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CSO
CSO
CSO - Capital Shopping Centres Group Plc - Audited results for the year ended
31 December 2010
CAPITAL SHOPPING CENTRES GROUP PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: CSO
Issuer Code: CSCSCG
23 February 2011
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
Twelve months ended 31 December
2010 2009 (2) Change
Net rental income from
continuing operations (GBPm) 277 267 Up 4%
Underlying earnings (GBPm) 97 75 Up 29%
Underlying EPS (pence) 15.4 15.1 Up 2%
Dividend per share
(including proposed 10p final
dividend) (pence) 15.0 15.0 (3) Unchanged
Property revaluation
surplus/(deficit) (GBPm) 501(+11.0%) (535)(-10.4%) n/a
IFRS profit/(loss) for the
year (GBPm) 529 (370) n/a
Pro forma (2)
31 December
31 December
2010 2009 Change
NAV per share (diluted,
adjusted) (pence) 390 339 Up 15%
Market value of investment
properties (GBPm) 5,099 4,631 Up 10%
Net external debt (GBPm) 2,437 2,522 Down 3%
Debt to assets ratio (per cent) 48 55 Reduced by 7ppt
RESULTS CONFIRM FURTHER RECOVERY
Growth in net rental income and earnings per share
- Net rental income increased by 4 per cent in total and 2 per cent like-for-
like
- 15.4 pence adjusted earnings per share, up 2 per cent on 2009
Positive operational performance
- 181 long term lettings generating GBP28 million annual rent, an increase of
GBP16 million from the previous rent
- Good letting progress at St David`s, Cardiff, extension now 83 per cent
committed by income (65 per cent on opening)
- Occupancy remains strong at 98.6 per cent (97.7 per cent including St
David`s, Cardiff)
- Footfall up a further 3 per cent like-for-like year on year, 6 per cent in
two years
Property valuation improvement
- Valuation surplus 11 per cent, including 3 per cent in the second half, out-
performing IPD
- NAV per share up 51 pence, 15 per cent up from demerger pro forma
- Total financial return including dividends for the year of 20 per cent
CORPORATE HIGHLIGHTS
- Group transformed into the only pure UK prime shopping centre REIT through
the successful demerger of Capital & Counties from Liberty International PLC
(now Capital Shopping Centres Group PLC)
- Placing of 62.3 million shares at 355 pence raising GBP221 million before
costs
- Debt to assets ratio 47 per cent and available financial headroom
approximately GBP500 million (post Trafford Centre acquisition), no
significant debt maturity until 2014
and in January 2011
- Completion of the acquisition of The Trafford Centre
- Completion of the C&C US transaction with Equity One
STRONGLY POSITIONED FOR GROWTH
- CSC now owns 14 centres including 10 of UK`s top 25 and 4 of the UK`s top 6
out-of-town
- Opportunity for growth in like-for-like net rental income - potential 18 per
cent reversionary upside
- Scope for valuation recovery to continue - valuation yields still above CSC
long-run average
- Potential for value creation through development and active management.
Plans for investment (up to GBP600 million over the medium term) with
potential to create at least 4,500 jobs for the regional economies in which
CSC operates
- Integration of The Trafford Centre - draw upon combined expertise to adopt
strongest features and best operational practices of individual centres
- Structural shift in UK retail towards pre-eminent destinations such as CSC`s
with strong leisure and catering offerings, new supply currently constrained.
(1) Please refer to glossary for definition of terms
(2) 2009 figures have been re-stated to remove the impact of the Capco
business following the demerger in May 2010
(3) CSC`s share of Liberty International PLC`s 2009 dividend of 16.5 pence per
share
Patrick Burgess, Chairman of CSC comments as follows:
"The 2010 results demonstrate that CSC`s recovery is on track with increased
like-for-like net rental income, improved operational performance and
continuing property valuation surpluses. CSC has made some striking moves to
redefine itself as the specialist REIT focused on pre-eminent UK regional
shopping centres, including the demerger of Capco and the transformational
acquisition of The Trafford Centre in January 2011.
CSC ends the year in a robust financial position with the debt to assets ratio
at 48 per cent, around GBP500 million of financial headroom and a range of
return enhancing organic opportunities which we intend to pursue vigorously.
While the UK faces economic challenges over the next few years, CSC is well
placed to achieve growth and superior shareholder returns."
Contents:
Chairman`s Statement
Business Review
Financial Review
Directors` Responsibilities
Financial Information
Summary of Investment and Development Properties
Other Information
Glossary
Dividends
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/Wendy Baker,
Hudson Sandler +44 (0)20 7796 4133
SA: Nicholas Williams, College Hill +27 (0)11 447 3030
A presentation to analysts and investors will take place at 1 Finsbury Avenue,
London EC2 at 09.30GMT on 23 February 2011. The presentation will also be
available to international analysts and investors through a live audio call
and webcast. The presentation will be available on the Group`s website
www.capital-shopping-centres.co.uk.
A copy of this press release is available for download from our website at
www.capital-shopping-centres.co.uk
Sponsor:
Merrill Lynch SA (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. At 31 December
2010 CSC owned 13 regional shopping centres amounting to 14.1 million sq. ft.
of retail space and valued at GBP5.1 billion.
On 28 January 2011, CSC acquired The Trafford Centre, Manchester, increasing
its portfolio to 14 centres, including 10 of the top 25 UK centres,
representing 16.0 million sq. ft. of retail space with a valuation of GBP6.7
billion.
CSC`s assets now comprise five major out-of-town centres including four of the
UK`s top six - The Trafford Centre, Manchester; Lakeside, Thurrock;
Metrocentre, Gateshead; Braehead, Glasgow and The Mall at Cribbs Causeway,
Bristol - and nine in-town centres including centres in prime destinations
such as 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 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.
This announcement contains "forward-looking statements" regarding the belief
or current expectations of Capital Shopping Centres Group PLC, its Directors
and other members of its senior management about Capital Shopping Centres
Group PLC`s businesses, financial performance and results of operations. These
forward-looking statements are not guarantees of future performance. Rather,
they are based on current views and assumptions and involve known and unknown
risks, uncertainties and other factors, many of which are outside the control
of Capital Shopping Centres Group PLC and are difficult to predict, that may
cause actual results, performance or developments to differ materially from
any future results, performance or developments expressed or implied by the
forward-looking statements. These forward-looking statements speak only as at
the date of this announcement. Except as required by applicable law, Capital
Shopping Centres Group PLC makes no representation or warranty in relation to
them and expressly disclaims any obligation to update or revise any forward-
looking statements contained herein to reflect any change in Capital Shopping
Centres Group PLC`s expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
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.
CHAIRMAN`S STATEMENT
INTRODUCTION
A measure of confidence returned in 2010 to the markets in which Capital
Shopping Centres Group PLC (CSC) operates and, along with it, a recovery in
valuations and further increases in occupational market activity.
Against this backdrop, and with a very encouraging level of shareholder
support, CSC has made some striking moves to redefine itself as the specialist
REIT focused on pre-eminent regional shopping centres. The strategic clarity
brought about by the separation in May of CSC and Capital & Counties
Properties PLC (Capco) laid the foundations for what has been labelled the
"transformational acquisition" of The Trafford Centre in January 2011.
CSC ended the year in a robust financial position. The combination of improved
market values and November`s capital raising brought the debt to assets ratio
back to 48 per cent, within the Board`s long-established objective of 40 to 50
per cent, and there are no significant debt maturities until 2014. With around
GBP500 million of financial headroom, the company is in a strong position to
progress its significant organic development opportunities.
In a year of intensive corporate activity we have asked a great deal of all
our staff and they have responded with a level of energy and enthusiasm for
which I and my fellow Directors are extremely grateful.
Demerger
In May we received shareholder approval for the creation of CSC, the only pure
UK prime shopping centre REIT, through the successful demerger of Capco from
Liberty International PLC (now CSC). The two strong and focused businesses,
each with their own characteristics and different attractions, have both been
received well and have started to demonstrate their capability as standalone
businesses to execute their own significant strategic plans. It is satisfying
to note that both have performed well independently since demerger in May.
The Trafford Centre
At last month`s EGM shareholders approved the acquisition of The Trafford
Centre, Manchester. This value-enhancing transaction not only strengthens
CSC`s industry position but enhances the overall quality of the Group`s assets
by its complementarity. It also extends CSC`s ability to engage with the
larger retail chains as a clear first choice nationally. After completion,
which took place on 28 January 2011, CSC owns fourteen UK shopping centres,
including ten of the top 25 centres and four of the top six out-of-town
shopping centres.
As well as significantly increasing CSC`s presence in the key North West
regional retail market, the structure of the transaction creates an enduring
relationship with John Whittaker, whose Peel Group is now a significant
shareholder, and gives us the opportunity to adopt across the enlarged Group
the best practices from both CSC and The Trafford Centre as we continue to
focus on the management of shopping centres as attractive destinations.
Board
The demerger of Capco in May inevitably led to some changes in the composition
of the Board. Ian Durant, Ian Hawksworth and Graeme Gordon stepped down to
become, respectively, Chairman, Chief Executive and Non-Executive Director of
Capco. I would like to thank them very much for their services to Liberty
International PLC and wish them every success in their new roles.
We were joined in May by Matthew Roberts, who succeeded Ian Durant as Finance
Director. Matthew is a Fellow of the Institute of Chartered Accountants in
England and Wales and has a wide range of relevant experience at substantial
companies in the retail and leisure sectors including Debenhams plc and Gala
Coral Group Ltd.
I am also pleased to note formally that in the course of the year Richard
Gordon, who has replaced Graeme Gordon, and John Abel, who has had a very
successful career in the industry, joined the Board as Non-Executive
Directors.
Following the EGM on 26 January 2011, John Whittaker has been appointed a Non-
Executive Director and has taken up the position of Deputy Chairman of the
Board. John is a highly regarded real estate investor with a passion for the
shopping centre business and proven vision and development expertise. I have
no doubt that his considerable wisdom and capabilities will prove invaluable
to us as his colleagues on the Board as well as beneficial to all
shareholders.
Dividends
The Directors are recommending a final dividend of 10.0 pence per share
bringing the amount paid and payable in respect of 2010 to 15.0 pence, the
same level as CSC`s share of the 2009 Liberty International PLC dividend and
covered by the adjusted earnings per share for 2010 of 15.4 pence. 5.0 pence
per share of the final dividend will be paid as a Property Income Distribution
subject to withholding tax. The Board`s policy remains to pay a progressive
dividend with an appropriate level of cover over adjusted earnings.
Economic contribution and corporate responsibility
CSC makes a significant economic contribution to the regions where its
shopping centres are located. We estimate over 50,000 people are directly
employed in CSC centres, with numerous other local businesses benefiting
indirectly. Through the payment of business rates of around GBP150 million per
annum, we and our tenants also make a major contribution to public finances.
Our plans for around GBP600 million of capital expenditure on three major
extensions and other active management projects will represent significant
private sector investment with the potential to create an estimated 4,500 jobs
at a time when the public sector is likely to be scaling back its capital
expenditure plans.
CSC ranks as a leader in the property sector in corporate responsibility. We
are committed to working closely with the communities served by our businesses
and operating responsibly in terms of care for the environment, reduction in
energy consumption and promotion of increased recycling of waste. We also
encourage and support a large number of local community initiatives in the
neighbourhoods of which we form part, in many of which I am glad to say our
staff take a very active part. We have also made a contribution to society at
a national level in sponsoring "Engaging Experience", an active and growing
network between charity founders and executives on the one hand and young
entrepreneurs and City workers on the other hand, facilitating an exchange of
inspiration, skills, energies and resources in a sector of growing
significance.
We continue to engage with a number of well-regarded benchmarking indices who
monitor the environmental and community engagement activities of public
companies and remain constituent members of FTSE4Good, JSE SRI Index, Dow
Jones Sustainability Indexes, Corporate Responsibility Index and OEKOM. In
November 2010, CSC became one of only 38 companies to have achieved the
CommunityMark, developed by Business in the Community. The award is
recognition of our innovative community programmes tailored to the locations
where we operate and is due in large part to the dedication of CSC`s staff and
our community partners in responding to local issues and needs - what one
might think of as part of a "Big-hearted Society".
Prospects
It is clear that business in the UK faces a series of challenges over the next
couple of years and retailers and consumers remain cautious, not least about
the effects of public sector austerity measures, tax increases and the price
of commodities including fuel. In Autumn 2008 I expressed the opinion that,
notwithstanding the gloom surrounding the recession into which the UK was
being plunged, the economy would recover some convincing traction within a few
years. Our present view of the most likely outcome is that the UK will
experience a period of low growth rather than a "double dip".
What is clear is that this environment is not affecting all retail property
equally. The strongest destinations are growing stronger as UK retail trade
continues to concentrate. Prime destinations such as CSC`s centres with strong
leisure and catering offerings are key locations for retailers` flagship
stores. With supply of new centres severely limited, successful UK and
international retailers looking to their growth plans for the next couple of
years are increasingly likely to compete for high profile, good quality space
in those best centres.
The 2010 results demonstrate that CSC`s recovery is on track with increased
like-for-like net rental income, the key driver of growth in earnings and
dividends, improved operational performance and continuing property valuation
surpluses. The opportunities for value creation through development and active
management described in the accompanying Business Review will be vigorously
pursued and I look forward to progress through the planning stages of our
major extensions to Victoria Centre, Nottingham, Lakeside, Thurrock and
Braehead, Glasgow, as well as embarking on other active management projects.
With the demand for space in the top 50 UK shopping centres increasing ahead
of supply, a range of return-enhancing organic opportunities, a strongly
reinforced corporate position and a reinvigorated approach to ensuring our
assets are attractive for the shopping public as well as to investors, CSC is
well placed to achieve growth.
With our clear and focused strategy, our unrivalled and irreplaceable assets
and our robust financial position the Board is confident of CSC achieving
superior shareholder returns.
