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CCO - Capital & Counties Properties PLC - Interim report for the half year ended
30 June 2011
Capital & Counties Properties PLC
(Incorporated and registered in the United Kingdom and Wales with registration
Number 07145041 and registered in South Africa as an external company with
Registration Number 2010/003387/10)
JSE code: CCO
ISIN: GB00B62G9D36
(the "Company")
PRESS RELEASE
3 August 2011
CAPITAL & COUNTIES PROPERTIES PLC ("Capco")
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2011
Highlights
- EPRA adjusted, diluted NAV up 4% to 154 pence per share
- Total property value GBP1.5 billion, up 2.9% on a like-for-like basis with
non-exhibition properties up 5.4%
- Property LTV 30%
- GBP100 million placing in May 2011 to fund acquisitions of key properties in
Covent Garden
- Covent Garden new ERV target of GBP50 million, replacing the original ERV
target of GBP40 million reached at June 2011
- GBP75 million realised from The Great Capital Partnership ("GCP") and China
- Planning applications submitted for the Earls Court & West Kensington
Opportunity Area ("ECOA") and
- Seagrave Road car park site
- Exclusivity Agreement signed with London Borough of Hammersmith & Fulham
- Proposed interim dividend of 0.5 pence per share
Ian Hawksworth, Chief Executive of Capital & Counties Properties PLC, commented:
"Capco has enjoyed a successful and active first half including its placing in
May, new acquisitions at Covent Garden, disposals in GCP and China and the
submission of the planning applications for Sir Terry Farrell`s Masterplan for
the Earls Court & West Kensington Opportunity Area and Seagrave Road in June.
Capco is well positioned in the central London property market, particularly in
the retail and residential sectors which continue to perform strongly. Looking
forward, we are confident of delivering superior returns across our estates from
the continued implementation of our strategy."
Enquiries:
Capital & Counties Properties PLC:
Ian Hawksworth Chief Executive +44 (0)20 3214 9188
Soumen Das Finance Director +44 (0)20 3214 9183
Public relations:
UK: Michael Sandler/Wendy Baker,
Hudson Sandler +44 (0)20 7796 4133
SA: Nicholas Williams,
College Hill +27 (0)11 447 3030
A presentation to analysts and investors will take place today at 9:00am BST at
UBS, Room 25, 7th Floor, 1 Finsbury Avenue, London, EC2M 2PP. The presentation
will also be available to analysts and investors through a live audio call and
webcast and after the event on the Group`s website: www.capitalandcounties.com.
A copy of this press release is available for download from our website at
www.capitalandcounties.com and hard copies can be requested via the website or
by contacting the company (email feedback@capitalandcounties.com or telephone
+44 (0)20 3214 9153).
COMPANY OVERVIEW
Capital & Counties Properties PLC is one of the largest listed investment and
development companies in central London. Our landmark estates, held directly or
through joint ventures, are valued at GBP1.5 billion, and offer the potential
for significant value unlock through entrepreneurial asset management to deliver
superior, long-term returns to our shareholders.
Our three estates are located in west London and the West End:
Covent Garden London
This historic location is globally recognised as a retail and leisure
destination. It is valued at GBP780 million.
Earls Court and Olympia
One of London`s leading exhibition businesses, EC&O has property assets
totalling GBP488 million, including Capco`s share of the Empress State Building.
The Great Capital Partnership
A 50/50 joint venture with Great Portland Estates which includes properties in
prime locations around Regent Street and Piccadilly worth GBP240 million.
FINANCIAL SUMMARY
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Net rental income 36.7 38.3 69.0
Underlying earnings after tax* 6.2 10.1 9.2
Gain on revaluation of investment and
development property 39.5 65.7 133.3
Change in fair value of derivative
financial instruments 5.7 (10.2) (0.3)
Profit before tax 70.2 54.8 132.5
Total investment and trading properties 1,502 1,310 1,378
Net debt 452 476 476
Net assets (EPRA adjusted, diluted) 1,064 861 926
Underlying earnings per share 1.0p 1.6p 1.5p
Net assets per share (EPRA adjusted, diluted) 154p 138p 148p
Debt to asset ratio 30% 36% 35%
* Appendix 2 provides an analysis of underlying earnings
This announcement includes statements that are forward-looking in nature.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
Capital & Counties Properties PLC to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Any information contained in this announcement on the price
at which shares or other securities in Capital & Counties Properties PLC have
been bought or sold in the past, or on the yield on such shares or other
securities, should not be relied upon as a guide to future performance.
OPERATING AND FINANCIAL REVIEW
OPERATING REVEW
Overview
Capco is a property investment company focusing on opportunities in prime
locations within central London. The Group`s goal is to transform existing areas
into more attractive and useful places to live, work and enjoy, benefiting
Londoners and visitors as well as the Group`s customers and shareholders.
Capco is a total return focused company. It unlocks value through its
entrepreneurial approach to generating substantial changes and improvements in
rental and capital values.
Capco is well positioned in the central London property market, particularly in
the retail and residential sectors which continue to perform strongly. The focus
on `place making`, by reinvigorating the historic estate of Covent Garden and
transforming a district of London with Sir Terry Farrell`s Earls Court
Masterplan, offers Capco the potential to outperform the broader market.
In light of these market conditions and confidence in the Group`s strategy,
Capco undertook a placing in May 2011 of 62.1 million shares, representing 9.99
per cent of its issued share capital, raising gross proceeds of GBP100.6 million
to expand its footprint in the Covent Garden estate. This capital has been
invested on GBP110 million of acquisitions in Covent Garden during the year to
date, with a particular focus on consolidating ownership of properties on King
Street, the home of contemporary luxury in Covent Garden. The estate continues
to benefit from Capco`s proactive asset management strategy. The original ERV
target of GBP40 million has been delivered on a like-for-like basis as at 30
June 2011, 18 months ahead of schedule and has been replaced with a new target
of GBP50 million for 31 December 2013.
The submission of the planning applications in June 2011 for the ECOA and
Seagrave Road car park was an important milestone for Capco. The development
will bring 7,500 new homes and 12,000 new jobs creating `Four Villages and a new
21st Century High Street`. The next stage of the realisation of this vision has
been achieved with the signing of an Exclusivity Agreement with the London
Borough of Hammersmith & Fulham ("LBHF") for GBP15 million, GBP10 million of
which is refundable in the event a deal is not concluded. The agreement gives
Capco one year of exclusivity in relation to LBHF`s land at ECOA and therefore
time to negotiate a land purchase agreement and secure the necessary statutory
consents to progress with comprehensive regeneration of the ECOA.
Market overview
London property continues to outperform the rest of the UK and is positioned
well within the global market attracting ongoing investor interest, particularly
in prime central London assets both in retail and residential markets. Several
factors including ongoing economic recovery, low interest rates and a limited
supply of product are predicted growth drivers for the London market going
forward.
With its position as a major global city, increasing international interest and
its unique cultural heritage as well as the upcoming 2012 Olympic Games, London
is in a strong position going forward.
Retail market
The last few years have been challenging for retailers and consumers throughout
the UK, however London is bucking the trend with 5.8 per cent growth in retail
sales since January despite the VAT increase (source: Colliers International,
Mid Summer Retail Report 2011). London continues to be a destination for global
retailers and is the number one target for American and Asia Pacific retailers.
The upcoming Olympics is adding further impetus to the market, with retailers
keen to establish a presence in time to capitalise on the expected growth in
retail sales during the Games.
The West End in particular is performing well, with Zone A rental levels pushed
to new levels in most areas. Quality space is also hard to find in prime central
London, so demand is increasing across all streets, particularly for flagship
units over 10,000 sq ft.
Residential market
The London residential market continues to perform well, with increasing
international investment in prime central London real estate. Over the past two
years nearly 50 per cent of buyers in London have been from overseas, driving
London growth above the average UK domestic housing market.
The prime central London residential property market is predicted to grow by 8
per cent in 2011. Within that market, new builds tend to be popular with Asian
buyers, accounting for 61 per cent of Zone 1 new build sales in the last six
months, while European buyers continue to favour existing homes (source: Savills
Research).
In addition, the prime central London housing market is spreading outside of the
traditional areas of Chelsea and Knightsbridge and new prime markets are being
pulled into the mix. The key drivers for these emerging prime markets are
location, connectivity, high-quality amenities, safe environment and strong
retail provision.
Valuations
Capco continues to outperform the UK property market, which increased 1.0 per
cent in the first six months of 2011 as measured by the IPD all property monthly
index. The strong central London occupier and investment markets are reflected
in the ERV growth and valuation increases at Covent Garden and within the The
Great Capital Partnership. Earls Court & Olympia shows a revaluation deficit due
to reduced bookings at Earls Court and the costs of the planning process, partly
offset by an 11 per cent increase in the valuation of Seagrave Road.
Market Market Market
Value Value Value
Jun-11 Dec-10 Change(2,3)
GBPm GBPm %
Covent Garden 780 640 6.0%
The Great Capital Partnership 240(1) 260(1) 6.1%
Empress State 103(1) 103(1) -
Total non-exhibition properties 1,123 1,003 5.4%
Earls Court & Olympia 385 378 (3.1)%
Total investment properties 1,508 1,381 2.9%
ERV Initial Equivalent
Change(2) Yield Yield
% % %
Covent Garden 6.3% 3.7% 5.2%
The Great Capital Partnership 9.8% 4.4% 5.1%
Empress State - 6.4% 6.2%
Total non-exhibition properties 6.5%
Earls Court & Olympia
Total investment properties
1 Represents Capco`s 50 per cent share
2 Like-for-like
3 Valuation change takes account of amortisation of lease incentives, capital
expenditure and fixed head leases
Covent Garden
- Capital value GBP780 million as at 30 June 2011, up 6.0% on a like-for-like
basis (31 Dec 2010: GBP640 million)
- Net rental income GBP13.1 million H1 2011, up 2.3% on a like-for-like basis
(H1 2010: GBP12.9 million)
- Passing rent GBP30.1 million as at 30 June 2011, up 10.3% on a like-for-like
basis (31 Dec 2010: GBP25.4 million) plus GBP1.7 million from rent-free periods
on contracted leases
- ERV GBP44.6 million as at 30 June 2011, up 6.3% on a like-for-like basis (31
Dec 2010: GBP37.5 million)
A key milestone in the repositioning of Covent Garden was the opening of the
world`s largest Apple store on the Piazza in August 2010. The evolution
continues with positive momentum generated through Capco`s proactive asset
management strategy, which is delivering new tenant signings across the estate.
