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JSE CCO
CCO
CCO - Capital & Counties Properties Plc - Interim report for the half year
ended 30 June 2010
CAPITAL & COUNTIES PROPERTIES PLC
(Incorporated and registered in the United Kingdom and Wales with registration
Number 07145041 and registered in South Africa as an external company with
Registration Number 2010/003387/10)
JSE code: CCO
ISIN: GB00B62G9D36
("Capco" or the "Company" or "Group")
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2010
Highlights
- Capco now established as a standalone independent business
following demerger
- Market value of properties of GBP1,313 million, up 5.3% in H1
2010 benefitting from central London focus
- Net rental income GBP38.3 million for H1 2010
- Adjusted, diluted net assets per share of 138p up 9% versus
December 2009 pro forma
- Adjusted, diluted net assets of GBP861 million
- Proposed interim dividend of 0.5p
- Loan-to-value of 36% with substantial cash resources of GBP187
million
- New openings at Covent Garden including Kurt Geiger and Apple
- New letting to the Burberry Group at 42 King Street, Covent
Garden
- Farrells appointed masterplanner for Earls Court redevelopment
area
- Improvement works on Olympia underway
Ian Durant, Chairman of Capital & Counties Properties PLC, commented:
"These are the first set of results from Capital & Counties Properties PLC as
an independent company following its demerger from Liberty International and
its successful listing on the London and Johannesburg Stock Exchanges in May
this year. Capco is a specialist central London property company, and I am
confident that our entrepreneurial and experienced management team is well
placed to unlock the potential of our prime investment properties in strategic
locations across the capital."
Ian Hawksworth, Chief Executive of Capital & Counties Properties PLC, added:
"The strength and potential of the UK`s capital city has been illustrated by
the valuation growth and recurrent income in the Group`s prime West End
properties over the first half of this year. The exhibition business has
demonstrated a resilient performance and momentum is building towards
obtaining planning consents for a long term development of Earls Court. The
Group`s business is supported by a conservative balance sheet and is now
poised to deliver considerable growth to our shareholders."
Enquiries:
Capital & Counties Properties PLC:
Ian Hawksworth Chief Executive +44 (0)20 7887 7041
Soumen Das Finance Director +44 (0)20 7960 1210
Public relations:
UK: Michael Sandler/Wendy Baker, Hudson +44 (0)20 7796 4133
Sandler
SA: Nicholas Williams, College Hill +27 (0)11 447 3030
Associates
A presentation to analysts and investors will take place today at 9.00am BST
at Bank of America Merrill Lynch Financial Centre, 2 King Edward Street,
London, EC1A 1HQ. The presentation will also be available to international
analysts and investors through a live audio call and webcast and after the
event on the Group`s website www.capitalandcounties.com.
A copy of this press release is available for download from our website at
www.capitalandcounties.com and hard copies can be requested via the website or
by contacting the company (email feedback@capcount.com or telephone +44 (0)20
7960 1299).
COMPANY OVERVIEW
Following the recent demerger from Liberty International, Capital & Counties
Properties PLC is one of the largest listed investment and development
companies in central London. Our landmark estates, held directly or through
joint ventures, are worth GBP1.3 billion, and offer the potential for
significant value unlock through entrepreneurial asset management to deliver
superior, long-term returns to our shareholders.
Our three estates are located in West London and the West End:
Covent Garden London
This historic location is globally recognised as a retail and leisure
destination. It is valued at GBP592 million.
Earls Court and Olympia
One of London`s leading exhibition businesses, EC&O has property assets
totalling GBP443 million, including our share of the Empress State
Partnership.
Great Capital Partnership
A 50/50 joint venture with Great Portland Estates which includes properties in
prime locations around Regent Street and Piccadilly worth GBP270 million.
FINANCIAL SUMMARY
30 June 30 June 31
December
2010 20091 20091
GBPm GBPm GBPm
Net rental income 38.3 43.9 78.1
Underlying earnings after tax excluding 10.1 12.6 15.2
valuation items*
Gain/(deficit) on revaluation of
investment and development
property 65.7 (143.1) (105.6)
Change in fair value of derivative (10.2) 20.3 16.9
financial instruments
Profit/(loss) before tax 54.8 (138.7) (150.0)
Total investment and trading properties 1,310 1,241
Net debt 476 463 2
Net assets (adjusted, diluted) 861 791 2
Adjusted earnings per share 1.6p 2.0p 2.4p 2
Net assets per share (adjusted, diluted) 138p 127p 2
Debt to asset ratio 36% 37% 2
* Appendix 2 provides an analysis of underlying earnings
1 See note 1 Basis of preparation
2 On a pro forma basis
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 Capital & Counties Properties 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 Capital & Counties Properties
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.
OPERATING AND FINANCIAL REVIEW
OPERATING REVIEW
These are the first set of results from Capital & Counties Properties PLC
("Capco") as an independent company following its demerger from Liberty
International PLC. It is testament to the considerable efforts of our
employees that the business has continued to perform well during a period of
significant internal restructuring. We are now operating as a standalone
company, and can look ahead with confidence to delivering on our asset plans
across our business to create substantial value for our shareholders.
The first half of 2010 has seen confidence return to the real estate market,
with the central London investment market performing particularly well. This
decoupling of the London real estate market from the rest of the UK is a
continuation of a trend that has been observed for a number of years, and was
the reason that the strategy for Capco was focused on central London in 2006.
Capco benefits from a strong presence in the West End of London, through
Covent Garden and the Great Capital Partnership which together represent 66
per cent of the business by value. Each is a unique portfolio which would be
exceptionally difficult to reassemble, such is the demand for investment
properties in the West End. There are 78 individual assets within these two
estates, with average individual lot sizes of GBP14 million. These estates
deliver passing rent to Capco of GBP40.7 million and have maintained near-full
occupancy even during the downturn of the past three years.
These prime locations attract both London residents and visitors from the UK
and abroad. We are seeing strong demand from a diverse range of occupiers
across our estates, either to expand existing units or to establish a new
presence.
The exhibitions business at Earls Court & Olympia ("EC&O") has had a resilient
first-half. Although EBITDA has fallen, it performed ahead of expectations
despite the economic climate. We would like to congratulate the team on
winning the Association of Event Organisers` "Venue Team of the Year" award
last month, a timely reminder that the business is a leader in its industry.
The planning process for the Earls Court site continues, and 2010 has seen
positive progress to date. This is a unique opportunity to transform a
district of London, and we are pleased to be working alongside Transport for
London and the London Borough of Hammersmith & Fulham, and engaged with the
Greater London Authority and the Royal Borough of Kensington & Chelsea, to
create a vision to benefit all stakeholders.
Valuations
There is continued appetite for central London investment properties from both
domestic and non-sterling denominated investors. This is in part driven by the
lack of supply of Grade A space for occupiers and the associated forecasts of
medium term rental growth creating competition among assets. This investor
demand has, through the first half of 2010, been met by increased levels of
supply, although to date there is little evidence that this has undermined
prices which continue to be supported by the weight of money available.
However there are now signs that there is less urgency amongst investors and
purchasers.
UK investment yields have fallen during the first half, leading to capital
values rising by 5.8 per cent as measured by the IPD all property monthly
index. Against this backdrop, Capco`s properties have increased in value by
5.3 per cent in the first half of 2010, due to a mixture of yield shift and
rental growth. Since June 2007, Capco`s properties have outperformed the IPD
all property monthly index, with a cumulative revaluation movement of -19.2
per cent versus -35.7 per cent for the index.
Market Market Market
Value Value Value ERV Initial Equivalen
t
Jun-10 Dec-09 Change( Change Yield Yield
2)
GBPm GBPm % % % %
Covent Garden 592 549 7.3% 3.5% 4.3% 5.1%
Great Capital
Partnership 270(1) 247(1) 8.7% 1.4% 5.4% 5.0%
Empress State 103(1) 94(1) 8.6% - 6.4% 6.1%
Other 8 9 -
Total non-
exhibition
properties 973 899 7.8% 2.5%
Earls Court &
Olympia 340 340 (1.3%)
Total investment
properties 1,313 1,239 5.3% 2.5%
(1 Represents Capco`s 50 per cent share
)
(2 Valuation change takes account of amortisation of lease
) incentives, capital expenditure and fixed head leases
Occupier market background
The central London office market has bounced back strongly in the first half
of 2010, with take-up levels at their highest since 2007, a rapid reversal of
the situation 12 months ago when it was experiencing its lowest level of
tenant activity since the early 1990s. In the West End, as existing stock
continues to be absorbed and supply becomes more constrained, the potential
for rental growth looks slightly more positive for better quality
accommodation that offers good value to occupiers.
Availability levels have fallen significantly during H1 2010 as occupiers have
pushed ahead with transactions and space released by existing tenants has been
withdrawn from the market, whilst development activity fell for the 8th
consecutive quarter as the lack of readily available development funding
continued to constrain new schemes. However a lot of occupier demand is still
being driven by lease events rather than expansion or new entrants coming into
the market and further macro-economic uncertainties may well have an adverse
impact through H2 2010.
In the retail sector, central London, and particularly the West End, has
defied the UK recession due to a variety of reasons, not least of which has
been the weakness of sterling over the past two years. This has not only
encouraged overseas tourists to visit the UK capital but has also encouraged
overseas retailers to consider London as a preferred destination to trade
from. In terms of the range and quality of shopping only New York and Tokyo
are comparable to central London.
Many notable retailers have opened flagship stores in the West End within the
last two years, and other brands, including a number of leading international
retailers, are continuing to actively seek accommodation in London`s key
retail locations to open flagship stores. They are adopting an increasingly
discerning attitude, focusing only on prime positions and in consequence,
there is an increasing discrepancy between the terms achievable for the very
best buildings in the best locations and those which are less prime.
Nevertheless, this level of demand, coupled with a shortage of supply, has
helped to sustain rental levels in 2010 to date and there are good prospects
for future rental growth in the prime section of the market.
Covent Garden
- Capital value GBP592 million as at 30 June 2010, up 7% (31 Dec
2009: GBP549 million)
- Net rental income GBP12.9 million H1 2010, up 4.0% (H1 2009:
GBP12.4 million)
- Passing rent GBP25.7 million as at 30 June 2010, down 3.0% (31
Dec 2009: GBP26.5 million) plus GBP2.8 million from rent free
periods on contracted leases
- ERV GBP34.4 million as at 30 June 2010, up 3.5% (31 Dec 2009:
GBP33.2 million)
The Covent Garden estate, situated in the heart of London`s West End and
Theatreland, represents 45 per cent of Capco`s property assets with its 92
shops and 41 restaurants contributing 77 per cent of its GBP27.1 million
current gross income, with the remainder split between offices contributing 17
per cent, leisure 5 per cent and residential 1 per cent. It is globally
recognised attracting over 46 million visitors per annum. We intend to re-
energise the Covent Garden estate as a leading retail and leisure destination
within central London, and have allocated capital of GBP75 million across a
series of projects to achieve this repositioning.
Since 30 June 2010, we have agreed a new conditional letting to the Burberry
Group, the global luxury company, at 42 King Street which we took a surrender
of in May 2010. This letting is a further step in implementing our rezoning
strategy for this part of the estate, and demonstrates the appeal of Covent
Garden to international retailers.
Our current goal is to increase the ERV to GBP40 million over three years,
capturing as much of this within the passing rent as possible. Since year end,
we have negotiated 25 rent reviews and lettings totalling GBP2.9 million,
approximately 6 per cent over the prevailing ERV. The expected opening later
this month of Bedford Chambers let to Apple clearly signifies our aspirations,
and should serve as a catalyst to attract further occupiers of this quality to
the estate.
At near-full occupancy within the estate, this repositioning requires a
proactive approach from our on site management team. The occupancy rate at 30
June 2010 was 96.4 per cent (December 2009: 99.0 per cent) adjusted for units
under offer and held for development. This increased level of vacancy comes as
a result of our interventions to secure control of key units.
Recent progress in improving the diversity and range of retail includes:
- opening of well known brands such as Kurt Geiger and Sketchers
on James Street;
- introduction of smaller niche retailers such as L`Artisan
Parfumeur and Erno Laszlo into the Market Building; and
- strong competition for 3 units on Long Acre opposite the
Longmartin scheme, which we expect will be available in the
Autumn.
We are expanding and improving the dining experience available on the estate
throughout the day by establishing a diverse Food & Beverage offer. The
opening of Andronicas and Le Pain Quotidien, offering casual all day dining,
complements the brasserie dining concept that Caprice Holdings (in place of
Rex Restaurants) intends to introduce in the former Theatre Museum. We were
disappointed to have our initial planning application for this project turned
down in May of this year, but intend to submit shortly a revised proposal
following further consultation with Westminster City Council which we believe
better addresses their requirements.
Our strategy for Covent Garden also includes the enhancement of the
residential offer through the creation of Covent Garden Living, aimed at
converting some of the more inefficient office areas within the estate to
residential use. We believe there is strong demand in this area from the
premium end of the market on both a sales and letting basis, and are aiming to
commence by year end our first major refurbishment at 34 Henrietta Street
where we hope to establish a new level of sales value per square foot for the
area.
