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LBT
LILII
LBT - Liberty International Plc - Interim Report For The Nine Months
Ended 30 September 2008
LIBERTY INTERNATIONAL PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: LBT
Issuer Code: LILI
INTERIM REPORT FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2008
Attached is the interim report for the nine months ended 30 September 2008:
Highlights
Summary of Investment and Development Properties
Operating and Financial Review
Unaudited Financial Information
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
A copy of this press release 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 conference call with analysts and investors will be held at 9.30 am on 5
November 2008.
This press release includes statements that are forward-looking in nature.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of Liberty International PLC to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Any information contained in this press release on
the price at which shares or other securities in Liberty International PLC have
been bought or sold in the past, or on the yield on such shares or other
securities, should not be relied upon as a guide to future performance.
HIGHLIGHTS OF NINE MONTH PERIOD ENDED 30 SEPTEMBER 2008
- Net rental income increased by 4.0 per cent to GBP281.3 million (30
September
2007 - GBP270.5 million)
- Occupancy levels at CSC`s UK regional shopping centres unchanged at 98.7
per cent, 97.9 per cent excluding units occupied by tenants in administration
and not yet re-let or under offer
- Encouragingly, 44 out of 78* units which have gone into administration in
2008 now re-let or under offer. Bad debt provisions and associated lease
incentive write-offs by Capital Shopping Centres ("CSC") in nine month period
of GBP10.2 million (30 June 2008 - GBP7.0 million, 30 September 2007 - GBP4.5
million)
- Underlying profit before valuation items and tax reduced from GBP96.7
million to GBP77.8 million, particularly impacted by one-off internal
reorganization expenses of GBP8.8 million
- Income Statement reflects loss before tax for the nine month period of
GBP1,059 million after including GBP1,083 million deficit on property
revaluations and GBP26 million deficit on valuation of derivative financial
instruments
- Overall valuation fall for nine month period of 12.1 per cent (7.4 per cent
for six months ended 30 June 2008), reflecting rising valuation yields
- ERV growth from CSC shopping centres contributes positive 1.2 per cent to
valuation outcome (30 June 2008 - positive 0.7 per cent)
- Substantial out-performance since 30 June 2007 of IPD UK monthly property
index capital value falls
- Six months ended 31 December 2007 - 6.1 per cent (IPD - 11.7 per cent)
- Nine months ended 30 September 2008 - 12.1 per cent (IPD - 14.3 per cent)
- Debt to assets ratio 50 per cent (30 June 2008 - 46 per cent) with debt
mostly asset-specific and non-recourse; GBP335 million cash and undrawn
committed facilities; no significant debt maturities until second half of 2010
- Total return for the nine month period ended 30 September 2008** of minus
20.5 per cent with net asset value per share (diluted, adjusted) reduced from
1264p to 975p
* CSC has 1,998 units in total across 14 regional shopping centres
** Dividend income and change in net asset value per share (diluted, adjusted)
Patrick Burgess, Chairman, commented as follows:
"The third quarter of 2008 and the period since the end of September will long
be remembered for the extreme turbulence in financial markets, which has had a
marked impact on the UK commercial property sector.
However, Liberty International has always focused on assets of the highest
quality, with our ownership including 8 of the UK`s top 21 regional shopping
centres and Central London assets such as Covent Garden; MetroCentre,
Gateshead, is the UK`s largest covered shopping centre while Lakeside,
Thurrock, is at the heart of the UK`s largest aggregation of retail floor
space.
The benefit of this approach becomes most obvious in more difficult periods,
with our assets performing well on a relative basis and occupancy at high
levels.
After 15 months of falling market values, our assets are now more defensively
stated with limited transactional evidence available to our valuers.
The scarcity value and strong competitive position of our UK regional shopping
centres is unlikely to be substantially further challenged for a sustained
period, given the sharp reduction we anticipate in the potential supply
pipeline of UK shopping centre space.
We look forward to addressing the changing environment as the consequences of
recent events unfold."
HIGHLIGHTS OF NINE MONTH PERIOD ENDED 30 SEPTEMBER 2008
FINANCIAL HIGHLIGHTS
Restated**
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2008 2007 2007
Net rental income GBP281m GBP271m GBP374m
Profit before tax
(underlying*) GBP78m GBP97m GBP129m
(Deficit)/gain on revaluation
and sale of investment and
development property GBP(1,088)m GBP192m GBP(279)m
(Loss)/profit before tax GBP(1,059)m GBP442m GBP(125)m
Total properties GBP7,878m GBP9,018m GBP8,666m
Net external debt *** GBP4,040m GBP3,622m GBP3,625m
Net assets (diluted, adjusted) GBP3,666m GBP5,156m GBP4,757m
Basic (loss)/earnings per share (266.5)p 112.4p (29.0)p
Adjusted earnings per share 20.1p 26.7p 36.0p
Dividend per share 16.5p 16.5p 34.1p
Net assets per share
(diluted, adjusted)**** 975p 1370p 1264p
* Before property trading and valuation items
** Restated numbers for nine months ended 30 September 2007 now include 100 per
cent of the long leasehold interest in MetroCentre, Gateshead rather than the
60 per cent previously reported
*** The net external debt excludes the GBP118 million (31 December 2007 - GBP43
million) compound financial instrument relating to 40 per cent third party
interest in the MetroCentre (see note 14)
**** Net assets per share (diluted, adjusted) would increase by 94p per share
to 1069p at 30 September 2008 (30 September 2007 - by 109p to 1479p, 31
December 2007 - by 104p to 1368p) if adjusted for notional acquisition costs
amounting to GBP353 million (30 September 2007 - GBP409 million, 31 December
2007 - GBP390 million)
BACKGROUND ON LIBERTY INTERNATIONAL
LIBERTY INTERNATIONAL PLC is one of the UK`s largest listed property companies
and a constituent of the FTSE-100 Index of the UK`s leading listed companies.
Liberty International converted into a UK Real Estate Investment Trust (REIT)
on 1 January 2007.
Liberty International owns 100 per cent of Capital Shopping Centres ("CSC"),
the premier UK regional shopping centre business, and of Capital & Counties, a
retail and commercial property investment and development company.
At 30 September 2008, Liberty International held GBP7.9 billion of total
properties of which UK regional shopping centres comprised 73 per cent and
retail property in aggregate 86 per cent. Shareholders` funds (diluted,
adjusted) amounted to GBP3.7 billion. Assets of the group under control or
joint control amounted to GBP10.4 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 GBP5.7 billion at 30 September
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 GBP2.15 billion at 30 September 2008
amounting to 7.4 million sq.ft. in aggregate. Capital & Counties had GBP615
million invested in the Covent Garden area including the historic Covent Garden
Market, and GBP542 million in Central London, primarily through the Great
Capital Partnership, a joint venture with Great Portland Estates plc, and a 50
per cent interest in Empress State, an office investment adjacent to Earls
Court. Capital & Counties also owns 50 per cent of EC&O Venues (Earls Court and
Olympia Group) which has assets valued at GBP372 million. In addition, Capital
& Counties had interests in the USA amounting to GBP422 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.
