| Tue 6 Nov 2007, 9:07 | | LBT - Liberty International Plc - Quarterly Report |
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LBT
LILII
LBT - Liberty International Plc - Quarterly Report For The Period
Ended 30 September 2007
LIBERTY INTERNATIONAL PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: LBT
Issuer Code: LILI
PRESS RELEASE
6 November 2007
LIBERTY INTERNATIONAL PLC
QUARTERLY REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2007
Attached is the quarterly report for the period ended 30 September 2007:
Page
Highlights 3
Summary of Investment and Development Properties 4- 6
Chairman`s statement 7- 9
Financial review 10-15
Unaudited Financial Information 16-22
Sir Robert Finch, Chairman of Liberty International, commented:
"Liberty International is pleased to report further strong results for the
third quarter of 2007. Adjusted earnings per share of 26.7p for the nine months
ended 30 September 2007 show a 10 per cent increase on the equivalent period in
2006. Adjusted net assets per share of 1369p (equivalent to 1478p adding back
notional property acquisition costs deducted from valuations) match the 1385p
reported at 30 June 2007 as reduced by the interim dividend of 16.5p paid in
the quarter. This outcome vindicates our focus over a long period on highest
quality real estate, in particular regional shopping centres. Evidence has
remained strong this year that super-prime or prime regional shopping centres,
well managed and properly marketed, attract considerable investor interest.
Liberty International has been built over a period of 27 years and now owns an
irreplaceable range of top quality assets with a very strong retail focus. The
team behind that ownership is one of the strongest in the country with a depth
of expertise, knowledge and track record which is unrivalled.
This allows us to have every confidence in the prospects for Liberty
International and in our ability to extend the group`s successful long-term
track record. We look forward to the investment opportunities and challenges
which a changing market will bring."
6 November 2007
This press release includes statements that are forward-looking in nature.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of Liberty International PLC to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Any information contained in this press release on
the price at which shares or other securities in Liberty International PLC have
been bought or sold in the past, or on the yield on such shares or other
securities, should not be relied upon as a guide to future performance.
A conference call with analysts and investors will take place at 9.00am on 6
November 2007.
Enquiries:
Liberty International PLC:
Sir Robert Finch Chairman +44 (0)20 7960 1273
David Fischel Chief Executive +44 (0)20 7960 1207
Aidan Smith Finance Director +44 (0)20 7960 1210
Public relations:
UK: Michael Sandler, Hudson Sandler +44 (0)20 7796 4133
SA: Matthew Gregorowski, +44 (0)20 7457 2020
College Hill Associates
Nicholas Williams, +27 (0)11 447 3030
College Hill Associates
BACKGROUND ON LIBERTY INTERNATIONAL
LIBERTY INTERNATIONAL PLC is one of the UK`s largest listed property companies
and a constituent of the FTSE-100 Index of the UK`s leading listed companies.
Liberty International converted into a UK Real Estate Investment Trust (REIT)
on 1 January 2007.
Liberty International owns 100 per cent of Capital Shopping Centres ("CSC"),
the premier UK regional shopping centre business, and of Capital & Counties, a
retail and commercial property investment and development company.
At 30 September 2007, Liberty International held GBP8.6 billion of total
properties of which UK regional shopping centres comprised 75 per cent and
retail property in aggregate 87 per cent. Shareholders` funds (diluted,
adjusted) amounted to GBP5.2 billion. Assets of the group under control or
joint control amounted to GBP11.3 billion at that date.
CAPITAL SHOPPING CENTRES has interests in 14 UK regional shopping centres
amounting to 12.6 million sq.ft. in aggregate including 8 of the UK`s top 21
regional shopping centres with a market value of GBP6.4 billion at 30 September
2007. CSC`s largest centres are Lakeside, Thurrock; MetroCentre, Gateshead;
Braehead, Renfrew, Glasgow; The Harlequin, Watford; and Manchester Arndale. CSC
has three major development projects underway or with planning permission in
Cardiff, Oxford and Newcastle.
CAPITAL & COUNTIES owned assets of GBP2.2 billion at 30 September 2007
amounting to 7.4 million sq.ft. in aggregate. Capital & Counties has around
GBP685 million invested in the Covent Garden area including the historic Covent
Garden Market, and around GBP350 million in Central London, primarily through
the Great Capital Partnership, a joint venture with Great Portland Estates plc.
Capital & Counties has acquired 50 per cent of EC&O Venues (Earls Court and
Olympia Group) for a sum that valued the assets at approximately GBP375
million. In addition, Capital & Counties has interests in the USA amounting to
around GBP380 million (2.7 million sq.ft.), predominantly comprising retail
assets in California, including the 856,000 sq.ft. Serramonte Shopping Centre,
Daly City, San Francisco.
LIBERTY INTERNATIONAL PLC
HIGHLIGHTS
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2007 2006 2006
Net rental income GBP261m GBP246m GBP341m
Profit before tax
(underlying)* GBP96m GBP91m GBP122m
Profit before tax GBP439m (note 2) GBP903m
Profit for the period
attributable to equity
shareholders (note 1) GBP407m - GBP1,564m
Gain on revaluation and sale
of investment properties GBP192m - GBP587m
Total properties GBP8,581m - GBP8,232m
Net debt GBP3,390m - GBP3,063m
Net assets (diluted, adjusted) GBP5,156m - GBP5,002m
Adjusted earnings per share 26.7p 24.3p 33.9p
Net assets per share
(diluted, adjusted)** 1369p - 1327p
Note 1 Year ended 31 December 2006 included GBP883 million (net) tax credit
from conversion to REIT status.
Note 2 Some comparative figures are not available as no property valuation was
undertaken at 30 September 2006.
* Before property trading, valuation and exceptional items
** Net assets per share (diluted, adjusted) would increase by 109p per share to
1478p at 30 September 2007(31 December 2006 - by 98p to 1425p) if adjusted for
notional acquisition costs amounting to GBP409 million (31 December 2006 -
GBP370
million).