Earls Court & Olympia
- EC&O capital value stable at GBP340 million as at 30 June 2010
(31 Dec 2009: GBP340 million)
- Empress State capital value GBP103 million as at 30 June 2010,
up 9% (31 Dec 2009: GBP94 million) (Capco 50 per cent share)
- EC&O EBITDA GBP13.2 million H1 2010, down 15.4% (H1 2009:
GBP15.6 million)
EC&O Venues
The Earls Court & Olympia exhibition business, EC&O Venues, comprises 1.7
million square feet of exhibition and conference floor space in three
internationally recognised central London venues. Although a robust and
resilient business, the economic downturn has impacted the business this year
as well as the industry globally. Turnover was GBP27.8 million (down 15 per
cent) and EBITDA was GBP13.2 million (down 15 per cent) for the first half of
the year (comprising net rental income of GBP14.6 million less related
administration expenses of GBP1.4 million).
EC&O Venues earns the majority of its revenues from renting space to
exhibition and conference organisers, and is therefore a natural extension of
the traditional investment real estate business.
- Over the past three years, EBITDA has been generated primarily
from the Earls Court (51%) and Olympia (42%) venues, with the
Brewery (1%) and other properties representing the remainder.
- Lettings are for six days on average, which includes the time
to set up and take down shows, as well as the event itself.
- A small proportion of the overall revenues (approximately 10%
on average over the past three years) is earned during the show
itself, for example from car parking, catering concessions and
eForce (IT services).
- The business is seasonal, with typically 65-75% of EBITDA
earned in the first half of the year.
The highlight of the year so far at Earls Court was a revitalised Ideal Home
Show (which saw the Earls Court facade turn green, covered in astro turf for a
month!) with over 250,000 visitors. New shows at Olympia include the Toy Fair
and the redesigned London International Fine Art & Antiques Fair, pushing
utilisation rates to over 40 per cent with the ground floor of the Olympia
Grand Hall running at 59 per cent.
Olympia currently hosts over 70 shows a year, and is particularly competitive
in the segment of the market seeking mid-sized space close to the West End. In
a market where the average size of show is falling (we estimate that 80 per
cent of shows are now less than 100,000 square feet), Olympia has the
potential to become the focal point for both consumer and trade-based
exhibitions and shows in central London, continuing its 124 year tradition of
fulfilling this vital role for the capital.
The initial reaction from the industry and our customers to our proposals to
enhance and improve Olympia has been encouraging. The EC&O Venues team has
closely engaged with its core customer base to discuss their future business
requirements and how this fits with the future of the Earls Court and Olympia
venues. On this basis, a detailed analysis has been undertaken to map business
from Earls Court to Olympia on a show-by-show basis. This indicates that the
transfer of a significant proportion of the existing Earls Court business
could be achieved at a 70 per cent utilisation rate within the new Olympia
building format. This would sustain approximately 65-75 per cent of the
existing EBITDA of the business. This work will continue to be refined, but we
are confident that our proposals for Olympia will prove to be a great
improvement for the business, its customers and our neighbours in the future.
Works are currently underway to infill the atrium space of the first floor of
the Olympia 2 building, which we expect to complete in early autumn. We have
recently submitted a planning application for Olympia to improve its
flexibility as a venue capable of hosting a number of events simultaneously.
Our proposals include the rebuild of the West Hall into a two-storey 90,000
square feet exhibition facility, and the conversion of the ground floor of the
Olympia 2 building to a vehicle marshalling facility.
Subject to planning, we expect construction of the West Hall to commence in
the early part of 2011 and to continue into H1 2012, scheduled around the
shows due to run at Olympia. The anticipated cost of these works remains at
GBP20 million.
The Earls Court site
Earls Court is one of the most important sites in London that offers the
potential for significant regeneration, and is possibly the most deliverable
given its location and transport infrastructure. Its location in central
London with prime residential districts on every border means that it offers
an attractive redevelopment opportunity for the future. As a result, since
Capco`s initial acquisition in 2007, we have been working with a range of
public bodies to gain general acceptance of this potential.
- The Earls Court site has secured recognition in the draft
London Plan as an Opportunity Area given its excellent public
transport and communication links.
- We are currently making representations to the Examination in
Public process for the London Plan to support this designation
and the potential scale of development.
- In addition, we have recently renewed our collaboration
agreement with our adjoining land owners, Transport for London
(TfL) and the London Borough of Hammersmith & Fulham (LBHF), to
work together in considering the wider Earls Court
Redevelopment Area (ECRA).
From a planning perspective we are working alongside not only LBHF, but also
with the Greater London Authority (GLA) and the Royal Borough of Kensington &
Chelsea, to establish a local development framework which we hope will
eventually form the basis of an Opportunity Area Planning Framework (OAPF). It
is envisaged this planning policy framework will be incorporated within each
borough`s local development plans and the GLA`s formally adopted London Plan
by mid-2011, and will set the backdrop for any planning application made.
The recent appointment of Farrells as masterplanner for the ECRA has done much
to assist this process. We hope that a joint vision for the site based on Sir
Terry Farrell`s masterplan principles will be agreed in the autumn, in
consultation with all relevant stakeholders.
Alongside our activities regarding the planning process, we are in continued
negotiations with TfL in relation to the regearing of our leasehold interest
in respect of Earls Court 1 & 2. Both sides` interests in this regard are
aligned, and we are therefore confident of a mutually acceptable conclusion to
these negotiations.
Valuation
The valuation for the EC&O business has remained unchanged from December 2009
at GBP340 million given the performance of the exhibitions business and the
current status of the planning process. This is made up of the following
elements:
Earls Court GBP135m Valued on an existing use basis
reflecting their use as exhibitions
venues. No upside from any future
development or planning permission
is recognised.
Olympia GBP97m
Seagrave Road GBP71m Currently a car park supporting
Earls Court, valued as a site with
the potential for residential
consent.
Other peripheral assets GBP37m A mixture of small assets and sites.
Total GBP340m
Empress State increased by GBP9 million to GBP103 million (9 per cent uplift)
(Capco 50 per cent share), reflecting the secure income profile with a RPI-
index linked lease to the Metropolitan Police until 2019.
Great Capital Partnership
- Capital value GBP270 million as at 30 June 2010, up 9% (31 Dec
2009: GBP247 million)
- Net rental income GBP6.8 million H1 2010 up 1.5% (H1 2009:
GBP6.7 million)
- Passing rent GBP15.0 million as at 30 June 2010, up 0.7%, (31
Dec 2009: GBP14.9 million) plus GBP0.3 million from rent free
periods on contracted leases
- ERV GBP16.4 million as at 30 June 2010, up 1.4% (31 Dec 2009:
GBP16.2 million)
(all amounts being Capco`s 50% share)
The Great Capital Partnership ("GCP") is a 50/50 joint venture with Great
Portland Estates plc, with all major decisions taken by the GCP board. Through
the board, Capco shares in the overall strategic control of the estate, which
sets policy on new lettings, investments, sales, financings and other asset
management duties.
GCP`s properties are located in central London`s prime property markets, with
the largest concentration being in the West End around Piccadilly and Regent
Street. Aside from delivering robust recurrent income, the portfolio has a
number of asset management, refurbishment and redevelopment opportunities to
deliver further value to shareholders. These opportunities are kept under
constant review and, given the current market background, we will look to grow
both rents and values through selective implementation of initiatives.
Recent portfolio activity has seen 38 letting transactions concluded totalling
GBP3.9 million of rent per annum, 5.0 per cent ahead of December ERV. As at
30 June 2010, 2.7 per cent of the portfolio by rental value was vacant,
adjusting for properties held for development and under offer. The principal
voids are 43 Fetter Lane and 24 Britton Street.
An aggregate sum of GBP2 million (Capco`s share) has been committed to working
up more detailed development proposals on Britton Street, Walmar House and
Fetter Lane. However no final decision has yet been taken by the Partnership
to commit to the actual developments.
Other
The majority of the Opportunities portfolio has been disposed over the past
three years, with only GBP7.7 million remaining, which will be sold in due
course.
Our investments in two Chinese real estate funds have performed well, rising
in value to GBP52.3 million as at 30 June 2010 (31 December 2009: GBP46.0
million) due to an uplift in the underlying valuation of the funds` assets as
well as a favourable movement in the exchange rate. Our remaining commitment
to the funds is limited at GBP14 million on the first fund, as we do not
anticipate any further capital calls on the second fund. We expect to see
further distributions from these investments as we move towards maturity of
the funds (in 2013 and 2015).
Board changes
We are pleased to welcome Henry Staunton as a new non-executive Director and
Chairman of the Audit Committee.
Interim dividend
We propose to pay an interim dividend of 0.5 pence per share. This is in line
with the indication given during the demerger process of a full year 2010
dividend of 1.5 pence per share. It remains our intention to grow the dividend
as the success of our asset plans is reflected in underlying profitability.
Outlook
The business has performed well in the first half of the year, as conditions
in the real estate market have stabilised. We are cautious regarding the
outlook for the central London investment market in the second half. Whilst
it should remain active, valuations will now be driven more by rental growth
captured from active asset management rather than any further downward yield
shift.
In this regard, our business is well placed. Our strategic focus on key
estates within central London means that our experienced, entrepreneurial team
have the opportunity to unlock considerable latent value through delivery of
our asset plans. We will look to release value from particular assets where we
believe there is limited upside and a strong investment market to execute an
exit.
In assessing the outlook for underlying profits for the full year, it should
be recognised that the first half performance will be eroded due to Earls
Court & Olympia`s business being seasonally biased towards the first half,
whilst the impact of being a standalone public company will be more fully
reflected in administration costs in the second half.
Nevertheless, recent successes at Covent Garden, re-letting units to target
retailers and gaining vacant possession of others, gives us confidence to
achieve our target ERV of GBP40 million. The exhibition business has responded
well to the economic climate; whilst profitability has fallen, it has
performed better than expected and the outlook is stable. The second half sees
a continuation of the planning process at Earls Court, and we expect the
publication of the London Plan by year end.
The business has demonstrated its defensive qualities over the past three
years, and is now poised to deliver considerable growth to our shareholders
going forward.
FINANCIAL REVIEW
Introduction
The Capital & Counties Properties PLC Group ("the Group") demerged from its
parent company, Liberty International PLC (subsequently renamed Capital
Shopping Centres Group PLC), with effect from 7 May 2010. Capital & Counties
Properties PLC has a premium listing on the official list of the UKLA, and a
secondary inward listing on the JSE Limited, with South African institutional
shareholders given two years until May 2012 to realign their portfolios.
Shares in Capital & Counties Properties PLC were admitted to dealings on the
London and Johannesburg Stock Exchanges in May 2010.
2009 historic financial information
The demerger documents and pro forma information were prepared (as is required
in such situations) to illustrate the Group`s financial performance and its
position as if the demerged group and capital structure had existed at 31
December 2009. On such pro forma basis, regarding intercompany debt due to
Liberty International as invested capital and taking account of the GBP244
million cash transfer from Liberty International, the Group`s net assets as at
31 December 2009 were GBP731 million. This represented an adjusted pro forma
net asset value per share of 127 pence.
Therefore, for the purposes of preparing such pro forma financial statements,
net finance costs were adjusted to exclude those charges arising on
intercompany debt due to Liberty International and included a pro forma
allocation of administration costs which were likely to be incurred by the
Group once operating on a standalone basis. Likewise, intercompany balances
due to Liberty International were disclosed as a component of invested capital
rather than third party debt.
These adjustments were made for comparability in the demerger documents.
However they lead to certain differences when applying the principles of
merger accounting as outlined in Note 1 Basis of preparation, and after taking
into account the change in the Group`s capital structure on demerger.
A reconciliation at 31 December 2009 between the balance sheet and income
statement reported within the Group`s demerger documents with that reported
within these condensed financial statements prepared under International
Financial Reporting Standards has been included in Appendix 4 to this
announcement.
Within this financial review, where more meaningful, comparison has been made
to 2009 pro forma financial information as disclosed in the demerger
documents.
Results for the six months ended 30 June 2010
The first half of 2010 has seen a strong valuation uplift for the Group`s
investment properties, offset in part by a contraction in the yield curve for
medium term UK interest rates leading to an unrealised mark to market charge
on derivative revaluation. Net rental income has been generally in line with
expectations, other than a more resilient performance than anticipated at
Earls Court & Olympia.
Summary consolidated income statement:
Actual Actual
30 June 30 June
2010 2009
GBPm GBPm
Net rental income 38.3 43.9
Other income - 1.6
Gain/(deficit) on revaluation and sale of 65.7 (165.0)
investment and development property
Administration expenses (including GBP4.1m of (11.8) (5.9)
demerger costs)
Net finance costs (37.4) (13.3)
Taxation (0.5) 0.4
Non-controlling interests - 17.5
Loss attributable to profit/(loss) for the 54.3 (120.8)
period
Adjustments:
(Gain)/deficit on revaluation and sale of (65.7) 165.0
investment and development property
Change in fair value of derivative financial 10.2 (20.3)
instruments
Exceptional finance costs (see note 4) 7.1 9.6
Demerger costs 4.1 -
Other adjustments (see note 6) 0.5 (20.9)
Underlying profit before tax after non- 10.5 12.6
controlling interests
Adjusted earnings per share (pence) 1.6 2.0
Underlying profit before tax after non-controlling interests fell by 17 per
cent from GBP12.6 million to GBP10.5 million and adjusted earnings per share
fell by 20 per cent to 1.6 pence.