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES
UK investment property valuation data
Market
value
30 Nominal equivalent yield
September 31 30
2008 December September
GBPm 2007 2008
UK regional shopping centres
Lakeside, Thurrock 1,107.2 4.90% 5.65%
MetroCentre, Gateshead (including
Retail Park) 952.0 5.03% 5.80%
Braehead, Glasgow 637.2 5.02% 5.79%
The Harlequin, Watford 432.2 4.95% 5.80%
Victoria Centre, Nottingham 394.7 5.00% 5.75%
Arndale, Manchester 358.0 5.13% 5.86%
Chapelfield, Norwich 283.1 5.20% 6.00%
Cribbs Causeway, Bristol 257.4 5.06% 5.8 2%
The Potteries, Stoke-on-Trent 250.4 5.50% 6.25%
Eldon Square, Newcastle upon Tyne 239.5 5.24% 6.10%
The Chimes, Uxbridge 230.2 5.35% 6.15%
The Glades, Bromley 220.3 5.40% 6.35%
St. David`s, Cardiff 85.8 5.26% 6.17%
Xscape, Braehead 33.4 6.21% 7.43%
Like-for-like capital 5,481.4 5.08% 5.86%
Other 231.4
Total UK regional shopping centres 5,712.8
UK non-shopping centre properties
Capco Covent Garden 611.8 4.63% 4.94%
Capco London (inc. Great Capital
Partnership) 285.2 5.68% 5.72%
Capco Opportunities 49.9 6.56% 8.17%
Capco Urban 65.8 5.57% 6.35%
1,012.7 5.09% 5.42%
Exhibition 350.2
Like-for-like-capital 1,362.9
Exhibition - Acquisitions 21.5
Other 342.7
Total UK non-shopping centre
properties 1,727.1
Initial
yield
30
September
2008
UK regional shopping centres
Lakeside, Thurrock 5.34%
MetroCentre, Gateshead (including Retail Park) 5.47%
Braehead, Glasgow 4.75%
The Harlequin, Watford 5.26%
Victoria Centre, Nottingham 5.40%
Arndale, Manchester 5.48%
Chapelfield, Norwich 5.70%
Cribbs Causeway, Bristol 5.57%
The Potteries, Stoke-on-Trent 5.75%
Eldon Square, Newcastle upon Tyne 3.92%
The Chimes, Uxbridge 6.10%
The Glades, Bromley 5.47%
St. David`s, Cardiff 5.56%
Xscape, Braehead 5.00%
Like-for-like capital 5.34%
Other
Total UK regional shopping centres
UK non-shopping centre properties
Capco Covent Garden 4.36%
Capco London (inc. Great Capital Partnership) 5.02%
Capco Opportunities 8.19%
Capco Urban 6.58%
4.89%
Exhibition
Like-for-like-capital
Exhibition - Acquisitions
Other
Total UK non-shopping centre properties
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 required by International Accounting
Standards regarding tenant lease incentives.
Initial Yield
Annualised net rents on investment properties expressed as a percentage of the
market value.
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.
Property analysis by use and type
Market value
31 December 30 September
2007 2008 % of total
GBPm GBPm properties
Regional shopping centres
and other retail
UK regional shopping centres 6,481.1 5,712.8 72.7%
UK other retail 807.7 719.3 9.1%
US regional shopping centres 138.6 151.5 1.9%
US other retail 130.0 146.5 1.9%
Total regional shopping
centres and other retail 7,557.4 6,730.1 85.6%
Office
UK business space 583.8 636.1 8.1%
US business space 78.6 88.7 1.1%
Total office 662.4 724.8 9.2%
Exhibition
UK Exhibition 381.4 371.7 4.8%
Residential
US residential 33.7 35.2 0.4%
Total investment properties 8,634.9 7,861.8 100.0%
Net
rental
income Revaluation
Passing 30 September deficit
rent ERV 2008 Increase/
GBPm GBPm GBPm (Decrease)
Regional shopping centres
and other retail
UK regional shopping
centres 284.8 360.8 207.0 (13.5)%
UK other retail 31.7 42.9 19.0 (8.5)%
US regional shopping
centres 8.2 10.7 5.8 (3.9)%
US other retail 8.1 8.9 4.9 (1.2)%
Total regional shopping
centres and other retail 332.8 423.3 236.7 (12.6)%
Office
UK business space 31.5 46.6 19.0 (10.9)%
US business space 6.9 7.4 3.8 0.7%
Total office 38.4 54.0 22.8 (9.7)%
Exhibition
UK Exhibition - - 20.8 (9.5)%
Residential
US residential 1.7 1.7 1.0 (6.0)%
Total investment
properties 372.9 479.0 281.3 (12.1)%
Investment property like-for-like income and revaluation analysis
Market value
31 30
December September
2007 2008
GBPm GBPm
UK regional shopping centres
Like-for-like capital and income 5,916.8 5,184.4
Other 335.0 297.0
Like-for-like capital 6,251.8 5,481.4
Redevelopments and developments 229.3 231.4
Total UK regional shopping
centres 6,481.1 5,712.8
UK non-shopping centre
properties
Like-for-like capital and income 591.2 531.8
Like-for-like capital only 870.5 831.1
Like-for-like capital 1,461.7 1,362.9
Acquisitions - 247.0
Redevelopments and developments 115.8 117.2
Disposals 195.5 -
Total UK non-shopping centre
properties 1,773.0 1,727.1
US properties*
Like-for-like capital and income 373.8 414.4
Like-for-like capital only 7.0 7.5
Total US properties 380.8 421.9
Total investment properties 8,634.9 7,861.8
Revaluation deficit
GBPm (Decrease)
UK regional shopping centres
Like-for-like capital and income (755.8) (12.7)%
Other (56.5) (16.9)%
Like-for-like capital (812.3) (12.9)%
Redevelopments and developments (76.9) (25.0)%
Total UK regional shopping
centres (889.2) (13.5)%
UK non-shopping centre
properties
Like-for-like capital and income (61.4) (10.4)%
Like-for-like capital only (79.0) (8.6)%
Like-for-like capital (140.4) (9.3)%
Acquisitions (13.6) (5.2)%
Redevelopments and developments (29.8) (19.9)%
Disposals -
Total UK non-shopping centre
properties (183.8) (9.6)%
US properties*
Like-for-like capital and income (9.2) (2.2)%
Like-for-like capital only (0.3) (3.4)%
Total US properties (9.5) (2.2)%
Total investment properties (1,082.5) (12.1)%
Net rental income
30 30
September September
2007 2008 Increase/
GBPm GBPm (Decrease)
UK regional shopping centres
Like-for-like capital and income 199.8 193.0 (3.4)%
Other 8.0 11.0
Like-for-like capital 207.8 204.0 (1.8)%
Redevelopments and developments 2.7 3.0
Total UK regional shopping
centres 210.5 207.0 (1.7)%
UK non-shopping centre
properties
Like-for-like capital and income 19.7 16.4 (16.8)%
Like-for-like capital only 10.2 37.8
Like-for-like capital 29.9 54.2
Acquisitions - 2.1
Redevelopments and developments 1.4 (0.1)
Disposals 14.3 2.6
Total UK non-shopping centre
properties 45.6 58.8 28.9%
US properties*
Like-for-like capital and income 14.4 15.2 5.6%
Like-for-like capital only - 0.3
Total US properties 14.4 15.5 7.6%
Total investment properties 270.5 281.3 4.0%
*Like-for-like percentage changes are in local currency
Analysis of UK non-shopping centres and US properties by location and type
Market value
31 30
December September
2007 2008
GBPm GBPm
UK non-shopping centre properties
Capco Covent Garden 663.6 614.7
Capco Earls Court 381.4 371.7
Capco London (inc. Great Capital Partnership) 353.2 541.5
Capco Opportunities 220.5 73.9
Capco Urban 154.3 125.3
Total UK non-shopping centre properties 1,773.0 1,727.1
US properties
US retail 268.6 298.0
US business space 78.6 88.7
US residential 33.6 35.2
Total US properties 380.8 421.9
2,153.8 2,149.0
Revaluation deficit
30
September
2008 Increase/
GBPm (decrease)
UK non-shopping centre properties
Capco Covent Garden (55.0) (8.2)%
Capco Earls Court (38.8) (9.5)%
Capco London (inc. Great Capital Partnership) (49.1) (8.2)%
Capco Opportunities (19.0) (21.3)%
Capco Urban (21.9) (15.1)%
Total UK non-shopping centre properties (183.8) (9.6)%
US properties
US retail (7.8) (2.6)%
US business space 0.6 0.7%
US residential (2.3) (6.0)%
Total US properties (9.5) (2.2)%
(193.3) (8.6)%
Net rental income
30 30
September September
2007 2008
GBPm GBPm
UK non-shopping centre properties
Capco Covent Garden 18.5 17.9
Capco Earls Court 2.5 20.8
Capco London (inc. Great Capital Partnership) 10.0 10.9
Capco Opportunities 9.3 6.1
Capco Urban 5.3 3.1
Total UK non-shopping centre properties 45.6 58.8
US properties
US retail 10.7 10.7
US business space 2.9 3.8
US residential 0.8 1.0
Total US properties 14.4 15.5
60.0 74.3
OPERATING AND FINANCIAL REVIEW
Introduction
The third quarter of 2008 and the period since the end of September will long
be remembered for extreme turbulence in financial markets and particularly
within the banking sector resulting in widespread central government
intervention around the globe.