Capco has acquired a number of properties in the Covent Garden area for GBP110
million including Kings Court (a 71,900 sq ft portfolio which includes five
properties bridging King Street and Floral Street), 35 King Street, 11 James
Street and through a GBP19 million property swap, One South Piazza. These
acquisitions extend the overall ownership to 52 buildings, 326 lettable units
and over 820,000 sq ft, with the overall estate valued at GBP780 million as at
30 June 2011, an increase of 6.3 per cent on a like-for-like basis since 31
December 2010.
41 new brands have been introduced to the Covent Garden estate since 2006,
improving the line-up of retail and food and beverage tenants. This year has
already seen the opening of Burberry Brit, Laduree, Vilebrequin, g-1, The
Icecreamists and a flagship Sunglass Hut. Strong retail interest in the area
remains from new occupiers and several new brands are expected to launch later
this year including a pop-up restaurant concept from Canteen, Rugby Ralph
Lauren, G-Shock West, Rabeanco and Brora, further cementing Covent Garden`s
reputation as a world class retail and dining destination. As at 30 June 2011,
occupancy was 97.4 per cent (31 December 2010: 97.1 per cent), footfall for
the last 12 months was 45 million, and the estate continues to deliver its
target visitor demographic with 89 per cent of domestic visitors classified as
ABC1.
Record rental levels have been achieved during the period across the estate on
Long Acre (Zone A: GBP470 psf), in the Market Building (Zone A: GBP450 psf) and
on King Street (Zone A: GBP440 psf). 39 rent reviews, renewals and new lettings
have been agreed during 2011 to date, totalling GBP5.0 million, approximately
5.5 per cent above the December 2010 ERV. This has underpinned growth in ERV.
The original portfolio has met its original target ERV of GBP40 million at 30
June 2011, 18 months ahead of schedule. Total ERV at Covent Garden, including
recent acquisitions and disposals on the estate, is GBP44.6 million. The ERV
target for December 2013 has been revised to GBP50 million, taking into account
the impact of the recent acquisitions. Gross income as at 30 June 2011 was
GBP31.4 million, up 6.8 per cent on a like-for-like basis from December 2010.
ERV Progression Dec 2009 June 2010
Original ownership GBP33 million GBP34 million
Acquisitions and disposals - -
Total GBP33 million GBP34 million
ERV Progression Dec 2010 June 2011
Original ownership GBP38 million GBP40 million
Acquisitions and disposals - GBP 5 million
Total GBP38 million GBP45 million
The residential opportunities under the Covent Garden Living brand are
continuing to progress with the first four luxury apartments, totalling 7,815 sq
ft, at One West Piazza (34 Henrietta Street) set to be completed by the end of
2011. The planning application for One East Piazza (Russell Chambers) was
recently approved and work will begin on site later this year. A second planning
application has been prepared for One South Piazza. These developments form the
next phase of the 80,000 sq ft of office to residential conversions identified
across the estate.
Work has started on site at the Flower Cellars building for the creation of
Caprice Holdings` new restaurant concept and the London Film Museum. Public
realm works continue in the area as a part of the ongoing programme to enhance
and improve the district.
The team at Covent Garden has been strengthened with the appointment of Sarah-
Jane Curtis as Director of Covent Garden. She will be joining the business from
Grosvenor Estates in September and brings a wealth of experience in the London
retail and residential property markets.
Earls Court & Olympia
- EC&O capital value GBP385 million as at 30 June 2011 (31 Dec 2010: GBP378
million)
Earls Court GBP133m Valued on existing use reflecting their
use as exhibitions venues.
Olympia GBP97m No upside from any future development or
planning permission is recognised.
Seagrave Road GBP115m Currently a car park supporting Earls
Court, valued as a site with the potential
for residential consent.
Other peripheral assets GBP40m A mixture of small assets and sites.
Total GBP385m
- Empress State capital value GBP103 million as at 30 June 2011 (31 Dec 2010:
GBP103 million) (representing Capco`s 50 per cent share)
- EC&O EBITDA GBP12.0 million H1 2011, down 9% (H1 2010: GBP13.2 million)
EC&O Venues
EC&O Venues continues to perform in line with expectations, with EBITDA in H1
2011 of GBP12.0 million, down 9 per cent year-on-year. EBITDA comprises net
rental income of GBP13.9 million, less related administration expenses of GBP1.9
million.
For 2011 the business has contracted 31 new shows including Landscape, London
Pet Show and Retail Business Technology, which has helped offset the loss of
certain shows as the exhibitions market remains competitive. Olympia has hosted
several successful events including the UK`s biggest dance event `Move It`
delivering over 20,000 visitors. Currently 43.2 per cent of budgeted sales have
been contracted for 2012.
The EC&O Venues marketing team was recently awarded the Best Venue Team at the
Association of Exhibition Organisers ("AEO") Awards. Olympia was also recently
recognised and shortlisted at the AEO Awards for Best Venue in the UK, a further
testament to its credentials as the premier events space in West London.
Transport for London ("TfL") announced a plan to suspend regular District Line
services to Kensington Olympia tube station, whilst retaining services for
certain larger exhibitions and increasing capacity of other services including
the Overground line which will continue to service Olympia. EC&O Venues is in
consultation with TfL regarding the details of these proposed changes.
The works at Olympia for the new 97,000 sq ft exhibition space in the West Hall
are continuing on schedule and on budget, with the new space set to be
operational in early 2012.
Earls Court & West Kensington Opportunity Area Masterplan
The first planning applications for Sir Terry Farrell`s Masterplan for ECOA and
the Seagrave Road car park site were submitted in June in line with the project
timeline by EC Properties Limited, a wholly-owned subsidiary of Capco, on behalf
of the three landowners EC Properties Limited, LBHF and TfL. The submission
followed 18 months of extensive community consultation and stakeholder
engagement. More than 7,500 new homes and 12,000 new jobs will be created by the
Masterplan which, excluding Seagrave Road, comprises 10.4 million sq ft of
development. The planning applications have now been registered by the local
authorities and a period of public consultation will commence shortly.
Gross external area
Capco LBHF TfL Total
Sq ft Sq ft Sq ft Sq ft
Residential 3.2m 3.0m 1.9m 8.1m
Commercial / Other 1.1m 0.7m 0.5m 2.3m
Total 4.3m 3.7m 2.4m 10.4m
In addition to the new homes, the Masterplan includes offices, leisure, hotel
and retail space, as well as a new primary school, library, community
facilities, an integrated health centre and 23.5 acres of public open space
including the 5 acre `Lost River Park`. The initial response to the Masterplan
has been positive, although there have been concerns voiced by some residents of
the West Kensington and Gibbs Green Estates. Capco is committed to working with
all local residents and stakeholders, with the consultation website
myearlscourt.com offering all stakeholders an opportunity to contribute.
The Mayor of London published the London Plan on 22 July 2011. It is the overall
strategic plan for London, setting out a fully integrated economic, transport
and social framework for the development of the Capital to 2031. As expected,
ECOA has been identified as an Opportunity Area within the London Plan, an area
representing a strategic development and regeneration opportunity for London.
The first round of consultation for the Supplementary Planning Document ("SPD"),
a site specific planning guidance document published by LBHF, the Royal Borough
of Kensington & Chelsea and the Greater London Authority ("GLA"), concluded in
April. The authorities are expected to publish their preferred option for the
SPD in the autumn.
Following the submission of the planning applications, Capco and LBHF have
signed an Exclusivity Agreement on 29 July 2011. In order to enter into the
agreement the Group has paid GBP15 million, GBP10 million of which is refundable
in the event a deal is not concluded. The agreement gives both parties one year
to negotiate a land purchase agreement and secure the necessary statutory
consents to progress with comprehensive regeneration of the Opportunity Area.
This agreement sets in motion the guarantee that all residents on LBHF`s land,
should it be included in the development, will be offered new homes in the
regeneration area.
Discussions between the Group and TfL to agree a renewed lease for Earls Court 1
and 2, and for a commercial agreement over the inclusion of its land in the
development continue to progress well and, it is anticipated, will be concluded
in the second half of 2011.
Seagrave Road
The valuation of Seagrave Road (including the adjacent Roxby Place properties)
as at 30 June 2011 is GBP115 million, an uplift of 11 per cent since December
2010 reflecting the ongoing progress in obtaining planning consent for the site,
as a detailed planning application for the development was submitted by EC
Properties Limited in June 2011.
The Seagrave Road scheme will deliver a high-quality, mixed tenure residential
neighbourhood set within the wider ECOA Masterplan. The development covers one
million square feet, comprising 608 private residential units and 200 affordable
homes set within eight residential buildings ranging from four to 16 storeys and
30 town houses.
In addition to the new residential offering, the development will provide a
range of amenities including a clubhouse and gym facility, cafe, secure basement
parking and a range of high-quality public, communal and private open spaces.
It is anticipated that the construction of the scheme will take just over five
years on a phased basis, with works commencing after the Olympic Games, in Q4
2012. Accordingly, the Group is actively considering how Seagrave Road will be
taken forward.
Total development costs (excluding land) are estimated to be in the region of
GBP300 million. The development will be split into four construction phases,
based on a conservative sales rate. On current projections, this phasing plan
would limit the additional capital requirement to approximately GBP100 million
to build out the development, assuming that capital is recycled between phases
within the project.
