trade 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 liabilities
Borrowings (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
--------------------------------------------------------------------------------
Equity
Called up ordinary share capital 14,998 14,998 14,998
Revaluation reserve 2,441 593 927
Redemption reserve 11,162 11,162 11,162
Retained 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 STATEMENT
for 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 activities
Operating (loss)/profit (11,172) 22,117 39,268
Adjustments 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 19,219
Interest received 31 175 192
Interest paid (877) (829) (1,535)
Premium on redemption of debenture
stock - (4,949) (4,949)
Preference dividends paid (24) (24) (47)
Corporation tax paid (2,108) (1,891) (4,919)
--------------------------------------------------------------------------------
Net cash inflow/(outflow) from
operating activities 4,733 (1,401) 7,961
Cash flows from investing activities
Acquisition and property development (11,095) (21,188) (24,401)
Sales of investment properties 48 14,075 14,136
Sales of other tangible fixed assets 50 - -
Expenditure on property, plant and
equipment - (69) (11)
--------------------------------------------------------------------------------
Net cash outflow from investing
activities (10,997) (7,182) (10,276)
Cash flows from financing activities
Net increase in borrowings 10,758 3,301 2,301
Equity dividends paid (4,823) (4,487) (8,501)
--------------------------------------------------------------------------------
Net cash inflow/(outflow) from
financing activities 5,935 (1,186) (6,200)
Net decrease in cash and cash
equivalents (329) (9,769) (8,515)
Cash and cash equivalents at 1 July 1,252 9,767 9,767
--------------------------------------------------------------------------------
Cash and cash equivalents at end of
period 923 (2) 1,252
--------------------------------------------------------------------------------
Mucklow (A&J) Group plc
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for 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 development
and owner occupied 1,498 62 167
properties
Deferred tax asset/(liability) on
items taken to equity 16 (7) (34)
Reversal of deferred tax on REIT
conversion - - 19
--------------------------------------------------------------------------------
Net gain recognised directly in
equity 1,514 55 152
(Loss)/profit for the period (12,204) 12,999 51,969
--------------------------------------------------------------------------------
Total recognised income and expense
for the period (10,690) 13,054 52,121
NOTES TO THE INTERIM REPORT
1 Accounting policies
Basis of preparation of interim financial information
The interim report has been prepared using accounting policies consistent with
IFRSs and in accordance with the requirements of IAS 34 Interim Financial
Reporting and the recognition and measurement criterion of IFRSs, as adopted by
the European Union and the disclosure requirements of the Listing Rules.
The Group's interim financial statements for the period ended 31 December 2007
were authorised for issue by the Board of Directors on 26 February 2008. The
interim 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 statutory
accounts as defined in Section 240 of the Companies Act 1985.
The statutory accounts for the year ended 30 June 2007 were unqualified by the
Group'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 and
owner occupied properties and deferred tax thereon.
The Group financial statements consolidate the financial statements of the
Company and all its subsidiaries. Control is assumed where the parent company
has the power to govern the financial and operational policies of the subsidiary.
Unrealised gains and losses on intra-group transactions and intra-group balances
are eliminated from the consolidated results.
Implementation of IFRS 7
In the current financial year, the Group will adopt International Financial
Reporting Standard 7 'Financial instruments: Disclosures' (IFRS 7) for the first
time. As IFRS 7 is a disclosure standard, there is no impact of that change in
accounting policy on the half-yearly financial report. Full details of the
change will be disclosed in our annual report for the year ended 30 June 2008.
Revenue recognition
Rental income
Gross rental income represents rents receivable for the year. Rent increases
arising from rent reviews due during the year are taken into account only to the
extent that such reviews have been agreed with tenants at the accounting date.
Rental income from operating leases is recognised on a straight-line basis over
the term of the lease.
Lease incentives are amortised on a straight-line basis over the lease term.
Property operating expenses are expensed as incurred. Service charges and other
recoverables are credited against the related expense.
Revenue and profits on sale of investment and trading properties
Revenue and profits on sale of investment properties and trading properties are
taken into account on the completion of contracts. The amount of profit
recognised is the difference between sale proceeds and the carrying amount.
Dividends and interest income
Dividend income from investments in subsidiaries is recognised when the
shareholders' rights to receive payment have been established. Interest income
is recognised on an accruals basis when it falls due.
Cost of properties
An amount equivalent to the total development outgoings, including interest,
attributable to properties held for development is added to the cost of such
properties. A property is regarded as being in the course of development until
Practical Completion.
