| Tue 2 Aug 2011, 8:02 | | CSO - Capital Shopping Centres Group Plc - Interim report for the half year |
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CSO
CSO
CSO - Capital Shopping Centres Group Plc - Interim report for the half year
ended 30 June 2011
CAPITAL SHOPPING CENTRES GROUP PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: CSO
Issuer Code: CSCSCG
2 August 2011
CAPITAL SHOPPING CENTRES GROUP PLC
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2011
Six months ended 30 June
2011 (2) 2010 Change
Net rental income from continuing
operations (GBPm) 178 135 Up 32%
Underlying earnings (GBPm) 66 43 Up 53%
Underlying EPS (pence) 8.0 7.0 Up 14%
Interim dividend per share (pence) 5.0 5.0 Unchanged
Property revaluation surplus (GBPm) 58 348 n/a
IFRS profit (GBPm) 193 291 Down 34%
30 June 31 December
2011 2010 Change
391 390 Up 1p
NAV per share (diluted, adjusted) (pence)
Market value of investment properties
(GBPm) 6,861 5,099 Up 35%
Net external debt (GBPm) 3,286 2,437 Up 35%
Debt to assets ratio (per cent) 48 48 Unchanged
(1) Please refer to glossary for definition of terms
(2) 30 June 2011 income data includes Trafford Centre results for the 5 month
period since completion
SOUND OPERATING PERFORMANCE AND PROGRESS WITH 2011 PRIORITIES
Sound operating performance in challenging retail environment:
- occupancy remains high at 97 per cent
- continuing footfall growth, up 3 per cent for the third consecutive year
- 80 long term lettings secured GBP5m additional rent, in aggregate at 98 per
cent of ERV
- short term lets are a continuing feature of the market given economic
conditions
Progress on CSC`s three priorities for 2011:
- growth in like-for-like net rental income - up 6 per cent mostly reflecting
2010 letting activity
- progress with active management projects through planning, letting and
construction. Major extensions moving towards planning consents
- The Trafford Centre performing strongly post acquisition - footfall up 8 per
cent - and integrated into Group`s overall activities
Financial performance:
- underlying earnings increased 53 per cent from GBP43 million to GBP66
million with net rental income growing from GBP135 million to GBP178 million
including 5 months of Trafford Centre operations
- underlying earnings per share increased 14 per cent to 8.0 pence
- total financial return including dividends 3 per cent
- robust financial position with debt to assets ratio unchanged at 48 per
cent, interest cover improved to 1.7 times
Valuation performance:
- 1.2 per cent like-for-like valuation increase (IPD 1.1 per cent increase)
reflecting 11bp yield shift
- Trafford Centre valuation unchanged
David Fischel, Chief Executive Officer of Capital Shopping Centres Group PLC,
commented:
"With 6 per cent growth in like-for-like net rental income and increased
footfall at our centres, CSC has delivered a sound operating performance in
the first half of 2011. The Trafford Centre has proved an excellent addition
and the Group has a range of active management projects and extensions in the
pipeline to deliver future growth. Although the economic environment remains
challenging, large centres such as those owned by CSC with a strong catering
and leisure component are continuing to outperform".
Contents:
Highlights
Operating and Financial Review
Directors` Responsibility Statement
Independent Review Report
Unaudited Financial Information
Investment and Development Property
Other Information
Glossary
Top Ten Properties
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: Morne Reinders, College Hill +27 (0)11 447 3030
A presentation to analysts and investors will take place at The Brewery,
Chiswell Street, London EC1Y 4SD at 09.30BST on 2 August 2011. The
presentation will also be available to international analysts and investors
through a live audio call and webcast. The presentation and the full press
release will be available for download from our website www.capital-shopping-
centres.co.uk.
NOTES TO EDITORS
Capital Shopping Centres is the leading specialist UK regional shopping centre
REIT
Capital Shopping Centres Group PLC (CSC) is the UK`s leading specialist
developer, manager and owner of pre-eminent regional shopping centres. With a
portfolio of 14 centres representing 16 million sq. ft. of retail space and a
valuation of GBP6.9 billion CSC`s assets attract well over 300 million
customers a year.
CSC`s assets 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 and to provide compelling destinations for shoppers. It
is a responsible and environmentally conscious participant in the communities
where it invests.
In April 2011 CSC was recognised as the UK`s Top Shopping Centre Investment
Manager in Going Shopping 2011 - The Definitive Guide to Shopping Centres
published by Trevor Wood Associates.
For further information see www.capital-shopping-centres.co.uk
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.
OPERATING AND FINANCIAL REVIEW
OPERATING REVIEW
Introduction
Capital Shopping Centres has delivered a sound operating performance in the
first half. We have made good progress on our three priorities for 2011:
- like-for-like net rental income has grown 6.1 per cent, an increase from the
2.1 per cent recorded in 2010, as the effect of two years of intensive letting
activity is now being seen in the income statement.
- value has been created from a range of active management projects which have
delivered strong returns at relatively low risk with further projects in the
pipeline at most CSC centres, while more substantial extension projects have
moved from the feasibility stage to detailed planning.
- The Trafford Centre has proved an excellent addition. The Trafford Centre
management team has taken on increased responsibilities for other centres
within the Group and has made a positive start on taking forward opportunities
for these assets.
Over some 40 years of developing, owning and managing regional shopping
centres in the UK, CSC has focused on the highest quality centres with the
best long term potential - strong catchment and demographics, exceptional
accessibility, compelling retail, leisure and catering mix - with a view to
generating sustained growth in like-for-like net rental income.
Our centres have evolved to reflect latest design and city planning concepts
and adapted to continuous change in consumer preferences and retailers`
requirements.
As a result CSC`s shopping centres suffered less and recovered quicker from
the 2008/09 downturn than secondary centres, emerging with high occupancy and
a refreshed combination of on-trend UK brands and exciting international
retailers.
(GRAPHIC REMOVED - PLEASE SEE PAGE 3 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
After the setback in the UK`s economic recovery in the last quarter of 2010,
it became clear during the first half of 2011 that national growth for the
period would be weak at best which has been confirmed by reported GDP growth
of 0.5 per cent for the first quarter and 0.2 per cent for the second. This
has inevitably affected the occupier market and has slowed the pace of
improvement in the terms of lettings.
Established retailers have been facing the combined effect of reduced
household incomes, product cost inflation and the challenge of online
retailing and have therefore been carefully analysing their space
requirements, with a structural shift towards top destinations offering a
broader leisure experience as well as the full range of comparison retail
offer. A number of retailers have recently set out plans to reduce their
overall space requirement while focusing their attentions more on flagship
locations.
Dynamic retailers realise that in order to achieve the best growth throughout
their multi-channel offer, they need their brand and full range to be
showcased where footfall is strongest. International retailers entering the UK
have also tended to establish their brands in the most prime destinations,
particularly large regional shopping centres near and within the top cities.
Consumer confidence has been low throughout the period, reflecting a reduction
in real wages, job insecurity and further house price weakness. The dent made
by austerity measures and petrol prices in household disposable incomes is
driving consumers to seek more value for their money, in the broader sense of
overall experience as well as product. With the ability to research and buy
online, customers are knowledgeable about product and price and do not need to
travel to a shop unless they get something else - convenience, physical
comparison, a social experience, a good day out.
With four of the UK`s top six out of town shopping centres, including The
Trafford Centre, Manchester acquired earlier this year, and ten of the UK`s
top 25 shopping centres, CSC`s portfolio is focused on those centres which are
best placed to gain from this structural change.
Footfall in CSC`s centres in the first six months of 2011 has shown further
growth in line with the consistent increases experienced over the last three
years, a demonstration of the defensive nature of the business with the visit
to a prime retail destination a core recreational activity.
The pipeline of new shopping centre space was dramatically curtailed by the
property market downturn of 2008 and 2009 with only a limited number of
openings in 2011. A characteristic of the industry is a long lead time for
bringing new space on stream. As a result, 2012 will be the first year with no
significant new openings since the start of the shopping centre industry some
forty years ago, with a further low level of committed openings anticipated in
2013 and beyond. This lack of supply is a positive factor for existing owners
of top quality assets such as CSC.
Property investment market background
Robust levels of demand for prime shopping centres coupled with limited stock
availability provide considerable support to valuations. Unlike prime Central
London assets, prime regional shopping centre valuations are still well below
peak levels.
With top quality assets rarely coming to market, downward pressure on yields
remains a positive factor for valuations, particularly given the current low
level of interest rates. Against this backdrop and in the absence of prime
product, certain of the stronger secondary shopping centres recently brought
to the market have attracted encouraging interest.
Property valuations
First Second First Second First
half half half half half
2011 2010 2010 2009 2009
Revaluation
surplus/(deficit) -
like-for-like 1.2% 3.1% 7.7% 2.6% (12.8)%
IPD monthly index retail
capital growth 1.1% 1.1% 6.3% 11.3% (14.0)%
Nominal equivalent yield -
like-for-like 6.19% 6.30% 6.52% 7.08% 7.37%
Nominal equivalent yield -
all centres 6.06%
Like-for-like change in
nominal equivalent yield
("yield shift") -11bp -22bp -56bp -29bp +70bp
Initial yield - like-for-like 5.23% 5.32% 5.35% 5.70% 6.30%
Initial yield - all centres 5.20%
Valuation effect of change
in aggregate ERV - - (1)% (1)% (3)%
The strongest valuation performance came from Metrocentre, reflecting steps
taken to manage pro-actively the forthcoming lease expiry profile and
Manchester Arndale where underlying rental levels have improved. The Trafford
Centre valuation is unchanged since the acquisition at the end of January
2011.
ERV in aggregate is unchanged in the period, as rental value growth in some
locations, driven by active management or particular sectors such as catering,
has been offset by market-wide reductions in some less prime pitches. The
Group`s independent valuers calculate the ERV of each centre unit by unit on
the basis of the evidence of lettings, applying their judgement to determine
the reversion.
Operating performance:
Despite a difficult trading environment, CSC has delivered a sound operating
performance.
- Like-for-like net rental income is up 6 per cent or GBP8 million compared to
the same period of 2010 reflecting lettings undertaken throughout 2010 and
further openings at Cardiff.
- Occupancy has remained high at 97 per cent (31 March 2011 - 97 per cent, 31
December 2010 - 98 per cent). The slight increase in vacancy reflects a number
of tenant failures around the June quarter date and the seasonal effect
following Christmas.
- Footfall in CSC`s centres is estimated to be up 3 per cent year-on-year for
the third consecutive year, while Experian data indicates UK retail footfall
overall has fallen by around 1 per cent.
- 80 long term lettings have been achieved in the period for GBP18 million
annual rent, an increase of GBP5 million over previous rent for those units
and in aggregate around 2 per cent below ERV. A number of positive deals on
larger units in bigger centres have enhanced the overall terms achieved in the
period, with the average of other deals remaining in the range of 90 per cent
to 95 per cent of ERV.
Long term lettings in the period include 18 new retailers to CSC centres
including 4 international brands. We continue to see competitive demand for
space in CSC`s centres for larger units suitable for flagship stores and well
located smaller units for catering outlets. CSC has a strong track record of
creative active management and professional project execution to deliver
appropriately configured space to meet retailers` requirements. Specific
examples of income-enhancing new flagship stores are mentioned by centre
below.
- A strong growth area for CSC has been the increase in requirements for
catering space. Catering operators now account for 8 per cent of CSC`s total
rent and some 370 units out of CSC`s 2,400. With current deals being struck at
higher levels, the aggregate rent of catering units across all CSC centres now
averages GBP43 per square foot.
- At 30 June 2011 CSC had 240 short-term leases which represented 3 per cent
of passing rent, 5 per cent of ERV and 3 per cent of space (31 December 2010 -
202 leases, 2 per cent of passing rent, 7 per cent of ERV, 4 per cent of
space). This remains a challenging area, with the slower progress than
anticipated in achieving long term re-lettings closer to ERV reflecting
economic conditions in the period.