Patrick Burgess
Chairman
23 February 2011
BUSINESS REVIEW
PROSPECTS AND PRIORITIES
CSC is strongly positioned for growth. Our three key areas of focus for 2011
to realise that potential, each of which is discussed below, are:
- growth in like-for-like net rental income
- value creation through continued enhancement of all CSC`s centres as retail
and leisure destinations by progressing our development and active management
opportunities
- integration of The Trafford Centre, drawing upon the combined expertise of
the enlarged Group to adopt more broadly the strongest features and best
operational practices of the individual centres and improve the performance of
all the assets
Net rental income
The chart below illustrates considerable upside between contracted rent and
the valuers` assessment of ERV. The potential to capture the additional 18 per
cent in annual rent arises primarily from:
- lease expiries, especially of concessionary short term lettings which
represent 2 per cent of passing rent but 7 per cent of ERV, a GBP17 million
opportunity
- rent reviews, especially of MSUs and department stores which have
experienced national rental growth due to increased demand (see Other
Information section for review cycle)
- vacancies, in particular at St David`s, Cardiff, which is on track to be
fully let by the end of 2011
An estimated 80 per cent of the reversion is expected to be captured into
passing rent within five years and 65 per cent within three years.
(GRAPHIC REMOVED - PLEASE SEE PAGE 5 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
Further, CSC is in a strong position to achieve ERV growth from current levels
as the demand for high quality shopping centre space continues to increase
ahead of supply.
Value creation through development and active management
Major extensions: CSC has 1.4 million sq. ft. of identified extension
opportunities at existing centres, an equivalent amount to a new major
regional shopping centre. Extensions to existing prime locations carry
attractive returns at a lower risk profile for CSC as developer than
establishing a new destination. Victoria Centre, Nottingham, Lakeside,
Thurrock and Braehead, Glasgow are each the primary centre in a strong
catchment, where CSC owns adjoining land and where retailer demand has been
identified. In each case, regional planning policies are progressing broadly
in line with CSC`s objectives and we anticipate that planning applications
will be submitted for two of the three during 2011. We estimate (reviewed by
DTZ) GBP170-175 million of development profit from these three projects
(equivalent to 19 pence per share), which we would expect that the valuers
will start to recognise in the valuation of these centres as the projects
progress. Development and ongoing operation of these extensions will generate
valuable new jobs for the communities served by the three centres.
Active management opportunities: In addition smaller active asset management
opportunities totalling GBP128 million across most of our centres, including
GBP50 million at The Trafford Centre, are progressing satisfactorily. These
generally have a lower risk profile and higher returns than the major
extensions and as such, we estimate that the added value is GBP107 million
(equivalent to 11 pence per share), which we would expect to recognise between
2011 and 2013. Examples include:
- a new flagship store for Primark at Metrocentre (works underway, planned
Autumn 2011 opening)
- a new 65,000 sq. ft. flagship store for Next at Eldon Square (shop fitting
underway for a pre-Easter opening)
- reconfiguration of former Borders store at Chapelfield, Norwich, to create
further catering (pre-let to Carluccios)
- creation of four new catering units at Braehead (three pre-let, opening
expected June 2011)
- six new stores and the doubling in size of an existing store for key US
brands Apple and Hollister
Lakeside, Victoria Centre, Braehead,
Thurrock Nottingham Glasgow
Estimated financials
Rental value (GBPm) 11-13 17-18 11-12
Development cost (GBPm) (1), (2) 140-160 225-250 140-150
Yield on cost 7.0-8.5% 7.0-8.0% 7.0-8.5%
Estimated area
Net approximate additional space
increase (`000 sq. ft.) 350 500 525
Total approximate space upon
completion (`000 sq. ft.) 1,800 1,500 1,600
Key dates
Planning expected to be submitted 2011 2011 2012
Active asset
management
Total opportunities
Estimated financials
Rental value (GBPm) 39-43 13-15
Development cost (GBPm) (1), (2) 505-560 128
Yield on cost 7.0-8.5% 10.0-12.0%
Estimated area
Net approximate additional space
increase (`000 sq. ft.) 1,375 N/A
Total approximate space upon
completion (`000 sq. ft.) 4,900 N/A
Key dates
Planning expected to be submitted Ongoing
(1) Management estimates (reviewed by DTZ) of GBP170-175 million of
development profit from identified extension opportunities, equivalent to 19
pence per share (at mid-point of estimated development profit)
(2) Active asset management projects of GBP128 million across existing
portfolio (including The Trafford Centre, including capitalised interest),
with added value of GBP107 million equivalent to 11 pence per share
The Trafford Centre
The acquisition of The Trafford Centre, announced in November 2010 and
completed on 28 January 2011, is a clear strategic fit for CSC and is in line
with the demerger objectives. We anticipate significant operating benefits
from combining the centre into CSC`s existing focused portfolio, including
strengthened retailer relationships and the addition of The Trafford Centre`s
successful leisure and catering offerings. In 2011 we will integrate the
complementary skills and expertise of The Trafford Centre team and draw upon
the combined talents to adopt more broadly the strongest features and best
operational practices of individual centres to improve the performance of all
of the enlarged Group`s assets. This process has already started with some
reorganisation of internal responsibilities and the establishment of
regionally focused teams.
PERFORMANCE IN 2010
CSC made good progress on its major priority for 2010 - to improve net rental
income, particularly from short-term lease re- lettings and larger space
renegotiations. Net rental income has increased 4 per cent in total and 2 per
cent like-for-like, following two years of intense letting activity. In 2010,
CSC has achieved 181 long term lettings, increasing annual rent by GBP16
million and closing the gap between contracted rent and ERV from 23 per cent
at 30 June 2010 to 18 per cent at 31 December 2010.
CSC`s other major objectives for 2010 were to progress the value-enhancing
organic growth opportunities and to complete the initial letting of St
David`s, Cardiff. Significant progress has been made in enhancing CSC`s
centres through their active management as retail and leisure destinations.
This is discussed in the Major Centres section below.
Net rental income
(GRAPHIC REMOVED - PLEASE SEE PAGE 6 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
Net rental income of GBP277 million for 2010 is 3.6 per cent above that of
2009. Like-for-like net rental income for 2010 is 2.1 per cent above that of
2009. After having seen positive letting activity for around twelve months,
the second half of 2010 saw these better terms come through in the form of
good income growth, turning around the first half`s reduced rate of decline to
achieve a full year increase.
Year ended 31 Year ended 31
December 2010 December 2009
GBPm GBPm
Rental income 350 341
Service charge income 60 59
Gross rental income 410 400
Rent payable (24) (21)
Service charge expense (64) (63)
Property operating expense (40) (37)
Bad debt and lease incentive write-offs (5) (12)
Net rental income 277 267
At the gross level, CSC`s rental income was 3 per cent higher than 2009
reflecting the completion of developments at Cardiff and Eldon Square and the
improved terms on replacement of short term concessionary leases. As the
retail environment has improved, bad debt and lease incentive write offs have
reduced significantly. Operating expenses have increased slightly, primarily
due to the full year of St David`s, Cardiff, and rent payable, the share of
net income paid to our partners through head lease arrangements such as at
Eldon Square, has increased in proportion to those centres` results.
Lettings
181 long term lettings have been completed in the year, for GBP28 million
aggregate annual passing rent, an increase of GBP16 million over previous rent
for those units:
- deals signed in the second half of 2010 reflected an improved letting
environment, on aggregate 8 per cent below ERV compared to 16 per cent below
in the first half of the year
- with the exception of a small number of strategic deals, the remainder of
the fourth quarter`s deals were at or around ERV
At 31 December 2010 CSC had 202 short term leases which represented 2 per cent
of passing rent and 7 per cent of ERV (2009 - 2 per cent and 7 per cent).
These are predominantly CSC`s smaller units, occupying only 4 per cent of
retail space (2009 - 7 per cent), with around 80 per cent smaller than 3,000
sq. ft.
Part of reversion crystallised
As a result of this letting activity, 5 percentage points of 30 June 2010`s 23
per cent potential uplift from contracted rent to ERV have been captured
leaving 18 per cent upside at 31 December 2010 (see Prospects and priorities
section).
New retailers
35 new retail partners were introduced to CSC centres in the year, with six
brands choosing a CSC centre for their first UK centre.
Retailer refits
Around one in six units in CSC`s centres were refitted by retailers in the
year, 139 in respect of new lettings and the balance by existing retailers.
This substantial investment represents a firm commitment on the part of
retailers and confidence in the quality of CSC`s centres.
Occupancy
(GRAPHIC REMOVED - PLEASE SEE PAGE 7 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
Occupancy remains high at 98.6 per cent (31 December 2009 - 97.8 per cent)
(including the new development areas of St David`s, Cardiff, 97.7 per cent (31
December 2009 - 95.9 per cent)). The rate of tenant failure continued to slow
with only 1 per cent of rent entering administration during the year (2009 - 8
per cent) and only 0.2 per cent in the second half of the year.
Footfall
Estimated footfall across CSC`s 13 centres was over 280 million in the year,
up 6 per cent in the year largely due to the successful opening of St David`s,
Cardiff. On a like for-like basis, footfall was up 3 per cent in 2010
following a 3 per cent increase in 2009. Retailer sales across CSC`s 13
centres are estimated to have increased 8 per cent year on year, driven by a
more than 70 per cent uplift at St David`s, Cardiff. Excluding this, sales at
the established centres increased by 3 per cent.
Major Centres
Lakeside, Thurrock, (GBP1,053 million, 18 per cent valuation surplus) has had
an excellent year with an extended flagship store for Primark opened and
trading well, 20 new long term lettings including Cult, Guess and Panasonic
and a broadened catering offer including Ed`s Easy Diner and Taco Bell`s first
UK store. The local regional planning framework, which is due to be adopted in
the summer of 2011, indicates scope for significant additional retail space in
the Lakeside area.
Metrocentre, Gateshead, (GBP843 million, 8 per cent valuation surplus). The
completion of the new leisure and catering offering, including Wagamama, TK
Maxx/Homesense and Handmade Burger, has revitalised the yellow quadrant and
driven an increase in retail spend. 39 new long term lettings have been
completed in 2010 including new brands to Metrocentre, Radley and Office. With
the 25th anniversary of opening approaching, good progress is being made in
extending leases nearing expiry. Around half of the anticipated peak in the
maturity profile has now been renegotiated. In January, an impressive new Next
Home store opened on the Retail Park, the first step in the planned evolution
of its retail mix.
Braehead, Glasgow, (GBP576 million, 13 per cent valuation surplus) has
benefited from the opening of the flagship Primark store in the former
Sainsbury`s location. In turn, H&M are due in March 2011 to open a flagship
store in the former Primark location. Five new brands have been signed up in
2010 including Apple and Hollister, who have chosen to locate flagship stores
at Braehead rather than competing retail areas. The broader Braehead
destination continues to evolve with the opening shortly of a major garden
centre and retail park planning applications in progress.
Arndale, Manchester, (GBP336 million, 16 per cent valuation surplus). The 2006
northern extension has evolved a more aspirational style during 2010 with the
addition of brands such as Bose, Pandora and Luke. Further, New Cathedral
Street now has the UK flagship Hugo Boss store, opened in November, in place
of Heal`s.
Eldon Square, Newcastle, (GBP250 million, 8 per cent valuation surplus). After
opening fully let in February 2010, the St Andrew`s Way mall has driven a 17
per cent increase in footfall through the centre. The development was
recognised by the British Council of Shopping Centres (BCSC) as achieving Gold
award standard in the Best In-town Retail Scheme category.
St David`s, Cardiff, (GBP243 million, 19 per cent valuation surplus) achieved
footfall of 37 million for 2010, well above target for its first full year
after opening. The new extension is now 83 per cent committed by income up
from approximately 65 per cent on opening day. 20 of 2010`s new lettings are
to retailers new to Wales, including Lego, Nike and Carluccios. We were
delighted that the development was awarded the British Council of Shopping
Centres (BCSC) Supreme Gold for Best In-town Retail Scheme.
CSC`s other centres have also seen tenant changes, particularly focused on
introduction of new international brands and enhancement of destination status
though leisure and catering offers. Chapelfield, Norwich now has flagship
Hollister and Clas Ohlson stores. We have plans for further catering in the
former Borders store at Chapelfield and at The Glades, Bromley.
Equity One transaction
Following receipt of appropriate regulatory, banking and tax clearances, the
completion of the transaction with Equity One relating to the restructuring of
the Group`s holding in C&C US took place on 4 January 2011. CSC now holds 4.1
million shares in Equity One and 11.4 million joint venture units redeemable
for cash or Equity One shares with an aggregate value of approximately $290
million based on Equity One`s share price at 19 February 2011.
INVESTMENT PROPERTY VALUATIONS
The UK commercial property investment market continued to experience valuation
recovery in 2010, following its turning point in mid 2009. In particular, good
quality property has continued to perform well while secondary assets have
remained under pressure. Prime shopping centres are proving increasingly
desirable to major international investors searching for quality UK
investments in an environment of low interest rates and relatively attractive
currency rates. Yields for prime shopping centres tightened significantly in
the first half and, after a cluster of transactions in the autumn, maintained
an inward progression while other sub-sectors slowed. Despite the recovery,
capital values as measured by the IPD UK monthly retail capital growth index
remain well below peak levels, currently at early 2003 levels. We are just
over a year on from the largest decline in UK commercial property values for
decades and valuation yields remain above CSC`s long-run average.
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The valuation outcome for CSC`s assets for the year was very positive. After a
2.6 per cent increase in the second half of 2009, values rose by 7.7 per cent
in the first half of 2010 and by 11.0 per cent for the full year. This
represents a significant out- performance of the IPD UK monthly retail capital
growth index which produced an increase of 7.5 per cent for the year.
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The majority of the valuation movement reflected changes in yield. CSC`s out-
performance was driven by the prime nature of the assets and the improvement
in passing rents including from re-letting of short term concessionary
tenancies on longer term leases at higher rents. While ERV remained steady in
the second half, passing rent increased by around 5 per cent, significantly
narrowing the reversionary gap. However, at 6.3 per cent, CSC`s weighted
average nominal equivalent yield is still well above its long run average
since 1994 of 6.0 per cent.