The consequences of these events and the corrective responses will not be fully
appreciated for many years to come.
The general impact on the UK property market has been very marked with further
declines in property valuations in the third quarter, widespread market
evidence of difficult conditions for achieving property disposals or obtaining
bank finance and greater reluctance by tenants to make decisions in respect of
new lettings.
In the circumstances, footfall and car parking figures from our UK regional
shopping centres have shown considerable overall resilience. Retail sales at
our centres have reflected trends in ONS non-food retail sales, which showed
three month year-on-year growth of 1.1 per cent for the quarter ended 30
September 2008.
Central London retail, where we have a strong presence through the Covent
Garden Estate and our 50 per cent share of the Great Capital Partnership, has
weakened but has continued to perform more strongly than other UK regions.
One favourable consequence of the difficult property market conditions has been
a sharp reduction in the potential supply pipeline of UK shopping centre space,
with projects which have not already started unlikely now to be opening for
some years, given the timescales involved in bringing major shopping centre
projects to fruition. The prime quality, scarcity value and strong competitive
position of our UK regional shopping centre assets is therefore unlikely to be
substantially further challenged for a sustained period.
Underlying profit
Underlying profit before tax for the nine month period to 30 September 2008
amounted to GBP77.8 million (2007 - GBP96.7 million), resulting in adjusted
earnings per share of 20.1p (2007 - 26.7p).
The third quarter`s results reflect the seasonally weak summer period at Earl`s
Court and Olympia and, as advised to shareholders in the half year results, a
one-off GBP2.5 million cost of outsourcing the group`s IT infrastructure.
For the nine month period, net rental income increased by GBP10.8 million (4.0
per cent) to GBP281.3 million compared to the comparative nine month period
ended 30 September 2007. This was offset by a GBP13.9 million increase in
finance costs resulting from net capital expenditure.
The operational overhead of Earls Court was GBP6.1 million for the nine months
ended 30 September 2008 (2007 - GBP1.8 million, third quarter only from the
July 2007 acquisition date). The balance of the increase in administration
expenses of GBP11.3 million principally resulted from the GBP3.7 million
year-to-date IT outsourcing costs and other reorganisation costs of GBP5.1
million as the group takes active steps to reduce costs and improve efficiency
while increasing the strength and depth of the senior management team.
Schedule 1 provides further analysis of the year to date results by quarter.
Capital Shopping Centres (`CSC`)
CSC`s prime regional centres aim to provide 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 experience.
We are continually looking to upgrade and refresh our centres to provide the
optimum shopping environment 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.
We have relatively little exposure 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 38 per cent
of CSC`s rent roll and national or international multiple retailers represent
over 90 per cent of the rent roll.
CSC`s occupancy rate remains unchanged from 31 December 2007 and 30 June 2008
at 98.7 per cent, which includes 0.8 per cent at 30 September 2008 where
tenants are subject to administration proceedings and re-letting has not yet
been agreed (30 June 2008 - 1.7 per cent).
The table below indicates the impact in 2008 on CSC`s net rental income from
bad and doubtful debts and lease incentive adjustments:
Nine months Nine months
ended ended
30 September 30 September
2008 2007
GBPm GBPm
Underlying like-for-like net rental
income 200.7 198.7 +1.0%
Surrender premiums received 2.5 5.6
Bad and doubtful debts (7.2)* (4.5)
Lease incentive adjustments (3.0)* -
Reported like-for-like net rental income 193.0 199.8 -3.4%
* For the six months ended 30 June 2008 bad and doubtful debts amounted to
GBP4.6 million and lease incentive adjustments amounted to GBP2.4 million with
an overall reported 2.5% like-for-like net rental income decline.
During 2008, 31 tenants affecting 78 units (7 tenants and 16 units in the
quarter ended 30 September 2008) have gone into administration out of 1,998
units overall; we have made good re-letting progress, with 44 re-let or under
offer.
These tenancies also contributed to an increase in non-recoverable outgoings of
GBP3.7 million, including GBP1.1 million on empty rates, compared with the nine
months ended 30 September 2007.
We have continued to make progress with the 2008 rent reviews, primarily at
Cribbs Causeway, where agreements are in line with expectations. Rent reviews
next year and in 2010 amount to 18 per cent and 27 per cent respectively of CSC
rental income.
Over 95 per cent of the September quarter rent has now been collected. This
collection rate is in line with previous quarters.
Capital & Counties
Capital & Counties has concentrated on creating large business units with an
emphasis on Central London, where it now has investment properties of GBP1.53
billion, 71 per cent of its total assets of GBP2.15 billion. Capital & Counties
has three primary Central London business units, Covent Garden London, the
Great Capital Partnership and Earls Court & Olympia, each of which is
performing well given the current economic uncertainty.
Occupancy across the 750,000 sq.ft. Covent Garden estate at the quarter end was
88 per cent by area and 87 per cent by rental. Like-for-like income from the
estate has been restrained by planned vacancy and marketing costs.
Total vacancy at the end of September in Covent Garden was 90,500 sq.ft, of
which 31,000 sq.ft. was retail, reflecting our objective of creating an
enhanced tenancy mix. 22,600 sq.ft. of the vacant retail accommodation was
committed, leaving a working retail vacancy of 4.8 per cent and a total vacancy
across the estate of 4.7 per cent.
Since the quarter end, planning consent has been granted for a new flagship
store for an iconic international brand fronting the Covent Garden Piazza which
kick-starts the overall enhancement process.
The Great Capital Partnership recorded occupancy of 90 per cent at the end of
the quarter. Of the vacant areas, 6.2 per cent represents areas under
refurbishment. The annual average passing rental of GBP28.34 per sq.ft. is well
below current market levels.
Progress in Capital & Counties` other main business units, Capco Opportunities
and Capco International, was satisfactory.
Disposals
We made no further disposals in the third quarter. The contracted forward sale
of Broadgate, Leeds for GBP69 million is expected to take place in January 2009
but the disposal has not yet been recognised in our financial statements.
Additions
The principal addition in the three month period was a 50 per cent interest in
the Empress State building in West London acquired for GBP113.5 million, with
GBP79.5 million of the consideration provided by an asset-specific,
non-recourse loan. As required by IAS 27 "Consolidated and Separate Financial
Statements", this acquisition has been fully consolidated with the 50 per cent
third party share adjusted through minority interest. This 470,000 sq.ft., 30
storey building is strategic to our plans at Earls Court and benefits from an
index-linked lease with 11 years remaining to a government tenant, the
Metropolitan Police.
Developments
Our committed development programme with GBP276 million remaining to be spent
is of modest size in relation to the overall Liberty International group.
Our two major active development projects, the extensions at St David`s,
Cardiff and Eldon Square, Newcastle, have continued on time and on budget for
opening in Autumn 2009 and Spring 2010 respectively. Lettings at St David`s,
Cardiff amount to 33 per cent by income, let or in solicitors` hands, and 47
per cent by floor area with a further 13 per cent in advanced negotiation. The
Eldon Square extension is over 70 per cent let by income.
