| Thu 5 Aug 2010, 8:09 | | CSO - Capital Shopping Centres Group Plc - Interim report for the half year |
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CSO
CSO
CSO - Capital Shopping Centres Group Plc - Interim report for the half year
ended 30 June 2010
CAPITAL SHOPPING CENTRES GROUP PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: CSO
Issuer Code: CSCSCG
CAPITAL SHOPPING CENTRES GROUP PLC ("CSC")
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2010
Pro forma
30 June 31 December
2010 2009 Change
NAV per share (diluted, adjusted) (pence) 368 339 Up 9%
Market value of investment properties
(GBPm) 4,919 4,631 Up 6%
Net external debt (GBPm) 2,622 2,522 Up 4%
Debt to assets ratio (per cent) 53 55 Down 2%
Six months ended 30 June
2010 2009 (2) Change
Property revaluation
surplus/(deficit)
(GBPm) 348.3 (+7.7%) (649.7) (-12.8%) n/a
IFRS
profit/(loss) for
the period (GBPm) 291.2 (495.1) n/a
Net rental income
from continuing
operations 134.5 132.7 Up 1%
(GBP)
Underlying
earnings (GBPm)
(1) 43.3 33.8 Up 28%
Underlying EPS
(pence) (1) 7.0 8.4 Down 17%
Interim dividend
per share (pence) 5.0 5.0 Unchanged
Weighted average
shares in issue
(million) 622 402 Up 55%
(1) Excluding valuation and exceptional items, refer note 10(c)
(2) 2009 figures have been re-stated to remove the impact of the Capco business
following the demerger in May 2010.
Property valuation recovery continued
Property revaluation surplus 7.7 per cent (IPD retail monthly index 6.3 per
cent for H1 2010)
Average valuation yield (nominal equivalent) of 6.5 per cent (31 December
2009 - 7.1 per cent), still defensive
Positive financial performance
NAV (diluted, adjusted) per share increased to 368 pence, total return for
the six month period of 12 per cent
Underlying earnings up 28 per cent to GBP43 million (2009 - GBP34 million),
7.0 pence per share (2009 - 8.4 pence) impacted by shares issued in 2009
Operational recovery underway
Net rental income from continuing operations up 1 per cent
Like-for-like net rental income reduction narrowed to 0.4 per cent improving
from reductions of 2009 full year - 3.4 per cent, 2008 full year - 4.3 per
cent, 2008 full year - 4.3 per cent
131 lettings generating GBP14 million of annual rent, an increase of GBP4
million from the previous rent
Occupancy remains strong at 98 per cent
Footfall up 3 per cent year-on-year, 6 per cent in two years
Attractive organic growth prospects
Lettings, lease expiries and rent reviews
Pipeline of opportunities to reinforce pre-eminence of centres
Patrick Burgess, Chairman of Capital Shopping Centres Group PLC, comments as
follows:
"Our unwavering focus on quality, with 13 prime centres all in the UK`s top 50
and a number of those among the UK`s very best, has been an important factor in
CSC`s strong performance in the first half of 2010, as we present the first set
of results since the demerger of the non-shopping centre activities which
completed in May 2010. The results show a 7.7 per cent uplift in property
valuations, increasing net asset value per share to 368 pence, and a 28 per
cent increase in underlying CSC earnings before valuation items. We are now
looking to drive growth in net rental income from lettings, lease expiries and
rent reviews, with a particular opportunity from converting last year`s
short-term lets into longer-term lets at higher rents. With around GBP125
million of value enhancing active management projects under consideration and
around GBP500 million of potential investment by way of major extensions, the
Group has significant scope to grow organically without depending on
acquisitions."
Contents:
Highlights
Operating and Financial Review
Directors` Responsibility Statement
Independent Review Opinion
Unaudited Financial Information
Summary of Investment and Development Properties
Other Information
Glossary
Enquiries:
Capital Shopping Centres Group PLC:
David Fischel Chief Executive +44 (0)20 7960 1207
Matthew Roberts Finance Director +44 (0)20 7960 1353
Kate Bowyer Investor Relations Manager +44 (0)20 7960 1250
Public relations:
UK: Michael Sandler, Hudson Sandler +44 (0)20 7796 4133
SA: Nicholas Williams, College Hill +27 (0)11 447 3030
A copy of this press release is available for download from our website at
www.capital-shopping-centres.co.uk
5 August 2010
Sponsor:
Merrill Lynch South Africa (Pty) Limited
NOTES TO EDITORS
Capital Shopping Centres is the leading specialist UK regional shopping centre
REIT
Capital Shopping Centres Group PLC (CSC) is the leading specialist developer,
owner and manager of pre-eminent UK regional shopping centres. CSC owns 13
regional shopping centres amounting to 14.1 million sq. ft. of retail space and
valued at GBP4.9 billion at 30 June 2010. The assets comprise four major
out-of-town centres - Lakeside, Thurrock; Metrocentre, Gateshead; Braehead,
Glasgow and The Mall at Cribbs Causeway, Bristol - and nine in-town centres
including the prime destinations in Cardiff, Manchester, Newcastle, Norwich and
Nottingham.
With a dedicated and skilled management team, CSC aims to be the landlord of
choice for retailers, to provide compelling destinations for shoppers and to
offer clarity and transparency to investors. CSC is a responsible and
environmentally conscious participant in the communities where it invests. CSC
focuses on the creation of long term and sustainable growth in net rental
income with a view to generating superior returns to shareholders through
dividend growth and capital appreciation.
CSC`s centres attracted 275 million customer visits and generated net rental
income of GBP267 million in 2009.
CSC was formerly known as Liberty International PLC. Its name was changed in
May 2010 upon demerger of its central London activities into a newly listed
company, Capital & Counties Properties PLC (Capco).
This announcement includes statements that are forward-looking in nature.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of Capital Shopping Centres Group 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 announcement on
the price at which shares or other securities in Capital Shopping Centres Group
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
Introduction
CSC is pleased to report a strong performance for the six months ended 30 June
2010, the first set of results since the demerger of the non-shopping centre
activities which completed in May 2010.
Highlights of the period for CSC are as follows:
An overall profit of GBP291 million driven by a 7.7 per cent increase in
property valuations, a notable turnaround from recent adverse circumstances.
A 28 per cent increase in underlying earnings from GBP34 million to GBP43
million with net rental income growing from GBP133 million to GBP135 million.
A robust operational performance from CSC`s shopping centres with continuing
footfall growth, good progress on lettings and occupancy maintained at 98 per
cent.
The successful opening in February 2010, fully let, of St Andrew`s Way mall,
Eldon Square, Newcastle. The extension to the centre of around 400,000 sq. ft.
has brought further prime units to the city and driven strong increases in
footfall through the entire centre.
Continued lettings at the recently opened St David`s, Cardiff, extension now
79 per cent committed by area, 78 per cent by income, with a further 4 per cent
by income in advanced negotiation, and at Metrocentre where the leisure and
catering upgrade is now fully let.
Important transactions to place the balance sheet in a very sound position
for the current stage of the cycle with the loan to value ratio now at 53 per
cent and the first significant debt maturity not until 2014:
- GBP525 million, seven year refinancing of debt secured on Lakeside, Thurrock
in January 2010, at the time the largest real estate financing in the UK since
the start of the crisis in the financial markets.
- The restructuring of the Group`s approximately GBP150 million ($250 million)
net investment in predominantly retail assets in California, USA (C&C US). In
exchange for its direct interest, CSC will receive 4.1 million shares in Equity
One, a US retail REIT, and 10.9 million redeemable units in a new joint
venture, completion is expected later this year.
- The disposal of the Westgate Centre, Oxford, and other non-core UK asset
disposals generating GBP66 million in cash.
In addition, CSC has attractive organic growth prospects. Lettings, lease
expiries and rent reviews have the scope to capture a 23 per cent uplift from
current contracted rents to our valuers` assessments of ERV, in particular
from:
Retailer demand for high quality space stimulated by scarcity of supply.
Strong demand for larger units in centres with best catchments.
Turning temporary lets into longer leases.
Further, CSC has a pipeline of opportunities to reinforce the pre-eminence of
its centres:
GBP125 million of identified revenue-enhancing active management
opportunities.
Feasibility work underway on a further c. GBP500 million of expenditure
across three major extensions to Lakeside, Thurrock, Braehead, Glasgow and
Victoria Centre, Nottingham.
We were pleased to obtain shareholder support for the demerger which was
executed smoothly and provides an improved platform for CSC and Capco to
deliver greater value for shareholders over time than the former Liberty
International could as a combined business.
Since demerger, the CSC management team has settled quickly and continues to
focus on the core objectives of delivering like-for-like growth in net rental
income and pursuing the active management and development opportunities within
CSC`s existing assets which provide the company with substantial scope to drive
the overall business forward over the next few years.
Market background
The UK economy`s modest recovery which began in the last quarter of 2009
continued in the first half of 2010. UK retail sales generally held up well and
can be expected to continue at satisfactory levels for the rest of the year as
consumers look to purchase ahead of the increase in VAT due to take effect in
January 2011. Tax increases and the programme embarked upon by the recently
elected coalition Government to control public sector expenditure are however
likely to constrain levels of growth for some time to come. Consumer confidence
levels have declined in the last few months as the scale of required adjustment
has become apparent.
The direct commercial property investment market in the UK continued its
rebound from the very depressed levels of mid - 2009 with the income component
of real estate returns now looking attractive in the prevailing low interest
rate regime. Domestic institutions have been active and, in addition, we have
specifically noted genuine interest from major international institutional
investors in large scale, high quality UK regional shopping centres.
CSC has benefited during the period from each of the above factors, namely an
improving economic background, a resilient retail environment and a recovering
property investment market.
The level of retailer failures has substantially diminished from the
exceptional levels experienced in late 2008 and early 2009 and, after two
difficult years, the letting market for quality retail space in large centres
has become more balanced between landlord and retailer.
Property valuations
After a relatively muted start to the recovery in asset valuations in the
second half of 2009, CSC`s assets have performed strongly in the first half of
2010 with a revaluation surplus of 7.7 per cent, mostly through yield
contraction with rental values holding up satisfactorily.
First Second First
half half half
2010 2009 2009
Revaluation surplus/(deficit) 7.7% 2.6% (12.8)%
IPD monthly index retail capital growth 6.3% 11.3% (14.0)%
Nominal equivalent yield (weighted average) 6.52% 7.08% 7.37%
Change in nominal equivalent yield ("yield
shift") -56bp -29bp +70bp
Initial yield 5.35% 5.70% 6.30%
Valuation effect of change in ERV (1)% (1)% (3)%
CSC believes that the yields applied by the valuers to its assets at 30 June
2010 remain above the long-term norm and are defensive relative to other retail
asset classes such as prime high street shops and prime retail warehouses
(nominal equivalent yields of 4.85 per cent and 5.25 per cent respectively,
according to CBRE).
CSC`s weighted average initial yield has contracted 35 basis points to 5.35
per cent, a number impacted in the short- term as CSC works through rent free
periods.
Valuers` estimates of ERV have fallen only marginally in the period, with
evidence from rent reviews and lettings supporting the current levels.
Lettings
New entrants to the UK retail market, together with existing successful
retailers looking to upsize, are creating some price tension for well
configured stores of over 15,000 sq. ft. in the best locations.
So far this year, CSC has welcomed 18 new retailers not previously represented
in our centres, 5 being new retailers to the UK.
Demand for restaurant space is strong as casual dining formats continue to
expand in our centres.
In the first half of the year CSC has achieved:
131 lettings for GBP14.2 million aggregate annual passing rent, an increase
of GBP3.9 million over previous rent for those units; and
a further 194 lettings under offer or in advanced negotiations at levels
which, if concluded, would substantially increase their passing rent from GBP15
million to GBP28 million, including GBP5 million relating to recently completed
developments.
Of the 131 lettings, the proportion in the form of short-term leases has
fallen:
61 of the new lettings are long-term, generating an uplift in annual rent of
GBP5.5 million to GBP10.4 million. In aggregate, these terms are around 16 per
cent below ERV, reflecting market conditions in 2009 when the majority of these
transactions went under offer;
54 short-term leases were signed, with terms around 25 per cent below
previous passing rent, a less severe reduction than those signed in 2009; and
16 turnover only leases were signed.
Included in the above is the progress which has been made in securing improved
terms on expiry of short-term lettings of which, since the year end:
34 units have been re-let, providing a GBP1.1 million uplift in annual rent
to GBP3.0 million; and
43 are in solicitors` hands or under active negotiation at terms which, if
concluded, would increase annual rent by GBP2.8 million to GBP4.4 million.
At 30 June 2010 CSC had 202 short-term leases which represented 2 per cent of
passing rent and 8 per cent of ERV.
As well as generating revenue, new lettings refresh the centres, keeping the
offer vibrant for shoppers. Around 120 units in established centres (6 per
cent) were refitted by retailers in the first half, 53 in respect of new
lettings and the balance by existing retailers. This substantial investment
represents a firm commitment on the part of retailers and belief in the quality
of CSC`s centres.
Operating highlights
Occupancy of established centres, treating the 1 per cent of tenants in
administration as unoccupied, has remained high at 98.1 per cent (31 December
2009 - 97.8 per cent). Tenants occupying 41 units and accounting for 1.4 per
cent of rent entered administration in the first half (2009 - 125 units and 5.5
per cent of rent).
Net rental income of GBP135 million represents an increase of 1 per cent from
the same period of 2009, with a much improved trend on a like-for-like basis
(-0.4 per cent compared to -3.4 per cent in 2009):
- Rental income on recently completed developments up GBP4 million;
- Reduced level of bad debt and lease incentive write offs (GBP4 million);
partly offset by
- Income foregone on disposals (GBP1 million decrease); and
- Full period effect of 2009`s short-term re-lettings.