31 December 30 June 31 December
2010 2010 2009
CSC nominal equivalent yield 6.30% 6.52% 7.08%
CSC like-for-like revaluation surplus
(six months ended) 3.1% 7.7% 2.6%
IPD UK monthly retail capital growth
(six months ended) 1.1% 6.3% 11.3%
UK RETAIL PROPERTY MARKET
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CSC`s focus is the top 50 UK shopping centre locations, which comprise around
50 million sq. ft. of which CSC owns 33 per cent(1). Such centres are and will
remain rare and change hands infrequently. Shopping centres in total represent
only around 13 per cent of the UK`s 1.3 billion sq. ft. of retail space, the
top 50 centres representing only around 4 per cent. The highly regulated
planning environment combined with the recent challenging economic environment
for financing of new centres has contributed to a limited development
pipeline. Controlling stakes change hands very rarely - CSC`s acquisition of
The Trafford Centre on 28 January 2011 was the first example for a decade of
change in control of a top ten centre.
CSC owns 14 centres (1), including four of the UK`s top six out-of-town
centres and ten of the UK`s top 25 centres, attracting well over 300 million
customer visits (1) in 2010. CSC owns more pre-eminent shopping centres in the
UK than any other operator. Scale strengthens relationships with leading
national and international retailers. In particular it gives CSC the ability
to discuss national property strategy with expanding retailers and
international entrants.
(1) including The Trafford Centre, Manchester, acquired on 28 January 2011
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UK retail trade continues to concentrate into fewer locations. The structural
shift towards prime destinations with strong leisure and catering offerings
benefits CSC`s pre-eminent UK shopping centres. The chart illustrates that
since the early 1970s the number of locations required to serve 50 per cent of
the comparison goods market share has fallen by more than a half, from 200 to
90 locations.
CSC`s centres can offer the retailer flagship stores in top locations. Such
stores are increasingly becoming a crucial marketing tool for the retailer`s
brand. The development of other retail channels such as online shopping
reinforce the concentration of physical comparison retailing into the
destinations, such as CSC`s, most attractive to the shopper for retail and
broader entertainment. Online sales comprise only a small but growing
proportion of total retail spend - 8 per cent in 2010 according to ONS. The
most successful retailers now have an integrated approach to online and in-
store sales, with strong evidence of high levels of interaction between the
two. This is highlighted by the popularity of "click and collect" and "return
to store" facilities, both of which reinforce the need for a physical store
and produce incremental sales.
As a result, as successful UK and international retailers look to their growth
plans for the next couple of years we expect to see increased competition for
high profile, good quality space in those best locations. We have seen the
early signs of this trend in 2010, including some competitive bidding
situations, particularly for larger, well configured units and catering units,
resulting in rent settlements above ERV.
Stark evidence of the increasing disparity between top and other shopping
centres in the balance of retailer demand and space supply can be seen in the
vacancy figures on the chart below. Vacancy rates for secondary centres are
still increasing, whilst those for big centres have reduced during 2010. It is
worth noting that average rates for the top 50 are well below even the "big
centres" average illustrated here.
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FINANCIAL REVIEW
FINANCING STRATEGY AND FINANCIAL MANAGEMENT
In 2010 the Group`s financial management has focused on achieving the
successful demerger of Capco, addressing the appropriate financial management
and medium term funding structure for the demerged Group including the
acquisition of The Trafford Centre and continuing to support the organisation
in its efforts to drive trading recovery. Notable achievements include:
- Underlying earnings up by 29 per cent
- NAV per share at 390 pence; total return for the year 20 per cent
- Additional equity capital of GBP216 million net of costs raised which,
combined with increased property values, takes debt to assets ratio to within
targeted range at 48 per cent
- Interest cover ratio increased by 15 ppt to 156 per cent just below target
level of 160 per cent
As previously indicated, the Group`s preference was to bring the debt to
assets ratio within the 40-50 per cent range, which has now been achieved.
Following completion of the capital raise and The Trafford Centre acquisition,
the ratio now stands at 47 per cent. In respect of our additional funding aim,
to achieve interest cover greater than 160 per cent, it is encouraging to
report significant progress with the 2010 interest cover ratio improving by 15
percentage points to 156 per cent.
Comparative figures re-presented
The successful demerger of Capco and the joint venture agreement with Equity
One in respect of the C&C US business, which was completed in January 2011,
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 31 December 2009 is, however, still
included in the respective line categories in the balance sheet.
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 31 December 2009 is however still included in the
respective line categories in the balance sheet. C&C US is categorised as an
asset held for sale at 31 December 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 31 December 2010 balance sheet.
Income from C&C US has been included in the Group`s underlying earnings in
2010 as it is anticipated that following completion of the transaction with
Equity One in January 2011 there will be an ongoing income stream from Equity
One shares and joint venture units. A gain on disposal of C&C US of
approximately GBP26 million will be recorded in the Group`s 2011 results, with
the gain being largely due to a reduction in the deferred tax liability
associated with the Group`s investment in Equity One and joint venture units
compared to the liability in connection with C&C US.
A pro forma balance sheet analysis prepared as if the demerger and C&C US
transaction had occurred at 31 December 2009 is included in the Other
Information section of this report.
Acquisition of The Trafford Centre and associated Capital Raising
The Group successfully completed an equity capital raise in November 2010 in
connection with the acquisition of The Trafford Centre. The acquisition of The
Trafford Centre was not completed until 28 January 2011 and therefore the
impact, with the exception of certain costs of the transaction incurred in
2010, is not reflected in these financial statements. The associated capital
raising raised net cash proceeds of GBP216 million, through a Placing of 62.3
million new ordinary shares issued at 355 pence per share.
As part of The Trafford Centre acquisition in January 2011 Peel subscribed
GBP43.7 million for 12.3 million ordinary shares and GBP23.7 million for
convertible bonds with a nominal value of GBP26.7 million converting into 6.7
million ordinary shares at a conversion price of 400 pence, giving a total
cash inflow of GBP67.4 million. On completion of the acquisition the loan
secured on Barton Square of GBP81 million was repaid. As indicated in the
circular issued in November 2010, the Group also utilised GBP34 million of the
cash raised to re-profile certain interest rate swap contracts in January 2011
which will benefit underlying finance costs.
Completion of
Balance sheet 31 December sale of
2010 C&C US
GBPm GBPm
Investment, development and trading properties 5,076.5 -
Investments 45.2 179.3
Net external debt (2,436.5) (4.8)
Other assets and liabilities (539.2) (12.1)
C&C US net assets 147.3 (147.3)
Net assets 2,293.3 15.1
Minority interest (19.9) -
Attributable to equity shareholders 2,273.4 15.1(1)
Fair value of derivatives (net of tax) 314.9 -
Other adjustments 88.7 (33.2)(2)
Net assets (diluted, adjusted) 2,677.0 (18.1)
Net external debt (2,436.5)
Debt to assets ratio 48%
Diluted, adjusted NAV per share 390p
Impact of
The Trafford Pro forma
Centre 31 December
acquisition 2010
Balance sheet GBPm GBPm
Investment, development and trading properties 1,642.4 6,718.9
Investments (5.9) 218.6
Net external debt (747.3) (3,188.6)
Other assets and liabilities (99.0) (650.3)
C&C US net assets - -
Net assets 790.2 3,098.6
Minority interest - (19.9)
Attributable to equity shareholders 790.2 3,078.7
Fair value of derivatives (net of tax) 24.1 339.0
Other adjustments - 55.5
Net assets (diluted, adjusted) 814.3 3,473.2
Net external debt (3,188.6)
Debt to assets ratio 47%
Diluted, adjusted NAV per share 390p
(1) The gain on sale of C&C US of GBP25.8 million comprises the increase of
GBP15.1 million attributable to equity shareholders above plus GBP10.7 million
of foreign exchange gains that have previously been taken directly to equity
but are required to be recycled through the income statement on disposal.
(2) The other adjustment of GBP33.2 million is the difference between the
deferred tax liabilities as a result of the disposal of C&C US. Such deferred
tax liabilities are added back in the calculation of diluted, adjusted net
assets.
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
The results for the year ended 31 December 2010 reflect the improved
conditions in the UK commercial property market in 2010. This is most clearly
illustrated by the 11.0 per cent revaluation gain on the Group`s UK shopping
centres in the year. However, the general economic environment remains
challenging and it is therefore encouraging that the Group achieved growth in
both like-for-like net rental income and against the comparable 2009
underlying earnings per share, two of the Group`s key measures of performance.
Income statement
The Group recorded a profit for the period of GBP529 million, a substantial
improvement on the loss of GBP370 million recorded in the year ended 31
December 2009.
The GBP446 million profit from continuing operations in the year contrasts
favourably with the GBP187 million loss recorded in 2009. The 2010 results
include a GBP501 million gain on property valuations which is partially offset
by a GBP50 million non- cash charge due to the movement in the fair value of
derivative financial instruments. In contrast, the 2009 loss included a
significant deficit on property valuations, GBP535 million, which was
partially compensated by a GBP400 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 GBP83 million in the period, largely due to
property valuation gains.
Underlying earnings, as shown in the chart, which excludes valuation and
exceptional items, increased by GBP22 million to GBP97 million. However, the
growth in underlying earnings per share was restricted by the issue of 256
million new shares in the 2009 capital raises, resulting in the increase being
restricted to 0.3 pence per share from 15.1 pence to 15.4 pence.
The Group`s net rental income which increased by 4 per cent to GBP277 million
in the year benefitted from the income generated by the new developments at St
David`s, Cardiff and the St Andrew`s Way mall at Eldon Square, and an
encouraging return to like-for-like growth in the second half of the year.
More detail on the rental performance is included in the Business Review.
Administration expenses, excluding the GBP16 million exceptional costs,
reduced from GBP26 million in 2009 to GBP23 million in 2010. The saving
largely resulted from tight cost control and lower pension costs compared to
2009. In addition, costs, in particular employee related, have been reduced
following the demerger of Capco in May 2010.
Underlying net finance costs, which exclude exceptional items, reduced by
GBP10 million in 2010, with the benefit of the treasury strategy of loan
prepayments and interest rate swap amendments more than offsetting the GBP15
million reduction in capitalised interest compared to 2009 following
completion of the developments at St David`s, Cardiff and Eldon Square,
Newcastle.
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Exceptional costs incurred in the year included finance costs of GBP66 million
incurred in the first half of the year largely on interest rate swap amendment
costs, GBP28 million of which was in connection with the re-financing of the
Lakeside facility. Expenses relating to the Capco demerger amounted to GBP8
million in the period. These costs are classified as exceptional
administration costs. Exceptional administration costs in 2010 also include
GBP4 million of costs relating to the acquisition of The Trafford Centre with
the balance relating to the disposal of C&C US. Further costs relating to the
Trafford Centre acquisition and related financial advice of GBP15 million were
incurred in January 2011 and will be included in the Group`s 2011 results.
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 GBP2.3 billion, with
the reduction in net assets resulting from the demerger of Capco more than
offsetting the impact of the increase in property values recorded in 2010 and
equity capital raised. A pro forma balance sheet analysis prepared as if the
demerger and proposed sale of C&C US had occurred at 31 December 2009
indicates that the net assets at 31 December 2009 were GBP1.7 billion.
As detailed in the table below, net assets (diluted, adjusted) have increased
by GBP530 million with the property valuation gain of GBP501 million being the
most significant factor in the increase.
Balance sheet Pro forma (1)
31 December 31 December
2010 2009
GBPm GBPm
Investment, development and trading properties 5,076.5 4,618.0
Investments 45.2 39.1
Net external debt (2,436.5) (2,521.6)
Other assets and liabilities (539.2) (582.7)
C&C US net assets 147.3 127.3
Net assets 2,293.3 1,680.1
Minority interest (19.9) -
Attributable to equity shareholders 2,273.4 1,680.1
Fair value of derivatives (net of tax) 314.9 282.2
Other adjustments 88.7 83.8
Adjusted net assets 2,677.0 2,046.1
Effect of dilution - 101.3
Net assets (diluted, adjusted) 2,677.0 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, further details are included
in the Other Information section of this report.
The investments of GBP45.2 million as at 31 December 2010 largely comprises
the Group`s interests in India, being a 25 per cent interest in the shopping
centre developer, Prozone, and a 9.9 per cent interest in the listed Indian
retailer, Provogue, our joint venture partner in Prozone. The Aurangabad
centre (800,000 sq. ft.), Prozone`s first centre, which opened in October last
year has continued to trade satisfactorily with over 150,000 weekly visitors
on average. The number of retailers trading is expected to increase from 74
currently to around 90 by March 2011 with the multiplex cinema due to open in
April. Prozone anticipates starting work shortly on the Coimbatore project
where good progress is being made on design and signing anchor stores. The
Nagpur project is planned to follow thereafter.
The fair value provision for financial derivatives, principally interest rate
swaps, included in other assets and liabilities above, increased by GBP25
million largely as a consequence of the continued low UK interest rate
environment. The most significant factor in the elimination of the effect of
dilution from 31 December 2009 is the repayment of the GBP75 million
convertible bonds in September 2010, rather than their conversion to equity
capital.
Adjusted net assets per share
As illustrated in the chart below, diluted adjusted net assets per share of
390 pence at 31 December 2010 represents an increase of 15 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. The other reduction of 9 pence is
due to the repayment of the convertible bonds, as noted above, and the impact
of the capital raise in November 2010.
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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 minimise low income yielding cash held on the balance sheet
through repayment of debt.