The Great Capital Partnership
- Capital value GBP240 million as at 30 June 2011, up 6.1% on a like-for-like
basis (31 Dec 2010: GBP260 million)
- Net rental income GBP6.2 million H1 2011, down 6.7% on a like-for-like basis
(H1 2010: GBP6.8 million)
- Passing rent GBP11.3 million as at 30 June 2011, down 5.8% on a like-for-like
basis (31 Dec 2010:
- GBP13.8 million) plus GBP0.5 million from rent-free periods on contracted
leases
- ERV GBP14.3 million as at 30 June 2011, up 9.8 % on a like-for-like basis (31
Dec 2010: GBP14.8 million) (all figures represent Capco`s 50 per cent share)
The 50/50 joint venture between Capco and Great Portland Estates has performed
well during the first half of 2011. On a like-for-like basis, ERV increased to
GBP14.3 million, up 9.8 per cent, net rental income fell to GBP6.2 million, down
6.7 per cent and values rose to GBP240 million, up 6.1 per cent (Capco share,
changes shown on a like-for- like basis). The reduction in net rental income
reflects a reduction in occupancy due to tenants exercising break clauses and
development work undertaken prior to reletting.
The process of refocusing the joint venture, announced last November, is ongoing
and the Partnership has taken advantage of continuing strong investor appetite
for central London assets. Two properties were sold for GBP75.3 million (Capco
share: GBP37.6 million) during the first half of the year and a further property
completed in July. These three sales have realised a total of GBP91.9 million
(Capco share: GBP46.0 million), representing an average surplus over 31 December
2010 valuation of 10 per cent.
Looking forward, the Partnership will continue to focus on its core West End
holdings on Piccadilly, Regent Street and Park Crescent.
Capco currently has capital commitments of GBP0.6 million to the Partnership
which represent pre-development costs to be incurred on possible schemes on
Regent Street and on the Jermyn Street Estate.
China
The two fund investments based in China, via Harvest Capital Partners, have
performed well benefitting from a strong domestic economy and continued RMB
appreciation against the US Dollar.
Within the CR1 Fund, only one asset, a small shopping centre in Beijing, remains
to be contracted for sale. During the first half of 2011 a total of GBP6.6
million has been returned and the remaining assets are currently valued at
GBP30.4 million as at 30 June 2011.
The CR2 Fund has successfully sold its only asset, a mixed use development in
Chongqing, and the Fund will shortly close. Capco has received a total of
GBP31.8 million, representing a profit of 63 per cent on capital invested.
Looking forward, Capco may seek to reinvest a smaller amount of capital from
profits received as well as look at how the Group might take advantage of its
track record of successfully investing in China.
Corporate Governance
The Board notes the recommendations of the Davies Review on Women on Boards, and
has due regard for the benefits of greater diversity. It is expected that an
additional non-executive Director will be appointed in due course, and the
composition of the Board will be kept under review to ensure the best balance of
skills and experience is maintained. We are proud that across the group there is
good female representation, and by September 2011 women will account for 43 per
cent of senior management.
Dividends
The Board has proposed an interim dividend of 0.5 pence per share to be paid on
20 September 2011 to shareholders on the register at 26 August 2011.
Outlook
Capco has enjoyed a successful 2011 to date and looks forward with confidence to
the second half of the year. The central London property markets continue to
perform strongly. The investment market has benefited from global capital
looking for central London assets across all property sectors.
Retailers` requirements for new space has become increasingly specific,
benefitting places such as Covent Garden which have become established as a key
central London retail destination. The estate should continue to experience
rental growth reflecting this demand.
Sir Terry Farrell`s Masterplan for ECOA is an important project for London, and
Capco is hopeful that the planning applications will be determined in a timely
manner. We continue to work with TfL and LBHF on the lease re-gear, land
assembly and future development rights across the ECOA and hope these will be
agreed during the second half of 2011.
FINANCIAL REVIEW
Valuation gains of 2.7 per cent were recorded in the first half of 2011, with
like-for-like ERV increasing by 6.5 per cent since December 2010.
In May, the Group completed a placing of 62.1 million new ordinary shares at a
price of 162 pence per share to fund acquisition opportunities at Covent Garden.
This placing generated gross proceeds of GBP100.6 million, and increased the
number of ordinary shares in issue to 683.9 million. As the capital raise was
structured as a placing at market value, no adjustment to prior year
comparatives is made.
Underlying earnings and earnings per share
As recommended by EPRA, the Group has presented an underlying calculation of
profit in addition to the amounts reported under IFRS. These amounts exclude the
effects of gains and losses associated with investment property valuations, fair
value movements on financial derivatives and certain exceptional, non-recurring
items. The Directors regard the presentation of adjusted figures as providing
useful information on the underlying performance of the business.
Summary consolidated income statement:
30 June 30 June
2011 2010
GBPm GBPm
Net rental income 36.7 38.3
Other income 0.3 -
Gain on revaluation and sale of investment and development
property 42.4 65.7
Administration expenses (11.0) (11.8)
Net finance costs (12.8) (37.4)
Profit on sale of available for sale investments 18.8 -
Remeasurement of deferred consideration (4.2) -
Taxation (1.7) (0.5)
IFRS profit for the period attributable to owners of the
Parent 68.5 54.3
Adjustments:
Gain on revaluation and sale of investment and development
property (42.4) (65.7)
Change in fair value of derivative financial instruments (5.7) 10.2
Exceptional finance costs (see note 4) 0.8 7.1
Demerger costs (included within administration expenses
above) - 4.1
Profit on sale of available for sale investments (18.8) -
Remeasurement of deferred consideration 4.2 -
Other adjustments (0.4) 0.1
Underlying earnings after tax 6.2 10.1
Underlying earnings per share (pence) 1.0 1.6
Underlying earnings after tax fell by 38 per cent to GBP6.2 million from the
comparative six month period, mainly due to a reduction in net rental income as
described below and higher underlying administration expenses incurred as a
result of operating on a stand-alone basis.
Net rental income
The Group`s net rental income fell to GBP36.7 million, a 1.9 per cent reduction
on a like-for-like basis, a 4.1 per cent reduction overall.
Net rental income for Covent Garden totalled GBP13.1 million, an increase of 2.3
per cent or GBP0.3 million on a like-for-like basis from the comparative six
month period with strong rental levels being achieved for new lettings.
The Great Capital Partnership generated net rental income of GBP6.2 million
(Capco share), a fall of 6.7 per cent on a like-for-like basis. This is due to a
11 per cent reduction in occupancy with break clauses exercised to facilitate
potential redevelopment. Sales of non-core properties, the result of refocusing
the Partnership announced in November last year, contributed to a fall in net
rental income of GBP0.6 million from the corresponding six month period.
Earls Court & Olympia, which includes the Group`s interest in the Empress State
Building, fell by 3.3 per cent on a like-for-like basis to GBP17.4 million. This
is broadly in line with expectations given the loss of events and reduced take-
up at Earls Court. Net rental income generated from the Group`s interest in the
Empress State Building was higher compared to the prior year reflecting its
index-linked lease.
Net rental income for the period included GBP0.9 million relating to lease
incentives.
Property valuation
Property gains of GBP42.4 million (2010: GBP65.7 million) include unrealised
gains of GBP39.5 million and realised gains of GBP2.9 million. With yields
remaining stable, unrealised gains generated during the first half of the year
were almost entirely due to ERV growth reflecting the Group`s strategy of
targeting rental growth from its asset plans.
Administration expenses
Adjusting for GBP4.1 million of exceptional demerger costs incurred in the first
half of 2010, underlying administration expenses have increased by GBP3.3
million to GBP11.0 million. In line with expectation, this relates to increased
headcount and establishment costs.
Net finance costs
Excluding gains and losses on the change in fair value of derivatives and one-
off costs incurred on the termination of interest rate swaps, underlying net
finance costs totalled GBP17.7 million, a decrease of GBP2.4 million on the
prior six month period. This reduction reflects decreased average debt as a
result of prepayments, most recently GBP20 million of the Earls Court & Olympia
facility in February 2011.
Taxation
The tax charge for the six months ended 30 June 2011 was GBP1.7 million (2010:
GBP0.5 million). This equates to an underlying tax rate of approximately 22.5
per cent. This is slightly below the expected longer term effective rate of 23
per cent, primarily due to capital allowances claimed.
Due to the availability of Group losses, contingent tax at 30 June 2011 is nil
(2010: GBP1.7 million).
Derivative valuation
The majority of our banking facilities have been arranged on a floating-rate
basis, but swapped to fixed-rate using derivative contracts coterminous with the
relevant debt facility.
During 2011 short-term rates marginally increased whilst longer term rates
reduced. This led to an income statement credit of GBP5.7 million in the period
to 30 June 2011.
Exceptional items
Within net financing costs, exceptional charges of GBP0.8 million were recorded
in relation to the termination of interest rate swaps which arose on a GBP20
million prepayment on the facility secured over Earls Court & Olympia made in
February 2011.
As part of the Group`s 2009 acquisition of the non-controlling interests` share
in Earls Court & Olympia, a deferred consideration payment becomes due based on
a number of factors including a potential redevelopment of the site and the
outcome of the planning permission process. Now that the Group has submitted a
planning application in relation to the full Earls Court regeneration area in
June, the provision has been remeasured resulting in an exceptional charge of
GBP4.2 million being recorded.
Other income of GBP0.3 million comprises an exceptional credit relating to a
non-
recurring VAT claim settled with HM Revenue & Customs.
Finally, following divestment of the Group`s interests in China, profits of
GBP18.8 million were realised during the first six months of 2011. As these
profits are non-recurring they have been treated as exceptional.
Financial position
As detailed in the table below EPRA net assets (adjusted, diluted) have
increased by GBP138 million or 6 pence per share since 31 December 2010. The
significant factors were the beneficial effect of the capital raising completed
in May 2011, which generated GBP97 million net of expenses, and the continued
revaluation gains recorded on the Group`s property portfolio during the first
half of 2011.
Summary consolidated balance sheet:
30 June 31 December
2011 2010
GBPm GBPm
Investment and development property 1,501.9 1,377.6
Investments 30.4 66.3
Net debt (451.6) (476.1)
Other assets and liabilities (54.2) (84.4)
IFRS Net assets 1,026.5 883.4
Fair value of derivative financial instruments (net of
recognised deferred tax) 36.1 41.4
Other adjustments 1.1 1.1
EPRA adjusted, diluted net assets 1,063.7 925.9
EPRA net assets per share (pence per share adjusted,
diluted) 154 148
The fair value provision for financial derivatives (interest rate swaps)
decreased by GBP5.7 million in the six months to June 2011. The resulting
balance sheet provision, net of deferred taxes, of GBP36.1 million is added back
to arrive at adjusted net assets.