The positive letting activity in the period has increased passing rent on the
continuing portfolio by 1 per cent to GBP269 million as well as increased
levels of annualised rent contributed by leases in rent free periods, from GBP7
million to GBP17 million of annual rent.
(Chart included in full announcement published on Capital Shopping Centres`
website at www.capital-shopping-centres.co.uk)
As illustrated by the chart, CSC has considerable upside potential between
current rent and the valuer`s assessment of ERV, in particular from:
- Lease expiries where the uplift to ERV is estimated at GBP37 million,
including GBP11 million currently in solicitors` hands or advanced negotiation
and a further GBP18 million in respect of short-term leases
- Vacancies valued at GBP22 million in excess of the normal running void,
including the remaining vacancy at St. David`s, Cardiff
Estimated footfall is up 3 per cent year-on-year for CSC`s established
centres, building on 2009`s 3 per cent increase.
Estimated retailer sales in CSC centres increased by 8 per cent in total and
broadly in line with the benchmark on a like-for-like basis (BRC like-for-like
non-food +0.9 per cent).
Affordability improved with estimated occupancy cost ratio (rent to retailer
turnover) of 13.2 per cent (2009 - 13.6 per cent) excluding anchor stores.
Lakeside: Market value - GBP988 million, 20 per cent of CSC`s total.
Lakeside is a prime regional shopping centre occupying a strong position on the
eastern perimeter of London`s M25 orbital motorway at the heart of Europe`s
largest aggregation of retail space. It is CSC`s flagship asset and largest by
value, with 13,000 free car parking spaces. Approximately 11.3 million people
live within 70 minutes` drive time and an estimated 25 million customer visits
are made each year.
Lakeside has attracted a number of new retail brands in 2010, including Cult,
Guess, and Fossil. Reinforcing Lakeside as a leisure destination, Dove opened
their second UK spa in January to much acclaim and additional treatment rooms
have since been added to reflect the level of demand. US restaurant operator
Taco Bell chose Lakeside as their first UK opening and early trading suggests
it has been well received. Other new catering outlets, Sainsy`s Pie & Mash and
Ed`s Diner, have added to the choice now provided at Lakeside.
The strong market requirement for flagship stores has been well demonstrated at
Lakeside this year. Primark have taken a further 20,000 sq. ft. which will
enlarge their store to 100,000 sq. ft. with an improved mall frontage. Demand
for well configured, large MSUs has been so strong that in June CSC conducted a
"best bids" process for a 36,000 sq. ft. opportunity. We are looking creatively
to deliver other larger format stores for existing retailers within the centre
to meet demand. Elsewhere in the centre competitive bidding has delivered
offers above the valuer`s assumption for prime rental levels.
We continue to explore further opportunities for enlarging the anchor stores,
roof box extensions and unit amalgamations to meet the evolving requirements of
retailers.
Metrocentre: Market value - GBP801 million, 16 per cent of CSC`s total
Metrocentre, Gateshead, is the largest covered shopping and leisure centre in
Europe and the leading shopping centre in the UK in terms of tenant mix,
transport links and catering offer. With 2.1 million sq. ft. of retail space
and 9,250 free car parking spaces, it is the premier regional shopping centre
destination for north east England attracting an estimated 23 million customer
visits a year.
Following the successful Red Mall extension in 2004, CSC embarked on a GBP45
million project to remodel the leisure and catering offer of the Yellow and
Blue Malls to include a new Odeon IMAX cinema, Namco family entertainment
centre and ten restaurants. The first two phases opened between 2008 and 2009,
with the Odeon IMAX proving to be one of Odeon`s best performing locations in
the UK, and the final phase is due to complete this autumn. In the first half
of 2010, the final restaurant unit has been let to Zizzi, completing the new
line up. TK Maxx and sister brand Homesense are currently fitting out their
first shopping centre combined store in the former cinema space which will
create a new retail anchor to Blue Mall. Metrocentre has also attracted a
number of new retailers this year such as Apple, Radley and G Star. In
addition, the former Woolworths store is now under offer with detailed planning
consent to one of the UK`s largest value fashion anchors, which will enable
them to upsize to 60,000 sq. ft. and will create a new and important anchor to
the Central Mall. Next have contracted to open a Home Store on the Metrocentre
Retail Park, the first letting in our strategy to improve its tenant mix.
Braehead: Market value - GBP569 million, 12 per cent of CSC`s total
Braehead continues to be the most successful out of town shopping centre in
Scotland with around half of Scotland`s population within its catchment and an
estimated 18 million customer visits per year. The Braehead shopping centre and
retail park are at the heart of the successful regeneration area led by CSC,
which now also includes the Xscape leisure destination, Ikea, business parks,
new homes, flagship car dealerships and shortly a major garden centre.
Following Sainsbury`s relocation to the former B&Q unit on the retail park in
late 2009, the surrender in early 2010 of their 80,000 sq. ft. former store
brought the largest letting opportunity since Braehead`s opening in 1999. With
the continued importance of creating flagship destinations, Primark took the
opportunity to relocate into the store and opened on 6 July 2010. Trading
reports have been exceptional with adjacent retailers reporting noteable
improvements in trade. The relocation of Primark has enabled fashion retailer
H&M to upsize to a 25,000 sq. ft. store which will carry stock for all ranges
including childrenswear. The opening of the new H&M store is anticipated in
March 2011.
Other centres
Recently completed development activities at other centres include:
The 1 million sq. ft. extension to St. David`s, Cardiff, which opened October
2009, led the regeneration of Wales` capital city into a unique shopping,
leisure, cultural and tourist destination. Now 1.4 million sq. ft. with 221
stores and a catchment of 2.5 million residents plus around 12 million tourist
visits a year, St. David`s is number six in Experian`s UK retail centre
rankings. A further ten retailers new to Wales have taken space in the first
half of 2010, including Carluccio`s and Pandora. As trading, footfall growth
and retailer comment remain positive, interest in the remaining units is
increasing and CSC is confident that the centre will provide strong growth in
the next few years.
The new St Andrews Way mall, Eldon Square, Newcastle, has traded strongly
since opening fully let in February 2010, with footfall for the centre overall
up 25 per cent since opening. The enlarged 1.4m sq. ft centre now includes 70
per cent of Newcastle`s prime retail space, with 38 remodelled or refurbished
stores including seven new retailers to the city.
Active management to create value by fulfilling retailer needs is fundamental
to CSC`s approach. Around GBP125 million of projects are planned which are
targeted to enhance shareholder returns as well as reinforce the pre-eminence
of CSC`s centres. During the period detailed planning consent has been received
for a 60,000 sq. ft. flagship store bringing Next into Eldon Square. Other
projects include unit amalgamations at Chapelfield, Norwich and The Glades,
Bromley, and reconfiguration to create additional retail space at The Victoria
Centre, Nottingham together with provision of a 10,000 sq. ft. roof box at
Lakeside and development of restaurant units at Bromley, Chapelfield and
Braehead. Opportunities to provide unit drivethrus on the former petrol
station sites at Braehead and Metrocentre are being drawn up in response to
specific user demand.
Good progress is being made on the feasibility of major extensions at Lakeside,
Victoria Centre, Nottingham and Braehead where discussions with local
authorities have gained momentum and, despite some post-election uncertainty in
the planning arena, the foundations of robust planning applications are
progressing.
International
US
In May 2010, CSC announced the exchange of contracts with Equity One, a US
retail REIT, relating to the restructuring of its approximately GBP150 million
($250 million) net investment in predominantly retail assets in California, USA
(C&C US). In exchange for its direct interest, CSC will on completion receive
4.1 million shares in Equity One and 10.9 million redeemable units in a new
joint venture. The transaction frees the group from day-to-day management of US
assets and gives significantly more flexibility in dealing with its interests
while retaining a cash income stream and scope to benefit from market recovery.
It is anticipated that the transaction will be completed later this year when
the appropriate regulatory, banking and tax clearances are received.
India
In the current year CSC has acquired a further 5.4 million shares in the listed
Indian retailer, Provogue, the partner in the Prozone shopping centre joint
venture, increasing our interest, at an average cost of Rupees 54 per share and
total cost of approximately GBP4.2 million, from 5.2 per cent to 9.9 per cent
(11.4 million shares). The joint venture`s first shopping centre development,
the 800,000 sq. ft. Aurangabad centre, is due to open in October with tenants
beginning to shop fit. The centre is around 80 per cent let and the occupancy
certificate, at this point excluding the unfinished multiplex, has now been
granted. The next two projects, in Coimbatore and Nagpur, are being worked up
to be embarked upon post the Aurangabad opening.
Dividends
The Directors have resolved to pay an interim dividend of 5.0 pence per share
on 3 November 2010 to shareholders on the register on 8 October 2010. This
dividend will be a property income distribution ("PID") subject to applicable
withholding tax. In line with the statement made at the time of the demerger,
the Directors intend, subject to available capital resources, to pay a dividend
in respect of 2010 of 15.0 pence per share in aggregate.
Business overview
Post-demerger, it is timely to review some important aspects of CSC`s business.
For a number of reasons, the Board of CSC regards the fundamentals as
exceedingly sound with promising prospects from the current base:
Our unwavering focus on quality, with 13 prime centres all in the UK`s top 50
and a number of those among the UK`s very best.
The trend (which has strengthened in the last few years) for large centres
with a wide range of catering and leisure attractions to outperform smaller
centres - demonstrated for example by CSC`s high occupancy level at 98 per cent
which compares very favourably with the aggregate vacancy level of UK retail
space which is estimated to exceed 10 per cent.
The resilient nature of our prime regional centres, exemplified by rising
footfalls in the last two years, with our centres serving as lifestyle
destinations for shoppers who may be cutting back other discretionary
expenditure.
The benefit for owners of existing large centres from a limited new supply of
high quality retail space, both as a result of the market downturn of the last
few years and generally from the restrictive UK planning environment.
CSC`s strong relationships with the UK`s leading retailers as we look for our
centres to host their flagship stores.
The overall scale of the business with 275 million annual customer visits
which, for example, provides a ready made platform for international retailers
looking to enter the UK market.
A wide geographic spread throughout the UK and an attractive mix with 52 per
cent by value of CSC`s assets comprising large scale out of town centres, and
48 per cent by value comprising the prime destinations in major cities such as
Cardiff, Manchester, Newcastle, Norwich and Nottingham.
The strong prospects for organic growth within our existing centres through a
continuation of CSC`s constant programme of investment in its centres, whether
through remodelling, extensions or tenant mix changes, to refresh the centres
and keep them in top condition enhancing their attraction for both retailers
and shoppers.
In investment terms, the value of CSC`s assets when considered as a
portfolio, which has taken over 30 years to assemble and could not be
replicated from scratch, exceeding the aggregate value of the individual
assets.
Prospects
CSC`s top priority at present remains to drive growth in net rental income. An
important element of this is to convert 2009`s short-term leases into
longer-term lets at higher rents. Lettings already completed this year have had
a positive impact on the rent roll, narrowing the gap to ERV, and, along with
those to follow in the second half, will start to impact the financial results
from 2011.
With our highly specialised and focused management team, CSC`s position as the
market-leading developer, owner and manager of pre-eminent UK regional shopping
centres offers a unique opportunity to work creatively with retailers to
satisfy their expansion plans.
We are confident of the investment prospects for CSC`s pre-eminent assets, with
valuation yields still above long term trend.
With around GBP125 million of value enhancing active management projects under
consideration and around GBP500 million by way of major extensions to Lakeside,
Braehead and Nottingham at the feasibility stage, the Group has significant
scope to grow organically without depending on acquisitions.
FINANCIAL REVIEW
Financing strategy and financial management
In the first half of 2010 the Group`s financial management has focussed on
achieving the successful demerger of Capco, addressing the appropriate
financial management and medium term funding structure for the demerged Group
and supporting the organisation in its efforts to improve the trading
performance. Notable achievements include:
Underlying earnings up by 28 per cent
Improving like-for-like net rental income trend
NAV per share at 368 pence; total return for the six months 12 per cent
Loan prepayments, swap terminations of GBP114 million and re-financing of
Lakeside secured facility concluded in January 2010 reduce re-financing and
loan financial covenant risk, resulting in no significant debt repayments until
2014
With regard to the capital structure, our preference over the medium to
long-term is to bring the debt to assets ratio within the 40-50 per cent range
and interest cover to greater than 160 per cent.
Comparative figures re-presented
The successful demerger of Capco and the proposed joint venture agreement in
respect of the C&C US business with Equity One has resulted in certain
comparative figures being re-presented. The Capco results up to the date of
demerger have now been classified as discontinued operations in the comparative
income statements and cash flow statements. The balance sheet information for
Capco at 30 June 2009 and 31 December 2009 is, however, still included in the
respective line categories in the balance sheets.
The C&C US results have also been included as discontinued operations in the
comparative income statements and cash flow statements. The C&C US balance
sheet information at 30 June 2009 and 31 December 2009 is however still
included in the respective line categories in the balance sheets. C&C US is
categorised as an asset held for sale at 30 June 2010 and therefore in
accordance with IFRS 5 non-current assets held for sale its total assets and
total liabilities are shown separately on the 30 June 2010 balance sheet. A pro
forma balance sheet analysis prepared as if the demerger and proposed sale of
C&C US had occurred at 31 December 2009 is included in the Other Information
section of this report.
Income from C&C US has been included in the Group`s underlying earnings as it
is anticipated that there will be an ongoing income stream from Equity One
shares and joint venture units once the transaction has been completed.
No re-statement of prior year comparatives has been made due to the structure
of the capital raisings in 2009 as noted in the 2009 annual report. However,
the impact of the additional shares issued increased the weighted average
shares used in the underlying earnings per share calculation from 402 million
in the first half of 2009 to 622 million in the current period. Re-basing the
comparative underlying earnings per share figure of 8.4 pence to the 2010
weighted average shares reduces this comparable figure to 5.4 pence, which is
23 per cent below the 7.0 pence adjusted earnings per share achieved in the
current period.