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES
Market value Revaluation surplus
31 December 30 September
2006 2007
GBPm GBPm GBPm Increase
UK regional shopping
centres
Lakeside, Thurrock 1,298.6 1,343.5 39.9 3.1%
Braehead, Glasgow 746.1 753.7 7.6 1.0%
MetroCentre, Gateshead
(60%) 615.0 658.7 24.2 3.8%
The Harlequin, Watford 523.6 531.1 7.4 1.4%
Victoria Centre,
Nottingham 441.1 464.8 24.7 5.7%
Chapelfield, Norwich 354.0 351.2 4.6 1.4%
Cribbs Causeway,
Bristol 311.6 312.1 0.8 0.2%
The Potteries,
Stoke-on-Trent 307.5 294.1 (15.4) (5.0)%
The Chimes, Uxbridge 275.0 273.1 (2.1) (0.8)%
The Glades, Bromley 269.5 262.9 (8.9) (3.1)%
Like-for-like capital
and income 5,142.0 5,245.2 82.8 1.6%
Arndale, Manchester 428.3 448.4 18.3 4.2%
Eldon Square,
Newcastle upon Tyne 240.1 268.2 3.6 1.4%
St. David`s, Cardiff 104.3 104.8 0.5 0.5%
Xscape, Braehead 39.4 41.3 (0.5) (1.4)%
Like-for-like capital 5,954.1 6,107.9 104.7 1.7%
Acquisitions - 49.5 (2.3) (4.5)%
Redevelopments and
developments 193.2 228.9 (6.9) (2.9)%
Disposals
(MetroCentre (40%)) 410.0 - - -
Total UK regional
shopping centres 6,557.3 6,386.3 95.5 1.5%
UK non-shopping centre
properties
Like-for-like capital
and income 435.4 452.4 14.9 3.4%
Like-for-like other 470.1 487.5 13.6 2.9%
Like-for-like capital 905.5 939.9 28.5 3.1%
Acquisitions - 703.0 (13.7) (1.9)%
Redevelopments and
developments 113.3 152.6 0.1 0.1%
Disposals 270.7 - - -
Total UK non-shopping
centre
properties 1,289.5 1,795.5 14.9 0.8%
US properties*
Like-for-like capital
and income 283.2 298.9 18.8 6.8%
Like-for-like other 70.3 73.1 3.4 5.0%
Like-for-like capital 353.5 372.0 22.2 6.5%
Acquisitions - 6.6 (0.2) (3.3)%
Redevelopments and
developments - - - -
Disposals 5.7 - - -
Total US properties 359.2 378.6 22.0 6.3%
Total investment
properties 8,206.0 8,560.4 132.4 1.6%
Net rental income
30 September 30 September
2006 2007
GBPm GBPm Increase
UK regional shopping centres
Lakeside, Thurrock
Braehead, Glasgow
MetroCentre, Gateshead (60%)
The Harlequin, Watford
Victoria Centre, Nottingham
Chapelfield, Norwich
Cribbs Causeway, Bristol
The Potteries, Stoke-on-Trent
The Chimes, Uxbridge
The Glades, Bromley
Like-for-like capital and income 159.8 167.1 4.6%
Arndale, Manchester
Eldon Square, Newcastle upon Tyne
St. David`s, Cardiff
Xscape, Braehead
Like-for-like capital 179.8 193.2 7.4%
Acquisitions - 0.4
Redevelopments and developments 4.0 2.8
Disposals (MetroCentre (40%)) 13.5 4.6
Total UK regional shopping
centres 197.3 201.0 1.9%
UK non-shopping centre properties
Like-for-like capital and income 15.4 14.8 (4.1)%
Like-for-like other 3.3 15.2
Like-for-like capital 18.7 30.0
Acquisitions - 7.3
Redevelopments and developments 3.1 1.9
Disposals 11.1 6.2
Total UK non-shopping centre
properties 32.9 45.4 37.9%
US properties*
Like-for-like capital and income 14.0 11.6 (9.1)%
Like-for-like other 1.6 2.9
Like-for-like capital 15.6 14.5
Acquisitions - -
Redevelopments and developments 0.3 0.1
Disposals 0.3 (0.1)
Total US properties 16.2 14.5
Total investment properties 246.4 260.9 5.9%
*Like-for-like percentage increases are in local currency
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES (Continued)
Property analysis by use and type
Revaluation
Market value surplus
31 December 30 September
2006 2007 % of total
GBPm GBPm properties Increase
Regional shopping
centres and other
retail
UK regional
shopping centres 6,557.3 6,386.3 74.6% 1.5%
UK other retail 781.6 830.4 9.7% 0.6%
US regional
shopping centres 123.1 137.0 1.6% 11.3%
US other retail 134.2 131.1 1.5% 3.5%
Total regional
shopping centres
and other retail 7,596.2 7,484.8 87.4% 1.6%
Office
UK business space 507.9 595.9 7.0% 3.2%
US business space 67.9 76.6 0.9% 4.5%
Total office 575.8 672.5 7.9% 3.3%
Exhibition
UK Exhibition - 369.2 4.3% (2.2)%
Residential
US residential 34.0 33.9 0.4% 1.9%
Total investment
properties 8,206.0 8,560.4 100.0% 1.6%
Analysis of UK non-shopping centres and US properties by location and type
Market value Revaluation surplus
31 30 30
December September September
2006 2007 2007
GBPm GBPm GBPm Increase
UK non-shopping centre
properties
Capco Covent Garden 491.5 685.0 7.6 1.1%
Capco Earls Court - 369.2 (8.1) (2.2)%
Capco London (inc. Great
Capital Partnership) 323.2 357.4 13.4 3.9%
Capco Opportunities 276.1 246.7 4.3 1.8%
Capco Urban 198.7 137.2 (2.3) (1.7)%
Total UK non-shopping
centre properties 1,289.5 1,795.5 14.9 0.8%
US properties
US retail 257.3 268.1 18.2 7.4%
US business space 67.9 76.6 3.2 4.5%
US residential 34.0 33.9 0.6 1.9%
Total US properties 359.2 378.6 22.0 6.3%
1,648.7 2,174.1 36.9 1.7%
Net rental income
30 30
September September
2006 2007
GBPm GBPm
UK non-shopping centre properties
Capco Covent Garden 4.3 18.5
Capco Earls Court - 2.5
Capco London (inc. Great Capital Partnership) 12.1 10.0
Capco Opportunities 10.7 9.3
Capco Urban 5.8 5.1
Total UK non-shopping centre properties 32.9 45.4
US properties
US retail 12.6 10.8
US business space 3.6 2.9
US residential - 0.8
Total US properties 16.2 14.5
49.1 59.9
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES (Continued)
UK investment property valuation data
Market
value Nominal equivalent yield
30
September 31 30
2007 December September
GBPm 2006 2007
UK regional shopping centres
Lakeside, Thurrock 1,343.5 4.65% 4.55%
Braehead, Glasgow 753.7 4.81% 4.82%
MetroCentre, Gateshead 658.7 4.75% 4.62%