Adjusted, diluted net assets per share
Adjusted, diluted NAV per share at 30 June 2011 increased 4 per cent to 154
pence per share, compared to 148 pence as at 31 December 2010. The increase,
largely the result of property valuation movements, is illustrated below.
Graphics have been removed. Please refer to page 10 of the full announcement
which can be found at www.capitalandcounties.com
Capital expenditure and divestment
In the first six months of 2011 the Group has been active in moving forward on a
number of its strategic plans with a significant amount of capital expenditure.
This has been funded by the capital raising as well as significant recycling of
capital as illustrated below.
Six months to 12 months to
30 June 31 December
2011 2010
GBPm GBPm
Acquisitions 111 10
Redevelopment expenditure 26 21
Less: Divestment (90) (27)
Net capital expenditure 47 4
Sales of non-core assets from within The Great Capital Partnership and the
divestment of China funds, discussed below, have contributed GBP72 million
(excluding GBP2.9 million profit realised on disposal) towards supporting the
Group to expand its footprint at Covent Garden, continue the redevelopment of
the Olympia Exhibition Centre and further the planning process for the Earls
Court regeneration area.
Of the GBP137 million invested in acquisitions and redevelopment expenditure,
GBP117 million relates to investments at Covent Garden; GBP110 million on
acquisitions and GBP7 million on redevelopments.
Future capital commitments amount to GBP50 million (31 December 2010: GBP45
million). These commitments will be funded by the Group`s cash and available
facilities.
China
The realisation of the investments in China continues. During the six months
ended 30 June 2011, cash of GBP38 million has been returned to the Group
realising profits of GBP18.8 million.
The divestment of Harvest China Real Estate Fund II has now completed. Over the
three year investment period the fund has generated a return in excess of 60 per
cent on capital employed, an exceptional performance during a period of economic
uncertainty.
Since the year end another asset held in Harvest China Real Estate Fund I has
been contracted for sale, with only one asset now remaining uncontracted.
Distribution of funds following settlement in relation to two assets are
forecast to be received by the Group during the second half of 2011 and the
first half of 2012.
An uplift on the underlying fund value of GBP2 million was recorded during the
first half.
Borrowings
In February 2011, as part of an agreed 12-month extension to the facility
secured over Earls Court & Olympia, the Group made a partial loan prepayment of
GBP20 million. The associated swap termination costs totalled GBP0.8 million.
Net debt for the period reduced by GBP25 million to GBP452 million. The capital
raising has strengthened the Group`s financial position with its loan-to-value
ratio down from 35 per cent at 31 December 2010 to 30 per cent at 30 June 2011.
Group debt ratios were as follows:
30 June 31 December
2011 2010
Loan-to-value 30% 35%
Interest cover 145% 130%
Weighted average debt maturity 2.7 years 3 years
Weighted average cost of debt 5.9% 5.9%
Proportion of gross debt with interest rate protection 95% 95%
At 30 June 2011, the Group`s average debt maturity is 2.7 years. The first
significant maturity of secured debt is the Earls Court & Olympia facility which
is due to mature in February 2013.
A detailed breakdown of the Group`s debt maturity is shown in note 12 of the
condensed financial statements.
Financial covenants apply to GBP635 million of asset specific debt. The two main
covenants are loan-to-value ("LTV") and Interest Cover ("IC"). The actual
requirements vary and are specific to each loan.
At 30 June 2011, the Group had cash and available facilities of GBP196 million
and is in compliance with all of its asset specific loan covenants.
Full details of the loan financial covenants are shown within appendix 3.
Derivatives
The Group`s policy is to eliminate the short and medium term risk arising on
interest rate volatility. This is generally achieved by entering into interest
rate swap contracts to hedge both the size and maturity profile of borrowings.
At 30 June 2011, the proportion of gross debt with interest rate protection
stood at 95 per cent.
The fair value provision for financial derivatives (interest rate swaps) has
decreased in the six months to 30 June 2011 due to the increase in short-term
rates. The resulting balance sheet provision, net of deferred taxes, of GBP36
million is added back to arrive at adjusted net assets.
Since 30 June 2011, to take advantage of the low interest rate environment, the
Group has entered into derivative contracts providing interest rate protection
on debt with a nominal value of GBP150 million. The protection starts after the
Group`s first significant debt maturity in 2013 and extends through until 2016.
Cash flow
The cash flow summary below shows a net cash inflow of GBP2.7 million during the
period to 30 June 2011, principally attributed to the impact of the Group`s
capital raising offset by acquisitions and debt prepayment.
Summary consolidated cash flow summary:
30 June 30 June
2011 2010
GBPm GBPm
Underlying operating cash generated 25.4 29.9
Net finance charges paid (18.3) (21.5)
Net movement in working capital (3.5) (4.4)
Recurring cash flow from operations 3.6 4.0
Property development/investments (109.0) (5.2)
Sale proceeds of property/investments 47.1 0.5
Demerger costs (0.7) (3.0)
Pension funding (3.6) 0.0
REIT entry charge and other tax (0.7) (2.0)
Cash flow before financing (63.3) (5.7)
Financing 66.8 180.6
Termination of interest rate swaps (0.8) (7.4)
Net Cash flow 2.7 167.5
The movement in recurring underlying cash flows has resulted from falling net
rental income together with higher recurring administration expenses. This has
been partially offset by a reduction in net finance charges due to the debt
prepayments in 2010 and February 2011. Other significant non-recurring cash
flows can be summarised as follows:
Graphics have been removed. Please refer to page 12 of the full announcement
which can be found at www.capitalandcounties.com
Proceeds generated from the sale of non-core properties within The Great Capital
Partnership generated GBP9 million during the first half with further proceeds
received post period end from completions in July. The divestment of China funds
returned GBP38 million to the Group during the period.
Cash applied to the development of property and investments during the period is
due principally to acquisition of investment properties at Covent Garden (GBP83
million); and development activity at both Earls Court and Olympia (GBP18
million). Smaller acquisitions and redevelopment activity across the Group`s
assets account for the balance.
As part of a reorganisation of the EC&O Venues business, the workforces of Earls
Court Limited and Olympia Limited were amalgamated into Olympia Limited. As a
result Earls Court Limited ceased to be a participating employer of the final
salary pension scheme which necessitated a payment of GBP3.6 million to the
scheme.
The final instalment, GBP0.1 million, of the REIT entry charge was settled
during the period (2010: GBP1.6 million).
Financing cash flows were dominated by the capital raising completed in May 2011
which generated GBP97 million, net of expenses. This was offset by the Earls
Court & Olympia debt prepayment of GBP20 million, together with the final
dividend payment made in respect of 2010 year end of GBP6.2 million.
PRINCIPAL RISKS AND UNCERTAINTIES
Effective risk management is integral to delivering Capco`s strategic
priorities.
The Board has overall responsibility for Group risk management. It reviews
principal risks and uncertainties regularly, together with actions taken to
mitigate them. The Board has delegated responsibility for assurance of the risk
management process and the review of mitigating controls to the Audit Committee.
The review begins with an assessment of over 90 risk factors raised by each
business unit and each corporate function. Risks are considered in terms of
their impact and likelihood from both a financial and reputational perspective.
Risks are assessed both gross and net of mitigating controls. This allows the
Audit Committee to monitor the most important controls and prioritise risk
management and internal audit activities accordingly.
Detailed risk registers are reviewed twice a year and upon any material change
to the business with a full risk review undertaken annually. The register is
reviewed in detail by the Audit Committee annually, with new or emerging risks
considered by the Committee as appropriate.
The principal risks and uncertainties facing the Group are set out below:
1. Development Risks
Impact: Inability to deliver against development plans, particularly regarding
ECOA
Risk Mitigation factors
Pre-application consultation and
involvement with key stakeholders and
landowners.
Unable to secure planning
consent due to political,
legislative or other risks inherent Engagement with relevant authorities at a
in the planning environment. Risk local and national level to ensure
of Secretary of State call-in or development proposals are in accordance
judicial review. Inability to gain with current and emerging policy.
the support of influential Project team of internal staff and
stakeholders. external consultants with capabilities
across all relevant areas.
Technical studies with regular review.
Responsive consultation with evidence
based information and focus on agreed
statements of common ground.
Inability to attract appropriate Flexibility in planning and ensuring
resource or skills to execute plan. correct resource availability in place.
Extensive design and technical work
undertaken along with informed market
valuation.
Failure to demonstrate viable
development due to
environmental, transportation and Use of maximum price contracts to manage
affordable housing impact or contractor costs.
ECOA masterplan design allows the
development of each landowner`s site
individually.
other technical factors. Punitive
cost, design or other implications.
Inability to reach agreement with
adjacent landowners (including
risk of Section 34A of the Housing
Act 1985 in relation to LBHF land
in ECOA).
2. Economic Risks
Impact: Economic factors may threaten the Group`s ability to meet its strategic
objectives
Risk Mitigation factors
Focus on quality tenants with initial
assessment of credit risk and active
credit control.
Rents decline as a result of lower
demand from occupiers due to
deteriorating profitability and Diversity of occupier mix with limited
confidence during a period of exposure to any single tenant.
economic uncertainty.
Decline in UK commercial or Focus on prime assets.
residential real estate market.
Regular assessment of investment market
conditions including bi-annual external
valuations.
Regular monitoring of covenants with
headroom maintained.
Restricted availability of credit
and higher tax rates may lead to
reduced consumer spending and
higher levels of business failure.
3. Concentration of Investments
Impact: Heightened exposure to events that threaten or disrupt central London
Risk Mitigation factors
Terrorist insurance in place.
Events which damage or diminish
London`s status as a global
financial, business and tourist Security and health & safety policies and
centre could affect the Group`s procedures in offices. Close liaison with
police &
National Counter Terrorism Security
Office (NaTSCO).
ability to let vacant space, reduce
the value of the Group`s Disaster recovery and business continuity
properties and potentially disrupt planning.
access or operations at the Active involvement in organisations and
Group`s head office. Changes to industry bodies promoting London.
existing or planned infrastructure
(including transport).
