Profit before tax
The main drivers of our profit before tax performance are the change in value of our investment portfolio (including any profits or losses on disposal of properties), our net rental income, the performance of Trillium, and the amount of net interest we paid. The degree to which movements on these and other items led to the reduction against the comparable period in our profit before tax to £375.2m (six months to 30 September 2006: £1,178.2m) is explained in Table 2 below:
Table 2: Principal changes in profit before tax and revenue profit
| Profit before tax £m | Revenue profit £m | |
| Six months ended 30 September 2007 | 375.2 | 172.8 |
| Six months ended 30 September 2006 | 1,178.2 | 193.1 |
| Valuation surplus | (840.4) | – |
| Profit on disposal of non-current properties | 38.1 | – |
| Profit on disposal of PPP projects | 10.0 | – |
| Profit on sale of trading properties | (0.6) | – |
| Increase in capitalised interest (1) | 20.9 | 20.9 |
| Amortisation of bond de-recognition (2) | 6.3 | – |
| Long-term development contract profits (3) | (8.4) | – |
| Property Partnerships profit (4) | 7.2 | 7.2 |
| Net rental and service charge income (5) | (3.2) | (3.2) |
| Indirect costs | 0.2 | 0.2 |
| Interest on SMIF acquisition loan | (27.1) | (27.1) |
| Other interest (6) | (18.3) | (18.3) |
| Debt restructuring charges | 5.3 | – |
| Other | 7.0 | – |
Notes:
- Increased development activity, with several developments commencing since 1 October 2006 (One New Change, St David’s 2, Cardiff and The Elements, Livingston).
- The debt instruments issued as part of the refinancing in November 2004 do not meet the de-recognition requirements of IAS39 as they are not deemed to be substantially different from the debt they replaced. As a result, the book value of the new instruments is reduced to the book value of the debt it replaced and the difference is amortised over the life of the new instruments. The decrease in amortisation over the comparable period is a reflection of the maturity profile of debt replaced.
- Lower levels of activity on the development contract at Broadcasting House.
- Profits from Accor, Royal Mail and one-off income from DWP, offset by increased central costs.
- Decrease in net rental and service charge income is largely driven by disposals made in the year ended 31 March 2007.
- Other interest, includes interest on the REIT conversion charge paid in July 2007 (£316.2m), which amounted to £3.6m.
© 2007 Land Securities Group