The Harlequin, Watford 531.1 4.75% 4.70%
Victoria Centre, Nottingham 464.8 4.95% 4.85%
Arndale, Manchester 448.4 4.96% 4.86%
Chapelfield, Norwich 351.2 5.00% 4.95%
Cribbs Causeway, Bristol 312.1 4.74% 4.76%
The Potteries, Stoke-on-Trent 294.1 5.00% 5.25%
The Chimes, Uxbridge 273.1 5.00% 5.20%
Eldon Square, Newcastle upon Tyne 268.2 5.20% 5.10%
The Glades, Bromley 262.9 4.95% 5.25%
St. David`s, Cardiff 104.8 5.00% 5.05%
Xscape, Braehead 41.3 6.04% 5.96%
Like-for-like capital 6,107.9 4.84% 4.82%
Other 278.4
Total UK regional shopping centres 6,386.3
UK non-shopping centre properties
Capco Covent Garden 508.7 4.56% 4.54%
Capco Opportunities 184.6 5.75% 5.80%
Capco Urban 154.4 4.89% 5.16%
Capco London 92.2 4.93% 5.11%
Like-for-like capital 939.9 4.89% 4.94%
Exhibition 369.2
Other 486.4
Total UK non-shopping centre properties 1,795.5
Passing Net rental
rent income ERV
30 30 30
September September September
2007 2007 2007
GBPm GBPm GBPm
UK regional shopping centres
Lakeside, Thurrock
Braehead, Glasgow
MetroCentre, Gateshead
The Harlequin, Watford
Victoria Centre, Nottingham
Arndale, Manchester
Chapelfield, Norwich
Cribbs Causeway, Bristol
The Potteries, Stoke-on-Trent
The Chimes, Uxbridge
Eldon Square, Newcastle upon Tyne
The Glades, Bromley
St. David`s, Cardiff
Xscape, Braehead
Like-for-like capital 242.3 193.2 303.2
Other 4.4 7.8 7.8
Total UK regional shopping centres 246.7 201.0 311.0
UK non-shopping centre properties
Capco Covent Garden
Capco Opportunities
Capco Urban
Capco London
Like-for-like capital 42.0 30.0 53.2
Exhibition - 2.5 -
Other 17.7 12.9 31.0
Total UK non-shopping centre
properties 59.7 45.4 84.2
CHAIRMAN`S STATEMENT
Introduction
Liberty International is pleased to report further strong results for the third
quarter of 2007. Adjusted earnings per share of 26.7p for the nine months ended
30 September 2007 show a 10 per cent increase on the equivalent period in 2006.
Adjusted net assets per share of 1369p (equivalent to 1478p adding back
notional property acquisition costs deducted from valuations) match the 1385p
reported at 30 June 2007 as reduced by the interim dividend of 16.5p paid in
the quarter. This outcome vindicates our focus over a long period on highest
quality real estate, in particular super-prime or prime regional shopping
centres.
We have continued to move rapidly to take advantage of our conversion at the
end of 2006 to tax transparent status as a UK real estate investment trust
(`REIT`). We have recorded GBP755 million of disposals this year at an
aggregate surplus over book values at 31 December 2006 of GBP59 million (30
June 2007 - GBP594 million of disposals at GBP21 million above book value).
These have closely matched additions of GBP920 million in the nine months,
comprising development expenditure and strategic acquisitions in Central
London including materially increasing our ownership in Covent Garden,
purchases by the Great Capital Partnership and, in the third quarter, the
GBP375 million Earls Court and Olympia transaction.
Investor enthusiasm for the quoted UK property sector has diminished in 2007 as
negative sentiment from the US sub-prime mortgage lending market spread across
the Atlantic. The third quarter saw torrid conditions in the UK inter-bank
sector including the highly-publicised troubles of Northern Rock. While credit
market conditions have put upward pressure on lending margins and unsettled UK
property investors, one favourable consequence has been a lowering of interest
rate expectations. The 10 year UK interest rate swap fell substantially in the
quarter from 5.92 per cent at 30 June 2007 to 5.45 per cent at 30 September
2007 and further since then to 5.33 per cent currently. While Liberty
International is relatively insensitive to interest rate movements in the short
term as our borrowings are mostly long-term fixed-rate, the impact of lower
interest rates on the wider UK economy and property market should be beneficial
over time.
Property valuations
After several years of buoyant market conditions, the third quarter of 2007 has
seen valuers taking a more cautious view of UK property.
Our overall gains for the year on the revaluation and sale of investment
properties reduced from GBP231 million at 30 June 2007 to GBP192 million at 30
September 2007.
The valuation yields for the majority of CSC`s UK regional shopping centres
were unchanged in the quarter ended 30 September 2007, but increases for three
of the smaller centres moved the overall average slightly upwards from 4.77 per
cent at 30 June 2007 to 4.82 per cent at 30 September 2007, effectively the
same as applied by the valuers at 31 December 2006. These results confirm the
defensive merits of our UK regional shopping centres, with resilient income
streams and low volatility in capital values.
Evidence has remained strong this year that super-prime or prime regional
shopping centres, well managed and properly marketed, attract considerable
investor interest; such centres are noticeably outperforming secondary centres
with the gap in valuation yields widening as investors once again begin to
factor in the much greater risks of lower quality assets. Furthermore, the
yields applied by valuers to prime regional shopping centres continue to look
undemanding compared with other prime UK property asset classes.