Interest associated with direct expenditure on investment properties which are
undergoing development or major refurbishment and development properties is
capitalised. Direct expenditure includes the purchase cost of a site or property
for development properties, but does not include the original book cost of
investment property under development or refurbishment. Interest is capitalised
gross from the start of development work until the date of practical completion,
but is suspended if there are prolonged periods when development activity is
interrupted. The rate used is the rate on specific associated borrowings or, for
that part of the development costs financed out of general funds, the average
rate.
Valuation of properties
Investment properties are valued at the balance sheet date at open market value.
Where investment properties are being redeveloped the property continues to be
treated as an investment property. Surpluses and deficits attributable to the
Group arising from revaluation are recognised in the income statement. Valuation
surpluses reflected in retained earnings are not distributable until realised on
sale.
Properties under development, which were not previously classified as investment
properties, are valued at open market value until practical completion, when
they are transferred to investment properties. Valuation surpluses and deficits
attributable to properties under development are taken to revaluation reserve
until completion, when they are transferred to retained earnings. Where the
valuation is below historic cost, the deficit is recognised in the income statement.
Owner occupied properties are valued at the balance sheet date at open market
value. 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 realisable
value.
Critical accounting judgements and key sources of estimation uncertainty
Management have made judgements over the valuation of properties that has a
significant effect on the amounts recognised in the financial statements.
Management have used the valuation performed by its independent valuers as the
fair value of its investment, development, owner-occupied and trading
properties. The valuation is based upon assumptions including future rental
income and an appropriate discount rate. The valuers also use market evidence of
transaction prices for similar properties.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or
services, or for administrative purposes, are stated in the balance sheet at
their revalued amounts, being the fair value at the date of revaluation, less
any subsequent accumulated depreciation and subsequent accumulated impairment
losses. Revaluations are performed with sufficient regularity such that the
carrying amount does not differ materially from that which would be determined
using fair values at the balance sheet date.
Any revaluation increase arising on the revaluation of such land and buildings
is credited to the properties revaluation reserve, except to the extent that it
reverses a revaluation decrease for the same asset previously recognised as an
expense, in which case the increase is credited to the income statement to the
extent of the decrease previously charged. A decrease in carrying amount arising
on the revaluation of such land and buildings is charged as an expense to the
extent that it exceeds the balance, if any, held in the properties revaluation
reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to income. On the subsequent sale
or retirement of a revalued property, the attributable revaluation surplus
remaining in the properties revaluation reserve is transferred directly to
retained earnings.
Plant and equipment is stated at cost less accumulated depreciation, less any
recognised impairment.
Depreciation
Depreciation is provided on buildings, motor vehicles and fixtures and fittings
on a straight-line basis over the estimated useful lives of between two and
twenty-five years. Investment properties are not depreciated.
Government grants
Capital grants received relating to the cost of building or refurbishing
investment properties are deducted from the cost of the relevant property.
Revenue grants are deducted from the related expenditure.
Share based payments
The cost of granting equity settled share options and other share based
remuneration is recognised in the income statement at their fair value at grant
date. They are expensed straight line over the vesting period, based on
estimates of the shares or options that eventually vest. Options are valued
using the Monte-Carlo simulation model.
Deferred taxation
Deferred taxation is provided in full on temporary differences that result in an
obligation to pay more tax, or a right to pay less tax, at a future date, at
rates expected to apply when they crystallise based on current tax rates and
law. Temporary differences arise from the inclusion of items in taxation
computations in periods different from when they are included in the financial
statements. Deferred tax is provided on temporary differences arising from the
revaluation of fixed assets. Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that they will be recovered.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income and expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantially enacted by the balance sheet date.
Tax is recognised in the income statement except for items that are reflected
directly in equity, where the tax is also recognised in equity.
Pension costs
The cost to the Group of contributions made to defined contribution plans is
expensed when the contributions fall due.
Acquisitions
On the acquisition of a business, including an interest in an associated
undertaking, fair values are attributed to the Group's share of separable net
assets. Where the fair value of the cost of acquisition exceeds the fair value
attributable to such assets, the difference is treated as purchased goodwill and
capitalised in the balance sheet in the year of acquisition.
Goodwill is reviewed annually for impairment. Under the Group's previous policy,
£134,728 of goodwill has been written off directly to reserves as a matter of
accounting policy. This would be credited to the income statement on disposal of
the business to which it related.