- Retailer sales in CSC centres increased by an estimated 3 per cent in total
out-performing the benchmark on a like-for- like basis. National statistics
have continued to confirm the evident weak retail market conditions with the
BRC like-for- like non-food index indicating declines of 1.1 and 0.6 per cent
respectively for the first and second quarters.
- Estimated occupancy cost ratio (rent to retailer turnover) of 13.3 per cent
excluding anchor stores remains unchanged from 2010. Estimates including The
Trafford Centre and St. David`s Cardiff for the first time indicate a slightly
higher ratio of 13.7 per cent.
- After 2010`s low level of retailer failures, the first half of 2011 has seen
a return to a more typical level. The impact on CSC`s first half year results
has been small at 2.0 per cent of rent roll with GBP1.1 million of debt and
incentives written off (first half 2010 1.4 per cent and GBP1.7 million.
Tenants occupying 61 units and accounting for 2.0 per cent of rent entered
administration in the first half (2010 - 41 units and 1.4 per cent of rent).
At the time of writing over half the units affected in 2011 are currently
trading.
(GRAPHIC REMOVED - PLEASE SEE PAGE 5 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
The chart above illustrates the valuers` assessment of reversion across the
enlarged Group.
- Annual property income has increased from GBP297 million to GBP382 million
in the period. The acquisition of The Trafford Centre added GBP85 million.
Letting activity and ending of rent free periods of GBP8 million was offset by
expiries and tenant failures.
- The reversion of 19 per cent of current rent is spread across the Group with
two thirds of the upside concentrated in the top five centres by value.
- The largest component of the uplift (GBP43 million) is anticipated to arise
on re-letting of expiries, around a third of which relates to short-term
leases. The uplift relating to vacancies has increased marginally in the
period due to tenant failures.
- The valuers` expectation is for two thirds of the reversion to be captured
within three years, 80 per cent within five.
Major assets - activity and value creation
Following the acquisition of The Trafford Centre, 64 per cent of CSC`s asset
valuation and 62 per cent of its annual property income are attributable to
CSC`s 5 pre-eminent out-of-town regional shopping centres including 4 of the
UK`s top 6. A further 21 per cent of CSC`s asset valuation is attributable to
the premier in-town shopping centres of 5 of the UK`s top cities and the
remaining 15 per cent comprises 4 other centres in the UK`s top 50.
(GRAPHICS REMOVED - PLEASE SEE PAGE 6 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT
WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
A key area of focus for 2011 is value creation through continued enhancement
of all CSC`s centres as retail and leisure destinations by progressing
development and active management opportunities. Reference was made in the
Annual Report to three large opportunities for around GBP500 million of
capital expenditure and GBP128 million of smaller active management projects.
The latter tend to be focused on specific retailer needs and as such are
characterised by relatively attractive returns at low risk. Updates for the
projects are given below and, for illustration, the six examples at Lakeside,
Metrocentre, Braehead, Eldon Square, Newcastle and Glades, Bromley account for
GBP39 million of capital expenditure and are expected to generate an average
stabilised initial yield on cost of 10 per cent.
The Trafford Centre: Market value - GBP1,650 million, annual property income
GBP85 million
The Trafford Centre is one of the most successful retail and leisure
destinations in the UK. It is located approximately six miles west of
Manchester in the North West of England, immediately adjoining the M60
motorway. Anchored by Selfridges, Debenhams, John Lewis and Marks & Spencer,
The Trafford Centre opened to the public in 1998 and annual visitor numbers
have grown consistently since then. It is CSC`s largest asset by value and
income, representing a quarter of the Group`s total. Approximately 5 million
people live within 45 minutes` drive time and an estimated 35 million customer
visits are made each year.
The Trafford Centre has continued its strong performance since acquisition by
CSC on 28 January 2011 with notable progress made in further developing its
retail and leisure mix:
- Footfall has increased by 8 per cent year-on-year with an estimated 6 per
cent increase in retailer sales Occupancy has decreased marginally to 96 per
cent.
- New stores have been opened by Thomas Sabo, Boux Avenue and Ted Baker with
another new brand to the Centre, Banana Republic, due to open next month. The
Circle 360 Champagne Bar opened in July, successfully bringing one of
Manchester`s most popular venues to The Trafford Centre, and Lego Land`s
second ride has further increased its popularity.
- M&S and Debenhams have both opened their extended stores showcasing new
ranges and Dune`s new concept flagship store follows later this month.
- Annual property income is GBP85 million and ERV is GBP105 million.
CSC has plans to invest around GBP50 million in revenue-enhancing active
management projects at The Trafford Centre, including GBP30 million at Barton
Square. An application to part-enclose the central courtyard of Barton Square
with a glass roof has been approved and permission has been renewed for the
reconfiguration and enclosure for recycling use of two service yards on the
south side of the Centre.
The Trafford Centre management team have taken additional responsibility for
three other CSC centres - Manchester Arndale and Cribb`s Causeway, Bristol,
the two assets jointly owned by CSC and the Prudential, and Braehead, Glasgow.
The Trafford Centre team are making good progress on taking forward the
opportunities for these assets.
Lakeside: Market value - GBP1,071 million, annual property income GBP58
million
Lakeside is a prime regional shopping centre occupying a strong position on
the eastern perimeter of London`s M25 orbital motorway at the heart of
Europe`s largest aggregation of retail space with an estimated 25 million
customer visits made each year.
Lakeside has had a strong start to 2011, the key features of which are:
- Footfall has increased by 6 per cent year-on-year with an estimated 1 per
cent increase in retailer sales
- Occupancy is 99 per cent.
- 16 long term lettings have been completed, with unsatisfied demand from MSU,
catering, leisure and lifestyle operators.
- New stores have been opened by, for example, Boux Avenue, La Senza and
Confetti & Lace.
- Annual property income up 1 per cent to GBP58 million, ERV up 2 per cent to
GBP65 million.
Active management projects totalling GBP11 million are underway:
- Three new flagship stores totalling 100,000 sq. ft. for Forever 21, Top
Shop/Top Man and BHS: planning permission has been received for a "roof box"
to create a new 35,000 sq. ft. store for Forever 21 in the existing Top
Shop/Top Man unit. Top Shop/Top Man will relocate to a new 31,500 sq. ft.
store created from Clinton Cards` unit and the upper level of BHS. A fully
refitted, new concept BHS will occupy the lower level of its existing store
and Clinton Cards is relocating to a new, smaller unit better suited to its
business model.
- New 8,000 sq. ft. fashion anchor for Brompton Walk: 5 units are being
amalgamated to create a flagship store opening later this month for Choice,
the high end multi-brand retailer, which has upsized four times in its 20
years at Lakeside.
A planning application is expected to be lodged in late 2011 for a 360,000 sq.
ft. extension:
- 160,000 sq. ft. department store
- around 40 new shops and restaurants
- fully integrated transport hub
- investment of around GBP140 to GBP160 million, anticipated stabilised
initial yield on cost 7 to 8.5 per cent
Metrocentre: Market value - GBP871 million, annual property income GBP52
million
Metrocentre is the largest covered shopping and leisure centre in Europe and
the leading shopping centre in the UK in terms of tenant mix, transport links
and catering offer. With 2.1 million sq. ft. of retail space and 9,250 free
car parking spaces, it is the premier regional shopping centre destination for
north east England attracting an estimated 23 million customer visits a year.
Significant activity in the first half of 2011 includes:
- 12 long term lettings and renewals have been completed, in aggregate GBP3
million new rent marginally ahead of ERV.
- The above includes progress with Metrocentre`s key 2011/2012 expiry cycle. A
further GBP15 million of rent expires in the remainder of 2011 and 2012, a
total of 23 per cent of Metrocentre`s rent roll reduced by pro-active
management from 54 per cent two years ago. While deals are taking longer to
complete as retailers carefully review their space requirements in the current
challenging environment, there are a further GBP2 million of renewals in
advanced negotiations, generally at terms a few percentage points below ERV.
- Primark are fitting out their new 60,000 sq. ft. flagship store for an
October 2011 opening, creating a strong new anchor for the yellow and blue
malls.
- Planning permission received for "MetrOasis", a 15,000 sq. ft. terrace of
new retail and catering of which 75 per cent by income is under offer. Sited
between Metrocentre and the retail park, this will improve linkages between
the two locations.
Braehead: Market value - GBP577 million, annual property income GBP30 million
With around half of Scotland`s population within its catchment and an
estimated 18 million customer visits per year, the Braehead shopping centre
and retail park are at the heart of the successful regeneration area led by
CSC which also includes the Xscape leisure destination, Ikea, business parks,
new homes, flagship car dealerships and a major garden centre. There is
considerable opportunity for Braehead to fulfil its role as a strategic centre
and CSC continues to work constructively with the local authority on a master
plan for the area which should lead over time to increased economic and social
activity.
Following the opening in May of H&M`s new flagship store and the first full
year of the new Primark, footfall at Braehead is up over 5 per cent year-on-
year. Hollister and another major US brand are currently fitting out for
openings in early September. The first of the new restaurants, Filling
Station, is now open on the former non-income producing "Fun Ice" and the
other units are being fitted out for openings later this month. This project
demonstrated the strength of appetite by catering operators, with competitive
demand increasing the rent achieved for the final unit by more than 15 per
cent.
Nottingham: Market value - GBP333 million, annual property income GBP19
million
The Victoria Centre, opened in 1972 and now 981,000 sq. ft., is the strongest
retail destination in Nottingham, the UK`s sixth-ranked city by shopping
population. Anchored by John Lewis and House of Fraser and currently 96 per
cent occupied, an estimated 23 million shoppers visit the centre each year.
Following a highly positive response to the public consultation exercise, a
detailed planning application was submitted in June 2011 for a proposed
500,000 sq. ft. extension to the Victoria Centre, providing:
- an additional department store, 39 shops and enhanced leisure & catering
facilities with a cinema and restaurants
- a new bus station, health club and offices
- improved pedestrian linkages running north/south and east/west through the
city
- 500 construction jobs and an estimated 2,200 new jobs on an ongoing basis
The outline timetable is for detailed planning consent to be granted by the
end of 2011, enabling works in 2012 and construction from 2013 to 2015 with an
opening for Christmas 2015. The capital expenditure of GBP225 to GBP250
million is expected to generate ERV of around GBP17 to GBP18 million,
equivalent to a stabilised initial return on cost of 7 to 8 per cent.
Other centres: Recently completed or projects in progress to create value at
other centres include:
- The major extension to St David`s, Cardiff, which opened in September 2009,
is now 90 per cent committed by income. Since Christmas new commitments have
been secured for a first shopping centre store for Cath Kidson, a UK first
store for Baci Lingerie and two of the four remaining MSUs. More than half
of all stores at St David`s are the retailers` first in Wales.
- In Newcastle, Next moved in May from Northumberland Street into Eldon
Square, creating a major store with full line merchandise and are delighted
with their relocation.
In Bromley, design work is underway and a detailed planning application will
be submitted later this month for 5 new restaurants in Queen`s Gardens, The
Glades.
International
On 4 January 2011, CSC completed its transaction with Equity One, a US retail
REIT, restructuring its GBP150 million ($250 million) net investment in
Californian property. In exchange for its direct interest, CSC has received
4.1 million shares in Equity One and 11.4 million redeemable units in a new
joint venture, in aggregate providing an effective 12 per cent interest in
Equity One valued at GBP179 million based on a share price of $18.64.
Equity One has a market capitalisation of $2.3 billion and its annualised
dividend is currently $0.88 per share with underlying FFO for 2010 of $1.08
per share. Equity One owns, develops and manages neighbourhood shopping
centres anchored by supermarket chains. At 31 March 2011, the company had 177
shopping centres (20.1m sq. ft.) and 25 other properties/development sites.
The top 4 geographies, totalling 60 per cent of rent, were South Florida, the
San Francisco Bay area, Atlanta and North East, USA.