Letting conditions are expected to remain difficult until stability and a
measure of confidence returns to financial markets and the general UK economy.
Property valuations
The valuation outcome for the nine month period was as follows:
Nine months Six months Six months
ended ended ended
30 September 30 June 31 December
2008 2008 2007
- UK regional shopping centres -13.5% - 7.6% -6.5%
- UK non-shopping centre properties -9.6% - 5.5% -3.4%
- USA -2.2% - 0.8% +2.7%
- Total -12.1% - 7.4% -6.1%
Changes in valuation yields were as follows:
Nominal Equivalent Yields
30 September 30 June 31 December 30 June
2008 2008 2007 2007
- UK regional
shopping centres 5.86% 5.51% 5.08% 4.77%
- UK non-shopping
centre properties 5.42% 5.25% 5.09% 4.95%
The movement on valuations has been largely due to adverse yield shift.
Encouragingly, the estimated rental value ("ERV") of CSC`s centres as
determined by our external valuers has increased slightly in the nine month
period contributing a positive 1.2 per cent to the valuation outcome for the
nine month period (30 June 2008 - positive 0.7 per cent).
Valuations have outperformed comparable IPD capital returns (IPD UK monthly
property index) which are as follows:
Nine months Six months Six months
ended ended ended
30 September 30 June 31 December
2008 2008 2007
- All property -14.3% -8.6% -11.7%
- Retail -14.4% -9.0% -12.4%
The fall, as measured by the IPD monthly index, of over 25 per cent (11.7 per
cent in the second half of 2007 and a further 14.3 per cent in 2008), in UK
commercial property capital values since the peak of the UK property market at
the end of June 2007 represents an exceptionally steep fall for a major
developed economy.
By comparison, Liberty International has substantially outperformed with an
overall fall in our investment properties of 6.1 per cent in the second half of
2007 and 12.1 per cent in 2008.
Indications from our valuers are that valuations have continued to decline
since 30 September 2008 reflecting financial market turbulence, although
transactional evidence is very limited.
After property revaluations and the 16.5p per share dividend payment in the
quarter, net asset value per share (adjusted, diluted) has declined from 1095p
at 30 June 2008 to 975p per share at 30 September 2008.
Financial position
Reflecting the falls in property valuations, the debt to assets ratio has
increased to 50 per cent at 30 September 2008 (30 June 2008 - 46 per cent).
The group`s debt is principally asset-specific and non-recourse as illustrated
in the table below:
Consolidated
balance Secured
sheet non-recourse Unsecured
GBPm GBPm GBPm
Investment properties 7,846 6,660 1,186
Other fixed assets 126 - 126
Trading properties 32 - 32
8,004 6,660 1,344
Non-recourse debt 3,846 4,066 (220)**
Corporate debt 294 - 294
Cash (100) - (100)
Net debt/(cash)* 4,040 4,066 (26)
Debt to assets ratio 50% 61% (2)%
* excludes GBP118 million MetroCentre compound financial instrument
(see note 14)
** internally held commercial mortgage backed securities (`CMBS`)
Cash and unutilised committed bank facilities amounted to GBP335 million,
providing the resources to complete our committed development programme.
Further details of the group`s debt structure including debt repayment profile
and major covenants are set out in Schedule 2.
Prospects
Liberty International has always focused on assets of the highest quality, with
our ownership including 8 of the UK`s top 21 regional shopping and Central
London assets such as Covent Garden. The benefit of this approach becomes most
obvious in more difficult periods when secondary assets tend to under-perform
markedly.
With continued high occupancy levels and defensive income streams, the
directors consider the business of Liberty International to continue to be
sound notwithstanding the relatively unfavourable UK economic and property
background.
However, reflecting the adverse conditions in both property and debt markets,
the group has been taking active steps to minimise further capital expenditure
commitments and to reduce administrative expenses. In the latter case, some
additional costs have been incurred in 2008 with the benefits to emerge in 2009
and beyond.
As our business is 73 per cent UK regional shopping centres and 86 per cent
retail property overall, the continued health of our retail tenant base is of
overriding importance to our long term success. We expect to be pro-active and
deal positively with tenant issues which will undoubtedly continue to emerge
from difficult trading conditions.
Our Board, management team and staff look forward to addressing the new
challenges.
5 November 2008
SCHEDULE 1
UNDERLYING PROFIT STATEMENT (unaudited)
For the nine months ended 30 September 2008
Quarter ended Quarter ended Quarter ended
30 September 30 June 31 March
2008 2008 2008
GBPm GBPm GBPm
UK shopping centres 66.9 65.6 74.5
Other commercial properties 20.2 24.3 29.8
Net rental income 87.1 89.9 104.3
Other (expense)/income (0.2) (0.1) 0.6
86.9 89.8 104.9
Administration expenses (16.8) (13.7) (14.5)
Operating profit
(underlying*) 70.1 76.1 90.4
Interest payable (55.3) (57.0) (58.4)
Interest receivable and
other finance income 5.9 5.0 1.0
Net finance costs
(underlying*) (49.4) (52.0) (57.4)
Profit before tax
(underlying*) 20.7 24.1 33.0
Property trading profits (0.7) - 0.9
Write down of trading property (2.5) - -
Tax on adjusted profit (0.6) (2.0) (0.5)
Minority interests 5.5 (2.3) (3.0)
Earnings used for calculation
of adjusted earnings per share 22.4 19.8 30.4
Adjusted earnings per share 6.2p 5.5p 8.4p
Nine months Restated nine
ended months ended
30 September 30 September
2008 2007
GBPm GBPm
UK shopping centres 207.0 210.5
Other commercial properties 74.3 60.0
Net rental income 281.3 270.5
Other (expense)/income 0.3 0.5
281.6 271.0
Administration expenses (45.0) (29.4)
Operating profit (underlying*) 236.6 241.6
Interest payable (170.7) (149.6)
Interest receivable and other finance income 11.9 4.7
Net finance costs (underlying*) (158.8) (144.9)
Profit before tax (underlying*) 77.8 96.7
Property trading profits 0.2 0.7
Write down of trading property (2.5) -
Tax on adjusted profit (3.1) (0.4)
Minority interests 0.2 (0.4)
Earnings used for calculation
of adjusted earnings per share 72.6 96.6
Adjusted earnings per share 20.1p 26.7p
* before property trading and valuation items
SCHEDULE 1 (continued)
UNDERLYING PROFIT STATEMENT (unaudited)
For the nine months ended 30 September 2007
Restated Restated
Quarter ended Quarter ended
30 September 30 June
2007 2007
GBPm GBPm
UK shopping centres 69.4 69.3
Other commercial properties 22.3 18.2
Net rental income 91.7 87.5
Other income/(expense) 0.2 (0.1)
91.9 87.4
Administration expenses (12.4) (9.6)
Operating profit (underlying*) 79.5 77.8
Interest payable (53.1) (46.8)
Interest receivable 1.3 2.1
Net finance costs (underlying*) (51.8) (44.7)
Profit before tax (underlying*) 27.7 33.1
Property trading profits - 0.7
Tax on adjusted profit (0.5) 0.6
Minority interests 1.2 (1.6)
Earnings used for calculation 28.4 32.8
of adjusted earnings per share
Adjusted earnings per share 7.9p 9.0p
Restated nine
Quarter ended months ended
31 March 30 September
2007 2007
GBPm GBPm
UK shopping centres 71.8 210.5
Other commercial properties 19.5 60.0
Net rental income 91.3 270.5
Other income/(expense) 0.4 0.5
91.7 271.0
Administration expenses (7.4) (29.4)
Operating profit (underlying*) 84.3 241.6
Interest payable (49.7) (149.6)
Interest receivable 1.3 4.7
Net finance costs (underlying*) (48.4) (144.9)
Profit before tax (underlying*) 35.9 96.7
Property trading profits - 0.7
Tax on adjusted profit (0.5) (0.4)
Minority interests - (0.4)
Earnings used for calculation 35.4 96.6
of adjusted earnings per share
Adjusted earnings per share 9.8p 26.7p
* before property trading and valuation items
SCHEDULE 2
Maturity profile of non-recourse secured debt
Total
Principal externally
Amortisation at maturity held debt
GBPm GBPm GBPm
Maturity profile
2008 11 - 11
2009 46 8 54
2010 51 10 61
2011 58 570 628
2012 54 236 290
2013 53 514 567
2014 45 26 71
2015 28 960 988
2016 7 789 796
2017 - 118 118
2027 - 231 231
353 3,462 3,815
Internally owned CMBS 220
Gross secured debt* - 61% of
secured assets of GBP6,660
million 4,035
* represents actual debt repayments and excludes the unamortised transaction
costs that are included in financial statements.
