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HURLINGHAM Plc

Half-Yearly Financial Report

Six months ended 31 March 2008

Chairman's Statement

Introduction

Further to the circular to Shareholders dated 14 March 2008, I am pleased to be reporting to you, following my appointment as Non-Executive Chairman on 14 March 2008. The attached results cover the six months ended 31 March 2008.

Principal activities

Throughout this period, the Board was heavily involved in formulating and implementing a restructuring of the Group. This was set out in detail in the circular dated 14 March 2008 and in particular involved the three previous Executive Directors resigning from the Board; Hurlingham selling its trading subsidiary Bettagrade Limited at net asset value; £600,000 of fresh equity capital being raised in cash at 75p per share; and the cancellation of the Company's 'A' Ordinary Shares.

These transactions were considered at two General Meetings of the Company held on 31 March 2008 and 7 April 2008 and the necessary resolutions were approved. Since that date, the Board has comprised of David Low and me.  David and I joined the Board in December 2005 and June 2004 respectively and have brought significant financial and corporate expertise to the Group.  

As a result of completion of these proposals, the Company now comprises primarily of a cash deposit of £1,830,000 which is held on interest bearing accounts with a reputable UK Bank. I comment further below on our strategy for the future.

Results

The financial results included in this Half-Yearly Financial Report cover those of Hurlingham Plc itself for the six months ended 31 March 2008. They do not include results for the Group's previous subsidiaries as the Company sold its last trading subsidiary before the period end and accordingly the Company is now the sole operating entity. The effect of this is that the results shown in the Income Statement reflect the profits and losses made by the Company by reference to the historical cost of its assets. Note 5 sets out a reconciliation of the equity attributable to Shareholders of the Company as disclosed in the audited financial statements of the Group for the year ended 30 September 2007, to the pro-forma equity attributable to Shareholders of the Company after completion of the reorganisation proposals set out in the circular to Shareholders dated 14 March 2008.

The results reflect the preparation of this Report using Adopted IFRS, further details of which are set out in note 1 to the financial statements. This has no affect on the underlying position of the Company, its strategy or cash flows, but it does affect the way such activities are presented, which is reflected in this Report.  

The results of the Company for the six months ended 31 March 2008 show a realised profit of £774,000 on the sale of the shares in its subsidiary referred to above and an operating loss, representing general administration and interest costs of £98,000, resulting in an overall net profit before tax of £676,000. This compares to a loss before tax of £79,000 in the comparative period to 31 March 2007.   The deferred tax asset of the Company at 30 September 2007 of £67,000 has been utilised against the profit on sale of Bettagrade during the period under review.  

  The pro-forma net assets of the Company at 31 March 2008, after completion of the proposals set out in the circular to shareholders dated 14 March 2008, are summarised in note 7 to the financial statements. This confirms net assets of £1,830,000, or 63p per share, which is in line with the expectations of value after completion of these proposals, as set out in the circular to shareholders.

Dividend

The Board does not recommend the payment of a dividend for the six months ended 31 March 2008.  

Strategy

Based on current interest rates, the Company's cash deposit is expected to produce interest of approximately £90,000 on an annual basis, having commenced to earn interest from April 2008. The administration costs previously incurred by the Group have been reduced and it is hoped that general external administration costs will be broadly covered by interest earned. This provides stability in the short and medium term. 

Since completion of the transactions referred to above, the Board has appraised a number of alternative and interesting opportunities that could be taken forward by the Company. It is envisaged that such acquisitions will be different from the business previously undertaken by the Company.  In order to implement such proposals, certain pre-acquisition costs will inevitably be incurred but these will only be committed when proposals are reasonably well advanced and they are in a form that the Board considers will be worthy of consideration by Shareholders.  Any such acquisition will involve a circular being sent to shareholders setting out the proposed terms of the acquisition, proposed financing arrangements in order to permit undertaking the transaction, financial details relating to the historic and future earnings and inviting Shareholders to consider such proposals prior to any acquisition by the Company.  

Conclusion

The current volatility in the financial markets and general economy is resulting in opportunities at more favourable acquisition prices being presented to the Company.  The Board is wholly committed to moving the Company forwards in order to enhance Shareholder returns and value. I look forward to reporting to you further on any firm proposals the Board considers appropriate to be considered by Shareholders of the Company.