CSC`s interests in India comprise 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.
Prozone`s first shopping centre, Aurangabad, is now well established with over
60 per cent occupancy and a number of further tenants fitting out. Footfall
has been growing consistently since the launch in the last quarter of 2010.
Prozone is well underway with preparations for commencing further development
projects in Coimbatore, Nagpur and Indore. As Prozone`s business has become
more established, CSC`s results have now incorporated third party direct
property valuations producing an encouraging GBP9 million surplus on CSC`s
interest.
CSC`s shareholding in Provogue amounts to 11.4 million shares (9.9 percent)
which at 30 June 2011 stood at R37 per share. The share price has come under
pressure in the period as India has gone out of favour with international
investors and small market capitalisation stocks, particularly real estate-
related, have been neglected by investors.
Dividends
The Directors have declared an interim dividend of 5.0 pence (2010 - 5.0
pence) per share payable on 22 November 2011 to shareholders on the register
on 14 October 2010. This dividend will be a property income distribution
("PID") subject to applicable withholding tax.
With effect from December 2010, the rules governing UK REITs were amended such
that scrip dividends are now eligible to be classified as a PID. This removes
one of the major barriers to CSC offering a scrip alternative. Further, of
relevance given CSC`s large South African shareholder base, recent changes in
the South Africa tax regime are affecting the way that ordinary and PID
dividends are taxed in the hands of South African shareholders in a manner
positive for likely take up of scrip dividends. We are currently reviewing the
options available to the company with a view to offering a scrip alternative
for the 2011 dividends, which would result in the requirement to convene an
EGM.
Prospects
CSC is a market-leading business based on the most prime retail assets with
strong asset management skills to respond to market changes.
The results for the first half of 2011 demonstrate a continuation of recovery
by CSC, although a more cautious occupier market is reflecting challenging
macro-economic conditions.
Our three priorities for 2011 remain:
- Growth in like-for-like net rental income: after a very strong first half
result, the quieter letting market implies a lower increase in the second half
of the year.
- Creation of value from the range of active management projects and more
substantial extension projects detailed above, with planning permissions and
retailer negotiations providing continuing evidence of progress
- The Trafford Centre: we look for continued strong performance from this pre-
eminent retail and leisure destination and to further access the broader
benefits to the Group from this acquisition.
FINANCIAL REVIEW
FINANCING STRATEGY AND FINANCIAL MANAGEMENT
In 2011 the Group`s financial management has focused on achieving the
successful integration of The Trafford Centre and continuing to address the
appropriate financial management and medium term funding structure for the
Group. Initial work has started on identifying options for re-financing the
Group`s Revolving Credit Facility ("RCF") which matures in 2013 and the first
significant asset specific debt maturities in 2015.
Notable financial highlights for the period include:
- Underlying earnings up by 53 per cent
- NAV per share at 391 pence; total return for the six months of 3 per cent
- Trafford Centre acquisition completed. Integration work progressing as
planned
- Debt to assets ratio at 48 per cent in target range of 40-50 per cent and
interest cover for the six months of 170 per cent exceeds target minimum of
160 per cent
Acquisition of The Trafford Centre and associated Capital Raising
The Group successfully completed the acquisition of The Trafford Centre on 28
January 2011 and therefore these financial statements include the impact of
the acquisition for the first time. Details of the opening balance sheet are
provided in Note 20. The Income Statement includes the results of The Trafford
Centre for the period from 28 January 2011 to 30 June 2011. Further details of
the contribution in the period are given in the Underlying Profit Statement.
As part of the 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.
RESULTS FOR THE PERIOD ENDED 30 JUNE 2011
The results for the six months ended 30 June 2011 reflect operational
improvements achieved, in particular improved letting terms, since the end of
2009. This is most clearly illustrated by the 6 per cent growth in like-for-
like net rental income in the period, a strong performance especially given
the general retail environment remains challenging. This growth in like-for-
like rental income was the main factor in driving the 14 per cent growth over
2010 underlying earnings per share.
Income statement
The Group recorded a profit for the period of GBP193 million, compared to the
GBP291 million achieved for the comparable prior year period which included
GBP73 million from the discontinued operations, Capco and C&C US.
The 2011 results include a GBP58 million gain on property valuations and a
GBP22 million non-cash gain on the movement in the fair value of derivative
financial instruments. The 2010 profit included a GBP348 million gain on
property valuations, which was partially offset by a GBP89 million adverse
movement in the fair value of derivative financial instruments.
Underlying earnings which excludes valuation and exceptional items, increased
by GBP23 million to GBP66 million, as shown in the chart below. The growth in
underlying earnings per share takes into account the issue of the 167 million
new shares in connection with the Trafford Centre acquisition, resulting in an
increase of 14 per cent from 7.0 pence per share in 2010 to 8.0 pence per
share in the current period.
The Group`s net rental income which increased by 32 per cent to GBP178 million
in the period, benefitted from the GBP35 million five month contribution from
The Trafford Centre. As noted above the Group`s existing centres achieved an
excellent 6 per cent growth in like-for-like net rental income. More detail on
the rental performance is included in the Business Review.
Underlying net finance costs, which exclude exceptional items, increased by
GBP16 million in 2011, with the benefit of the interest rate swap amendments
undertaken in January 2011 offsetting the GBP19 million five month cost of the
Trafford Centre CMBS notes.
Administration expenses, excluding the GBP16 million exceptional costs,
increased from GBP11 million in 2010 to GBP12 million in 2011 largely due to
inclusion of the Trafford Centre. Administration costs remain under tight
control.
(GRAPHIC REMOVED - PLEASE SEE PAGE 9 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
Exceptional costs in the period include finance costs of GBP34 million
incurred in January 2011 on interest rate swap amendment costs. Expenses
relating to the acquisition, including financial advice costs in relation to
the Simon Property Group`s proposal, amounted to GBP16 million in the period.
These costs are classified as exceptional administration costs.
As the fair value of the Trafford Centre net assets acquired of GBP757 million
exceeded the GBP703 million fair value of the consideration, based on the
Group`s share price on 28 January 2011 of 376 pence per share, negative
goodwill of GBP54 million arose on the acquisition. This is recorded in the
Income Statement as gain on acquisition of subsidiaries. A share price of 405
pence per share would have resulted in nil goodwill on the acquisition.
As noted in the 2010 annual report the disposal of the C&C US business that
was completed in January 2011 resulted in a gain of GBP40 million before tax.
The results for the period also includes a deferred tax provision of GBP14
million in respect of the investment in Equity One shares and joint venture
units received as consideration, giving a net post tax gain of GBP26 million
on the combined impact of this transaction.
The income statement also includes two items arising from the Group`s
interests in India. The GBP9.0 million share of associate income from Prozone,
the shopping centre developer, is offset by the impairment of GBP8.7 million
in the market value of the 9.9 per cent interest in Provogue, the listed
Indian retailer, as the Indian stock market came under pressure especially for
stocks of small market capitalisation.
Balance sheet
The Group`s net assets attributable to equity shareholders have increased from
the GBP2.3 billion disclosed in the 2010 annual report to GBP3.1 billion, with
the increase largely resulting from the acquisition of The Trafford Centre and
the associated equity capital raised.
As detailed in the table below, net assets (diluted, adjusted) have increased
by GBP813 million from 31 December 2010 with the Trafford Centre acquisition
and the profit for the period less the payment of the 2010 final dividend
comprising the majority of the movement.
Balance sheet Pro forma (1)
30 June 31 December 31 December
2011 2010 2010
GBPm GBPm GBPm
Investment, development and
trading properties 6,814.5 5,076.5 6,718.9
Investments 221.7 45.2 218.6
Net external debt (3,285.7) (2,436.5) (3,188.6)
Other assets and liabilities (583.9) (539.2) (650.3)
C&C US net assets - 147.3 -
Net assets 3,166.6 2,293.3 3,098.6
Minority interest (29.6) (19.9) (19.9)
Attributable to equity shareholders 3,137.0 2,273.4 3,078.7
Fair value of derivatives (net of tax) 298.7 314.9 339.0
Other adjustments 54.4 88.7 55.5
Net assets (diluted, adjusted) 3,490.1 2,677.0 3,473.2
(1) The pro forma analysis includes the Trafford Centre and re-classifies the
C&C US assets that were held-for-sale to investments.
The investments of GBP222 million as at 30 June 2011 comprise the Group`s
interests in the US and India. The investment in the US comprises 4.1 million
shares in Equity One, and 11.4 million shares in a joint venture with Equity
One, that the Group received in exchange for its interest in C&C US. Based on
the Equity One share price of $18.64 the Group`s investment has been valued at
GBP179 million at 30 June 2011.
The fair value provision for financial derivatives, principally interest rate
swaps, included in other assets and liabilities above, decreased by GBP15
million largely as a consequence of cash payments made in the period.
Adjusted net assets per share
As illustrated in the chart below, diluted adjusted net assets per share were
391 pence at 30 June 2011, an increase of 1 pence in the period. The increase
is attributable to the property valuation gain, offset by the 2010 final
dividend and the exceptional costs.
(GRAPHIC REMOVED - PLEASE SEE PAGE 11 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
Cash flow
The cash flow summary below shows a reduction in the Group`s cash balance in
the period. This can be attributed to the payments made in respect of
exceptional costs (GBP50 million) and the REIT entry charge (GBP21 million) in
the period.
Six months Six months
to June to June
2011 2010
GBPm GBPm
Underlying operating cash generated 167.0 122.3
Net finance charges paid (100.4) (84.3)
Exceptional finance and other costs (49.9) (74.4)
Net movement in working capital 2.3 (4.8)
Taxation/REIT entry charge (23.1) (18.2)
Cash flow from operations (4.1) (59.4)
Property development/investments (11.3) (30.5)
Sale proceeds of property/investments 1.7 65.7
Other derivative financial instruments (8.3) (19.5)
Cash acquired with businesses 37.6 -
Cash sold with businesses (20.3) -
Dividends (90.9) (66.9)
Cash flow before financing and equity raises (95.6) (110.6)
Net debt repaid (52.2) (79.4)
Equity capital raised 68.4 1.8
Impact of discontinued operations - (256.5)
Others (1.8) (54.1)
Net decrease in cash and cash equivalents (81.2) (498.8)
Investment in property related assets was mainly limited to existing
commitments in the period, with the most significant expenditure in the period
being in respect of Eldon Square (GBP2 million) and Braehead (GBP2 million).
The cash acquired/sold with businesses relates to the Trafford Centre and C&C
US respectively.
Net debt repayments of GBP52 million are discussed in the Debt structure
section below.
The table below illustrates that recurring operating cash flow covers the
proposed interim dividend.
Six months to
June 2011
Dividends - cash cover pence per
share
Underlying operating cash generated 20.2
Net finance charges excluding exceptional items (12.2)
Convertible bond coupon (0.3)
Net movement in working capital 0.3
Recurring cash flow 8.0
2011 proposed Interim dividend 5.0
Capital commitments
The Group has an aggregate commitment to capital projects of GBP55 million at
30 June 2011, down from the GBP90 million at 31 December 2010. The most
significant element of the reduction is due to the majority of costs to
complete the St. David`s, Cardiff project, including land assembly costs, now
accrued on the balance sheet. In addition to the committed expenditure, the
Group has an identified project pipeline of GBP134 million. Itis anticipated
that GBP30 million relating to capital projects will be incurred in the
balance of 2011.
Group debt ratios were as follows: 30 June 31 December
2011 2010
Debt to assets 48% 48%
Interest cover 170% 156%
Weighted average debt maturity 7.5 years 5.8 years
Weighted average cost of gross debt 5.6% 5.7%
Proportion of gross debt with interest rate protection 98% 94%
Financial position and financing structure
At 30 June 2011, the Group had net external debt of GBP3,286 million, an
increase of GBP97 million compared to the 31 December 2010 pro forma of
GBP3,189 million. In addition to cash balances of GBP165 million the Group had
undrawn facilities of GBP275 million at 30 June 2011, the GBP248 million
revolving credit facility and GBP27 million on the St David`s, Cardiff, joint
venture loan facility, giving total headroom of GBP440 million.