Maturity profile of unsecured debt with recourse to Liberty International PLC
Unsecured Convertible
bonds bonds
GBPm GBPm
Maturity profile
2009 31 -
2010 - 111
2011 - -
2013 27 -
58 111
Internally owned CMBS
Cash and cash equivalents
Net cash - (2%) of unsecured assets of GBP1,344 million
Drawn
revolving
credit Total
facilities debt
GBPm GBPm
Maturity profile
2009 - 31
2010 70 181
2011 55 55
2013 - 27
125 294
Internally owned CMBS (220)
Cash and cash equivalents (100)
Net cash - (2%) of unsecured assets of GBP1,344 million (26)
*includes investment and development properties, trading properties and other
investments.
Unsecured revolving credit facilities
Undrawn at
Total 30 September
facility 2008
GBPm GBPm
Maturity profile
2010 210 140
2011 100 45
2012 50 50
360 235
Facilities mature in December in the year of maturity, with the exception of a
GBP50 million facility that matures in June 2011.
Principal Covenants
CMBS debt
Loan to
Drawn value
Maturity GBPm covenant
Facility
Lakeside 2011 639 90%
MetroCentre 2015 574 90%
Braehead 2015 389 -
Watford 2015 291 -
1,893
Loan to Interest
value Interest cover *
30 September cover 30 September
2008 covenant 2008
Facility
Lakeside 58% 120% 135%
MetroCentre 64% 120% 143%
Braehead N/A 120% 143%
Watford N/A 120% 129%
* calculated in accordance with the loan agreements
Non-recourse bank loans
In respect of the balance of the group`s non-recourse secured debt of
approximately GBP2.1 billion, group companies have entered into a number of
non-recourse bank loans secured on specific assets of the group, which have
financial covenants.
The two main financial covenants are Loan to Value (LTV) and Interest Cover
(IC). The actual requirements are specific to each loan agreement. Where they
do apply, the LTV covenants range from 70% to 90%. All loan agreements have IC
covenants ranging from 100% to 120%. The group is in compliance with all the
financial covenants at 30 September 2008.
In the case of CMBS debt and non-recourse bank loans, covenant breaches can be
rectified by a number of remedies such as additional security, temporary cash
deposit or partial repayment before an event of default occurs.
Unsecured revolving credit facilities
The principal covenant is an IC covenant of 125% of group interest cover, the
same as the minimum required for REIT status.
The group is in compliance with this covenant at 30 September 2008.
CONSOLIDATED INCOME STATEMENT (unaudited)
For the nine months ended 30 September 2008
Nine months
ended
30 September
2008
GBPm
Notes
449.1
Revenue 2
Rental income 440.7
Rental expenses (159.4)
Net rental income 2 281.3
Other income 0.5
(Deficit)/gain on revaluation and sale of investment
and development property 3 (1,087.8)
Profit on sale of subsidiary 0.8
Write down of trading property (2.5)
(807.7)
Administration expenses
Ongoing expenses (45.0)
Impairment of goodwill (21.6)
Operating (loss)/profit (874.3)
Interest payable 4 (170.7)
Interest receivable 5.4
Other finance income/(costs) 4 6.5
Change in fair value of derivative financial
instruments (26.3)
Net finance (costs)/income (185.1)
(Loss)/profit before tax (1,059.4)
Current tax (2.4)
Deferred tax 31.2
REIT entry charge (2.7)
Taxation 26.1
(Loss)/profit for the period (1,033.3)
Loss attributable to minority interests 5 70.0
(Loss)/profit for the period attributable to equity
shareholders (963.3)
Basic (loss)/earnings per share 13 (266.5)p
Diluted (loss)/earnings per share 13 (255.6)p
Restated nine Year
months ended ended
30 September 31 December
2007 2007
GBPm GBPm
426.3 574.6
Revenue
Rental income 396.7 546.7
Rental expenses (126.2) (172.4)
Net rental income 270.5 374.3
Other income 1.2 2.0
(Deficit)/gain on revaluation and sale of
investment and
development property 192.1 (279.1)
Profit on sale of subsidiary - -
Write down of trading property - -
463.8 97.2
Administration expenses
Ongoing expenses (29.4) (45.2)
Impairment of goodwill - -
Operating (loss)/profit 434.4 52.0
Interest payable (149.6) (209.3)
Interest receivable 4.7 8.8
Other finance income/(costs) (1.9) (3.3)
Change in fair value of derivative financial
instruments 154.1 27.0
Net finance (costs)/income 7.3 (176.8)
(Loss)/profit before tax 441.7 (124.8)
Current tax (1.3) (2.7)
Deferred tax (33.6) (23.8)
REIT entry charge (3.0) (3.9)
Taxation (37.9) (30.4)
(Loss)/profit for the period 403.8 (155.2)
Loss attributable to minority interests 2.9 50.2
(Loss)/profit for the period attributable to
equity shareholders 406.7 (105.0)
Basic (loss)/earnings per share 112.4p (29.0)p
Diluted (loss)/earnings per share 109.1p (26.6)p
CONSOLIDATED BALANCE SHEET (unaudited)
As at 30 September 2008
As at
30 September
2008
GBPm
Notes
Non-current assets
Goodwill 5.3
Investment and development property 7 7,845.7
Plant and equipment 1.2
Investments 125.2
Trade and other receivables 88.4
8,065.8
Current assets
Trading property 8 31.9
Derivative financial instruments 11 45.7
Trade and other receivables 120.6
Cash and cash equivalents 99.9
298.1
Total assets 8,363.9
Current liabilities
Trade and other payables (354.2)
Tax liabilities (5.3)
Borrowings excluding finance leases 9 (44.7)
Borrowings - finance leases 9 (3.1)
Derivative financial instruments 11 (139.9)
(547.2)
Non-current liabilities
Borrowings excluding finance leases and partnership
debt 9 (4,045.0)
Borrowings - finance leases and partnership debt 9 (165.8)
Deferred tax provision (42.1)
Other provisions (1.4)
Other payables (65.7)
(4,320.0)
Total liabilities (4,867.2)
Net assets 3,496.7
Equity
Amounts attributable to equity shareholders 14 3,412.2
Minority interests 14 84.5
Total equity 3,496.7
Diluted, adjusted net assets per share 13 975p
Basic net assets per share 13 944p
Restated as at Restated as at
31 December 30 September
2007 2007
GBPm GBPm
Non-current assets
Goodwill 26.6 5.7
Investment and development property 8,622.8 8,971.9
Plant and equipment 1.2 2.5
Investments 51.0 34.9
Trade and other receivables 78.5 69.2
8,780.1 9,084.2
Current assets
Trading property 43.7 45.8
Derivative financial instruments 25.4 82.0
Trade and other receivables 134.9 193.2
Cash and cash equivalents 188.4 150.7
392.4 471.7
Total assets 9,172.5 9,555.9