2010 2009
GBPm GBPm
Underlying operating cash generated 250.7 252.9
Net finance charges paid (161.3) (166.8)
Exceptional finance and other costs (81.9) (38.6)
Net movement in working capital (8.3) (2.6)
Taxation/REIT entry charge (37.9) (32.0)
Cash flow from operations (38.7) 12.9
Property development/investments (51.6) (189.8)
Sale proceeds of property/investments 74.8 23.3
Other derivative financial instruments (26.2) -
Pension buy-out - (15.5)
Dividends (102.2) (23.0)
Cash flow before financing and equity raises (143.9) (192.1)
Net debt repaid (171.6) (241.0)
Equity capital raised 222.4 865.7
Impact of discontinued operations (248.7) 67.5
Others 21.7 (8.3)
Net (decrease)/increase in cash and cash equivalents (320.1) 491.8
The table below illustrates that recurring operating cash flow does not cover
the dividend in the year. Cash generation will increase as the impact of rent
free periods and incentives granted at recently completed developments reduce.
Also, cash flows from the US were affected by the finalisation process of the
Equity One transaction. It is anticipated that the Group will start to receive
dividends from its Equity One investment in 2011.
Dividends - cash cover 2010
Pence per
share
Underlying operating cash generated 39.9
Dividends received from C&C US (net of tax) 0.3
Net finance charges excluding exceptional items (25.7)
Net movement in working capital (1.3)
Recurring cash flow 13.2
2010 total dividends of 15.0p 15.0
2010 investment in property related assets was mainly limited to existing 2009
commitments, with the most significant expenditure in the period being in
respect of St David`s, Cardiff (GBP13 million), Eldon Square (GBP12 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 GBP75
million, including GBP54 million net proceeds received from the disposal of
Westgate, Oxford.
Net debt repayments of GBP172 million are discussed in the Debt structure and
maturity section below.
Capital commitments
The Group has an aggregate commitment to capital projects of GBP90 million at
31 December 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 loan facility secured on St David`s, Cardiff. In addition to the
committed expenditure, the Group has identified GBP128 million, including
GBP50 million at The Trafford Centre, of active asset management
opportunities. It is anticipated that GBP31 million relating to these projects
will be incurred in 2011.
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 during the year, was undrawn at 31 December
2010.
Net external debt decreased from GBP2,522 million at 31 December 2009 to
GBP2,437 million at 31 December 2010. The largest factor in the decrease is
the GBP216 million net proceeds received from the capital raise completed in
November 2010.
The Group had cash balances of GBP222 million at 31 December 2010. Available
undrawn facilities at that date 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. In January 2011
GBP56 million of the St David`s, Cardiff loan was drawn which, combined with
the acquisition of The Trafford Centre, gives the Group headroom of c. GBP500
million.
Pro forma (1) Pro forma (2)
31 December 31 December 31 December
Group debt ratios were as 2010 2010 2009
follows:
Debt to assets 48% 47% 55%
Interest cover 156% N/A 141%
Weighted average debt maturity 5.8 years 8.0 years 5.5 years
Weighted average cost of gross
debt 5.7% 5.9% 6.0%
Proportion of gross debt with
interest rate protection 94% 95% 104%
(1) The pro forma figures include The Trafford Centre balances following the
acquisition which was completed on 28 January 2011
(2) 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 48 per cent, a substantial improvement on the pro
forma level of 55 per cent at 31 December 2009.Adjusting for The Trafford
Centre acquisition to give indicative pro forma figures results in:
- the debt to assets ratio reducing to 47 per cent from 48 per cent as at 31
December 2010
- the weighted average debt maturity increasing to 8.0 years from 5.8 years as
at 31 December 2010
- the weighted average cost of gross debt increasing to 5.9 per cent from 5.7
per cent as at 31 December 2010
- proportion of gross debt with interest rate protection increasing to 95 per
cent from 94 per cent at 31 December 2010
Debt structure and maturity
The significant repayments of Group debt during 2010 were GBP36 million of
scheduled loan amortisation plus a voluntary GBP48 million prepayment on the
loan secured on Victoria Centre, Nottingham and the GBP75 million of
convertible bonds.
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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 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 GBP2.5 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.
As noted in the Interim Report in the first half of 2010 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, which 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 in April 2010, as part of a loan prepayment and covenant
moderation agreement which included the Loan to Value covenant being waived
until 2012.
The Group is in compliance with all of its corporate and asset-specific loan
covenants.
During the year a new GBP248 million revolving credit facility was put in
place with maturity in June 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 31
December 2010, the latest test date. Compliance with financial covenants is
and will continue to be constantly monitored.
Re-financing activity
The GBP546 million loan and associated CMBS notes secured on Lakeside,
Thurrock were scheduled to mature in July 2011 but were re-financed in January
2010 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 new
loan was partially hedged in 2010, with a significant exposure to low variable
interest rates which was a factor in reducing the Group`s average cost of debt
from 6.0 per cent to 5.7 per cent. The hedging arrangements require an
increasing level of protection from 60 per cent in 2010, to 75 per cent in
2011 and 2012, and 90 per cent thereafter until maturity.
As indicated in the circular issued in connection with the acquisition of The
Trafford Centre, the Group has repaid the GBP81 million loan secured on Barton
Square and also utilised GBP34 million of cash to re-profile certain interest
rate swap contracts in January 2011.
Interest rate hedging and fair value of financial instruments
At 31 December 2010 the fair value of the Group`s derivative financial
instruments was a net liability of GBP340 million. This liability includes the
Group`s derivative contracts to hedge both interest rate and currency risk.
During the period scheduled derivative payments of GBP97 million were made
plus GBP64 million of interest rate swap prepayments. However lower sterling
interest rates resulted in the liability increasing by GBP25 million from the
comparable pro forma balance at the end of 2009.
At 31 December 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.
Following completion of the Equity One transaction, the Group is reviewing its
currency hedging policy and therefore the existing currency swaps may 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 GBP147 million, including payments made in respect of
Capco prior to demerger, with GBP42 million paid in 2010. The remaining
balance of GBP21 million will be paid in 2011. The financial benefits to date
have amounted to GBP173 million, comprising net rental income and capital
gains sheltered from UK tax. In addition, an estimated GBP33 million will be
payable in respect of The Trafford Centre.
The tax charge on continuing operations in the period of GBP1 million
comprises the REIT entry financing charge of GBP3 million partially offset by
deferred tax credits on the revaluation of interest rate swaps.
The total tax charge on discontinued operations of GBP12 million comprises
GBP10 million deferred tax on the revaluation of the C&C US properties and
GBP2 million of irrecoverable withholding tax suffered on dividends paid by
C&C US.
Key risks and uncertainties
The key risks and uncertainties facing the Group are set out in the table
below:
Risk Description
Financing
Liquidity Reduced availability
Economic and property market downturn Property values decrease
Reduction in rental income
Macro economic conditions deteriorate
Interest cover Interest rates fluctuate
Market price risk of fixed rate Interest rates fluctuate resulting in
derivatives significant assets and or liabilities
derivative contracts
REIT Breach REIT conditions
PID requirements
Group`s ordinary shares are The Group`s ordinary shares are listed
dual- listed on the London and Johannesburg stock
exchanges
Joint Ventures Reliance on JV partners` performance
and reporting
Asset Management
Tenants Tenant failure
Voids Increased voids, failure to let
developments
Reputation
Responsibility for visitors to Failure of Health & Safety
shopping centres
Business interruption Lost access to centres or head office
People/HR
Staff Loss of key staff
Developments
Time Planning
Cost and letting risk Construction cost overrun, low
occupancy levels
Strategy
Defining and executing Group`s Inappropriate strategy defined or
strategy poor execution of strategic plans
Risk Impact
Financing
Liquidity Insufficient funds to meet operational
and financing needs
Economic and property market Impact on covenants and other loan
downturn agreement obligations
Interest cover Lack of certainty over interest costs
Market price risk of fixed rate Potential cash outflow if derivative
derivatives contract contains break clause
REIT Tax penalty or be forced to leave the
REIT regime Requirement to pay 90
per cent of income restricts ability
to retain cash for investment
Group`s ordinary shares are Additional complexity when assessing
dual-listed options for capital raising
Joint Ventures Partners underperform or provide
incorrect information
Asset Management
Tenants Financial loss
Voids Financial loss
Reputation
Responsibility for visitors to Impact on reputation or potential
shopping centres criminal/ civil proceedings
Business interruption Impact on footfall and tenant income
Adverse publicity
People/HR
Staff Adverse impact on the Group`s
performance
Developments
Time Securing planning consent for
developments
Cost and letting risk Returns reduced by increased costs or
delay in securing tenants
Strategy
Defining and executing Group`s Financial loss
strategy Sub-optimal returns
Reputational impact
Risk Mitigation
Financing
Liquidity Capital raisings have enhanced liquidity position
Regular reporting of current and projected position
to the Board
Efficient treasury management and active credit control
process
Economic and Regular monitoring of LTV and ICR covenants and
property market other obligations
downturn Covenant headroom monitored and maintained;
regular market valuations; focus on quality assets
Interest cover Hedging to establish long term certainty
Market price risk Manage derivative contracts to achieve a balance
of 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 Initial and subsequent assessment of tenant covenant
strength
Active credit control process
Voids Policy of active tenant mix management
Reputation
Responsibility for Annual audits carried out by independent external
visitors to consultants
shopping centres Heath & Safety policies in place
Business Documented Business Recovery Plans in place
interruption Security team training and procedure in shopping centres
Terrorism risks monitored
People/HR
Staff Succession planning; performance evaluation;
training and development; incentives & rewards
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; fixed cost contracts
Strategy
Defining and Experienced management team familiar with shopping
executing Group`s centre industry
strategy Use of research and third party diligence expertise as
required; Board review process
Directors` responsibilities
Statement of Directors` responsibilities
The statement of Directors` responsibilities has been prepared in relation to
the Group`s full Annual Report for the year ended 31 December 2010. Certain
parts of the Annual Report are not included within this announcement.
We confirm to the best of our knowledge:
- the Group financial statements, which have been prepared in accordance with
IFRS`s as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and
- the Business Review includes a fair review of the development and
performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that it faces.
Signed on behalf of the Board on 23 February 2011
David Fischel
Chief Executive
Matthew Roberts
Finance Director
Consolidated income statement
for the year ended 31 December 2010
Re-presented
2010 2009
Notes GBPm GBPm
Continuing operations
Revenue 2 420.3 405.0
Net rental income 2 276.9 267.3
Net other income 3 0.7 4.9
Revaluation and sale of investment and
development property 4 497.2 (535.7)
Sale and impairment of other investments (2.6) (10.1)
Administration expenses - ongoing (23.0) (26.2)
Administration expenses - exceptional (15.6) -
Operating profit/(loss) 733.6 (299.8)
Finance costs 5 (165.4) (174.8)
Finance income 3.1 3.7
Other finance costs 6 (75.1) (48.2)
Change in fair value of derivative
financial instruments (50.0) 399.6
Net finance (costs)/income (287.4) 180.3
Profit/(loss) before tax 446.2 (119.5)
Current tax 7 (0.1) 2.9
Deferred tax 7 2.8 (67.1)
REIT entry charge 7 (3.3) (3.1)
Taxation 7 (0.6) (67.3)
Profit/(loss) for the year from continuing
operations 445.6 (186.8)
Profit/(loss) for the year from
discontinued operations 21 83.0 (183.3)
Profit/(loss) for the year 528.6 (370.1)
Attributable to:
Equity shareholders of CSC Group PLC
- Continuing operations 428.8 (175.1)
- Discontinued operations 83.0 (163.7)
511.8 (338.8)
Non-controlling interest 16.8 (31.3)
528.6 (370.1)
Basic earnings/(loss) per share
From continuing operations 9 68.3p (35.2)p
From discontinued operations 9 13.2p (32.9)p
9 81.5p (68.1)p
Diluted earnings/(loss) per share
From continuing operations 9 67.5p (34.0)p
From discontinued operations 9 13.0p (32.1)p
9 80.5p (66.1)p
Profit/(loss) for the year from
discontinued operations arises from:
Demerged operations 21 59.3 (124.4)
C&C US 21 23.7 (58.9)
83.0 (183.3)
Underlying earnings per share are shown in note 9.