As an illustration of this point, indicative UK property market valuation
yields, as provided by one of our valuers, CB Richard Ellis, are set out below:
Indicative equivalent yield %
31 December 30 June 30 September
2006 2007 2007
Retail
Prime shops 4.00 4.00 4.25
Prime shopping centres 4.75 4.75 4.75
Secondary shopping centres 5.50 5.75 6.00
Prime retail parks 3.85 3.85 4.00
Offices
Prime West End of London 3.75 3.50 3.75
Prime City of London 4.25 4.25 4.50
We are confident that Liberty International`s concentration on super-prime or
prime large-scale and predominantly retail real estate will be advantageous in
any overall flight to quality by UK property investors.
Successful property investment requires a long-term perspective and, in the UK,
while the indications are that upward pressure on valuation yields has
continued since the end of the third quarter, we have many positive factors,
including consistent economic growth, investor demand for long-term, stable,
income producing and inflation-proofing assets to meet the retirement needs of
the UK population, relatively benign long-term interest rates and no material
over-supply issues in the real estate industry.
Furthermore, although shareholders buying our shares only pay stamp duty at 0.5
per cent on share transactions, the assumption contained within the valuations
is that our assets would be sold individually to purchasers who would pay the
full 4 per cent stamp duty land tax applicable to large property transactions
and other notional acquisition costs. Adjusting for this factor would increase
our net asset value by GBP409 million, representing 109p per share over and
above
our published net asset value per share figure of 1369p producing a more
realistic number for shareholders of 1478p.
Capital Shopping Centres
CSC`s business has continued to perform robustly. Like-for-like growth in net
rental income amounted to 4.6 per cent for the nine month period and the
occupancy rate continued at the high level of 98.5 per cent. In the year to
date, we have recorded 90 tenancy changes, 4.5 per cent of our 2,025 total
retail units, increasing the annual rents from these tenancies by GBP5.2
million.
Asset management initiatives are a constant feature of the business. In
particular, the Boardwalk development at Lakeside, Thurrock, of 11 restaurants
overlooking the lake and a refurbished cinema, has traded strongly since
opening in June 2007, enhancing activity throughout the centre.
At MetroCentre, Gateshead, we have, with our partners, GIC, acquired the
adjoining 220,000 sq.ft. Metro Retail Park for GBP82.5 million, increasing our
overall ownership to over 2 million sq.ft., and obtained planning permission
for the intended upgrade of the Yellow and Blue Quadrants, with a view to
continuing our improvement programme, most notably delivered by the successful
370,000 sq.ft. Red Mall extension which opened in Autumn 2004.
CSC`s development activities are progressing according to programme with two
major projects under way, the 967,500 sq.ft. extension of St David`s, Cardiff,
opening in Autumn 2009, and the 480,000 sq.ft. retail extension of Eldon
Square, Newcastle, where the largest phase opens in Spring 2010. In both cases,
we have entered into fixed price construction contracts to ensure control of
costs, we have secured anchor tenants and lettings are in line with
expectations. We anticipate ample retailer requirements for the attractive and
well-configured retail space. The compulsory purchase order inquiry date for
the 750,000 sq.ft. Westgate, Oxford, refurbishment and extension has now been
fixed for December 2007 and, subject to a satisfactory outcome, we will be in a
position to commit to the project in 2008 for an opening in 2011. We are
pleased to have satisfied the principal stakeholders that our proposals fit
well in this unique and architecturally- sensitive city-centre location.
CSC is a retail property business, not a retailer, and our net rental income
growth is more correlated to rent reviews, typically on a five year cycle in
the UK, and active asset management initiatives, than short term fluctuations
in retail sales. Nevertheless, it is encouraging that UK non- food retail
sales, as measured by ONS, have continued to grow steadily with year-on-year
growth of 4.1 per cent for the twelve months ended 30 September 2007.
Successful retailers are continuing to look to expand and trade from high
quality space such as CSC offers.
Capital & Counties
We have continued the dynamic re-alignment of the business of Capital &
Counties, with gross assets now increased to GBP2.2 billion compared with
GBP1.1 billion as recently as 30 June 2006, the last quarter date before last
year`s major acquisition of the Covent Garden Estate.
Capital & Counties` activities are strongly focussed on Central London with
over GBP1.4 billion invested at 30 September 2007. We continue to regard
Central London as a long-term beneficiary of globalisation, with its
world-class financial services industry and historical, cultural and
residential attractions. Three important investments now form the core of
our London holdings. First, the Covent Garden Estate, where we have further
consolidated our ownership during the quarter. Covent Garden is now the
group`s fourth largest investment at GBP685 million and we are making good
progress working closely with stakeholders on the strategic plan for the
area. Second, our 50/50 partnership with Great Portland Estates plc, The
Great Capital Partnership, which has grown to GBP660 million, of which
some two-thirds is focussed on the Regent Street, London W1, area. Third,
Earls Court and Olympia where we moved decisively during the quarter to
secure 50 per cent ownership. These globally recognised London landmark
venues offer over 1 million sq.ft. of exhibition and conference space
with considerable opportunities to intensify use. The GBP375 million
assets of Earls Court and Olympia are fully consolidated at 30 September
2007 reflecting the nature of the ownership arrangements.
Through Capco Urban, our mixed-use development business, the group continues
its activities in other important regional locations. Our US activities
focussed on California have performed well in 2007 with a 6.5 per cent
revaluation gain driven by our flagship shopping centre, Serramonte, in the
San Francisco bay area.
Financial position
Liberty International`s financial position remains exceptionally strong with a
debt to assets ratio of 39 per cent at 30 September 2007 and a long-term debt
structure, predominantly on an asset- specific and fixed rate basis and with no
significant repayments before 2011. We have around GBP500 million of unutilised
committed borrowing facilities to finance all our development commitments.
Prospects
Liberty International has been built over a period of 27 years and now owns an
irreplaceable range of prime regional shopping centres and other real estate
holdings with a very strong retail focus. The team behind that ownership is one
of the strongest in the country with a depth of expertise, knowledge and track
record which is unrivalled. This allows us to have every confidence in the
prospects for Liberty International and in our ability to extend the group`s
successful long-term track record. We look forward to the investment
opportunities and challenges which a changing market will bring.