Current liabilities
Trade and other payables (341.7) (263.6)
Tax liabilities (5.7) (3.1)
Borrowings excluding finance leases (146.2) (127.5)
Borrowings - finance leases (6.1) (6.1)
Derivative financial instruments (97.8) (24.9)
(597.5) (425.2)
Non-current liabilities
Borrowings excluding finance leases and
partnership debt (3,609.9) (3,595.7)
Borrowings - finance leases and
partnership debt (94.1) (86.0)
Deferred tax provision (73.7 ) (83.1)
Other provisions (1.4) (0.7)
Other payables (87.0) (134.1)
(3,866.1) (3,899.6)
Total liabilities (4,463.6) (4,324.8)
Net assets 4,708.9 5,231.1
Equity
Amounts attributable to equity shareholders 4,507.0 5,018.3
Minority interests 201.9 212.8
Total equity 4,708.9 5,231.1
Diluted, adjusted net assets per share 1264p 1370p
Basic net assets per share 1246p 1388p
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited)
For the nine months ended 30 September 2008
Nine months
ended
30 September
2008
Note GBPm
(Loss)/profit for the period as per the
consolidated income
statement before minority interest (1,033.3)
Other recognised income and expense in the period:
Actuarial losses on defined benefit pension schemes -
Tax on items taken directly to equity 2.2
(Losses)/gains on revaluation of investments,
net exchange translation differences and
other movements (9.1)
Net (loss) recognised in equity due to minority
interests (on the above) -
Net (losses)/gains recognised in equity (6.9)
Total recognised (expense) and income for the period (1,040.2)
Total recognised expense attributable to minority
interests 14(b) 70.0
Total recognised (expense) and income for the period
attributable to equity shareholders 14(a) (970.2)
Restated nine Year
months ended ended
30 September 31 December
2007 2007
GBPm GBPm
(Loss)/profit for the period as per the
consolidated income statement before
minority interest 403.8 (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 5.4 6.4
Net (loss) recognised in equity due to
minority interests (on the above) - (0.7)
Net (losses)/gains recognised in equity 5.4 4.2
Total recognised (expense) and income
for the period 409.2 (151.0)
Total recognised expense attributable to
minority interests 2.9 50.9
Total recognised (expense) and income for the period
attributable to equity shareholders 412.1 (100.1)
A summary of changes in group equity is shown in note 14.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the nine months ended 30 September 2008
Nine months
ended
30 September
2008
Note GBPm
Cash generated from operations 10 271.2
Interest paid (190.9)
Interest received 5.4
Tax paid (3.9)
REIT entry charge (41.0)
Cash flows from operating activities 40.8
Cash flows from investing activities
Purchase and development of property (204.1)
Sale of property 100.9
Purchase of subsidiary companies (31.6)
Sale of subsidiary companies 5.0
Purchase of non-current asset investments (89.9)
Cash flows from investing activities (219.7)
Cash flows from financing activities
Partnership loan capital introduced 3.5
Issue and repurchase of shares (1.6)
Borrowings drawn 416.6
Borrowings repaid (216.7)
Equity dividends paid (112.1)
Cash flows from financing activities 89.7
Effect of exchange rate changes on cash and cash
equivalents 0.7
Net decrease in cash and cash equivalents (88.5)
Cash and cash equivalents at beginning of period/year 188.4
Cash and cash equivalents at end of period/year 99.9
Restated nine Restated
months ended year ended
30 September 31 December
2007 2007
GBPm GBPm
Cash generated from operations 85.6 266.8
Interest paid (160.2) (222.0)
Interest received 4.7 9.8
Tax paid (0.4) 2.7
REIT entry charge (7.8) (15.6)
Cash flows from operating activities (78.1) 41.7
Cash flows from investing activities
Purchase and development of property (453.2) (575.5)
Sale of property 409.3 416.2
Purchase of subsidiary companies (54.6) (80.0)
Sale of subsidiary companies - -
Purchase of non-current asset investments (29.5) (39.2)
Cash flows from investing activities (128.0) (278.5)
Cash flows from financing activities
Partnership loan capital introduced - -
Issue and repurchase of shares (4.1) (3.1)
Borrowings drawn 384.9 425.6
Borrowings repaid (236.1) (197.0)
Equity dividends paid (109.7) (122.1)
Cash flows from financing activities 35.0 103.4
Effect of exchange rate changes on cash and cash
equivalents - -
Net decrease in cash and cash equivalents (171.1) (133.4)
Cash and cash equivalents at beginning of
period/year 321.8 321.8
Cash and cash equivalents at end of
period/year 150.7 188.4
FINANCIAL INFORMATION (unaudited)
1 Basis of preparation
The financial information for the nine months ended 30 September 2008 is
unaudited and does not constitute statutory accounts within the meaning of
s240 of the Companies Act 1985 and has been prepared on a basis consistent with
previous quarters.
The financial information was approved by the Board on 5 November 2008
2 Segmental analysis
Nine months ended 30 September 2008
UK Other
shopping commercial
centres properties Exhibition
GBPm GBPm GBPm
Revenue 309.6 84.3 45.8
Rental income including service
charge and other income 303.8 81.8 45.8
Rent payable and other outgoings (96.8) (29.6) (25.0)
Net rental income 207.0 52.2 20.8
Property trading profits 0.3 (0.1) -
Other income - 0.2 -
Deficit on revaluation and sale of
investment and
development property (889.9) (159.1) (38.8)
Profit on sale of subsidiary - 0.8 -
Write down of trading property - (2.5) -
Segment result before overheads and
finance costs (682.6) (108.5) (18.0)
Nine months ended 30 September 2008
Other Group
activities total
GBPm GBPm
Revenue 9.4 449.1
Rental income including service charge and other income 9.3 440.7
Rent payable and other outgoings (8.0) (159.4)
Net rental income 1.3 281.3
Property trading profits - 0.2
Other income 0.1 0.3
Deficit on revaluation and sale of investment and
development property - (1,087.8)
Profit on sale of subsidiary - 0.8
Write down of trading property - (2.5)
Segment result before overheads and finance costs 1.4 (807.7)
Administration costs in respect of the Exhibition business amount to GBP6.1
million for the nine months ended 30 September 2008 (GBP1.8 million to 30
September 2007).