Results for the six months ended 30 June 2010
The results for the period ended 30 June 2010 reflect the improved conditions
in the UK commercial property market in 2010. This is most clearly illustrated
by the 7.7 per cent revaluation gain on the Group`s UK shopping centres in the
first six months of 2010. However, the general economic environment remains
challenging and it is therefore encouraging that the Group achieved growth over
the comparable 2009 underlying earnings, one of the Group`s key measures of
performance.
Income statement
The Group recorded a profit for the period of GBP291 million, a substantial
improvement on the loss of almost GBP500 million recorded in the first six
months of 2009.
The GBP219 million profit from continuing operations in the six month period
contrasts favourably with the GBP320 million loss recorded in 2009. The 2010
results include a GBP348 million gain on property valuations which is partially
offset by a GBP89 million non-cash charge due to the movement in the fair value
of derivative financial instruments. In contrast, the 2009 loss was caused by a
significant deficit on property valuations, GBP650 million, which was partially
compensated by a GBP397 million favourable movement in the fair value of
derivative financial instruments.
Those businesses classified as discontinued operations, which are detailed
above, contributed a profit of GBP73 million in the period, largely due to
property valuation gains.
Underlying earnings, as shown in the chart below, which excludes valuation and
exceptional items, increased by almost GBP10 million to GBP43 million. However,
underlying earnings per share as noted above was adversely affected by the
issue of 256 million new shares in the 2009 capital raises, resulting in a
reduction of 1.4 pence per share to 7.0 pence.
The Group`s net rental income increased by 1 per cent to GBP135 million. CSC`s
net rental income benefitted in the period from lower bad debt charges and the
income generated by the new developments at St David`s, Cardiff and the St.
Andrew`s mall at Eldon Square. More detail on the rental performance is
included in the Operating Review.
Administration expenses, excluding the GBP8 million costs associated with the
Capco demerger, reduced from GBP14 million in the six months to 30 June 2009 to
GBP11 million in 2010. The saving largely resulted from lower professional fees
and pension costs as a result of the insurance buyout of the defined benefit
pension scheme in the second half of 2009. The sharing of certain costs with
Capco in 2010 resulted in an approximate GBP0.5 million benefit which will
cease as Capco become fully resourced in the second half of the year.
Underlying net finance costs, which exclude exceptional items, reduced by GBP5
million in 2010, with the benefit of the treasury strategy of loan prepayments
and interest swap terminations more than offsetting the reduction in
capitalised interest of GBP8 million following completion of the developments
at St. David`s, Cardiff and Eldon Square, Newcastle.
(Chart included in full announcement published on Capital Shopping Centres`
website at www.capital-shopping-centres.co.uk)
Exceptional finance costs of GBP66 million were incurred in the period largely
on interest rate swap termination costs, GBP28 million of which was in
connection with the re-financing of the Lakeside facility. The cost of the
demerger amounted to GBP8 million in the period, these costs are classified as
exceptional administration costs. Total demerger costs incurred by the Group
totalled GBP13 million, with GBP2 million having been expensed in 2009 and GBP3
million charged to Capco. This total cost of GBP13 million was GBP2 million
higher than previously indicated due to certain internal re-structuring costs
arising from the demerger.
Balance sheet
The Group`s net assets attributable to equity shareholders have reduced from
the GBP2.4 billion disclosed in the 2009 annual report to GBP1.9 billion
largely as a result of the demerger of Capco. A pro forma balance sheet
analysis prepared as if the demerger and proposed sale of C&C US had occurred
at 31 December 2009 is included in the Other Information section of this
report.
As detailed in the table below, net assets (diluted, adjusted) have increased
by GBP162 million from the pro forma net assets (diluted, adjusted) at 31
December 2009. This increase was due to the property valuation gain on the UK
shopping centre properties of GBP348 million being only partially offset by the
exceptional costs incurred in the period and the final dividend for 2009 paid
in 2010 of GBP71 million.
Balance sheet Pro forma (1)
30 June 31 December
2010 2009
GBPm GBPm
Investment, development and trading properties 4,915.5 4,618.0
Investments 48.0 39.1
Net external debt (2,622.4) (2,521.6)
Other assets and liabilities (623.1) (582.7)
C&C US net assets 144.0 127.3
Net assets 1,862.0 1,680.1
Minority interest (1.8) -
Attributable to equity shareholders 1,860.2 1,680.1
Fair value of derivatives (net of tax) 355.6 282.2
Other adjustments 80.6 83.8
Adjusted net assets 2,296.4 2,046.1
Effect of dilution 12.7 101.3
Net assets (diluted, adjusted) 2,309.1 2,147.4
(1) The pro forma analysis removes the Capco balances that were demerged and
re-classifies the C&C US assets as held-for-sale.
The fair value provision for financial derivatives, principally interest rate
swaps, included in other assets and liabilities above, increased by GBP76
million largely as a consequence of the deferral of expectations of UK interest
rate increases. The reduction in the dilution effect from 31 December 2009
relates to the now expected repayment of the GBP75 million convertible bonds in
September 2010.
Adjusted net assets per share
As illustrated in the chart below diluted adjusted net assets per share of 368
pence at 30 June 2010 represents an increase of 9 per cent compared to the 31
December 2009 pro forma value of 339 pence. The increase is attributable to the
property valuation gain, partially offset by the 2009 final dividend and the
exceptional costs. Included in Other in the chart below is the negative 6 pence
impact of the now anticipated repayment of the convertible bonds in September
2010.
(Chart included in full announcement published on Capital Shopping Centres`
website at www.capital-shopping-centres.co.uk)
Cash flow
The cash flow summary below shows a substantial reduction in the Group`s cash
balance in the period. This is due to the impact of the demerger and the
strategy to reduce surplus cash held on the balance sheet.
2010 2009
GBPm GBPm
Underlying operating cash generated 121.7 129.2
Net finance charges paid (85.5) (95.4)
Exceptional finance and other costs (73.2) (15.3)
Net movement in working capital (4.2) (15.8)
Taxation/REIT entry charge (18.2) (0.3)
Cash flow from operations (59.4) 2.4
Property development/investments (30.5) (109.8)
Sale proceeds of property/investments 65.7 23.3
Other derivative financial instruments (19.5) -
Dividends (66.9) -
Cash flow before financing and equity raises (110.6) (84.1)
Net debt repaid (79.4) (182.7)
Equity capital raised 1.8 591.7
Impact of discontinued operations (256.5) 165.4
Others (54.1) 7.2
Net (decrease)/increase in cash and cash equivalents (498.8) 497.5
Cash flow from operations has fallen from the comparable period in 2009 due to
the exceptional finance and other costs, which includes termination of interest
rate swap contracts (GBP64 million) and Capco demerger costs (GBP8 million),
and higher REIT entry charges (GBP19 million). Adjusting for these items, which
are considered to be of a non-recurring nature, gives recurring cash flow from
operations of GBP34 million.
The table below illustrates that recurring operating cash flow covers the 2010
interim dividend of 5 pence per share.
2010
Dividends - cash cover GBPm
Underlying operating cash generated 121.7
Dividends received from C&C US (net of tax) 1.6
Net finance charges excluding exceptional items (85.5)
Net movement in working capital (4.2)
Recurring cash flow 33.6
2010 interim dividend of 5.0p 31.1
2010 investment in property related assets was mainly restricted to existing
2009 commitments, with the most significant expenditure in the period being in
respect of St. David`s 2, Cardiff (GBP8 million), Eldon Square (GBP8 million)
and Braehead (GBP5 million). A further GBP4 million was spent to increase the
Group`s existing investment in India.
Cash proceeds from the disposal of properties and investments generated cash of
GBP66 million, including GBP54 million net proceeds received from the disposal
of Westgate, Oxford.
Net debt repayments of GBP79 million are discussed in the debt structure
section below.
Capital commitments
The Group has an aggregate commitment to capital projects of GBP111 million at
30 June 2010, down from the GBP124 million, excluding the Capco commitments, at
31 December 2009. The largest project within the outstanding commitments
relates to finalisation of the St. David`s, Cardiff shopping centre project
including the associated residential development, which will be funded through
the associated loan facility. Current expectations are that GBP52 million of
the total commitments will be funded in the second half of 2010.
Financial position
The Group`s debt is largely arranged on an asset-specific basis, with limited
or non-recourse from the borrowing entities to other Group companies. This
structure permits the Group a high degree of financial flexibility in dealing
with debt issues and importantly avoids the concentration of covenant and
refinancing risk associated with a single group-wide borrowing.
The flexibility of this debt structure was evidenced by the success in
obtaining, where required, lender consent to proceed with the demerger.
In addition to the asset-specific debt, the Group has a corporate revolving
credit facility of GBP248 million, which is available until June 2013 and can
be utilised to fund opportunities before they reach the stage that they can
support their own financing arrangements. This facility, which was utilised to
fund working capital requirements in the first half of the year, was undrawn at
30 June 2010.
Net external debt increased from GBP2,522 million at 31 December 2009 to
GBP2,622 million at 30 June 2010. The largest factor in the net debt increase
was the GBP64 million early termination of interest rate swap contracts.
The Group had cash balances of GBP128 million at 30 June 2010. This balance
includes GBP76 million held in a restricted bank account to fund redemption
(GBP75 million) and interest payments (GBP1 million) on the convertible bonds
due for repayment in September this year. Available undrawn facilities total
GBP331 million, consisting of the GBP248 million revolving credit facility and
approximately GBP83 million undrawn on the joint venture asset specific loan on
St. David`s, Cardiff. The Group is in compliance with all of its corporate and
asset-specific loan covenants.
Pro forma (1)
30 June 31 December
Group debt ratios were as follows: 2010 2009
Debt to assets 53% 55%
Interest cover 152% 141%
Weighted average debt maturity 6.1 years 5.5 years
Weighted average cost of gross debt 5.7% 6.0%
Proportion of gross debt with interest rate
protection 94% 104%
(1) The pro forma figures remove the Capco balances that were demerged and the
C&C US balances now held for sale.
The debt to assets ratio was 53 per cent, an improvement on the pro forma level
of 55 per cent at 31 December 2009. The lower average rate on the Group`s cost
of debt was the major factor in the improved interest cover, which increased to
152 per cent from the 141 per cent applicable at 31 December 2009 on a pro
forma basis.
The re-financing of the Lakeside facility and the interest rate swap
terminations during the period resulted in:
the weighted average debt maturity increasing to 6.1 years from 5.5 years as
at 31 December 2009
the weighted average cost of gross debt reducing to 5.7 per cent from 6.0 per
cent as at 31 December 2009
proportion of gross debt with interest rate protection falling to 94 per cent
from 104 per cent at 31 December 2009
the next significant date for repayment of CMBS related debt now being 2015
Debt structure and maturity
(Chart included in full announcement published on Capital Shopping Centres`
website at www.capital-shopping-centres.co.uk)
The significant repayments of Group debt during the first half of 2010 were
GBP18 million of scheduled loan amortisation plus a voluntary GBP48 million
prepayment on the loan secured on the Victoria Shopping Centre, Nottingham.
Debt maturing in the second half of 2010 totals GBP93 million, including the
GBP75 million of convertible bonds, with the balance being further scheduled
loan amortisation.
In 2011 and 2012, the Group has no debt maturities other than scheduled
amortisation. GBP27 million of unsecured bonds mature in 2013 with the next
maturity of secured loans being GBP56 million in 2014. The undrawn Revolving
Credit Facility of GBP248 million and GBP83 million undrawn on the facility
secured on St. David`s, Cardiff mature in 2013 and 2014 respectively.
Financial covenants
Full details of the loan financial covenants are included in the Other
Information section of this report.
Financial covenants apply to GBP2.4 billion of secured 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.
During the period the Group made asset-specific loan prepayments of GBP48
million and GBP36 million of swap repayments to reduce financial covenant risk.
A further GBP34 million of CMBS notes, that were owned by a Group company since
issuance, were cancelled at zero cash cost to the Group. GBP2 million was
injected into Xscape Braehead Partnership, as part of a loan prepayment and
covenant moderation agreement, including the Loan to Value covenant being
waived until 2012.
During the year the GBP248 million revolving credit bank loan was amended with
the 2011 maturity extended to 2013. This renegotiation also resulted in reduced
borrowing costs and improved financial covenants. These financial covenants are
tested semi-annually on a number of the Group`s companies, defined as the
Borrower Group, and all tests are currently satisfied.
There is a minimum capital cover and interest cover condition applicable to the
GBP231 million mortgage debenture tested semi-annually. Both tests were
satisfied at 30 June 2010, the latest test date. Compliance with financial
covenants is and will continue to be constantly monitored.
Re-financing activity
Lakeside
The GBP546 million loan and associated CMBS notes secured on the Lakeside,
Thurrock Shopping Centre was scheduled to mature in July 2011 but was
re-financed in January this year with a new GBP525 million, 7 year loan
maturing in 2017 to take advantage of the improvement in bank liquidity and
reduce near term refinancing risk.
At the time of prepayment the loan had a funding cost of 5.5 per cent. The
hedging arrangements of the new loan require an increasing level of interest
rate protection from the current level of 60 per cent towards maturity. In
addition, 30 per cent of the loan amount is protected by an interest rate cap
with a maximum interest rate payable of 4 per cent. The new loan and the
associated hedging arrangements reduced the overall interest cost of the loan
and was the most significant factor in lowering the Group`s average cost of
debt from 6.0 per cent to 5.7 per cent.
Interest rate hedging and fair value of financial instruments
At 30 June 2010 the fair value liability of the Group`s derivative financial
instruments was GBP391 million. This liability includes the Group`s derivative
contracts to hedge both interest rate and currency risk. During the period
scheduled derivative payments of GBP53 million were made plus GBP64 million of
interest rate swap prepayments, however a deferral of expectations of sterling
interest rate increases resulted in the liability increasing by GBP76 million
from the comparable balance at the end of 2009.