Sir Robert Finch
Chairman
6 November 2007
FINANCIAL REVIEW
Liberty International recorded the following significant transactions in the
third quarter of 2007:
- Completion of the acquisition of a 50 per cent interest in the Earls Court
and Olympia Group for a net consideration of GBP54 million.
- Acquisition of the Metro Retail Park through the MetroCentre Partnership for
GBP82.5 million (group`s share GBP49.5 million).
- Acquisition of further properties by The Great Capital Partnership for GBP140
million (group`s share GBP70 million).
- Acquisition of further properties in Covent Garden for GBP32 million.
- Property sales realising GBP161 million at a surplus over 31 December 2006
values of GBP38 million bringing total sales for the year to date to GBP755
million
at a surplus of GBP59 million.
Further details are shown in the paragraph "Transactions during the quarter"
below.
Results for the period ended 30 September 2007
The results for the 9 months to 30 September 2007 include those of the Earls
Court and Olympia Group from the date of completion of the acquisition, 24 July
2007, on the basis of full consolidation as a subsidiary. The share of profits
and net assets attributable to the other 50 per cent shareholders are shown
under minority interests. This has affected the results in several ways.
Firstly, they are not directly comparable with the equivalent period for last
year, both because of the inclusion of a new activity and because of the
presentation on a consolidated basis. Secondly, the exhibition business is more
seasonal than the group`s longer-term rental businesses, with the summer months
generally producing much less income than in other quarters. The table below
shows the revenue results for the period, adjusted for the effect of the Earls
Court acquisition. This shows that the results for the rest of the business for
the third quarter were broadly in line with those of the second quarter. In
addition, and not adjusted in the numbers below, the receipt of a surrender
premium of GBP3 million is reflected in the first quarter`s results whereas the
subsequent loss of income is borne in the two succeeding quarters. The
quarterly trend should therefore be considered in light of the above.
Quarter Quarter Quarter
ended ended ended
30 30 31
September June March
2007 2007 2007
GBPm GBPm GBPm
Profit before tax
(underlying) attributable to
ordinary shareholders 28.8 31.5 35.9
Add back effect of Earls Court
acquisition 2.5 - -
Pro forma profit for the period
(underlying) attributable
to ordinary shareholders 31.3 31.5 35.9
Pro forma adjusted earnings
per share 8.6p 9.0p 9.8p
Nine months Nine months
ended ended
30 30
September September
2007 2006
GBPm GBPm
Profit before tax
(underlying) attributable to
ordinary shareholders 96.2 90.9
Add back effect of Earls Court
acquisition 2.5 -
Pro forma profit for the period
(underlying) attributable
to ordinary shareholders 98.7 90.9
Pro forma adjusted earnings
per share 27.4p 24.3p
The Income Statement for the 9 months to 30 September 2007 shows continuing
underlying growth, after adjusting for the Earls Court acquisition, with a 9
per cent increase in underlying profit before tax from GBP91 million to GBP99
million, and a 13 per cent increase in adjusted earnings per share.
Like-for-like net rental income in the group`s UK regional shopping centres
increased by 4.6 per cent. Like-for-like non-shopping centre net rental income
fell by 4.1 per cent (GBP0.6 million) in the UK, an improvement over the 6.5
per cent at June, and by 9.1 per cent in the US. The falls reflect planned
refurbishment activity, a lease expiry in the UK where the property has been
subsequently re-let and a small number of tenant failures. Good progress has
been made in securing new tenants or with sales where appropriate.
Valuations
Gains on revaluation and sale of investment properties for the nine months
ended 30 September 2007 amounted to GBP192 million, including GBP59 million
from disposals, (six months ended 30 June 2007, GBP231 million and
GBP21 million respectively).
Like-for-like percentage gains on revaluation of investment properties since
the preceding year end are summarised as follows:
Nine months Six months Year
ended ended ended
30 September 30 June 31 December
2007 2007 2006
- UK regional shopping centres +1.7% +2.6% +7.9%
- UK non-shopping centre properties +3.1% +3.2% +13.9%
- USA +6.5% +3.7% +5.8%
The related weighted average nominal equivalent yields were as follows:
As at As at As at
30 September 2007 30 June 2007 31 December 2006
UK regional
shopping centres 4.82% 4.77% 4.84%
UK non-shopping
centre properties 4.94% 4.95% 4.89%
The percentage valuation gains on UK regional shopping centres reduced
marginally in the quarter ended 30 September 2007 with a small increase in the
average equivalent yield since 30 June 2007. This increase in yield was
confined to a few centres with the majority of yields, principally the yields
on the larger centres, unchanged from 30 June 2007. Of the revaluation gain on
UK regional shopping centres over the nine month period, two thirds is
estimated to have arisen as a result of underlying rental growth.
The small reduction in percentage valuation gains on UK non-shopping centre
properties is also largely unrelated to yield shift. Sales during the third
quarter generated proceeds of GBP161 million and a surplus over December 2006
values of GBP38 million bringing total sales for the year to date to GBP755
million
with a surplus of GBP59 million. Some substantial valuation gains recognised
earlier in the year have been validated and realised through sales in the third
quarter. Valuations have absorbed costs related to purchases made during the
period.
Revaluation surpluses in the USA increased from 3.7 per cent at 30 June 2007 to
6.5 per cent at 30 September 2007 primarily driven by the retail properties
and, in particular, Serramonte which showed an increase of 11.3 per cent for
the nine months to 30 September 2007.
Quarter by quarter movements in the gains on revaluation and sale of investment
properties are as follows:
Nine
Quarter ended months ended
30 September 30 June 31 March 30 September
2007 2007 2007 2007
GBPm GBPm GBPm GBPm
Gain on
revaluation (77.3) 69.5 140.2 132.4
Gain on sale 38.2 5.0 16.1 59.3
Gains on
revaluation
and sale
of investment
properties (39.1) 74.5 156.3 191.7
Net assets per share
Adjusted net assets per share at 30 September 2007 were effectively unchanged
from 30 June 2007 at 1369p (the reported figure of 1385p at 30 June 2007 less
the interim dividend of 16.5p paid in the period). This represents a total
return for the nine month period of 5.7 per cent, from 1327p at 31 December
(after taking into account the final dividend for 2006 of 17.25p and the
interim dividend for 2007 of 16.5p paid in 2007).