The reduction in underlying profit is illustrated in the chart that appears on
p8 of the pdf of the interim report available on the Company`s website.
The Group`s net rental income reduced by 4.8 per cent on a like-for-like basis
since 30 June 2009 to GBP38.3 million. Net rental income for Covent Garden
(GBP12.9 million) and the Great Capital Partnership (GBP6.8 million) increased
by 3.2 per cent and 3.0 per cent respectively. This was offset by EC&O which
fell by GBP2.8 million or 13.6 per cent to GBP17.9 million. Although this
reflects the slowdown in exhibition income, the first half performance (which
typically represents 65-75 per cent of profits) illustrated a degree of
resilience against both budget and forecast. Of the reduction in net rental
income of GBP5.6 million, GBP3.2 million can be attributed to the
deconsolidation of Empress State (as explained below) and a further GBP0.4
million due to the sale of non-core assets during 2009.
Net rental income for the period included GBP0.9 million relating to lease
incentives.
Underlying administration expenses increased by GBP1.8 million to GBP7.7
million in the first half of 2010. This increase can be attributed to a higher
overhead cost base largely as a result of becoming a standalone business with
the full impact to be felt in the second half of 2010.
Underlying net finance costs which exclude exceptional items totalled GBP20.1
million, a decrease of GBP3.9 million on the prior year. This reduction
reflects decreased average debt following a number of prepayments made in both
the second half of 2009 and first half of 2010.
Exceptional items include demerger-related administration costs of GBP4.1
million. Within net financing costs, exceptional finance charges of GBP7.1
million were recorded in relation to the termination of interest rate swaps
arising principally from debt prepayment on demerger.
Pre-demerger the Group benefited from the tax savings provided by Liberty
International`s REIT status. Following demerger, the Directors believed that
the business would have greater operating flexibility as a listed non-REIT
property company, hence from 7 May 2010 the Group is again subject to UK
corporation tax and will pay ordinary dividends with no requirement to
withhold tax at source when paying a dividend. The Group is still required to
settle the outstanding REIT liability due in respect of subsidiaries formerly
within Liberty International`s REIT business.
The net tax charge for the six months to 30 June 2010 was GBP0.5 million,
lower than would be expected because of capital allowances and certain
exceptional items. The effective rate of tax on underlying recurring profit is
expected to be approximately 25 per cent.
Empress State
As outlined in Note 12, the accounting treatment for the Group`s 50 per cent
interest in the Empress State Limited Partnership changed from full to
proportional consolidation in August 2009. This resulted in a deemed disposal
of GBP94 million of investment property, reduced the Group`s gross debt by
GBP78 million and accounts for a GBP3.2 million reduction in net rental income
in the six months to 30 June 2010 over the comparative period of 2009.
Balance sheet
As detailed in the tables below net assets (adjusted, diluted) have increased,
on a pro forma basis, by GBP70 million or 11 pence per share since 31 December
2009.
Summary consolidated balance sheet:
Actual Actual Pro forma
30 June 31 31
December December
2010 2009 2009
GBPm GBPm GBPm
Investment and development 1,309.9 1,240.5 1,240.5
property
Investments 52.3 46.0 46.0
Net debt (476.3) (707.1) (463.1)
Other assets and liabilities (92.5) (486.7) (92.5)
Net assets 793.4 92.7 730.9
Adjustments:
Fair value of derivative financial
instruments (net of recognised
deferred tax) 52.8 53.3 53.3
Other adjustments (see note 16) 14.4 7.0 7.0
Adjusted net assets 860.6 153.0 791.2
Effect of dilution 0.1 - -
Net assets (adjusted, diluted) 860.7 153.0 791.2
Net assets per share (pence per
share adjusted, diluted) 138 25 127
The fair value provision for financial derivatives (interest rate swaps)
increased by GBP10 million in the six months to June 2010. The resulting
balance sheet provision, net of deferred taxes, of GBP53 million is added back
to arrive at adjusted net assets.
Adjusted net assets per share
The adjusted net assets per share are shown in the chart that appears on p9 of
the pdf of the interim report available on the Company`s website.
The significant contributing factors in this growth were the property
valuation surplus arising at 30 June 2010 of GBP66 million (11 pence per
share), together with a GBP7 million revaluation surplus arising from the
Group`s investments in China, of which approximately GBP3.5 million was due to
favourable exchange rate movements.
Cash flow
The cash flow summary below shows a net cash inflow of GBP167.5 million in the
six months to 30 June 2010. When adjusted for the cash allocation from Liberty
International of GBP244.0 million, an outflow of GBP76.5 million can
principally be attributed to debt prepaid and repaid during the period of
GBP63.4 million.
Summary consolidated cash flow summary:
30 June 30 June
2010 2009
GBPm GBPm
Underlying operating cash generated 29.9 40.6
Net finance charges paid (21.5) (37.7)
Net movement in working capital (4.4) (87.8)
Recurring cashflow from operations 4.0 (84.9)
Property development/investments (5.2) (10.0)
Sale proceeds of property/investments 0.5 106.3
Demerger costs (3.0) -
REIT entry charge and other tax (2.0) (1.0)
Cash flow before financing (5.7) 10.4
Financing 180.6 (2.7)
Termination of interest rate swaps (7.4) -
Net Cash flow 167.5 7.7
Recurring cash flow from operations has improved from the comparable period in
2009 largely due to a favourable movement in working capital. In the
comparative period when the Group still formed part of Liberty International,
cash reserves generated from the sale of property and investments were
transferred from the Group and managed centrally by Liberty International.
The adverse movement in recurring underlying cash flows is the result of
falling net rental income together with higher recurring administration
expenses, both of which have been discussed above. Additionally, in the
comparative period to 30 June 2009 the Group received a distribution from its
investment in China of GBP1.5 million whereas in the six months to 30 June
2010 no such distribution was received.
Cash utilised for finance costs has fallen due to the prepayment of external
debt since 30 June 2009.
Cash applied to the development of property and investments in the period is
principally due to ongoing planning activity at Earls Court & Olympia of GBP4
million. REIT entry charges of GBP1.6 million were paid during the six months
with the remaining liability of GBP2.1 million principally scheduled for
payment during the second half of 2010.
Capital commitments
The Group has an aggregate commitment to capital projects of GBP22 million.
This includes GBP14 million in relation to one of the China real estate
investment funds in which the Group invests. The investment period for this
fund has now closed but this capital is reserved in the event the fund`s
manager pursues certain specified new projects as agreed by the fund`s
investment committee.
These commitments will be funded by the Group`s cash and available facilities
at 30 June 2010 of GBP191 million.
Debt
The Group`s debt is arranged on an asset specific basis, with limited or no
recourse to the Group. This structure permits the Group a higher degree of
financial flexibility in dealing with individual property issues compared to a
financing structure based on a single Group-wide borrowing facility.
In the six months to 30 June 2010, the Group made partial asset specific loan
prepayments of GBP56 million of which GBP20 million was prepaid on facilities
secured against Earls Court & Olympia and GBP36 million on facilities secured
over Covent Garden as well as the repayment on maturity of a smaller facility.
The associated swap termination costs totalled GBP7.1 million.
Net debt reduced from GBP707 million at 31 December 2009 to GBP476 million at
30 June 2010, a decrease of GBP231 million, with the cash allocation received
from Liberty International prior to demerger being the driving factor behind
the reduction in net debt.
A loan to value ratio of 36 per cent is slightly lower than the 37 per cent at
31 December 2009 (calculated on a pro forma basis), with the marginally higher
debt level being compensated by the revaluation surplus on the value of the
Group`s property assets. The Group`s interest cover ratio significantly
improved following the debt prepayments.
The Group had cash and available facilities of GBP191 million and is in
compliance with all of its asset specific loan covenants.
Group debt ratios were as follows:
Actual Actual Pro forma
30 June 31 31 December
December
2010 2009 2009
Loan to value 36% 57% 37%
Interest cover 152% 126% 126%
Weighted average debt maturity 3.5 4 years 4 years
years
Weighted average cost of debt 5.9% 5.8% 5.8%
Proportion of gross debt with
interest rate production 96% 95% 95%
The Group`s average debt maturity is 3.5 years. The first significant maturity
of secured debt is the Earls Court & Olympia facility which matures in
February 2012.
A detailed breakdown of the Group`s debt maturity is shown in note 10 of the
condensed financial statements.
Financial Covenants
Full details of the loan financial covenants are shown in Appendix 3.
Financial covenants apply to GBP657 million of asset specific debt. The two
main covenants are Loan to Value ("LTV") and Interest Cover ("IC"). The
actual requirements vary and are specific to each loan. At 30 June 2010
GBP210 million of non-recourse loans had no loan to value requirement.
A LTV covenant of 75 per cent will become effective on 18 August 2010 in the
loan facility secured against Empress State. As at the 30 June 2010 valuation
the actual LTV was 75.2 per cent, and hence a modest prepayment may be
required on this facility.
Compliance with financial covenants is and will continue to be closely
monitored.
Interest rate hedging and fair value of financial instruments
The Group`s policy is to eliminate the short and medium term risk arising on
interest rate volatility. This is generally achieved by entering into interest
rate swap contracts to hedge both the size and maturity profile of borrowings.
At 30 June 2010, the proportion of gross debt with interest rate protection
was 100 per cent of borrowings on the Group`s wholly owned properties, 85 per
cent of borrowings on joint venture properties and 96 per cent overall.
As illustrated in the chart that appears on p11 of the pdf of the interim
report available on the Company`s website, during the first half of 2010 short
term rates marginally increased whilst longer term rates reduced. This led to
an income statement charge of GBP10.2 million for the six months to 30 June
2010.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are as set out in the
table below:
Risk Description Impact Mitigation
Financing
Liquidity Reduced Insufficient Regular reporting of
availability funds to meet current and projected
operational position to the Board
and financing Efficient treasury
needs management and strict
credit control
Economic and Property Impact on Regular monitoring of LTV
property values covenants and ICR covenants Covenant
market decrease headroom monitored and
downturn Reduction in maintained; regular market
rental income valuations; focus on
quality assets
Interest Interest rates Lack of Hedging to establish long
cover fluctuate certainty term certainty
over interest
costs
Market price Interest rates Potential Manage derivative
risk of fixed fluctuate cash outflow contracts to achieve a
rate resulting in if derivative balance between hedging
derivatives significant contract interest rate exposure and
assets and or contains minimising potential cash
liabilities on break clause calls
derivative
contracts
Foreign Certain Group Value of Monitor exposure within
exchange investments investments specified limits and
are not is adversely consider usage of cross
denominated in affected by currency interest rate
sterling movements in swaps if appropriate
impacted
exchange
rates
Joint Reliance on JV Partners Agreements in place and
Ventures partners` under - regular communication with
performance perform or partners
and reporting provide
incorrect
information
Asset Management
Tenants Tenant failure Financial Initial assessment of
loss tenant covenant strength
Regular reporting and
modelling of tenant
covenant
Active credit control
process
Voids Increased Financial Policy of active tenant
voids, failure loss mix management
to let
developments
Reputation
Concentration Concentration Exposure to Terrorist insurance in
of the events that place
Group`s threaten Security and health &
properties in visitor safety policies and
central London security, procedures in offices
health &
safety or
public
transport in
central
London
Business Lost access to Impact on Documented business
interruption sites or head footfall and recovery plans in place
office tenant income
Adverse
publicity
People/HR
Staff Key staff Loss of key Succession planning;
members of performance evaluation;
the training and development;
management incentive reward
team could
impact
adversely on
the Group`s
success
Developments
Time Planning Securing Policy of sustainable
planning development
consent for Constructive dialogue with
developments planning authorities
Managerial experience
Cost and Construction Returns Approval process based on
letting risk cost overrun, reduced by detailed project costs;
low occupancy increased regular monitoring and
levels costs or forecasting of project
delay in costs and rental income
securing and fixed cost contracts
tenants
Opportunities Failure to Limited Maintain adequate
identify and future liquidity and facilities
acquire development Pro-active and experienced
suitable opportunities management team
development
and investment
properties
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 15 to 34 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 15 to 34 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 3 to 11 refers to important events
which have taken place in the period.
The principal risks and uncertainties facing the business are referred to on
page 12 of the operating and financial review.
Related party transactions are set out in note 18 of the condensed set of
financial statements.
A list of current Directors is maintained on the Capital & Counties Properties
PLC website: www.capitalandcounties.com.