Restated nine months ended 30 September 2007
UK Other
shopping commercial
centres properties Exhibition
GBPm GBPm GBPm
Revenue 315.2 103.4 7.4
Rental income including service
charge and other income 308.2 81.1 7.4
Rent payable and other outgoings (97.7) (23.6) (4.9)
Net rental income 210.5 57.5 2.5
Property trading profits - 0.7 -
Other income - 0.2 -
Gain/(deficit) on revaluation and
sale of investment and
development property 117.1 83.1 (8.1)
Segment result before overheads and
finance costs 327.6 141.5 (5.6)
Restated nine months ended 30 September 2007
Other Group
activities total
GBPm GBPm
Revenue 0.3 426.3
Rental income including service charge and other income - 396.7
Rent payable and other outgoings - (126.2)
Net rental income - 270.5
Property trading profits - 0.7
Other income 0.3 0.5
Gain/(deficit) on revaluation and sale of investment and
development property - 192.1
Segment result before overheads and finance costs 0.3 463.8
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
FINANCIAL INFORMATION (unaudited)
3 (Deficit)/gain on revaluation and sale of investment and development property
Restated
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2008 2007 2007
GBPm GBPm GBPm
(Deficit)/gain on revaluation
of investment and
development property (1,082.5) 148.8 (316.5)
(Deficit)/gain on sale of
investment property (5.3) 43.3 37.4
(Deficit)/gain on revaluation
and sale of investment and
development property (1,087.8) 192.1 (279.1)
4 Finance costs
Restated
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2008 2007 2007
GBPm GBPm GBPm
Gross interest payable - recurring 183.7 159.2 224.4
Interest capitalised on
developments (13.0) (9.6) (15.1)
Total interest payable 170.7 149.6 209.3
Interest payable to partner (4.6) - (3.0)
External interest payable 166.1 149.6 206.3
Costs of termination of
financial instruments 6.6 0.8 2.0
Profit on repurchase of CMBS notes (13.1) - -
Issue costs written off on
redemption of loans - 1.1 1.3
Other finance (income)/costs (6.5) 1.9 3.3
5 Minority interests
Nine months ended 30 September 2008
Income Statement
Earls Court Empress
& Olympia MetroCentre State
GBPm GBPm GBPm
Net rental income 10.4 15.6 0.7
Administration costs (3.1) - -
Net finance costs (8.0) (14.5) (0.6)
Valuation and other non-operating items (16.3) (55.8) (2.4)
Tax on adjusted earnings (0.6) - -
Tax on valuation 4.7 - -
Net loss for the period (12.9) (54.7) (2.3)
Nine months ended 30 September 2008
Other Total
GBPm GBPm
Net rental income 0.4 27.1
Administration costs (0.2) (3.3)
Net finance costs (0.3) (23.4)
Valuation and other non-operating items - (74.5)
Tax on adjusted earnings - (0.6)
Tax on valuation - 4.7
Net loss for the period (0.1) (70.0)
6 Dividends
An interim dividend of 16.5p per share was paid in the third quarter of 2008.
FINANCIAL INFORMATION (unaudited)
7 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 121.9 334.8 456.7
Transfers from trading properties 4.9 - 4.9
Disposals (2.2) (198.5) (200.7)
Foreign exchange fluctuations - 44.5 44.5
Deficit on valuation (889.2) (193.3) (1,082.5)
At 30 September 2008 5,701.4 2,144.3 7,845.7
The group`s interests in investment and development properties were valued as
at 30 September 2008, 31 December 2007 and 30 September 2007 by independent
external valuers in accordance with the Appraisal and Valuation Manual of
RICS, on the basis of market value. Market value represents the figure that
would appear in a hypothetical contract of sale between a willing buyer and a
willing seller.
As at As at As at
30 September 31 December 30 Sept ember
2008 2007 2007
GBPm GBPm GBPm
Balance sheet carrying value
of investment and
development property 7,845.7 8,622.8 8,971.9
Adjustment in respect of
tenant incentives 66.7 69.3 74.4
Adjustment in respect of
head leases (50.6) (57.2) (49.1)
Market value of investment
and development property 7,861.8 8,634.9 8,997.2
8 Trading property
The estimated replacement cost of trading properties based on market value
amounted to GBP32.3 million (31 December 2007- GBP46.1 million, 30 September
2007 - GBP45.8 million). A provision of GBP2.5 million has been made for a
reduction in the estimated net realisable value for one of the properties.
FINANCIAL INFORMATION (unaudited)
9 Borrowings, including finance leases
Restated
As at As at As at
30 September 31 December 30 September
2008 2007 2007
GBPm GBPm GBPm
Amounts falling due within
one year:
Secured borrowings -
non-recourse
Bank loans and overdrafts 11.2 118.8 105.4
Commercial mortgage backed
securities ("CMBS") notes 33.5 27.4 22.1
Borrowings excluding finance
leases 44.7 146.2 127.5
Finance lease obligations 3.1 6.1 6.1
Amounts falling due within
one year 47.8 152.3 133.6
Amounts falling due after
more than one year:
Secured borrowings - non
recourse
CMBS notes 2011 585.9 633.7 636.2
CMBS notes 2015 1,044.4 1,131.4 1,138.3
Bank loans 2012 226.1 207.9 239.2
Bank loans 2013 722.0 406.1 399.6
Bank loans 2014 24.4 27.4 27.4
Bank loans 2016 804.4 652.2 709.8
Bank loans 2017 117.2 117.2 -
3,524.4 3,175.9 3,150.5
Other secured borrowings
Debentures 2027 226.2 226.1 226.0
3,750.6 3,402.0 3,376.5
Unsecured borrowings
CSC bonds 2009 31.5 31.4 31.3
CSC bonds 2013 26.6 26.6 26.6
Other bank loans 125.0 38.6 50.1
3,933.7 3,498.6 3,484.5
GBP111.3 million 3.95%
convertible bonds due 2010 111.3 111.3 111.2
Borrowing excluding finance
leases and partnership debt 4,045.0 3,609.9 3,595.7
MetroCentre com pound
financial instrument 118.3 43.0 43.0
Finance lease obligations 47.5 51.1 43.0
Borrowings - finance leases
and partnership debt 165.8 94.1 86.0
Amounts falling due after
more than one year 4,210.8 3,704.0 3,681.7
Total borrowings, including
finance leases 4,258.6 3,856.3 3,815.3
Cash and cash equivalents (99.9) (188.4) (150.7)
Net borrowings 4,158.7 3,667.9 3,664.6
Deduct:
- MetroCentre compound
financial instrument (see
note 14) (118.3) (43.0) (43.0)
Net external debt 4,040.4 3,624.9 3,621.6
FINANCIAL INFORMATION (unaudited)
10 Cash generated from operations
Nine months
ended
30 September
2008
Notes GBPm
(Loss)/profit before tax (1,059.4)
Adjustments for:
Deficit/(gain) on revaluation of investment
and development property 3 1,082.5
Deficit/(gain) on sale of investment property 3 5.3
Profit on sale of subsidiary (0.8)
Write down of trading property 2.5
Depreciation 0.2
Amortisation of lease incentives and other
direct costs 14.0
Impairment of goodwill 21.6
Interest payable 4 170.7
Interest receivable (5.4)
Other finance (income)/costs 4 (6.5)
Change in fair value of derivative financial
instruments 26.3
Changes in working capital:
Change in trading properties 6.9
Change in trade and other receivables (4.9)
Change in trade and other payables 18.2
Cash generated from operations 271.2
Restated
Nine months Year
ended ended
30 September 31 December
2007 2007
GBPm GBPm
(Loss)/profit before tax 441.7 (124.8)
Adjustments for:
Deficit/(gain) on revaluation of investment
and development property (148.8) 316.5
Deficit/(gain) on sale of investment property (43.3) (37.4)
Profit on sale of subsidiary - -
Write down of trading property - -
Depreciation 0.2 0.3
Amortisation of lease incentives and other
direct costs 3.9 (1.6)
Impairment of goodwill - -
Interest payable 149.6 209.3
Interest receivable (4.7) (8.8)
Other finance (income)/costs 1.9 3.3
Change in fair value of derivative financial
instruments (154.1) (27.0)
Changes in working capital:
Change in trading properties (0.7) 8.5
Change in trade and other receivables (74.2) (6.4)
Change in trade and other payables (85.9) (65.1)
Cash generated from operations 85.6 266.8
FINANCIAL INFORMATION (unaudited)
11 Fair values of financial instruments
As at 30 September 2008
Balance
sheet value Fair value
GBPm GBPm
Debentures and other fixed rate loans
Sterling
C&C 5.562% debenture 2027 226.2 299.0
CSC 6.875% unsecured bonds 2013 26.6 25.0
CSC 5.75% unsecured bonds 2009 31.4 31.4
US dollars
Fixed rate loans 179.2 178.4
463.4 533.8
Convertible bonds - fixed rate 111.3 126.2
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 September 2007
Balance
sheet value Fair value
GBPm GBPm
Debentures and other fixed rate loans
Sterling
C&C 5.562% debenture 2027 226.0 326.5
CSC 6.875% unsecured bonds 2013 26.6 26.1
CSC 5.75% unsecured bonds 2009 31.3 31.5
US dollars
Fixed rate loans 154.2 152.1
438.1 536.2
Convertible bonds - fixed rate 111.2 159.7
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 13p per share (31 December 2007 -
21p, 30 September 2007 - 18p).
