| Wed 6 Aug 2008, 8:08 | | LBT - Liberty International Plc - Interim Report for the half year ended 30 June |
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LBT
LILII
LBT - Liberty International Plc - Interim Report for the half year ended 30 June
2008
LIBERTY INTERNATIONAL PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: LBT
Issuer Code: LILI I
6 August 2008
LIBERTY INTERNATIONAL PLC
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2008
Attached is the interim report for the half year ended 30 June 2008:
Highlights
Summary of Investment and Development Properties
Operating and Financial Review
Unaudited Condensed Set of Financial Statements
Enquiries:
Liberty International PLC:
David Fischel Chief Executive +44 (0)20 7960 1207
Ian Durant Finance Director +44 (0)20 7960 1210
Kate Bowyer Investor Relations +44 (0)20 7960 1250
Public relations:
UK: Michael Sandler, Hudson Sandler +44 (0)20 7796 4133
SA: Nicholas Williams,
College Hill Associates +27 (0)11 447 3030
Following changes in the UK company disclosure regulations, Liberty
International is no longer obliged to send half yearly accounts to
shareholders. In the interests of economy, Liberty International will not be
producing and distributing a 2008 Interim Report. A copy of this announcement
is available for download from our website at www.liberty-international.co.uk,
and hard copies can be requested via the website or by contacting the company
(email feedback@lib-int.com or telephone +44 (0)20 7960 1406).
A presentation to analysts and investors will take place at UBS, 1 Finsbury
Avenue, London EC2 at
9.30 am on 6 August 2008.
This announcement 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 announcement 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.
HIGHLIGHTS
Patrick Burgess, Chairman, commented as follows:
"Reflecting the defensive nature of Liberty International`s assets, the
valuation outcome for the last twelve months since the market peak has
considerably outperformed the benchmark IPD index, though we have recorded a
further 7.4 per cent fall in investment property valuations in the first half
of 2008. The values of our Central London assets have held up particularly
well. The fall in values has been almost entirely driven by yield shift rather
than changes in rental values. Net asset value per share has declined from
1264p to 1095p.
Liberty International has continued to demonstrate its resilience based upon
our quality assets, sound financial structure and active asset management
approach, notwithstanding that the first half of 2008 has been a difficult
period for the UK property sector. We are confident that with our firm
foundation we can meet the challenges and plan for the opportunities which
current market conditions will provide.
The property cycle has to run its course with excesses of the boom years to be
purged from the system. Property values are unlikely to recover until stability
returns to the banking sector and therefore we consider the process of falling
property values is not yet complete. However, the outperformance of prime
assets against secondary should continue, with rental levels likely to become
an increasingly important factor in valuation performance. We also expect a
period of weak consumer spending given current confidence levels.
However, occupancy levels at our UK shopping centres have remained high; we
have continued to achieve new lettings both for our developments and completed
assets; our programme of disposals of non-core assets which started once we
achieved REIT status in January 2007 has continued successfully and now
generated over GBP500 million of inflows; our financial position is strong with
a 46 per cent debt to assets ratio and GBP478 million of cash and committed
facilities; we have made good progress with our committed development programme
which is based on a small number of prime projects and modest in size; we have
a pipeline of attractive projects which can be brought forward when market
conditions are suitable; and we have substantially strengthened and deepened
our pool of management talent over the last two years.
Underlying profits for the period, excluding valuation items, were held back by
a prudential approach to bad debts and lease incentive write-offs and by
interest and administration expenses linked to development activities and
recent investments. As we consider these factors will not hinder our long term
progress, the directors have declared an unchanged interim dividend of 16.5p
per share."
6 August 2008
HIGHLIGHTS OF SIX MONTH PERIOD ENDED 30 JUNE 2008
Occupancy levels at Capital Shopping Centres` UK regional shopping centres
have remained high at 98.7 per cent but like-for-like income growth impacted by
an increase of GBP4.5 million in bad debt provisions and associated lease
incentive write-offs related to tenants in administration.
Underlying profit before tax excluding valuation and exceptional items
reduced from GBP69 million to GBP57 million reflecting bad debts, interest
charge on recent investments in Earls Court and Olympia and overseas, and
administration expenses on development activities and internal reorganisation.
Interim dividend unchanged at 16.5p per share
Valuation outcome - six monthly comparison
Six months Six months Six months
ended ended ended
30 June 31 December 30 June
2008 2007 2007
- UK regional shopping centres -7.6% -6.5% +2.6%
- UK non-shopping centre
properties -5.5% -3.4% +3.2%
- USA -0.8% +2.7% +3.8%
- Total -7.4% -6.1% +2.6%
The valuation outcome for the period mostly reflected changes in yields with a
0.7 per cent increase in the estimated rental values of UK regional shopping
centres.
Valuations have outperformed comparable IPD capital returns (IPD UK monthly
property index)
which are as follows:
Six months Six months
ended ended
30 June 31 December
2008 2007
- All Property -8.6% -11.7%
- Retail -9.0% -12.4%
Change in valuation yields as follows:
Nominal Equivalent Yields
30 June 31 March 31 December 30 June
2008 2008 2007 2007
- UK regional shopping
centres 5.51% 5.34% 5.07% 4.77%
- UK non-shopping centre
properties 5.25% 5.23% 5.18% 4.95%
Continuation of successful disposal programme of non-core assets since
becoming a REIT in January 2007.
- Disposals of GBP196 million at GBP4 million below 31 December 2007 book
values (2007 - disposals of GBP340 million at GBP37 million surplus over 31
December 2006 book values; also, CSC`s interest in MetroCentre, Gateshead
reduced by 40 per cent for GBP426 million consideration, a GBP16 million
surplus).
Progress with current development programme, based on a small number of prime
projects and of modest size relative to the overall business.
- Expenditure to complete committed development programme around GBP283 million
including St David`s 2, Cardiff opening Autumn 2009 and Eldon Square South,
Newcastle opening Spring 2010
- Westgate, Oxford development on hold
Robust financial position
- 46 per cent debt to assets ratio
- over GBP478 million cash and undrawn committed facilities
- no significant debt maturities before 2011
- debt mostly fixed-rate and asset-specific
Income Statement prepared under International Financial Reporting Standards
("IFRS") reflects loss for the six month period of GBP458 million after
including GBP639 million deficit on property revaluations and GBP140 million
valuation surplus on derivative financial instruments.
Total return for the six month period ended 30 June 2008* of minus 11.9 per
cent with net asset value per share (diluted, adjusted) reduced from 1264p to
1095p. Total return for year ended 30 June 2008* of minus 18.4 per cent.
* Dividend income and change in net asset value per share (diluted, adjusted).
FINANCIAL HIGHLIGHTS
Restated***
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
Net rental income GBP194m GBP179m GBP374m
Profit before tax (underlying*) GBP57m GBP69m GBP129m
(Deficit)/gain on revaluation
and sale of
investment and development
property GBP(639)m GBP233m GBP(279)m
(Loss)/profit before tax GBP(458)m GBP552m GBP(125)m
Total properties GBP7,987m GBP8,608 m GBP8,666m
GBP3,740m GBP3,148m GBP3,668m
Net debt
Net assets (diluted, adjusted) GBP4,122m GBP5,226m GBP4,757m
Basic (loss)/earnings per share (117.9)p 138.0p (29.0)p
Adjusted earnings per share 13.9p 18.8p 36.0p
Dividend per share 16.5p 16.5p 34.1p
Net assets per share (diluted,
adjusted)** 1095p 1385p 1264p
* Before property trading, valuation and exceptional items
** Net assets per share (diluted, adjusted) would increase by 95p per share to
1190p at 30 June 2008 (30 June 2007 - by 101p to 1486p, 31 December 2007 - 104p
to 1368p) if adjusted for notional acquisition costs amounting to GBP360
million (30 June 2007 - GBP370 million, 31 December 2007 - GBP390 million)
*** Restated numbers for six months ended 30 June 2007 now include 100 per cent
of MetroCentre, Gateshead rather than the 60 per cent previously reported - see
note 1 to the 30 June 2008 condensed set of financial statements.
Note 17 to the 30 June 2008 condensed set of financial statements sets out full
details and calculations of basic and adjusted earnings per share and net
assets (diluted, adjusted).
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 June 2008, Liberty International held GBP8.0 billion of total properties
of which UK regional shopping centres comprised 75 per cent and retail property
in aggregate 88 per cent. Shareholders` funds (diluted, adjusted) amounted to
GBP4.1 billion. Assets of the group under control or joint control amounted to
GBP10.5 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 GBP6.0 billion at 30 June
2008. CSC`s largest centres are Lakeside, Thurrock; MetroCentre, Gateshead;
Braehead, Renfrew, Glasgow; The Harlequin, Watford; and Manchester Arndale. In
addition, CSC has major development projects in progress in Cardiff and
Newcastle.
CAPITAL & COUNTIES owned assets of GBP1.9 billion at 30 June 2008 amounting to
7.4 million sq.ft. in aggregate. Capital & Counties had GBP632 million invested
in the Covent Garden area including the historic Covent Garden Market, and
GBP347 million in Central London, primarily through the Great Capital
Partnership, a joint venture with Great Portland Estates plc. Capital &
Counties acquired 50 per cent of EC&O Venues (Earls Court and Olympia Group) in
2007 for a sum that valued the assets at approximately GBP375 million. In
addition, Capital & Counties had interests in the USA amounting to GBP377
million (2.6 million sq.ft.), predominantly comprising retail assets in
California, including the 850,000 sq.ft. Serramonte Shopping Centre, Daly City,
San Francisco.
DIVIDENDS
The Directors of Liberty International PLC have announced an interim dividend
per ordinary share (ISIN GB0006834344) of 16.5p (2007 - 16.5p) payable on 16
September 2008 (see salient dates below). This dividend will be paid totally as
a Property Income Distribution ("PID") and will be wholly subject to a 20%
withholding tax unless exemptions apply (please refer to the PID SPECIAL NOTE
below).
Dates
The following are the salient dates for the payment of the interim dividend:
Thursday, 14 August 2008 Sterling/Rand exchange rate struck.
Friday, 15 August 2008 Sterling/Rand exchange rate and dividend amount in
SA currency announced.
Monday, 25 August 2008 Ordinary shares listed ex-dividend on the JSE,
Johannesburg
Wednesday, 27 August 2008 Ordinary shares listed ex-dividend on the London
Stock Exchange.
Friday, 29 August 2008 Record date for interim dividend in London and
Johannesburg.
Friday, 29 August 2008 UK shareholders only: Last date for receipt of Tax
Exemption
Declaration forms to permit dividends to be paid
gross.
Tuesday, 16 September 2008 Dividend payment day for shareholders
(Note: Payment to ADR holders will be made on
26 September 2008).
South African shareholders should note that, in accordance with the
requirements of Strate, the last day to trade cum-dividend will be Friday, 22
August 2008 and that no dematerialisation or rematerialisation of shares will
be possible from Monday, 25 August to Friday, 29 August 2008 inclusive.
No transfers between the UK and South African registers may take place from
Thursday, 14 August to Sunday, 31 August 2008 inclusive.
PID SPECIAL NOTE:
UK shareholders: For those who are eligible for exemption from the 20%
withholding tax and have not previously registered for exemption, an HM Revenue
& Customs ("HMRC") Tax Exemption Declaration is available for download from the
"Investors" section of the Liberty International website
(www.liberty-international.co.uk), or on request from our UK registrars, Capita
Registrars, or HMRC. Validly completed forms must be received by Capita
Registrars no later than the Record Date, Friday, 29 August 2008, otherwise the
dividend will be paid after deduction of tax.
South African and other non-UK shareholders: South African shareholders may
apply to HMRC after payment of the dividend for a refund of the difference
between the 20% withholding tax and the UK/South African double taxation treaty
rate of 15%. Other non-UK shareholders may be able to make similar claims.
Refund application forms for all non-UK shareholders are available for download
from the "Investors" section of the Liberty International website (www.liberty-
international.co.uk), or on request from our SA registrars, Computershare, or
HMRC. Refunds are not claimable from Liberty International, the South African
Revenue Service or other national authorities, only from the UK`s HMRC.
For South African shareholders, a helpline for questions relating to the
withholding tax is available until 30 November 2008 on 0800 006 497 (+27 11 870
8218 if calling from outside South Africa).
Calls from within South Africa are toll-free.
The above does not constitute advice and shareholders should seek their own
professional guidance. Liberty International does not accept liability for any
loss suffered arising from reliance on the above.