Consolidated statement of comprehensive income
for the year ended 31 December 2010
2010 2009
Notes GBPm GBPm
Profit/(loss) for the year 528.6 (370.1)
Other comprehensive income
Revaluation of other investments 17.2 (5.3)
Realise revaluation reserve on disposal of other
investments 2.6 4.5
Exchange differences (1.1) 2.2
Actuarial loss on defined benefit pension schemes - (14.8)
Tax on items taken to other comprehensive income 7 (2.8) (2.8)
Other comprehensive income for the year 15.9 (16.2)
Total comprehensive income for the year 544.5 (386.3)
Attributable to: 527.7 (354.7)
Equity shareholders of CSC Group PLC 16.8 (31.6)
Non-controlling interest 544.5 (386.3)
Total comprehensive income attributable to equity
shareholders of
CSC Group PLC arises from: 432.6 (163.0)
Continuing operations 95.1 (191.7)
Discontinued operations 527.7 (354.7)
Consolidated balance sheet
as at 31 December 2010
Re-presented
2010 2009
Notes GBPm GBPm
Non-current assets
Investment and development property 11 5,051.0 6,182.6
Plant and equipment 4.1 1.9
Investment in associate companies 28.8 26.8
Other investments 16.4 58.3
Derivative financial instruments 24.2 15.0
Trade and other receivables 13 76.7 69.8
5,201.2 6,354.4
Current assets
Trading property 12 25.5 24.2
Current tax assets 4.1 1.1
Trade and other receivables 13 50.2 86.1
Cash and cash equivalents 14 222.3 582.5
C&C US - assets 21 423.9 -
726.0 693.9
Total assets 5,927.2 7,048.3
Current liabilities
Trade and other payables 15 (194.4) (285.2)
Borrowings 16 (46.0) (148.5)
Derivative financial instruments (9.3) (14.3)
C&C US - liabilities 21 (276.6) -
(526.3) (448.0)
Non-current liabilities
Borrowings 16 (2,751.5) (3,740.1)
Derivative financial instruments (354.6) (371.8)
Deferred tax provision 18 - (37.1)
Other provisions (1.2) (8.6)
Other payables (0.3) (21.6)
(3,107.6) (4,179.2)
Total liabilities (3,633.9) (4,627.2)
Net assets 2,293.3 2,421.1
Equity
Share capital 19 346.3 311.3
Share premium 20.4 1,005.7
Treasury shares 20 (29.9) (9.7)
Convertible bond reserve - 6.7
Other reserves 526.5 286.9
Retained earnings 1,410.1 820.2
Attributable to equity shareholders of
CSC Group PLC 2,273.4 2,421.1
Non-controlling interest 19.9 -
Total equity 2,293.3 2,421.1
Consolidated statement of changes in equity
for the year ended 31 December 2010
Attributable to equity shareholders of CSC Group PLC
Convertible
Share Share Treasury bond
capital premium shares reserve
GBPm GBPm GBPm GBPm
At 1 January 2010 311.3 1,005.7 (9.7) 6.7
Profit for the year - - - -
Other comprehensive income:
Revaluation of other investments - - - -
Realise revaluation reserve
on disposal of other investments - - - -
Exchange differences - - - -
Tax on items taken to other
comprehensive income - - - -
Total comprehensive income
for the year - - - -
Ordinary shares issued 35.0 20.4 - -
Dividends paid - - - -
Redemption and conversion of
convertible bonds - - - (6.7)
Non-controlling interest
additions - - - -
Share based payments - - - -
Acquisition of treasury shares - - (20.9) -
Disposal of treasury shares - - 0.7 -
Other - - - -
Reduction of capital (note 21) - (1,005.7) - -
Demerger effected by way of
repayment of capital (note 21) - - - -
35.0 (985.3) (20.2) (6.7)
At 31 December 2010 346.3 20.4 (29.9) -
Other Retained
reserves earnings Total
GBPm GBPm GBPm
At 1 January 2010 286.9 820.2 2,421.1
Profit for the year - 511.8 511.8
Other comprehensive income:
Revaluation of other investments 17.2 - 17.2
Realise revaluation reserve
on disposal of other investments 2.6 - 2.6
Exchange differences (1.1) - (1.1)
Tax on items taken to other
comprehensive income (2.8) - (2.8)
Total comprehensive income for the year 15.9 511.8 527.7
Ordinary shares issued 185.1 - 240.5
Dividends paid - (102.8) (102.8)
Redemption and conversion of convertible bonds - 6.7 -
Non-controlling interest additions - - -
Share based payments - 1.0 1.0
Acquisition of treasury shares - - (20.9)
Disposal of treasury shares - 5.3 6.0
Other - 0.6 0.6
Reduction of capital (note 21) - 1,005.7 -
Demerger effected by way of
repayment of capital (note 21) 38.6 (838.4) (799.8)
223.7 78.1 (675.4)
At 31 December 2010 526.5 1,410.1 2,273.4
Non-
controlling Total
interest equity
GBPm GBPm
At 1 January 2010 - 2,421.1
Profit for the year 16.8 528.6
Other comprehensive income:
Revaluation of other investments - 17.2
Realise revaluation reserve on disposal of other investments - 2.6
Exchange differences - (1.1)
Tax on items taken to other comprehensive income - (2.8)
Total comprehensive income for the year 16.8 544.5
Ordinary shares issued - 240.5
Dividends paid - (102.8)
Redemption and conversion of convertible bonds - -
Non-controlling interest additions 3.1 3.1
Share based payments - 1.0
Acquisition of treasury shares - (20.9)
Disposal of treasury shares - 6.0
Other - 0.6
Reduction of capital (note 21) - -
Demerger effected by way of
repayment of capital (note 21) - (799.8)
3.1 (672.3)
At 31 December 2010 19.9 2,293.3
Consolidated statement of changes in equity
for the year ended 31 December 2009
Attributable to equity shareholders of CSC Group PLC
Convertible
Share Share Treasury bond
capital premium shares reserve
GBPm GBPm GBPm GBPm
At 1 January 2009 182.6 993.4 (10.8) 7.6
Loss for the year - - - -
Other comprehensive income:
Revaluation of other investments - - - -
Realise revaluation reserve
on disposal of other investments - - - -
Exchange differences - - - -
Actuarial loss on defined
benefit pension schemes - - - -
Tax on items taken to other
comprehensive income - - - -
Total comprehensive income
for the year - - - -
Ordinary shares issued 128.0 - - -
Realisation of merger reserve - - - -
Dividends paid - - - -
Conversion of convertible bonds 0.7 12.3 - (0.9)
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 (0.9)
At 31 December 2009 311.3 1,005.7 (9.7) 6.7
Other Retained
reserves earnings Total
GBPm GBPm GBPm
At 1 January 2009 287.3 497.9 1,958.0
Loss for the year - (338.8) (338.8)
Other comprehensive income:
Revaluation of other investments (5.3) - (5.3)
Realise 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) (14.5)
Tax on items taken to other
comprehensive income (2.0) (0.8) (2.8)
Total comprehensive income for the year (0.6) (354.1) (354.7)
Ordinary shares issued 737.7 - 865.7
Realisation of merger reserve (737.7) 737.7 -
Dividends paid - (28.2) (28.2)
Conversion of convertible bonds - 0.9 13.0
Loss of control of deemed subsidiary - - -
Increase in partner capital - 0.3 0.3
Non-controlling interest additions - - -
Purchase of non-controlling interest - (34.3) (34.3)
Share based payments 0.2 - 0.2
Acquisition of treasury shares - - (0.2)
Disposal of treasury shares - - 1.3
0.2 676.4 817.8
At 31 December 2009 286.9 820.2 2,421.1
Non-
controlling Total
interest equity
GBPm GBPm
At 1 January 2009 27.8 1,985.8
Loss for the year (31.3) (370.1)
Other comprehensive income:
Revaluation of other investments - (5.3)
Realise revaluation reserve on disposal of other investments - 4.5
Exchange differences - 2.2
Actuarial loss on defined benefit pension schemes (0.3) (14.8)
Tax on items taken to other comprehensive income - (2.8)
Total comprehensive income for the year (31.6) (386.3)
Ordinary shares issued - 865.7
Realisation of merger reserve - -
Dividends paid - (28.2)
Conversion of convertible bonds - 13.0
Loss of control of deemed subsidiary (8.0) (8.0)
Increase in partner capital - 0.3
Non-controlling interest additions 11.8 11.8
Purchase of non-controlling interest - (34.3)
Share based payments - 0.2
Acquisition of treasury shares - (0.2)
Disposal of treasury shares - 1.3
3.8 821.6
At 31 December 2009 - 2,421.1
Consolidated statement of cash flows
for the year ended 31 December 2010
Re-presented
2010 2009
Notes GBPm GBPm
Cash flows from continuing operations
Cash generated from operations 24 226.8 250.3
Interest paid (229.1) (221.9)
Interest received 1.5 16.5
Taxation 2.2 1.1
REIT entry charge (40.1) (33.1)
Cash flows from operating activities (38.7) 12.9
Cash flows from investing activities
Purchase and development of property, plant
& equipment (47.4) (189.8)
Sale of property 64.4 4.6
Sale of other investments 10.4 18.7
Purchase of other investments (4.2) -
Purchase of pension insurance policy - (15.5)
Other derivative financial instruments (26.2) -
Cash flows from investing activities (3.0) (182.0)
Cash flows from financing activities
Partnership equity introduced 3.1 11.7
Issue of ordinary shares 222.4 865.7
Acquisition of treasury shares (1.4) (0.2)
Sale of treasury shares 0.2 -
Cash transferred from/(to) restricted
accounts 14 19.8 (19.8)
Borrowings drawn 518.7 237.3
Borrowings repaid (690.3) (478.3)
Equity dividends paid (102.2) (23.0)
Cash flows from financing activities (29.7) 593.4
Net (decrease)/increase in cash and cash
equivalents from continuing operations (71.4) 424.3
Cash flows from discontinued operations
Operating activities 0.3 9.6
Investing activities (1.2) 119.7
Financing activities (69.0) (60.6)
Cash and cash equivalents transferred on
demerger (179.2) -
Effect of exchange rate changes on cash and
cash equivalents 0.4 (1.2)
Net (decrease)/increase in cash and cash
equivalents from discontinued operations (248.7) 67.5
Net (decrease)/increase in cash and cash
equivalents (320.1) 491.8
Cash and cash equivalents at 1 January 562.7 70.9
Cash and cash equivalents at 31 December 14 242.6 562.7
Notes
1 Accounting convention and basis of preparation
The financial information does not constitute the Group`s statutory accounts
for either the year ended 31 December 2010 or the year ended 31 December 2009,
but is derived from those accounts. The Group`s statutory accounts for 2009
have been delivered to the Registrar of Companies and those for 2010 will be
delivered following the Company`s annual general meeting. The auditors`
reports on both the 2009 and 2010 accounts were not qualified or modified; did
not draw attention to any matters by way of an emphasis of matter; and did not
contain any statement under Section 498 of the Companies Act 2006.
The financial statements have been prepared in accordance with International
Financial Reporting Standards, as adopted by the European Union (IFRS), IFRIC
interpretations and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The financial statements have been prepared under the historical cost
convention as modified by the revaluation of properties, available- for-sale
investments, financial assets and liabilities held for trading. A summary of
the more important Group accounting policies is given in note 2 to the Annual
Report.
The accounting policies used are consistent with those applied in the last
annual financial statements, as amended to reflect the adoption of new
standards, amendments, and interpretations which became effective in the year.
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 project.
These either had no material impact on the financial statements or resulted in
changes to presentation and disclosure only.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on management`s best
knowledge of the amount, event or actions, actual results ultimately may
differ from those estimates. Where such judgements are made they are included
within the accounting policies given in note 2 to the Annual Report.
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 year ended 31
December 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 following standards and interpretations have been issued and adopted by
the EU but are not effective for the year ended 31 December 2010 and have not
been adopted early:
IAS 24 Related Party Transactions;
IAS 32 Financial Instruments: Presentation (amendment);
IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction (amendment); and
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.
These pronouncements are not expected to have a material impact on the
financial statements, but will result in changes to presentation or disclosure
where they are applicable.
The Group`s business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chairman`s
Statement and the Business Review. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are described in the
Financial Review. In addition note 32 to the Annual Report includes the
Group`s risk management objectives, details of its financial instruments and
hedging activities, its exposures to liquidity risk and details of its capital
structure.
Following the successful GBP216 million, net of expenses, capital raising
completed in November 2010 and the completion of The Trafford Centre
acquisition in January 2011, the Group has access to a substantial cash
balance and a GBP248 million undrawn revolving credit facility. The Group has
no major asset-specific debt refinancing requirements until 2014.
The Directors have therefore concluded, based on the Group`s forecasts and
projections and taking into account reasonably possible changes in trading
performance along with the factors listed above, that there is a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing the annual financial statements.
2 Segmental reporting
Operating segments are determined based on the internal reporting and
operational management of the Group. Following the demerger of Capco (see note
21) 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.
2010 2009
GBPm GBPm
Revenue 420.3 405.0
Rent receivable 350.4 341.1
Service charge income 59.6 58.9
410.0 400.0
Rent payable (23.7) (21.4)
Service charge and other non-recoverable costs (109.4) (111.3)
Net rental income 276.9 267.3
Additional disclosures for the UK Shopping Centres segment:
2010 2009
GBPm GBPm
Depreciation 0.4 0.2
Additions to non-current assets1 37.5 163.6
1 Excluding financial instruments and deferred tax assets
The Group`s geographical segments are set out below. This represents where the
Group`s assets and revenues are predominantly domiciled.
Revenue 1 Non-current assets 2
2010 2009 2010 2009
GBPm GBPm GBPm GBPm
United Kingdom 420.3 405.0 5,137.7 5,956.9
United States - - - 351.0
India - - 39.3 31.5
420.3 405.0 5,177.0 6,339.4
1 Revenue is presented for continuing operations only
2 Non-current assets excluding financial instruments and deferred tax assets
3 Net other income
2010 2009
GBPm GBPm
Sale of trading property 10.3 -
Cost of sales (9.3) -
Profit on sale of trading property 1.0 -
Write down of trading property (0.3) (0.1)
Insurance recovery - 5.0
Net other income 0.7 4.9
4 Revaluation and sale of investment and development property
2010 2009
GBPm GBPm
Revaluation of investment and development property 500.6 (534.7)
Sale of investment property (3.4) (1.0)
Revaluation and sale of investment and development property 497.2 (535.7)
5 Finance costs
2010 2009
GBPm GBPm
On bank and overdrafts loans 160.8 184.9
On convertible debt 2.3 2.9
On obligations under finance leases 4.0 4.1
Gross finance costs 167.1 191.9
Interest capitalised on developments (1.7) (17.1)
Finance costs 165.4 174.8
6 Other finance costs
2010 2009
GBPm GBPm
Metrocentre amortisation of compound financial instrument 8.8 9.6
Loss on sale/repurchase of CMBS notes1 - 4.3
Revolving credit facility arrangement fee1 1.2 5.4
Cost of termination of derivative financial instruments1 65.1 28.9
Other finance costs 75.1 48.2
1 Amounts totalling GBP66.3 million in the year ended 31 December 2010 are
treated as exceptional and therefore excluded from the calculation of
underlying earnings (2009 - GBP38.6 million).