Financial position
The group raised GBP161 million from disposals during the quarter and purchased
GBP178 million of investment properties in addition to the GBP375 million of
property acquired through the Earls Court transaction. For the year-to-date,
total additions, including development expenditure and the Earls Court
properties, amounted to GBP920 million and proceeds from sales amounted to
GBP755
million. Net debt increased from GBP3,063 million at 31 December 2006 to
GBP3,390
million at 30 September 2007.
Liberty International`s financial ratios, including a debt to assets ratio of
39 per cent at 30 September 2007 (31 December 2006 - 36 per cent), remain
robust.
At 30 September 2007 the weighted average maturity of the group`s debt was over
6.7 years and the weighted average cost of debt was 5.8% (7 years and 5.7 per
cent excluding Earls Court debt). The group had undrawn committed borrowing
facilities of GBP285 million with a further GBP235 million added since 30
September
2007.
Fair value of debt and financial instruments
Long-term interest rates declined in the third quarter having risen strongly in
the first half of the year. The ten year UK interest rate swap, a reasonable
proxy for our fixed rate hedging strategy, rose from 5.11 per cent at 31
December 2006 to 5.92 per cent at 30 June 2007, falling back to 5.45 per cent
at 30 September 2007. We recorded a surplus of GBP154 million in the nine
months ended 30 September 2007 on revaluation of the derivative financial
instruments used to fix our long-term debt. Compared to the surplus at 30
June 2007 of GBP251 million, this represents a reduction in the quarter of
GBP97 million.
The potential adjustment to net assets per share (diluted, adjusted) arising
from the fair value of the group`s debt and financial instruments in recent
years is shown below:
Fair value
Fair value adjustment
10 year adjustment (before tax)
GBPswap (before tax) pence per
% GBPm share
31 December 2005 4.51% (417.4) (119)p
31 December 2006 5.11% (240.2) (64)p
31 March 2007 5.35% (121.6) (32)p
30 June 2007 5.92% 47.1 13 p
30 September 2007 5.45% (41.0) (11)p
The group`s net borrowings at 30 September 2007 amounted to GBP3,390 million
with
GBP549 million of fixed rate debt and the remainder largely fixed by way of
derivative financial instruments. Additional hedging was put in place during
the quarter and the structure of the group`s hedging instruments means that on
the fixed element of our borrowings the group has a declining interest rate
profile (see table below):
Interest Rate Swap Summary
Notional amount Average rate
Effective after GBPm %
1 Year 2,935 5.26
5 Years 2,893 5.11
10 Years 2,425 4.69
15 Years 2,100 4.58
20 Years 2,100 4.58
25 Years 1,700 4.42
Share buy-backs
Liberty International has shareholder approval to buy-back on-market up to 10
per cent of its shares. Although the current share price is at a discount to
published net asset value, we would expect only to use the buy-back power very
selectively given the scale of our development programme and the long-term time
horizon required to bring major shopping centre projects to fruition. During
the third quarter, Liberty International bought 700,000 shares at an average
price of 1017 pence per share.
Transactions during the quarter ended 30 September 2007
- Acquisition of a 50 per cent interest in EC&O Venues (Earls Court and Olympia
Group) Capital & Counties acquired a 50 per cent interest in EC&O for a sum
that valued the assets at approximately GBP375 million. The consideration for
the
50 per cent interest was GBP54 million taking into account all assets, debt and
other liabilities of the business. The group owns and manages the Earls Court
and Olympia Exhibition Centres in West London and the Brewery, Chiswell Street,
London EC2, with the aim of establishing the venues as landmark leisure
destinations, centred around the core businesses of exhibitions, conferences
and special events whilst exploring opportunities to intensify use. The
interest in EC&O has been accounted for as a subsidiary with the results,
assets and liabilities fully consolidated in the quarterly results.
Development Programme
Details of the principal development projects underway or with planning
permission are set out in the table below:
Cost to
Development Status complete
as at
30 September
2007
Eldon Square, Newcastle
(60% interest) GBP65m
Phase one - restaurants
and 22,000 sq. ft. retail. Completed in
October 2006.
Phase two - bus station
and 48,000 sq. ft. retail. Bus station completed
February 2007.
Retail on site; expected
opening Spring
2008.
Phase three - 410,000 sq. ft.
retail extension On site July 2007.
including 175,000 sq. ft. Debenhams Expected opening
department store. Spring 2010.
St David`s, Cardiff GBP175m
967,500 sq. ft. extension. On site. Expected
opening autumn 2009.
Joint venture with Land
Securities Group PLC.
Westgate Centre, Oxford GBP155m
750,000 sq. ft. ref urbishment Detailed planning
and extension. permission granted
Joint venture with LaSalle Investment March 2007. CPO
Management. inquiry in December 2007.
Expected start on site 2008.
Expected opening 2011.