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES
Market value
31 December 30 June
2007 2008
GBPm GBPm
UK regional shopping centres
Lakeside, Thurrock 1,247.9 1,162.7
MetroCentre, Gateshead 1,010.0 937.5
Braehead, Glasgow 730.3 671.6
The Harlequin, Watford 506.2 460.5
Victoria Centre, Nottingham 444.8 425.7
Arndale, Manchester 418.5 384.5
Chapelfield, Norwich 324.5 295.6
Cribbs Causeway, Bristol 296.3 277.2
The Potteries, Stoke-on-Trent 278.3 261.0
The Chimes, Uxbridge 261.8 245.6
The Glades, Bromley 257.2 234.3
St David`s, Cardiff 101.2 91.7
Xscape, Braehead 39.8 36.8
Like-for-like capital and income 5,916.8 5,484.7
Metro Retail Park 77.0 63.7
Eldon Square, Newcastle upon Tyne 258.0 250.1
Like-for-like capital 6,251.8 5,798.5
Redevelopments and developments 229.3 229.2
Total UK regional shopping
centres 6,481.1 6,027.7
UK non-shopping centre
properties
Like-for-like capital and income 591.2 555.6
Like-for-like capital only 870.5 857.7
Like-for-like capital 1,461.7 1,413.3
Acquisitions - 31.1
Redevelopments and developments 115.8 111.3
Disposals 195.5 -
Total UK non-shopping centre
properties 1,773.0 1,555.7
US properties*
Like-for-like capital and income 373.8 370.0
Like-for-like capital only 7.0 6.9
Total US properties 380.8 376.9
Total investment properties 8,634.9 7,960.3
Revaluation deficit
GBPm (Decrease)
UK regional shopping centres
Lakeside, Thurrock (84.5) (6.8)%
MetroCentre, Gateshead (75.1) (7.5)%
Braehead, Glasgow (63.4) (8.7)%
The Harlequin, Watford (45.0) (8.9)%
Victoria Centre, Nottingham (19.3) (4.4)%
Arndale, Manchester (34.8) (8.1)%
Chapelfield, Norwich (25.5) (8.1)%
Cribbs Causeway, Bristol (20.0) (6.7)%
The Potteries, Stoke-on-Trent (17.5) (6.3)%
The Chimes, Uxbridge (16.3) (6.3)%
The Glades, Bromley (24.2) (9.0)%
St David`s, Cardiff (12.4) (11.9)%
Xscape, Braehead (4.3) (11.9)%
Like-for-like capital and income (442.3) (7.5)%
Metro Retail Park (13.3) (17.3)%
Eldon Square, Newcastle upon Tyne (20.8) (7.7)%
Like-for-like capital (476.4) (7.6)%
Redevelopments and developments (42.5) (15.7)%
Total UK regional shopping
centres (518.9) (7.9)%
UK non-shopping centre
properties
Like-for-like capital and income (41.1) (7.0)%
Like-for-like capital only (41.0) (4.5)%
Like-for-like capital (82.1) (5.5)%
Acquisitions (3.8) (11.0)%
Redevelopments and developments (26.5) (18.8)%
Disposals -
Total UK non-shopping centre
properties (112.4) (6.7)%
US properties*
Like-for-like capital and income (3.1) (0.8)%
Like-for-like capital only (0.1) (0.7)%
Total US properties (3.2) (0.8)%
Total investment properties (634.5) (7.4)%
Net rental income
30 June 30 June
2007 2008 Increase/
GBPm GBPm (Decrease)
UK regional shopping centres
Lakeside, Thurrock
MetroCentre, Gateshead
Braehead, Glasgow
The Harlequin, Watford
Victoria Centre, Nottingham
Arndale, Manchester
Chapelfield, Norwich
Cribbs Causeway, Bristol
The Potteries, Stoke-on-Trent
The Chimes, Uxbridge
The Glades, Bromley
St David`s, Cardiff
Xscape, Braehead
Like-for-like capital and income 134.2 130.8 (2.5)%
Metro Retail Park
Eldon Square, Newcastle upon Tyne
Like-for-like capital 139.1 138.2 (0.6)%
Redevelopments and developments 2.0 1.9
Total UK regional shopping
centres 141.1 140.1 (0.7)%
UK non-shopping centre
properties
Like-for-like capital and income 13.0 11.5 (11.5)%
Like-for-like capital only 3.0 29.9
Like-for-like capital 16.0 41.4
Acquisitions - 0.5
Redevelopments and developments 1.3 (0.1)
Disposals 10.3 2.6
Total UK non-shopping centre
properties 27.6 44.4 60.9%
US properties*
Like-for-like capital and income 10.1 9.5 (3.6)%
Like-for-like capital only - 0.2
Total US properties 10.1 9.7 (4.0)%
Total investment properties 178.8 194.2 8.6%
*Like-for-like percentage changes are in local currency
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES (Continued)
Property analysis by use and type
Market value
31 December 30 June
2007 2008 % of total
GBPm GBPm properties
Regional shopping centres and
other retail
UK regional shopping centres 6,481.1 6,027.7 75.7%
UK other retail 807.7 733.0 9.2%
US regional shopping centres 138.6 133.8 1.7%
US other retail 130.0 130.2 1.6%
Total regional shopping centres
and other retail 7,557.4 7,024.7 88.2%
Office
UK business space 583.8 442.4 5.6%
US business space 78.6 80.0 1.0%
Total office 662.4 522.4 6.6%
Exhibition
UK Exhibition 381.4 380.3 4.8%
Residential
US residential 33.7 32.9 0.4%
Total investment properties 8,634.9 7,960.3 100.0%
Net Revaluation
Passing rental deficit
rent ERV income Increase/
GBPm GBPm GBPm (Decrease)
Regional shopping centres and
other retail
UK regional shopping centres 286.3 348.8 140.1 (7.9)%
UK other retail 32.4 43.6 12.9 (5.4)%
US regional shopping centres 6.9 10.1 3.4 (2.2)%
US other retail 7.7 8.5 3.2 (0.4)%
Total regional shopping centres
and other retail 333.3 411.0 159.6 (7.5)%
Office
UK business space 19.2 32.5 12.9 (8.8)%
US business space 7.1 7.7 2.5 1.7%
Total office 26.3 40.2 15.4 (7.3)%
Exhibition
UK Exhibition - - 18.6 (5.7)%
Residential
US residential 1.6 1.6 0.6 (2.2)%
Total investment properties 361.2 452.8 194.2 (7.4)%
Analysis of UK non-shopping centres and US properties by location and type
Market value
31 December 30 June
2007 2008
GBPm GBPm
UK non-shopping centre properties
Capco Covent Garden 663.6 631.7
Capco Earls Court 381.4 380.3
Capco London (inc. Great Capital Partnership) 353.2 346.6
Capco Opportunities 220.5 79.7
Capco Urban 154.3 117.4
Total UK non-shopping centre properties 1,773.0 1,555.7
US properties
US retail 268.6 264.0
US business space 78.6 80.0
US residential 33.6 32.9
Total US properties 380.8 376.9
2,153.8 1,932.6
Revaluation deficit
30 June
2008 Increase/
GBPm (decrease)
UK non-shopping centre properties
Capco Covent Garden (33.5) (5.0)%
Capco Earls Court (23.0) (5.7)%
Capco London (inc. Great Capital Partnership) (21.9) (5.8)%
Capco Opportunities (12.6) (14.3)%
Capco Urban (21.4) (15.6)%
Total UK non-shopping centre properties (112.4) (6.7)%
US properties
US retail (3.7) (1.4)%
US business space 1.3 1.7%
US residential (0.8) (2.2)%
Total US properties (3.2) (0.8)%
(115.6) (5.6)%
Net rental income
30 June 30 June
2007 2008
GBPm GBPm
UK non-shopping centre properties
Capco Covent Garden 11.3 12.7
Capco Earls Court - 18.6
Capco London (inc. Great Capital Partnership) 6.9 6.7
Capco Opportunities 5.9 4.4
Capco Urban 3.5 2.0
Total UK non-shopping centre properties 27.6 44.4
US properties
US retail 7.4 6.6
US business space 2.1 2.5
US residential 0.6 0.6
Total US properties 10.1 9.7
37.7 54.1
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES (Continued)
UK investment property valuation data
Market
value Nominal equivalent yield
30 June
2008 31 December 30 June
GBPm 2007 2008
UK regional shopping centres
Lakeside, Thurrock 1,162.7 4.90% 5.30%
MetroCentre, Gateshead (including
Retail Park) 1,001.2 5.03% 5.44%
Braehead, Glasgow 671.6 5.02% 5.42%
The Harlequin, Watford 460.5 4.95% 5.45%
Victoria Centre, Nottingham 425.7 5.00% 5.35%
Arndale, Manchester 384.5 5.13% 5.52%
Chapelfield, Norwich 295.6 5.20% 5.70%
Cribbs Causeway, Bristol 277.2 5.06% 5.40%
The Potteries, Stoke-on-Trent 261.0 5.50% 6.00%
Eldon Square, Newcastle upon Tyne 250.1 5.24% 5.75%
The Chimes, Uxbridge 245.6 5.35% 5.80%
The Glades, Bromley 234.3 5.40% 6.00%
St. David`s, Cardiff 91.7 5.26% 5.96%
Xscape, Braehead 36.8 6.21% 6.74%
Like-for-like capital 5,798.5 5.08% 5.51%
Other 229.2
Total UK regional shopping centres 6,027.7
UK non-shopping centre properties
Capco Covent Garden 631.7 4.63% 4.75%
Capco London (inc. Great Capital
Partnership) 298.0 5.68% 5.72%
Capco Opportunities 53.9 6.56% 7.58%
Capco Urban 71.0 5.57% 5.91%
1,054.6 5.09% 5.25%
Exhibition 358.8
1,413.4
Like-for-like-capital
Exhibition - Acquisitions 21.5
Other 120.8
Total UK non-shopping centre properties 1,555.7
Net rental
Initial income ERV
yield 30 June 30 June
30 June 2008 2008
2008 GBPm GBPm
UK regional shopping centres
Lakeside, Thurrock 5.02%
MetroCentre, Gateshead (including Retail
Park) 5.16%
Braehead, Glasgow 4.52%
The Harlequin, Watford 4.92%
Victoria Centre, Nottingham 5.14%
Arndale, Manchester 4.72%
Chapelfield, Norwich 5.16%
Cribbs Causeway, Bristol 4.94%
The Potteries, Stoke-on-Trent 5.50%
Eldon Square, Newcastle upon Tyne 3.57%
The Chimes, Uxbridge 5.77%
The Glades, Bromley 5.20%
St. David`s, Cardiff 5.32%
Xscape, Braehead 3.66%
Like-for-like capital 4.98% 138.2 343.6
Other 1.9 5.2
Total UK regional shopping centres 140.1 348.8
UK non-shopping centre properties
Capco Covent Garden 4.35%
Capco London (inc. Great Capital
Partnership) 4.67%
Capco Opportunities 7.24%
Capco Urban 5.86%
4.69% 23.0 64.4
Exhibition 18.4
41.4 64.4
Like-for-like-capital
Exhibition - Acquisitions 0.2
Other 2.8 11.7
Total UK non-shopping centre properties 44.4 76.1
Glossary
ERV (Estimated Rental Value)
The external valuers` estimates of the group`s share of the current annual
market rent of all lettable space net of any non-recoverable charges, before
bad debt provision and adjustments to comply with International Accounting
Standards regarding tenant lease incentives.
Like-for-like capital and income
The category of investment properties which have been owned throughout both
periods without significant capital expenditure in either period, so both
income and capital can be compared on a like-for-like basis.
Like-for-like capital
The category of investment properties which includes like-for-like income
properties, plus those which have been owned throughout the current period but
not the whole of the prior period, without significant capital expenditure in
the current period, so capital values but not income can be compared on a
like-for-like basis.
Net rental income
The group`s share of net rents receivable as shown in the Income Statement,
having taken due account of non-recoverable charges, bad debt provisions and
adjustments to comply with International Accounting Standards regarding tenant
lease incentives.
Nominal equivalent yield
Effective annual yield to a purchaser from the assets individually at market
value after taking account of notional acquisition costs but assuming rent is
receivable annually in arrears rather than reflecting the actual rental cash
flows.
Passing Rent
The group`s share of contracted annual rents receivable at the balance sheet
date. This takes no account of accounting adjustments made in respect of rent
free periods or tenant incentives, the reclassification of certain lease
payments as finance charges or any irrecoverable costs and expenses, and does
not include excess turnover rent, additional rent in respect of unsettled rent
reviews or sundry income such as from car parks etc.