By order of the Board
I D Hawksworth
Chief Executive
S Das
Finance Director
3 August 2010
INDEPENDENT REVIEW REPORT TO CAPITAL & COUNTIES PROPERTIES PLC
Introduction
We have been engaged by the Company to review the condensed set of
consolidated financial statements in the half-yearly financial report for the
six months ended 30 June 2010, which comprises the consolidated income
statement, consolidated statement of comprehensive income, consolidated
balance sheet, consolidated statement of changes in equity, 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 the 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 2010 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 LLPChartered Accountants
London
3 August 2010
Notes:
a) The maintenance and integrity of the Capital & Counties Properties 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 2010
Six Six Year
months months
ended ended ended
30 June 30 June 31
December
2010 2009 2009
Note GBPm GBPm GBPm
s
Revenue 2 59.2 69.8 127.7
Rental income 59.2 68.4 126.4
Rental expenses (20.9) (24.5) (48.3)
Net rental income 2 38.3 43.9 78.1
Other income - 1.6 1.5
Gain/(deficit) on revaluation and
sale of investment and
development property 3 65.7 (165.0) (128.8)
Profit on sale of investment - - 3.6
Write down of trading property - - (0.1)
104.0 (119.5) (45.7)
Administration expenses
Ongoing expenses (7.7) (5.9) (14.5)
Impairment of other receivables - - (12.0)
Demerger costs (4.1) - -
Operating profit/(loss) 92.2 (125.4) (72.2)
Finance costs 4 (20.7) (25.1) (50.1)
Finance income 0.6 1.1 2.6
Other finance costs 4 (7.1) (9.6) (47.2)
Change in fair value of
derivative financial instruments (10.2) 20.3 16.9
Net finance costs (37.4) (13.3) (77.8)
Profit/(loss) before tax 54.8 (138.7) (150.0)
Current tax (0.4) - (1.3)
Deferred tax - - (0.1)
REIT entry charge (0.1) 0.4 0.3
Taxation 5 (0.5) 0.4 (1.1)
Profit/(loss) for the period 54.3 (138.3) (151.1)
Loss attributable to non-
controlling interests - 17.5 19.6
Profit/(loss) for the period
attributable to owners of the
Group 54.3 (120.8) (131.5)
Basic earnings/(loss) per share 16 8.7p (19.4)p (21.1)p
Diluted earnings/(loss) per share 16 8.7p (19.4)p (21.1)p
Adjusted earnings per share are shown in Note 16.
The above consolidated income statement should be read in conjunction with the
accompanying notes.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
For the six months ended 30 June 2010
Six Six Year
months months
ended ended ended
30 June 30 June 31
December
2010 2009 2009
GBPm GBPm GBPm
Profit/(loss) for the period 54.3 (138.3) (151.1)
Other comprehensive income
Actuarial losses on defined benefit
pension schemes - - (0.3)
Profit/(loss) on revaluation of
investments and other movements 7.1 (8.2) (5.2)
Tax on items taken directly to - - 0.1
equity
Net loss recognised in equity due
to non-controlling interests - - (0.2)
Other comprehensive income for the
half year, net of tax 7.1 (8.2) (5.6)
Total comprehensive income for the 61.4 (146.5) (156.7)
period
Total comprehensive income for the
period is attributable to:
Owners of the group 61.4 (129.0) (136.9)
Non-controlling interests - (17.5) (19.8)
61.4 (146.5) (156.7)
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
CONSOLIDATED BALANCE SHEET (unaudited)As at 30 June 2010
As at As at
30 June 31
December
2010 2009
Notes GBPm GBPm
Non-current assets
Investment and development property 6 1,309.9 1,240.5
Plant and equipment 0.8 1.0
Investments 52.3 46.0
Trade and other receivables 8 14.7 14.5
1,377.7 1,302.0
Current assets
Trading property 7 0.3 0.3
Trade and other receivables 8 23.1 22.1
Cash and cash equivalents 186.8 19.3
210.2 41.7
Total assets 1,587.9 1,343.7
Non-current liabilities
Borrowings, including finance leases 10 (655.7) (655.4)
Derivative financial instruments 13 (66.0) (56.2)
Other provisions 14 (7.1) (7.4)
Other payables - (0.9)
(728.8) (719.9)
Current liabilities
Borrowings, including finance leases 10 (7.4) (71.0)
Trade and other payables 9 (58.3) (460.1)
(65.7) (531.1)
Total liabilities (794.5) (1,251.0
)
Net assets 793.4 92.7
Equity
Share capital 17 155.5 497.5
Other components of equity 637.9 (404.8)
Capital and reserves attributable to 793.4 92.7
owners of the Group
Non-controlling interests - -
Total equity 793.4 92.7
Basic net assets per share 16 127.6p 14.9p
Adjusted, diluted net assets per share 16 138.3p 24.6p
The above consolidated balance sheet should be read in conjunction with the
accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2010
Non-distributable Distributable
reserves (2) reserves (2)
Share Share Merger Revalua Capital Retain Total
tion ed
capit premi reserv reserve contrib earnin Equit
al um e ution gs y
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 497.5 89.1 87.6 15.7 - (597.2 92.7
January 2010 )
Profit for the - - - - - 54.3 54.3
period
Other
comprehensive
income:
Fair value
gains on available
for sale - - - 7.1 - - 7.1
financial assets
Total
comprehensive
income
for the period
ended
30 June 2010 - - - 7.1 - 54.3 61.4
Capital reduction (342. - - - - 342.0 -
0)
Capital
reorganisation and
pro forma - - 53.8 (4.2) 696.7 (107.0 639.3
restatement (1) )
Total transactions
with
owners (342. - 53.8 (4.2) 696.7 235.0 639.3
0)
Balance at 30 June 155.5 89.1 141.4 18.6 696.7 (307.9 793.4
2010 )
Distrib
utable
Non-distributable reserve
reserves (2) s (2)
Non-
Share Share Merg Reva Retaine contro Total
er luat d lling
ion
capita premi rese rese earning Total intere equity
l um rve rve s sts
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 89.1 87.6 20.9 (431.2) 263.9 27.8 291.7
January 2009 497.5
Loss for the - - - - (120.8) (120.8 (17.5) (138.3
period ) )
Other
comprehensive
income:
Fair value
gains on
available
for sale - - - (8.2 - (8.2) - (8.2)
financial assets )
Total
comprehensive
income
for the period
ended
30 June 2009 - - - (8.2 (120.8) (129.0 (17.5) (146.5
) ) )
Balance at 30 497.5 89.1 87.6 12.7 (552.0) 134.9 10.3 145.2
June 2009
The above consolidated statements of changes in equity should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2010
Distrib
utable
Non-distributable reserve
reserves (2) s (2)
Non-
Share Shar Merg Reva Retaine contr Total
e er luatio d olling
n
capit prem rese rese earning Total inter equit
al ium rve rve s ests y
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balanc 497.5 89.1 87.6 20.9 (431.2) 263.9 27.8 291.7
e at 1
January
2009
Loss - - - - (131.5) (131. (19.6 (151.
for the 5) ) 1)
period
Other
comprehe
nsive
income:
Actuar
ial
losses
on
defined
- - - - (0.3) (0.3) (0.2) (0.5)
benefit
pension
schemes
Fair
value
gains on
availabl
e
for - - - (5.2 - (5.2) - (5.2)
sale )
financia
l assets
Tax on
items
taken
directly
to
equity - - - - 0.1 0.1 - 0.1
Total
comprehe
nsive
income
for
the year
ended
31 - - - (5.2 (131.7) (136. (19.8 (156.
December ) 9) ) 7)
2009
Loss
of
deemed
control
of
former - - - - - - (8.0) (8.0)
subsidia
ry
Purcha
se of
non-
controll
ing
intere - - - - (34.3) (34.3 - (34.3
sts ) )
Total
transact
ions
with
owners - - - - (34.3) (34.3 (8.0) (42.3
) )
Balanc 497.5 89.1 87.6 15.7 (597.2) 92.7 - 92.7
e at 31
December
2009
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
(1 On demerger from Liberty International a number of reserves were
) realised and pro forma adjustments (made in the comparative periods
to reflect the application of merger accounting principles)
released. Debt waivers granted to the Group by Liberty
International have been reflected as a capital contribution
reserve.
(2 Presented for indicative purposes only
)
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the six months ended 30 June 2010
Six Six
months Year months
ended ended ended
30 June 31 30 June
December
2010 2009 2009
Note GBPm GBPm GBPm
Cash generated from operations 11 22.5 81.4 (47.2)
Interest paid (21.5) (71.0) (38.1)
Interest received - 1.9 0.4
Taxation (0.4) - -
Cash flows from operating 0.6 12.3 (84.9)
activities
Cash flows from investing
activities
Purchase and development of (5.2) (32.2) (10.0)
property
Sale of property 0.1 118.8 106.3
Sale of investment 0.4 11.4 -
Purchase of non-current asset - (0.9) -
investments
Loss of deemed control of former - (3.7) -
subsidiary
Purchase of non-controlling - (25.0) -
interests
REIT entry charge paid (1.6) (2.7) (1.0)
Cash flows from investing (6.3) 65.7 95.3
activities
Cash flows from financing
activities
Borrowings repaid (63.4) (69.7) (2.7)
Funding from Capital Shopping 244.0 - -
Centres Group
Termination of swaps (7.4) (5.5) -
Cash flows from financing 173.2 (75.2) (2.7)
activities
Net increase in cash and cash 167.5 2.8 7.7
equivalents
Cash and cash equivalents at 19.3 16.5 16.5
beginning of period
Cash and cash equivalents at end 186.8 19.3 24.2
of period
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
NOTES (unaudited)
1 Principal accounting policies
The Capital & Counties Properties PLC Group demerged from its parent company,
Liberty International PLC (subsequently renamed Capital Shopping Centres Group
PLC), with effect from 7 May 2010. Shares in Capital & Counties Properties PLC
were admitted to dealings on the London and Johannesburg Stock Exchanges in
May 2010. The Group`s assets principally comprise investment properties at
Covent Garden; Earls Court & Olympia; a 50 per cent interest in the Empress
State building; and a 50 per cent interest in the Great Capital Partnership, a
joint venture focused predominantly on London`s West End.
Basis of preparation
The condensed consolidated financial statements for the six months ended 30
June 2010 is reviewed, not audited and does not constitute statutory accounts
within the meaning of s434 of the Companies Act 2006. The condensed
consolidated financial statements has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and with
IAS 34 `Interim Financial Reporting`.
These condensed consolidated financial statements were approved by the Board
of Directors on 3 August 2010.
The condensed consolidated financial statements have been prepared under the
historical cost convention as modified for the revaluation of properties,
available-for-sale investments and financial assets held for trading.
There is no material seasonal impact on the Group`s financial performance.
Taxes on income in interim periods are accrued using tax rates expected to be
applicable to total annual earnings.
Standards and guidelines relevant to the Group that were in issue at the date
of approval of the condensed consolidated financial statements but not yet
effective for the current accounting period and have not been adopted early:
IAS 24 `Related Party Disclosures` (revised)
IAS 32 `Financial Instruments: Presentation` (amendment)
IFRS 9 `Financial Instruments`
IFRIC 14 `Prepayments of a Minimum Funding Requirement` (amendment)
IFRIC 19 `Extinguishing Financial Liabilities with Equity Instruments`
The assessment of new standards, amendments and interpretations issued but not
effective, are not anticipated to have a material impact on the financial
statements.
During 2010, the following accounting standards and guidance were adopted by
the Group:
IAS 1 `Presentation of Financial Statements` (amendment)
IAS 27 `Consolidated and Separate Financial Statements` (revised)
IAS 39 `Financial Instruments: Recognition and Measurement; Eligible Hedged
Items`
IFRS 2 `Share-based Payment` (revised)
IFRS 3 `Business Combinations` (revised)
IFRIC 17 `Distribution of Non-cash Assets to Owners`
These pronouncements either had no impact on the condensed consolidated
Financial Statements or resulted in changes to presentation and disclosure
only.
Group reorganisation
All Capital & Counties Properties PLC Group companies which were owned and
controlled by Liberty International PLC prior to the demerger were transferred
under the new ultimate parent company, Capital & Counties Properties PLC prior
to 10 May 2010. The introduction of this new ultimate holding company
constitutes a group reconstruction.
The transaction falls outside the scope of IFRS 3 `Business Combinations`.
Accordingly, following the guidance regarding the selection of an appropriate
accounting policy provided in IAS 8 `Accounting Policies, Changes in
Accounting Estimates and Errors`, the transaction has been accounted for in
these condensed financial statements using the principles of merger accounting
with reference to UK Generally Accepted Accounting Practice (UK GAAP). This
policy, which does not conflict with IFRS, reflects the economic substance of
the transaction.
Therefore, although the Group reconstruction did not become unconditional
until 10 May 2010, these condensed financial statements are presented as if
the Group structure has always been in place.
Going concern basis
The Directors are satisfied that the Group has the resources to continue in
operational existence for the foreseeable future, for this reason the
condensed consolidated financial statements are prepared on a going concern
basis.