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 September 31 December 30 September
2008 2007 2007
GBPm GBPm GBPm
Current assets 45.7 25.4 82.0
Current liabilities (139.9) (97.8) (24.9)
(94.2) (72.4) 57.1
Interest rate swaps
Notional principal
30 September 31 December 30 September
2008 2007 2007
GBPm GBPm GBPm
Effective on or after:
1 year 3,607 3,319 2,935
5 years 3,192 3,220 2,893
10 years 2,425 2,543 2,425
15 years 2,100 2,100 2,100
20 years 2,100 2,100 2,100
25 years 1,625 1,625 1,700
Average contracted rate
30 September 31 December 30 September
2008 2007 2007
% % %
Effective on or after:
1 year 5.28 5.27 5.26
5 years 5.16 5.16 5.11
10 years 4.69 4.72 4.69
15 years 4.58 4.58 4.58
20 years 4.58 4.58 4.58
25 years 4.40 4.40 4.42
12 Capital commitments
At 30 September 2008, the group was contractually committed to GBP276.0 million
of future expenditure for the purchase, construction, development and
enhancement of investment property and GBP47.1 million in respect of overseas
investments (31 December 2007 - GBP317.0 million, 30 September 2007 - GBP309.0
million).
FINANCIAL INFORMATION (unaudited)
13 Per share details
(a) (Loss)/earnings per share
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2008 2007 2007
millions millions millions
Weighted average ordinary
shares in issue for calculation of
basic earnings per share 361.4 361.7 361.7
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 376.0 376.5 376.4
Restated
Nine months Nine months Year
ended ended ended
30 September 30 September 31 December
2008 2007 2007
GBPm GBPm GBPm
(Loss)/earnings used for
calculation of basic earnings
per share (963.3) 406.7 (105.0)
Reduction in interest charge
from conversion of bonds, net
of tax 2.3 4.2 5.0
(Loss)/earnings used for
calculation of diluted
earnings per share (961.0) 410.9 (100.0)
Basic (loss)/earnings per
share (pence) (266.5)p 112.4p (29.0)p
Diluted (loss)/earnings per
share (pence) (255.6)p 109.1p (26.6)p
(Loss)/earnings used for
calculation of basic earnings
per share (963.3) 406.7 (105.0)
Add back/(less)
deficit/(gain) on revaluation
and sale of investment and
development property 1,087.8 (192.1) 279.1
Less profit on sale of
subsidiary (0.8) - -
Add back impairment of goodwill 21.6 - -
Add back other finance costs - 1.9 3.3
Add back/(less) change in
fair value of derivative
financial instruments 26.3 (154.1) (27.0)
(Less)/add back deferred tax
in respect of investment and
development property (11.6) 1.9 4.2
(Less)/add back deferred tax
in respect of derivative
financial instruments (10.4) 32.0 15.6
(Less)/add back deferred tax
on capital allowances (9.9) 0.6 4.5
Add back REIT entry charge 2.7 3.0 3.9
Less amounts above due from
minority interests (69.8) (3.3) (48.3)
Earnings used for calculation
of adjusted earnings per share 72.6 96.6 130.3
Adjusted earnings per share
(pence) 20.1p 26.7p 36.0p
Earnings used for calculation
of adjusted earnings per share 72.6 96.6 130.3
Reduction in interest charge
from conversion of bonds, net
of tax 2.3 4.2 5.0
Earnings used for calculation
of adjusted, diluted earnings
per share 74.9 100.8 135.3
Adjusted, diluted earnings
per share (pence) 19.9p 26.8p 35.9p
FINANCIAL INFORMATION (unaudited)
13 Per share details (continued)
(b) Net assets
Restated
As at As at As at
30 September 31 December 30 September
2008 2007 2007
GBPm GBPm GBPm
Basic net asset value used
for calculation of basic net
assets per share 3,412.2 4,507.0 5,018.3
Fair value of derivative
financial instruments (net of tax) 69.0 57.7 (57.3)
Deferred tax on revaluation
surpluses 23.1 35.8 33.1
Deferred tax on capital
allowances 42.9 49.9 46.9
Unrecognised surplus on
trading properties (net of tax) 0.6 1.7 -
Minority interests on the above (5.0) (15.9) (6.7)
Adjusted net asset value 3,542.8 4,636.2 5,034.3
Effect of dilution:
On conversion of bonds 111.3 111.3 111.3
On exercise of options 11.4 9.7 10.8
Diluted, adjusted net asset
value used for calculation
of diluted, adjusted net
assets per share 3,665.5 4,757.2 5,156.4
Basic net assets per share 944p 1246p 1388p
Diluted, adjusted net assets
per share 975p 1264p 1370p
(c) Shares in issue
As at As at As at
30 September 31 December 30 September
2008 2007 2007
millions millions millions
Shares in issue, excluding
those held by ESOP trust and
treated as cancelled 361.3 361.5 361.5
Effect of dilution:
On conversion of bonds 13.9 13.9 13.9
On exercise of options 0.7 1.0 1.1
Diluted shares in issue 375.9 376.4 376.5
(d) Convertible debt
3.95 per cent convertible bonds due 2010
At 30 September 2008, 31 December 2007 and 30 September 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.
FINANCIAL INFORMATION (unaudited)
14 Summary of changes in equity
Nine months
ended
30 September
2008
Note GBPm
(a) Equity shareholders
Opening equity shareholders` funds 4,507.0
Issue of shares 2.0
Cancellation of shares (3.6)
4,505.4
Total recognised (expense) and income for the
period attributable to equity shareholders (970.2)
3,535.2
Dividends 6 (123.0)
Closing shareholders` equity 3,412.2
Restated
Year Nine months
ended ended
31 December 30 September
2007 2007
GBPm GBPm
(a) Equity shareholders
Opening equity shareholders` funds 4,732.4 4,732.4
Issue of shares 4.7 3.7
Cancellation of shares (7.9) (7.8)
4,729.2 4,728.3
Total recognised (expense) and income for the
period attributable to equity shareholders (100.1) 412.1
4,629.1 5,140.4
Dividends (122.1) (122.1)
Closing shareholders` equity 4,507.0 5,018.3
(b) Minority interest
Nine months ended 30 September 2008
Balance Sheet
Earls Court Empress**
& Olympia MetroCentre* State
GBPm GBPm GBPm
At 31 December 2007 47.9 151.1 -
Net loss for the period (12.9) (54.7) (2.3)
Transfer on disposal - - -
Capital introduced - 3.5 27.2
MetroCentre compound financial
instrument * - (75.3) -
At 30 September 2008 35.0 24.6 24.9
Nine months ended 30 September 2008
Other Total
GBPm GBPm
At 31 December 2007 2.9 201.9
Net loss for the period (0.1) (70.0)
Transfer on disposal (2.8) (2.8)
Capital introduced - 30.7
MetroCentre compound financial instrument * - (75.3)
At 30 September 2008 - 84.5
* The proceeds from the investment by a third party of a 40 per cent interest
in the MetroCentre Partnership in 2007 are required under IFRS to be allocated
between debt and minority interest. The amount included in debt at 30 September
2008 is GBP118.3 million (31 December 2007 - GBP43.0 million, 30 September 2007
- GBP43.0 million). The balance of the proceeds are included in minority
interest. The movement in the amount allocated as debt from 31 December 2007 is
due to a refined valuation methodology.
** As required by IAS 27 "Consolidated and Separate Financial Statements", this
acquisition has been fully consolidated with the 50 per cent third party share
adjusted through minority interest.
05 November 2008
Sponsor
Merrill Lynch
Date: 05/11/2008 09:14:53 Produced by the JSE SENS Department.
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