Initial Yield
Annualised net rents on investment properties expressed as a percentage of the
market value.
OPERATING AND FINANCIAL REVIEW
OPERATING REVIEW
Introduction
Although the first half of 2008 was a difficult period for the UK property
sector, Liberty International has continued to demonstrate its resilience based
upon our quality assets, sound financial structure and active asset management
approach.
The period can be summarised as follows:
Further falls in investment property valuations, but outperforming the
benchmark IPD index levels, reflecting the defensive nature of our assets.
Occupancy levels at our UK shopping centres have remained high.
We have continued to achieve new lettings both for our developments and
completed assets.
Our programme of disposals of non-core assets which started once we achieved
REIT status in January 2007 has generated further significant cash inflows in
the first half of 2008.
We have repurchased GBP110 million of CSC commercial mortgage backed
securities at attractive levels, recording a substantial exceptional profit of
GBP13 million.
Our development programme, which is based on a small number of prime projects
and of modest size relative to the overall business, has progressed very
satisfactorily.
We have continued to invest in active asset management opportunities and have
a pipeline of attractive projects which can be brought forward when market
conditions are suitable.
Our financial position remains strong with a 46 per cent debt to assets ratio
and GBP478 million of cash and committed facilities.
We have continued the programme of the last two years of substantially
strengthening and deepening our pool of management talent.
In terms of results:
Investment property values, which had fallen from their peak at 30 June 2007
by 6.1 per cent in the second half of 2007, fell by a further 7.4 per cent in
the first half of 2008, reducing our net asset value per share to 1095p.
Underlying profits, before valuation and exceptional items, reduced from
GBP69 million in the first half of 2007 to GBP57 million in the first half of
2008, reflecting, as fully described in the Financial Review, prudent bad debt
and associated lease incentive write-offs, an increased interest charge from
the promising recent investments in Earls Court and Olympia and overseas, and
increased administration expenses relating to development activities and
internal reorganisation.
Total return, in terms of dividend and change in net asset value per share,
amounted to minus 11.9 per cent and minus 18.4 per cent for the six months and
year respectively ended 30 June 2008.
The directors have resolved to pay an unchanged interim dividend of 16.5p per
share. This dividend as in 2007 will be paid entirely as a Property Income
Distribution (`PID`) with the non-PID element of the year`s dividend attached
to the final dividend. Liberty International has always pursued a progressive
dividend policy, distributing substantially all of the group`s recurring
income.
We have shown consistent growth over a long period from 4.5p per share in 1985
to 34.1p per share in 2007. The final dividend will be determined in February
2009 when the full year`s results are reported taking into account the
performance for the full year and market conditions and prospects at that date.
Property market conditions
External factors have generally been more negative:
The credit crisis has continued to widen in impact with the banking sectors
in the UK and USA under extreme pressure.
The general availability of finance for UK commercial property has therefore
further diminished.
UK property values have fallen sharply for twelve months with a record 19.3
per cent drop in capital values for the year ended 30 June 2008 indicated by
the IPD UK monthly property index.
UK stockmarket sentiment has been poor with the FTSE banking, property and
retail sectors at 30 June 2008 respectively 46 per cent, 52 per cent and 53 per
cent off 2007 highs.
At the consumer level, disposable incomes are under pressure as the inflation
rate has exceeded average earnings growth, with highly visible increases in
food and fuel costs.
The UK housing market has noticeably weakened.
As a result, and despite no significant rise yet in unemployment, consumer
confidence levels fell to all time lows at 30 June 2008 (measured at 61
compared with 93 at 31 December 2007 according to the Nationwide/TNS index
where above 100 is optimistic and below 100 is pessimistic).
However, UK retail sales for the first six months of 2008 as measured by ONS
proved rather more resilient than might have been expected from market
sentiment and consumer confidence indices with an increase in total sales by
value comparing the first six months of 2008 and 2007 of 4.6 per cent, with
non-food, the category in which Liberty International is primarily interested,
at 2.7 per cent.
The interest rate climate has been mixed. UK base rate declined in 2008 from
5.50 per cent to 5.0 per cent, with inflationary pressures needing to subside
before further reductions can be expected. Year on year inflation, as measured
by the retail price index, increased to 4.6 per cent at 30 June 2008. The five
year sterling interest rate swap, an important measure for the UK property
industry, increased substantially in the six month period, mostly in the second
quarter, from 5.08 per cent to 6.07 per cent although it has subsequently
reduced to around 5.5 per cent.
Valuations
Commercial property valuations have now been falling for twelve months since
the middle of 2007.
Prime regional shopping centres such as those owned by CSC have historically
exhibited relatively low volatility in capital values compared with other
sectors and, as expected, have outperformed in a falling market.
To date, the fall in values has been almost entirely driven by yield shift
rather than changes in rental values.
In the case of CSC, the overall fall of 7.6 per cent in the six month period
was 8.3 per cent attributable to the nominal equivalent yields increasing from
5.08 per cent to 5.51 per cent offset by a 0.7 per cent increase in rental
values.
Encouragingly, the high quality Central London and US assets of Capital &
Counties have also performed relatively strongly in the last year.
In the view of the directors of Liberty International, further upward movement
in valuation yields may well be experienced but the relative outperformance of
prime assets against secondary should continue. In addition, rental levels are
likely to become an increasingly important factor in valuation performance once
the major part of the correction in yields has taken effect.
Percentage falls of Liberty International`s completed investment properties on
a like-for-like basis were as follows:
6 months 3 months 3 months 6 months
ended ended ended ended
30 June 30 June 31 March 31 December
2008 2008 2008 2007
UK regional shopping
centres -7.6% -3.1% -4.5% -6.5%
Other UK -5.5% -3.5% -2.0% -3.4%
USA -0.8% -0.4% -0.4% +2.7%
Total * -7.4% -3.4% -4.0% -6.1%
* including all investment properties and developments
These valuation falls compare favourably with the comparable capital returns
reported by the IPD UK monthly property index:
6 months 6 months
ended ended
30 June 31 December
2008 2007
All Property -8.6% -11.7%
Retail -9.0% -12.4%
Details of the valuations are set out in the Summary of Investment and
Development Properties in the Interim Report.
Capital Shopping Centres (`CSC`)
UK regional shopping centres comprise some 75 per cent of our overall business
with GBP6.0 billion of investment properties at 30 June 2008.
Continued high occupancy levels, asset performance relative to IPD and progress
with value-adding opportunities bear out the resilience of the business. CSC`s
centres are focussed on providing variety, diversity and volume of shops in a
single location containing the most attractive flagship and department stores,
offering the best services and providing a safe, stress-free, and rewarding
shopping experience.
Key measures of performance are as follows:
Occupancy at 30 June 2008 was 98.7 per cent (31 March 2008 - 98.5 per cent,
31 December 2007 - 98.7 per cent). Included in this percentage at 30 June 2008
were 62 tenancies in administration amounting to 3 per cent of CSC`s rent roll,
approximately GBP10 million per annum. 45 of these units were still trading at
30 June 2008. We have fully provided in the second quarter against outstanding
debts and lease incentive carry forwards for these units.
Like-for-like net rental income reduced by 2.6 per cent but, adjusting for
the above provisions, the underlying increase amounted to 3.1 per cent.
Rental levels at our centres are generally unchanged with the estimated
rental value according to CSC`s valuers increased by 0.7 per cent in 2008.
Prime rental levels have not increased since March 2008 but management have
focussed on confirming prime rental levels and achieving positive movement in
secondary locations.
At our completed centres, we have achieved 35 new lettings and 15 assignments
in the period that have resulted in 45 fascia changes (2.3 per cent of total
retail units) refreshing the retail offer for our shoppers, and increasing
aggregate rent by GBP0.8 million per annum (2007 - 138 tenancy changes
increasing annual rents by GBP7 million).
Strategies to maximise opportunities from both rent reviews and lease
expiries are planned several years in advance and are currently underway.
15 per cent of income, equating to 16 per cent of total retail units, is due
for review this year, primarily at The Mall, Cribbs Causeway. Settlements are
progressing steadily in line with our expectations.
Opportunities to add value through rent reviews next year and in 2010 amount to
17 per cent and 27 per cent respectively of rental income. The main review
cycle next year is at Braehead, Renfrew, Glasgow and in 2010 at Chapelfield,
Norwich and Lakeside.
Lease expiries also provide opportunities to refresh the retail offer and add
value.
Around one-third of CSC`s income is secured for ten years or more with 23 per
cent maturing within the next five years, particularly at Metrocentre which
reaches its 25th anniversary in 2011.
Footfall and car parking for the six months was on a par with last year with
no trends emerging between in-town or out-of-town centres or geographically.
Comparing the first half of 2008 with 2007, retail sales figures in our
centres not impacted by significant development broadly reflect ONS non-food
retail performance trends. However, individual retailer performance remains
variable, with market conditions widening the disparity between winners and
losers.
We have relatively little exposure in our prime regional shopping centres to
the most difficult sectors of the retail market, particularly big ticket items,
bulky goods and the household goods sector.
Our retailer tenant mix is diverse. The top 20 tenants account for 42 per
cent of CSC`s rent roll and all possess strong or good covenants. National or
international multiple retailers represent over 90 per cent of the rent roll.
Active management is at the heart of our business with two projects completed
in the period.
St. George`s Way, Eldon Square, Newcastle, a new mall, previously the old bus
station, opened in February and provides 48,000 sq.ft. of additional retail
space, 84 per cent committed by income, 93 per cent by floor area; lettings
include Waitrose, Argos and Boots.
The 50,000 sq.ft. project to remodel the High Street entrance of The Glades,
Bromley, opened for trade in May. The new retail space is 93 per cent committed
by income with the remaining 7 per cent in negotiation and has been let to
first rate retailers such as H&M, Mango and Body Shop, providing their best
concept stores.
The GBP45 million remodelling of the Yellow and Blue Quadrants at MetroCentre
commenced on site in May to upgrade leisure and catering facilities including a
new state of the art cinema, family entertainment centre and restaurants. 49
per cent of the anticipated income is committed, 57 per cent by floor area. The
first phase will open in Autumn next year and the second phase in Autumn 2010.
Several projects are underway at our other centres including the refurbishment
and tenant mix repositioning of the retail park at Cribbs Causeway. We are also
remodelling the food court in the shopping centre to provide eight new
restaurants, five of which are committed with the remaining three in
negotiation.
We are continually looking to upgrade and refresh our centres to provide the
optimum shopping environments for our retailers and to be the most compelling
destinations of choice for our shoppers. Value enhancing projects are underway
or at design or feasibility stage at most of our shopping centres which can be
brought forward at the appropriate time.
Capital & Counties
We reported the completion in 2007 of the realignment of Capital & Counties
into large focussed business units with an emphasis on Central London, where we
now have investments of GBP1.35 billion out of an overall GBP1.95 billion. In
the first half of 2008, we made firm progress across our business units,
actioning individual operating plans and disposing of non-core assets.
Our focus on prime investment properties has resulted in a relatively modest
reduction in values on retained investment properties of 5.5 per cent in the UK
and 0.8 per cent in the USA.
Changes in total investment properties at fair value are set out below:
GBPm
31 December 2007 2,157
Purchases 92
Disposals (198)
Valuation deficit (116)
30 June 2008 1,935
Net rental income amounted to GBP54 million in the six month period, a 44 per
cent increase on the first half of 2007.
We achieved disposals of GBP198 million in the six months ended 30 June 2008.
Since the beginning of 2007, the Capital & Counties disposal strategy has
generated over GBP500 million with a total surplus attributable to Liberty
International against book values of over GBP30 million. In addition to this,
we have contracted to sell Broad Gate, Leeds on its completion for GBP69
million which has not yet been reflected in the financial statements.
At Covent Garden, we received support from key stakeholders for our enhancement
strategy and our vision to position Covent Garden as a world class district has
been welcomed by target retail brands. Tenant engineering has commenced in
earnest and we expect to welcome high end brands into the established mix.
Selective enhancement and refurbishment work has commenced with planning
applications made, most notably for Bedford Chambers which is contracted to a
major global retailer. Marketing and rebranding drove higher customer visits of
approximately 45 million per annum with average dwell time extended by 30
minutes to 2.5 hours.
The Great Capital Partnership has continued to benefit from its concentration
in Central London with only a 5.7 per cent fall in values during the period.