Andrew Blurton

Chairman

27 June 2008

Registered Office:
90 Babbacombe Road

Bromley

Kent BR1 3LS

INCOME STATEMENT

for the six months ended 31 March 2008 

	Notes	Six months ended  31 March 2008 (Unaudited)	Six months ended  31 March 2007 (Unaudited)	Year  ended 30 September  2007 (Audited)
		£'000	£'000	£'000
Revenue
Discontinued operations		-	4	6
Gross Profit		-	4	6
Administrative expenses		_(79)	(79)	(161)
Loss from operating activities
Continuing operations		(79)	(79)	(161)
Discontinued operations		-	4	6
Profit on sale of property, plant and   equipment		-	-	37
Profit on sale of shares in subsidiary   undertaking	5	774	-	-
Restructuring costs on closure of travel division		-	-	95
Profit/(loss) before interest		695	(75)	(23)
Finance income		8	12	20
Finance expenses		(27)	(16)	(41)
Profit/(loss) before taxation		676	(79)	(44)
Taxation	2	(67)	-	67
Profit/(loss) for the period		609	(79)	23
Earnings/(loss) per share	4
Basic		28.9p	(3.8p)	1.1p
Diluted		28.9p	(3.8p)	1.1p

  BALANCE SHEET

at 31 March 2008 

	Notes	31 March 2008 (Unaudited)	31 March 2007 (Unaudited)	30 September 2007 (Audited)
		£'000	£'000	£'000
Non-current assets
Investment in subsidiary undertakings		-	1,234	1,234
Property, plant and equipment		-	62	-
Deferred tax asset		_   -	-	67
		-	1,296	1,301
Current assets
Trade and other receivables		1,341	4	13
Amounts owed by subsidiaries (since sold)		-	1,118	-
Cash and cash equivalents		_ 2	-	-
		1,343	1,122	13
Total assets		1,343	2,418	1,314
Current liabilities
Bank overdraft		-	(552)	(542)
Trade and other payables		(113)	(22)	(25)
Amounts owed to subsidiaries (since sold)		-	(90)	(97)
		(113)	(664)	(664)
Non-current liabilities
Provision for losses in subsidiaries (since sold)		-	(1,207)	-
Total liabilities		(113)	(1,871)	(664)
Net assets		1,230	547	650
Capital and reserves
Share capital		1,579	1,579	1,579
Share premium account	6	333	362	362
Retained earnings	6	(682)	(1,394)	(1,291)
Total equity attributable to shareholders of  the Company	7	1,230	547	650

  CASH FLOW STATEMENT

For the six months ended 31 March 2008

		Six months ended 31 March 2008 (Unaudited)	Six months ended 31 March 2007 (Unaudited)	Year ended 30 September 2007 (Audited)
		£'000	£'000	£'000
Profit/(loss) for the period		609	(79)	23
Adjustment for non-cash items
Taxation		67	-	(67)
Finance expenses		27	16	41
Finance income		(8)	(12)	(20)
Profit on sale of property, plant and   equipment		-	-	(37)
Profit on sale of shares in   subsidiary undertakings		(774)	-	(95)
Depreciation of property, plant and   equipment		-	1	1
Cash flows from operations before   changes in working capital		(79)	(74)	(154)
Decrease/(increase) in trade and   other receivables		6	5	2
(Decrease)/increase in trade and   other payables		3	4	7
Decrease/(increase) in amounts   owed to subsidiaries (since sold)		(97)	(975)	160
Cash generated from operations		(167)	(1,040)	15
Interest paid		(26)	(10)	(35)
Net cash from operating activities		(193)	(1,050)	(20)
Cash flows from investing activities
Interest received		8	12	20
Proceeds received from sale of   property, plant and equipment		-	-	99
Cash receipt from sale of subsidiary   company, net of disposal cash		729	-	(1,127)
Purchase of property, plant and   equipment		-	-	-
Net cash from investing activities		737	12	(1,008)
Net increase/(decrease) in cash   and cash equivalents		544	(1,038)	(1,028)
Opening cash and cash equivalents		(542)	486	486
Closing cash and cash equivalents		2	(552)	(542)

  NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)

1.    ACCOUNTING POLICIES

Basis of preparation

On 31 March 2008, Hurlingham Plc completed the sale of its only trading subsidiary, Bettagrade Limited, in the manner set out in the circular to Shareholders of the Company dated 14 March 2008.  As a result, Shareholders' interests are represented by the Company's own financial performance and the financial information contained in this Half-Yearly Financial Report covers the results of the Company only for the six months then ended, together with the balance sheet of the Company at that date.  Further analysis concerning the disposal of the Group's subsidiary and the fund raising that was completed on 7 April 2008 is set out in notes 5 and 6 of the financial statements.

Hurlingham Plc is a company incorporated in the United Kingdom. The financial statements for the year ended 30 September 2007 have been restated in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRS').  This unaudited Half-Yearly Financial Report for the six months ended 31 March 2008 has been prepared on the historical cost basis in accordance with Adopted IFRS.