Debt structure
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. It is
largely syndicated bank debt and CMBS structures with corporate-level debt
limited to the revolving credit facility. The flexibility of this structure
was evidenced by the absence of lender issues during the demerger of Capco.
(GRAPHIC REMOVED - PLEASE SEE PAGE 12 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
The revolving credit facility matures in mid 2013 and we have started
approaching banks that we consider have the ability to provide similar
corporate level facilities, with a view to putting these in place by the end
of the first half of 2012. These banks would then be in place to assist with
the longer term funding strategy.
The above table shows that the value of maturities peaks in 2015-2016. Over
the last few months consideration has been given to replacing some facilities
early but it has been concluded that the associated one-off costs would
outweigh the benefit of longer maturities. Given the high quality of our
assets we consider we should have funding optionality from a variety of debt
funding sources such as secured bonds and bank loans, CMBS-linked notes,
unsecured bonds and bank loans, and private placements.
During the period net debt repayments of GBP52 million were made, the most
significant item being the repayment of the GBP81 million loan secured on
Barton Square. An additional GBP56 million has been drawn on the St David`s,
Cardiff joint venture loan facility, with the balance of the net repayment
being due to scheduled debt amortisation payments.
Hedging
The majority of the Group`s debt is floating rate. The Group uses interest
rate swaps to fix short and medium-term interest obligations, reducing cash
flow volatility caused by changes in interest rates. The Group is currently
effectively fully hedged, with a small forecast excess in 2012 to 2014.
The table below sets out the nominal amount and average rate of hedging in
place under current and forward starting swap contracts:
Average
Nominal amount rate
GBPm %
In effect on or after:
1 year 2,989 4.48
2 years 2,994 4.57
5 years 1,306 4.48
10 years 688 4.77
15 years 681 4.78
20 years 620 4.77
25 years 125 4.57
Since 2009, the Group has reduced the number of forward starting swaps as
anticipated borrowing requirements have been reduced by capital raisings and
market practice relating to swaps has changed. Costs of rescheduling and
terminating such instruments have been treated as exceptional finance charges
as incurred. Currently GBP555 million nominal amount of forward starting swaps
remain, carrying a market value liability of around GBP72 million. As lenders`
practice no longer allows the use of existing hedging contracts in new
facilities, these contracts are and will remain surplus, unrelated to the
current or anticipated borrowing needs. As such, the estimated annual cash
payments from 2012 of around GBP14 million, reducing to GBP10 million by 2015,
will be reported as an exceptional finance charge and will impact NAV
(diluted, adjusted) as incurred.
Covenants
Full details of the loan financial covenants are included in the Other
Information section of this report. The Group is in compliance with all of its
corporate and asset-specific loan covenants. As detailed in that analysis, as
a result of improved property valuations and rental income levels, the
headroom over the minimum covenant levels has generally increased in the
period.
Taxation
Since the Group became a UK REIT on 1 January 2007, the Group has made REIT
entry charge payments of GBP168 million, with GBP21 million paid in the
period. This now completes all payments due in respect of the Group`s original
REIT charges. Payments in respect of the Trafford Centre totalling GBP33
million will be made in the next twelve months. The cash flow benefits to date
have amounted to GBP176 million, comprising net rental income and capital
gains sheltered from UK tax.
Key risks and uncertainties
The key risks and uncertainties facing the Group are as set out in the table
below:
Risk Description
Financing
Liquidity Reduced availability
Economic and Property values decrease
property market
downturn Reduction in rental income
Macro economic
conditions deteriorate
Interest cover Interest rates fluctuate
Market price risk Interest rates fluctuate
of fixed rate resulting in significant
derivatives assets and/or liabilities
on derivative contracts
REIT Breach REIT conditions
PID requirements
Group`s ordinary The Group`s ordinary
shares are dual- shares are listed on the
listed 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 Failure of Health & Safety
visitors to
shopping centres
Business Lost access to centres
interruption or head office
People/HR
Staff Loss of key staff
Developments
Time Planning
Cost and letting Construction cost
risk overrun, low
occupancy levels
Strategy
Defining and Inappropriate strategy
executing the defined or poor execution
Group`s strategy of strategic plans
Impact Mitigation
Insufficient funds to Regular reporting of current and projected position
meet operational and to the Board
financing needs Efficient treasury management and strict credit
control process
Impact on covenants Regular monitoring of LTV and ICR covenants
Covenant headroom monitored and maintained
Regular market valuations
Focus on quality assets
Lack of certainty over Hedging to establish high degree of certainty
interest costs throughout term of loan
Potential cash outflow Manage derivative contracts to achieve a balance
if derivative contract between hedging interest rate exposure and
contains break clause minimising potential cash calls
Tax penalty or be forced Regular monitoring of compliance and tolerances
to leave the REIT regime
Requirement to pay 90 Alternative sources of investment funding constantly
per cent of income under review
restricts ability to retain
cash for investment
Additional complexity Professional advice sought in both jurisdictions to
when assessing ensure Group capital needs are met in optimal
options for capital manner
raising
Partners under - Agreements in place and regular communication
perform or provide with partners
incorrect information
Financial loss Initial and subsequent assessment of tenant
covenant strength
Active credit control process
Financial loss Policy of active tenant mix management
Active management to minimise financial impact if
voids should arise.
Impact on reputation Annual audits by external consultants
or potential criminal/ Health & Safety policies in place
civil proceedings
Impact on footfall and Documented Business Recovery Plans in place
tenant income Security team training and procedure in
Adverse publicity shopping centres
Terrorist Insurance is in place
Adverse impact on the Succession planning
Group`s performance Performance evaluation
Training and development
Incentives and rewards
Securing planning Policy of sustainable development and regeneration
consent for of brownfield sites
developments Constructive dialogue with planning authorities
Returns reduced by Approval process based on detailed project costs
increased costs or Regular monitoring and forecasting of project costs
delay in securing and rental income
tenants Fixed cost contracts
Financial loss Experienced management team familiar with
shopping centre industry
Sub-optimal returns Use of research and third party diligence expertise
as required
Reputational impact Board review process
DIRECTORS` RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the condensed set of financial
statements, in accordance with applicable law and regulations. The Directors
confirm that, to the best of their knowledge:
- this condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting, as adopted by the European Union; and
- this condensed set of financial statements includes a fair review of the
information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure
and Transparency Rules of the United Kingdom`s Financial Services Authority.
The operating and financial review refers to important events which have taken
place in the period.
The principal risks and uncertainties facing the business are referred to in
the operating and financial review.
Related party transactions are set out in note 22 of the condensed set of
financial statements.
A list of current Directors is maintained on the Capital Shopping Centres
Group PLC website: www.capital-shopping- centres.co.uk.
By order of the Board
D A Fischel
Chief Executive
M Roberts
Finance Director
2 August 2011
INDEPENDENT REVIEW REPORT TO CAPITAL SHOPPING CENTRES GROUP PLC
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2011, which comprises the consolidated income statement, consolidated
statement of comprehensive income, consolidated balance sheet, consolidated
statement of changes in equity, consolidated statement of cash flows and
related notes. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
Directors` responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom`s Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of
the Financial Services Authority and for no other purpose. We do not, in
producing this report, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity` issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2011 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom`s Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
2 August 2011
Notes:
(a) The maintenance and integrity of the Capital Shopping Centres Group PLC
website is the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred to
the financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
CONSOLIDATED INCOME STATEMENT (unaudited)
For the six months ended 30 June 2011
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
Notes GBPm GBPm GBPm
Continuing operations
Revenue 4 256.0 205.0 420.3
Net rental income 4 177.9 134.5 276.9
Net other income 3.7 0.3 0.7
Revaluation and sale of
investment and development
property 5 58.4 344.8 497.2
Gain on acquisition of
subsidiaries 20 54.3 - -
Gain on sale of subsidiaries 21 40.4 - -
Sale and impairment of
other investments (8.7) - (2.6)
Administration expenses -
ongoing (11.8) (11.2) (23.0)
Administration expenses -
exceptional 20 (15.5) (8.1) (15.6)
Operating profit 298.7 460.3 733.6
Finance costs 6 (98.1) (82.3) (165.4)
Finance income 0.6 1.3 3.1
Other finance costs 7 (38.4) (70.7) (75.1)
Change in fair value of
derivative financial instruments 21.7 (89.1) (50.0)
Net finance costs (114.2) (240.8) (287.4)
Profit before tax and
associates 184.5 219.5 446.2
Current tax 8 (0.7) - (0.1)
Deferred tax 8 0.2 0.8 2.8
REIT entry charge 8 - (1.7) (3.3)
Taxation 8 (0.5) (0.9) (0.6)
Share of profit of
associates 9.0 - -
Profit for the period from
continuing operations 193.0 218.6 445.6
Profit for the period from
discontinued operations - 72.6 83.0
Profit for the period 193.0 291.2 528.6
Attributable to:
Equity shareholders of CSC
Group PLC
- Continuing operations 183.3 219.9 428.8
- Discontinued operations - 72.6 83.0
183.3 292.5 511.8
Non-controlling interest 9.7 (1.3) 16.8
Basic earnings per share 193.0 291.2 528.6
From continuing operations 10 21.8p 35.4p 68.3p
From discontinued
operations 10 - 11.6p 13.2p
Diluted earnings per share 21.8p 47.0p 81.5p
From continuing operations 10 21.3p 34.8p 67.5p
From discontinued
operations 10 - 11.5p 13.0p
21.3p 46.3p 80.5p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
For the six months ended 30 June 2011
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
193.0 291.2 528.6
Profit for the period
Other comprehensive income:
Revaluation of other investments 0.6 13.9 17.2
Recognised in impairment of other
investments 8.7 - -
Recognised in gain on disposal of
subsidiaries (note 21) (10.9) - -
Realised revaluation reserve on
disposal of other investments - - 2.6
Exchange differences (3.4) (1.9) (1.1)
Tax on items taken directly to other
comprehensive income (0.2) (0.8) (2.8)
Other comprehensive income for the period (5.2) 11.2 15.9
Total comprehensive income for the period 187.8 302.4 544.5
Attributable to:
Equity shareholders of CSC Group PLC 178.1 303.7 527.7
Non-controlling interest 9.7 (1.3) 16.8
187.8 302.4 544.5
Total comprehensive income
attributable to equity shareholders
of CSC Group PLC arises from:
Continuing operations 178.1 212.6 432.6
Discontinued operations - 91.1 95.1
178.1 303.7 527.7
CONSOLIDATED BALANCE SHEET (unaudited)