The Partnership undertook two significant transactions in the period, a major
property swap transaction with the Crown Estate involving 580,000 sq.ft. of
property in Central London with an aggregate value as at 31 December 2007 of
GBP358 million, and a major financing of the partnership comprising a GBP225
million credit facility. Although headline rents in the West End will
undoubtedly come under pressure, the GCP portfolio with an average rent of
GBP34 psf is considered reversionary and its focus on prime properties with
added value potential will prove of benefit.
We have made good progress with our plans for Earls Court and Olympia
underpinned by a solid operating performance from the exhibition business and
are in the process of agreeing a vision with adjacent landowners, TfL and
London Borough of Hammersmith and Fulham for a major integrated mixed use
development around Earls Court.
We have merged the Capco Urban business unit with the development function of
CSC to create two business units, Liberty International Developments and
Liberty International Project Management Services, which will oversee and
implement large scale development projects on behalf of the entire group.
Capco Opportunities has focussed on the identification of high yield indirect
investments, with GBP42 million of such investments made in the period, aiming
to take advantage of the dislocation in the structured debt markets which has
resulted in debt linked to high quality assets trading at abnormally high
yields.
Our international activities, managed through Capco International, have
performed to expectation. Our assets in California have remained robust both in
terms of income and value. In India our joint venture, Prozone Liberty, is
working on four major shopping centre projects with the first in Aurangabad due
for completion around the end of next year. These projects have attracted third
party investment at levels implying significant value creation from our initial
investment. In China our relationship is developing well with Harvest Capital
and China Resources. Our first co-investment in Harvest Capital`s fund CR1 is
showing a healthy surplus.
Development projects
Our extensive portfolio of investment properties in the UK contains a number of
value adding development opportunities which can be initiated when market
conditions are more appropriate. At present, our cautious approach over the
last few years to new development activity has resulted in limited development
commitments with GBP283 million remaining to be spent, mostly to be completed
by the end of 2009 or early 2010.
Construction of our mixed-use joint venture project in Cardiff to add 967,500
sq.ft. of prime retail space is progressing well, with the handover of the John
Lewis shell for fitting out anticipated in late Summer and centre completion in
Autumn next year. Overall around 125 new shops and restaurants are being
developed which, when added to the existing centre, will enlarge St. David`s to
one of the UK`s largest city centre retail schemes at 1.4 million sq.ft.
Letting progress is encouraging with 32 per cent of the anticipated income and
46 per cent of retail area now committed, with a further 9 per cent by income
and area at advanced negotiation stage. Cardiff is a European capital city and
St David`s is a prime, quality centre. We are confident its strengths will
continue to attract quality occupiers.
The third and largest phase of redevelopment of Eldon Square, Newcastle
providing a total of 410,000 sq.ft. of retail space commenced on site in July
2007 and is progressing well, on budget and programme for completion in Spring
2010.
This redevelopment of the Southern part of the centre will provide 25 new
retail units and a new 175,000 sq.ft. department store for Debenhams.
To date, 71 per cent of the anticipated income is committed, 82 per cent of the
floor area.
On completion, Eldon Square will comprise 1.3 million sq.ft. of retail space in
the heart of Newcastle`s city centre.
Whilst we are positive about the long term prospects for Oxford as a retail
destination, current market conditions do not meet our criteria for an
immediate redevelopment of the Westgate Centre. We are working closely with our
partners to optimise this development opportunity and will reconsider
commencement when market conditions allow.
Overall prospects
The property cycle has to run its course with excesses of the boom years to be
purged from the system. Property values are unlikely to recover until stability
returns to the banking sector and therefore we consider the process of falling
values is not yet complete. We expect a period of weak consumer spending given
current confidence levels.
CSC`s prime, quality assets with resilient income streams are well placed to
face the current challenging economic and retail environments. We have ample
opportunities within our existing portfolio to add value in both the medium and
long term.
Capital & Counties is well positioned to weather the current adverse market
conditions and to take full advantage of future opportunities. Our business
units consist of high quality assets in excellent locations primarily in
Central London.
Our management team is creative, experienced from previous downcycles and
focussed on delivering value to shareholders. We are confident that with our
firm foundation we can meet the challenges and plan for the opportunities which
current market conditions will provide.
FINANCIAL REVIEW
Results for the half year ended 30 June 2008
The results for the half year reflect the impact of the investment property
valuation, movement in the fair value of derivatives and a number of one-off
charges to net rental income. On an adjusted basis, earnings per share fell
compared with the first half of 2007 by 4.9 pence to 13.9 pence per share. The
impact of the exhibition business of Earls Court and Olympia is summarised as
follows:-
Six Months to 30 June 2008
Base Exhibition Total
GBPm GBPm GBPm
Net rental income 175.6 18.6 194.2
Other income 0.5 - 0.5
Administration expenses (23.8) (4.4) (28.2)
Net interest costs (99.0) (10.4) (109.4)
Underlying profit/(loss)
before tax 53.3 3.8 57.1
Property trading profits 0.9 - 0.9
Tax on adjusted profit (1.3) (1.2) (2.5)
Minority interest after tax
on adjusted items (4.0) (1.3) (5.3)
Earnings/(loss) for adjusted
earnings per share 48.9 1.3 50.2
Six Months to 31 December 2007
Base Exhibition Total
GBPm GBPm GBPm
Net rental income 185.4 10.1 195.5
Other income (1.2) - (1.2)
Administration expenses (23.1) (5.1) (28.2)
Net interest costs (98.6) (8.8) (107.4)
Underlying profit/(loss)
before tax 62.5 (3.8) 58.7
Property trading profits 2.2 - 2.2
Tax on adjusted profit (1.9) (0.4) (2.3)
Minority interest after tax
on adjusted items 1.4 2.1 3.5
Earnings/(loss) for adjusted
earnings per share 64.2 (2.1) 62.1
Six Months to
30 June 2007
Total
GBPm
Net rental income 178.8
Other income 0.3
Administration expenses (17.0)
Net interest costs (93.1)
Underlying profit/(loss)
before tax 69.0
Property trading profits 0.7
Tax on adjusted profit 0.1
Minority interest after tax
on adjusted items (1.6)
Earnings/(loss) for adjusted
earnings per share 68.2
Basis of preparation
The comparative columns for the first half of 2007 have been restated to
reflect fully consolidated accounting for the group`s interest in the
MetroCentre Partnership with a minority interest rather than the proportionate
consolidation shown in the interim results last year. This revised treatment
reflects the contractual relationship between the parties.
A 50 per cent interest in Earls Court and Olympia was acquired by the group on
24 July 2007. The results for the first half of 2008 and the second half of
2007 reflect the consolidated results of this exhibition business, including
the inclusion of its overhead in the group`s administration expenses and
recognise a minority interest relating to the partner`s share. There was no
comparative in the first half of 2007.
Income statement
The group`s net rental income of GBP194.2 million represents an 8.6 per cent
increase compared to the first half of 2007. Excluding Earls Court and
Olympia`s GBP18.6 million, the group`s net rental income fell by 1.8 per cent
over the same period.
CSC is not immune to difficult retail market conditions and is affected by
tenant defaults in the sector, but the underlying rents remain resilient. CSC`s
net rental income fell by 0.7 per cent and on a like-for-like basis fell by 2.5
per cent. This was impacted by a number of one-off surrender premiums received
and charges relating to doubtful debts, including tenant incentives relating to
tenants in administration. The impact of these can be summarised as follows:
Six months Six months
ended ended
30 June 30 June
2008 2007
GBPm GBPm
Underlying like-for-like net rental
income 135.5 131.4 +3.1%
Surrender premiums received 2.3 5.4
Bad debts written off (2.9) (0.5)
Provision for doubtful debts (1.7) (2.1)
Lease incentive adjustments (2.4) -
Reported like-for-like net rental income 130.8 134.2 -2.5%
This demonstrates the resilience of CSC`s underlying rents, reflected also in
the valuer`s ERV assessment at 30 June 2008 which showed an increase of 0.7
percent on a like-for-like basis.
Capital & Counties net rental income rose by 44 per cent to GBP54.1 million.
Excluding Earl`s Court and Olympia it fell by 5.8 per cent, primarily as a
result of disposals. Planned activity in Covent Garden generated increased
vacancy with an impact of GBP0.6 million and marketing costs of GBP0.8 million.
The restructuring of the Crown Estate in the first quarter produced a reduction
in net rental income from the Great Capital Partnership compared with the first
half last year. As a result the like-for-like net rental income for the UK
activities of Capital & Counties fell by 11.5 per cent from GBP13.0 million to
GBP11.5 million.
The group`s deficit on revaluation and sale of investment and development
property for the half year to 30 June 2008 amounted to GBP638.5 million. This
included a GBP4.0 million loss on the sale of investment properties. Together
with the sale of a 70 per cent owned subsidiary, Capital Enterprise Centres,
these disposals excluding the Crown Estates restructuring realised GBP166
million cash, loan notes or reduction in debt and removed GBP170 million
property from the balance sheet.
The revaluation deficit reflects the continued expansion of yields which has
affected property valuations since 30 June 2007. Most of the valuation movement
of UK regional shopping centres in the 6 months to 30 June 2008 is estimated to
have derived from a change in yields rather than rental growth. The related
nominal equivalent yields were as follows:
30 June 31 March 31 December 30 June
2008 2008 2007 2007
UK regional shopping
centres 5.51% 5.34% 5.07% 4.77%
UK non-shopping centre
properties 5.25% 5.23% 5.18% 4.95%
Headline administration expenses, which increased compared with the 6 months to
30 June 2007, are significantly affected by the inclusion of the results of
Earls Court and Olympia for the first half year in 2008:-
Corporate and
property Exhibition Reported
GBPm GBPm GBPm
6 months to 30 June 2007 17.0 - 17.0
6 months to 31 December 2007 23.1 5.1 28.2
6 months to 30 June 2008 23.8 4.4 28.2
The costs of 2008 and the second half of 2007 include a number of one-off items
related to embarking on a reorganisation of the finance and IT functions. In
addition, costs of GBP2.3 million (year ended 2007 GBP1.6 million) were
incurred to support development initiatives in the UK, India and China. In July
the group signed an agreement with BT to outsource its IT infrastructure, and
will, as a consequence, record a one-off charge of GBP2.5 million which will be
included in the second half administration cost.
The income statement reflects an impairment charge of GBP21.6 million relating
to the goodwill associated with the Covent Garden restaurants, acquired in the
last quarter of 2007. The acquisition of these restaurants provided the access
to leases which will in time be reflected in the uplift of the property values.
In the meantime in accordance with IAS 36, the cashflow from these units has
been reviewed and the group has determined that it is not appropriate to
maintain the goodwill on the balance sheet.
Net interest payable amounted to GBP109.4 million in the first half of 2008
(2007 GBP93.1 million) reflecting the increased level of debt, particularly
following the Earls Court and Olympia acquisition.
The tax credit of GBP4.0 million for the first half of 2008 included a small
charge to current tax and a deferred tax credit resulting from the property
revaluation deficit.
The loss attributable to minority interests amounted to GBP27.5 million (30
June 2007 - profit of GBP4.0 million). This reflected the shares of partners in
the underlying profit, principally the MetroCentre and Earls Court and Olympia,
totalling GBP5.3 million (30 June 2007 GBP1.6 million) and the revaluation
deficit after tax of GBP32.8 million (30 June 2007 gain of GBP2.4 million).
Balance sheet
Total equity has fallen from GBP4,709 million to GBP4,229 million (10.2 per
cent) in the six months to 30 June 2008. The fall in net asset value was
particularly influenced by the property revaluation, amounting to GBP634.5
million, offset by the change in fair value of derivative financial instruments
of GBP140.1 million. On a diluted adjusted basis, the net asset value per share
has fallen by 12 per cent from 1246p (1264p less the 2007 final dividend of
17.6p) to 1095p.
Investments comprise:
Balance sheet value Cost
30 June 31 December 30 June
2008 2007 2008
GBPm GBPm GBPm
China 43.9 13.8 43.9
India 37.5 32.9 34.8
Real estate debt securities 41.5 - 41.8
Other 4.5 4.3 4.5
Total Investments 127.4 51.0 125.0
The investment in China is in two US dollar-denominated Real Estate Growth
Funds with real estate investments and developments in a number of locations in
China. The first fund has been operational since May 2007. The group has
undertaken to invest an additional $64 million (GBP32 million) in the second
fund of which it is a sponsoring founder investor. In accordance with fund
industry standard practice, the surplus of $5 million shown by the most recent
valuation (31 March 2008) has not been recognised.