The use of Adopted IFRS for the preparation of this Report has no affect on the underlying position of the Company, its strategy or cash flows. However Adopted IFRS does affect the way such activities are presented and this is reflected in this Report. Due to the composition of the Company's assets and liabilities, there has been no requirement to restate the numbers included in the financial results or net assets of the Company from those disclosed in previous periods.

In accordance with IFRS 1 - 'First Time Adoption of International Financial Reporting Standards', the Company has taken advantage of the following exemptions at 1 October 2006, the date of transition to IFRS; share options granted before 7 November 2002 or vested prior to 1 October 2006 have therefore not needed to be recognised in accordance with IFRS 2.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in this Half-Yearly Financial Report.  The accounting policies set out below include the policies the Company has adopted in prior periods and to the extent that they are only relevant to consolidated financial statements, are the policies that the Company will adopt if it acquires subsidiary companies in the future.

These financial statements are presented in UK Sterling, which is the Company's functional currency.  All financial information has been rounded to the nearest thousand pounds.

Basis of consolidation

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.  

Where necessary, accounting policies of subsidiaries are changed on acquisition to align them with the policies adopted by the Company. Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Property, plant and equipment

Properties are land and buildings held for use in the production or supply of goods or services, or for administrative purposes, and are stated in the balance sheet at cost less accumulated depreciation and any impairment in value. Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.  

Freehold land is not depreciated. Depreciation on property, plant and equipment is charged so as to write off the cost or valuation of property, plant and equipment, other than land and property under construction, using the straight line method, over their following estimated useful lives:-

Buildings   Fixtures and equipment

50 years   3 to 10 years

The gain or loss on disposal or derecognition of property, plant and equipment is determined by comparing the sale proceeds with the carrying amount of the asset at the date of disposal or retirement, and is recognised in the Income Statement.  

Financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Non-derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows.

Interest bearing bank loans and overdrafts are initially recorded at fair value. The net amount of any premium or discount over the nominal value, less issue costs, is amortised over the life of the instrument via the effective interest method over its life and charged or credited to interest payable in the Income Statement.

Ordinary share capital is classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.  

Revenue recognition

Revenue is measured at the fair value of consideration received or receivable.  

Interest income is accrued on a time basis by reference to the principle outstanding and at the effective interest rate applicable.

Dividends

Dividends that have been approved by shareholders at previous Annual General Meetings are included within liabilities. Dividends proposed at the balance sheet date that are subject to approval by shareholders at the annual general meeting are not included as a liability in the current period's financial statements.

Finance income and expense

Finance income comprises interest received or receivable on funds invested. Interest income is recognised in the Income Statement as it accrues, using the effective interest method. Dividend income is recognised in the Income Statement on the date the Company's entity's right to receive the income is established.

Finance expenses comprise interest paid or payable and finance charges on finance leases that are recognised in the Income Statement. Interest incurred on loans specific to properties in the course of development is capitalised during the development phase but ceases to be capitalised once the development is completed and ready for occupation. Where such interest is allowable in computing the taxation liabilities of the Company, this is used to reduce the tax charge in the Income Statement.  

Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised directly in equity.

Current tax is based on taxable profit for the period and any adjustment to tax payable in respect of previous periods. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income and expense that are taxable in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. 

Deferred tax is the tax that is expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

2.    TAXATION

	Six months ended 31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended 30 September 2007 £'000
Current tax:
UK Corporation Tax	-	-	-
Deferred tax asset:
Use of timing differences from prior periods	(67)	­-	-
Management expenses and tax losses available in future periods	-	-	67
Tax in Income Statement	(67)	-	67

At 31 March 2007, the Company had unrelieved interest payments and excess management expenses carried forward of £296,000 (30 September 2007: £343,000). These were utilised during the six months ended 31 March 2008 consequent upon disposal of the Company's subsidiary Bettagrade Limited.  

3.    DIVIDENDS

The Board does not recommend the payment of a dividend for the six months ended 31 March 2008.  

4.    EARNINGS/(LOSS) PER SHARE

The calculation of the earnings/(loss) per share is based on the profit attributable to Ordinary shareholders for the six months ended 31 March 2008 of £609,000 (31 March 2007: loss of £79,000; 30 September 2007: profit of £23,000) and on the weighted average number of Ordinary shares in issue during the current and previous periods of 2,105,706.