Basis of consolidation
The Group`s condensed consolidated financial statements are prepared in
accordance with International Financial Reporting Standards ("IFRS"), as
adopted by the European Union, International Financial Reporting
Interpretations Committee ("IFRIC") interpretations and with those parts of
the Companies Act 2006 applicable to companies reporting under IFRS.
The condensed consolidated financial statements are to be prepared in British
pounds sterling which is determined to be the functional currency of the
Group.
Subsidiaries
Subsidiary undertakings are fully consolidated from the date on which the
Group is deemed to govern the financial and operating policies of an entity,
whether through a majority of the voting rights or otherwise; they cease to be
consolidated from the date this control is lost.
Joint Ventures
The Group`s interest in jointly controlled entities is accounted for using
proportional consolidation. The Group`s share of the assets, liabilities,
income and expenses are combined with the equivalent items in the condensed
consolidated financial statements on a line-by-line basis.
Investments in subsidiaries and joint ventures are reviewed at least annually
for impairment. Where there exists an indication of impairment an assessment
of the recoverable amount is performed. The recoverable amount is based on the
higher of the investments` continued value in use or its fair value less cost
to sell; fair value is derived from the entities` net asset value at the
balance sheet date.
Estimation & uncertainty
The preparation of condensed consolidated financial statements in conformity
with IFRS requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities and the reported amounts of
revenues and expenses. Although these estimates are based on management`s best
knowledge of the amount, event or actions, actual results ultimately may
differ from those estimates. The most significant area of estimation and
uncertainty in the condensed consolidated set of financial statements is in
respect of the valuation of the property portfolio and investments, where
external valuations are obtained. Other areas of estimation and uncertainty
are included within the accounting policies below. The more significant being:
Revenue recognition
Share-based payments
Provisions
Pensions
Contingent liabilities & capital commitments
Operating segments
Segmental information is disclosed in the notes to the condensed consolidated
financial statements reflecting management reporting of divisional financial
performance and position as used in operational decision making.
Foreign currencies
Transactions in currencies other than the Group`s functional currency are
recorded at the exchange rate prevailing at the transaction date. Foreign
exchange gains and losses resulting from settlement of these transactions and
from retranslation of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement except when qualifying as
hedges, in which case they are dealt with in reserves.
Revenue recognition
Property rental income and exhibition income consists of gross income
calculated on an accruals basis, together with services where the Group acts
as principal in the ordinary course of business, excluding sales of investment
properties. Rental income receivable is spread evenly over the period from
lease commencement to lease expiry. Lease incentives and other directly
attributable contributions are recognised within net rental income on the same
straight-line basis as rental income.
Contingent rents, being those lease payments that are not fixed at the
inception of a lease, for example increases arising on rent reviews, are
recorded as income in the periods in which they are earned.
Rent reviews are recognised as income, based on management`s estimates, when
it is reasonable to assume they will be received. Estimates are derived from
knowledge of market rents for comparable properties determined on an
individual property basis and updated for progress of negotiations.
Where revenue is obtained by the sale of properties, it is recognised when the
significant risks and returns have been transferred to the buyer. This will
normally take place on exchange of contracts unless there are conditions
attached. For conditional exchanges, sales are recognised when these
conditions are satisfied.
Interest income is accrued on a time basis, by reference to the principal
outstanding and the effective interest rate.
Dividend income is recognised when the relevant Group company`s right to
receive payment has been established.
Exceptional items
Exceptional items are those items that in the Directors` view are required to
be separately disclosed by virtue of their size or incidence to enable a full
understanding of the Group`s financial performance.
Income taxes
Current tax is the amount payable on the taxable income for the year and any
adjustment in respect of prior years. It is calculated using rates that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax is provided using the balance sheet liability method in respect
of temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the amounts used in computation of
taxable profit, with the exception of deferred tax on revaluation surpluses
where the tax basis used is the accounts` historic cost.
Temporary differences are not provided on the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit, and differences
relating to investments in subsidiaries to the extent that they will not
reverse in the foreseeable future.
Deferred tax is determined using tax rates that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is
settled.
Deferred tax assets are recognised only to the extent that management believe
it is probable that future taxable profit will be available against which the
temporary differences can be utilised. Deferred tax assets and liabilities are
offset only when they relate to taxes levied by the same authority and the
Group intends to settle them on a net basis.
Tax is included in the income statement except when it relates to items
recognised in other comprehensive income, or directly in equity, in which case
the related tax is also recognised in other comprehensive income or directly
in equity.
Share-based payments
The cost of granting share options and other share-based remuneration to
employees and Directors is recognised through the income statement with
reference to the fair value of the options at the date of grant. The income
statement is charged over the vesting period of the options.
An option pricing model is used applying assumptions around expected yields,
forfeiture rates, exercise price and volatility.
Own shares held in connection with employee share plans and other share-based
payment arrangements are treated as treasury shares and deducted from equity.
Impairment of financial assets
An annual review is conducted for financial assets to determine whether there
is any evidence of a loss event as described by IAS 39. Where there is
objective evidence of impairment the amount of any loss is calculated by
estimating future cash flows or by using fair value where this is available
through observable market prices.
Investment and development property
Investment and development properties are owned or leased by the Group and
held for long term rental income and capital appreciation.
The Group has chosen to use the fair value model. Properties are initially
recognised at cost and subsequently revalued at the balance sheet date to fair
value as determined by professionally qualified external valuers on the basis
of market value. The valuation is based upon assumptions including market rent
or business profitability, future growth, anticipated maintenance costs,
development costs and an appropriate discount rate where possible applying
yields based on known transactions for similar properties and likely
incentives offered to tenants. These assumptions conform with RICS valuation
standards.
Incentive assets are adjusted for against the fair value of properties to
which they are directly attributable.
Properties held under leases are stated gross of the recognised finance lease
liability.
The cost of development properties includes capitalised interest and other
directly attributable outgoings, except in the case of properties and land
where no development is imminent, in which case no interest is included.
Interest is capitalised (before tax relief) on the basis of the average rate
of interest paid on the relevant debt outstanding, until the date of practical
completion.
When the Group redevelops an existing investment property for continued future
use as an investment property, the property remains an investment property
measured at fair value.
Gains or losses arising from changes in the fair value of investment and
development property are recognised in the income statement of the period in
which they arise. Depreciation is not provided in respect of investment
properties including plant and equipment integral to such investment
properties.
When the use of a property changes from that of trading property to investment
property, such property is transferred at fair value, with any resulting gain
being recognised as property trading profit.
Investment properties cease recognition as investment property either when
they have been disposed of or when they are permanently withdrawn from use and
no future economic benefit is expected from their disposal. Where the Group
disposes of a property at fair value in an arm`s length transaction the
carrying value immediately prior to the sale is adjusted to the transaction
price, offset by any directly attributable costs, and the adjustment is
recorded in the income statement.
Leases
Leases are classified according to the substance of the transaction. A lease
that transfers substantially all the risks and rewards of ownership to the
lessee is classified as a finance lease. All other leases are normally
classified as operating leases.
Group as a lessee:
In accordance with IAS 40, finance and operating leases of investment property
are accounted for as finance leases and recognised as an asset and an
obligation to pay future minimum lease payments. The investment property asset
is included in the balance sheet at fair value, gross of the recognised
finance lease liability. Lease payments are allocated between the liability
and finance charges so as to achieve a constant financing rate.
Other finance-leased assets are capitalised at the lower of the fair value of
the leased asset or the present value of the minimum lease payments and
depreciated over the shorter of the lease term and the useful life of the
asset.
Rentals payable under operating leases are charged to the income statement on
a straight-line basis over the lease term.
Group as lessor:
Assets leased out under finance leases are recognised as receivables at the
amount of the Group`s net investment in the leases. Finance lease income is
allocated to accounting periods so as to reflect a constant rate of return on
the net investment.
Assets leased out under operating leases are included in investment property,
with rental income recognised on a straight-line basis over the lease term.
Trading property
Trading property comprise those properties that in the Directors` view are
expected to be disposed of within one year of the balance sheet date. Such
properties are transferred from investment property at fair value which forms
its deemed cost. Subsequently it is carried at the lower of cost and net
realisable value.
Plant and equipment
Plant and equipment consists of vehicles, fixtures, fittings and other
equipment. Plant and equipment is stated at cost less accumulated depreciation
and any accumulated impairment losses.
Depreciation is charged to the income statement on a straight-line basis over
an asset`s estimated useful life to a maximum of five years.
Investments
Available-for-sale investments, being investments intended to be held for an
indefinite period, are initially recognised and subsequently measured at fair
value. For listed investments, fair value is the current bid market value at
the reporting date.
Gains or losses arising from changes in the fair value of available-for-sale
investments are included in other comprehensive income, except to the extent
that losses are determined to be attributable to impairment, in which case
they are recognised in the income statement.
Upon disposal accumulated fair value adjustments are recycled from reserves to
the income statement.
Trade receivables
Trade receivables are initially recognised and subsequently measured at
amortised cost. The Directors exercise judgement as to the collectability of
the Group`s trade receivables and determine when it is appropriate to impair
these assets. Factors such as days past due, credit status of the
counterparty and historical evidence of collection are considered.
Cash and cash equivalents
Cash and cash equivalents are recognised at fair value. Cash and cash
equivalents comprise cash on hand, deposits with banks and other short term
highly liquid investments with original maturities of three months or less.
Derivatives financial instruments
The Group uses derivative financial instruments to manage exposure to interest
rate risk. They are initially recognised on the trade date at fair value and
subsequently remeasured at fair value based on market price.
Changes in fair value are recognised directly in the income statement.
Trade payables
Trade payables are recognised and subsequently measured at amortised cost
until settled.
Dividend distribution
Dividend distributions to shareholders are recognised as a liability once
approved by shareholders.
Provisions
Provisions are recognised when the Group has a current obligation arising from
a past event and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the Directors` best estimate of the
expenditure required to settle that obligation at the balance sheet date.
Borrowings
Borrowings are recognised initially at their net proceeds on issue and
subsequently carried at amortised cost. Any transaction costs and premiums or
discounts are recognised over the contractual life using the effective
interest method. In the event of early repayment all unamortised transaction
costs are recognised immediately in the income statement.
Pensions
The costs of defined contribution schemes and Group`s personal pension plans
are charged against profits in the year in which they are incurred.
Past service costs and current service costs of defined benefit schemes are
recognised immediately in income. While actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are charged
or credited to equity in other comprehensive income for the period in which
they arise. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method and applying
assumptions which are agreed between the Group and its actuaries.
Contingent liabilities and capital commitments
Contingent liabilities are not recognised due to lack of certainty with
respect to measurement of the potential future liability. A description of the
nature and, where possible, an estimate of the financial effect of contingent
liabilities is disclosed.
Capital commitments are disclosed when the Group has a contractual future
obligation which has not been provided for at the balance sheet date.
2 Segmental reporting
Management has determined the operating segments based on reports reviewed by
the Chief Executive, who is deemed to be the chief operating decision maker.
For management and reporting purposes the Group is organised into four
operating divisions being Great Capital Partnership, Earls Court & Olympia,
Covent Garden and Other. The Other segment primarily constitutes the business
unit historically known as Opportunities. This segment included a number of
smaller assets located primarily in central London and the south east of
England which were sold during 2009. The Earls Court & Olympia segment also
includes the Group`s interest in the Empress State Limited Partnership which
holds the Empress State Building adjacent to the Group`s property at Earls
Court.
The Group`s operating segments derive their revenue primarily from rental
income from lessees, with the exception of Earls Court & Olympia whose revenue
primarily represents exhibition income. Net rental income is the principal
performance measure.
Six months ended 30 June 2010
Great Earls Covent Group
Capita Court
l
Partne & Garden Othe total
rship Olympi r
a *
GBPm GBPm GBPm GBPm GBPm
Revenue 8.1 31.1 19.4 0.6 59.2
Rent receivable and exhibition 7.5 31.1 17.7 0.4 56.7
income
Service charge income 0.6 - 1.7 0.2 2.5
8.1 31.1 19.4 0.6 59.2
Rent payable - - (0.6) - (0.6)
Service charge and other non- (1.3) (13.2) (5.9) 0.1 (20.3)
recoverable costs
Net rental income 6.8 17.9 12.9 0.7 38.3
Gain on revaluation of
investment and
development property 21.8 3.5 40.1 0.3 65.7
Segment result 28.6 21.4 53.0 1.0 104.0
Unallocated administration costs (11.8)
Operating profit 92.2
Net finance costs1 (37.4)
Profit before tax 54.8
Taxation (0.5)
Profit for the period 54.3
Total assets2 289.3 463.8 610.1 224. 1,587.
7 9
Total liabilities2 (131.0 (276.2 (379.7 (7.6 (794.5
) ) ) ) )
Net assets 158.3 187.6 230.4 217. 793.4
1
Other segment items:
Capital expenditure (0.3) (4.5) (0.4) - (5.2)
Depreciation - - (0.1) - (0.1)
* Includes the Group`s interest in the Empress State Limited
Partnership which holds the Empress State Building adjacent to the
Group`s property at Earls Court.