The investment in India comprises a 5.25 per cent holding in Provogue (a
publicly listed company) and a 25 per cent interest in Prozone Liberty, a 75
per cent subsidiary of Provogue, which is developing four shopping centres.
Both shareholdings are classified as "non-current asset investments" in the
balance sheet. The Provogue investment is held at fair value, with changes in
fair value recognised in equity. The Prozone Liberty holding is currently held
at cost and, as its activities become more significant, its treatment as an
associated company will be considered.
To take advantage of the dislocation in pricing on traded Commercial
Mortgage-Backed Securities ("CMBS"), CapCo Opportunities acquired GBP51 million
nominal value of third party notes for consideration of GBP42 million. These
are almost equally split by value into "AAA" rated and "A" / "BBB" groups. The
combination of yield and accretion is expected to produce a very satisfactory
return taking account of the risk of loss by default. The assets are written up
by way of accretion to reach par at maturity. The accretion, together with the
interest receivable, is recorded in the income statement as interest
receivable. The fair value adjustment is reflected by a movement in reserves.
In the first half of 2008 these amounts were respectively GBP0.5 million and
GBP(0.8) million.
Financial position and treasury activities
During the first half of 2008, Liberty International`s net debt increased from
GBP3,668 million to GBP3,740 million. Net debt comprised GBP3,858 million of
debt and GBP118 million of cash, and represents a debt to assets ratio of 46
per cent (31 December 2007 42 per cent).
The weighted average maturity of the group`s debt was 6.4 years and the
weighted average cost of debt was 6.0 per cent, fully hedged against interest
rate movements.
Liberty International has maintained a strong financial position with
unutilised committed facilities at 30 June 2008 of GBP360 million (31 December
2007 GBP540 million), which combined with the cash balances of GBP118 million
provide total liquidity of GBP478 million. This is in excess of commitments.
The group`s debt structure remains strong and banking covenants are being met.
Loans are predominantly fixed rate, asset-specific and non-recourse and there
are no significant maturities before 2011. The following tables show the
underlying balance sheets taking out the minorities` share of debt and IFRS
adjustments for head leases split between secured and unsecured finance:
Consolidated Minorities` Underlying
balance share in Head balance
sheet JVs leases sheet
GBPm GBPm GBPm GBPm
Investment properties 7,949 (589) (53) 7,307
Other fixed assets 128 128
8,077 (589) (53) 7,435
Net debt 3,740 (312) (53) 3,375
Debt to assets ratio 46% 53% 45%
Underlying
balance
sheet Secured Unsecured
GBPm GBPm GBPm
Investment properties 7,307 6,132 1,175
Other fixed assets 128 - 128
7,435 6,132 1,303
Net debt 3,375 3,264 111
Debt to assets ratio 45% 53% 9%
The values of investment properties have fallen by 13.5 per cent, from their
peak at 30 June 2007, and the loan-to-value ratio on the secured assets remains
conservative at 53 per cent (31 December 2007 51 per cent).
The two principal bank covenants are loan to value and interest cover ratios on
specific properties in the non-recourse secured facilities and group interest
cover ratio in the unsecured facilities. The group has cure rights in the event
of any covenant breach, but does not currently anticipate any such breaches. In
the light of prevailing market conditions, a review of the sensitivity of
downside scenarios of asset values and interest cover has been conducted, and
this shows considerable further falls in property values and marked reductions
in rental income would be required to trigger any default in any of the group`s
own facilities.
The group`s net borrowing at 30 June 2008 of GBP3,740 million included GBP555
million fixed rate debt and the remainder fixed by way of derivative financial
instruments.
Long term interest rates have been volatile, and rose strongly at the end of
June 2008. The 10 year UK interest rate swap, a reasonable proxy for our
hedging strategy, rose from 5.02 per cent at 31 December 2007 to 5.65 per cent
at 30 June 2008. As a result the group recorded in its income statement a
surplus of GBP140 million in the half year ended 30 June 2008 on revaluation of
the derivative financial instruments used to fix interest rates on the group`s
debt.
During the first half of 2008 as part of its treasury activities, the group
purchased GBP110.6 million nominal of CMBS relating to certain of CSC`s
shopping centres recording an exceptional profit of GBP13.2 million. The group
currently holds GBP221.7 million CMBS relating to CSC assets, held on the
group`s balance sheet as a deduction from the group`s debt, at par value.
The fair value of the group`s fixed rate debt instruments detailed in note 15
exceeds the balance sheet value, and would, if recognised, reduce the diluted
adjusted NAV per share by 11p. This, however, would be offset by an GBP82
million after tax surplus on derivative instruments amounting to 22 pence per
share, also not recognised in diluted adjusted NAV per share of 1095p.
The CMBS related debt which amounted to GBP1,670 million at 30 June 2008 and
which is held on the balance sheet at amortised cost, had a market value of
GBP1,483 million. This discount is equivalent to 52 pence per share.
Share repurchases
Liberty International has shareholder approval to repurchase up to 10 per cent
of its shares. Any repurchases are made selectively, taking careful account of
the scale of the group`s development programme and financial commitments and
resources. During the first half of 2008 Liberty International bought 350,000
shares at an average price of 869 pence per share.
Tax
The group is in compliance with the conditions necessary to retain its REIT
status. The group has agreed with HMRC to settle the REIT entry charge over 4
years to early 2011 which, together with imputed interest, amounts to GBP169
million. During the first half of 2008 the group spent GBP30 million cash on
the REIT entry charge (year ended 31 December 2007 GBP16 million) and expects
to pay a further GBP123 million. The group has, since becoming a REIT, saved
tax on capital gains and rental profits covered by the REIT exemption of GBP114
million to 30 June. The REIT entry charge was recognised in the income
statement in 2006. In the 6 months to 30 June 2008 the charge to the income
statement was GBP1.6 million, reflecting the interest on entry payments.
As a UK REIT the company is required to allocate a portion of its dividends as
a Property Income Distribution ("PID") and pay such dividends after deduction
of withholding tax unless specific exemptions apply. The level of PID depends
on a number of factors and is mitigated by the availability of capital
allowances and capitalised interest. In 2007, the interim dividend was declared
a PID, and the interim dividend for 2008 is also wholly a PID.
Developments
Details of the redevelopment and development properties are set-out below:
Development Expenditure Revaluation
6 months 6 months
ended 30 June ended 30
2008 Cumulative June 2008
GBPm GBPm GBPm
Capital Shopping Centres
St David`s 2, Cardiff 30.3 171.8 (25.5)
Westgate, Oxford 12.2 32.9 (13.6)
Other 0.2 0.5 (3.4)
Capital & Counties 22.0 65.3 (26.5)
Total developments and
redevelopments 64.7 270.5 (69.0)
Costs to
Market complete as
Value at 30 at 30 June Expected
June 2008 2008 Rent
GBPm GBPm GBPm
Capital Shopping Centres
St David`s 2, Cardiff 143.7 163.0 18
Westgate, Oxford 35.0 Uncommitted N/A
Other 50.5 Uncommitted N/A
Capital & Counties 111.3 20.0 N/A
Total developments and
redevelopments 340.5 183.0
In addition, GBP7.8 million was incurred in the half year on the Southern
Gateway redevelopment at Eldon Square, Newcastle. This is classified within the
completed investment properties. CSC`s share of costs to complete amounted to
GBP44 million at 30 June 2008.
Contracts have been exchanged for the sale of the major refurbishment at Broad
Gate, Leeds. The transaction is expected to be concluded in early 2009 on
completion of the development, for consideration of GBP69 million, in excess of
its current market value and anticipated costs to complete. This transaction is
not yet reflected in the financial statements.
Principal risks and uncertainties
The principal risks and uncertainties relating to the business at 31 December
2007 were set out in the Directors` Report on Page 18 of the Annual Report. The
risk mitigation strategies are contained in that section, with an in-depth
disclosure relating to financial instruments shown on pages 38 to 42.
The view of the Liberty International Board of Directors is that the nature of
these risks has not changed since 7 March 2008 nor is it expected that they
will change over the course of the next six months. However, in terms of risk
mitigation, management will be vigilant to anticipate and respond to any
problems caused or exacerbated by the current economic uncertainty.
The risks identified are shown below:
Risk Description
Financial risks Interest rate movement
Liquidity risk
Market price risk
Change in the value of property portfolio
General economic downturn
Asset management risks Increased voids
Failure to meet rental targets
Investment/Strategic risks Diversification into new areas of property use and
geographical location
Development risks Acquisition of sites for development
Securing planning consent for developments
Commitment to proceed
Construction and letting risk
People/HR risks Appointment and retention of key staff
Disaster/Terrorism risk Effect of natural disaster/terrorist strike on
business continuity
Health & Safety Responsibility for the safety of visitors to
shopping centres
Impact on reputation of potential criminal/civil
proceedings
6 August 2008
UNDERLYING PROFIT STATEMENT (unaudited)
For the six months ended 30 June 2008
Quarter Quarter Six months
ended ended ended
30 June 31 March 30 June
2008 2008 2008
GBPm GBPm GBPm
UK shopping centres 65.6 74.5 140.1
Other commercial properties 24.3 29.8 54.1
Net rental income 89.9 104.3 194.2
Other (expense)/income (0.1) 0.6 0.5
89.8 104.9 194.7
Administration expenses (13.7) (14.5) (28.2)
Operating profit (underlying*) 76.1 90.4 166.5
Interest payable (57.0) (58.4) (115.4)
Interest receivable 5.0 1.0 6.0
Net finance costs (underlying*) (52.0) (57.4) (109.4)
Profit before tax (underlying*) 24.1 33.0 57.1
Property trading profits - 0.9 0.9
Tax on adjusted profit (2.0) (0.5) (2.5)
Minority interests (2.3) (3.0) (5.3)
Earnings used for calculation of
adjusted earnings per share 19.8 30.4 50.2
Adjusted earnings per share 5.5p 8.4p 13.9p
Restated Restated
Quarter Quarter Six months
ended ended ended
30 June 31 March 30 June
2007 2007 2007
GBPm GBPm GBPm
UK shopping centres 69.3 71.8 141.1
Other commercial properties 18.2 19.5 37.7
Net rental income 87.5 91.3 178.8
Other (expense)/income (0.1) 0.4 0.3
87.4 91.7 179.1
Administration expenses (9.6) (7.4) (17.0)
Operating profit (underlying*) 77.8 84.3 162.1
Interest payable (46.8) (49.7) (96.5)
Interest receivable 2.1 1.3 3.4
Net finance costs (underlying*) (44.7) (48.4) (93.1)
Profit before tax (underlying*) 33.1 35.9 69.0
Property trading profits 0.7 - 0.7
Tax on adjusted profit 0.6 (0.5) 0.1
Minority interests (1.6) - (1.6)
Earnings used for calculation of
adjusted earnings per share 32.8 35.4 68.2
Adjusted earnings per share 9.0p 9.8p 18.8p
* before property trading, valuation and exceptional items
DIRECTORS` RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the condensed set of financial
statements, in accordance with applicable law and regulations. The Directors
confirm that, to the best of their knowledge:
the condensed set of financial statements on pages 28 to 44 has been prepared
in accordance with IAS 34 "Interim Financial Reporting", as adopted by the
European Union;
and
the condensed set of financial statements on pages 28 to 44 includes a true
and fair review of the information required by Sections DTR 4.2.7R and DTR
4.2.8R of the Disclosure and Transparency Rules of the United Kingdom`s
Financial Services Authority.
The operating and financial review on pages 10 to 24 refers to important events
which have taken place in the period.
The principal risks and uncertainties facing the business are referred to on
pages 22 to 23 of the operating and financial review.
Related party transactions are set out in note 21 of the condensed set of
financial statements.
A list of current Directors is maintained on the Liberty International PLC
website: www.liberty-international.co.uk.
