Latest Results

City Lofts Group Ltd announces its Interim Results for the six month period ended 30 June 2007.

Highlights

Financial

• Sales completions with a value of £41.8 million (2006 £1.8 million)
• New £43 million development facility completed
• Additional £13.5 million funding to support the Group’s development pipeline

Residential development

• New development site acquired at Chatham’s historic Dockyard in Kent with a potential GDV of £259 million

Corporate

• JER and Lehman Brothers take equity stake in the Group on its de-listing from AIM

Nigel Kempner, Chairman of City Lofts Group Ltd, commented:

“Within the constraints posed by more challenging market conditions that are faced by the sector as a whole, the Group is well placed to capitalise on its development pipeline given strong support of its principal shareholders and its long term relationships with its key bankers and joint venture partners.”

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Chairman's Statement

This is my first statement as the newly appointed Chairman of City Lofts. After a review of the future activities of the board, which are being brought to London, my predecessor as Chairman, John Holt, and Graham Berry, non-executive director, resigned as directors on 31 October 2007. The Board wishes to record its thanks for the contributions to the Board and Company that both have made.

Sales turnover for the six month period ending 30 June 2007 was £41.8 million resulting in profit before interest of £6.3 million. After net interest costs of £5.9 million and exceptional items of £1.9 million (relating to the costs of the Scheme of Arrangement offer which was not approved by shareholders, and the de-listing as a public company in February 2007), a loss before tax was recorded of £1.6 million. £1.6 million of the interest costs relate to the period subsequent to the relevant developments reaching building completion and handover by the contractors.

Currently the city centre markets in which City Lofts traditionally operates provide some challenges with investor expectations of larger discounts to market value and smaller buy-to-let investors being less active. However, the rental market for City Loft’s apartments remains strong with indications of increasing rental demand and rental growth.

The activities of the group continue to evolve from the core city centre development business. The Group intends to seek more mixed-use schemes in the greater London region and the south of England, with a less debt intensive funding model that will reduce the dependence on the off-plan investor sales market. Developing the asset management business of Vivacity in the private rental investment market compliments the development business and mitigates the risk of an increasingly more difficult residential development market.

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City Loft Developments

Dring the period, the construction of 203 apartments at Salford Quays was completed on time and on budget. Construction continues at the sites at St. Paul’s in Sheffield (316 apartments, of which 196 apartments have been sold off-plan), at Half Tide Dock in Liverpool (121 apartments, of which 43 apartments have been sold off plan) and at Milliners Wharf in Manchester (261 apartments, of which 142 apartments have been sold off-plan).

In September 2007 the Group exchanged contracts to acquire a 27 acre site at Chatham, part of the former historic Dockyards in Kent. City Lofts is now working closely with the landowners, Medway Council and English Heritage, before submitting a masterplan for the site. The masterplan is expected to include around 1,000 apartments and houses, around 300 affordable homes, a range of commercial facilities and amenities and approximately 12 acres of public open space. The masterplan will also incorporate the provision of combined heat and power (CHP) technology, provided by EcoCentroGen, a company in which City Lofts holds an investment. It is anticipated that the completed development value of the project, which will take a number of years to undertake, will be around £260 million.

At the present time, the Group’s development pipeline totals around 3,950 apartments, with a Gross Development Value (“GDV”) of around £900 million to be developed over the next 5 years.

Vivacity

As referred to previously, the Group retained a portfolio of 230 apartments geographically located in Liverpool, Salford Quays, Leeds, Newcastle, Nottingham and Cardiff. These are let and managed by Vivacity, the residential management arm of the Group. Good rental demand is being experienced for these apartments. External partners to fund this portfolio and expand its activities will be sought during 2008.

EcoCentroGen (“ECG”)

ECG is a specialist project manager of combined heat, power and data systems for both residential and commercial developments. ECG has agreed terms with Consensus Business Group for them to take an equity stake in ECG and invest funds to promote the next stage of development of the business. It is anticipated that, subject to certain milestones being met, the Group’s equity stake in ECG will settle at 30%.

Non-UK Projects

The development at 81 Victor Hugo in Paris moves forward with completion of the building refurbishment due in the autumn of 2008. Indications are of good demand for the apartments at better than anticipated prices. The development in Ibiza of 18 villas and 21 apartments is progressing well with an anticipated start on site in the spring of 2008. Discussions are being held with funding partners to run the non-UK projects as a separate business with the provision of new funds for its expansion.

The Company has faced challenges in the past few months due to changing financing markets and the effect of the so-called “credit crunch” in the banking market, but given its successful track record over many years the Group continues to receive strong support from its principal bankers and shareholders. Last year £143 million of development finance was secured. Recently, a new development facility of £43 million was also secured and further development facilities continue to be negotiated with a number of banks. Last month, the Company’s major shareholders advanced a further facility of £13.5 million to support the Group’s working capital requirement.

The future is challenging both in terms of the market within which we operate and the environment for funding our projects. We are keeping a tight control on costs and are making sure that we have as solid a platform as possible to take advantage of available opportunities over the coming period. Retaining certain of our completed development pipeline for the residential rental market will, we believe, advance Vivacity, our residential management subsidiary, as a specialist asset management business.

Within the constraints posed by more challenging market conditions that are faced by the sector as a whole, the Group is well placed to capitalise on its development pipeline given strong support of its principal shareholders and its long term relationships with its key bankers and joint venture partners.

Nigel Kempner
Chairman
20 December 2007

Consolidated Profit and Loss Account

Turnover and operating profit/(loss) all derive from continuing operations.

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Notes

To download these figures including the notes to the accounts,click here.