As at 30 June 2011
As at As at As at
30 June 31 December 30 June
2011 2010 2010
Notes GBPm GBPm GBPm
Non-current assets
Investment and development
property 12 6,804.1 5,051.0 4,886.7
Plant and equipment 5.4 4.1 2.5
Investments in associate
companies 37.1 28.8 29.0
Other investments 13 184.6 16.4 19.0
Derivative financial
instruments 22.7 24.2 23.0
Trade and other receivables 86.1 76.7 42.4
Current assets 7,140.0 5,201.2 5,002.6
Trading property 10.4 25.5 28.8
Current tax assets 4.0 4.1 5.7
Trade and other receivables 56.6 50.2 68.6
Derivative financial
instruments 0.1 - -
Cash and cash equivalents 14 164.5 222.3 127.7
C&C US - assets - 423.9 429.6
235.6 726.0 660.4
Total assets 7,375.6 5,927.2 5,663.0
Current liabilities
Trade and other payables (267.3) (194.4) (213.8)
Borrowings 15 (65.3) (46.0) (115.5)
Derivative financial
instruments (0.8) (9.3) (19.0)
C&C US - liabilities - (276.6) (285.6)
Non-current liabilities (333.4) (526.3) (633.9)
Borrowings 15 (3,527.6) (2,751.5) (2,769.0)
Derivative financial
instruments (346.8) (354.6) (394.5)
Other provisions (1.1) (1.2) (1.4)
Other payables (0.1) (0.3) (2.2)
(3,875.6) (3,107.6) (3,167.1)
Total liabilities (4,209.0) (3,633.9) (3,801.0)
Net assets 3,166.6 2,293.3 1,862.0
Equity
Share capital 17 430.2 346.3 311.7
Share premium 564.1 20.4 1.4
Treasury shares (29.6) (29.9) (5.4)
Convertible bonds 18 143.7 - 6.1
Other reserves 521.3 526.5 336.7
Retained earnings 1,507.3 1,410.1 1,209.7
Amounts attributable to
equity shareholders of CSC
Group PLC 3,137.0 2,273.4 1,860.2
Non-controlling interest 29.6 19.9 1.8
Total equity 3,166.6 2,293.3 1,862.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2011
Attributable to equity shareholders of CSC Group PLC
Share Share Treasury Convertible
capital premium shares bonds
GBPm GBPm GBPm GBPm
At 1 January 2011 346.3 20.4 (29.9) -
Profit for the period - - - -
Other comprehensive income:
Revaluation of other
investments - - - -
Recognised in impairment
of other investments - - - -
Recognised in gain on
disposal of subsidiaries - - - -
Exchange differences - - - -
Tax on items taken directly
to other comprehensive income - - - -
Total comprehensive
income for the period - - - -
Ordinary shares issued 83.9 543.7 - -
Dividends paid (note 9) - - - -
Convertible bonds issued - - - 143.7
Interest on convertible bonds - - - -
Disposal of treasury shares - - 0.3 -
Share-based payments - - - -
83.9 543.7 0.3 143.7
At 30 June 2011 430.2 564.1 (29.6) 143.7
Attributable to equity shareholders of CSC Group PLC
Other Retained
reserves earnings Total
GBPm GBPm GBPm
At 1 January 2011 526.5 1,410.1 2,273.4
Profit for the period - 183.3 183.3
Other comprehensive income:
Revaluation of other investments 0.6 - 0.6
Recognised in impairment
of other investments 8.7 - 8.7
Recognised in gain on
disposal of subsidiaries (10.9) - (10.9)
Exchange differences (3.4) - (3.4)
Tax on items taken directly
to other comprehensive income (0.2) - (0.2)
Total comprehensive
income for the period (5.2) 183.3 178.1
Ordinary shares issued - - 627.6
Dividends paid (note 9) - (85.2) (85.2)
Convertible bonds issued - - 143.7
Interest on convertible bonds - (2.4) (2.4)
Disposal of treasury shares - (0.2) 0.1
Share-based payments - 1.7 1.7
- (86.1) 685.5
At 30 June 2011 521.3 1,507.3 3,137.0
Non-
controlling Total
interest equity
GBPm GBPm
At 1 January 2011 19.9 2,293.3
Profit for the period 9.7 193.0
Other comprehensive income:
Revaluation of other investments - 0.6
Recognised in impairment
of other investments - 8.7
Recognised in gain on
disposal of subsidiaries - (10.9)
Exchange differences - (3.4)
Tax on items taken directly
to other comprehensive income - (0.2)
Total comprehensive
income for the period 9.7 187.8
Ordinary shares issued - 627.6
Dividends paid (note 9) - (85.2)
Convertible bonds issued - 143.7
Interest on convertible bonds - (2.4)
Disposal of treasury shares - 0.1
Share-based payments - 1.7
- 685.5
At 30 June 2011 29.6 3,166.6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the year ended 31 December 2010
Attributable to equity shareholders of CSC Group PLC
Share Share Treasury Convertible
capital premium shares bonds
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 - - - -
Realised 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 (note 9) - - - -
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 - (1,005.7) - -
Demerger effected by way
of repayment of capital - - - -
35.0 (985.3) (20.2) (6.7)
At 31 December 2010 346.3 20.4 (29.9) -
Attributable to equity shareholders of CSC Group PLC
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
Realised 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 (note 9) - (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 - 1,005.7 -
Demerger effected by way
of repayment of capital 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
Realised 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 (note 9) - (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 - -
Demerger effected by way
of repayment of capital - (799.8)
3.1 (672.3)
At 31 December 2010 19.9 2,293.3
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2010
Attributable to equity shareholders of CSC Group PLC
Share Share Treasury Convertible
capital premium shares bonds
GBPm GBPm GBPm GBPm
At 1 January 2010 311.3 1,005.7 (9.7) 6.7
Profit/(loss) for the period - - - -
Other comprehensive income:
Revaluation of other investments - - - -
Exchange differences - - - -
Tax on items taken to other
comprehensive income - - - -
Total comprehensive
income for the period - - - -
Ordinary shares issued 0.4 1.4 - -
Dividends paid (note 9) - - - -
Conversion of bonds - - - (0.6)
Non-controlling interest
additions - - - -
Acquisition of treasury shares - - (1.5) -
Disposal of treasury shares - - 5.8 -
Share-based payments - - - -
Reduction of capital - (1,005.7) - -
Demerger effected by way
of repayment of capital - - - -
0.4 (1,004.3) 4.3 (0.6)
At 30 June 2010 311.7 1.4 (5.4) 6.1
Attributable to equity shareholders of CSC Group PLC
Other Retained
reserves earnings Total
GBPm GBPm GBPm
At 1 January 2010 286.9 820.2 2,421.1
Profit/(loss) for the period - 292.5 292.5
Other comprehensive income:
Revaluation of other investments 13.9 - 13.9
Exchange differences (1.9) - (1.9)
Tax on items taken to other
comprehensive income (0.8) - (0.8)
Total comprehensive
income for the period 11.2 292.5 303.7
Ordinary shares issued - - 1.8
Dividends paid (note 9) - (71.4) (71.4)
Conversion of bonds - 0.6 -
Non-controlling interest additions - - -
Acquisition of treasury shares - - (1.5)
Disposal of treasury shares - - 5.8
Share-based payments - 0.5 0.5
Reduction of capital - 1,005.7 -
Demerger effected by way
of repayment of capital 38.6 (838.4) (799.8)
38.6 97.0 (864.6)
At 30 June 2010 336.7 1,209.7 1,860.2
Non-
controlling Total
interest equity
GBPm GBPm
At 1 January 2010 - 2,421.1
Profit/(loss) for the period (1.3) 291.2
Other comprehensive income:
Revaluation of other investments - 13.9
Exchange differences - (1.9)
Tax on items taken to other
comprehensive income - (0.8)
Total comprehensive
income for the period (1.3) 302.4
Ordinary shares issued - 1.8
Dividends paid (note 9) - (71.4)
Conversion of bonds - -
Non-controlling interest additions 3.1 3.1
Acquisition of treasury shares - (1.5)
Disposal of treasury shares - 5.8
Share-based payments - 0.5
Reduction of capital - -
Demerger effected by way
of repayment of capital - (799.8)
3.1 (861.5)
At 30 June 2010 1.8 1,862.0
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the six months ended 30 June 2011
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
Notes GBPm GBPm GBPm
Cash flows from continuing
operations
Cash generated from
operations 16 153.8 109.4 226.8
Interest paid (135.4) (151.5) (229.1)
Interest received 0.6 0.9 1.5
Taxation (2.0) 1.5 2.2
REIT entry charge (21.1) (19.7) (40.1)
Cash flows from operating
activities (4.1) (59.4) (38.7)
Cash flows from investing
activities
Purchase and development
of property, plant & equipment (11.3) (26.6) (47.4)
Sale of property 1.7 64.4 64.4
Sale of other investments - 1.3 10.4
Purchase of other investments - (3.9) (4.2)
Cash sold with businesses (20.3) - -
Cash acquired with businesses 37.6 - -
Other derivative financial
instruments (8.3) (19.5) (26.2)
Cash flows from investing
activities (0.6) 15.7 (3.0)
Cash flows from financing
activities
Partnership equity introduced - 3.1 3.1
Issue of ordinary shares 44.7 1.8 222.4
Issue of convertible bonds 23.7 - -
Acquisition of treasury shares - (0.6) (1.4)
Sale of treasury shares 0.1 - 0.2
Cash transferred from/(to)
restricted accounts 0.5 (56.6) 19.8
Borrowings drawn 56.3 518.5 518.7
Borrowings repaid (108.5) (597.9) (690.3)
Interest on convertible bonds (2.4) - -
Equity dividends paid (90.9) (66.9) (102.2)
Cash flows from financing
activities (76.5) (198.6) (29.7)
Net decrease in cash and
cash equivalents
from continuing operations (81.2) (242.3) (71.4)
Cash flows from
discontinued operations
Operating activities - (12.0) 0.3
Investing activities - (3.1) (1.2)
Financing activities - (63.2) (69.0)
Cash and cash equivalents
transferred on demerger - (179.2) (179.2)
Effect of exchange rate
changes on cash and cash equivalents - 1.0 0.4
Net decrease in cash and
cash equivalents from
discontinued operations - (256.5) (248.7)
Net decrease in cash and
cash equivalents (81.2) (498.8) (320.1)
Cash and cash equivalents
at beginning of period 242.6 562.7 562.7
Cash and cash equivalents
at end of period 14 161.4 63.9 242.6
NOTES (unaudited)
1 Basis of preparation
The condensed set of financial statements for the six months ended 30 June
2011 is unaudited and does not constitute statutory accounts within the
meaning of s434 of the Companies Act 2006. The condensed set of financial
statements has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Services Authority and with IAS 34 as
adopted by the European Union.
The comparative information presented for the year ended 31 December 2010 is
not the Group`s statutory accounts for that year.
Those accounts have been reported on by the Group`s auditors and delivered to
the registrar of companies. The auditors` opinion on those accounts was
unqualified and did not contain an emphasis of matter paragraph or a statement
made under Section 498 (2) or (3) of the Companies Act 2006.
The condensed set of financial statements should be read in conjunction with
the Group`s statutory accounts for the year ended 31 December 2010 which have
been prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amount of assets and liabilities, income
and expense. Actual results may differ from these estimates. Except as
described below, in preparing the condensed set of financial statements, the
significant judgements made by management in applying the Group accounting
policies and the key sources of estimation uncertainty were the same as those
applied to the consolidated financial statements as at and for the year ended
31 December 2010.
The largest area of estimation and uncertainty in the condensed set of
financial statements is in respect of the valuation of the property portfolio,
where external valuations were obtained.
The Directors have concluded, based on the Group`s forecasts and projections
and taking into account reasonably possible changes in trading performance,
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 Accounting policies
Except as described below, the accounting policies applied are consistent with
those of the Group`s statutory accounts for the year ended 31 December 2010 as
set out on pages 69 to 72 of the Annual Report.
Taxes on income in interim periods are accrued using tax rates expected to be
applicable to total annual earnings.
The following standards, amendments and interpretations endorsed by the EU are
effective for the first time for the Group`s 31 December 2011 year end:
IAS 24 Related Party Disclosures;
IAS 32 Financial Instruments: Presentation (amendment);
IFRIC14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction;
IFRIC 19 Extiguishing Financial Liabilities with Equity Instruments; and
Amendments arising from the 2010 annual improvements projects.
These either had no material impact on the condensed financial statements or
resulted in changes to presentation and disclosure only.
3 Seasonality and cyclicality
There is no material seasonality or cyclicality impacting interim financial
reporting.