4. Corporate Risks
Impact: The Group`s ability to maintain its reputation, revenue and value could
be damaged by corporate risks
Risk Mitigation factors
Appointment of experienced individuals
with clear responsibility and
Responding to regulatory, accountability. Sound
reputation, communication, governance and internal policies with
legislative and corporate appropriately skilled executive and
governance challenges. Non-executive
Directors, with support from external
advisors as appropriate.
Appropriate due diligence and
consultation.
Non-REIT status brings
heightened tax exposure and a
potential competitive
disadvantage when bidding for
new assets.
Risk associated with attracting Succession planning, performance
and retaining staff. evaluations, training & development,
long term incentive rewards.
Failure to comply with health and Comprehensive health and safety
safety or other statutory procedures in place across the Group
regulations or notices. and monitored regularly. External
consultants undertake annual audits in
all locations. Safe working practices
well established, including staff
communication and training.
5. Financing Risks
Impact: Reduced or limited availability of debt or equity finance may threaten
the Group`s ability to meet its financial commitments or objectives and
potentially to operate as a going concern
Risk Mitigation factors
Maintain appropriate liquidity to cover
commitments.
Decline in market conditions or a
general rise in interest rates could
impact the availability and cost of Target longer and staggered debt
debt financing. maturities to avoid refinancing
concentration and
consideration of early refinancing.
Derivative contracts to provide interest
rate protection.
Covenants breached. Regular monitoring of covenants with
Reduced availability of equity headroom maintained
capital. Maintain appropriate liquidity to cover
commitments.
Target conservative overall leverage
levels.
DIRECTORS` RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the condensed set of financial
statements, in accordance with applicable law and regulations. The Directors
confirm that, to the best of their knowledge:
- the condensed set of financial statements on pages 17 to 38 has been prepared
in accordance with IAS 34 "Interim Financial Reporting", as adopted by the Euro
pean Union; and
- the condensed set of financial statements on pages 17 to 38 includes a true
and fair view of the information required by Sections DTR 4.2.7R and DTR 4.2.8R
of the Disclosure and Transparency Rules of the United Kingdom`s Financial
Services Authority.
The operating and financial review on pages 3 to 12 refers to important events
which have taken place in the period.
The principal risks and uncertainties facing the business are referred to on
pages 13 and 14.
Related party transactions are set out in note 19 of the condensed set of
financial statements.
A list of current Directors is maintained on the Capital & Counties Properties
PLC website: www.capitalandcounties.com.
By order of the Board
I D Hawksworth
Chief Executive
S Das
Finance Director
3 August 2011
INDEPENDENT REVIEW REPORT TO CAPITAL & COUNTIES PROPERTIES PLC
Introduction
We have been engaged by the Company to review the condensed set of consolidated
financial statements in the half-yearly financial report for the six months
ended 30 June 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 the International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity` issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 June 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
3 August 2011
Notes:
a) The maintenance and integrity of the Capital & Counties Properties PLC
website is the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that may have occurred
to the financial statements since they were initially presented on the
website.
b) Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
CONSOLIDATED INCOME STATEMENT (unaudited)
For the six months ended 30 June 2011
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
Note GBPm GBPm GBPm
Revenue 2 58.4 59.2 113.7
Rental income 58.4 59.2 113.6
Rental expenses (21.7) (20.9) (44.6)
Net rental income 2 36.7 38.3 69.0
Other income 0.3 - 0.1
Gain on revaluation and
sale of investment and
development property 3 42.4 65.7 134.6
Profit on sale of available
for sale investments 18.8 - -
Remeasurement of deferred
consideration (4.2) - 0.7
Write down of trading property - - (0.1)
Impairment of other receivables - - (1.6)
Administration expenses 94.0 104.0 202.7
Ongoing expenses (11.0) (7.7) (18.6)
Demerger costs - (4.1) (5.3)
Operating profit 83.0 92.2 178.8
Finance costs 4 (18.5) (20.7) (40.3)
Finance income 0.8 0.6 1.4
Other finance costs 4 (0.8) (7.1) (7.1)
Change in fair value of
derivative financial
instruments 5.7 (10.2) (0.3)
Net finance costs (12.8) (37.4) (46.3)
Profit before tax 70.2 54.8 132.5
Current tax (1.7) (0.4) (1.2)
Deferred tax - - 0.4
REIT entry charge - (0.1) (0.1)
Taxation 5 (1.7) (0.5) (0.9)
Profit for the period
attributable to owners of
the Parent 68.5 54.3 131.6
Earnings per share from
continuing operations
Basic earnings per share 17 10.7p 8.7p 21.2p
Diluted earnings per share 17 10.7p 8.7p 21.2p
Weighted average number of
shares 17 639.3 621.9 621.9
Underlying earnings per share are shown in note 17.
The above consolidated income statement should be read in conjunction with the
accompanying notes.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
For the six months ended 30 June 2011
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Profit for the period 68.5 54.3 131.6
Other comprehensive income
Actuarial gains on defined benefit
pension schemes attributable to owners - - 1.4
Gain on revaluation of available for
sale investments
and other movements 1.8 7.1 21.5
Tax on items taken directly to equity - - (0.4)
Other comprehensive income for the
period, net of tax 1.8 7.1 22.5
Total comprehensive income for the
period attributable to owners of Parent 70.3 61.4 154.1
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
CONSOLIDATED BALANCE SHEET (unaudited)
As at 30 June 2011
As at As at
30 June 31 December
2011 2010
Note GBPm GBPm
Non-current assets
Investment and development property 7 1,501.9 1,377.6
Plant and equipment 1.0 1.0
Available for sale investments 30.4 66.3
Pension asset 1.6 -
Trade and other receivables 9 11.2 12.4
Current assets 1,546.1 1,457.3
Trading property 8 0.3 0.3
Trade and other receivables 9 58.4 26.8
Cash and cash equivalents 10 191.2 188.5
249.9 215.6
Total assets 1,796.0 1,672.9
Non-current liabilities
Borrowings, including finance leases 12 (629.4) (651.5)
Pension deficit - (2.0)
Derivative financial instruments 14 (48.2) (53.9)
Other provisions 15 (7.5) (3.3)
Current liabilities (685.1) (710.7)
Borrowings, including finance leases 12 (13.4) (13.1)
Trade and other payables 11 (69.1) (65.0)
Tax liabilities (1.9) (0.7)
(84.4) (78.8)
Total liabilities (769.5) (789.5)
Net assets 1,026.5 883.4
Equity
Share capital 18 170.9 155.4
Other components of equity 855.6 728.0
Capital and reserves attributable to owners
of the Parent 1,026.5 883.4
The above consolidated balance sheet should be read in conjunction with the
accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2011
Share Share Merger Revaluation
capital premium reserve reserve
GBPm GBPm GBPm GBPm
Balance at 1 January 2011 155.4 89.1 141.4 33.0
Profit for the period - - - -
Other comprehensive income:
Fair value gains on available
for sale financial assets - - - 1.8
Total comprehensive income
for the period ended
30 June 2011 - - - 1.8
Transactions with owners
Ordinary shares issued 15.5 6.0 75.1 -
Realise revaluation reserves on
disposal of available for sale
investments - - - (18.2)
Fair value of share based payments - - - -
Dividends paid - - - -
Total transactions with owners 15.5 6.0 75.1 (18.2)
Balance at 30 June 2011 170.9 95.1 216.5 16.6
Other Retained Total
reserves earnings Equity
GBPm GBPm GBPm
Balance at 1 January 2011 0.5 464.0 883.4
Profit for the period - 68.5 68.5
Other comprehensive income:
Fair value gains on available
for sale financial assets - - 1.8
Total comprehensive income for the
period ended 30 June 2011 - 68.5 70.3
Transactions with owners
Ordinary shares issued - - 96.6
Realise revaluation reserves on
disposal of available for sale investments - - (18.2)
Fair value of share based payments 0.6 - 0.6
Dividends paid - (6.2) (6.2)
Total transactions with owners 0.6 (6.2) 72.8
Balance at 30 June 2011 1.1 526.3 1,026.5
Share Share Merger Revaluation
capital premium reserve reserve
GBPm GBPm GBPm GBPm
Balance at 1 January 2010 497.5 89.1 87.6 15.7
Profit for the period - - - -
Other comprehensive income:
Fair value gains on available
for sale financial assets - - - 7.1
Total comprehensive income for
the period ended 30 June 2010 - - - 7.1
Transactions with owners
Capital reduction (342.0) - - -
Capital reorganisation and pro
forma restatement (1) - - 53.8 (4.2)
Total transactions with owners (342.0) - 53.8 (4.2)
Balance at 30 June 2010 155.5 89.1 141.4 18.6
Capital Retained Total
contribution earnings Equity
GBPm GBPm GBPm
Balance at 1 January 2010 - (597.2) 92.7
Profit for the period - 54.3 54.3
Other comprehensive income:
Fair value gains on available
for sale financial assets - - 7.1
Total comprehensive income for
the period ended 30 June 2010 - 54.3 61.4
Transactions with owners
Capital reduction - 342.0 -
Capital reorganisation and pro
forma restatement (1) 696.7 (107.0) 639.3
Total transactions with owners 696.7 235.0 639.3
Balance at 30 June 2010 696.7 (307.9) 793.4
1) On demerger from Liberty International a number of reserves were realised and
pro forma adjustments (made in the comparative periods to reflect the
application of merger accounting principles) released. Debt waivers granted to
the Group by Liberty International were reflected as a capital contribution
reserve prior to being realised in retained earnings.