At 30 June 2010 the Group`s gross debt was 94 per cent hedged by a combination
of fixed rate debt or floating rate debt with rate protection through interest
rate swaps and interest rate caps. Whilst interest rate swaps fix the interest
rate payable and provide certainty over future cash flows, interest rate caps
allow the Group certainty on the upper level of interest rate payable but also
benefit from participating in the current low rate environment.
Interest rate and US$ hedging policy has historically been based on having
certainty on cash flows. The Group hedges using predominantly interest rate
swaps to eliminate the risk of our loans, which have been taken out on a
variable basis. Following completion of the Equity One Inc transaction, the
Group`s intention is to phase out currency hedging and therefore the existing
currency swaps will not be renewed as they mature.
Taxation
Since the Group became a UK REIT on 1 January 2007, the Group has made REIT
entry charge payments of GBP124 million, including payments made in respect of
Capco prior to demerger, with GBP21 million paid in the first half of 2010. A
further GBP43 million has still to be paid, with GBP23 million due to be paid
in the second half of 2010 and the balance in 2011. The financial benefits to
date have amounted to almost GBP170 million, comprising net rental income and
capital gains sheltered from UK tax.
The tax charge on continuing operations in the period of GBP1 million comprises
the REIT entry financing charge of GBP2 million partially offset by deferred
tax credits on the revaluation of interest rate swaps.
The total tax charge on discontinued operations of GBP6 million comprises GBP2
million of irrecoverable withholding tax suffered on dividends paid by C&C US
and deferred tax on the revaluation of the C&C US properties.
Audit partner
The audit partner, Parwinder Purewal, was due to rotate off the audit following
the conclusion of the 31 December 2009 audits of the Group and its subsidiaries
as he had completed five years in the role. Given the significant changes in
the Group arising from the demerger of Capco and the Board composition in the
year, the Audit Committee requested and PricewaterhouseCoopers LLP agreed to an
extension to the tenure of the audit partner in order to provide continuity and
to support the maintenance of audit quality. He will therefore continue to act
as audit partner for one further year, being the year ending 31 December 2010.
Key risks and uncertainties
The key risks and uncertainties facing the Group are as set out in the table
below:
Risk Description Impact
Financing
Liquidity Reduced availability Insufficient funds to
meet operational and
financing needs
Economic and Property values decrease Impact on covenants
property market
downturn Reduction in rental income
Interest cover Interest rates fluctuate Lack of certainty over
interest costs
Market price risk of Interest rates fluctuate Potential cash outflow
fixed rate resulting in significant if derivative contract
derivatives assets and or liabilities contains break clause
on derivative contracts
REIT Breach REIT conditions Tax penalty or be forced
to leave the REIT regime
PID requirements Requirement to pay 90
per cent of income
restricts ability to
retain cash for investment
Group`s ordinary The Group`s ordinary Additional complexity
shares are dual- shares are listed on the when assessing
listed London and options for capital
Johannesburg stock raising
exchanges
Joint Ventures Reliance on JV partners` Partners under -
performance and perform or provide
reporting incorrect information
Asset Management
Tenants Tenant failure Financial loss
Voids Increased voids, failure Financial loss
to let developments
Reputation
Responsibility for Failure of Health & Safety Impact on reputation
visitors to shopping or potential criminal/
centres civil proceedings
Business Lost access to centres Impact on footfall and
interruption or head office tenant income
Adverse publicity
People/HR
Staff Key staff Loss of key members
of the management
team could impact
adversely on the
Group`s success
Developments
Time Planning Securing planning
consent for developments
Cost and letting Construction cost Returns reduced by
risk overrun, low increased costs or
occupancy levels delay in securing tenants
Risk Mitigation
Financing
Liquidity Regular reporting of current and projected position
to the Board
Efficient treasury management and strict credit control
Economic and Regular monitoring of LTV and ICR covenants
property market Covenant headroom monitored and maintained
downturn Regular market valuations
Focus on quality assets
Interest cover Hedging to establish high degree of certainty
throughout term of loan
Market price risk of Manage derivative contracts to achieve a balance
fixed rate between hedging interest rate exposure and
derivatives minimising potential cash calls
REIT Regular monitoring of compliance and tolerances
Alternative sources of investment funding constantly
under review
Group`s ordinary Professional advice sought in both jurisdictions to
shares are dual- ensure Group capital needs are met in optimal
listed manner
Joint Ventures Agreements in place and regular communication
with partners
Asset Management
Tenants Ongoing assessment of tenant covenant strength
Active credit control process
Voids Policy of active tenant mix management
Active management to minimise financial impact if
voids should arise
Reputation
Responsibility for Annual audits by external consultants
visitors to shopping Health & Safety policies in place
centres
Business Documented Business Recovery Plans in place
interruption Security team training and procedure in
shopping centres
Terrorist Insurance is in place
People/HR
Staff Succession planning
Performance evaluation
Training and development
Incentive reward
Developments
Time Policy of sustainable development and regeneration
of brownfield sites
Constructive dialogue with planning authorities
Cost and letting Approval process based on detailed project costs
risk Regular monitoring and forecasting of project costs
and rental income
Utilisation of fixed cost contracts
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:
this condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting, as adopted by the European Union; and
this condensed set of financial statements includes a 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 refers to important events which have taken
place in the period.
The principal risks and uncertainties facing the business are referred to in
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 Shopping Centres Group
PLC website: www.capital-shopping- centres.co.uk.
By order of the Board
D A Fischel
Chief Executive
M Roberts
Finance Director
5 August 2010
INDEPENDENT REVIEW REPORT TO CAPITAL SHOPPING CENTRES GROUP PLC
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June
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 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 LLP
Chartered Accountants
London
5 August 2010
Notes:
(a) The maintenance and integrity of the Capital Shopping Centres Group 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
Re-presented Re-presented
Six months six months year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Notes GBPm GBPm GBPm
Continuing operations
Revenue 4 205.0 205.6 405.0
Net rental income 4 134.5 132.7 267.3
Net other income 0.3 5.0 4.9
Revaluation and sale
of investment and
development property 5 344.8 (650.8) (535.7)
Sale and impairment
of other investments - (10.1) (10.1)
Administration
expenses - ongoing (11.2) (14.3) (26.2)
Administration
expenses - exceptional (8.1) - -
Operating
profit/(loss) 460.3 (537.5) (299.8)
Finance costs 6 (82.3) (87.2) (174.8)
Finance income 1.3 1.8 3.7
Other finance costs 7 (70.7) (24.1) (48.2)
Change in fair value of
derivative financial
instruments (89.1) 396.5 399.6
Net finance
(costs)/income (240.8) 287.0 180.3
Profit/(loss) before tax 219.5 (250.5) (119.5)
Current tax 8 - 0.2 2.9
Deferred tax 8 0.8 (68.3) (67.1)
REIT entry charge 8 (1.7) (1.6) (3.1)
Taxation 8 (0.9) (69.7) (67.3)
Profit/(loss) for the
period from continuing
operations 218.6 (320.2) (186.8)
Profit/(loss) for
the period from
discontinued
operations 17 72.6 (174.9) (183.3)
Profit/(loss) for
the period 291.2 (495.1) (370.1)
Attributable to:
Equity shareholders
of CSC Group PLC 292.5 (470.1) (338.8)
Non-controlling interest (1.3) (25.0) (31.3)
291.2 (495.1) (370.1)
Basic
earnings/(loss) per share
From continuing
operations 10 35.4p (77.8)p (35.2)p
From discontinued
operations 10 11.6p (39.2)p (32.9)p
47.0p (117.0)p (68.1)p
Diluted
earnings/(loss) per share
From continuing
operations 10 34.8p (75.4)p (34.0)p
From discontinued
operations 10 11.5p (38.1)p (32.1)p
46.3p (113.5)p (66.1)p
Profit/(loss) from
discontinued
operations arises from:
Demerged operations 17 59.7 (140.7) (124.4)
C&C US 17 12.9 (34.2) (58.9)
72.6 (174.9) (183.3)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
For the six months ended 30 June 2010
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Profit/(loss) for the period 291.2 (495.1) (370.1)
Other comprehensive income:
Revaluation of other investments 13.9 (12.2) (5.3)
Realised revaluation reserve on
disposal of other investments - 6.0 4.5
Exchange differences (1.9) 4.5 2.2
Actuarial loss on defined benefit
pension schemes - - (14.8)
Tax on items taken directly to equity (0.8) (1.7) (2.8)
Other comprehensive income for
the period 11.2 (3.4) (16.2)
Total comprehensive income for
the period 302.4 (498.5) (386.3)
Attributable to:
Equity shareholders of CSC Group PLC 303.7 (473.5) (354.7)
Non-controlling interest (1.3) (25.0) (31.6)
302.4 (498.5) (386.3)
Total comprehensive income
attributable to equity
shareholders of
CSC Group PLC arises from:
Continuing operations 212.6 (285.6) (163.0)
Discontinued operations 91.1 (187.9) (191.7)
303.7 (473.5) (354.7)
CONSOLIDATED BALANCE SHEET (unaudited)
As at 30 June 2010
As at
30 June
2010
Notes GBPm
Non-current assets
Investment and development property 12 4,886.7
Plant and equipment 2.5
Investments in associate companies 29.0
Other investments 19.0
Derivative financial instruments 23.0
Trade and other receivables 42.4
Current assets 5,002.6
Trading property 28.8
Current tax assets 5.7
Trade and other receivables 68.6
Cash and cash equivalents 13 127.7
C&C US - assets 17 429.6
660.4
Total assets 5,663.0
Current liabilities
Trade and other payables (213.8)
Current tax liabilities -
Borrowings 14 (115.5)
Derivative financial instruments (19.0)
C&C US - liabilities 17 (285.6)
(633.9)
Non-current liabilities
Borrowings 14 (2,769.0)
Derivative financial instruments (394.5)
Deferred tax provision 8 -
Other provisions (1.4)
Other payables (2.2)
(3,167.1)
Total liabilities (3,801.0)
Net assets 1,862.0
Equity
Share capital 311.7
Share premium 1.4
Treasury shares (5.4)
Convertible bond reserve 6.1
Other reserves 336.7
Retained earnings 1,209.7
Amounts attributable to equity shareholders of CSC
Group PLC 1,860.2
Non-controlling interest 1.8
Total equity 1,862.0
Re-presented Re-presented
as at as at
31 December 30 June
2009 2009
GBPm GBPm
Non-current assets
Investment and development property 6,182.6 6,062.1
Plant and equipment 1.9 1.6
Investments in associate companies 26.8 29.6
Other investments 58.3 63.7
Derivative financial instruments 15.0 18.7
Trade and other receivables 69.8 80.8
Current assets 6,354.4 6,256.5
Trading property 24.2 25.2
Current tax assets 1.1 -
Trade and other receivables 86.1 83.3
Cash and cash equivalents 582.5 568.4
C&C US - assets - -
693.9 676.9
Total assets 7,048.3 6,933.4
Current liabilities
Trade and other payables (285.2) (287.4)
Current tax liabilities - (1.4)
Borrowings (148.5) (61.7)
Derivative financial instruments (14.3) (9.9)
C&C US - liabilities - -
(448.0) (360.4)
Non-current liabilities
Borrowings (3,740.1) (4,021.0)
Derivative financial instruments (371.8) (367.0)
Deferred tax provision (37.1) (34.9)
Other provisions (8.6) (7.3)
Other payables (21.6) (42.3)
(4,179.2) (4,472.5)
Total liabilities (4,627.2) (4,832.9)
Net assets 2,421.1 2,100.5
Equity
Share capital 311.3 283.3
Share premium 1,005.7 1,005.7
Treasury shares (9.7) (9.8)
Convertible bond reserve 6.7 7.6
Other reserves 286.9 775.7
Retained earnings 820.2 27.8
Amounts attributable to equity shareholders
of CSC Group PLC 2,421.1 2,090.3
Non-controlling interest - 10.2
Total equity 2,421.1 2,100.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2010
Attributable to equity shareholders of CSC Group PLC
Share Share Treasury
capital premium shares
GBPm GBPm GBPm
At 1 January 2010 311.3 1,005.7 (9.7)
Profit/(loss) for the period - - -
Other comprehensive
income:
Revaluation of other
investments - - -
Exchange differences - - -
Tax on items taken directly
to equity - - -
Total comprehensive
income for the period - - -
Ordinary shares issued 0.4 1.4 -
Dividends paid - - -
Conversion of bonds - - -
Non-controlling interest
additions - - -
Acquisition of treasury shares - - (1.5)
Disposal of treasury shares - - 5.8
Share based payments - - -
Reduction of capital (note 17) - (1,005.7) -
Demerger effected by way of
repayment of capital (note 17) - - -
0.4 (1,004.3) 4.3
At 30 June 2010 311.7 1.4 (5.4)
Attributable to equity shareholders of CSC Group PLC
Convertible
bond Other Retained
reserve reserves earnings
GBPm GBPm GBPm
At 1 January 2010 6.7 286.9 820.2
Profit/(loss) for the period - - 292.5
Other comprehensive
income:
Revaluation of other
investments - 13.9 -
Exchange differences - (1.9) -
Tax on items taken directly
to equity - (0.8) -
Total comprehensive
income for the period - 11.2 292.5
Ordinary shares issued - - -
Dividends paid - - (71.4)
Conversion of bonds (0.6) - 0.6
Non-controlling interest
additions - - -
Acquisition of treasury shares - - -
Disposal of treasury shares - - -
Share based payments - - 0.5
Reduction of capital (note 17) - - 1,005.7
Demerger effected by way of
repayment of capital (note 17) - 38.6 (838.4)
