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 deficit, gains on disposals, goodwill impairment, trading profits and profits on long-term development contracts.
Revenue profit for the six months increased by 13.3% from £172.8m to £195.8m, principally due to an increase in profit in Trillium.
In the six month period, there was an increase in revenue profit in London and Retail of £2.6m. Net rental income from our investment portfolio increased by £18.4m on the back of £4.4m of like-for-like rental income increases and £29.4m from our developments, including New Street Square, EC4, and Princesshay in Exeter. Offsetting the higher net rental income on our investment portfolio were higher interest costs as we ceased capitalising interest on completed developments as well as higher non-recoverable service charge costs arising from voids, in particular those related to properties being emptied in anticipation of redevelopment. At a Group level, interest costs were higher than the prior period as we had the full six months effect of the REIT conversion charge of £316.2m paid in July 2007.
At Trillium, operating profit was at a similar level to last year, while at the revenue profit level there has been an improvement of £20.4m, largely attributable to a reduction in interest on the PPP investments. These assets were refinanced and then sold in the second half of 2007/08 to Trillium Investment Partners, the fund in which we have a 10% interest. Since our PPP investments are generally accounted for as assets held for sale, we do not recognise any income from our ownership of them. Consequently, Trillium’s revenue profit benefits from the interest saving from the release of capital when these assets are sold. Further information on the performance of Trillium can be found on page 16.