By order of the Board
D A Fischel
Chief Executive
I C Durant
Finance Director
6 August 2008
INDEPENDENT REVIEW REPORT TO LIBERTY INTERNATIONAL PLC
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June
2008, which comprises the consolidated income statement, consolidated balance
sheet, consolidated statement of recognised income and expense, consolidated
statement of cash flows and related notes. We have read the other information
contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors` responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom`s Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity` issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2008 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom`s Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
6 August 2008
Notes:
a) The maintenance and integrity of the Liberty International PLC website is
the responsibility of the Directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
CONSOLIDATED INCOME STATEMENT (unaudited)
For the six months ended 30 June 2008
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
Notes GBPm GBPm GBPm
Revenue 2 308.3 267.6 574.6
Rental income 296.9 260.1 546.7
Rental expenses (102.7) (81.3) (172.4)
Net rental income 2 194.2 178.8 374.3
Other income 1.4 1.0 2.0
(Deficit)/gain on
revaluation and sale of
investment and
development property 3 (638.5) 233.2 (279.1)
Profit on sale of
subsidiary 4 0.8 - -
(442.1) 413.0 97.2
Administration expenses
Ongoing expenses (28.2) (17.0) (45.2)
Impairment of goodwill 5 (21.6) - -
Operating (loss)/profit (491.9) 396.0 52.0
Interest payable 6 (115.4) (96.5) (209.3)
Interest receivable 6.0 3.4 8.8
Other finance
income/(costs) 6 3.5 (1.9) (3.3)
Change in fair value of
derivative financial
instruments 27.0
140.1 251.2
Net finance costs 34.2 156.2 (176.8)
(Loss)/profit before tax (457.7) 552.2 (124.8)
Current tax (1.9) (0.9) (2.7)
Deferred tax 7.5 (46.0) (23.8)
REIT entry charge (1.6) (1.8) (3.9)
Taxation 7 4.0 (48.7) (30.4)
(Loss)/profit for the
period (453.7) 503.5 (155.2)
Loss/(profit)
attributable to
minority interests 8 27.5 (4.0) 50.2
(Loss)/profit for the
period attributable to
equity shareholders (426.2) 499.5 (105.0)
Basic (loss)/earnings
per share 17 (117.9)p 138.0p (29.0)p
Diluted (loss)/earnings
per share 17 (112.9)p 133.0p (26.6)p
Adjusted earnings per share are shown in note 17.
Notes 1 to 23 form part of the condensed set of financial statements.
CONSOLIDATED BALANCE SHEET (unaudited)
As at 30 June 2008
Restated Restated
As at As at As at
30 June 31 December 30 June
2008 2007 2007
Notes GBPm GBPm GBPm
Non-current assets
Goodwill 5 5.3 26.6 -
Investment and
development property 10 7,948.9 8,622.8 8,561.6
Plant and equipment 0.7 1.2 0.9
Investments 127.4 51.0 23.5
Trade and other
receivables 12 84.6 78.5 68.6
8,166.9 8,780.1 8,654.6
Current assets
Trading property 11 38.3 43.7 46.8
Derivative financial
instruments 114.7 25.4 160.4
Trade and other
receivables 12 128.4 134.9 123.7
Cash and cash equivalents 117.8 188.4 199.4
399.2 392.4 530.3
Total assets 8,566.1 9,172.5 9,184.9
Current liabilities
Trade and other payables (274.8) (341.7) (263.4)
Tax liabilities (5.0) (5.7) (1.4)
Borrowings, including
finance leases 13 (52.1) (152.3) (167.9)
Derivative financial
instruments (42.6) (97.8) (13.1)
(374.5) (597.5) (445.8)
Non-current liabilities
Borrowings, including
finance leases 13 (3,805.7) (3,704.0) (3,179.5)
Deferred tax provision 7 (60.6) (73.7) (85.0)
Other provisions (1.4) (1.4) (4.8)
Other payables (95.0) (87.0) (108.3)
(3,962.7) (3,866.1) (3,377.6)
Total liabilities (4,337.2) (4,463.6) (3,823.4)
Net assets 4,228.9 4,708.9 5,361.5
Equity
Called up ordinary share
capital 181.4 181.4 181.8
Share premium 975.6 975.6 980.6
Treasury shares (11.7) (9.6) (4.3)
Convertible bond reserve 9.1 9.1 9.1
Other non-distributable
reserves 274.2 275.4 702.1
Retained earnings 2,583.2 3,075.1 3,301.9
Attributable to equity
shareholders 4,011.8 4,507.0 5,171.2
Minority interests 217.1 201.9 190.3
Total equity 18 4,228.9 4,708.9 5,361.5
Diluted, adjusted net
assets per share 17 1095p 1264p 1385p
Basic net assets per share 17 1110p 1246p 1429p
Notes 1 to 23 form part of the condensed set of financial statements.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited)
For the six months ended 30 June 2008
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
Notes GBPm GBPm GBPm
(Loss)/profit for the
period as per the
consolidated income
statement before
minority interest (453.7) 503.5 (155.2)
Other recognised income
and expense in the period:
Actuarial losses on
defined benefit pension schemes - - (2.0)
Tax on items taken
directly to equity - - 0.5
(Losses)/gains on
revaluation of
investments, net
exchange translation
differences and other movements (3.4) (0.4) 6.4
Net loss recognised in
equity due to minority
interests (on the above) - - (0.7)
Net (losses)/gains
recognised in equity (3.4) (0.4) 4.2
Total recognised
(expense) and income
for the period (457.1) 503.1 (151.0)
Total recognised
expense and (income)
attributable to
minority interests 18(b) 27.5 (4.0) 50.9
Total recognised
(expense) and income
for the period
attributable
to equity shareholders 18(a) (429.6) 499.1 (100.1)
A summary of changes in group equity is shown in note 18.
Notes 1 to 23 form part of the condensed set of financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the six months ended 30 June 2008
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
Notes GBPm GBPm GBPm
Cash generated from
operations 14 204.9 51.9 266.8
Interest paid (125.6) (85.1) (222.0)
Interest received 6.0 3.6 9.8
Tax paid (3.4) - 2.7
REIT entry charge (29.7) - (15.6)
Cash flows from
operating activities 52.2 (29.6) 41.7
Cash flows from
investing activities
Purchase and
development of property (129.5) (229.3) (575.5)
Sale of property 106.1 287.3 459.2
Purchase of subsidiary
companies - - (80.0)
Sale of subsidiary
companies 5.0 - -
Purchase of non-current
asset investments (82.7) (23.5) (39.2)
Cash flows from
investing activities (101.1) 34.5 (235.5)
Cash flows from
financing activities
Issue and repurchase of shares (2.1) 2.1 (3.1)
Borrowings drawn 292.0 130.0 382.6
Borrowings repaid (248.1) (197.0) (197.0)
Equity dividends paid 9 (63.5) (62.4) (122.1)
Cash flows from
financing activities (21.7) (127.3) 60.4
Net decrease in cash
and cash equivalents (70.6) (122.4) (133.4)
Cash and cash
equivalents at
beginning of
period/year 188.4 321.8 321.8
Cash and cash
equivalents at end of
period/year 117.8 199.4 188.4
Notes 1 to 23 form part of the condensed set of financial statements.
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
1 Basis of preparation
The condensed set of financial statements is unaudited and does not constitute
statutory accounts within the meaning of s240 of the Companies Act 1985. The
condensed set of financial statements has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and with
IAS 34 as adopted by the EU. The auditors` report on the financial statements
for 2007, which have been filed with the Registrar of Companies and were
prepared in accordance with International Financial Reporting Standards as
endorsed by the European Union ("IFRS"), IFRIC interpretations and with those
parts of the Companies Act 1985 applicable to companies reporting under IFRS,
was unqualified, did not contain an emphasis of matter paragraph and did not
contain a statement made under s237(2) or s237(3) of the Companies Act 1985.
The condensed set of financial statements should be read in conjunction with
the financial statements for the year ended 31 December 2007, which have been
prepared in accordance with IFRS as adopted by the European Union. The
condensed set of financial statements has been reviewed, not audited.
The largest area of estimation and uncertainty in the condensed set of
financial statements is in respect of the valuation of the property portfolio
and investments, where external valuations are obtained.
There is no material seasonal impact on the group`s financial performance.
Taxes on income in interim periods are accrued using the tax rate expected to
be applicable to total annual earnings.
Except as described below, the condensed set of financial statements has been
prepared using the accounting policies set out on pages 26 and 27 of the
group`s financial statements for 2007.
The following new standards, amendments to standards and interpretations have
been issued but are not yet effective and have not been adopted early:
IFRS 8, `Operating Segments`, effective for annual periods beginning on 1
January 2009. IFRS 8 replaces IAS 14, `Segment Reporting`, and requires that
segment information is presented on the same basis as that used for internal
management reporting. The expected impact is still being assessed in detail,
but it appears likely that this will have minimal impact on disclosure.
IAS 1 (amendment), `Presentation of Financial Statements`, effective for annual
periods beginning on 1 January 2009. Proforma financial statements under the
revised disclosure requirements are currently under development.
IAS 32 (amendment) - `Financial instruments: presentation`, effective for
periods beginning on or after 1 January 2009.
This is not relevant to the group, as the group does not have any puttable
instruments.
IFRIC 15, `Agreements for the Construction of Real Estate`, effective for
periods beginning on or after 1 January 2009. Management is evaluating the
effect of this interpretation on its revenue recognition.
IFRIC 16 - `Hedges of a net investment in a foreign operation`, effective for
periods beginning on or after 1 October 2008. Management is evaluating the
effect of this interpretation on its net investment in foreign operations
hedge.
The assessment of new standards, amendments and interpretations issued but not
effective, not included above and issued prior to the approval of the Annual
Report for 2007, are not anticipated to have a material impact on the Financial
Statements, as stated on page 26 of the Annual Report.
Derivative financial instruments are classified as held for trading per IAS 39
`Financial Instruments: recognition and measurement`, and presented as current
in the balance sheet in accordance with IAS 1 `Presentation of Financial
Statements`. The prior year balances have been restated to provide appropriate
comparison. This has resulted in restatement of GBP5.0 million as at 31
December 2007 and GBP152.0 million as at 30 June 2007 from "Non-current trade
and other receivables" to "Current trade and other receivables"; and GBP94.0
million and GBP7.6 million respectively from "Non-current liabilities" to
"Current liabilities". There is no impact on the income statement or basic and
diluted earnings per share for the year ended 31 December 2007 and half year
ended 30 June 2007 as a result of this reclassification. Derivative current
assets are shown separately on the face of the balance sheet whereas previously
they were aggregated with trade and other receivables.
In the financial statements for the year ended 31 December 2007 the MetroCentre
Partnership was consolidated as a subsidiary, with effect from the formation
date of 25 March 2007, reflecting the control exercised by Liberty
International. This had previously been treated on a proportional consolidation
basis. The Directors therefore believe it to be appropriate that this revised
treatment is reflected in the figures for 30 June 2007 and have restated the
figures accordingly.