Empress State represented GBP3.3 million of the GBP17.9 million
net rental income for Earls Court & Olympia.
1 The Group operates a central treasury function which manages and
monitors the Group`s finance income/(costs) on a net basis.
2 Total assets and liabilities exclude loans and investments between
Group companies.
Six months ended 30 June 2009
Great Earls Covent Group
Capital Court
Partner & Garden Othe total
ship Olympia* r
GBPm GBPm GBPm GBPm GBPm
Revenue 8.4 38.9 19.5 3.0 69.8
Rent receivable and 7.7 38.9 17.3 1.6 65.5
exhibition income
Service charge income 0.7 - 2.2 - 2.9
8.4 38.9 19.5 1.6 68.4
Service charge and other non- (1.7) (15.1) (7.1) (0.6 (24.5)
recoverable costs )
Net rental income 6.7 23.8 12.4 1.0 43.9
Property trading profits - - - 0.2 0.2
Other income - - - 1.4 1.4
Deficit on revaluation and
sale of investment and
development property (43.8) (47.0) (50.9) (23. (165.0)
3)
Segment result (37.1) (23.2) (38.5) (20. (119.5)
7)
Unallocated administration (5.9)
costs
Operating loss (125.4)
Net finance costs1 (13.3)
Loss before tax (138.7)
Taxation 0.4
Loss for the period (138.3)
Total assets2 237.4 554.9 544.7 79.0 1,416.0
Total liabilities2 (131.5) (446.0) (406.1 (9.5 (993.1)
) )
105.9 108.9 138.6 69.5 422.9
Unallocated net assets (277.7)
Net assets 145.2
Other segment items:
Capital expenditure (0.4) (2.3) (3.4) (4.8 (10.9)
)
* Includes the Group`s interest in the Empress State Limited
Partnership which holds the Empress State Building adjacent to the
Group`s property at Earls Court.
Empress State represented GBP6.4 million of the GBP23.8 million
net rental income for Earls Court & Olympia.
1 The Group operates a central treasury function which manages and
monitors the Group`s finance income/(costs) on a net basis.
2 Total assets and liabilities exclude loans and investments between
Group companies.
Year ended 31 December 2009
Great Earls Covent Group
Capital Court
Partners & Garden Othe total
hip Olympia r
*
GBPm GBPm GBPm GBPm GBPm
Revenue 16.9 66.2 41.1 3.5 127.7
Rent receivable and exhibition 15.3 66.2 37.5 2.2 121.2
income
Service charge income 1.6 - 3.6 - 5.2
16.9 66.2 41.1 2.2 126.4
Service charge and other non- (3.1) (29.4) (14.5) (1.3 (48.3)
recoverable costs )
Net rental income 13.8 36.8 26.6 0.9 78.1
Other income/(expense) (0.1) - 1.2 0.4 1.5
Deficit on revaluation and
sale of investment and
development property (21.3) (47.7) (35.8) (24. (128.8)
0)
Write down of trading property - - - (0.1 (0.1)
)
Profit on sale of investments - - - 3.6 3.6
Impairment of other - - - (12. (12.0)
receivables 0)
Segment result (7.6) (10.9) (8.0) (31. (57.7)
2)
Unallocated administration (14.5)
costs
Operating loss (72.2)
Net finance costs1 (77.8)
Loss before tax (150.0)
Taxation (1.1)
Loss for the year (151.1)
Total assets2 262.9 453.6 557.2 70.0 1,343.7
Total liabilities2 (130.8) (294.2) (417.6 (7.2 (849.8)
) )
132.1 159.4 139.6 62.8 493.9
Unallocated net liabilities (401.2)
Net assets 92.7
Other segment items:
Capital expenditure (18.1) (8.0) (6.7) (5.6 (38.4)
)
Depreciation - - (0.2) - (0.2)
* Includes the Group`s interest in the Empress State Limited
Partnership which holds the Empress State Building adjacent to the
Group`s property at Earls Court. Empress State represented GBP10.4
million of the GBP36.8 million net rental income for Earls Court &
Olympia.
1 The Group operates a central treasury function which manages and
monitors the Group`s finance income/(costs) on a net basis.
2 Total assets and liabilities exclude loans and investments between
Group companies.
3 Gain/(deficit) on revaluation and sale of investment and development
property
Six Six Year
months months
ended ended ended
30 June 30 June 31
December
2010 2009 2009
GBPm GBPm GBPm
Gain/(deficit) on revaluation of
investment and development 65.7 (143.1) (105.6)
property
Deficit on sale of investment and
development property - (21.9) (23.2)
Gain/(deficit) on revaluation and
sale of investment and development
property 65.7 (165.0) (128.8)
4 Finance costs
Six Six Year
months months
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Gross finance costs - recurring 21.1 27.0 52.0
Interest capitalised on (0.4) (1.9) (1.9)
developments
Total finance costs 20.7 25.1 50.1
Exceptional finance costs:
- costs of termination of
financial instruments 7.1 - 5.4
- interest due to Capital
Shopping Centres Group - 9.6 41.8
Other finance costs 7.1 9.6 47.2
Interest is capitalised, before tax relief, on the basis of the average rate
of interest paid of 5.9 per cent (2009: 6.25 per cent) on the relevant debt,
applied to the cost of developments during the year.
5 Taxation
Six months Six Year
months
ended ended ended
30 June 30 June 31
December
2010 2009 2009
GBPm GBPm GBPm
Current tax on profits excluding 0.4 - 1.3
exceptional items and property
disposals
Deferred tax:
On investment and development 7.2 - -
property
On derivative financial (10.3) - 0.5
instruments
On other temporary differences - - (0.4)
On exceptional items 3.1 - -
Deferred tax on profits excluding - - 0.1
exceptional items and property
disposals
Tax charge excluding exceptional 0.4 - 1.4
items and property disposals
REIT entry charge/(credit) 0.1 (0.4) (0.3)
Taxation charge/(credit) 0.5 (0.4) 1.1
Under IAS 12 "Income Taxes", provision is made for the deferred tax assets and
liabilities associated with the revaluation of investment properties at the
corporate tax rate expected to apply to the Group at the time of use. For UK
properties the relevant tax rate will be 28 per cent (2009 - 0 per cent).
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.
The recognised deferred tax asset on the revaluation of investment properties
calculated under IAS 12 is nil at 30 June 2010 (31 December 2009 - GBP8.4
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 tax liability would be GBP1.7 million at
30 June 2010. If upon sale the group retained all its capital allowances,
which is within the control of the group, the deferred tax provision in
respect of capital allowances of GBP13.3 million at 30 June 2010 may also be
released.
Fair value Fair value
of of
Accelerated investment derivative Other
and
capital development financial temporary
allowances properties instruments differences Total
GBPm GBPm GBPm GBPm GBPm
Provided
deferred tax
provision:
At 31 14.5 (8.4) (2.9) (3.2) -
December
2009
Recognised (1.2) 8.4 (10.3) 3.1 -
in income
At 30 June 13.3 - (13.2) (0.1) -
2010
Unrecognised
deferred tax
asset:
At 31 - (12.6) - (5.4) (18.0)
December
2009
Income - (67.4) (5.4) 1.1 (71.7)
statement
items
At 30 June - (80.0) (5.4) (4.3) (89.7)
2010
In accordance with the requirement of IAS 12 "Income Taxes", the deferred tax
asset has not been recognised in the Group financial statements due to
uncertainty on the level of profits that will be available in future periods.
6 Investment and development property
Total
GBPm
At 1 January 2010 1,240.5
Additions 5.2
Disposals (1.5)
Gain on valuation 65.7
At 30 June 2010 1,309.9
Total
GBPm
At 1 January 2009 1,552.5
Additions 38.4
Disposals (150.4)
Loss of deemed control of former (94.4)
subsidiary
Deficit on valuation (105.6)
At 31 December 2009 1,240.5
As at As at
30 June 31 December
2010 2009
GBPm GBPm
Balance sheet carrying value of
investment and development property 1,309.9 1,240.5
Adjustment in respect of tenant 9.6 6.0
incentives
Adjustment in respect of head leases (6.9) (7.0)
Market value of investment and
development property 1,312.6 1,239.5
The Group`s interests in investment and development properties were valued as
at 30 June 2010 and 31 December 2009 by independent external valuers in
accordance with the Royal Institute of Chartered Surveyors (RICS) Valuation
Standards 6th Edition, 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.
7 Trading property
The estimated replacement cost of trading property based on market value
amounted to GBP1.4 million (31 December 2009 - GBP1.1 million).
8 Trade and other receivables
As at As at
30 June 31
December
2010 2009
GBPm GBPm
Amounts falling due within one year
Rents receivable 7.2 7.8
Other receivables 12.1 10.4
Prepayments and accrued income 3.4 2.6
Corporation tax recoverable 0.4 1.3
23.1 22.1
Amounts falling due after more than
one year
Other receivables 7.8 8.6
Prepayments and accrued income 6.9 5.9
14.7 14.5
9 Trade and other payables
As at As at
30 June 31
December
2010 2009
GBPm GBPm
Amounts falling due within one year
Rents received in advance 18.2 21.9
Accruals and deferred income 23.4 22.2
Other payables 12.2 11.0
Other taxes and social security 4.5 3.8
Amounts payable to Capital Shopping - 401.2
Centres Group
58.3 460.1
10 Borrowings, including finance leases
As at 30 June 2010
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Amounts falling
due within one
year
Bank loans and 6.5 6.5 - - 6.5 6.5
overdrafts
Borrowings, 6.5 6.5 - - 6.5 6.5
excluding finance
leases
Finance lease 0.9 0.9 - 0.9 - 0.9
obligations
Amounts falling 7.4 7.4 - 0.9 6.5 7.4
due within one
year
Amounts falling
due after more
than one year
Bank loan 2012 128.0 128.0 - - 128.0 128.0
Bank loans 2013 410.1 410.1 - - 410.1 410.1
Bank loan 2017 111.6 111.6 - - 111.6 111.6
Borrowings 649.7 649.7 - - 649.7 649.7
excluding finance
leases
Finance lease 6.0 6.0 - 6.0 - 6.0
obligations
Amounts falling 655.7 655.7 - 6.0 649.7 655.7
due after more
than one year
Total borrowings 663.1 663.1 - 6.9 656.2 663.1
Cash and cash (186.8)
equivalents
Net debt 476.3
As at 31 December 2009
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Amounts falling
due within one
year
Bank loans and 70.2 70.2 - - 70.2 70.2
overdrafts
Borrowings, 70.2 70.2 - - 70.2 70.2
excluding finance
leases
Finance lease 0.8 0.8 - 0.8 - 0.8
obligations
Amounts falling 71.0 71.0 - 0.8 70.2 71.0
due within one
year
Amounts falling
due after more
than one year
Bank loan 2012 127.0 127.0 - - 127.0 127.0
Bank loans 2013 410.7 410.7 - - 410.7 410.7
Bank loan 2017 111.5 111.5 - - 111.5 111.5
Borrowings 649.2 649.2 - - 649.2 649.2
excluding finance
leases
Finance lease 6.2 6.2 - 6.2 - 6.2
obligations
Amounts falling 655.4 655.4 - 6.2 649.2 655.4
due after more
than one year
Total borrowings 726.4 726.4 - 7.0 719.4 726.4
Cash and cash (19.3)
equivalents
Net debt 707.1
11 Cash generated from operations
Six Year Six
months months
ended ended ended
30 June 31 30 June
December
2010 2009 2009
Note GBPm GBPm GBPm
s
Profit/(loss) before tax 54.8 (150.0) (138.7)
Adjustments for:
Gain/(deficit) on revaluation of
investment and development
property 3 (65.7) 105.6 143.1
Deficit on sale of investment 3 - 23.2 21.9
property
Profit on sale of investment - (3.6) -
Impairment of other receivables - 12.0 -
Write down of trading property - 0.1 -
Depreciation - 0.2 -
Profit on sale of trading - (0.2) (0.2)
properties
Amortisation of lease incentives
and other direct costs (0.7) 0.8 1.2
Finance costs 4 20.7 50.1 25.1
Finance income (0.6) (2.6) (1.1)
Exceptional finance costs 4 7.1 47.2 9.6
Change in fair value of derivative
financial instruments 10.2 (16.9) (20.3)
Changes in working capital
Change in trading properties - 4.0 4.0
Change in trade and other 0.8 3.1 6.4
receivables
Change in trade and other payables (4.1) 8.4 (98.2)
Cash generated from operations 22.5 81.4 (47.2)
12 Business combinations
On 18 August 2009 the call option the Group held against the residual 50 per
cent of Empress State Limited Partnership expired. This call option was deemed
to give the Group control and therefore, up to the date of expiry, Empress
State Limited Partnership was consolidated as a subsidiary.
No consideration was received relating to the loss of control and no gain or
loss was recognised. The consolidated assets and liabilities of Empress State
Limited Partnership were derecognised and the remaining interest in Empress
State Limited Partnership was accounted for as a joint venture in accordance
with the Group`s published accounting policy.