Group undertakings
Investments are included in the balance sheet at cost less any permanent
diminution in value.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance
sheet when the Group becomes a party to the contractual provisions of the instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are
subsequently measured at amortised cost using the effective interest rate
method. Appropriate allowances for estimated irrecoverable amounts are
recognised in the income statement when there is objective evidence that the
asset is impaired. The allowance recognised is measured as the difference
between the asset's carrying amount and the present value of future cash flows
discounted at the effective rate computed at initial recognition.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlements or redemption and direct issue costs, are accounted for on an
accrual basis in profit and loss using the effective interest rate method and
are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
Trade payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
2 Revenue
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 investment
and development properties 7,768 7,057 14,285
Proceeds on sale of trading properties 2,653 2,740 10,680
-------------------------------------------------------------------------------
10,421 9,797 24,965
Finance 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 the
second 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 39,268
Net 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)/surplus
for 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 1,068
Preference share dividend 24 24 47
Capitalised interest (635) - (508)
Revolving credit facility 632 - -
Other interest payable 27 78 552
-------------------------------------------------------------------------------
Total finance - ordinary 290 929 1,159
Premium 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 13
Other 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 charge
Current 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 income
statement 785 3,422 (18,600)
-------------------------------------------------------------------------------
Tax recognised in equity
Deferred tax (credit)/charge (16) 7 15
-------------------------------------------------------------------------------
The Company elected to become a Real Estate Investment Trust (REIT) with effect
from 1 July 2007. As a result of this, rental income and capital gains of the
REIT business are not subject to tax. The tax charge for the six months ending
31 December 2007 shown above represents the tax payable on the non-REIT
business, mainly the sale of trading properties and interest receivable.
6 Profit, earnings per share and net asset value per share
Profit
The adjusted profit before tax has been amended from the profit before tax 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
-------------------------------------------------------------------------------
(Loss)/profit before tax (11,419) 16,421 33,369
Premium on redemption of debenture stock - 4,949 4,949
Profit on disposal of investment
properties (48) (2,247) (2,247)
Net losses/(gains) on revaluation of
investment properties and losses on
development 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) has
been calculated on the basis of the weighted average of 59,991,990 ordinary
shares 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 per
share 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 51,969
Profit on disposal of investment properties (48) (2,247) (2,247)
Tax charged on profit on disposal of
investment properties - 2,239 2,340
Net losses/(gains) on revaluation of
investment properties and losses on
development properties 19,926 (11,701) (16,322)
REIT conversion charge - - 5,736
Deferred tax 3 585 (30,830)
-------------------------------------------------------------------------------
EPRA adjusted earnings 7,677 1,875 10,646
Premium on redemption of debenture stock - 4,949 4,949
Tax thereon at 30% - (1,485) (1,485)
-------------------------------------------------------------------------------
Adjusted earnings 7,677 5,339 14,110
-------------------------------------------------------------------------------
EPRA diluted earnings per share 12.79p 3.13p 17.75p
Adjusted (and adjusted diluted)
earnings per share 12.79p 8.90p 23.52p
The Group presents an adjusted earnings per share figure as the Directors
consider that this is a better indicator of the performance of the Group.
There are no dilutive shares.
Net asset value per share
The net asset value per share of 406p (2006: 374p) has been calculated on the
basis of the number of equity shares in issue of 59,991,990 and equity
shareholders' funds of £243.78m (2006: £224.24m). The EPRA (adjusted) net asset
value 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 243,779 224,238 259,292
Valuation of land held as trading
properties 6,667 16,507 9,995
Mark to market on debt (1,534) (1,637) (1,341)
Book value of land held as trading
properties (830) (1,246) (921)
Deferred tax 120 31,540 133
-------------------------------------------------------------------------------
248,202 269,402 267,158
-------------------------------------------------------------------------------
EPRA (adjusted) net asset value per
share 413p 449p 445p
-------------------------------------------------------------------------------
7 Properties
Unaudited
£'000
-------------------------------------------------------------------------------
DTZ valuation as at 31 December 2007 281,550
Owner-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 valued
by professionally qualified external valuers in accordance with the RICS
Appraisal and Valuation Standards published by the Royal Institution of
Chartered 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 259,292 215,672 215,672
Total recognised income and expense (10,690) 13,054 52,121
Dividends (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 related
parties, have been eliminated on consolidation and are not disclosed in this
note.
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 on
26 February 2008.
Rupert J Mucklow David Wooldridge
Chairman Finance Director
INDEPENDENT REVIEW REPORT TO A & J MUCKLOW GROUP PLC
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2007 which comprises the consolidated income statement, the
consolidated balance sheet, the consolidated cash flow statement, the
consolidated statement of recognised income and expense and related notes 1 to
9. We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our
work has been undertaken so that we might state to the company those matters we
are required to state to them in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdoms' Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 December 2007 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
Birmingham, UK
26 February 2008
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