The results from veteran entrepreneur Paul Rackham’s Property Recycling Group (PROP), which buys brownfield land and cleans it up to sell to developers, showed reduced sales and profits - but these statistics don't tell the whole story.

Rackham, who has always warned that revenues from the company would be ‘lumpy’, revealed turnover for the year to December was down from £4.2m to £420,000 and profits from £2.4m to £240,000. This is because PROP didn’t complete a major sale in 2006, compared to the £3.5m received from a single deal in 2005. A second-half dividend of 0.7p per share, to add to the 0.5p paid at the interim, is designed to show management’s confidence.

PROP has six major sites on its books, comprising around 500 acres of land. ‘All six have planning approval,’ stressed Rackham, ‘but we won’t sell until we’ve maximised their value. We could have sold this year but we wouldn’t have got full value.’ Investors might expect activity in the coming months with Rackham proclaiming: ‘I should be very disappointed if we don’t have a major sale this year.’

Looking ahead, demand for land is high and around 180,000 acres of brownfield land means supply is not limited either. However, property acquisitions were tricky in 2006, reckoned Rackham, due to an excess of ‘hot money’ leading to over-valuations. ‘Last year we made only two purchases but this year we’ll be able to find more sites at the right prices and there should be a few distress sales, which will be good for us,’ he said.

Rackham has ‘plenty of powder’ to execute acquisitions, with £8m cash on deposit and a £30m bank facility. This capital appreciation play, recommended by GCI at 57p and down from 75p highs last year, requires patience but is worth holding.