13 Classification of financial assets and liabilities
The table below sets out the group`s accounting classification of each class
of financial assets and liabilities, and their fair values at 30 June 2010 and
31 December 2009.
The fair values of quoted borrowings are based on the bid price. The fair
values of derivative financial instruments are determined from observable
market prices or estimated using appropriate yield curves at 30 June and 31
December each year by discounting the future contractual cash flows to the net
present values.
To
Carrying To income comprehensive
value Fair statement income
value
GBPm GBPm GBPm GBPm
30 June 2010
Trade and other 37.8 37.8 - -
receivables
Cash and cash 186.8 186.8 - -
equivalents
Total loans and 224.6 224.6 - -
receivables
Investments 52.3 52.3 - 7.1
Total available-for-sale 52.3 52.3 - 7.1
investments
Derivative financial (66.0) (66.0) (10.2) -
instrument liabilities
Total held for trading (66.0) (66.0) (10.2) -
liabilities
Trade and other payables (65.4) (65.4) - -
Borrowings (663.1) (663.1) - -
Total loans and payables (728.5) (728.5) - -
To
Carrying To income comprehensive
value Fair statement income
value
GBPm GBPm GBPm GBPm
31 December 2009
Trade and other 36.6 36.6 - -
receivables
Cash and cash 19.3 19.3 - -
equivalents
Total loans and 55.9 55.9 - -
receivables
Investments 46.0 46.0 - (5.2)
Total available-for- 46.0 46.0 - (5.2)
sale investments
Derivative financial (56.2) (56.2) 16.9 -
instrument liabilities
Total held for trading (56.2) (56.2) 16.9 -
liabilities
Trade and other (468.4) (468.4) - -
payables
Borrowings (726.4) (726.4) - -
Total loans and (1,194.8) (1,194.8) - -
payables
14 Other provisions for liabilities and charges
Six Year
months
ended ended
30 June 31
December
2010 2009
GBPm GBPm
Deferred consideration payable* (3.8) (3.8)
Provisions for pension (3.3) (3.3)
Other provisions - (0.3)
Total other provisions (7.1) (7.4)
* Included within provisions charged during the year is GBP3.8
million relating to deferred consideration payable on the
acquisition of the minority interest share in Earls Court &
Olympia. The provision has been discounted as it considered that
no payment will be required until 2012. The amount of deferred
consideration payable is based on a number of factors including a
potential re-development of the Earls Court & Olympia site with the
final details of such a re-development dependent on discussions
with the owners of the adjacent land and the outcome of the
planning permission process. The maximum potential payment is
GBP20.0 million.
15 Capital commitments and contingent liabilities
At 30 June 2010, the Group was contractually committed to GBP22.1 million (31
December 2009 - GBP18.3 million) of future expenditure for the purchase,
construction, development and enhancement of investment property.
At 30 June 2010, the Group has a contingent commitment to provide a future
investment of GBP42.0 million (31 December 2009 - GBP39 million), into one of
the real estate investment funds in which the Group has previously invested.
The Directors` current expectation, following discussions with Harvest Capital
Partners, the manager of the fund, is that this further investment will not be
required as the fund`s managers have wound down marketing efforts in relation
to the specific fund that the Group has committed investment funds.
16 Per share details
(a) Earnings/(loss) per share
Six Six Year
months months
ended ended ended
30 June 30 June 31
December
2010 2009 2009
millions millions millions
Weighted average ordinary shares in
issue for calculation of basic
earnings/(loss) per share 621.9 621.9 621.9
Weighted average ordinary shares to be
issued under employee
incentive arrangements 0.1 - -
Weighted average ordinary shares in
issue for calculation of diluted
earnings/(loss) per share 622.0 621.9 621.9
Six Six Year
months months
ended ended ended
30 June 30 June 31
December
2010 2009 2009
GBPm GBPm GBPm
Profit/(loss) used for calculation of
basic and diluted
earnings/(loss) per share 54.3 (120.8) (131.5)
Basic earnings/(loss) per share (pence) 8.7p (19.4)p (21.1)p
Diluted earnings/(loss) per share 8.7p (19.4)p (21.1)p
(pence)
Profit/(loss) used for calculation of 54.3 (120.8) (131.5)
basic loss per share
(Less)/add back (gain)/deficit on
revaluation and sale of investment and
development property (65.7) 165.0 128.8
Add back profit on sale of investment - - (3.6)
Add back impairment of other - - 12.0
receivables
Add back demerger costs 4.1 - -
Add back deferred tax in respect of
investment and development property 8.4 - -
Less deferred tax on capital allowances (1.2) - (0.1)
Add back exceptional deferred tax 3.1 - -
Less amounts above due from non-
controlling interests - (23.5) (22.1)
Headline earnings 3.0 20.7 (16.5)
Add back other finance costs 7.1 9.6 47.2
Add back/(less) change in fair value of
derivative financial instruments 10.2 (20.3) (16.9)
Add back/(less) deferred tax in respect
of derivative financial instruments (10.3) - 0.5
Add back/(less) REIT entry charge 0.1 (0.4) (0.3)
Less amounts above due from non-
controlling interests - 3.0 1.2
Earnings used for calculation of
adjusted earnings per share 10.1 12.6 15.2
Adjusted earnings per share (pence) 1.6p 2.0p 2.4p
Headline earnings per share (pence) 0.5p 3.3p (2.7)p
Earnings used for calculation of
adjusted, diluted earnings per share 10.1 12.6 15.2
Adjusted, diluted earnings per share 1.6p 2.0p 2.4p
(pence)
(b) Net assets
As at As at
30 June 31
December
2010 2009
GBPm GBPm
Basic net asset value used for calculation of 793.4 92.7
basic net assets per share
Fair value of derivative financial instruments 52.8 53.3
(net of deferred tax)
Deferred tax on revaluation surpluses - (8.4)
Deferred tax on capital allowances 13.3 14.5
Unrecognised surplus on trading properties 1.1 0.9
(net of tax)
Adjusted net asset value 860.6 153.0
Effect of dilution:
On exercise of options 0.1 -
Adjusted, diluted net asset value used for
calculation of diluted,
adjusted net assets per share 860.7 153.0
Fair value of derivative financial instruments (52.8) (53.3)
(net of deferred tax)
Diluted EPRA NNNAV 807.9 99.7
Basic net assets per share (pence) 127.6p 14.9p
Adjusted, diluted net assets per share (pence) 138.3p 24.6p
Diluted EPRA NNNAV per share (pence) 129.8p 16.0p
(c) Shares in issue
As at As at
30 June 31
December
2010 2009
millions millions
Shares in issue 621.9 621.9
Effect of dilution:
On exercise of options 0.3 -
Adjusted, diluted number of shares 622.2 621.9
17 Share capital and share premium
The Companies Act 2006 removed the concept of authorised share capital from 1
October 2009.
Share Share
capital premium
GBPm GBPm
Issued and fully paid
At 30 June 2009 - 621,828,502 ordinary shares of 497.4 89.1
80p each
- 50,000 redeemable 0.1 -
ordinary shares of GBP1 each
At 31 December 2009 - 621,828,502 ordinary 497.4 89.1
shares of 80p each
- 50,000 0.1 -
redeemable ordinary shares of GBP1 each
Capital reduction on ordinary shares of 55p each (342.0) -
At 30 June 2010 - 621,828,502 ordinary shares of 155.4 89.1
25p each
- 50,000 redeemable 0.1 -
ordinary shares of GBP1 each
18 Related party transactions
Key management* compensation
Six Six Year
months months ended
ended ended ended
30 June 30 June 31
December
2010 2009 2009
GBPm GBPm GBPm
Salaries and short term employee 1.0 0.5 0.6
benefits
Pensions and other post-employment 0.1 0.1 0.2
benefits
1.1 0.6 0.8
* Key management comprises the Directors of Capital & Counties Properties PLC,
and those group employees who have been designated as Persons Discharging
Managerial Responsibilities ("PDMR").
Those who have been newly defined as key management in the demerged Group have
had their disclosures made prospectively with no comparatives in prior periods
where they did not meet the definition of related parties. To the extent that
those who were regarded as key management prior to the demerger had their
costs reflected directly in the subsidiaries of the entities forming part of
the demerged Group or that those costs were recharged to one of these
entities, the details of these comparative figures are disclosed.
19 Events occurring after the reporting period
A number of changes to the UK Corporation tax system were announced in the
June 2010 Budget Statement. The Finance (No 2) Act 2010 is expected to include
legislation to reduce the main rate of corporation tax from 28% to 27% from 1
April 2011. Further reductions to the main rate are proposed to reduce the
rate by 1% per annum to 24% by 1 April 2014. The changes had not been
substantively enacted at the balance sheet date and, therefore, are not
included in these financial statements.
The effect of the reduction in the corporation tax rate from 28 per cent to 27
per cent with effect from 1 April 2011 (substantially enacted on 20 July 2010)
would be to reduce the unrecognised deferred tax asset at 30 June 2010 by
GBP3.2 million. This decrease in the unrecognised deferred tax asset would
have no effect on the profit for the year.
APPENDIX 1
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTY (unaudited).
1. Property data as at 30 June 2010
Weig
hted
aver Gro
age ss
Market Initia Nomi Pass unex are
l* nal* ing* pire a
d
value yield equi rent ERV leas mil
vale * e lio
nt n
GBPm Owne (EPRA) yiel GBPm GBP Occu year sq
rshi d m panc s* ft
p y* C
Covent Garden 592.2 100% 4.30% 5.14 34. 96.4 7.4 0.7
% 4 %
Earls Court 442.9 100% 5.9 1.7
Great Capital 269.8 50% 5.36% 5.04 16. 97.3 7.9 1.0
Partnership % 4 %
Other 7.7 100% 1.2 0.1
Total investment
and development
properties 1,312. 48.0 57. 3.5
6 9 B
* As defined in glossary.
A Includes Earls Court, which as from December 2009 is 100 per cent
owned and also the Group`s 50 per cent economic
interest in the Empress State building (GBP102.5 million).
B Earls Court Exhibition Centre does not report a passing rent, ERV,
occupancy, or lease maturity due to the nature of its
Exhibition business.
C Area shown is gross area of the property, this is not adjusted for
proportional ownership.
2. Analysis of property by use
30 June 2010 Market Value 30 June 2010 ERV
Retai Offi Exhibi Reside Total Reta Offi Exhib Resid Tota
l ce tion ntial il ce ition entia l
l
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Covent 513.2 67.4 - 11.6 592.2 28.8 4.9 - 0.7 34.4
Garden
Earls - 102. 340.4 - 442.9 - 5.9 - - 5.9
Court 5
Great
Capita
l
Partne 90.4 164. - 15.4 269.8 5.1 10.7 - 0.6 16.4
rship 0
Other - 7.7 - - 7.7 - 1.2 - - 1.2
603.6 341. 340.4 27.0 1,312 33.9 22.7 - 1.3 57.9
6 .6
3. Analysis of capital return in the period
Like-for-like properties
Market value Revaluation surplus*
30 June 31 30 June
December
2010 2009 2010
GBPm GBPm GBPm Increase
Covent Garden 592.2 548.4 40.1 7.3%
Earls Court 442.9 434.8 3.5 0.8% A
Great Capital Partnership 269.8 247.3 22.1 8.7%
Other 7.7 7.5 - -
Total like-for-like 1,312.6 1,238.0 65.7 5.3%
properties
Disposals - 1.5 - -
Total investment 1,312.6 1,239.5 65.7 5.3%
properties
All properties
Covent Garden 592.2 548.4 40.1 7.3%
Earls Court 442.9 434.8 3.5 0.8%
Great Capital Partnership 269.8 247.3 22.1 8.7%
Other 7.7 9.0 - -
Total investment 1,312.6 1,239.5 65.7 5.3%
properties
* Revaluation surplus includes amortisation of lease incentives and fixed head
leases.