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
1 Basis of preparation (continued)
The overall impact on net asset value of the group is GBPnil. However, the
impact on the individual lines is as follows:
Six months Nine months
ended ended
30 June 30 September
2007 2007
GBPm GBPm
Balance sheet
Increase in property value 436.8 436.8
Increase in current assets 2.3 2.3
Increase in current liabilities (16.0) (43.0)
Increase in finance loan (232.8) (232.0)
Overall increase in minority interest 190.3 164.1
Income statement
Decrease in profit on sale of property (16.0) (16.0)
Increase in property valuation gain 16.0 16.0
Increase in net rental income 5.2 9.6
Increase in valuation movement 2.4 0.4
Increase in finance interest charge (3.6) (7.2)
Movement in minority interest 4.0 2.8
2 Segmental analysis
Six months ended 30 June 2008
UK Other
shopping commercial
centres properties Exhibition
GBPm GBPm GBPm
Revenue 207.4 58.1 35.9
Rental income including service
charge and other income 202.8 51.6 35.9
Rent payable and other outgoings (62.7) (16.9) (17.3)
Net rental income 140.1 34.7 18.6
Property trading profits 0.3 0.6 -
Other income - 0.2 -
Deficit on revaluation and sale of
investment and
development property (518.9) (96.6) (23.0)
Profit on sale of subsidiary - 0.8 -
Segment result before overheads and
finance costs (378.5) (60.3) (4.4)
Six months ended 30 June 2008
Other Group
activities total
GBPm GBPm
Revenue 6.9 308.3
Rental income including service charge and other
income 6.6 296.9
Rent payable and other outgoings (5.8) (102.7)
Net rental income 0.8 194.2
Property trading profits - 0.9
Other income 0.3 0.5
Deficit on revaluation and sale of investment and
development property - (638.5)
Profit on sale of subsidiary - 0.8
Segment result before overheads and finance costs 1.1 (442.1)
Six months ended 30 June 2007
UK Other
shopping commercial
centres properties Exhibition
GBPm GBPm GBPm
Revenue 205.0 62.4 -
Rental income including service
charge and other income 205.0 55.1 -
Rent payable and other outgoings (63.9) (17.4) -
Net rental income 141.1 37.7 -
Property trading profits - 0.7 -
Other income - 0.1 -
Gain on revaluation and sale of
investment and
development property 168.3 64.9 -
Segment result before overheads and
finance costs 309.4 103.4 -
Six months ended 30 June 2007
Other Group
activities total
GBPm GBPm
Revenue 0.2 267.6
Rental income including service charge and other
income - 260.1
Rent payable and other outgoings - (81.3)
Net rental income - 178.8
Property trading profits - 0.7
Other income 0.2 0.3
Gain on revaluation and sale of investment and
development property - 233.2
Segment result before overheads and finance costs 0.2 413.0
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
2 Segmental analysis (continued)
Year ended 31 December 2007
UK Other
shopping commercial
centres properties Exhibition
GBPm GBPm GBPm
Revenue 424.8 126.3 24.7
Rental income including service
charge and other income 411.7 110.3 24.7
Rent payable and other outgoings (122.9) (34.9) (14.6)
Net rental income 288.8 75.4 10.1
Property trading profits 1.5 1.4 -
Other income - 0.3 -
(Deficit)/gain on revaluation and
sale of investment and
development property (284.5) 0.6 4.8
Segment result before overheads and
finance costs 5.8 77.7 14.9
Year ended 31 December 2007
Other Group
activities total
GBPm GBPm
Revenue (1.2) 574.6
Rental income including service charge and other
income - 546.7
Rent payable and other outgoings - (172.4)
Net rental income - 374.3
Property trading profits - 2.9
Other income (1.2) (0.9)
(Deficit)/gain on revaluation and sale of investment
and development property - (279.1)
Segment result before overheads and finance costs (1.2) 97.2
3 (Deficit)/gain on revaluation and sale of investment and development property
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
GBPm GBPm GBPm
(Deficit)/gain on revaluation of
investment and development
property (634.5) 228.1 (316.5)
(Deficit)/gain on sale of
investment property (4.0) 5.1 37.4
(Deficit)/gain on revaluation and
sale of investment and
development property (638.5) 233.2 (279.1)
4 Profit on sale of subsidiary
The group disposed of its 70 per cent interest in Capital Enterprise Centres
(Jersey) Limited during the period for a consideration of GBP8.2 million in
cash and loan notes. This gave rise to a GBP0.8 million profit on disposal.
5 Impairment of goodwill
Following an impairment test, required under IAS 36, the goodwill arising on
the acquisition of the Covent Garden Restaurants has been written off in full.
As a result, a charge of GBP21.6 million has been made to the income statement
in the period; GBP21.3 million relates to the impairment of goodwill to 31
December 2007 and GBP0.3 million to acquisition costs incurred in the current
period being fully impaired. This is due to the advanced state of the plans to
reconfigure the buildings in which they are located. These plans are, however,
subject to commercial agreement.
6 Finance costs
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
GBPm GBPm GBPm
Gross interest payable - recurring 124.4 103.0 224.4
Interest capitalised on
developments (9.0) (6.5) (15.1)
Interest payable 115.4 96.5 209.3
Costs of termination of financial
instruments 9.7 - 2.0
Profit on repurchase of CMBS notes (13.2) - -
Issue costs written off on
redemption of loans - 1.9 1.3
Other finance (income)/costs (3.5) 1.9 3.3
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
7 Taxation
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
GBPm GBPm GBPm
Current tax on profits excluding
exceptional items and property
disposals 1.9 0.9 2.7
Deferred tax:
On investment and development
properties (12.5) 2.9 8.7
On derivative financial
instruments 4.4 44.1 15.6
On other temporary differences 0.6 (1.0) (0.5)
Deferred tax on profits excluding
exceptional items and property
disposals (7.5) 46.0 23.8
Tax on profits excluding
exceptional items and property
disposals (5.6) 46.9 26.5
REIT entry charge 1.6 1.8 3.9
Taxation (credit)/charge (4.0) 48.7 30.4
Under IAS 12 (Income Taxes), provision is made for the deferred tax liability
associated with the revaluation of investment properties at the corporate tax
rate expected to apply to the group at the time of use. For those UK properties
qualifying as REIT properties the relevant tax rate will be 0 per cent, for
other UK properties the relevant tax rate will be 28 per cent and for overseas
properties the relevant tax rate will be the prevailing corporate tax rate in
that country.
The deferred tax provision on the revaluation of investment properties
calculated under IAS 12 is GBP24.2 million at 30 June 2008 (31 December 2007 -
GBP35.8 million, 30 June 2007 - GBP33.8 million). This IAS 12 calculation does
not reflect the expected amount of tax that would be payable if the assets were
sold. The group estimates that calculated on a disposal basis the liability is
GBP77.0 million at 30 June 2008 (31 December 2007 - GBP86.8 million, 30 June
2007 - GBP52.9 million). If upon sale the group retained all the capital
allowances, which is within the control of the group, the deferred tax
provision in respect of capital allowances of GBP43.4 million may also be
released.
Where gains such as revaluation of development properties and other assets and
actuarial movements on pension funds are dealt with in reserves, any deferred
tax is also dealt with in reserves.
Movements in the provision for deferred tax
As at
31 December Recognised Sale of
2007 in income subsidiaries
GBPm GBPm GBPm
Revaluation of investment and
development property 35.8 (6.6) (5.0)
Capital allowances 49.9 (5.9) (0.6)
Derivative financial instruments (14.7) 4.4 -
Other temporary differences 2.7 0.6 -
Net deferred tax provision 73.7 (7.5) (5.6)
As at
Recognised 30 June
in equity 2008
GBPm GBPm
Revaluation of investment and development property - 24.2
Capital allowances - 43.4
Derivative financial instruments - (10.3)
Other temporary differences - 3.3
Net deferred tax provision - 60.6
As at
31 December Recognised Acquisition of
2006 in income subsidiaries
GBPm GBPm GBPm
Revaluation of investment and
development property 32.1 4.2 -
Capital allowances 31.8 4.5 14.9
Derivative financial
instruments (32.2) 15.6 1.9
Other temporary differences 9.1 (0.5) (5.2)
Net deferred tax provision 40.8 23.8 11.6
As at
Recognised 31 December
in equity 2007
GBPm GBPm
Revaluation of investment and development
property (0.5) 35.8
Capital allowances (1.3) 49.9
Derivative financial instruments - (14.7)
Other temporary differences (0.7) 2.7
Net deferred tax provision (2.5) 73.7
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
7 Taxation (continued)
As at
31 December Recognised Acquisition of
2006 in income subsidiaries
GBPm GBPm GBPm
Revaluation of investment and
development property 32.1 2.2 -
Capital allowances 31.8 0.7 -
Derivative financial
instruments (32.2) 44.1 -
Other temporary differences 9.1 (1.0) -
Net deferred tax provision 40.8 46.0 -
As at
Recognised 30 June
in equity 2007
GBPm GBPm
Revaluation of investment and development property (0.5) 33.8
Capital allowances (1.3) 31.2
Derivative financial instruments - 11.9
Other temporary differences - 8.1
Net deferred tax provision (1.8) 85.0
All deferred tax liabilities are expected to have a maturity of more than one
year.
8 Minority interests
Minority interests comprise third party shares of the MetroCentre, the
Exhibition business and other assets; GBP5.3 million underlying profit and
GBP32.8 million deficit on revaluation after taxation (31 December 2007 -
GBP1.9 million underlying loss and GBP48.3 million deficit on revaluation after
taxation, 30 June 2007 - GBP1.6 million underlying profit and GBP2.4 million
gain on revaluation after taxation).
9 Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
GBPm GBPm GBPm
Ordinary shares
Prior period final dividend paid
of 17.6p per share (2007 - 17.25p) 63.5 62.4 62.4
Interim dividend paid of nil per
share (31 December 2007 - 16.5p) - - 59.7
Dividends paid 63.5 62.4 122.1
Proposed dividend of 16.5p per
share (30 June 2007 - 16.5p, 31
December 2007 - 17.6p) 59.6 59.7 63.6
10 Investment and development property
UK Other
shopping commercial
centres properties Total
GBPm GBPm GBPm
At 31 December 2007 6,466.0 2,156.8 8,622.8
Additions 69.1 91.8 160.9
Disposals (2.1) (198.3) (200.4)
Foreign exchange fluctuations - 0.1 0.1
Deficit on valuation (518.9) (115.6) (634.5)
At 30 June 2008 6,014.1 1,934.8 7,948.9
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
10 Investment and development property (continued)
UK Other
shopping commercial
centres properties Total
GBPm GBPm GBPm
At 31 December 2006 6,542.8 1,644.3 8,187.1
Additions 226.8 835.0 1,061.8
Disposals (14.2) (289.2) (303.4)
Foreign exchange fluctuations - (6.2) (6.2)
Deficit on valuation (289.4) (27.1) (316.5)
At 31 December 2007 6,466.0 2,156.8 8,622.8
Restated
UK Other
shopping commercial Restated
centres properties Total
GBPm GBPm GBPm
At 31 December 2006 6,542.8 1,644.3 8,187.1
Additions 63.1 252.5 315.6
Disposals (9.1) (154.1) (163.2)
Foreign exchange fluctuations - (6.0) (6.0)
Surplus on valuation 163.6 64.5 228.1
At 30 June 2007 6,760.4 1,801.2 8,561.6
The group`s interests in investment and development properties were valued as
at 30 June 2008, 31 December 2007 and 30 June 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 As at
30 June 31 December 30 June
2008 2007 2007
GBPm GBPm GBPm
Balance sheet carrying value of
investment and development property 7,948.9 8,622.8 8,561.6
Adjustment in respect of head leases
and incentives 11.4 12.1 24.9
Market value of investment and
development property 7,960.3 8,634.9 8,586.5
11 Trading property
The estimated replacement cost of trading properties based on market value
amounted to GBP38.3 million (31 December 2007 - GBP46.1 million, 30 June 2007 -
GBP51.0 million).
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
12 Trade and other receivables
Restated Restated
As at As at As at
30 June 31 December 30 June
2008 2007 2007
GBPm GBPm GBPm
Amounts falling due after more than
one year:
Other receivables 33.8 17.9 12.5
Prepayments and accrued income 50.8 60.6 56.1
84.6 78.5 68.6
Amounts falling due within one year:
Rents receivable 31.9 27.3 23.7
Other receivables 50.4 60.4 49.7
Prepayments and accrued income 46.1 47.2 50.3
128.4 134.9 123.7
13 Borrowings, including finance leases
Restated
As at As at As at
30 June 31 December 30 June
2008 2007 2007
GBPm GBPm GBPm
Amounts falling due within one year:
Secured borrowings
Bank loans and overdrafts 14.9 118.8 139.6
Commercial mortgage backed securities
("CMBS") notes 31.2 27.4 21.7
Finance lease obligations 6.0 6.1 6.6
Amounts falling due within one year 52.1 152.3 167.9
Amounts falling due after more than
one year:
Secured borrowings - non recourse
CMBS notes 2015 1,050.5 1,131.3 1,144.2
CMBS notes 2011 588.3 633.7 637.4
Bank loans 2017 117.2 117.2 -
Bank loans 2016 829.9 652.2 511.0
Bank loans 2013 251.3 251.2 251.1
Other loans 525.6 428.9 180.9
3,362.8 3,214.5 2,724.6
Other secured borrowings
Debentures 2027 226.2 226.1 225.9
3,589.0 3,440.6 2,950.5
Unsecured borrowings
CSC bonds 2013 26.6 26.6 26.6
CSC bonds 2009 31.4 31.4 31.2
Other loans - 43.0 16.0
3,647.0 3,541.6 3,024.3
GBP111.3 million 3.95% convertible
bonds due 2010 111.3 111.3 110.4
Finance lease obligations 47.4 51.1 44.8
Amounts falling due after more than
one year 3,805.7 3,704.0 3,179.5
Total borrowings, including finance
leases 3,857.8 3,856.3 3,347.4
Cash and cash equivalents (117.8) (188.4) (199.4)
Net borrowings 3,740.0 3,667.9 3,148.0
Certain borrowings of the group`s property subsidiaries are secured by charges
on specific property assets of those subsidiaries. Certain borrowing agreements
contain financial and other conditions that, if contravened, could alter the
repayment profile.
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
13 Borrowings, including finance leases (continued)
The group has various undrawn committed borrowing facilities. The facilities
available in respect of which all conditions precedent had been met were as
follows:
As at As at As at
30 June 31 December 30 June
2008 2007 2007
GBPm GBPm GBPm
Expiring in more than 2 years 360.0 540.0 535.0
These undrawn facilities are available at floating rates based on LIBOR plus
applicable margin.