(0.6) 38.6 97.0
At 30 June 2010 6.1 336.7 1,209.7
Non-
controlling Total
Total interest equity
GBPm GBPm GBPm
At 1 January 2010 2,421.1 - 2,421.1
Profit/(loss) for the period 292.5 (1.3) 291.2
Other comprehensive
income:
Revaluation of other
investments 13.9 - 13.9
Exchange differences (1.9) - (1.9)
Tax on items taken directly
to equity (0.8) - (0.8)
Total comprehensive
income for the period 303.7 (1.3) 302.4
Ordinary shares issued 1.8 - 1.8
Dividends paid (71.4) - (71.4)
Conversion of bonds - - -
Non-controlling interest
additions - 3.1 3.1
Acquisition of treasury shares (1.5) - (1.5)
Disposal of treasury shares 5.8 - 5.8
Share based payments 0.5 - 0.5
Reduction of capital (note 17) - - -
Demerger effected by way of
repayment of capital (note 17) (799.8) - (799.8)
(864.6) 3.1 (861.5)
At 30 June 2010 1,860.2 1.8 1,862.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the year ended 31 December 2009
Attributable to equity shareholders of CSC Group PLC
Share Share Treasury
capital premium shares
GBPm GBPm GBPm
At 1 January 2009 182.6 993.4 (10.8)
Loss for the year - - -
Other comprehensive income:
Revaluation of other
investments - - -
Realised revaluation reserve on
disposal of other investments - - -
Exchange differences - - -
Actuarial loss on defined
benefit pension schemes - - -
Tax on items taken
directly to equity - - -
Total comprehensive income
for the year - - -
Ordinary shares issued 128.0 - -
Realisation of merger reserve - - -
Dividends paid - - -
Conversion of bonds 0.7 12.3 -
Loss of control of
deemed subsidiary - - -
Increase in partner capital - - -
Non-controlling interest additions - - -
Purchase of non-
controlling interest - - -
Share based payments - - -
Acquisition of treasury shares - - (0.2)
Disposal of treasury shares - - 1.3
128.7 12.3 1.1
At 31 December 2009 311.3 1,005.7 (9.7)
Attributable to equity shareholders of CSC Group PLC
Convertible
bond Other Retained
reserve reserves earnings
GBPm GBPm GBPm
At 1 January 2009 7.6 287.3 497.9
Loss for the year - - (338.8)
Other comprehensive income:
Revaluation of other
investments - (5.3) -
Realised revaluation reserve on
disposal of other investments - 4.5 -
Exchange differences - 2.2 -
Actuarial loss on defined
benefit pension schemes - - (14.5)
Tax on items taken
directly to equity - (2.0) (0.8)
Total comprehensive income
for the year - (0.6) (354.1)
Ordinary shares issued - 737.7 -
Realisation of merger reserve - (737.7) 737.7
Dividends paid - - (28.2)
Conversion of bonds (0.9) - 0.9
Loss of control of
deemed subsidiary - - -
Increase in partner capital - - 0.3
Non-controlling interest additions - - -
Purchase of non-
controlling interest - - (34.3)
Share based payments - 0.2 -
Acquisition of treasury shares - - -
Disposal of treasury shares - - -
(0.9) 0.2 676.4
At 31 December 2009 6.7 286.9 820.2
Non-
controlling Total
Total interest equity
GBPm GBPm GBPm
At 1 January 2009 1,958.0 27.8 1,985.8
Loss for the year (338.8) (31.3) (370.1)
Other comprehensive income:
Revaluation of other
investments (5.3) - (5.3)
Realised revaluation reserve on
disposal of other investments 4.5 - 4.5
Exchange differences 2.2 - 2.2
Actuarial loss on defined
benefit pension schemes (14.5) (0.3) (14.8)
Tax on items taken
directly to equity (2.8) - (2.8)
Total comprehensive income
for the year (354.7) (31.6) (386.3)
Ordinary shares issued 865.7 - 865.7
Realisation of merger reserve - - -
Dividends paid (28.2) - (28.2)
Conversion of bonds 13.0 - 13.0
Loss of control of
deemed subsidiary - (8.0) (8.0)
Increase in partner capital 0.3 - 0.3
Non-controlling interest additions - 11.8 11.8
Purchase of non-
controlling interest (34.3) - (34.3)
Share based payments 0.2 - 0.2
Acquisition of treasury shares (0.2) - (0.2)
Disposal of treasury shares 1.3 - 1.3
817.8 3.8 821.6
At 31 December 2009 2,421.1 - 2,421.1
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2009
Attributable to equity shareholders of CSC Group PLC
Share Share Treasury
capital premium shares
GBPm GBPm GBPm
At 1 January 2009 182.6 993.4 (10.8)
Loss for the period - - -
Other comprehensive income:
Revaluation of
other investments - - -
Realised revaluation reserve on
disposal of other investments - - -
Exchange differences - - -
Tax on items taken
directly to equity - - -
Total comprehensive
income for the period - - -
Ordinary shares issued 100.7 - -
Conversion of bonds - 12.2 -
Non-controlling interest additions - - -
Acquisition of treasury shares - - (0.2)
Disposal of treasury shares - 0.1 1.2
100.7 12.3 1.0
At 30 June 2009 283.3 1,005.7 (9.8)
Attributable to equity shareholders of CSC Group PLC
Convertible
bond Other Retained
reserve reserves earnings
GBPm GBPm GBPm
At 1 January 2009 7.6 287.3 497.9
Loss for the period - - (470.1)
Other comprehensive income:
Revaluation of
other investments - (12.2) -
Realised revaluation reserve on
disposal of other investments - 6.0 -
Exchange differences - 4.5 -
Tax on items taken
directly to equity - (1.7) -
Total comprehensive
income for the period - (3.4) (470.1)
Ordinary shares issued - 504.0 -
Conversion of bonds - (12.2) -
Non-controlling interest additions - - -
Acquisition of treasury shares - - -
Disposal of treasury shares - - -
- 491.8 -
At 30 June 2009 7.6 775.7 27.8
Non-
controlling Total
Total interest equity
GBPm GBPm GBPm
At 1 January 2009 1,958.0 27.8 1,985.8
Loss for the period (470.1) (25.0) (495.1)
Other comprehensive income:
Revaluation of
other investments (12.2) - (12.2)
Realised revaluation reserve on
disposal of other investments 6.0 - 6.0
Exchange differences 4.5 - 4.5
Tax on items taken
directly to equity (1.7) - (1.7)
Total comprehensive
income for the period (473.5) (25.0) (498.5)
Ordinary shares issued 604.7 - 604.7
Conversion of bonds - - -
Non-controlling interest additions - 7.4 7.4
Acquisition of treasury shares (0.2) - (0.2)
Disposal of treasury shares 1.3 - 1.3
605.8 7.4 613.2
At 30 June 2009 2,090.3 10.2 2,100.5
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the six months ended 30 June 2010
Six months
ended
30 June
2010
Notes GBPm
Cash flows from continuing operations
Cash generated from operations 15 109.4
Interest paid (151.5)
Interest received 0.9
Taxation 1.5
REIT entry charge (19.7)
Cash flows from operating activities (59.4)
Cash flows from investing activities
Purchase and development of property, plant & equipment (26.6)
Sale of property 64.4
Sale of other investments 1.3
Purchase of other investments (3.9)
Purchase of pension insurance policy -
Other derivative financial instruments (19.5)
Cash flows from investing activities 15.7
Cash flows from financing activities
Partnership equity introduced 3.1
Issue of ordinary shares 1.8
Acquisition of treasury shares (0.6)
Cash transferred (to)/from restricted accounts (56.6)
Borrowings drawn 518.5
Borrowings repaid (597.9)
Equity dividends paid (66.9)
Cash flows from financing activities (198.6)
Net (decrease)/increase in cash and cash equivalents
from continuing operations (242.3)
Cash flows from discontinued operations
Operating activities (12.0)
Investing activities (3.1)
Financing activities (63.2)
Cash and cash equivalents transferred on demerger (179.2)
Effect of exchange rate changes on cash and cash
equivalents 1.0
Net (decrease)/increase in cash and cash equivalents
from discontinued operations (256.5)
Net (decrease)/increase in cash and cash equivalents (498.8)
Cash and cash equivalents at beginning of period 562.7
Cash and cash equivalents at end of period 13 63.9
Re-presented Re-presented
six months year
ended ended
30 June 31 December
2009 2009
GBPm GBPm
Cash flows from continuing operations
Cash generated from operations 113.4 250.3
Interest paid (113.1) (221.9)
Interest received 2.4 16.5
Taxation - 1.1
REIT entry charge (0.3) (33.1)
Cash flows from operating activities 2.4 12.9
Cash flows from investing activities
Purchase and development of property, plant
& equipment (109.8) (189.8)
Sale of property 4.6 4.6
Sale of other investments 18.7 18.7
Purchase of other investments - -
Purchase of pension insurance policy - (15.5)
Other derivative financial instruments - -
Cash flows from investing activities (86.5) (182.0)
Cash flows from financing activities
Partnership equity introduced 7.4 11.7
Issue of ordinary shares 591.7 865.7
Acquisition of treasury shares (0.2) (0.2)
Cash transferred (to)/from restricted
accounts - (19.8)
Borrowings drawn 201.8 237.3
Borrowings repaid (384.5) (478.3)
Equity dividends paid - (23.0)
Cash flows from financing activities 416.2 593.4
Net (decrease)/increase in cash and cash
equivalents
from continuing operations 332.1 424.3
Cash flows from discontinued operations
Operating activities 10.1 9.6
Investing activities 150.5 119.7
Financing activities 6.2 (60.6)
Cash and cash equivalents transferred on
demerger - -
Effect of exchange rate changes on cash and
cash equivalent (1.4) (1.2)
Net (decrease)/increase in cash and cash
equivalents
from discontinued operations 165.4 67.5
Net (decrease)/increase in cash and cash
equivalents 497.5 491.8
Cash and cash equivalents at beginning of period 70.9 70.9
Cash and cash equivalents at end of period 568.4 562.7
NOTES (unaudited)
1 Basis of preparation
The condensed set of financial statements for the six months ended 30 June 2010
is unaudited and does not constitute statutory accounts within the meaning of
s434 of the Companies Act 2006. The condensed set of financial statements has
been prepared in accordance with the Disclosure and Transparency Rules of the
Financial Services Authority and with IAS 34 as adopted by the European Union.
The comparative information presented for the year ended 31 December 2009 is
not the Group`s statutory accounts for that year. Those accounts have been
reported on by the Group`s auditors and delivered to the registrar of
companies. The auditors` opinion on these accounts was unqualified and did not
contain an emphasis of matter paragraph or a statement made under Section 498
(2) or (3) of the Companies Act 2006.
The comparative information has been re-presented to meet the requirements of
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations so that
operations being reclassified as discontinued during the six months ended 30
June 2010 are also shown as discontinued in certain comparatives. Comparative
information is re-presented for the income statement and statement of cash
flows but not the balance sheet. Balance sheet comparatives have been
re-presented to classify derivative financial instruments according to their
maturity date.
The condensed set of financial statements should be read in conjunction with
the Group`s statutory accounts for the year ended 31 December 2009 which have
been prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amount of assets and liabilities, income and expense.
Actual results may differ from these estimates. Except as described below, in
preparing the condensed set of financial statements, the significant judgements
made by management in applying the Group accounting policies and the key
sources of estimation uncertainty were the same as those applied to the
consolidated financial statements as at and for the year ended 31 December
2009.
The largest area of estimation and uncertainty in the condensed set of
financial statements is in respect of the valuation of the property portfolio
and investments, where external valuations were obtained.
2 Accounting policies
Except as described below, the accounting policies applied are consistent with
those of the Group`s statutory accounts for the year ended 31 December 2009 as
set out in pages 74 to 77 of the Annual Report.
Taxes on income in interim periods are accrued using tax rates expected to be
applicable to total annual earnings.
During 2010, the following standards, amendments and interpretations endorsed
by the EU are effective for the first time for the Group`s 31 December 2010
year end:
IFRS 2 Share-based Payment (amendment);
IFRS 3 Business Combinations;
IAS 27 Consolidated and Separate Financial Statements;
IAS 39 Financial Instruments: Recognition and Measurement (amendment);
IFRIC 12 Service Concession Arrangements;
IFRIC 15 Arrangements for Construction of Real Estate;
IFRIC 16 Hedges of a Net Investment in a Foreign Operation;
IFRIC 17 Distributions of Non-cash Assets to Owners; and
Amendments arising from the 2008 and 2009 annual improvements projects.
These either had no material impact on the condensed financial statements or
resulted in changes to presentation and disclosure only.
3 Seasonality and cyclicality
There is no material seasonality or cyclicality impacting interim financial
reporting.
4 Segmental reporting
Following the demerger of Capco (see note 17) the Group has reassessed its
segmental reporting. The Group is now primarily a UK shopping centre focussed
business and to reflect this, the segmental reporting has been changed to show
one main reportable operating segment being UK Shopping Centres.
Revenue represents total income from tenants and net rental income is the
principal profit measure used to measure performance. All continuing items in
the income statement arise in the UK Shopping Centres segment. A more detailed
analysis of net rental income is given below.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Revenue 205.0 205.6 405.0
Rent receivable 170.7 171.1 341.1
Service charge income 29.9 29.4 58.9
200.6 200.5 400.0
Rent payable (11.7) (10.2) (21.4)
Service charge and other
non-recoverable costs (54.4) (57.6) (111.3)
Net rental income 134.5 132.7 267.3
Total assets are analysed as follows:
As at As at As at
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
UK Shopping Centres segment assets 5,195.1 4,772.8 4,567.8
India investments 38.3 31.5 29.4
Assets of discontinued operations 429.6 1,721.5 1,817.9
Unallocated assets (1) - 522.5 518.3
Total assets 5,663.0 7,048.3 6,933.4
(1) Unallocated assets in comparative periods represent balances controlled at
a corporate level when the Group had more than one operating segment.