7 Taxation
2010 2009
Taxation charge for the year GBPm GBPm
Current UK corporation tax at 28% (2009 - 28%) - -
Prior year items - UK corporation tax 0.1 (2.9)
Current tax 0.1 (2.9)
Deferred tax:
On investment and development property 0.4 (0.2)
On derivative financial instruments (2.6) 69.5
On exceptional items (0.6) (2.2)
Deferred tax (2.8) 67.1
REIT entry charge 3.3 3.1
Total tax charge 0.6 67.3
The tax charge for the year is lower (2009 - higher) than the standard rate of
corporation tax in the UK. The differences are explained below:
2010 2009
GBPm GBPm
Profit/(loss) before tax 446.2 (119.5)
Profit/(loss) before tax multiplied by the standard rate
in the UK of 28% (2009 - 28%) 124.9 (33.5)
UK capital allowances not reversing on sale (4.2) (4.1)
Disposals of properties and investments (17.1) (2.4)
Prior year corporation tax items 0.1 (2.8)
Prior year deferred tax items 1.0 4.5
Expenses disallowed, net of capitalised interest 5.9 (3.4)
Interest disallowed under transfer pricing 0.6 1.9
Group relief - 1.9
REIT exemption - corporation tax 6.8 (13.4)
REIT exemption - deferred tax (130.8) 134.1
REIT exemption - entry charge 3.3 3.1
Unutilised losses carried forward 1.2 0.9
Unprovided deferred tax 8.0 (19.5)
Reduction in tax rate 0.9 -
Total tax charge 0.6 67.3
Tax on items taken to other comprehensive income is analysed as:
2010 2009
GBPm GBPm
Investment and development property (0.1) -
Pension liability movements - 0.8
Revaluation and sale of investments 2.9 2.0
Tax on items taken to other comprehensive income 2.8 2.8
8 Dividends
2010 2009
GBPm GBPm
Ordinary shares
Prior period final dividend paid of 11.5 pence per share (2009
- nil pence per share) 71.4 -
Interim dividend paid of 5 pence per share (2009 - 5 pence per
share) 31.4 28.2
Dividends paid 102.8 28.2
Proposed final dividend of 10 pence per share 85.9
Details of the shares in issue and dividends waived are given in notes 19 and
20.
9 Earnings per share
(a) Earnings per share
Basic and diluted earnings per share as calculated in accordance with IAS 33
Earnings per Share.
2010
Earnings Shares Pence per
GBPm million share
Continuing operations
Basic earnings/(loss) per share(1) 428.8 627.8 68.3p
Dilutive convertible bonds, share options
and share awards 1.7 9.7
Diluted earnings/(loss) per share 430.5 637.5 67.5p
Discontinued operations:
Basic earnings/(loss) per share1 83.0 627.8 13.2p
Dilutive convertible bonds, share options
and share awards - 9.7
Diluted earnings/(loss) per share 83.0 637.5 13.0p
Continuing and discontinued operations:
Basic earnings/(loss) per share(1) 511.8 627.8 81.5p
Dilutive convertible bonds, share options
and share awards 1.7 9.7
Diluted earnings/(loss) per share 513.5 637.5 80.5p
2009
Earnings Shares Pence 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 calculation 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.
2010 2009
Gross Net 1 Gross Net 1
GBPm GBPm GBPm GBPm
Basic earnings/(loss) 511.8 (338.8)
Remove:
Revaluation and sale of investment
and development property (580.5) (547.5) 768.3 704.9
Sale and impairment of other
investments 2.6 2.6 10.4 10.4
Impairment of other receivables - - 12.0 12.0
Exceptional other income - - (5.3) (5.3)
Headline (loss)/earnings (33.1) 383.2
Dilution(2) 1.7 1.5
Diluted headline (loss)/earnings (31.4) 384.7
Weighted average number of shares 627.8 497.7
Dilution(2) 9.7 12.3
Diluted weighted average number of shares 637.5 510.0
Headline (loss)/earnings per share (pence) (5.3)p 77.0p
Diluted headline (loss)/earnings per
share (pence) (4.9)p 75.4p
1 Net of tax and non-controlling interest.
2 The dilution impact is required to be included as for earnings per share as
calculated in note 9(a) even where this is not dilutive for headline earnings
per share.
(c) Underlying earnings per share
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.
2010
Earnings Shares Pence per
GBPm million share
Basic earnings/(loss) per share from
continuing operations(1) 428.8 627.8
68.3p
Remove:
Revaluation and sale of investment and
development property (497.2) (79.2)p
Sale and impairment of other investments 2.6 0.4p
Exceptional administration costs 15.6 2.5p
Exceptional other income - -
Exceptional finance charges 66.3 10.6p
Change in fair value of derivative
financial instruments 50.0 8.0p
Tax on the above (2.8) (0.4)p
REIT entry charge 3.3 0.5p
Non-controlling interest in respect of the
above 19.1 3.0p
Add:
C&C US underlying earnings included within
discontinued operations 10.9 1.7p
Underlying earnings per share 96.6 627.8 15.4p
Dilutive convertible bonds, share options
and share awards 1.7 9.7
Underlying, diluted earnings per share 98.3 637.5 15.4p
2009
Earnings Shares Pence 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
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.
10 Net assets per share
NAV per share (diluted, adjusted) is a non-GAAP measure but has been included
as it is considered to be a key measure of the Group`s results.
2010
Net NAV per
assets Shares share
GBPm million (pence)
NAV attributable to equity shareholders of
CSC Group PLC(1) 2,273.4 685.8
331p
Dilutive convertible bonds, share options
and share awards - -
Diluted NAV 2,273.4 685.8 331p
Add:
Unrecognised surplus on trading properties
(net of tax) 1.4 -
Remove:
Fair value of derivative financial instruments
(net of tax) 314.9 46p
Deferred tax on investment and development
property 47.7 7p
Non-controlling interest in respect of the
above (31.7) (5)p
Add:
Non-controlling interest recoverable balance
not recognised 71.3 11p
NAV per share (diluted, adjusted) 2,677.0 685.8 390p
2009
Net NAV per
assets Shares share
GBPm million (pence)
NAV attributable to equity shareholders of
CSC Group PLC1 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 in respect of
the above (27.1) (5)p
Add:
Non-controlling interest recoverable balance
not recognised 71.3 11p
NAV per share (diluted, adjusted) 2,945.9 634.3 464p
(1) The number of shares used has been adjusted for shares held in the ESOP
and treasury shares.
11 Investment and development property
Freehold Leasehold Total
GBPm GBPm GBPm
At 1 January 2009 4,001.8 3,072.6 7,074.4
Additions from acquisitions - 1.5 1.5
Additions from subsequent expenditure 94.4 109.3 203.7
Loss of deemed control of former
subsidiary (94.4) - (94.4)
Other disposals (212.9) (8.6) (221.5)
Foreign exchange movements (49.0) - (49.0)
Deficit on revaluation (376.3) (355.8) (732.1)
At 31 December 2009 3,363.6 2,819.0 6,182.6
C&C US balances transferred to assets
held for sale (338.0) - (338.0)
Additions from subsequent expenditure 12.1 17.5 29.6
Other disposals (36.1) (31.1) (67.2)
Transferred to trading property - (16.1) (16.1)
Surplus on revaluation 331.4 230.1 561.5
Transferred on demerger (note 21) (653.1) (648.3) (1,301.4)
At 31 December 2010 2,679.9 2,371.1 5,051.0
2010 2009
GBPm GBPm
Balance sheet carrying value of investment and development
property 5,051.0 6,182.6
Adjustment in respect of tenant incentives 86.8 83.2
Adjustment in respect of head leases (38.7) (47.1)
Market value of investment and development property 5,099.1 6,218.7
Included within investment and development property additions during the year
is GBP1.7 million (2009 - GBP19.0 million) of interest capitalised on
developments in progress.
The fair value of the Group`s investment and development properties as at 31
December 2010 was determined by independent external valuers at that date. The
valuations conform with the Royal Institution of Chartered Surveyors ("RICS")
Valuation Standards 6th Edition and with IVS 1 of International Valuation
Standards, and were 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.
There are certain restrictions on the realisability of investment property
when a credit facility is in place. In most circumstances the Group can
realise up to 50 per cent without restriction providing the Group continues to
manage the asset. Realising an amount in excess of this would trigger a change
of control and mandatory repayment of the facility.
12 Trading property
2010 2009
GBPm GBPm
Undeveloped sites 11.5 24.2
Property in development 11.1 -
Completed properties 2.9 -
25.5 24.2
The estimated replacement cost of trading properties based on market value
amounted to GBP27.4 million (2009 - GBP25.0 million).
13 Trade and other receivables
2010 2009
GBPm GBPm
Current
Rents receivable 15.5 27.8
Other receivables 12.7 20.3
Prepayments and accrued income 22.0 38.0
50.2 86.1
Non-current
Other receivables 0.2 11.3
Prepayments and accrued income 76.5 58.5
76.7 69.8
Included within prepayments and accrued income are tenant lease incentives of
GBP86.8 million (2009 - GBP83.2 million).
14 Cash and cash equivalents
2010 2009
GBPm GBPm
Unrestricted cash 222.3 562.7
Restricted cash - 19.8
222.3 582.5
Cash and cash equivalents per the statement of cash flows:
Unrestricted cash 222.3 562.7
C&C US - classified as held for sale 20.3 -
242.6 562.7
Restricted cash at 31 December 2009 related to amounts placed on deposit to
ensure continued compliance with certain loan facility financial covenants.
15 Trade and other payables
2010 2009
GBPm GBPm
Current
Rents received in advance 74.7 98.7
Trade payables 2.7 1.0
Accruals and deferred income 64.0 99.9
Other payables 16.0 30.2
Other taxes and social security 37.0 55.4
194.4 285.2
16 Borrowings
Carrying 2010
value Secured Unsecured
GBPm GBPm GBPm
Current
Bank loans and overdrafts 16.5 16.5 -
Commercial mortgage backed securities
("CMBS") notes 25.4 25.4 -
Borrowings, excluding finance leases 41.9 41.9 -
Finance lease obligations 4.1 4.1 -
46.0 46.0 -
Non-current
CMBS notes 2015 1,005.9 1,005.9 -
Bank loan 2014 58.4 58.4 -
Bank loans 2016 749.1 749.1 -
Bank loan 2017 511.1 511.1 -
Debentures 2027 226.9 226.9 -
CSC bonds 2013 26.7 - 26.7
Borrowings excluding finance leases and
Metrocentre
compound financial instrument 2,578.1 2,551.4 26.7
Metrocentre compound financial instrument 138.7 - 138.7
Finance lease obligations 34.7 34.7 -
2,751.5 2,586.1 165.4
Total borrowings 2,797.5 2,632.1 165.4
Cash and cash equivalents (222.3)
Net debt 2,575.2
Fixed Floating Fair
rate rate value
GBPm GBPm GBPm
Current
Bank loans and overdrafts - 16.5 16.5
Commercial mortgage backed securities
("CMBS") notes - 25.4 20.0
Borrowings, excluding finance leases - 41.9 36.5
Finance lease obligations 4.1 - 4.1
Non-current 4.1 41.9 40.6
CMBS notes 2015 - 1,005.9 794.6
Bank loan 2014 - 58.4 58.4
Bank loans 2016 - 749.1 749.1
Bank loan 2017 - 511.1 511.1
Debentures 2027 226.9 - 196.5
CSC bonds 2013 26.7 - 27.3
Borrowings excluding finance leases and
Metrocentre
compound financial instrument 253.6 2,324.5 2,337.0
Metrocentre compound financial instrument - 138.7 138.7
Finance lease obligations 34.7 - 34.7
288.3 2,463.2 2,510.4
Total borrowings 292.4 2,505.1 2,551.0
Cash and cash equivalents
Net debt
Net external debt (adjusted for Metrocentre compound financial instrument) at
31 December 2010 was GBP2,436.5 million.
2009
Carrying
value Secured Unsecured
GBPm GBPm GBPm
Current
Bank loans and overdrafts 30.0 30.0 -
Commercial mortgage backed securities
("CMBS") notes 33.5 33.5 -
3.95% convertible bonds due 2010 79.2 - 79.2
Borrowings, excluding finance leases 142.7 63.5 79.2
Finance lease obligations 5.8 5.8 -
148.5 69.3 79.2
Non-current
CMBS notes 2011 417.7 417.7 -
CMBS notes 2015 1,030.6 1,030.6 -
Bank loan 2011 100.0 100.0 -
Bank loan 2012 147.0 147.0 -
Bank loans 2013 633.4 633.4 -
Bank loan 2014 60.0 60.0 -
Bank loans 2016 809.3 809.3 -
Bank loan 2017 117.5 117.5 -
Debentures 2027 226.6 226.6 -
CSC bonds 2013 26.8 - 26.8
Borrowings excluding finance leases and
Metrocentre
compound financial instrument 3,568.9 3,542.1 26.8
Metrocentre compound financial instrument 129.9 - 129.9
Finance lease obligations 41.3 41.3 -
3,740.1 3,583.4 156.7
Total borrowings 3,888.6 3,652.7 235.9
Cash and cash equivalents (582.5)
Net debt 3,306.1
Fixed Floating Fair
rate rate value
GBPm GBPm GBPm
Current
Bank loans and overdrafts 11.5 18.5 30.0
Commercial mortgage backed securities ("CMBS")
notes - 33.5 25.8
3.95% convertible bonds due 2010 79.2 - 79.3
Borrowings, excluding finance leases 90.7 52.0 135.1
Finance lease obligations 5.8 - 5.8
96.5 52.0 140.9
Non-current
CMBS notes 2011 - 417.7 376.1
CMBS notes 2015 - 1,030.6 744.0
Bank loan 2011 - 100.0 100.0
Bank loan 2012 - 147.0 147.0
Bank loans 2013 192.7 440.7 633.4
Bank loan 2014 - 60.0 60.0
Bank loans 2016 - 809.3 809.3
Bank loan 2017 - 117.5 117.5
Debentures 2027 226.6 - 165.9
CSC bonds 2013 26.8 - 28.8
Borrowings excluding finance leases and
Metrocentre
compound financial instrument 446.1 3,122.8 3,182.0
Metrocentre compound financial instrument - 129.9 129.9
Finance lease obligations 41.3 - 41.3
487.4 3,252.7 3,353.2
Total borrowings 583.9 3,304.7 3,494.1
Cash and cash equivalents
Net debt
Net external debt (adjusted for Metrocentre compound financial instrument) at
31 December 2009 was GBP3,176.2 million.
The market value of assets secured as collateral against borrowings at 31
December 2010 is GBP5,073.2 million.
The fair values of financial assets and liabilities have been established
using the market value, where available. For those instruments without a
market value, a discounted cash flow approach has been used.