Other developments - CSC GBP70m
Other developments - Capital and Counties GBP50m
Total developments underway or with planning
consent GBP515m
UNDERLYING PROFIT STATEMENT (unaudited)
Quarter Quarter Quarter
Ended Ended ended
30 September 30 June 31 March
2007 2007 2007
GBPm GBPm GBPm
UK shopping centres 65.1 64.1 71.8
Other commercial properties 22.2 18.2 19.5
Net rental income 87.3 82.3 91.3
Other income/(expense) 0.2 (0.1) 0.4
87.5 82.2 91.7
Administration expenses (12.4) (9.6) (7.4)
Operating profit (underlying)* 75.1 72.6 84.3
Interest payable (49.5) (43.2) (49.7)
Interest receivable 1.3 2.1 1.3
Net finance costs (underlying)* (48.2) (41.1) (48.4)
Profit before tax (underlying)* 26.9 31.5 35.9
Minority interests 1.9 - -
Profit before tax (underlying)*
attributable to
equity shareholders 28.8 31.5 35.9
Tax on profit (underlying) (0.5) 0.6 (0.5)
Minority interests` share of tax 0.2 - -
Profit for the period (underlying)*
attributable
to equity shareholders 28.5 32.1 35.4
Adjusted earnings per share (note 8) 7.9p 9.0p 9.8p
Nine months Nine months
Ended Ended
30 September 30 September
2007 2006
GBPm GBPm
UK shopping centres 201.0 197.3
Other commercial properties 59.9 49.1
Net rental income 260.9 246.4
Other income/(expense) 0.5 2.1
261.4 248.5
Administration expenses (29.4) (22.7)
Operating profit (underlying)* 232.0 225.8
Interest payable (142.4) (138.1)
Interest receivable 4.7 3.2
Net finance costs (underlying)* (137.7) (134.9)
Profit before tax (underlying)* 94.3 90.9
Minority interests 1.9 -
Profit before tax (underlying)* attributable
to
equity shareholders 96.2 90.9
Tax on profit (underlying) (0.4) (9.7)
Minority interests` share of tax 0.2 -
Profit for the period (underlying)*
attributable
to equity shareholders 96.0 81.2
Adjusted earnings per share (note 8) 26.7p 24.3p
* before property trading, valuation and exceptional items
UNAUDITED FINANCIAL INFORMATION
CONSOLIDATED INCOME STATEMENT (unaudited)
Nine months Year
ended ended
30 September 31 December
2007 2006
Notes GBPm GBPm
Net rental income 260.9 340.6
Other income 1.2 34.8
Gain on revaluation and sale of
investment and development properties 2 191.7 586.5
453.8 961.9
Administration expenses (29.4) (34.2)
Operating profit 424.4 927.7
Interest payable 3 (142.4) (190.0)
Interest receivable 4.7 3.9
Exceptional finance costs (1.9) (2.0)
Change in fair value of derivative
financial instruments 154.1 163.5
Net finance costs 14.5 (24.6)
Profit before tax 438.9 903.1
Tax (37.9) 661.0
Minority interests 5.7 -
Profit for the period attributable
to equity shareholders 406.7 1,564.1
Adjusted earnings per share 26.7p 33.9p
CONSOLIDATED BALANCE SHEET (unaudited)
As at As at
30 September 31 December
2007 2006
Notes GBPm GBPm
Non-current assets
Goodwill 5.7 -
Investment and development property 4 8,535.1 8,187.1
Plant and equipment 2.5 0.9
Investments 34.9 -
Trade and other receivables 6 134.1 81.4
8,712.3 8,269.4
Current assets
Trading properties 5 45.8 45.2
Trade and other receivables 6 208.0 113.8
Cash and cash equivalents 150.7 321.8
404.5 480.8
Total assets 9,116.8 8,750.2
Current liabilities
Trade and other payables (263.6) (319.5)
Tax liabilities (3.1) (2.1)
Borrowings, including finance leases 7 (133.6) (43.5)
Derivative financial instruments (3.8) (4.6)
(404.1) (369.7)
Non-current liabilities
Borrowings, including finance leases 7 (3,406.7) (3,341.3)
Derivative financial instruments (21.1) (128.9)
Deferred tax provision (83.1) (40.8)
Other provisions (0.7) (4.9)
Other payables (134.1) (132.2)
(3,645.7) (3,648.1)
Total liabilities (4,049.8) (4,017.8)
Net assets 5,067.0 4,732.4
Net assets attributable to minority
interests (48.7) -
Net assets attributable to equity
shareholders 5,018.3 4,732.4
Equity
Called up share capital and reserves 9 5,018.3 4,732.4
Diluted, adjusted net assets per
share 8 1369p 1327p
Basic net assets per share 8 1388p 1308p
NOTES
1 Basis of preparation
The Quarterly Report is unaudited and does not constitute statutory accounts
within the meaning of s240 of the Companies Act 1985. The auditor`s opinion on
the statutory accounts for the year ended 2006, which were prepared in
accordance with International Financial Reporting Standards as adopted by the
European Union ("IFRS"), IFRIC interpretations and with those parts of the
Companies Act, 1985 applicable to companies reporting under IFRS, was
unqualified and did not contain a statement made under s237(2) or s237(3) of
the Companies Act 1985.
The financial information has been prepared using the accounting policies set
out on pages 42 and 43 of the Group`s Annual report for 2006.
2 Gain on revaluation and sale of investment and development properties
Nine months Year
ended ended
30 September 31 December
2007 2006
GBPm GBPm
Gain on revaluation of investment and
development properties 132.4 558.5
Gain on sale of investment properties 59.3 28.0
Gain on revaluation and sale of investment and
development properties 191.7 586.5
3 Interest payable
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2007 2006 2006
GBPm GBPm GBPm
Gross interest payable -
recurring 152.0 144.5 198.6
Interest capitalised on
developments (9.6) (6.4) (8.6)
Interest payable 142.4 138.1 190.0
4 Investment and development property
UK Other
shopping commercial
centres properties Total
GBPm GBPm GBPm
At 31 December 2006 6,542.8 1,644.3 8,187.1
Additions 149.1 770.9 920.0
Disposals (419.1) (277.6) (696.7)
Foreign exchange fluctuations - (7.7) (7.7)
Surplus on valuation 95.5 36.9 132.4
At 30 September 2007 6,368.3 2,166.8 8,535.1
The group`s interests in investment and development properties were valued as
at 31 December 2006 and 30 September 2007 by independent external valuers in
accordance with the Appraisal and Valuation Manual of RICS on the basis of
market value. Market value represents the figure that would appear in a
hypothetical contract of sale between a willing buyer and a willing seller.
As at As at
30 September 31 December
2007 2006
GBPm GBPm
Balance sheet carrying value of investment and
development properties 8,535.1 8,187.1
Adjustment in respect of head leases and
incentives 25.3 18.9
Market Value of investment and development
properties 8,560.4 8,206.0
NOTES (Continued)
5 Trading properties
The estimated replacement cost of trading properties based on market value
amounted to GBP45.8 million (31 December 2006 - GBP49.9 million).