5 Revaluation and sale of investment and development property
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Revaluation of investment and
development property 348.3 (649.7) (534.7)
Sale of investment property (3.5) (1.1) (1.0)
Revaluation and sale of
investment and development property 344.8 (650.8) (535.7)
6 Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
On bank loans and overdrafts 80.3 93.1 184.9
On convertible debt 1.6 1.4 2.9
On obligations under finance leases 2.0 2.0 4.1
Gross finance costs 83.9 96.5 191.9
Interest capitalised on developments (1.6) (9.3) (17.1)
Finance costs 82.3 87.2 174.8
Interest is capitalised, before tax relief, on the basis of the average rate of
interest paid of 6.25 per cent (six months ended 30 June 2009 - 6.25 per cent,
year ended 31 December 2009 - 6.25 per cent) on the relevant debt, applied to
the cost of developments during the year.
7 Other finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Metrocentre amortisation of
compound financial instrument 4.4 4.5 9.6
Loss on sale of CMBS notes(1) - 4.3 4.3
Revolving credit facility
arrangement fee (1) 1.2 5.4 5.4
Costs of termination of derivative
financial instruments(1) 65.1 9.9 28.9
Other finance costs 70.7 24.1 48.2
(1) Amounts totalling GBP66.3 million for the six months ended 30 June 2010 are
treated as exceptional and therefore excluded from the calculation of adjusted
earnings (six months ended 30 June 2009 - GBP19.6 million, year ended 31
December 2009 - GBP38.6 million).
8 Taxation
Taxation charge/(credit) for the period:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Current tax - (0.2) (2.9)
Deferred tax:
On investment and development property 0.4 (0.1) (0.2)
On derivative financial instruments (1.2) 68.8 69.5
On other temporary differences 0.2 (0.4) -
On exceptional items (0.2) - (2.2)
Deferred tax (0.8) 68.3 67.1
REIT entry charge 1.7 1.6 3.1
Total tax charge 0.9 69.7 67.3
Movements in the provision for deferred tax:
Investment and Derivative
development financial
properties instruments
GBPm GBPm
Deferred tax provision:
At 1 January 2010 42.8 (7.4)
C&C US balances transferred to assets held for sale (37.1) -
Recognised in the income statement 0.7 (0.8)
Recognised in other comprehensive income or
directly in equity - 0.8
Transferred on demerger (note 17) (6.4) 2.6
At 30 June 2010 - (4.8)
Unrecognised deferred tax asset:
At 1 January 2010 (12.8) (14.4)
Income statement items (0.3) (5.0)
Transferred on demerger 12.8 -
At 30 June 2010 (0.3) (19.4)
Other
temporary
differences Total
GBPm GBPm
Deferred tax provision:
At 1 January 2010 1.7 37.1
C&C US balances transferred to assets held for sale - (37.1)
Recognised in the income statement (0.7) (0.8)
Recognised in other comprehensive income or
directly in equity - 0.8
Transferred on demerger (note 17) 3.8 -
At 30 June 2010 4.8 -
Unrecognised deferred tax asset:
At 1 January 2010 (12.6) (39.8)
Income statement items (0.7) (6.0)
Transferred on demerger 1.5 14.3
At 30 June 2010 (11.8) (31.5)
In accordance with the requirements 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 the non-REIT
businesses in future periods.
9 Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Ordinary shares
Final dividend paid of 11.5 pence
per share (2009 - nil pence per share) 71.4 - -
Interim dividend paid of nil per
share (2009 - 5 pence per share) - - 28.2
Dividends paid 71.4 - 28.2
Interim dividend of 5.0 pence per share 31.1 28.2 -
10 Earnings per share
(a) Earnings per share
Basic and diluted earnings per share as calculated in accordance with IAS 33
Earnings per Share.
Six months ended
30 June 2010
Pence
Earnings Shares per
GBPm million share
Continuing operations:
Basic earnings/(loss) per share (1) 219.9 621.7 35.4p
Dilutive convertible bonds,
share options and share awards 1.1 13.1
Diluted earnings/(loss) per share 221.0 634.8 34.8p
Discontinued operations:
Basic earnings/(loss) per share (1) 72.6 621.7 11.6p
Dilutive convertible bonds,
share options and share awards - 13.1
Diluted earnings/(loss) per share 72.6 634.8 11.5p
Continuing and discontinued
operations:
Basic earnings/(loss) per share (1) 292.5 621.7 47.0p
Dilutive convertible bonds,
share options and share awards 1.1 13.1
Diluted earnings/(loss) per share 293.6 634.8 46.3p
Six months ended
30 June 2009
Pence
Earnings Shares per
GBPm million share
Continuing operations:
Basic earnings/(loss) per share (1) (312.7) 401.8 (77.8)p
Dilutive convertible bonds,
share options and share awards 0.8 11.8
Diluted earnings/(loss) per share (311.9) 413.6 (75.4)p
Discontinued operations:
Basic earnings/(loss) per share (1) (157.4) 401.8 (39.2)p
Dilutive convertible bonds,
share options and share awards - 11.8
Diluted earnings/(loss) per share (157.4) 413.6 (38.1)p
Continuing and discontinued
operations:
Basic earnings/(loss) per share (1) (470.1) 401.8 (117.0)p
Dilutive convertible bonds,
share options and share awards 0.8 11.8
Diluted earnings/(loss) per share (469.3) 413.6 (113.5)p
Year ended
31 December 2009
Pence
Earnings Shares per
GBPm million share
Continuing operations:
Basic earnings/(loss) per share (1) (175.1) 497.7 (35.2)p
Dilutive convertible bonds,
share options and share awards 1.5 12.3
Diluted earnings/(loss) per share (173.6) 510.0 (34.0)p
Discontinued operations:
Basic earnings/(loss) per share (1) (163.7) 497.7 (32.9)p
Dilutive convertible bonds,
share options and share awards - 12.3
Diluted earnings/(loss) per share (163.7) 510.0 (32.1)p
Continuing and discontinued
operations:
Basic earnings/(loss) per share (1) (338.8) 497.7 (68.1)p
Dilutive convertible bonds,
share options and share awards 1.5 12.3
Diluted earnings/(loss) per share (337.3) 510.0 (66.1)p
(1) The weighted average number of shares used for the calculated of basic
earnings/(loss) per share has been adjusted for shares held in the ESOP and
treasury shares.
(b) Headline earnings per share
Headline earnings per share has been calculated and presented as required by
the Johannesburg Stock Exchange listing requirements.
Six months ended
30 June 2010
Gross Net (1)
GBPm GBPm
Basic earnings/(loss) 292.5
Remove:
Revaluation and sale of investment and
development property (417.9) (406.2)
Loss on sale and impairment of other investments - -
Impairment of other receivables - -
Exceptional other income - -
Headline (loss)/earnings (113.7)
Dilution (2) 1.1
Diluted headline (loss)/earnings (112.6)
Weighted average number of shares 621.7
Dilution (2) 13.1
Diluted weighted average number of shares 634.8
Headline (loss)/earnings per share (pence) (18.3)p
Diluted headline (loss)/earnings per share (pence) (17.7)p
Six months ended
30 June 2009
Gross Net (1)
GBPm GBPm
Basic earnings/(loss) (470.1)
Remove:
Revaluation and sale of investment and
development property 890.8 828.3
Loss on sale and impairment of other investments 10.1 10.1
Impairment of other receivables - -
Exceptional other income (0.2) (0.2)
Headline (loss)/earnings 368.1
Dilution (2) 0.8
Diluted headline (loss)/earnings 368.9
Weighted average number of shares 401.8
Dilution (2) 11.8
Diluted weighted average number of shares 413.6
Headline (loss)/earnings per share (pence) 91.6p
Diluted headline (loss)/earnings per share (pence) 89.2p
Year ended
31 December 2009
Gross Net (1)
GBPm GBPm
Basic earnings/(loss) (338.8)
Remove:
Revaluation and sale of investment and
development property 768.3 704.9
Loss on sale and impairment of other investments 10.4 10.4
Impairment of other receivables 12.0 12.0
Exceptional other income (5.3) (5.3)
Headline (loss)/earnings 383.2
Dilution (2) 1.5
Diluted headline (loss)/earnings 384.7
Weighted average number of shares 497.7
Dilution (2) 12.3
Diluted weighted average number of shares 510.0
Headline (loss)/earnings per share (pence) 77.0p
Diluted headline (loss)/earnings per share (pence) 75.4p
(1) Net of tax and non-controlling interests.
(2) The dilution impact is required to be included as for earnings per share as
calculated in note 10(a) even where this is not dilutive for headline earnings
per share.
(c) Underlying earnings per share
EPRA underlying earnings per share is a non-GAAP measure but has been included
as it is considered to be a key measure of the Group`s operating results and
indication of the extent to which dividend payments are supported by current
earnings.
Six months ended
30 June 2010
Pence
Earnings Shares per
GBPm million share
Basic earnings/(loss) per share
from continuing operations (1) 219.9 621.7 35.4p
Remove:
Revaluation and sale of investment and
development property (344.8) (55.5)p
Sale and impairment of investments - -
Exceptional administration costs 8.1 1.3p
Exceptional other income - -
Exceptional finance charges 66.3 10.7p
Change in fair value of
derivative financial instruments 89.1 14.4p
Tax on the above (1.0) (0.2)p
REIT entry charge 1.7 0.3p
Non-controlling interest
in respect of the above (0.4) (0.1)p
Add:
C&C US underlying earnings
included within discontinued
operations 4.4 0.7p
EPRA underlying earnings per share 43.3 621.7 7.0p
Dilutive convertible bonds,
share options and share awards - 0.9
Underlying, diluted earnings per share 43.3 622.6 7.0p
Six months ended
30 June 2009
Pence
Earnings Shares per
GBPm million share
Basic earnings/(loss) per share
from continuing operations (1) (312.7) 401.8 (77.8)p
Remove:
Revaluation and sale of
investment and development property 650.8 162.0p
Sale and impairment of investments 10.1 2.5p
Exceptional administration costs - -
Exceptional other income (5.0) (1.3)p
Exceptional finance charges 19.6 4.9p
Change in fair value of
derivative financial instruments (396.5) (98.7)p
Tax on the above 68.7 17.1p
REIT entry charge 1.6 0.4p
Non-controlling interest
in respect of the above (4.7) (1.2)p
Add:
C&C US underlying earnings
included within discontinued operations 1.9 0.5p
EPRA underlying earnings per share 33.8 401.8 8.4p
Dilutive convertible bonds,
share options and share awards 0.8 11.8
Underlying, diluted earnings per share 34.6 413.6 8.4p
Year ended
31 December 2009
Pence
Earnings Shares per
GBPm million share
Basic earnings/(loss) per share
from continuing operations (1) (175.1) 497.7 (35.2)p
Remove:
Revaluation and sale of
investment and development property 535.7 107.6p
Sale and impairment of investments 10.1 2.0p
Exceptional administration costs - -
Exceptional other income (5.0) (1.0)p
Exceptional finance charges 38.6 7.8p
Change in fair value of
derivative financial instruments (399.6) (80.3)p
Tax on the above 66.9 13.5p
REIT entry charge 3.1 0.6p
Non-controlling interest
in respect of the above (5.9) (1.2)p
Add:
C&C US underlying earnings
included within discontinued operations 6.3 1.3p
EPRA underlying earnings per share 75.1 497.7 15.1p
Dilutive convertible bonds,
share options and share awards 1.5 12.3
Underlying, diluted earnings per share 76.6 510.0 15.0p
(1) The weighted average number of shares used for the calculation of basic
earnings/(loss) per share has been adjusted for shares held in the ESOP and
treasury shares.
11 Net assets per share
As at 30 June 2010
Net NAV per
assets Shares share
GBPm million (pence)
NAV attributable to equity
shareholders of
CSC Group PLC (1) 1,860.2 622.4 299p
Dilutive convertible bonds,
share options and share awards 12.7 4.3
Diluted NAV 1,872.9 626.7 299p
Add:
Unrecognised surplus on
trading properties (net of tax) 1.4 -
Remove:
Fair value of derivative
financial instruments
(net of tax) 355.6 57p
Deferred tax on investment
and development property 43.8 7p
Non-controlling interest
on the above (35.9) (6)p
Add:
Non-controlling interest
recoverable balance not
recognised 71.3 11p
Diluted EPRA NAV 2,309.1 626.7 368p
Fair value of derivative
financial instruments
(net of tax) (355.6) (56)p
Excess of fair value of debt
over book value 288.2 46p
Diluted EPRA NNNAV 2,241.7 626.7 358p
As at 31 December 2009
Net NAV per
assets Shares share
GBPm million (pence)
NAV attributable to equity
shareholders of
CSC Group PLC (1) 2,421.1 621.5 390p
Dilutive convertible bonds,
share options and share
awards 101.3 12.8
Diluted NAV 2,522.4 634.3 398p
Add:
Unrecognised surplus on
trading properties (net of tax) 0.9 -
Remove:
Fair value of derivative
financial instruments
(net of tax) 335.5 53p
Deferred tax on investment
and development property 42.9 7p
Non-controlling interest
on the above (27.1) (5)p
Add:
Non-controlling interest
recoverable balance not
recognised 71.3 11p
Diluted EPRA NAV 2,945.9 634.3 464p
Fair value of derivative
financial instruments
(net of tax) (335.5) (53)p
Excess of fair value of debt
over book value 394.5 63p
Diluted EPRA NNNAV 3,004.9 634.3 474p
As at 30 June 2009
Net NAV per
assets Shares share
GBPm million (pence)
NAV attributable to equity
shareholders of
CSC Group PLC (1) 2,090.3 565.4 370p
Dilutive convertible bonds,
share options and share
awards 85.1 11.9
Diluted NAV 2,175.4 577.3 377p
Add:
Unrecognised surplus on
trading properties (net of tax) 0.6 -
Remove:
Fair value of derivative
financial instruments
(net of tax) 322.6 56p
Deferred tax on investment
and development property 40.7 7p
Non-controlling interest
on the above (38.4) (7)p
Add:
Non-controlling interest
recoverable balance not
recognised 83.8 15p
Diluted EPRA NAV 2,584.7 577.3 448p
Fair value of derivative
financial instruments
(net of tax) (322.6) (56)p
Excess of fair value of debt
over book value 637.3 110p
Diluted EPRA NNNAV 2,899.4 577.3 502p
(1) The number of shares used has been adjusted for shares held in the ESOP and
treasury shares.