The maturity profile of gross debt (excluding finance leases) is as follows:
2010 2009
GBPm GBPm
Wholly repayable within one year 41.9 142.7
Wholly repayable in more than one year but not more than
two years 44.3 617.0
Wholly repayable in more than two years but not more than
five years 1,124.7 836.0
Wholly repayable in more than five years 1,547.8 2,245.8
2,758.7 3,841.5
Certain borrowing agreements contain financial and other conditions that, if
contravened, could alter the repayment profile.
The Group has various undrawn committed borrowing facilities. The facilities
available at 31 December in respect of which all conditions precedent had been
met were as follows:
2010 2009
GBPm GBPm
Expiring in one to two years - 360.0
Expiring in more than two years 248.0 107.8
Finance lease disclosures:
2010 2009
GBPm GBPm
Minimum lease payments under finance leases fall due:
Not later than one year 4.1 5.8
Later than one year and not later than five years 19.1 22.5
Later than five years 74.2 99.5
97.4 127.8
Future finance charges on finance leases (58.6) (80.7)
Present value of finance lease liabilities 38.8 47.1
Present value of finance lease liabilities:
Not later than one year 4.1 5.8
Later than one year and not later than five years 15.3 18.7
Later than five years 19.4 22.6
38.8 47.1
Finance lease liabilities are in respect of leasehold investment property.
Many leases provide for payment of contingent rent, usually a proportion of
net rental income, in addition to the rents above.
17 Convertible debt
3.95 per cent convertible bonds due 2010 ("the 3.95 per cent bonds")
On 16 October 2003, the company issued GBP240 million nominal 3.95 per cent
bonds raising GBP233.5 million after costs. At the time of issue, the holders
of the 3.95 per cent bonds had the option to convert their bonds into ordinary
shares at any time on or up to 23 September 2010 at GBP8.00 per ordinary
share, a conversion rate of 125 ordinary shares for every GBP1,000 nominal of
3.95 per cent bonds. On 28 May 2009, following the Firm Placing and Placing
and Open Offer, the conversion price was adjusted to GBP7.16 per share, a
conversion rate of approximately 139.66 ordinary shares for every GBP1,000
nominal of 3.95 per cent bonds.
On 5 October 2009, following a placing of shares, the conversion price was
adjusted to GBP7.08 per share, a conversion rate of approximately 141.24
ordinary shares for every GBP1,000 nominal of 3.95 per cent bonds. On demerger
in May 2010, the conversion price was adjusted to GBP5.31 per share, a
conversion rate of approximately 188.32 ordinary shares per GBP1,000 nominal
of 3.95 per cent bonds.
The 3.95 per cent bonds were redeemable at par at the Company`s option subject
to the Capital Shopping Centres Group PLC ordinary share price having traded
at 120 per cent of the conversion price for a specified period, or at anytime
once 85 per cent by nominal value of the bonds originally issued had been
converted or cancelled. Unless otherwise converted, cancelled or redeemed the
3.95 per cent bonds were to be redeemed by Capital Shopping Centres Group PLC
at par on 30 September 2010. On demerger the terms were adjusted to allow
bondholders to redeem the bonds at par plus accrued interest at any time until
shortly before maturity.
On 2 January 2009, notices were accepted by the Company in respect of GBP13.0
million of bonds representing 14.1 per cent of the 3.95 per cent bonds
outstanding on 31 December 2008. The bonds converted into 1.7 million new
ordinary shares.
During 2010 and prior to 30 September, GBP6.5 million of bonds were redeemed
under the bondholders put option available as a result of the revised terms
following the demerger.
On 30 September 2010 Capital Shopping Centres Group PLC redeemed on maturity
all the outstanding 3.95 per cent bonds at par.
The net proceeds received from the initial issue of the convertible bonds was
split between the liability element and an equity component, representing the
fair value of the embedded option to convert the liability into equity as
follows:
2010 2009
GBPm GBPm
Net proceeds of convertible bonds issued 233.5 233.5
Equity component (19.6) (19.6)
Liability at date of issue 213.9 213.9
Cumulative amortisation 19.2 19.2
Cumulative conversions (153.9) (153.9)
Cumulative redemptions (79.2) -
Liability at 31 December - 79.2
18 Deferred tax provision
Under IAS 12 Income Taxes, provision is made for the deferred tax assets and
liabilities associated with the revaluation of investment properties at the
corporate tax rate expected to apply to the Group at the time of use. For
those UK properties qualifying as REIT properties the relevant tax rate will
be 0 per cent (2009 - 0 per cent), for other UK non-REIT properties the
relevant tax rate will be 27 per cent (2009 - 28 per cent) and for overseas
properties the relevant tax rate will be the prevailing corporate tax rate in
that country.
The deferred tax provision on non-REIT investment properties calculated under
IAS 12 is GBPnil at 31 December 2010 (2009 - GBP42.8 million). This IAS 12
calculation does not reflect the expected amount of tax that would be payable
if the assets were sold.
The Group estimates that calculated on a disposal basis the maximum tax
liability would be GBPnil at 31 December 2010 (2009 - GBP49.5 million).
Investment and Derivative
development financial
property instruments
Movements in the provision for deferred tax GBPm GBPm
Provided deferred tax provision:
At 1 January 2009 75.9 (79.4)
Recognised in the income statement (26.9) 70.0
Recognised in other comprehensive income or
directly in equity (6.2) 2.0
At 31 December 2009 42.8 (7.4)
C&C US balances transferred to held for sale (37.1) -
Recognised in the income statement 0.8 (2.3)
Recognised in other comprehensive income or
directly in equity (0.1) 2.9
Transferred on demerger (note 21) (6.4) 2.6
At 31 December 2010 - (4.2)
Unrecognised deferred tax asset:
At 1 January 2010 (12.8) (14.4)
Income statement items (0.2) (1.3)
Transferred on demerger 12.8 -
At 31 December 2010 (0.2) (15.7)
Other
temporary
differences Total
Movements in the provision for deferred tax GBPm GBPm
Provided deferred tax provision:
At 1 January 2009 3.5 -
Recognised in the income statement (2.5) 40.6
Recognised in other comprehensive income or
directly in equity 0.7 (3.5)
At 31 December 2009 1.7 37.1
C&C US balances transferred to held for sale - (37.1)
Recognised in the income statement (1.3) (2.8)
Recognised in other comprehensive income or
directly in equity - 2.8
Transferred on demerger (note 21) 3.8 -
At 31 December 2010 4.2 -
Unrecognised deferred tax asset:
At 1 January 2010 (12.6) (39.8)
Income statement items (2.6) (4.1)
Transferred on demerger 1.5 14.3
At 31 December 2010 (13.7) (29.6)
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 the
uncertainty of the level of profits that will be available in the non-REIT
elements of the Group in future periods.
19 Share capital
Share
capital
GBPm
Issued and fully paid
At 31 December 2009 - 622,878,501 ordinary shares of 50p each 311.3
Shares issued 35.0
At 31 December 2010 - 692,673,009 ordinary shares of 50p each 346.3
During the year the Company issued a total of 1,722,214 ordinary shares in
connection with the exercise of options by former employees under the Capital
Shopping Centres Group PLC Approved Share Option Scheme and the Capital
Shopping Centres Group PLC Unapproved Share Option Scheme.
In connection with joint ownership elections by participants under the
Company`s Joint Share Ownership Plan (JSOP) a total of 5,772,294 ordinary
shares were issued during the year to the trustee of the Company`s Employee
Benefit Trust.
On 25 November 2010 the Company announced a placing of 62.3 million new
ordinary shares at a price of 355 pence per share.
The placing represented in aggregate 9.9 per cent of the issued share capital
of CSC prior to the placing. As a result, share capital increased by GBP31.2
million with the balance of the proceeds being taken to a merger reserve.
Full details of the rights and obligations attaching to the ordinary shares
are contained in the Company`s Articles of Association.
These rights include an entitlement to receive the Company`s report and
accounts, to attend and speak at General Meetings of the Company, to appoint
proxies and to exercise voting rights. Holders of ordinary shares may also
receive dividends and may receive a share of the Company`s assets on the
Company`s liquidation. There are no restrictions on the transfer of the
ordinary shares.
At 23 February 2011, the Company had an unexpired authority to repurchase
shares up to a maximum of 62,182,850 shares with a nominal value of GBP31.1
million, and the Directors have an unexpired authority to allot up to a
maximum of 144,907,167 shares with a nominal value of GBP72.5 million.
Included within the issued share capital as at 31 December 2010 are 5,856,736
ordinary shares (2009 - 288,070) held by the Trustee of the Employee Share
Ownership Plan (ESOP) which is operated by the Company (note 20) and 1,050,000
treasury shares (2009 - 1,050,000). The nominal value of these shares is
GBP3.5 million (2009 - GBP0.7 million).
As a technical requirement of the demerger of Capital & Counties Properties
PLC from the Group, 50,001 new redeemable shares of GBP1 each were issued by
the Company on 28 April 2010. All 50,001 redeemable shares in issue were
redeemed at par on 24 May 2010.
20 Treasury shares and Employee Share Ownership Plan (ESOP)
The cost of shares in Capital Shopping Centres Group PLC held either as
treasury shares or by the Trustee of the Employee Share Ownership Plan (ESOP)
operated by the Company is accounted for as treasury shares.
The purpose of the ESOP is to acquire and hold shares which will be
transferred to employees in the future under the Group`s employee incentive
arrangements. Dividends of GBP0.01 million (2009 - GBP0.01 million) have been
waived by agreement.
2010 2009
Shares Shares
million GBPm million GBPm
At 1 January 1.3 9.7 1.4 10.8
Acquisition of treasury shares 6.1 20.9 0.1 0.2
Disposal of treasury shares (0.5) (0.7) (0.2) (1.3)
At 31 December 6.9 29.9 1.3 9.7
21 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 year from discontinued operations:
Period ended
7 May 2010 2009
GBPm GBPm
Revenue 45.4 133.2
Net rental income 30.1 79.2
Net other income - 1.4
Revaluation and sale of investment and development
property 60.9 (140.7)
Sale and impairment of other investments - (0.3)
Impairment of other receivables - (12.0)
Administration expenses (7.6) (14.5)
Operating profit/(loss) 83.4 (86.9)
Net finance costs (23.6) (36.1)
Profit/(loss) before tax 59.8 (123.0)
Taxation (0.5) (1.4)
Profit/(loss) for the period 59.3 (124.4)
C&C US
In 2010 the Group entered into an agreement with Equity One, pursuant to which
Equity One would acquire the Group`s interests in its U.S. subsidiaries (C&C
US), through a joint venture with the Group. The transaction completed after
the balance sheet date on 4 January 2011. Consideration was in the form of
approximately 11.4 million shares in the joint venture and 4.1 million shares
in Equity One common stock, resulting in an estimated gain on disposal of
GBP26 million. The Group`s investment in these shares will be accounted for as
an available-for-sale investment as the Group does not have control nor
significant influence over the venture.
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 at 31 December 2010.
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 31 December
2010. These comprise:
GBPm
Assets
Investment and development property 375.8
Plant and equipment 0.1
Trading property 6.8
Trade and other receivables 20.9
Cash and cash equivalents 20.3
C&C US - assets 423.9
Liabilities
Trade and other payables (10.2)
Current tax liabilities (2.4)
Borrowings (216.3)
Deferred tax provision (47.7)
C&C US - liabilities (276.6)
C&C US - net assets 147.3
The following amounts are included for C&C US in the income statement within
profit/(loss) for the year from discontinued operations:
2010 2009
GBPm GBPm
Revenue 47.9 40.7
Net rental income 25.7 24.4
Net other income 2.3 (4.1)
Revaluation and sale of investment and development property 22.4 (91.8)
Administration expenses (2.6) (2.7)
Operating profit/(loss) 47.8 (74.2)
Net finance costs (12.6) (12.4)
Profit/(loss) before tax 35.2 (86.6)
Taxation (11.5) 27.7
Profit/(loss) for the year 23.7 (58.9)
Underlying earnings 10.9 6.3
Underlying earnings for the year ended 31 December 2010 includes a taxation
charge of GBP1.9 million (2009 - taxation credit of GBP1.1 million).
22 Capital commitments
At 31 December 2010, the Group was contractually committed to GBP90.1 million
(2009 - GBP142.4 million) of future expenditure for the purchase,
construction, development and enhancement of investment property. All of the
GBP90.1 million committed is expected to be spent in 2011.
The Group`s share of joint venture commitments included above at 31 December
2010 was GBP63.0 million (2009 - GBP75.6 million).
23 Contingent liabilities
As at 31 December 2010, the Group has no material contingent liabilities other
than those arising in the normal course of business.
24 Cash generated from operations
2010 2009
Notes GBPm GBPm
Continuing operations
Profit/(loss) before tax 446.2 (119.5)
Remove:
Revaluation and sale of investment and
development property 4 (497.2) 535.7
Sale and impairment of other investments 2.6 10.1
Depreciation 0.4 0.2
Share based payments 1.0 0.2
Amortisation of lease incentives and other
direct costs (5.3) 6.5
Finance costs 5 165.4 174.8
Finance income (3.1) (3.7)
Other finance costs 6 75.1 48.2
Change in fair value of derivative financial
instruments 50.0 (399.6)
Changes in working capital:
Change in trading property 4.5 (0.7)
Change in trade and other receivables (21.1) (7.1)
Change in trade and other payables 8.3 5.2
Cash generated from operations 226.8 250.3
25 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation for the Group.