6 Trade and other receivables
As at As at
30 September 31 December
2007 2006
GBPm GBPm
Amounts falling due within one year:
Rents receivable 62.9 26.1
Derivative financial instruments 17.1 7.0
Other receivables 75.5 42.3
Prepayments and accrued income 52.5 38.4
208.0 113.8
Amounts falling due after more than one year:
Derivative financial instruments 64.9 14.0
Other receivables 13.6 12.2
Prepayments and accrued income 55.6 55.2
134.1 81.4
7 Borrowings, including finance leases
As at As at
30 September 31 December
2007 2006
GBPm GBPm
Amounts falling due within one year 133.6 43.5
Amounts falling due after more than one year 3,406.7 3,341.3
Total borrowings, including finance leases 3,540.3 3,384.8
Cash and cash equivalents (150.7) (321.8)
Net borrowings 3,389.6 3,063.0
See below for details of interest rate hedging arrangements
Fair value of financial instruments
As at 30 September 2007
Balance
sheet Fair
value value
GBPm GBPm
Debentures and other fixed rate loans
Sterling
C&C 5.562% debenture 2027 226.0 326.5
CSC 6.875% unsecured bonds 2013 26.6 26.1
CSC 5.75% unsecured bonds 2009 31.3 31.5
US dollars
Fixed rate loans 154.2 152.1
438.1 536.2
Floating rate and other loans 2,991.0 2,991.0
3,429.1 3,527.2
Convertible bonds - fixed rate 111.2 159.7
Total borrowings 3,540.3 3,686.9
As at 31 December 2006
Balance
Sheet Fair
Value value
GBPm GBPm
Debentures and other fixed rate loans
Sterling
C&C 5.562% debenture 2027 225.8 348.8
CSC 6.875% unsecured bonds 2013 26.5 25.4
CSC 5.75% unsecured bonds 2009 41.3 42.0
US dollars
Fixed rate loans 164.0 169.1
457.6 585.3
Floating rate and other loans 2,818.5 2,818.5
3,276.1 3,403.8
Convertible bonds - fixed rate 108.7 195.4
Total borrowings 3,384.8 3,599.2
The adjustment in respect of the above, after credit for tax relief, to the
diluted net assets per share (which does not require adjustment for the fair
value of convertible bonds) would amount to 18p per share (31 December 2006 -
24p).
All other financial assets and liabilities included in the balance sheet are
stated at fair values.
NOTES (Continued)
Derivative financial instruments
As at As at
30 September 31 December
2007 2006
GBPm GBPm
Non current assets (note 6) 64.9 14.0
Current assets (note 6) 17.1 7.0
Current liabilities (3.8) (4.6)
Non-current liabilities (21.1) (128.9)
57.1 (112.5)
Interest rate swaps
Notional principal
30 September 31 December
2007 2006
GBPm GBPm
Effective after:
1 year 2,935 3,055
5 years 2,893 3,153
10 years 2,425 2,075
15 years 2,100 1,750
20 years 2,100 1,750
25 years 1,700 1,275
Average contracted rate
30 September 31 December
2007 2006
% %
Effective after:
1 year 5.26 5.31
5 years 5.11 5.16
10 years 4.69 4.75
15 years 4.58 4.63
20 years 4.58 4.63
25 years 4.42 4.43
NOTES (Continued)
8 Per share details
(a) Earnings per share
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2007 2006 2006
GBPm GBPm GBPm
Underlying earnings 96.0 81.2 114.9
Property trading profits 0.7 0.8 (0.3)
Earnings used for calculation
of adjusted earnings per
share 96.7 82.0 114.6
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2007 2006 2006
Number Number Number
millions millions millions
Weighted average shares in issue 362.6 337.8 340.0
Weighted averages shares held
by ESOP (0.9) (1.5) (1.5)
Weighted average shares used
for calculation of adjusted
earnings per share 361.7 336.3 338.5
(b) Net assets per share
As at As at
30 September 31 December
2007 2006
GBPm GBPm
Basic net asset value 5,018.3 4,732.4
Fair value of derivative financial instruments
(net of tax) (57.1) 80.4
Deferred tax on revaluation surpluses 33.1 32.1
Deferred tax on capital allowances 46.8 31.8
Unrecognised surplus on trading properties
(net of tax) - 4.7
Minority interest in the above adjustments (6.7) -
5,034.4 4,881.4
Effect of dilution:
On conversion of bonds 111.2 108.7
On exercise of options 10.8 12.3
Diluted, adjusted net asset value 5,156.4 5,002.4
As at As at
30 September 31 December
2007 2006
Number Number
millions millions
Shares in issue, excluding those held by ESOP
trust and treated as cancelled 361.5 361.7
Effect of dilution:
On conversion of bonds 13.9 13.9
On exercise of options 1.1 1.5
Diluted shares in issue 376.5 377.1
(c) Convertible debt
3.95 per cent convertible bonds due 2010
At 30 September 2007 and 31 December 2006 3.95 per cent convertible bonds with
a nominal value of GBP111.3 million were in issue. The holders of the 3.95 per
cent bonds have the option to convert their bonds into ordinary shares at any
time on or up to 23 September 2010 at 800p per ordinary share. The 3.95 per
cent bonds may be redeemed at par at the company`s option after 14 October
2008.
9 Summary of changes in equity
Nine
months Year
ended ended
30 September 31 December
2007 2006
GBPm GBPm
Opening equity shareholders` funds 4,732.4 2,933.1
Issue of shares 3.7 342.4
Cancellation of shares (7.8) (1.0)
4,728.3 3,274.5
Underlying profit for the period 96.0 114.9
Trading, valuation and exceptional items and
related tax 310.7 1,449.2
Profit for the period 406.7 1,564.1
Actuarial gains on defined benefit pension
schemes - 0.7
Surplus on fixed asset investments 4.4 -
Tax on items taken directly to equity - (4.9)
Net exchange translation differences and other
movements 1.0 (4.6)
Total recognised income and expense for the
period 412.1 1,555.3
5,140.4 4,829.8
Dividends paid (122.1) (97.4)
Closing equity shareholders` funds 5,018.3 4,732.4
6 November 2007
Sponsor: Merrill Lynch
Date: 06/11/2007 09:07:36 Produced by the JSE SENS Department.
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