4 Segmental reporting
Operating segments are determined based on the internal reporting and
operational management of the Group. The Group has 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. A more detailed analysis
of net rental income is given below.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Revenue 256.0 205.0 420.3
Rent receivable 211.3 170.7 350.4
Service charge income 36.8 29.9 59.6
248.1 200.6 410.0
Rent payable (13.0) (11.7) (23.7)
Service charge and other
non-recoverable costs (57.2) (54.4) (109.4)
Net rental income 177.9 134.5 276.9
5 Revaluation and sale of investment and development property
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Revaluation of investment and
development property 58.3 348.3 500.6
Sale of investment property 0.1 (3.5) (3.4)
Revaluation and sale of investment
and development property 58.4 344.8 497.2
6 Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
On bank loans and overdrafts 96.1 80.3 160.8
On convertible debt - 1.6 2.3
On obligations under finance leases 2.0 2.0 4.0
Gross finance costs 98.1 83.9 167.1
Interest capitalised on developments - (1.6) (1.7)
Finance costs 98.1 82.3 165.4
7 Other finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Amortisation of Metrocentre compound
financial instrument 4.0 4.4 8.8
Revolving credit facility
arrangement fee(1) - 1.2 1.2
Costs of termination of derivative
financial instruments(1) 34.4 65.1 65.1
Other finance costs 38.4 70.7 75.1
(1) Amounts totalling GBP34.4
million for the six months ended 30
June 2011 are treated as exceptional and therefore excluded from the
calculation of underlying earnings (six months ended 30 June 2010 - GBP66.3
million, year ended 31 December 2010 - GBP66.3 million).
8 Taxation
Taxation charge for the period:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Current tax 0.7 - 0.1
Deferred tax:
On derivative financial instruments (12.5) (1.2) (2.6)
On other temporary differences 0.1 0.6 0.4
On other investments 13.4 - -
On exceptional items (1.2) (0.2) (0.6)
Deferred tax (0.2) (0.8) (2.8)
REIT entry charge - 1.7 3.3
Total tax charge 0.5 0.9 0.6
Movements in the provision for deferred tax:
Derivative Other
Other financial temporary
investments instruments differences Total
GBPm GBPm GBPm GBPm
Deferred tax provision:
At 1 January 2011 - (4.2) 4.2 -
Recognised in the
income statement 13.4 (12.5) (1.1) (0.2)
Recognised in other
comprehensive income (0.1) 0.3 - 0.2
At 30 June 2011 13.3 (16.4) 3.1 -
Unrecognised deferred
tax asset:
At 1 January 2011 - (15.7) (13.9) (29.6)
Income statement items - 13.3 (0.9) 12.4
At 30 June 2011 - (2.4) (14.8) (17.2)
In accordance with the requirements of IAS 12 Income Taxes, the deferred tax
asset has not been recognised in the Group financial statements due to
uncertainty on the level of profits that will be available in the non-REIT
elements of the Group in future periods.
9 Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Ordinary shares
Final dividend paid of 10.0 pence
per share (2009 - 11.5 pence per share) 85.2 71.4 71.4
2010 Interim dividend paid of 5
pence per share - - 31.4
Dividends paid 85.2 71.4 102.8
Proposed interim dividend of 5 pence
per share 42.7
10 Earnings per share
(a) Earnings per share
Basic and diluted earnings per share as calculated in accordance with IAS 33
Earnings per Share.
Six months ended 30 June 2011
Pence
Earnings Shares per
GBPm million share
Continuing operations:
Basic earnings per share (1) 180.9 828.2 21.8p
Dilutive convertible bonds,
share options and share awards 2.4 33.1
Diluted earnings per share 183.3 861.3 21.3p
Discontinued operations:
Basic earnings per share (1) - 828.2 -
Dilutive convertible bonds,
share options and share awards - 33.1
Diluted earnings per share - 861.3 -
Continuing and discontinued operations:
Basic earnings per share (1) 180.9 828.2 21.8p
Dilutive convertible bonds,
share options and share awards 2.4 33.1
Diluted earnings per share 183.3 861.3 21.3p
Six months ended 30 June 2010
Pence
Earnings Shares per
GBPm million share
Continuing operations:
Basic earnings per share (1) 219.9 621.7 35.4p
Dilutive convertible bonds,
share options and share awards 1.1 13.1
Diluted earnings per share 221.0 634.8 34.8p
Discontinued operations:
Basic earnings per share (1) 72.6 621.7 11.6p
Dilutive convertible bonds,
share options and share awards - 13.1
Diluted earnings per share 72.6 634.8 11.5p
Continuing and discontinued operations:
Basic earnings per share (1) 292.5 621.7 47.0p
Dilutive convertible bonds,
share options and share awards 1.1 13.1
Diluted earnings per share 293.6 634.8 46.3p
Year ended 31 December 2010
Pence
Earnings Shares per
GBPm million share
Continuing operations:
Basic earnings per share (1) 428.8 627.8 68.3p
Dilutive convertible bonds,
share options and share awards 1.7 9.7
Diluted earnings per share 430.5 637.5 67.5p
Discontinued operations:
Basic earnings per share (1) 83.0 627.8 13.2p
Dilutive convertible bonds,
share options and share awards - 9.7
Diluted earnings per share 83.0 637.5 13.0p
Continuing and discontinued operations:
Basic earnings per share (1) 511.8 627.8 81.5p
Dilutive convertible bonds,
share options and share awards 1.7 9.7
Diluted earnings per share 513.5 637.5 80.5p
(1) The weighted average number of shares used for the calculation of basic
earnings per share has been adjusted for shares held in the ESOP and treasury
shares. Basic earnings per share are stated after deducting interest on
convertible bonds recognised directly in equity of GBP2.4 million in the six
months ended 30 June 2011.
(b) Headline earnings per share
Headline earnings per share has been calculated and presented as required by
the Johannesburg Stock Exchange listing requirements and is given for
continuing plus discontinued operations.
Six months ended 30 June 2011
Gross Net (1)
GBPm GBPm
Basic earnings 180.9
Remove:
Revaluation and sale of investment and
development property (58.4) (48.8)
Gain on acquisition of subsidiaries (54.3) (54.3)
Gain on sale of subsidiaries (40.4) (25.9)
Sale and impairment of other investments 8.7 8.7
Headline earnings/(loss) 60.6
Dilution (2) 2.4
Diluted headline earnings/(loss) 63.0
Weighted average number of shares 828.2
Dilution (2) 33.1
Diluted weighted average number of shares 861.3
Headline earnings/(loss) per share (pence) 7.3p
Diluted headline earnings/(loss) per share (pence) 7.3p
Six months ended 30 June 2010
Gross Net (1)
GBPm GBPm
Basic earnings 292.5
Remove:
Revaluation and sale of investment and
development property (417.9) (406.2)
Gain on acquisition of subsidiaries - -
Gain on sale of subsidiaries - -
Sale and impairment of other investments - -
Headline earnings/(loss) (113.7)
Dilution (2) 1.1
Diluted headline earnings/(loss) (112.6)
Weighted average number of shares 621.7
Dilution (2) 13.1
Diluted weighted average number of shares 634.8
Headline earnings/(loss) per share (pence) (18.3)p
Diluted headline earnings/(loss) per share (pence) (17.7)p
Year ended 31 December 2010
Gross Net (1)
GBPm GBPm
Basic earnings 511.8
Remove:
Revaluation and sale of investment and
development property (580.5) (547.5)
Gain on acquisition of subsidiaries - -
Gain on sale of subsidiaries - -
Sale and impairment of other investments 2.6 2.6
Headline earnings/(loss) (33.1)
Dilution (2) 1.7
Diluted headline earnings/(loss) (31.4)
Weighted average number of shares 627.8
Dilution (2) 9.7
Diluted weighted average number of shares 637.5
Headline earnings/(loss) per share (pence) (5.3)p
Diluted headline earnings/(loss) per share (pence) (4.9)p
(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 10(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.
Six months ended 30 June 2011
Pence
Earnings Shares per
GBPm million share
Basic earnings per share
from continuing operations (1) 180.9 828.2 21.8p
Remove:
Revaluation and sale of investment and
development property (58.4) (7.1)p
Share of associates revaluation
of investment and development property (9.1) (1.1)p
Sale and impairment of other investments 8.7 1.1p
Gain on acquisition of subsidiaries (54.3) (6.6)p
Gain on sale of subsidiaries (40.4) (4.9)p
Exceptional administration costs 15.5 1.9p
Exceptional finance charges 34.4 4.2p
Change in fair value of
derivative financial instruments (21.7) (2.6)p
Tax on the above (0.2) -
REIT entry charge - -
Non-controlling interest
in respect of the above 10.9 1.3p
Add:
C&C US underlying earnings
included within discontinued operations - -
Underlying earnings per share 66.3 828.2 8.0p
Dilutive convertible bonds,
share options and share awards 2.4 33.1
Underlying, diluted earnings per share 68.7 861.3 8.0p
Six months ended 30 June 2010
Pence
Earnings Shares per
GBPm million share
Basic earnings per share
from continuing operations (1) 219.9 621.7 35.4p
Remove:
Revaluation and sale of investment and
development property (344.8) (55.5)p
Share of associates revaluation
of investment and development property - -
Sale and impairment of other investments - -
Gain on acquisition of subsidiaries - -
Gain on sale of subsidiaries - -
Exceptional administration costs 8.1 1.3p
Exceptional finance charges 66.3 10.7p
Change in fair value of
derivative financial instruments 89.1 14.4p
Tax on the above (1.0) (0.2)p
REIT entry charge 1.7 0.3p
Non-controlling interest
in respect of the above (0.4) (0.1)p
Add:
C&C US underlying earnings
included within discontinued operations 4.4 0.7p
Underlying earnings per share 43.3 621.7 7.0p
Dilutive convertible bonds,
share options and share awards - 0.9
Underlying, diluted earnings per share 43.3 622.6 7.0p
Year ended 31 December 2010
Pence
Earnings Shares per
GBPm million share
Basic earnings 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
Share of associates revaluation
of investment and development property - -
Sale and impairment of other investments 2.6 0.4p
Gain on acquisition of subsidiaries - -
Gain on sale of subsidiaries - -
Exceptional administration costs 15.6 2.5p
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
(1) The weighted average number of shares used for the calculation of basic
earnings per share has been adjusted for shares held in the ESOP and treasury
shares. Basic earnings per share are stated after deducting interest on
convertible bonds recognised directly in equity of GBP2.4 million in the six
months ended 30 June 2011.
11 Net assets per share
As at 30 June 2011
Net NAV per
assets Shares share
GBPm million (pence)
NAV attributable to equity shareholders of
CSC Group PLC (1) 3,137.0 853.5 368p
Dilutive convertible bonds, share options
and share awards - 39.1
Diluted NAV 3,137.0 892.6 351p
Add:
Unrecognised surplus on
trading properties (net of tax) - -
Remove:
Fair value of derivative
financial instruments (net of tax) 298.7 33p
Deferred tax on investment and development
property and other investments 13.3 2p
Non-controlling interest on the above (30.2) (3)p
Add:
Non-controlling interest
recoverable balance not recognised 71.3 8p
NAV per share (diluted, adjusted) 3,490.1 892.6 391p
As at 31 December 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
and other investments 47.7 7p
Non-controlling interest on 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
As at 30 June 2010
Net NAV per
assets Shares share
GBPm million (pence)
NAV attributable to equity
shareholders of CSC Group PLC (1) 1,860.2 622.4 299p
Dilutive convertible bonds,
share options and share awards 12.7 4.3
Diluted NAV 1,872.9 626.7 299p
Add:
Unrecognised surplus on
trading properties (net of tax) 1.4 -
Remove:
Fair value of derivative
financial instruments (net of tax) 355.6 57p
Deferred tax on investment
and development property
and other investments 43.8 7p
Non-controlling interest on the above (35.9)
(6)p
Add:
Non-controlling interest
recoverable balance not recognised 71.3 11p
NAV per share (diluted, adjusted) 2,309.1 626.7 368p
(1) The number of shares used has been adjusted for shares held in the ESOP
and treasury shares.