12 Investment and development property
Total
GBPm
At 1 January 2010 6,182.6
C&C US balances transferred to assets held for sale (338.0)
Additions from subsequent expenditure 17.5
Disposals (67.1)
Transferred to trading property (16.1)
Revaluation 409.2
Transferred on demerger (note 17) (1,301.4)
At 30 June 2010 4,886.7
As at As at As at
30 June 31 December 30 June
2010 2009 2009
GBPm GBPm GBPm
Balance sheet carrying value of
investment and development property 4,886.7 6,182.6 6,062.1
Adjustment in respect of tenant
incentives 71.6 83.2 80.7
Adjustment in respect of head leases (39.3) (47.1) (48.9)
Market value of investment and
development property 4,919.0 6,218.7 6,093.9
The fair value of the Group`s investment and development properties as at 30
June 2010 was determined by independent external valuers at that date. The
valuation conforms with the Royal Institution of Chartered Surveyors (RICS)
Valuation Standards 6th Edition and with IVS 1 of International Valuation
Standards, and was arrived at by reference to market transactions for similar
properties.
The main assumptions underlying the valuations are in relation to market rent,
taking into account forecast growth rates and yields based on known
transactions for similar properties and likely incentives offered to tenants.
13 Cash and cash equivalents
As at As at As at
30 June 31 December 30 June
2010 2009 2009
GBPm GBPm GBPm
Unrestricted cash 51.4 562.7 568.4
Restricted cash 76.3 19.8 -
127.7 582.5 568.4
Cash and cash equivalents per the
statement of cash flows:
Unrestricted cash 51.4 562.7 568.4
C&C US - classified as held for sale 12.5 - -
63.9 562.7 568.4
Restricted cash at 30 June 2010 relates to amounts deposited in a trust account
equal to the outstanding principal on the 3.95 per cent convertible bonds plus
interest due on maturity to be used on exercise of put options or on maturity.
14 Borrowings
As at As at As at
30 June 31 December 30 June
2010 2009 2009
Current borrowings
Bank loans and overdrafts 11.6 30.0 20.9
Commercial mortgage backed securities
("CMBS") notes 24.7 33.5 34.3
3.95% convertible bonds due 2010 74.7 79.2 -
Borrowings excluding finance leases 111.0 142.7 55.2
Finance lease obligations 4.5 5.8 6.5
Current borrowings 115.5 148.5 61.7
Non-current borrowings
CMBS notes 2011 - 417.7 479.7
CMBS notes 2015 1,018.9 1,030.6 1,043.1
Bank loan 2011 - 100.0 100.0
Bank loan 2012 - 147.0 216.1
Bank loans 2013 - 633.4 715.2
Bank loan 2014 58.2 60.0 24.4
Bank loans 2016 756.1 809.3 825.6
Bank loan 2017 513.2 117.5 117.4
Debentures 2027 226.7 226.6 226.4
CSC bonds 2013 26.7 26.8 26.7
3.95% convertible bonds due 2010 - - 79.2
Borrowings excluding finance leases and
Metrocentre compound financial
instrument 2,599.8 3,568.9 3,853.8
Metrocentre compound financial
instrument 134.4 129.9 124.8
Finance lease obligations 34.8 41.3 42.4
Non-current borrowings 2,769.0 3,740.1 4,021.0
Total borrowings 2,884.5 3,888.6 4,082.7
Cash and cash equivalents (127.7) (582.5) (568.4)
Net debt 2,756.8 3,306.1 3,514.3
Net external debt (adjusted for Metrocentre compound financial instrument) at
30 June 2010 was GBP2,622.4 million (31 December 2009 - GBP3,176.2 million, 30
June 2009 - GBP3,389.5 million).
15 Cash generated from operations
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
Notes GBPm GBPm GBPm
Continuing operations
Profit/(loss) before tax 219.5 (250.5) (119.5)
Remove:
Revaluation and sale of
investment and
development property 5 (344.8) 650.8 535.7
Sale and impairment of
other investments - 10.1 10.1
Depreciation 0.2 0.2 0.2
Amortisation of lease
incentives and other
direct costs (2.1) 5.6 6.5
Finance costs 6 82.3 87.2 174.8
Finance income (1.3) (1.8) (3.7)
Other finance costs 7 70.7 24.1 48.2
Change in fair value of
derivative financial
instruments 89.1 (396.5) (399.6)
Changes in working
capital:
Change in trading
properties 1.2 (0.4) (0.7)
Change in trade and
other receivables (10.8) 2.2 (7.1)
Change in trade and other payables 5.4 (17.6) 5.4
Cash generated from operations 109.4 113.4 250.3
16 Capital commitments
At 30 June 2010, the Group was contractually committed to GBP110.7 million (31
December 2009 - GBP142.4 million, 30 June 2009 - GBP172.4 million) of future
expenditure for the purchase, construction, development and enhancement of
investment property.
The Group`s share of joint venture commitments included above at 30 June 2010
was GBP79.3 million (31 December 2009 - GBP75.6 million, 30 June 2009 -
GBP104.8 million).
17 Discontinued operations
Demerger
On 9 March 2010 Liberty International PLC (renamed Capital Shopping Centres
Group PLC on 7 May 2010) announced its intention to separate into two
businesses, CSC and Capco. The separation was effected by way of a demerger of
the central London focused property investment and development division to a
new company called Capital & Counties Properties PLC (Capco). The demerger
became unconditional on 7 May 2010.
The demerger was effected through a reduction of capital. This involved the
cancellation of the share premium account followed by the transfer of demerged
assets to Capco in consideration for which Capco issued to shareholders of CSC
one ordinary share for each CSC ordinary share held.
The share premium account cancelled amounted to GBP1,005.7 million. The book
value of assets and liabilities transferred to Capco, as recorded in the
consolidated accounts of CSC, was GBP799.8 million. The assets and liabilities
transferred were:
GBPm
Assets
Investment and development property 1,301.4
Plant and equipment 0.8
Other investments 53.3
Trading property 0.3
Current tax assets 0.6
Trade and other receivables 40.4
Cash and cash equivalents 179.2
Total assets 1,576.0
Liabilities
Trade and other payables (49.7)
Borrowings (660.7)
Derivative financial instruments (58.3)
Other provisions (7.5)
Total liabilities (776.2)
Net assets 799.8
As a result of the demerger Capco has been classified as a discontinued
operation in these financial statements.
The following amounts are included for Capco in the income statement within
profit/(loss) for the period from discontinued operations:
Period Six months Year
ended ended ended
7 May 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Revenue 45.4 79.6 133.2
Net rental income 30.1 45.1 79.2
Net other income - 1.6 1.4
Revaluation and sale of investment
and development property 60.9 (177.7) (140.7)
Sale and impairment of other
investments - - (0.3)
Impairment of other receivables - - (12.0)
Administration expenses (7.6) (6.2) (14.5)
Operating profit/(loss) 83.4 (137.2) (86.9)
Net finance costs (23.6) (3.7) (36.1)
Profit/(loss) before tax 59.8 (140.9) (123.0)
Taxation (0.1) 0.2 (1.4)
Profit/(loss) for the period 59.7 (140.7) (124.4)
C&C US
The Group has entered into an agreement with Equity One, pursuant to which
Equity One will acquire the Group`s interests in its U.S. subsidiaries (C&C
US), through a joint venture with CSC. Consideration will be in the form of
10.9 million shares in the joint venture and 4.1 million shares in Equity One
common stock. The CSC investment in these shares will be accounted for as an
available-for-sale investment as CSC will not have control nor significant
influence over the venture. The transaction had not completed as at 30 June
2010 but is expected to complete later in 2010. Under IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations, C&C US is required to be classified
as a discontinued operation and as a disposal group held for sale.
The total assets and total liabilities of C&C US are classified as held for
sale and separately disclosed on the face of the balance sheet at 30 June 2010.
These comprise:
GBPm
Assets
Investment and development property 386.4
Plant and equipment 0.1
Trading property 10.8
Trade and other receivables 19.8
Cash and cash equivalents 12.5
C&C US - assets 429.6
Liabilities
Trade and other payables (7.7)
Current tax liabilities (2.5)
Borrowings (231.6)
Deferred tax provision (43.8)
C&C US - liabilities (285.6)
C&C US - net assets 144.0
The following amounts are included for C&C US in the income statement within
profit/(loss) for the period from discontinued operations:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2010 2009 2009
GBPm GBPm GBPm
Revenue 21.9 21.0 40.7
Net rental income 13.7 12.4 24.4
Net other income 0.1 (2.8) (4.1)
Revaluation and sale of
investment and development
property 12.2 (62.3) (91.8)
Administration expenses (1.2) (1.3) (2.7)
Operating profit/(loss) 24.8 (54.0) (74.2)
Net finance costs (6.5) (6.5) (12.4)
Profit/(loss) before tax 18.3 (60.5) (86.6)
Taxation (5.4) 26.3 27.7
Profit/(loss) for the period 12.9 (34.2) (58.9)
Underlying earnings 4.4 1.9 6.3
18 Related party transactions
There have been no related party transactions during the period that require
disclosure under Section DTR 4.2.8 R of the Disclosure and Transparency Rules
or under IAS34 Interim Financial Reporting except those disclosed elsewhere in
this condensed set of financial statements.
INVESTMENT AND DEVELOPMENT PROPERTIES (unaudited)
Property data
Market Initial*
value yield
GBPm Ownership Note (EPRA)
As at 30 June 2010
Lakeside, Thurrock 988.0 100% 5.30%
Metrocentre, Gateshead 800.5 90% A 5.99%
Braehead, Glasgow 568.5 100% 5.20%
The Harlequin, Watford 351.0 93% 5.22%
Victoria Centre, Nottingham 332.0 100% 5.44%
Arndale, Manchester 322.5 48% B 5.56%
Eldon Square, Newcastle upon
Tyne 235.3 60% 4.19%
Chapelfield, Norwich 231.3 100% 5.28%
St David`s, Cardiff 229.3 50% 2.93%
Cribbs Causeway, Bristol 220.3 33% C 5.17%
The Chimes, Uxbridge 210.2 100% 6.15%
The Potteries, Stoke-on-Trent 201.8 100% 6.59%
The Glades, Bromley 179.0 64% 5.63%
Other 49.3 D
Total investment and
development property 4,919.0 5.35%
As at 31 December 2009
Total investment and
development property 4,631.1 5.70%
Nominal* Passing*
equivalent rent ERV*
yield GBPm GBPm Occupancy*
As at 30 June 2010
Lakeside, Thurrock 6.10% 98.5%
Metrocentre, Gateshead 6.62% 98.4%
Braehead, Glasgow 6.32% 99.2%
The Harlequin, Watford 6.65% 98.6%
Victoria Centre, Nottingham 6.60% 97.8%
Arndale, Manchester 6.22% 99.3%
Eldon Square, Newcastle upon Tyne 7.16% 96.0%
Chapelfield, Norwich 6.90% 99.6%
St David`s, Cardiff 6.48% 93.9% E
Cribbs Causeway, Bristol 6.14% 95.8%
The Chimes, Uxbridge 6.70% 100.0%
The Potteries, Stoke-on-Trent 7.25% 99.4%
The Glades, Bromley 7.25% 95.5%
Other
Total investment and
development property 6.52% 269.2 355.4 98.1%
As at 31 December 2009
Total investment and
development property 7.08% 271.1 363.4 97.8%
Weighted
average Gross
unexpired area
lease million
years sq ft F
As at 30 June 2010
Lakeside, Thurrock 1.4
Metrocentre, Gateshead 2.1
Braehead, Glasgow 1.1
The Harlequin, Watford 0.7
Victoria Centre, Nottingham 1.0
Arndale, Manchester 1.6
Eldon Square, Newcastle upon Tyne 1.4
Chapelfield, Norwich 0.5
St David`s, Cardiff 1.4
Cribbs Causeway, Bristol 1.0
The Chimes, Uxbridge 0.4
The Potteries, Stoke-on-Trent 0.6
The Glades, Bromley 0.5
Other 0.4
Total investment and
development property 6.4 14.1
As at 31 December 2009
Total investment and
development property 6.8 14.0
* As defined in glossary.
Notes
A Interest shown is that of the Metrocentre Partnership in the Metrocentre (90
per cent) and the Metro Retail Park (100 per cent).
CSC has a 60 per cent interest in the Metrocentre Partnership which is
consolidated as a subsidiary of the Group.
B The Group`s interest is through a joint venture ownership of a 95 per cent
interest in The Arndale, Manchester, and 90 per cent interest in New Cathedral
Street, Manchester.
C The Group`s interest is through a joint venture ownership of a 66 per cent
interest in The Mall at Cribbs Causeway and a 100 per cent interest in The
Retail Park, Cribbs Causeway.
D Includes the Group`s 50 per cent economic interest in Xscape, Braehead.
E Excludes the recently completed extension to St David`s, Cardiff.
F Area shown is the gross area of the property, this is not adjusted for the
proportional ownership.
Analysis of capital return in the period
Market value
30 June 31 December Revaluation surplus *
2010 2009 30 June 2010
GBPm GBPm GBPm %
Like-for-like properties 4,919.0 4,384.2 348.3 7.7%
Disposals - 67.3 - -
Redevelopments and developments - 179.6 - -
Total investment properties 4,919.0 4,631.1 348.3 7.7%
* Revaluation surplus includes amortisation of lease incentives and fixed head
leases.