14 Cash generated from operations
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
Notes GBPm GBPm GBPm
(Loss)/profit before tax (457.7) 552.2 (124.8)
Adjustments for:
Deficit/(gain) on
revaluation of
investment and
development
property 3 634.5 (228.1) 316.5
Deficit/(gain) on sale
of investment property 3 4.0 (5.1) (37.4)
Profit on sale of
subsidiary 4 (0.8) - -
Depreciation 0.2 - 0.3
Amortisation of lease
incentives and other
direct costs 9.3 1.5 (1.6)
Impairment of goodwill 5 21.6 - -
Interest payable 6 115.4 96.5 209.3
Interest receivable (6.0) (3.4) (8.8)
Exceptional finance
(income)/costs 6 (3.5) 1.9 3.3
Change in fair value of
derivative financial
instruments (140.1) (251.2) (27.0)
Changes in working
capital:
Change in trading
properties 5.4 (14.5) 8.5
Change in trade and
other receivables (5.9) (22.3) (6.4)
Change in trade and
other payables 28.5 (75.6) (65.1)
Cash generated from
operations 204.9 51.9 266.8
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
15 Fair values of financial instruments
As at 30 June 2008
Balance
sheet value Fair value
GBPm GBPm
Debentures and other fixed rate loans
Sterling
C&C 5.562% debenture 2027 226.2 282.4
CSC 6.875% unsecured bonds 2013 26.6 26.3
CSC 5.75% unsecured bonds 2009 31.4 31.5
US dollars
Fixed rate loans 159.9 160.8
444.1 501.0
Convertible bonds - fixed rate 111.3 127.5
As at 31 December 2007
Balance
sheet value Fair value
GBPm GBPm
Debentures and other fixed rate loans
Sterling
C&C 5.562% debenture 2027 226.1 342.0
CSC 6.875% unsecured bonds 2013 26.6 26.2
CSC 5.75% unsecured bonds 2009 31.4 31.5
US dollars
Fixed rate loans 161.0 160.6
445.1 560.3
Convertible bonds - fixed rate 111.3 152.7
As at 30 June 2007
Balance
sheet value Fair value
GBPm GBPm
Debentures and other fixed rate loans
Sterling
C&C 5.562% debenture 2027 225.9 327.5
CSC 6.875% unsecured bonds 2013 26.6 26.6
CSC 5.75% unsecured bonds 2009 31.2 31.7
US dollars
Fixed rate loans 155.3 153.4
439.0 539.2
Convertible bonds - fixed rate 110.4 160.3
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 11p per share (31 December 2007 -
21p, 30 June 2007 - 19p).
All other financial assets and liabilities included in the balance sheet are
stated at fair values.
Derivative financial instruments
As at As at As at
30 June 31 December 30 June
2008 2007 2007
GBPm GBPm GBPm
Current assets 114.7 25.4 160.4
Current liabilities (42.6) (97.8) (13.1)
72.1 (72.4) 147.3
Interest rate swaps
Notional principal
30 June 31 December 30 June
2008 2007 2007
GBPm GBPm GBPm
Effective on or after:
1 year 3,372 3,319 2,642
5 years 3,201 3,220 2,818
10 years 2,425 2,543 2,350
15 years 2,100 2,100 2,025
20 years 2,100 2,100 2,025
25 years 1,625 1,625 1,550
Average contracted rate
30 June 31 December 30 June
2008 2007 2007
% % %
Effective on or after:
1 year 5.26 5.27 5.31
5 years 5.16 5.16 5.10
10 years 4.69 4.72 4.68
15 years 4.58 4.58 4.57
20 years 4.58 4.58 4.57
25 years 4.40 4.40 4.38
16 Capital commitments
At 30 June 2008, the group was contractually committed to GBP283.2 million of
future expenditure for the purchase, construction, development and enhancement
of investment property and GBP50.2 million in respect of overseas investments
(31 December 2007 - GBP317.0 million, 30 June 2007 - GBP354.0 million).
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
17 Per share details
(a) (Loss)/earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
millions millions millions
Weighted average ordinary shares
in issue for calculation of basic
earnings per share 361.6 361.9 361.7
Weighted average ordinary shares
to be issued on conversion of bonds
and under employee incentive
arrangements 14.6 14.8 14.7
Weighted average ordinary shares
in issue for calculation of
diluted
earnings per share 376.2 376.7 376.4
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
GBPm GBPm GBPm
(Loss)/earnings used for
calculation of basic earnings
per share (426.2) 499.5 (105.0)
Reduction in interest charge from
conversion of bonds, net of tax 1.5 2.8 5.0
(Loss)/earnings used for
calculation of diluted earnings
per share (424.7) 502.3 (100.0)
Basic (loss)/earnings
per share (pence) (117.9)p 138.0p (29.0)p
Diluted (loss)/earnings
per share (pence) (112.9)p 133.0p (26.6)p
(Loss)/earnings used for
calculation of basic
earnings per share (426.2) 499.5 (105.0)
Add back/(less) deficit/(gain) on
revaluation and sale of
investment and
development property 638.5 (233.2) 279.1
Less profit on sale of subsidiary (0.8) - -
Add back impairment of goodwill 21.6 - -
(Less)/add back exceptional
finance (income)/costs (3.5) 1.9 3.3
Less change in fair value of
derivative financial instruments (140.1) (251.2) (27.0)
(Less)/add back deferred tax in
respect of investment and
development property (6.6) 2.2 4.2
Add back deferred tax in respect
of derivative financial
instruments 4.4 44.1 15.6
(Less)/add back deferred tax on
capital allowances (5.9) 0.7 4.5
Add back REIT entry charge 1.6 1.8 3.9
(Less)/add back amounts above due
(from)/to minority interests (32.8) 2.4 (48.3)
Earnings used for calculation of
adjusted earnings per share 50.2 68.2 130.3
Adjusted earnings per share (pence) 13.9p 18.8p 36.0p
Earnings used for calculation of
adjusted earnings per share 50.2 68.2 130.3
Reduction in interest charge from
conversion of bonds, net of tax 1.5 2.8 5.0
Earnings used for calculation of
adjusted, diluted earnings per share 51.7 71.0 135.3
Adjusted, diluted earnings per
share (pence) 13.7p 18.8p 35.9p
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
17 Per share details (continued)
(b) Net assets
Restated
As at As at As at
30 June 31 December 30 June
2008 2007 2007
GBPm GBPm GBPm
Basic net asset value used for
calculation of basic net assets
per share 4,011.8 4,507.0 5,171.2
Fair value of derivative financial
instruments (net of tax) (82.4) 57.7 (121.6)
Deferred tax on revaluation surpluses 24.2 35.8 33.8
Deferred tax on capital allowances 43.4 49.9 31.2
Unrecognised (deficit)/surplus on
trading properties (net of tax) (0.1) 1.7 3.2
Minority interests on the above 1.8 (15.9) (13.8)
Adjusted net asset value 3,998.7 4,636.2 5,104.0
Effect of dilution:
On conversion of bonds 111.3 111.3 110.4
On exercise of options 11.6 9.7 11.8
Diluted, adjusted net asset value used
for calculation of diluted, adjusted net
assets per share 4,121.6 4,757.2 5,226.2
Basic net assets per share 1110p 1246p 1429p
Diluted, adjusted net assets per share 1095p 1264p 1385p
(c) Shares in issue
As at As at As at
30 June 31 December 30 June
2008 2007 2007
Million Million Million
Shares in issue, excluding those held
by ESOP trust and treated as cancelled 361.3 361.5 362.0
Effect of dilution:
On conversion of bonds 13.9 13.9 13.9
On exercise of options 1.2 1.0 1.4
Diluted shares in issue 376.4 376.4 377.3
(d) Convertible debt
3.95 per cent convertible bonds due 2010
At 30 June 2008, 31 December 2007 and 30 June 2007 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 subject to the Liberty International ordinary
share price having traded at 120 per cent of the conversion price of 800p per
share for a specific period.
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
18 Summary of changes in equity
Restated
Six months Year Six months
ended ended ended
30 June 31 December 30 June
2008 2007 2007
Note GBPm GBPm GBPm
(a) Equity shareholders
Opening equity
shareholders` funds 4,507.0 4,732.4 4,732.4
Issue of shares 1.4 4.7 2.6
Cancellation of shares (3.5) (7.9) (0.5)
4,504.9 4,729.2 4,734.5
Total recognised
(expense) and income
for the
period attributable to
equity shareholders (429.6) (100.1) 499.1
4,075.3 4,629.1 5,233.6
Dividends paid 9 (63.5) (122.1) (62.4)
Closing shareholders`
equity 4,011.8 4,507.0 5,171.2
(b) Minority interest
Opening minority
interest 201.9 - -
Additions 2.5 252.8 186.3
Disposals (2.8) - -
Compound financial
instrument 43.0 - -
244.6 252.8 186.3
Total recognised
(expense) and income
for the period (27.5) (50.9) 4.0
Closing minority
interest 217.1 201.9 190.3
Total equity 4,228.9 4,708.9 5,361.5
19 Share capital and share premium
Six months Year ended
30 June 31 December
2008 2007
GBPm GBPm
Authorised
500,000,000 ordinary
shares of 50p each 250.0 250.0
Share Share
capital premium
GBPm GBPm
Issued
At 30 June 2008 and 31
December
2007 - 362,772,673
ordinary shares of 50p
each 181.4 975.6
Full details of the rights and obligations attaching to the ordinary shares are
contained in the company`s Articles of Association. These rights include an
entitlement to receive the company`s report and accounts, to attend and speak
at General Meetings of the company, to appoint proxies and to exercise voting
rights. Holders of ordinary shares may also receive dividends and may receive a
share of the company`s assets on the company`s liquidation. There are no
restrictions on the transfer of the ordinary shares.
At 6 August 2008, the company had an unexpired authority to repurchase shares
up to a maximum of 35,857,267 shares with a nominal value of GBP17.8 million,
and the directors have an unexpired authority to allot up to a maximum of
90,518,168 shares with a nominal value of GBP45.3 million.
Included within the issued share capital as at 30 June 2008 are 474,998
ordinary shares (31 December 2007 - 570,180) held by the Trustee of the
Employee Share Ownership Plan ("ESOP") which is operated by the company (note
20) and 1,050,000 treasury shares (31 December 2007 - 700,000). The nominal
value of these shares is GBP0.8 million (31 December 2007 - GBP0.6 million).
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS (unaudited)
20 Treasury shares and Employee Share Ownership Plan (ESOP)
During the period the company purchased a total of 350,000 shares with a
nominal value of GBP0.2 million. These shares are held as treasury shares.
The cost of shares in Liberty International purchased in the market and held by
the Trustee of the Employee Share Ownership Plan (ESOP) operated by the company
is also accounted for as treasury shares.
The purpose of the ESOP is to acquire and hold shares which will be transferred
to employees in the future under the group`s employee incentive arrangements.
Six months ended Year ended
30 June 2008 31 December 2007
Number GBPm Number GBPm
At 1 January 1.3 (9.6) 1.1 (6.4)
Acquired in the year 0.4 (3.5) 0.8 (7.9)
Disposed of on exercise of options (0.2) 1.4 (0.6) 4.7
At 30 June 2008 and 31 December 2007 1.5 (11.7) 1.3 (9.6)
21 Related party transactions
Key management* compensation
Six months Year ended Six months
ended ended ended
30 June 31 December 30 June
2008 2007 2007
GBPm GBPm GBPm
Salaries and short-term employee
benefits 2.6 5.5 2.2
Pensions and other
post-employment benefits 0.3 0.5 0.2
Share-based payment - 2.3 -
Other long-term payments - 0.9 -
Termination benefits 0.1 - -
3.0 9.2 2.4
*Key management comprises the Directors of Liberty International, and those
group employees who have been designated as Persons Discharging Managerial
Responsibilities ("PDMR").
22 Events after the balance sheet date
Details of the interim dividend proposed are given in note 9.
23 General information
The company is a public limited company incorporated in England and Wales and
domiciled in the UK. The address of its registered office is 40 Broadway,
London SW1H 0BT.
The company has its primary listing on the London Stock Exchange. The company
has a secondary listing on the JSE, South Africa.
The condensed set of financial statements was approved for issue on 6 August
2008.
Date: 06/08/2008 08:08:01 Produced by the JSE SENS Department.
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