The above consolidated statements of changes in equity should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2011
Share Share Merger Revaluation
capital premium reserve reserve
GBPm GBPm GBPm GBPm
Balance at 1 January 2010 497.5 89.1 87.6 15.7
Profit for the year - - - -
Other comprehensive income:
Fair value gains on available
for sale financial assets - - - 21.5
Actuarial gains on defined
benefit pension schemes - - - -
Tax on items taken directly
to equity - - - -
Total comprehensive income
for the year ended
31 December 2010 - - - 21.5
Transactions with owners
Capital reduction (342.0) - - -
Capital reorganisation and pro
forma restatement(1) - - 53.8 (4.2)
Capital contribution realised - - - -
Share redemption (0.1) - - -
Fair value of share-based-
payments - - -
Dividends paid - - - -
Total transactions with
owners (342.1) - 53.8 (4.2)
Balance at 31 December 2010 155.4 89.1 141.4 33.0
Capital Other Retained Total
contribution reserves earnings equity
GBPm GBPm GBPm GBPm
Balance at 1 January 2010 - - (597.2) 92.7
Profit for the year - - 131.6 131.6
Other comprehensive income:
Fair value gains on available
for sale financial assets - - - 21.5
Actuarial gains on defined
benefit pension schemes - - 1.4 1.4
Tax on items taken directly
to equity - - (0.4) (0.4)
Total comprehensive income
for the year ended
31 December 2010 - - 132.6 154.1
Transactions with owners
Capital reduction - - 342.0 -
Capital reorganisation and
pro forma restatement(1) 696.7 - (107.0) 639.3
Capital contribution realised (696.7) - 696.7 -
Share redemption - - - (0.1)
Fair value of share-based-
payments - 0.5 - 0.5
Dividends paid - - (3.1) (3.1)
Total transactions with owners - 0.5 928.6 636.6
Balance at 31 December 2010 - 0.5 464.0 883.4
1) On demerger from Liberty International a number of reserves were realised and
pro forma adjustments (made in the comparative periods to reflect the
application of merger accounting principles) released. Debt waivers granted to
the Group by Liberty International were reflected as a capital contribution
reserve prior to being realised in retained earnings.
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the six months ended 30 June 2011
Six months Year Six months
ended ended ended
30 June 31 December 30 June
2011 2010 2010
Note GBPm GBPm GBPm
Cash generated from
operations 13 21.2 38.6 22.5
Interest paid (19.1) (41.4) (21.5)
Interest received 0.8 1.3 -
Taxation (0.6) 1.0 (0.4)
Cash flows from operating
activities 2.3 (0.5) 0.6
Cash flows from investing
activities
Purchase and development of property (109.0) (26.8) (5.2)
Sale of property 8.7 28.1 0.1
REIT entry charge paid (0.1) (3.6) (1.6)
Sale of available for sale investments 38.4 0.5 0.4
Pension funding (3.6) - -
Cash flows from investing activities (65.6) (1.8) (6.3)
Cash flows from financing activities
Issue of shares 96.6 - -
Issue of redeemable shares - 0.1 -
Redemption of redeemable shares - (0.1) -
Cash transferred to
restricted accounts - (6.0) -
Borrowing drawn - 6.0 -
Borrowings repaid (23.4) (68.0) (63.4)
Funding from Capital
Shopping Centres Group - 244.0 244.0
Termination of swaps (0.8) (7.4) (7.4)
Equity dividends paid (6.2) (3.1) -
Cash flows from financing activities 66.0 165.5 173.2
Net increase in
unrestricted cash and cash equivalents 2.7 163.2 167.5
Unrestricted cash and cash
equivalents at beginning of period 182.5 19.3 19.3
Unrestricted cash and cash
equivalents at end of period 10 185.2 182.5 186.8
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
NOTES (unaudited)
1 Principal accounting policies
Shares in Capital & Counties Properties PLC were admitted to dealings on the
London and Johannesburg Stock Exchanges in May 2010. The Group`s assets
principally comprise investment properties at Covent Garden; Earls Court &
Olympia; a 50 per cent interest in the Empress State Building; and a 50 per cent
interest in The Great Capital Partnership, a joint venture focused predominantly
on London`s West End.
Basis of preparation
The condensed consolidated financial statements for the six months ended 30 June
2011 are reviewed, not audited and do not constitute statutory accounts within
the meaning of s434 of the Companies Act 2006. The condensed consolidated
financial statements have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Services Authority and with IAS 34 `Interim
Financial Reporting`.
These condensed consolidated financial statements were approved by the Board of
Directors on 3 August 2011.
The condensed consolidated financial statements have been prepared under the
historical cost convention as modified for the revaluation of properties,
available for sale investments and financial assets held for trading which are
held at fair value.
There is no material seasonal impact on the Group`s financial performance.
Taxes on income in interim periods are accrued using tax rates expected to be
applicable to total annual earnings.
There were no standards and guidelines relevant to the Group that were in issue
and endorsed by the European Union at the date of approval of the condensed
consolidated financial statements.
The assessment of new standards, amendments and interpretations issued but not
effective, are not anticipated to have a material impact on the financial
statements.
During the six months to 30 June 2011, the following accounting standards and
guidance were adopted by the Group:
IAS 24 `Related Party Disclosures` (revised)
IAS 32 `Financial Instruments: Presentation` (amendment)
IFRIC 14 `Prepayments of a Minimum Funding Requirement` (amendment)
IFRIC 19 `Extinguishing Financial Liabilities with Equity Instruments`
IFRS 1 `First-time Adoption of International Financial Reporting Standards`
(amendment)
Collectively, together with the International Accounting Standards Board`s
annual improvements, these pronouncements either had no impact on the condensed
consolidated Financial Statements or resulted in changes to presentation and
disclosure only.
Going concern basis
The Directors are satisfied that the Group has the resources to continue in
operational existence for the foreseeable future and for this reason, the
condensed consolidated financial statements are prepared on a going concern
basis.
Basis of consolidation
The Group`s condensed consolidated financial statements are prepared in
accordance with International Financial Reporting Standards ("IFRS"), as adopted
by the European Union, International Financial Reporting Interpretations
Committee ("IFRIC") interpretations and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS. The condensed consolidated
financial statements are prepared in British pounds sterling which is determined
to be the functional currency of the Group.
Subsidiaries
Subsidiary undertakings are fully consolidated from the date on which the Group
is deemed to govern the financial and operating policies of an entity, whether
through a majority of the voting rights or otherwise; they cease to be
consolidated from the date this control is lost. All intra Group balances
resulting from intra Group transactions are eliminated in full.
Joint ventures
The Group`s interest in jointly controlled entities is accounted for using
proportional consolidation. The Group`s share of the assets, liabilities, income
and expenses are combined with the equivalent items in the condensed
consolidated financial statements on a line-by-line basis.
Investments in subsidiaries and joint ventures are reviewed at least annually
for impairment. Where there exists an indication of impairment an assessment of
the recoverable amount is performed. The recoverable amount is based on the
higher of the investments` continued value in use or its fair value less cost to
sell; fair value is derived from the entities` net asset value at the balance
sheet date.
Estimation and uncertainty
The preparation of condensed consolidated financial statements in conformity
with IFRS requires the use of estimates and assumptions that affect the reported
amounts of assets and liabilities and the reported amounts of revenues and
expenses. Although these estimates are based on management`s best knowledge of
the amount, event or actions, actual results ultimately may differ from those
estimates. The most significant area of estimation and uncertainty in the
condensed consolidated set of financial statements is in respect of the
valuation of the property portfolio and investments, where external valuations
are obtained. Other areas of estimation and uncertainty are included within the
accounting policies below. The more significant being:
Revenue recognition
Share-based payments
Provisions
Pensions
Contingent liabilities & capital commitments
Income tax
Trade and other receivables
Operating segments
Segmental information is disclosed in the notes to the consolidated financial
statements reflecting management reporting of divisional financial performance
and position as used by the chief operating decision maker.
Foreign currencies
Transactions in currencies other than the Group`s functional currency are
recorded at the exchange rate prevailing at the transaction date. Foreign
exchange gains and losses resulting from settlement of these transactions and
from retranslation of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement except when qualifying as
hedges, in which case they are dealt with in reserves.
Revenue recognition
Property rental income and exhibition income consists of gross income calculated
on an accruals basis, together with services where the Group acts as principal
in the ordinary course of business, excluding sales of investment properties.
Rental income receivable is spread evenly over the period from lease
commencement to lease expiry. Lease incentives and other directly attributable
contributions are recognised within net rental income on the same straight-line
basis as rental income.
Contingent rents, being those lease payments that are not fixed at the inception
of a lease, for example increases arising on rent reviews, are recorded as
income in the periods in which they are earned.
Rent reviews are recognised as income, based on management`s estimates, when it
is reasonable to assume they will be received. Estimates are derived from
knowledge of market rents for comparable properties determined on an
individual property basis and updated for progress of negotiations.
Where revenue is obtained by the sale of properties, it is recognised when the
significant risks and returns have been transferred to the buyer. This will
normally take place on exchange of contracts unless there are conditions
attached. For conditional exchanges, sales are recognised when these conditions
are satisfied.
Interest income is accrued on a time apportioned basis, by reference to the
principal outstanding and the effective interest rate.
Dividend income is recognised when the relevant Group company`s right to receive
payment has been established.
Exceptional items
Exceptional items are those items that in the Directors` view are required to be
separately disclosed by virtue of their size or incidence to enable a full
understanding of the Group`s financial performance. These are excluded from the
calculation of underlying earnings.
Income taxes
Current tax is the amount payable on the taxable income for the year and any
adjustment in respect of prior years. It is calculated using rates that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax is provided using the balance sheet liability method in respect of
temporary differences between the carrying amounts of assets and liabilities in
the financial statements and the amounts used in computation of taxable profit,
with the exception of deferred tax on revaluation surpluses where the tax basis
used is the accounts` historic cost.
Temporary differences are not provided on the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit, and differences
relating to investments in subsidiaries to the extent that they will not reverse
in the foreseeable future.
Deferred tax is determined using tax rates that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is
settled.
Deferred tax assets are recognised only to the extent that management believe it
is probable that future taxable profit will be available against which the
temporary differences can be utilised. Deferred tax assets and liabilities are
offset only when they relate to taxes levied by the same authority and the Group
intends to settle them on a net basis.
Tax is included in the income statement except when it relates to items
recognised in other comprehensive income, or directly in equity, in which case
the related tax is also recognised in other comprehensive income or directly in
equity.
Share-based payments
The cost of granting share options and other share-based remuneration to
employees and Directors is recognised through the income statement with
reference to the fair value of the options at the date of grant. The income
statement is charged over the vesting period of the options.
An option pricing model is used applying assumptions around expected yields,
forfeiture rates, exercise price and volatility.