12 Investment and development property
GBPm
At 1 January 2011 5,051.0
Trafford Centre acquisition 1,650.0
Additions from subsequent expenditure 34.9
Transfer from trading properties 11.5
Disposals (1.6)
Surplus on revaluation 58.3
At 30 June 2011 6,804.1
As at As at As at
30 June 31 December 30 June
2011 2010 2010
GBPm GBPm GBPm
Balance sheet carrying value of investment
and development property 6,804.1 5,051.0 4,886.7
Adjustment in respect of tenant incentives 95.0 86.8 71.6
Adjustment in respect of head leases (38.3) (38.7) (39.3)
6,860.8 5,099.1 4,919.0
Market value of investment and development property
The fair value of the Group`s investment and development properties as at 30
June 2011 was determined by independent external valuers at that date. The
valuation conforms with the Royal Institution of Chartered Surveyors (RICS)
Valuation Standards 7th Edition and with IVS 1 of International Valuation
Standards, and was arrived at by reference to market transactions for similar
properties.
The main assumptions underlying the valuations are in relation to market rent,
taking into account forecast growth rates and yields based on known
transactions for similar properties and likely incentives offered to tenants.
13 Other investments
GBPm
At 1 January 2011 16.4
Additions 179.3
Reclassification to intercompany (6.3)
Revaluation 0.6
Foreign exchange movements (5.4)
At 30 June 2011 184.6
Additions are the consideration received for C&C US consisting of 11.35
million joint venture shares and 4.05 million shares in Equity One (note 21).
The reclassification to intercompany results from the Trafford Centre
acquisition and the elimination of the Group`s investment in Trafford CMBS.
14 Cash and cash equivalents
As at As at As at
30 June 31 December 30 June
2011 2010 2010
GBPm GBPm GBPm
Unrestricted cash 161.4 222.3 51.4
Restricted cash 3.1 - 76.3
164.5 222.3 127.7
Cash and cash equivalents per the
statement of cash flows:
Unrestricted cash 161.4 222.3 51.4
C&C US - classified as held for sale - 20.3 12.5
161.4 242.6 63.9
Restricted cash at 30 June 2011 reflects amounts held to match the 2014 loan
notes shown within borrowings. Restricted cash at 30 June 2010 relates to
amounts deposited in a trust account equal to the outstanding principal plus
interest due on maturity which was used to settle the 3.95 per cent
convertible bonds on maturity in September 2010.
15 Borrowings
As at As at As at
30 June 31 December 30 June
2011 2010 2010
GBPm GBPm GBPm
Current borrowings
Bank loans and overdrafts 18.4 16.5 11.6
Commercial mortgage backed securities
("CMBS") notes 40.1 25.4 24.7
Loan notes 2014 3.1 - -
3.95% convertible bonds due 2010 - - 74.7
Borrowings excluding finance leases 61.6 41.9 111.0
Finance lease obligations 3.7 4.1 4.5
Current borrowings 65.3 46.0 115.5
Non-current borrowings
CMBS notes 2015 1,012.9 1,005.9 1,018.9
CMBS notes 2022 52.2 - -
CMBS notes 2029 105.8 - -
CMBS notes 2033 381.7 - -
CMBS notes 2035 178.4 - -
Bank loan 2014 114.7 58.4 58.2
Bank loans 2016 742.0 749.1 756.1
Bank loan 2017 508.9 511.1 513.2
Debentures 2027 227.0 226.9 226.7
CSC bonds 2013 26.7 26.7 26.7
Borrowings excluding finance leases and
Metrocentre compound financial
instrument 3,350.3 2,578.1 2,599.8
Metrocentre compound financial instrument 142.7 138.7 134.4
Finance lease obligations 34.6 34.7 34.8
Non-current borrowings 3,527.6 2,751.5 2,769.0
Total borrowings 3,592.9 2,797.5 2,884.5
Cash and cash equivalents (164.5) (222.3) (127.7)
Net debt 3,428.4 2,575.2 2,756.8
Net external debt (adjusted for Metrocentre compound financial instrument) at
30 June 2011 was GBP3,285.7 million (31 December 2010 - GBP2,436.5 million, 30
June 2010 - GBP2,622.4 million).
16 Cash generated from operations
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
Notes GBPm GBPm GBPm
Continuing operations
Profit before tax 184.5 219.5 446.2
Remove:
Revaluation and sale of
investment and development
property 5 (58.4) (344.8) (497.2)
Gain on acquisition of
subsidiaries 20 (54.3) - -
Gain on sale of
subsidiaries 21 (40.4) - -
Sale and impairment of
other investments 8.7 - 2.6
Depreciation 0.7 0.2 0.4
Share-based payments 0.8 0.6 1.0
Amortisation of lease
incentives and other
direct costs (4.3) (2.1) (5.3)
Finance costs 6 98.1 82.3 165.4
Finance income (0.6) (1.3) (3.1)
Other finance costs 7 38.4 70.7 75.1
Change in fair value of
derivative financial instruments (21.7) 89.1 50.0
Changes in working capital:
Change in trading property 3.6 1.2 4.5
Change in trade and other receivables (5.7) (10.8) (21.1)
Change in trade and other payables 4.4 4.8 8.3
Cash generated from operations 153.8 109.4 226.8
17 Share capital
GBPm
Issued and fully paid
At 31 December 2010 - 692,673,009 ordinary shares of 50p each 346.3
Shares issued 83.9
At 30 June 2011 - 860,347,169 ordinary shares of 50p each 430.2
On 28 January 2011 the Company issued 155,000,000 ordinary shares as part of
the consideration for the acquisition of The Trafford Centre (note 20). As a
condition of the acquisition the Company issued to the Peel Group a further
12,316,817 ordinary shares for cash at GBP3.55 per share.
During the period the Company issued a total of 357,343 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.
18 Convertible bonds
On 28 January 2011 the Company issued GBP127.6 million, 3.75 per cent
perpetual subordinated convertible bonds (the "convertible bonds") as part of
the consideration for the acquisition of The Trafford Centre (note 20). As a
condition of the acquisition the Company also issued to the Peel Group GBP25.7
million of convertible bonds for a subscription amount of GBP23.7 million and
an implied issue price of the underlying shares of GBP3.55 per share.
A total of GBP154.3 million convertible bonds were issued and remain
outstanding at 30 June 2011. These are accounted for as equity at their fair
value on issue which totalled GBP143.7 million.
The convertible bonds can be converted at the option of the bondholder at any
time from 28 January 2013 at GBP4.00 per ordinary share, a conversion rate of
250 ordinary shares for every GBP1,000 nominal. Full conversion would result
in 38,579,250 ordinary shares being issued.
The convertible bonds may be redeemed at their principal amount at the
Company`s option on 28 January 2014 or any subsequent interest payment date
thereafter, or at any time once 85 per cent or more of the principal amount of
the bonds originally issued have been converted or cancelled.
19 Capital commitments
At 30 June 2011, the Group was contractually committed to GBP54.5 million (31
December 2010 - GBP90.1 million, 30 June 2010 - GBP110.7 million) of future
expenditure for the purchase, construction, development and enhancement of
investment property.
The Group`s share of joint venture commitments included above at 30 June 2011
was GBP21.0 million (31 December 2010 - GBP63.0 million, 30 June 2010 -
GBP79.3 million).
20 Acquisition of The Trafford Centre
On 28 January 2011 the Group acquired 100% of the share capital of Tokenhouse
Holdings Limited (renamed CSC 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 the Peel Group 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. Total
exceptional administration expenses associated with the acquisition are
GBP19.5 million of which GBP4.0 million were recognised in 2010 and the
balance of GBP15.5 million in 2011.
Through its subsidiaries CSC Trafford Centre Group Limited owns and operates
The Trafford Centre in Manchester. Further details of the business are given
in the Operating and Financial Review.
The fair value of the consideration paid has been assessed as GBP702.7
million, consisting of GBP582.8 million in respect of the ordinary shares and
GBP119.9 million in respect of the convertible bonds. The fair value has been
assessed using the Capital Shopping Centres Group PLC opening share price on
28 January 2011 of GBP3.76, being the share price at the point the acquisition
took place.
The fair value of assets and liabilities acquired is set out in the table
below.
Fair value
Book value adjustments Fair value
GBPm GBPm GBPm
Assets
Investment and development property 1,653.6 (3.6) 1,650.0
Plant and equipment 0.4 - 0.4
Cash and cash equivalents (including
restricted cash of GBP3.6 million) 41.2 - 41.2
Trade and other receivables 18.8 (12.9) 5.9
Total assets 1,714.0 (16.5) 1,697.5
Liabilities
Borrowings (833.3) (16.6) (849.9)
Trade and other payables (88.7) 15.6 (73.1)
Derivative financial instruments (17.5) - (17.5)
Total liabilities (939.5) (1.0) (940.5)
Net assets 774.5 (17.5) 757.0
Fair value of consideration paid 702.7
Gain on acquisition of subsidiaries 54.3
The book values disclosed are under IFRS and after allowing for the impact of
joining the REIT regime. The trade and other liabilities book value includes
the REIT entry charge of GBP33.0 million.
The fair value of the assets and liabilities acquired exceeds the fair value
of the consideration and as a result a gain of GBP54.3 million is recognised
in the income statement on acquisition. This gain reflects the CSC share price
at the date of the acquisition of GBP3.76 which, in accordance with IFRS 3
Business Combinations, is required to be used to assess the fair value of the
consideration for acquisition accounting purposes. The acquisition was however
agreed based on an issue price of the CSC Group ordinary shares of GBP4.00.
The difference between the agreed issue price of GBP4.00 and the share price
at the date the acquisition was completed of GBP3.76 is the principal reason
for recording an accounting gain on the acquisition.
During the period the acquired companies contributed GBP42.6 million to the
revenue of the Group and GBP8.1 million to the profit for the period.
Had the acquisition taken place at 1 January 2011 the revenue of the Group for
the period would have been GBP265.0 million and the profit for the period
would have been GBP195.7 million.
21 Disposal of C&C US
In 2010 the Group entered into an agreement with Equity One, pursuant to which
Equity One agreed to acquire the Group`s interests in its US subsidiaries (C&C
US), through a joint venture with CSC. The transaction was completed on 4
January 2011. Consideration consisted of approximately 11.35 million shares in
the joint venture and 4.05 million shares in Equity One common stock. Based on
the Equity One share price on 4 January of $18.15 and an exchange rate on that
day of 1.56, the consideration had a fair value of GBP179.3 million at the
date of the transaction and the net assets exchanged had a book value of
GBP147.3 million including a deferred tax liability on investment property of
GBP47.7 million. After taking into account costs of the transaction of GBP2.5
million, and the transfer of related hedging and foreign currency balances
from equity of GBP10.9 million, a profit of GBP40.4 million has been
recognised in the income statement as summarised in the table below.
GBPm
Fair value of consideration received 179.3
Book value of net assets (147.3)
Costs of the transaction (2.5)
Cumulative foreign currency and hedging balances transferred from
reserves 10.9
Gain on sale of subsidiaries 40.4
22 Related party transactions
There have been no related party transactions during the period that require
disclosure under Section DTR 4.2.8 R of the Disclosure and Transparency Rules
or under IAS34 Interim Financial Reporting except those disclosed elsewhere in
this condensed set of financial statements.