(A) Revaluation increase comprises Earls Court (down 1.3%) and Empress State
(up 8.6%)
4 Analysis of income in the period
Like-for-like properties
30 June 30 June
2010 2009 Change
GBPm GBPm %
Covent Garden 12.9 12.2 5.0%
Earls Court 17.9 20.7 (13.5)%
Great Capital Partnership 6.8 6.5 5.1%
Other 0.2 0.3 (42.0)%
Like-for-like properties 37.8 39.7 (4.8)%
Disposals 0.5 4.2A -
Total investment properties 38.3 43.9 (12.8)%
All properties
Covent Garden 12.9 12.4 4.0%
Earls Court 17.9 23.8 (24.8)%
Great Capital Partnership 6.8 6.7 1.5%
Other 0.7 1.0 (30.0)%
Total investment properties 38.3 43.9 (12.8)%
A Includes loss of deemed control of former subsidiary and
conversion to proportional consolidation of the
Empress State building of GBP3.2 million
APPENDIX 2
UNDERLYING PROFIT STATEMENT
For the six months ended 30 June 2010
Six Six Twelve
months months months
ended ended ended
30 June 30 June 31
December
2010 2009 2009
GBPm GBPm GBPm
Net rental income 38.3 43.9 78.1
Other income - 1.6 1.5
38.3 45.5 79.6
Administration expenses (7.7) (5.9) (14.5)
Operating profit (underlying*) 30.6 39.6 65.1
Finance costs (20.7) (25.1) (50.1)
Finance income 0.6 1.1 2.6
Net finance costs (underlying*) (20.1) (24.0) (47.5)
Profit before tax (underlying*) 10.5 15.6 17.6
Write down of trading properties - - (0.1)
Tax on adjusted profit (0.4) - (1.0)
Non-controlling interest - (3.0) (1.3)
Earnings used for calculation of
adjusted earnings per share 10.1 12.6 15.2
Adjusted earnings per share (pence) 1.6 2.0 2.4
* before property trading, valuation and exceptional items
APPENDIX 3
FINANCIAL COVENANTS
Financial covenants on asset-specific debt excluding joint ventures
Loan Loan to
outstan 30 June Interes Interes
ding at t t
31 July LTV 2010 cover Cover
2010(1)
Maturi GBPm covenan Market covenan reporte
ty t value(2 t d(3)
)
EC&O(7) 2012 133.0 N/A N/A 125% 180%
Covent Garden London 2013 222.5(5 75% 57% 120% 146%
(8) )
Covent Garden London 2017 112.0(5 70% 55% 120% 147%
(9) )
Total 467.5
Financial covenants on joint ventures asset-specific debt
Loan
outstan Loan to
ding at
31 July 30 June Intere Inter
st est
2010(1) LTV 2010 cover cover
Matu GBPm covena Market covena repor
rity nt value(2 nt ted
)
Empress State 2013 77.1(4) N/A(6) 75%(6) 115% 130%
Partnership (10)
Great Capital 2013 112.5(4 70% 44% 120% 206%
Partnership(11) )
Total 189.6
Notes:
The loan values are the actual principal balances outstanding at 31 July 2010,
which take into account any principal repayments made in July 2010. The
accounting/balance sheet value of the loans includes any unamortised fees.
The loan to 30 June 2010 market values provides an indication of the impact
the 30 June 2010 property valuations undertaken for inclusion in the condensed
financial statements could have on the LTV covenants. The actual timing and
manner of testing LTV covenants varies and is loan specific.
Based on the latest certified figures, calculated in accordance with loan
agreements, which have been submitted between 30 June 2010 and 31 July 2010.
The calculations are loan specific and include a variety of historic, forecast
and in certain instances a combined historic and forecast basis.
50 per cent of the debt is shown which is consistent with accounting treatment
and the Group`s economic interest.
There are two separate loans on the Covent Garden London properties.
Empress State LTV applies from 18 August 2010
Loan facility provided by Anglo Irish Bank Corporation PLC.
Loan facility provided by a consortium of six banks with Lloyds TSB Bank PLC
acting as agent.
Loan facility provided by NyKredit RealKredit A/s.
Loan facility provided by a consortium of three banks with Eurohypo AG acting
as agent.
Loan facility provided by a consortium of four banks with Eurohypo AG acting
as agent.
APPENDIX 4
RECONCILIATION OF PRO FORMA TO INTERIMS
Balance Sheet As at 31 December 2009
Prospec Cash Demerge Prospectu
tus r s
Pro alloca costs
forma tion
(1) (2)
Investment and 1,240.5 - - 1,240.5
development property
Cash and cash 263.3 (244.0 - 19.3
equivalents )
Trade and other 36.6 - - 36.6
receivables
Investments 46.0 - - 46.0
Other assets 1.3 - - 1.3
Total assets 1,587.7 (244.0 - 1,343.7
)
Liabilities
Borrowings (726.4) - - (726.4)
Trade and other payables (66.8) - 2.8 (64.0)
Derivative financial (56.2) - - (56.2)
instruments
Other liabilities (7.4) - - (7.4)
Total liabilities (856.8) - 2.8 (854.0)
Net assets 730.9 (244.0 2.8 489.7
)
Net assets per share 127 (39) - 88
(pence per share
adjusted, diluted)
Prospec Remove Reclass Remove Demerge Interim
tus ify r
non- amounts proform capital comparat
a ives
demerge due to recharg (6)
d es
entitie CSC (5)
s
(3) Group
(4)
Assets
Investment
and
development 1,240.5 - - - - 1,240.5
property
Cash and
cash
equivalents 19.3 - - - - 19.3
Trade and
other
receivables 36.6 - - - - 36.6
Investments 46.0 - - - - 46.0
Other assets 1.3 - - - - 1.3
Total assets 1,343.7 - - - - 1,343.7
Liabilities
Borrowings (726.4) - - - - (726.4)
Trade and
other
payables (64.0) (185.5) (953.5) 14.0 728.0 (461.0)
Derivative
financial
instruments (56.2) - - - - (56.2)
Other (7.4) - - - - (7.4)
liabilities
Total (854.0) (185.5) (953.5) 14.0 728.0 (1,251.0
liabilities )
Net assets 489.7 (185.5) (953.5) 14.0 728.0 92.7
Net assets
per share
(pence per
share
adjusted, 88 (30) (153) 2 117 25
diluted)
Income Statement Year ended 31 December 2009
Prospec Cash Demerge Prospectu
tus r s
Pro alloca costs(2
forma tion(1 )
)
Net rental income 79.2 - - 79.2
Deficit on revaluation
and sale of investment
and development property (140.7) - - (140.7)
Impairment of investment
in associate
company (3.9) - - (3.9)
Administration expenses (21.3) - 2.8 (18.5)
Other income, expense (7.0) - - (7.0)
and charges
Operating profit/(loss) (93.7) - 2.8 (90.9)
Net finance costs (36.1) - - (36.1)
Taxation (1.4) - - (1.4)
Attributable to non- 19.6 - - 19.6
controlling interest
Loss for the year (111.6) - 2.8 (108.8)
Prospect Remove Reclass Remove Demerg Interim
us ify er
non- amounts proform capita comparat
a l(6) ives
demerge due to recharg
d es(5)
entitie CSC
s(3)
Group(4
)
Net rental 79.2 (1.1) - - - 78.1
income
Deficit on
revaluation
and sale of
investment
and
development (140.7) 11.9 - - - (128.8)
property
Impairment
of
investment
in
associate (3.9) 3.9 - - - -
company
Administrati
on
expenses (18.5) - - 4.0 - (14.5)
Other
income,
expense and (7.0) - - - - (7.0)
charges
Operating
profit/(loss (90.9) 14.7 - 4.0 - (72.2)
)
Net finance (36.1) - (41.7) - - (77.8)
costs
Taxation (1.4) 0.3 - - - (1.1)
Attributable
to non-
controlling 19.6 - - - - 19.6
interest
Loss for the (108.8) 15.0 (41.7) 4.0 - (131.5)
year
1. Cash which was transferred from Capital Shopping Centres Group
to the Group prior to completion of the demerger.
2. Represents demerger and related costs which were allocated to
the Group by Capital Shopping Centres Group.
3. Information in the prospectus was prepared using conventions
commonly adopted for preparation of financial
information for inclusion in investment circulars. This resulted
in certain departures from IFRS; the most significant being
IAS 27. The prospectus included assets under `control` of Capco
management whereas the interim comparatives only
Include assets demerged from Capital Shopping Centres Group.
This was outlined on page 80 of the prospectus.
4. Debt due to Capital Shopping Centres Group was classified as
Equity in the prospectus as these assets were to be demerged and
form part of Capco equity. On a comparative basis however these
legally took the form of debt and are disclosed as such for the
comparative period. This was highlighted on page 80 of the
prospectus.
5. Included in the prospectus was a pro forma allocation of
overhead costs which had not historically been recharged by
Capital Shopping Centres Group. For the interim comparatives
this pro forma allocation falls away. This was highlighted on
page 81 of the prospectus.
6. The objective of merger accounting is to report the consolidated
financial position of the Group as if it had always
been combined. Consequently, the share capital issued for the
purposes of the transaction is shown as if it has
always been on issue.
DIVIDENDS
The Directors of Capital & Counties Properties PLC have proposed an
interim dividend per ordinary share (ISIN GB00B62G9D36) of 0.5p
payable on 27 October 2010.
Dates
The following are the salient dates for the payment of the proposed
interim dividend:
Wednesday, 22 Sterling/Rand exchange rate struck
September 2010
Thursday, 23 Sterling/Rand exchange rate and dividend
September 2010 amount in SA currency announced
Monday, 4 October Ordinary shares listed ex-dividend on the
2010 JSE, Johannesburg
Wednesday, 6 October Ordinary shares listed ex-dividend on the
2010 London Stock Exchange
Friday, 8 October Record date for interim dividend in London
2010 and Johannesburg
Wednesday, 27 Dividend payment date for shareholders
October 2010
South African shareholders should note that, in accordance with the
requirements of Strate, the last day to trade cum-dividend will be
Friday, 1 October 2010 and that no dematerialisation or
rematerialisation of shares will be possible from Monday, 4 October
2010 to Friday, 8 October 2010 inclusive. No transfers between the
UK and South African registers may take place from Wednesday 22
September 2010 to Sunday, 10 October 2010 inclusive.
The above dates are proposed and subject to change.
GLOSSARY
Adjusted earnings per share (EPS)
Earnings per share adjusted to exclude non-recurring and valuation
items and related tax.
Adjusted, diluted net asset value per share (NAV)
NAV per share adjusted to exclude the fair value of derivative
instruments and related tax and deferred tax on capital allowances and
revaluation gains and to include any unrecognised post tax surplus on
trading properties.
Annual property income
The Group`s share of passing rent plus the external valuers` estimate
of annual excess turnover rent, additional rent in respect of unsettled
rent reviews and sundry income such as that from car parks.
Capital Shopping Centres Group
Capital Shopping Centres Group represents Capital Shopping Centres
Group PLC (formerly Liberty International PLC) and all its subsidiary
companies.
Diluted figures
Reported amounts adjusted to include the effects of potential shares
issuable under employee incentive arrangements.
Earnings per share
Profit after tax divided by the weighted average number of shares in
issue during the period.
EPRA
European Public Real Estate Association, the publisher of Best Practice
Recommendations intended to make financial statements of public real
estate companies in Europe clearer, more transparent and comparable.
ERV (estimated rental value)
The external valuers` estimate 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 Financial Reporting Standards regarding tenant lease
incentives.
Interest cover ratio (ICR)
Net rental income less administration costs divided by the net finance
cost excluding the change in fair value of derivatives and any
exceptional finance costs.
IPD
Investment Property Databank Ltd, producer of an independent benchmark
of property returns.
Interest rate swap
A derivative financial instrument enabling parties to exchange interest
rate obligations for a predetermined period. These are used by the
Group to convert floating rate debt to fixed rates.
Initial yield (EPRA)
Annualised net rent (after deduction of revenue costs such as head
rent, running void, service charge after shortfalls and empty rates) on
investment properties expressed as a percentage of the gross market
value before deduction of theoretical acquisition costs, consistent
with EPRA`s net initial yield.
Liberty International
Liberty International represents Liberty International PLC
(subsequently renamed Capital Shopping Centres Group PLC) and all its
subsidiary companies.
Like-for-like properties
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. For the
purposes of comparison of capital values, this will also include assets
owned at the previous reporting period end but not throughout the prior
period.
Loan-to-value (LTV)
LTV is the ratio of attributable debt to the market value of an
investment property.
Net asset value (NAV) per share
Net assets attributable to equity shareholders divided by the number of
ordinary shares in issue at the period end.
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 Financial
Reporting 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
assuming rent is receivable annually in arrears, reflecting estimated
rental values (ERV) but disregarding potential changes in market rents.
Occupancy rate
The passing rent of let and under offer units expressed as a percentage
of the passing rent of let and under offer units plus ERV of un-let
units, excluding development and recently completed properties and
treating units let to tenants in administration as un-let.
Pro forma
The pro forma basis as outlined on page 140 of the Group`s prospectus
dated 12 March 2010.
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. Contracted annual rents in respect of tenants in
administration are excluded.
Underlying profit before tax
Profit before taxation after excluding impairment charges, net
valuation gains/losses (including profits/losses on disposals), net
refinancing charges and swap termination costs.
Tenant (or lease) incentives
Any incentives offered to occupiers to enter into a lease. Typically
incentives are in the form of an initial rent free period and/or a cash
contribution to fit-out the premises. Under International Financial
Reporting Standards the value of incentives granted to tenants is
amortised through the income statement on a straight-line basis to the
earliest lease termination date.
Triple net asset vale (NNNAV) per share (EPRA)
Represents fair value of equity and includes fair value adjustments of
all material balance sheet items which are not reported at their fair
value as part of the NAV per IFRS balance sheet statement
Weighted average unexpired lease
The unexpired lease team to lease expiry weighted by ERV for each
lease.
03 August 2010
Sponsor: Merrill Lynch South Africa (Proprietary) Limited
Date: 03/08/2010 08:05:03 Produced by the JSE SENS Department.
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