Impairment of financial assets
An annual review is conducted for financial assets to determine whether there is
any evidence of a loss event as described by IAS 39. Where there is
objective evidence of impairment the amount of any loss is calculated by
estimating future cash flows or by using fair value where this is available
through observable market prices.
Investment and development property
Investment and development properties are owned or leased by the Group and held
for long term rental income and capital appreciation.
The Group has chosen to use the fair value model. Properties are initially
recognised at cost and subsequently revalued at the balance sheet date to fair
value as determined by professionally qualified external valuers on the basis of
market value. The valuation is based upon assumptions including market rent or
business profitability, future growth, anticipated maintenance costs,
development costs and an appropriate discount rate where possible applying
yields based on known transactions for similar properties and likely incentives
offered to tenants. These assumptions conform with RICS valuation standards.
Incentive assets are adjusted for against the fair value of properties to which
they are directly attributable.
Properties held under leases are stated gross of the recognised finance lease
liability.
The cost of development properties includes capitalised interest and other
directly attributable outgoings, except in the case of properties and land where
no development is imminent, in which case no interest is included. Interest is
capitalised (before tax relief) on the basis of the average rate of interest
paid on the relevant debt outstanding, until the date of practical completion.
When the Group redevelops an existing investment property for continued future
use as an investment property, the property remains an investment property
measured at fair value.
Gains or losses arising from changes in the fair value of investment and
development property are recognised in the income statement of the period in
which they arise. Depreciation is not provided in respect of investment
properties including plant and equipment integral to such investment properties.
When the use of a property changes from that of trading property to investment
property, such property is transferred at fair value, with any resulting gain
being recognised as property trading profit.
Investment properties cease recognition as investment property either when they
have been disposed of or when they are permanently withdrawn from use and no
future economic benefit is expected from their disposal. Where the Group
disposes of a property at fair value in an arm`s length transaction the carrying
value immediately prior to the sale is adjusted to the transaction price, offset
by any directly attributable costs, and the adjustment is recorded in the income
statement.
Leases
Leases are classified according to the substance of the transaction. A lease
that transfers substantially all the risks and rewards of ownership to the
lessee is classified as a finance lease. All other leases are normally
classified as operating leases.
Group as a lessee:
In accordance with IAS 40, finance and operating leases of investment property
are accounted for as finance leases and recognised as an asset and an obligation
to pay future minimum lease payments. The investment property asset is included
in the balance sheet at fair value, gross of the recognised finance lease
liability. Lease payments are allocated between the liability and finance
charges so as to achieve a constant financing rate.
Other finance-leased assets are capitalised at the lower of the fair value of
the leased asset or the present value of the minimum lease payments and
depreciated over the shorter of the lease term and the useful life of the asset.
Rentals payable under operating leases are charged to the income statement on a
straight-line basis over the lease term.
Group as lessor:
Assets leased out under finance leases are recognised as receivables at the
amount of the Group`s net investment in the leases.
Finance lease income is allocated to accounting periods so as to reflect a
constant rate of return on the net investment.
Assets leased out under operating leases are included in investment property,
with rental income recognised on a straight-line basis over the lease term.
Trading property
Trading property comprise those properties that in the Directors` view are
expected to be disposed of within one year of the balance sheet date. Such
properties are transferred from investment property at fair value which forms
its deemed cost. Subsequently it is carried at the lower of cost and net
realisable value.
Plant and equipment
Plant and equipment consists of vehicles, fixtures, fittings and other
equipment. Plant and equipment is stated at cost less accumulated depreciation
and any accumulated impairment losses. Cost includes the original purchase price
of the asset plus any attributable cost in bringing the asset to its working
condition for its intended use.
Depreciation is charged to the income statement on a straight-line basis over an
asset`s estimated useful life to a maximum of five years.
Available for sale investments
Available for sale investments, being investments intended to be held for an
indefinite period, are initially recognised and subsequently measured at fair
value. For listed investments, fair value is the current bid market value at the
reporting date.
Gains or losses arising from changes in the fair value of available for sale
investments are included in other comprehensive income, except to the extent
that losses are determined to be attributable to impairment, in which case they
are recognised in the income statement.
Upon disposal accumulated fair value adjustments are recycled from reserves to
the income statement.
Trade and other receivables
Trade and other receivables are initially recognised and subsequently measured
at amortised cost. The Directors exercise judgement as to the collectability of
the Group`s trade receivables and determine when it is appropriate to impair
these assets.
Factors such as days past due, credit status of the counterparty and historical
evidence of collection are considered.
Cash and cash equivalents
Cash and cash equivalents are recognised at fair value. Cash and cash
equivalents comprise cash on hand, deposits with banks and other short term
highly liquid investments with original maturities of three months or less.
Derivative financial instruments
The Group uses derivative financial instruments to manage exposure to interest
rate risk. They are initially recognised on the trade date at fair value and
subsequently remeasured at fair value based on market price.
Changes in fair value are recognised directly in the income statement.
Trade payables
Trade payables are obligations for goods or services acquired in the ordinary
course of business.Trade payables are recognised and subsequently measured at
amortised cost until settled.
Dividend distribution
Dividend distributions to shareholders are recognised as a liability once
approved by shareholders.
Provisions
Provisions are recognised when the Group has a current obligation arising from a
past event and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the Directors` best estimate of the
expenditure required to settle that obligation at the balance sheet date.
Borrowings
Borrowings are recognised initially at their net proceeds on issue and
subsequently carried at amortised cost. Any transaction costs and premiums or
discounts are recognised over the contractual life using the effective interest
method. In the event of early repayment all unamortised transaction costs are
recognised immediately in the income statement.
Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares are recognised as a deduction from
equity, net of any tax effects.
Pensions
The costs of the defined contribution scheme and the Group`s personal pension
plans are charged against profits in the year in which they fall due.
Past service costs and current service costs of the defined benefit scheme are
recognised immediately in income. Actuarial gains and losses arising from
experience adjustments and changes in actuarial assumptions are charged or
credited to equity in other comprehensive income for the period in which they
arise. The defined benefit obligation is calculated annually by independent
actuaries using the projected unit credit method and applying assumptions which
are agreed between the Group and its actuaries.
Contingent liabilities and capital commitments
Contingent liabilities are not recognised due to lack of certainty with respect
to measurement of the potential future liability. A description of the nature
and, where possible, an estimate of the financial effect of contingent
liabilities is disclosed.
Capital commitments are disclosed when the Group has a contractual future
obligation which has not been provided for at the balance sheet date.
2 Segmental reporting
Management has determined the operating segments based on reports reviewed by
the Chief Executive, who is deemed to be the chief operating decision maker.
For management and reporting purposes the Group is organised into four operating
divisions being The Great Capital Partnership, Earls Court & Olympia, Covent
Garden and Other. The Other segment primarily constitutes the business unit
historically known as Opportunities and other head office companies. This
segment included a number of smaller assets located primarily in the south east
of England which were sold during 2009 and 2010. The Earls Court & Olympia
segment also includes the Group`s interest in the Empress State Building
adjacent to the Group`s property at Earls Court.
The Group`s operating segments derive their revenue primarily from rental income
from lessees, with the exception of Earls Court & Olympia whose revenue
primarily represents exhibition income.
Unallocated expenses are costs incurred centrally which are neither directly nor
reasonably attributable to individual segments.
Reportable segments
Six months ended 30 June 2011
The Great Capital Earls Court Covent
Partnership & Olympia(1) Garden
GBPm GBPm GBPm
Revenue 7.4 31.5 19.5
Rent receivable and exhibition income 6.9 31.5 17.9
Service charge income 0.5 - 1.6
Rental income 7.4 31.5 19.5
Service charge and other
non-recoverable costs (1.2) (14.1) (6.4)
Net rental income 6.2 17.4 13.1
Other income - - -
Gain on revaluation of
investment and
development property 16.9 (12.2) 37.6
Profit on sale of available for
sale investments - - -
Remeasurement of deferred
consideration - (4.2) -
Segment result 23.1 1.0 50.7
Unallocated costs
Administration expenses
Operating profit
Net finance costs(2)
Profit before tax
Taxation
Profit for the period
Summary balance sheet
Total segmental assets(3) 283.7 515.9 800.7
Total segmental liabilities(3) (128.7) (244.5) (391.1)
155.0 271.4 409.6
Unallocated net assets(2)
Net assets
Other segment items:
Capital expenditure (0.6) (19.3) (117.3)
Depreciation - - (0.1)
Six months ended 30 June 2011
Group
Other total
GBPm GBPm
Revenue - 58.4
Rent receivable and exhibition income - 56.3
Service charge income - 2.1
Rental income - 58.4
Service charge and other non-recoverable costs - (21.7)
Net rental income - 36.7
Other income 0.3 0.3
Gain on revaluation of investment and
development property 0.1 42.4
Profit on sale of available for sale investments 18.8 18.8
Remeasurement of deferred consideration - (4.2)
Segment result 19.2 94.0
Unallocated costs
Administration expenses (11.0)
Operating profit 83.0
Net finance costs(2) (12.8)
Profit before tax 70.2
Taxation (1.7)
Profit for the period 68.5
Summary balance sheet
Total segmental assets(3) 25.1 1,625.4
Total segmental liabilities(3) (5.2) (769.5)
19.9 855.9
Unallocated net assets(2) 170.6
Net assets 1,026.5
Other segment items:
Capital expenditure - (137.2)
Depreciation - (0.1)
1) Empress State represented GBP3.6 million of the GBP17.4 million net rental
income for Earls Court & Olympia.
2) The Group operates a central treasury function which manages and monitors the
Group`s finance income/(costs) on a net basis and a majority of the Group`s cash
balances
3) Total assets and liabilities exclude loans between and investments in Group
companies.