Significant transactions between the Company and its subsidiaries are shown
below:
2010 2009
Subsidiary Nature of transaction GBPm GBPm
Capital Shopping Centres PLC Increase in investment 500.0 -
Re-charges 4.5 4.3
Liberty International Capital
(Five) Limited Dividend - 3.2
Liberty International Capital
(Six) Limited Dividend - 10.0
CSC Capital (Jersey) Limited Increase in investment 217.6 -
Significant balances outstanding between the Company and its subsidiaries are
shown below:
Amounts owed Amounts owed
by subsidiaries to subsidiaries
2010 2009 2010 2009
Subsidiary GBPm GBPm GBPm GBPm
Liberty International Group Treasury
Limited 467.6 2,373.9 - -
Conduit Insurance Holdings Limited 16.2 16.0 - -
Liberty International Holdings Limited 104.7 132.8 - -
TAI Investments Limited - - (27.9) (5.0)
Capital Shopping Centres PLC 5.1 5.1 - -
Libtai Holdings (Jersey) Limited - - - (7.1)
Nailsfield Limited 22.6 22.6 - -
CSC Trading - - (3.3) -
Greenhaven Industrial Properties
Limited - - (1.8) -
CSC Capital (Jersey) Limited - - (218.7) -
Prior to the demerger Capital Shopping Centres Group PLC exercised control
over and provided a number of group services to Capco. All transactions since
7 May 2010, including the provision of services under the demerger agreement,
have been on an arms length basis on normal commercial terms.
Key management(1) compensation is analysed below:
2010 2009
GBPm GBPm
Salaries and short-term employee benefits 7.2 7.2
Pensions and other post-employment benefits 0.3 0.5
Share-based payments 0.8 -
Termination benefits 0.5 -
8.8 7.7
(1) Key management comprises the Directors of Capital Shopping Centres Group
PLC and those employees who have been designated as persons discharging
managerial responsibility.
26 Events after the reporting period
On 4 January the Group completed a transaction with Equity One whereby Equity
One acquired the Group`s interest in its US subsidiaries (C&C US), through a
joint venture with the Group. Further details are given in note 21.
On 28 January 2011 the Group acquired 100% of the share capital of Tokenhouse
Holdings Limited (renamed The Trafford Centre Group Limited) for consideration
consisting of 155.0 million ordinary shares in the Company and GBP127.6
million 3.75 per cent perpetual subordinated convertible bonds (the
"convertible bonds"). As a condition of the acquisition the Company also
issued to Peel 12,316,817 ordinary shares for GBP3.55 each and convertible
bonds with a nominal value of GBP26.7 million, convertible into 6,679,250
ordinary shares, for a subscription amount of GBP23.7 million and an implied
issue price of the underlying shares of GBP3.55 each.
The Trafford Centre Group Limited owns and operates, through its subsidiaries,
The Trafford Centre in Manchester. Further details of the business are given
in the Business Review.
Under IFRS 3 Business Combinations, the Group is required to account for the
consideration and the assets and liabilities acquired at their fair value on
the date the acquisition was completed. The fair value of the consideration
based on the share price on 28 January 2011 was GBP702.7 million and consisted
of GBP582.8 million of ordinary shares and GBP119.9 million of convertible
bonds. Due to the proximity of the acquisition to the date on which these
accounts have been published, the initial accounting for the business
combination, including the assessment of the fair value of assets and
liabilities acquired, has not yet been completed and is therefore not included
in this note to the accounts. The financial impact of the acquisition is
discussed in the Financial Review.
27 General information
The Company is a public limited company incorporated in England and Wales and
domiciled in the UK. The address of its registered office is 40 Broadway,
London SW1H 0BT.
The Company has its primary listing on the London Stock Exchange. The company
has a secondary listing on the Johannesburg Stock Exchange, South Africa.
INVESTMENT AND DEVELOPMENT PROPERTY (unaudited)
Property data as at 31 December 2010
Net
Market initial
value Yield
GBPm Ownership Note (EPRA) *
As at 31 December 2010
Lakeside, Thurrock 1,053.0 100% 5.19%
Metrocentre, Gateshead 843.4 90% A 5.70%
Braehead, Glasgow 575.5 100% 5.20%
The Harlequin, Watford 353.0 93% 5.15%
Victoria Centre, Nottingham 337.0 100% 5.33%
Arndale, Manchester 336.4 48% B 5.76%
Eldon Square, Newcastle upon Tyne 250.4 60% 4.62%
St David`s, Cardiff 242.8 50% 3.47%
Chapelfield, Norwich 236.1 100% 5.22%
Cribbs Causeway, Bristol 220.5 33% C 5.49%
The Chimes, Uxbridge 217.1 100% 6.01%
The Potteries, Stoke-on-Trent 201.2 100% 6.43%
The Glades, Bromley 177.7 64% 5.61%
Other 55.0 D
Total investment and development
property 5,099.1 5.32%
As at 31 December 2009
Total investment and development
property 4,631.1 5.70%
Gross
Nominal area
equivalent million
yield* Occupancy* sq ft F
As at 31 December 2010
Lakeside, Thurrock 5.75% 99.0% 1.4
Metrocentre, Gateshead 6.33% 97.5% 2.1
Braehead, Glasgow 6.12% 99.3% 1.1
The Harlequin, Watford 6.65% 96.9% 0.7
Victoria Centre, Nottingham 6.40% 98.4% 1.0
Arndale, Manchester 5.99% 100.0% 1.6
Eldon Square, Newcastle upon Tyne 7.01% 98.6% 1.4
St David`s, Cardiff 6.09% 97.1% E 1.4
Chapelfield, Norwich 6.80% 99.0% 0.5
Cribbs Causeway, Bristol 6.05% 97.3% 1.0
The Chimes, Uxbridge 6.50% 99.3% 0.4
The Potteries, Stoke-on-Trent 7.25% 100.0% 0.6
The Glades, Bromley 7.25% 97.9% 0.5
Other 0.4
Total investment and development property 6.30% 98.6% 14.1
As at 31 December 2009
Total investment and development property 7.08% 97.8% 14.0
2010 2009
GBPm GBPm
Net rental income 276.9 267.3
Passing rent 283.1 271.1
ERV 354.1 363.4
Weighted average unexpired lease 7.0 years 6.8 years
* 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). The Group 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. Including
this extension, occupancy for St David`s, Cardiff was 81.4% and for the Group
was 97.7%.
F Area shown is not adjusted for the proportional ownership.
Analysis of capital return in the year
Market value Revaluation surplus
2010 2009 2010
GBPm GBPm GBPm %
Like-for-like property 5,092.4 4,563.8 500.6 11.0
Disposals - 67.3 - -
Redevelopments and developments 6.7 - - -
Total investment and development
property 5,099.1 4,631.1 500.6 11.0
Analysis of net rental income in the year
2010 2009 Change
GBPm GBPm %
Like-for-like property 260.0 254.7 2.1
Disposals 1.0 3.7 (73.0)
Developments 15.9 8.9 78.7
Total investment property and development property 276.9 267.3 3.6
Rent review cycle and lease maturity
(GRAPHICS REMOVED - PLEASE SEE PAGE 46 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
FINANCIAL COVENANTS (unaudited)
Financial covenants on asset-specific debt excluding joint ventures
Loan
outstanding at
31 January 2011 1 LTV
Maturity GBPm covenant
Metrocentre 2015 549.1 90%
Braehead 2015 335.3 N/A
Watford 2015 243.7 N/A
Nottingham 2016 252.0 90%
Chapelfield 2016 212.1 N/A
Uxbridge 2016 159.5 85%
Bromley 2016 137.5 85%
Lakeside 2017 519.7 75%
Total 2,408.9
Loan to
31 December Interest
Interest
2010 cover cover
market value 2 covenant actual 3
Metrocentre 68% 120% 130%
Braehead N/A 120% 171%
Watford N/A 120% 133%
Nottingham 75% 110% 165%
Chapelfield N/A 110% 137%
Uxbridge 73% 120% 148%
Bromley 77% 120% 145%
Lakeside 49% 140% 192%
Total
Financial covenants on joint ventures asset-specific debt
Loan
outstanding LTV
Maturity GBPm covenant
Cardiff 2014 37.2 4,5 75%
Xscape 2014 22.8 4 N/A6
Total 60.0
Loan to
31 December Interest Interest
2010 cover cover
market value 2 covenant actual 3
Cardiff 14% 150% 192%
Xscape N/A 120% 189%
Total
1 The loan values are the actual principal balances outstanding at 31 January
2011, which take into account any principal repayments made in January 2011.
The balance sheet value of the loans includes any unamortised fees.
2 The Loan to 31 December 2010 market value provides an indication of the
impact of the 31 December 2010 property valuations undertaken for inclusion in
the 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 31 December 2010 and 31 January
2011. 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.
5 On 17 January 2011 a further drawdown of GBP56.2 million was made. Based on
this the loan to market value would be 36%.
6 The Xscape LTV covenant is suspended until 1 April 2012.
Financial covenants on corporate facilities at 31 December 2010
Interest
Net worth Net worth cover
covenant* actual covenant*
GBP248m facility, maturing in 2013 GBP600m GBP1,415.6m 120%
Interest Borrowings/ Borrowings/
cover net worth net worth
actual covenant* actual
GBP248m facility, maturing in 2013 146% 110% 8%
* 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.
Capital Shopping Centres Debenture PLC at 31 December 2010
Capital Interest Interest
Loan cover Capital cover cover cover Capital
Maturity GBPm covenant actual covenant actual
2027 231.4 167% 195% 100% 112%
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 Capital Shopping
Centres 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 year ended 31 December 2010
Re-presented Six months
Year ended Year ended ended
31 December 31 December 31 December
2010 2009 2010
GBPm GBPm GBPm
Net rental income 276.9 267.3 142.4
Net other income 0.7 (0.1) 0.4
277.6 267.2 142.8
Administration expenses (23.0) (26.2) (11.8)
Underlying operating profit 254.6 241.0 131.0
Finance costs (165.4) (174.8) (83.1)
Finance income 3.1 3.7 1.8
Other finance costs (8.8) (9.6) (4.4)
Underlying net finance costs (171.1) (180.7) (85.7)
Underlying profit before tax 83.5 60.3 45.3
Tax on adjusted profit (0.1) 2.7 0.1
Remove amounts attributable to
non-controlling interest 2.3 5.8 1.4
C&C US underlying earnings included
within discontinued operations 10.9 6.3 6.5
Underlying earnings 96.6 75.1 53.3
Underlying earnings per share (pence) 15.4p 15.1p 8.4p
Re-presented Re-presented
Six months Six months Six months
ended ended ended
31 December 30 June 30 June
2009 2010 2009
GBPm GBPm GBPm
Net rental income 134.6 134.5 132.7
Net other income (0.1) 0.3 -
134.5 134.8 132.7
Administration expenses (11.9) (11.2) (14.3)
Underlying operating profit 122.6 123.6 118.4
Finance costs (87.6) (82.3) (87.2)
Finance income 1.9 1.3 1.8
Other finance costs (5.1) (4.4) (4.5)
Underlying net finance costs (90.8) (85.4) (89.9)
Underlying profit before tax 31.8 38.2 28.5
Tax on adjusted profit 2.1 (0.2) 0.6
Remove amounts attributable to
non-controlling interest 3.0 0.9 2.8
C&C US underlying earnings included
within discontinued operations 4.4 4.4 1.9
Underlying earnings 41.3 43.3 33.8
Underlying earnings per share (pence) 8.3p 7.0p 8.4p
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 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 the C&C US
assets and liabilities on a consistent basis with how they are shown in the
Group`s 31 December 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) -
6,354.4 (1,302.0) -
Current assets
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 - - -
(448.0) 76.9 (7.3)
Non-current liabilities
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
(351.0) 4,701.4
Current assets
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)
(230.5) (608.9)
Non-current liabilities
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.
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 to the Group
Annualised net rent (as net 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
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 external debt
Net debt after removing the Metrocentre compound financial instrument.
Net 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.
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.
Topped-up NIY (EPRA)
Net initial yield adjusted for the expiration of rent free periods and other
unexpired lease incentives.
Total financial return
Change in net asset value per share plus dividends per share paid in the
period expressed as a percentage of opening net asset value per share.
Trading property
Property 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.
Vacancy rate (EPRA)
The ERV of vacant space divided by total ERV.
Yield shift
A movement (usually expressed in basis points) in the nominal equivalent yield
of a property asset.
Dividends
The Directors of Capital Shopping Centres Group PLC have proposed a final
dividend per ordinary share (ISIN GB0006834344) of 10.0 pence (2009 - 11.5
pence) to bring the total dividend per ordinary share for the year to 15.0
pence (2009 - 16.5 pence).
This dividend will be partly paid as a Property Income Distribution ("PID")
with a gross value of 5 pence per share and partly paid as a non- PID with a
value of 5 pence per share. The PID element will be subject to deduction of a
20 per cent withholding tax unless exemptions apply (please refer to the
Special note below). The non-PID element will be treated as an ordinary UK
company dividend. The following are the salient dates for the payment of the
proposed final dividend:
Thursday 19 May 2011
Sterling/Rand exchange rate struck
Friday 20 May 2011
Sterling/Rand exchange rate and dividend amount in SA currency announced
Monday 30 May 2011
Ordinary shares listed ex-dividend on the Johannesburg Stock Exchange
Wednesday 1 June 2011
Ordinary shares listed ex-dividend on the London Stock Exchange
Friday 3 June 2011
Record date for 2010 final dividend in London and Johannesburg
Tuesday 21 June 2011
Dividend payment day for shareholders
South African shareholders should note that, in accordance with the
requirements of Strate, the last day to trade cum-dividend will be Friday 27
May 2011 and that no dematerialisation or rematerialisation of shares will be
possible from Monday 30 May to Friday 3 June 2011 inclusive. No transfers
between the UK and South African registers may take place from Thursday 19 May
to Sunday 5 June 2011 inclusive.
PID Special note:
The following applies to the PID element only of the 2010 Final Dividend:
UK shareholders: For those who are eligible for exemption from the 20 per cent
withholding tax and have not previously registered for exemption, a 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. Validly completed forms must be received by Capita
Registrars no later than the Record Date, Friday 3 June 2011, 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.
Additional information on PIDs can be found at www.capital-shopping-
centres.co.uk/investors/shareholder_info/reit. 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.
Date: 23/02/2011 09:01:00 Produced by the JSE SENS Department.
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information disseminated through SENS.