Analysis of net rental income in the period
Six months Six months
ended ended
30 June 30 June
2010 2009 Change
GBPm GBPm %
Like-for-like properties 126.1 126.6 (0.4)%
Disposals 1.0 1.7 (41.2)%
Developments 7.4 4.4 68.2%
Total investment properties 134.5 132.7 1.4%
OTHER INFORMATION
FINANCIAL COVENANTS
Financial covenants on asset-specific debt excluding joint ventures
Loan
outstanding at
31 July 2010 (1) LTV
Maturity GBPm covenant
Metrocentre 2015 555.2 90%
Braehead 2015 337.7 N/A
Watford 2015 255.9 N/A
Nottingham 2016 252.0 90%
Chapelfield 2016 212.6 N/A
Uxbridge 2016 160.7 85%
Bromley 2016 138.6 85%
Lakeside 2017 522.4 75%
Total 2,435.1
Loan to
30 June Interest Interest
2010 cover cover
Market value (2) covenant actual (3)
Metrocentre 73% 120% 136%
Braehead N/A 120% 163%
Watford N/A 120% 129%
Nottingham 76% 110% 160%
Chapelfield N/A 110% 126%
Uxbridge 77% 120% 145%
Bromley 77% 120% 129%
Lakeside 53% 140% 191%
Total
Financial covenants on joint ventures asset-specific debt
Loan
outstanding at
31 July
2010 (1) LTV
Maturity GBPm covenant
Cardiff 2014 37.2 (4) 75%
Xscape 2014 22.8 (4) N/A
Total 60.0
Loan to
30 June Interest Interest
2010 cover cover
Market value (2) covenant actual (3)
Cardiff 15% 150% 170%
Xscape N/A 120% 170%
Total
Notes
(1) 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
balance sheet value of the loans includes any unamortised fees.
(2) The Loan to 30 June 2010 Market Value 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.
(3) Based on 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.
(4) 50 per cent of the debt is shown which is consistent with accounting
treatment and the Group`s economic interest.
Financial covenants on corporate facilities at 30 June 2010
Interest
Net worth Net worth cover
covenant* Actual covenant*
GBP248m facility, maturing in 2013 GBP600 GBP1,247 120%
Borrowings/ Borrowings/
Interest cover Net worth Net worth
Actual covenant* Actual
GBP248m facility, maturing in 2013 135% 110% 22%
* Tested on the Borrower Group which excludes, at the Group`s election, certain
subsidiaries with asset-specific finance. The facility is secured on the
Group`s investments in the Arndale, Manchester and Cribbs Causeway, Bristol.
CSC Debenture PLC at 30 June 2010
Capital Interest Interest
Loan cover Capital cover cover cover
Maturity GBPm covenant Actual covenant Actual
2027 231.4 167% 189% 100% 107%
The debenture is currently secured on the Group`s interests in The Potteries,
Stoke-on-Trent and Eldon Square, Newcastle.
Should the capital cover or interest cover test be breached CSC Debenture
PLC (the issuer) has three months from the date of delivery of the valuation
or the latest certificate to the Trustees to make good any deficiencies.
The issuer may withdraw property secured on the debenture by paying a sum
of money or through the substitution of alternative property provided that
the loan to value and income tests are satisfied immediately following the
substitution.
UNDERLYING PROFIT STATEMENT (unaudited)
For the six months ended 30 June 2010
Re-presented
Six months six months
ended ended
30 June 30 June
2010 2009
GBPm GBPm
Net rental income 134.5 132.7
Net other income 0.3 -
134.8 132.7
Administration expenses (11.2) (14.3)
Underlying operating profit 123.6 118.4
Finance costs (82.3) (87.2)
Finance income 1.3 1.8
Other finance costs (4.4) (4.5)
Underlying net finance costs (85.4) (89.9)
Underlying profit before tax 38.2 28.5
Tax on adjusted profit (0.2) 0.6
Remove amounts attributable to
non-controlling interest 0.9 2.8
C&C US underlying earnings
included within discontinued operations 4.4 1.9
Underlying earnings 43.3 33.8
Underlying earnings per share (pence) 7.0p 8.4p
Re-presented Re-presented
six months year
ended ended
31 December 31 December
2009 2009
GBPm GBPm
Net rental income 134.6 267.3
Net other income (0.1) (0.1)
134.5 267.2
Administration expenses (11.9) (26.2)
Underlying operating profit 122.6 241.0
Finance costs (87.6) (174.8)
Finance income 1.9 3.7
Other finance costs (5.1) (9.6)
Underlying net finance costs (90.8) (180.7)
Underlying profit before tax 31.8 60.3
Tax on adjusted profit 2.1 2.7
Remove amounts attributable to
non-controlling interest 3.0 5.8
C&C US underlying earnings
included within discontinued operations 4.4 6.3
Underlying earnings 41.3 75.1
Underlying earnings per share (pence) 8.3p 15.1p
CONSOLIDATED PRO FORMA BALANCE SHEET (unaudited)
As at 31 December 2009
The analysis below is provided to illustrate the impact on the Group`s balance
sheet as if the demerger of Capco and the proposed disposal of C&C US had
occurred at 31 December 2009. The demerger of Capco and demerger and other
costs information have been extracted from the Circular on the demerger of
Capco that was issued on 12 March 2010.
The re-classification of C&C US as held for sale column classifies C&C US`
assets and liabilities on a consistent basis as they are shown in the
Group`s 30 June 2010 balance sheet.
As at Demerger
31 December Demerger of and
2009 Capco (1) other costs (2)
GBPm GBPm GBPm
Non-current assets
Investment and development
property 6,182.6 (1,240.5) -
Plant and equipment 1.9 (1.0) -
Investments in associate
companies 26.8 - -
Other investments 58.3 (46.0) -
Derivative financial
instruments 15.0 - -
Trade and other receivables 69.8 (14.5) -
Current assets 6,354.4 (1,302.0) -
Trading property 24.2 (0.3) -
Current tax assets 1.1 (1.3) -
Trade and other receivables 86.1 (20.8) -
Cash and cash equivalents 582.5 (263.3) -
C&C US - assets - - -
693.9 (285.7) -
Total assets 7,048.3 (1,587.7) -
Current liabilities
Trade and other payables (285.2) 61.9 (7.3)
Borrowings (148.5) 15.0 -
Derivative financial
instruments (14.3) - -
C&C US - liabilities - - -
Non-current liabilities (448.0) 76.9 (7.3)
Borrowings (3,740.1) 711.4 -
Derivative financial
instruments (371.8) 56.2 -
Deferred tax provision (37.1) - -
Other provisions (8.6) 7.4 -
Other payables (21.6) 2.1 -
(4,179.2) 777.1 -
Total liabilities (4,627.2) 854.0 (7.3)
Net assets 2,421.1 (733.7) (7.3)
Pro forma
Reclassify as at
C&C US as held 31 December
for sale 2009
GBPm GBPm
Non-current assets
Investment and development property (338.0) 4,604.1
Plant and equipment (0.2) 0.7
Investments in associate companies - 26.8
Other investments - 12.3
Derivative financial instruments - 15.0
Trade and other receivables (12.8) 42.5
Current assets (351.0) 4,701.4
Trading property (10.0) 13.9
Current tax assets 2.3 2.1
Trade and other receivables (6.2) 59.1
Cash and cash equivalents (12.8) 306.4
C&C US - assets 377.7 377.7
351.0 759.2
Total assets - 5,460.6
Current liabilities
Trade and other payables 8.3 (222.3)
Borrowings 11.6 (121.9)
Derivative financial instruments - (14.3)
C&C US - liabilities (250.4) (250.4)
Non-current liabilities (230.5) (608.9)
Borrowings 192.7 (2,836.0)
Derivative financial instruments - (315.6)
Deferred tax provision 37.1 -
Other provisions - (1.2)
Other payables 0.7 (18.8)
230.5 (3,171.6)
Total liabilities - (3,780.5)
Net assets - 1,680.1
(1) Represents the demerger of the Capco business and includes an allocation to
Capco of GBP244 million of cash. The financial information used in this
adjustment has been extracted from the Combined Financial Information in the
listing prospectus of Capco, dated 12 March 2010, as adjusted to reflect the
allocation of cash prior to completion of the demerger.
(2) GBP7.3 million represents estimated demerger and related costs not incurred
or accrued as at 31 December 2009.
DIVIDENDS
The Directors of Capital Shopping Centres Group PLC have announced an interim
dividend per ordinary share (ISIN GB0006834344) of 5 pence (2009 - 5.0 pence)
payable on 3 November 2010 (see salient dates below). This dividend will be
paid totally as a Property Income Distribution ("PID") and will be wholly
subject to a 20 per cent withholding tax unless exemptions apply (please refer
to the SPECIAL NOTE below).
Dates
The following are the salient dates for the payment of the interim dividend:
Wednesday, 22 September 2010 Sterling/Rand exchange rate struck.
Thursday, 23 September 2010 Sterling/Rand exchange rate and dividend
amount in SA currency announced.
Monday, 4 October 2010 Ordinary shares listed ex-dividend on the
JSE, Johannesburg
Wednesday, 6 October 2010 Ordinary shares listed ex-dividend on the
London Stock Exchange.
Friday, 8 October 2010 Record date for interim dividend in London
and Johannesburg.
Friday, 8 October 2010 UK shareholders only: Last date for receipt
of Tax Exemption Declaration forms to permit
dividends to be paid gross.
Wednesday, 3 November 2010 Dividend payment day for shareholders
(Note: Payment to ADR holders will be made
on 15 November 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 to Friday, 8 October 2010 inclusive. No
transfers between the UK and South African registers may take place from
Wednesday, 22 September to Sunday, 10 October 2010 inclusive.
PID SPECIAL NOTE:
UK shareholders: For those who are eligible for exemption from the 20 per cent
withholding tax and have not previously registered for exemption, an HM Revenue
& Customs ("HMRC") Tax Exemption Declaration is available for download from the
"Investors" section of the Capital Shopping Centres Group website
(www.capital-shopping-centres.co.uk), or on request to our UK registrars,
Capita Registrars, or HMRC. Validly completed forms must be received by Capita
Registrars no later than the Record Date, Friday 8 October 2010, otherwise the
dividend will be paid after deduction of tax.
South African and other non-UK shareholders: South African shareholders may
apply to HMRC after payment of the dividend for a refund of the difference
between the 20 per cent withholding tax and the UK/South African double
taxation treaty rate of 15 per cent. Other non-UK shareholders may be able to
make similar claims. Refund application forms for all non-UK shareholders are
available for download from the "Investors" section of the Capital Shopping
Centres Group website (www.capital-shopping- centres.co.uk), or on request to
our SA registrars, Computershare, or HMRC. Refunds are not claimable from
Capital Shopping Centres Group, the South African Revenue Service or other
national authorities, only from the UK`s HMRC.
For South African shareholders, a helpline for questions relating to the
withholding tax is available until 17 December 2010 on 086 110 0915 (+27 11 373
0056 if calling from outside South Africa). Calls from within South Africa are
toll-free.
The above does not constitute advice and shareholders should seek their own
professional guidance. Capital Shopping Centres Group PLC does not accept
liability for any loss suffered arising from reliance on the above.
GLOSSARY
Adjusted, diluted net asset value per share
NAV per share adjusted to exclude the fair value of derivative instruments and
related tax and deferred tax on investment and development property 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 and mall commercialisation.
Debt to assets ratio
Net external debt divided by the balance sheet value of investment and
development property plus trading property.
Diluted figures
Reported amounts adjusted to include the effects of dilutive potential shares
issuable under convertible bonds and employee incentive arrangements.
Earnings per share
Profit for the period attributable to equity shareholders of CSC Group PLC
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 under IFRS regarding tenant lease
incentives.
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.
Initial yield (EPRA)
Annualised net rent (after deduction of revenue costs such as head rent,
running void, service charge after shortfalls, empty rates and merchant
association contribution) 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.
Initial yield to the Group
Annualised net rent (as initial yield (EPRA)) on investment properties
expressed as a percentage of the net market value, representing the yield that
would be foregone by the Group were the asset to be sold.
Interest cover ratio (ICR)
Underlying operating profit excluding trading property related items divided by
the net finance cost excluding the change in fair value of derivatives,
exceptional finance costs and amortisation of compound financial instruments.
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.
IPD
Investment Property Databank Ltd, producer of an independent benchmark of
property returns.
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 of CSC Group PLC 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 IFRS including those 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
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.
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.
Property Income Distribution (PID)
A dividend, generally subject to UK withholding tax at the basic rate of income
tax, that a UK REIT is required to pay to its shareholders from its qualifying
rental profits. Certain classes of shareholder may qualify to receive a PID
gross - shareholders should refer to www.capital-shopping-centres.co.uk for
further information. The Group can also pay non-PID dividends which are not
subject to UK withholding tax.
Real Estate Investment Trust (REIT)
A tax regime which exempts from corporation tax the rental profits and capital
gains of the REIT`s qualifying investment property activities. In the UK, the
regime must be elected into and the REIT must meet certain ongoing
qualifications, including the requirement to distribute at least 90 per cent of
qualifying rental profits to shareholders. The Group elected for REIT status
with effect from 1 January 2007.
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 IFRS the value of incentives granted to tenants is
amortised through the income statement on a straight-line basis over the lease
term.
Trading properties
Properties held for trading purposes rather than to earn rentals or for capital
appreciation and shown as current assets in the balance sheet.
Underlying earnings per share (EPS)
Earnings per share adjusted to exclude valuation movements, exceptional items
and related tax.
Underlying figures
Amounts described as underlying exclude valuation movements, exceptional items
and related tax.
Yield shift
A movement (usually expressed in basis points) in the yield of a property asset.
Date: 05/08/2010 08:09:39 Produced by the JSE SENS Department.
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