Revenue profit

Revenue profit is our measure of the underlying pre-tax profit of the Group, which we use internally to assess our performance. It includes the pre-tax results of our joint ventures but excludes capital and other one-off items such as the valuation surplus, gains on disposals, trading profits and profits on long-term development contracts.

Revenue profit for the six months fell by 10.5% from £193.1m to £172.8m, for the reasons set out in Table 2.

While Trillium’s operating profit is at a similar level to last year, at the revenue profit level there has been a decline of £34.5m, largely attributable to interest on the SMIF assets acquired in February 2007. SMIF owns and provides management services to PPP projects. Since it remains our intention to divest the PPP investments by transferring them to a fund and bringing in outside investors while maintaining a minority interest, we have treated these assets as a disposal group. The accounting implications of this are that we do not consolidate the individual assets and liabilities of the PPP investments. Instead, they are held in the balance sheet at fair value less costs to sell and we do not recognise our share of the underlying net income of the PPP projects. However, we do include the interest cost of the loan associated with acquiring SMIF in Group revenue profit as well as the cost of the SMIF management team. For the six months to 30 September 2007, the interest cost associated with the acquired SMIF business amounted to £27.1m.