Company Information for Highland Timber Plc

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Company Statement

Highland Timber is engaged in the ownership of forest estates throughout the UK and New Zealand. Their property portfolio is comprised of 15 forest properties, including six properties in the UK, and five freehold properties and four forestry rights in New Zealand. In the UK, 89% of this productive portfolio is comprised of spruce and approximately 80% of the productive area is of advanced age and currently in production.

Current Operations

During 2006 we carried out the UK forestry plan outlined last year and felled timber only where maturity or safeguarding our forests required it. As a consequence UK turnover at £273,000 was well below that of the previous year at £772,000. This resulted in an operating loss for the year of £151,000 after forestry maintenance and corporate expenses, but before the reversal of forest
impairment charges borne in previous years of £728,000. As reported in our interim statement we sold our smallest forest Ruegill in July 2006 and achieved a profit of £70,000 on a book value of £111,000. This, together with net interest received of £123,000, resulted in a pre-tax profit of £42,000 before and £770,000 after the reversal of impairment charges.

We ended the year with a cash balance of £2,723,000 and a cash outflow in the year of £551,000, of which £593,000 was due to New Zealand GST and other payments in respect of the sale of the New Zealand forests in 2005. The UK cash flow excluding these payments was a positive £42,000.

International financial reporting standards will be voluntarily adopted next year. Since we are a single product business with no subsidiaries, overseas operations or borrowings, most of its provisions will have little impact. One principal requirement which will however impact us after this year end is the requirement under IFRS, IAS 41 Agriculture, to revalue our forests at fair value every year. This is not an easy task. Very few commercial forests have been sold on the open market in recent years and each has its own
characteristics of size, location, age and quality, making direct comparisons difficult. In the past we have had the forests valued by professional valuers every three years with management judgments applied in the intervening years. In future they will be valued by outside valuers every year with management judgments only applying at the half year.

Fortunately, this year's professional valuation by John Clegg & Co has coincided with improved timber prices and an even larger increase in the value of the forests, possibly in anticipation of further increases in timber prices and also influenced by the search for eco-friendly investments.

The valuation exercise would give an overall value to the forests under IAS 41 of £6,550,000, giving a total increase in value of £1,345,000. Of this total, £728,000 is shown in this year's results as a write back of previous impairments under existing accounting rules with the balance of £617,000 to be taken into account under the new IFRS rules in the year ending 31 December 2007.

Outlook

We will continue to maintain our forests to a good standard and to fell only where maturity and good housekeeping require it. We will also continue to look for appropriate investments for our cash balance of £2,723,000.

Seasonal replanting is normally best carried out early in the year and we expect replanting in our Welsh forests to be completely up to date in the first half of 2007 and in our Scottish forests in the first half of 2008.

These replanting costs, together with normal maintenance and corporate costs, are not likely to be covered by planned levels of timber felling and interest income. The outcome for 2007 will therefore be largely dependent on the value placed on the forests at the end of the year.

Board of Directors and Key Management

Ron Williams	Chairman
Oliver Waring	CEO

Company Address 23 Cathedral Yard Exeter, Devon, United Kingdom EX1 1HB Telephone: 01392 412 122 Facsimile: 01392 253 282 Email: info[at]highlandtimber.co.uk

Capital 11,772,267 ordinary shares with a nominal value of 1p each

Annual General Meeting April

Most Recent Statement

18/05/07 - Sale of Forest Assets
18/04/07 - Result of AGM
11/04/07 - Statement re Offer for UK Forests
01/03/07 - Holding(s) in Company