5.    PROFIT ON SALE OF SHARES IN SUBSIDIARY UNDERTAKING

The profit on sale of shares in subsidiary undertaking arose as follows:-

	Six months ended 31 March 2008 £'000	Six months ended 31 March 2007 £'000	Year ended 30 September 2007 £'000
Profit realised by the Company on disposal of subsidiary owning the Group's Perth hotel. Details of this disposal were set out in the circular to Shareholders dated 14 March 2008, and related information is also included in note 7 below.	774	-	-

The effect of this disposal on the net asset value of the Group as disclosed in the audited financial statements of the Group for the year ended 30 September 2007 is summarised below:- 

			Six months ended 31 March 2008 £'000
Equity shareholders' funds at 30 September 2007			2,295
Less accrual for pension payments and compensation arrangements to Retiring Directors approved at General Meeting of Shareholders held on 31 March 2008			(255)
Less 'A' Ordinary Shares swapped as part consideration for sale of Bettagrade Limited, as referred to in circular to shareholders dated 14 March 2008			(331)
Less estimated costs of Group reorganisation as referred to in circular to Shareholders dated 14 March 2008			(180)
Less Bettagrade deferred tax asset at 30 September 2007			(36)
Less loss recorded by Bettagrade Limited in management accounts to 31 March 2008			(98)
Less loss after interest and tax incurred by Hurlingham Plc (excluding profit on sale of Bettagrade Limited) in six months ended 31 March 2008 per page 3 of financial statements			(165)
Total equity attributable to Ordinary Shareholder per balance sheet on page 4 of financial statements			1,230

Add funds raised from share subscription on 7 April 2008		600
Pro-forma equity attributable to Ordinary Shareholders per note 7 to the financial statements		1,830

The amount of profit arising on the sale of Bettagrade Limited has been based on the draft completion accounts prepared in accordance with the Share Purchase Agreement for the sale of Bettagrade. These are well advanced and are expected to be finalised between the parties before the year end. To the extent that any adjustment is required, this will be reflected in the audited financial statements for the year ended 30 September 2008.

6.    MOVEMENT ON RESERVES

		Share premium account £'000	Retained earnings £'000
Balance at 1 October 2007		362	(1,291)
Costs arising on issue of shares		(29)	-
Profit for the period		-	609
Balance at 31 March 2008		333	(682)

7.    POST BALANCE SHEET EVENT

On 14 March 2008, the Company issued a circular to Shareholders with information to enable them to consider a proposed restructuring of the Company. This involved the Company selling its only trading subsidiary Bettagrade Limited at its net book value, which reflected the £4.5m value of the Perth hotel that was included in the financial statements of the Company for the year ended 30 September 2007.  The sale included bank indebtedness in Bettagrade Limited amounting to approximately £1,730,000 and other liabilities of Bettagrade Limited of approximately £144,000, leaving the Group as part of the net disposal proceeds.

The resolutions relating to the restructuring were passed at General Meetings of the Company held on 31 March 2008 and 7 April 2008 and the sale of Bettagrade Limited was completed as planned.  This involved the Company receiving net proceeds on completion of the sale of £1,339,000 and raising £600,000 gross on 7 April 2008 from the subscription by certain existing and new shareholders of 800,000 new Ordinary Shares for cash at 75p per share.  As part of these proposals, the Company's 'A' Ordinary Shares were swapped for part of the consideration receivable and the issued share capital of the Company now consists solely of Ordinary Shares.

Set out below is a pro forma balance sheet of the Company which has been prepared for illustrative purposes only, to show the effect of completion of the share issue on 7 April 2008, as if it had occurred on 31 March 2008. It is based on the unaudited consolidated balance sheet of Hurlingham at 31 March 2008 on page 4 of this Report. This statement is provided for illustrative purposes only and, because of its nature, it may not give a true picture of the financial position of Hurlingham at the date of this document.  

 

	At 31 March 2008	Adjustments	Pro forma at 31 March 2008
	£’000	£’000	£’000
Current assets
Trade and other receivables	1,341	(1,339)	2
Cash and cash equivalents	2	1,939	1,941
	1,343	600	1,943
Total liabilities	(113)	-	(113)
Net assets	1,230	600	1,830
Equity attributable to Ordinary Shareholders in pence per share (2,905,606 Ordinary Shares in issue)			63p

 

8.    HALF-YEARLY FINANCIAL REPORT AND FINANCIAL STATEMENTS

Copies of this Half-yearly financial report will be sent to Shareholders during June 2008 and, in accordance with AIM rule 20, an electronic copy is also available on the Company's website at www.hurlinghamplc.co.uk. The audited financial statements of Hurlingham Plc for the year ended 30 September 2007, together with further copies of this Half-yearly financial report and the Interim report for the six months ended 31 March 2007, are available from the office of the Secretary at the Company's registered office of 90 Babbacombe Road, Bromley, Kent BR1 3LS.

ENDIR EASKXADNPEFE