INVESTMENT AND DEVELOPMENT PROPERTY (unaudited)
Property data
Market Initial*
value yield
GBPm Ownership Notes (EPRA)
As at 30 June 2011
The Trafford Centre, Manchester 1,650.0 100% 5.09%
Lakeside, Thurrock 1,071.0 100% 5.00%
Metrocentre, Gateshead 870.9 90% A 5.55%
Braehead, Glasgow 576.5 100% 5.08%
The Harlequin, Watford 353.0 93% 5.09%
Manchester, Arndale 347.6 48% B 5.51%
Victoria Centre, Nottingham 333.0 100% 5.19%
St David`s, Cardiff 276.0 50% 3.92%
Eldon Square, Newcastle upon Tyne 261.9 60% 4.41%
Chapelfield, Norwich 240.6 100% 5.40%
Cribbs Causeway, Bristol 221.2 33% C 5.48%
The Chimes, Uxbridge 217.3 100% 5.95%
The Potteries, Stoke-on-Trent 198.5 100% 6.89%
The Glades, Bromley 178.8 64% 5.70%
Other 64.5 D
Total investment and development
property 6,860.8 5.20%
Total investment and development
property
(excluding The Trafford Centre) 5,210.8 5.23%
As at 31 December 2010
Total investment and development
property 5,099.1 5.32%
Gross
Nominal* area
equivalent million
yield Occupancy* sq. ft. E
As at 30 June 2011
The Trafford Centre, Manchester 5.62% 95.8% 1.9
Lakeside, Thurrock 5.69% 98.7% 1.4
Metrocentre, Gateshead 6.03% 98.5% 2.1
Braehead, Glasgow 6.12% 96.1% 1.1
The Harlequin, Watford 6.65% 95.1% 0.7
Manchester, Arndale 5.97% 97.7% 1.6
Victoria Centre, Nottingham 6.40% 95.9% 1.0
St David`s, Cardiff 5.85% 89.0% 1.4
Eldon Square, Newcastle upon Tyne 6.76% 96.1% 1.4
Chapelfield, Norwich 6.80% 96.3% 0.5
Cribbs Causeway, Bristol 6.04% 97.0% 1.0
The Chimes, Uxbridge 6.45% 98.6% 0.4
The Potteries, Stoke-on-Trent 7.25% 99.8% 0.6
The Glades, Bromley 7.25% 96.7% 0.5
Other 0.4
Total investment and development
property 6.06% 96.8% 16.0
Total investment and development
property
(excluding The Trafford Centre) 6.19% 97.1% 14.1
As at 31 December 2010
Total investment and development
property 6.30% 98.6% 14.1
* 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 Manchester Arndale, and a 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) Area shown is not adjusted for the proportional ownership.
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Passing rent 354.1 271.7
ERV 459.1 354.1
Weighted average unexpired lease 7.6 years 7.0 years
Analysis of capital return in the period
Market value
30 June 31 December
2011 2010
GBPm GBPm
Like-for-like property 5,194.7 5,092.4
The Trafford Centre 1,650.0 -
Transferred from trading property 11.2 -
Developments 4.9 6.7
Total investment and development property 6,860.8 5,099.1
Revaluation surplus *
30 June 2011
GBPm %
Like-for-like property 63.9 1.2
The Trafford Centre (2.0) (0.1)
Transferred from trading property (0.4) (3.4)
Developments (3.2) (39.5)
Total investment and development property 58.3 0.9
* Revaluation surplus includes amortisation of lease incentives and fixed head
leases.
Analysis of net rental income in the period
Six months Six months
ended ended
30 June 30 June
2011 2010 Change
GBPm GBPm %
Like-for-like property 135.0 127.2 6.1
The Trafford Centre 35.4 - 100.0
Disposals - 1.0
(100.0)
Developments 7.5 6.3 19.0
Total investment and development property 177.9 134.5 32.3
OTHER INFORMATION
FINANCIAL COVENANTS (unaudited)
Financial covenants on asset-specific debt excluding joint ventures
Loan
outstanding at
31 July 2011 (1) LTV
Maturity GBPm covenant
Metrocentre 2015 542.8 90%
Braehead 2015 328.8 N/A
Watford 2015 251.5 N/A
Nottingham 2016 248.2 90%
Chapelfield 2016 210.9 N/A
Uxbridge 2016 158.3 85%
Bromley 2016 136.4 85%
Lakeside 2017 517.1 75%
Total 2,394.0
Loan to
30 June Interest Interest
2011 cover cover
market value (2) covenant actual (3)
Metrocentre 62% 120% 136%
Braehead 57% 120% 173%
Watford 71% 120% 135%
Nottingham 75% 120% 230%
Chapelfield 88% 120% 146%
Uxbridge 73% 120% 145%
Bromley 76% 120% 143%
Lakeside 48% 140% 196%
Total
The Trafford Centre
There are no financial covenants on the Trafford Centre debt. However a debt
service charge ratio is assessed quarterly and where this falls below
specified levels certain restrictions come into force. The loan to market
value ratio is 48 per cent.
Financial covenants on joint ventures asset-specific debt
Loan
outstanding at
31 July
2011 (1) LTV
Maturity GBPm covenant
Cardiff 2014 93.4 (4) 75%
Xscape 2014 22.8 (4) n/a (5)
Total 116.2
Loan to
30 June Interest Interest
2011 cover cover
market value (2) covenant actual (3)
Cardiff 34% 150% 250%
Xscape 89% 120% 170%
Total
Notes
(1) The loan values are the actual principal balances outstanding at 31 July
2011, which take into account any principal repayments made in July 2011. The
balance sheet value of the loans includes any unamortised fees.
(2) The Loan to 30 June 2011 market value provides an indication of the impact
the 30 June 2011 property valuations undertaken for inclusion in the condensed
financial statements could have on the LTV covenants. The actual timing and
manner of testing LTV covenants varies and is loan specific.
(3) Based on latest certified figures, calculated in accordance with loan
agreements, which have been submitted between 30 June 2011 and 31 July 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) The Xscape LTV covenant is suspended until 1 April 2012.
Financial covenants on corporate facilities at 30 June 2011
Interest
Net worth Net worth cover
covenant* actual covenant*
GBP248m facility, maturing in 2013 GBP600 GBP1,353m 120%
Interest Borrowings/ Borrowings/
cover net worth net worth
actual covenant* actual
GBP248m facility, maturing in 2013 155% 110% 31%
* 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 Arndale, Manchester and Cribbs Causeway, Bristol.
Capital Shopping Centres Debenture PLC at 30 June 2011
Capital Capital Interest Interest
Loan cover cover cover cover
Maturity GBPm covenant actual covenant actual
2027 231.4 167% 198% 100% 117%
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 six months ended 30 June 2011
Six months Six months
ended ended
30 June 30 June
2011 2010
GBPm GBPm
Net rental income 177.9 134.5
Net other income 3.7 0.3
181.6 134.8
Administration expenses (11.8) (11.2)
Underlying operating profit 169.8 123.6
Finance costs (98.1) (82.3)
Finance income 0.6 1.3
Other finance costs (4.0) (4.4)
Underlying net finance costs (101.5) (85.4)
Underlying profit before tax 68.3 38.2
Tax on adjusted profit (0.7) (0.2)
Remove amounts attributable to non-controlling interest 1.2 0.9
Share of underlying loss of associates (0.1) -
C&C US underlying earnings included within
discontinued operations - 4.4
Interest on convertible bonds deducted directly
in equity (2.4) -
Underlying earnings 66.3 43.3
Underlying earnings per share (pence) 8.0p 7.0p
Six months Year
ended ended
31 December 31 December
2010 2010
GBPm GBPm
Net rental income 142.4 276.9
Net other income 0.4 0.7
142.8 277.6
Administration expenses (11.8) (23.0)
Underlying operating profit 131.0 254.6
Finance costs (83.1) (165.4)
Finance income 1.8 3.1
Other finance costs (4.4) (8.8)
Underlying net finance costs (85.7) (171.1)
Underlying profit before tax 45.3 83.5
Tax on adjusted profit 0.1 (0.1)
Remove amounts attributable to non-controlling interest 1.4 2.3
Share of underlying loss of associates - -
C&C US underlying earnings included within
discontinued operations 6.5 10.9
Interest on convertible bonds deducted directly in equity - -
Underlying earnings 53.3 96.6
Underlying earnings per share (pence) 8.4p 15.4p
Included within underlying earnings for the six months ended 30 June 2011 are
the following amounts related to the Trafford Centre acquisition.
GBPm
Net rental income 35.4
Administration expenses (0.6)
Underlying operating profit 34.8
Underlying net finance costs (19.5)
Underlying profit before tax 15.3
Interest on convertible bonds deducted directly in equity (2.4)
Underlying earnings 12.9
DIVIDENDS
The Directors of Capital Shopping Centres Group PLC have announced an interim
dividend per ordinary share (ISIN GB0006834344) of 5 pence (2010 - 5.0 pence)
payable on 22 November 2011 (see salient dates below). This dividend will be
paid totally as a Property Income Distribution ("PID") and will be wholly
subject to a 20 per cent withholding tax unless exemptions apply (please refer
to the SPECIAL NOTE below).
Dates
The following are the salient dates for the payment of the interim dividend:
Thursday, 29 September 2011 Sterling/Rand exchange rate struck.
Friday, 30 September 2011 Sterling/Rand exchange rate and dividend
amount in SA currency announced.
Monday, 10 October 2011 Ordinary shares listed ex-dividend on the JSE,
Johannesburg
Wednesday, 12 October 2011 Ordinary shares listed ex-dividend on the
London Stock Exchange.
Friday, 14 October 2011 Record date for interim dividend in London and
Johannesburg.
Friday, 14 October 2011 UK shareholders only: Last date for receipt
of Tax Exemption Declaration forms to permit
dividends to be paid gross.
Tuesday, 22 November 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, 7
October 2011 and that no dematerialisation or rematerialisation of shares will
be possible from Monday, 10 October to Friday, 14 October 2011 inclusive. No
transfers between the UK and South African registers may take place from
Thursday, 29 September to Sunday, 16 October 2011 inclusive.
PID SPECIAL NOTE:
UK shareholders:
For those who are eligible for exemption from the 20 per cent withholding tax
and have not previously registered for exemption, an HM Revenue & Customs
("HMRC") Tax Exemption Declaration is available for download from the REITs
page of the "Investors" section of the Capital Shopping Centres Group website
(www.capital-shopping-centres.co.uk), or on request to our UK registrars,
Capita Registrars, or HMRC. Validly completed forms must be received by Capita
Registrars no later than the Record Date, Friday 14 October 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 also be able to claim a refund of withholding
tax (either as an individual or as a company) from HMRC subject to the terms
of a double tax treaty, if any, between the UK and the country in which the
shareholder is relevant.
Refund application forms for all non-UK shareholders are available for
download from the REITs page of 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. UK withholding tax
refunds are not claimable from Capital Shopping Centres Group, the South
African Revenue Service ("SARS") or other national authorities, only from the
UK`s HMRC.
NOTE: The taxation of PIDs in South Africa for South African resident
shareholders changed on 1 January 2011 and they are therefore advised to
contact their own tax advisers or SARS to confirm the current tax treatment.
Neither Capital Shopping Centres Group nor Computershare are able to provide
any guidance at this time as the effect of the change is a matter to be
determined between South African resident shareholders and SARS.
The above does not constitute advice and shareholders should seek their own
professional guidance. Capital Shopping Centres Group does not accept
liability for any loss suffered arising from reliance on the above.
GLOSSARY
Adjusted, diluted net asset value per share
NAV per share adjusted to exclude the fair value of derivative instruments and
related tax and deferred tax on investment and development property and other
investments 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 plus interest on convertible bonds recognised in
equity 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.
GLOSSARY
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.
Total financial return
The change in adjusted NAV per share plus dividends per share paid in the
period expressed as a percentage of opening NAV per share less dividends paid
in the period.
Trading property
Properties held for trading purposes rather than to earn rentals or for
capital appreciation and shown as current assets in the balance sheet.
Underlying earnings per share (EPS)
Earnings per share adjusted to exclude valuation movements, exceptional items
and related tax.
Underlying figures
Amounts described as underlying exclude valuation movements, exceptional items
and related tax.
Yield shift
A movement (usually expressed in basis points) in the yield of a property
asset.
Top ten properties
(GRAPHIC REMOVED - PLEASE SEE PAGES 44 & 45 OF FULL ANNOUNCEMENT WHICH CAN BE
FOUND AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
Sponsor: Merrill Lynch South Africa (Pty) Limited
Date: 02/08/2011 08:01:55 Produced by the JSE SENS Department.
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