Six months ended 30 June 2010
The Great Capital Earls Court
Partnership & Olympia(1)
GBPm GBPm
Revenue 8.1 31.1
Rental Income
Rent receivable and exhibition income 7.5 31.1
Service charge income 0.6 -
Rental income 8.1 31.1
Rent payable - -
Service charge and other non-recoverable
costs (1.3) (13.2)
Net rental income 6.8 17.9
Gain on revaluation and sale of investment
and development property 21.8 3.5
Segment result 28.6 21.4
Unallocated costs
Administration expenses
Operating profit
Net finance costs 2
Profit before tax
Taxation
Profit for the period
Summary balance sheet
Total segmental assets 3 289.3 463.8
Total segmental liabilities 3 (131.0) (276.2)
158.3 187.6
Unallocated net assets
Net assets
Other segment items:
Capital expenditure (0.3) (4.5)
Depreciation - -
Six months ended 30 June 2010
Covent Group
Garden Other total
GBPm GBPm GBPm
Revenue 19.4 0.6 59.2
Rental Income
Rent receivable and exhibition income 17.7 0.4 56.7
Service charge income 1.7 0.2 2.5
Rental income 19.4 0.6 59.2
Rent payable (0.6) - (0.6)
Service charge and other non-recoverable costs (5.9) 0.1 (20.3)
Net rental income 12.9 0.7 38.3
Gain on revaluation and sale of investment and
development property 40.1 0.3 65.7
Segment result 53.0 1.0 104.0
Unallocated costs
Administration expenses (11.8)
Operating profit 92.2
Net finance costs(2) (37.4)
Profit before tax 54.8
Taxation (0.5)
Profit for the period 54.3
Summary balance sheet
Total segmental assets(3) 610.1 59.5 1,422.7
Total segmental liabilities(3) (379.7) (7.6) (794.5)
230.4 51.9 628.2
Unallocated net assets 165.2
Net assets 793.4
Other segment items:
Capital expenditure (0.4) - (5.2)
Depreciation (0.1) - (0.1)
1) Empress State represented GBP3.3 million of the GBP17.9 million net rental
income for Earls Court & Olympia.
2) The Group operates a central treasury function which manages and monitors the
Group`s finance income/(costs) on a net basis and a majority of Group`s cash
balances.
3) Total assets and liabilities exclude loans and investments between Group
companies.
Year ended 31 December 2010
The Great Capital Earls Court Covent
Partnership & Olympia 1 Garden
GBPm GBPm GBPm
Revenue 16.1 57.7 38.9
Rent receivable and exhibition income 14.9 57.7 36.2
Service charge income 1.2 - 2.7
Rental Income 16.1 57.7 38.9
Rental payable - - (1.0)
Service charge and other
non-recoverable costs (2.5) (28.6) (12.2)
Net rental income 13.6 29.1 25.7
Other income - - -
Gain on revaluation and sale of investment
and development property 33.5 23.3 77.8
Remeasurement of deferred
consideration - 0.7 -
Write down of trading property - - -
Profit on sale of investments
Impairment of other receivables - - -
Segment result 47.1 53.1 103.5
Unallocated administration costs
Operating profit
Net finance costs(2)
Profit before tax
Taxation
Profit for the year
Summary balance sheet
Total segmental assets(3) 273.1 503.2 659.0
Total segmental liabilities(3) (128.6) (273.4) (382.0)
144.5 229.8 277.0
Unallocated net assets(2)
Net assets
Other segment items:
Capital expenditure (1.1) (22.7) (7.5)
Depreciation - - (0.1)
Year ended 31 December 2010
Group
Other total
GBPm GBPm
Revenue 1.0 113.7
Rent receivable and exhibition income 0.6 109.4
Service charge income 0.3 4.2
Rental Income 0.9 113.6
Rental payable - (1.0)
Service charge and other non-recoverable costs (0.3) (43.6)
Net rental income 0.6 69.0
Other income 0.1 0.1
Gain on revaluation and sale of investment and
development property - 134.6
Remeasurement of deferred consideration - 0.7
Write down of trading property (0.1) (0.1)
Profit on sale of investments
Impairment of other receivables (1.6) (1.6)
Segment result (1.0) 202.7
Unallocated administration costs (23.9)
Operating profit 178.8
Net finance costs(2) (46.3)
Profit before tax 132.5
Taxation (0.9)
Profit for the year 131.6
Summary balance sheet
Total segmental assets(3) 64.7 1,500.0
Total segmental liabilities(3) (5.5) (789.5)
59.2 710.5
Unallocated net assets(2) 172.9
Net assets 883.4
Other segment items:
Capital expenditure - (31.3)
Depreciation - (0.1)
1) Empress State represents GBP6.5 million of the GBP29.1 million net rental
income for Earls Court & Olympia.
2) The Group operates a central treasury function which manages and monitors the
Group`s finance income/(costs) on a net basis and a majority of Group`s cash
balances.
3) Total assets and liabilities exclude loans between and investments in Group
companies.
3 Gain on 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
Gain on revaluation of investment
and development property 39.5 65.7 133.3
Gain on sale of investment and
development property 2.9 - 1.3
Gain on revaluation and sale of
investment and development property 42.4 65.7 134.6
4 Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Finance costs
On bank overdrafts and loans 18.7 20.7 40.7
Amortisation of issue costs 0.2 0.2 0.1
On obligations under finance leases 0.2 0.2 0.3
Gross finance costs 19.1 21.1 41.1
Interest capitalised on development (0.6) (0.4) (0.8)
Finance costs 18.5 20.7 40.3
Costs of termination of financial
Instruments(1) 0.8 7.1 7.1
Other finance costs 0.8 7.1 7.1
1) Treated as exceptional and therefore excluded from the calculation of
underlying earnings
Interest is capitalised, before tax relief, on the basis of the average rate of
interest paid of 5.9 per cent (2010 - 5.9 per cent) on the relevant debt,
applied to the cost of developments during the year.
5 Taxation
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Current tax on profits excluding
exceptional items and property
disposals 1.8 0.4 2.3
Deferred tax:
On investment and development
property 16.9 7.2 6.7
On accelerated capital allowances (0.4)
On losses (18.2)
On derivative financial instruments 0.4 (10.3) (9.6)
On exceptional items 1.3 3.1 2.5
Deferred tax on profits excluding
exceptional items and property disposals - - (0.4)
Tax charge excluding exceptional
items and property disposals 1.8 0.4 1.9
Current tax credit on exceptional
items and property disposals (0.1) - (1.1)
REIT entry charge - 0.1 0.1
Taxation charge 1.7 0.5 0.9
Under IAS 12 "Income Taxes", provision is made for the deferred tax assets and
liabilities associated with the revaluation of investment properties at the
corporate tax rate expected to apply to the Group at the time of use. For UK
properties the relevant tax rate will be 25 per cent (2010 - 28 per cent).
Where gains such as revaluation of development properties and other assets and
actuarial movements on pension funds are dealt with in reserves, any deferred
tax is also dealt with in reserves.
The recognised deferred tax liability on the revaluation of investment
properties calculated under IAS 12 is GBP16.9 million at 30 June 2011 (31
December 2010 - nil). This liability is offset by the recognised deferred tax
asset on losses available within the Group. However it is noted that the
availability of the losses could be restricted under certain circumstances which
are closely monitored. The contingent tax liability on assets as at 30 June 2011
is nil which is line with the IAS 12 position mentioned above. If upon sale the
group retained all its capital allowances, which is within the control of the
group, the deferred tax provision in respect of capital allowances of GBP12.4
million at 30 June 2011 may also be released.
Fair value of Fair value of
Accelerated investment and derivative
capital development financial
allowances properties instruments
GBPm GBPm GBPm
Provided deferred tax
provision:
At 31 December 2010 12.8 - (12.5)
Recognised in income (0.4) 16.9 0.4
At 30 June 2011 12.4 16.9 (12.1)
Unrecognised deferred tax asset:
At 31 December 2010 - (43.3) (2.2)
Income statement items - 34.8 2.2
At 30 June 2011 - (8.5) -
Other
temporary
differences Losses Total
GBPm GBPm GBPm
Provided deferred tax
provision:
At 31 December 2010 (0.3) - -
Recognised in income 1.3 (18.2) -
At 30 June 2011 1.0 (18.2) -
Unrecognised deferred tax asset:
At 31 December 2010 (11.2) (10.9) (56.7)
Income statement items 10.9 10.9 47.9
At 30 June 2011 (0.3) - (8.8)
In accordance with the requirement of IAS 12 "Income Taxes", the deferred tax
asset has not been recognised in the Group financial statements due to
uncertainty on the level of profits that will be available in future periods.
Further amendments to the UK Corporation Tax system were announced in the March
2011 Budget which included changes to the main rates of UK Corporation Tax. The
main rate of corporation tax decreased from 28 per cent to 26 per cent from 1
April 2011.
This reduction is in addition to the decrease to 27 per cent enacted in the
Finance Act 2010. The Budget will reduce the main rate of corporation tax from
26 per cent to 25 per cent from 1 April 2012. It proposes to make further
reductions to the main rate of 1 per cent per annum to 23 per cent by 1 April
2014. The decrease in tax rate to 25 per cent has been substantively enacted for
the purposes of IAS 12 and therefore has been reflected in these financial
statements.
6 Dividends
As at As at As at
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Ordinary shares
Prior period final dividend paid of 1.0p
per share 6.2 - -
Interim dividend paid of nil per share
(December 2010 - 0.5p) - - 3.1
Dividends paid 6.2 - 3.1
Proposed dividend of 0.5p per share (June
2010 - 0.5p; December 2010 1.0p) 3.2 3.1 6.2
Details of the shares in issue are given in note 18.
7 Investment and development property
Total
GBPm
At 1 January 2011 1,377.6
Additions from acquisitions 110.9
Additions from subsequent expenditure 26.3
Disposals (52.4)
Gain on valuation 39.5
At 30 June 2011 1,501.9
Total
GBPm
At 1 January 2010 1,240.5
Additions from acquisitions 10.3
Additions from subsequent expenditure 21.0
Disposals (27.5)
Gain on valuation 133.3
At 31 December 2010 1,377.6
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Balance sheet carrying value of investment and
development property 1,501.9 1,377.6
Adjustment in respect of tenant incentives 14.3 9.6
Adjustment in respect of head leases (8.3) (6.8)
1,507.9 1,380.4
Market value of investment and development property
Included within investment and development properties is GBP0.6 million (2010 -
GBP0.8 million) of interest capitalised on developments and redevelopments in
progress.
The fair value of the Group`s investment and development properties as at 30
June 2011 was determined by independent external valuers. Following the recent
acquisition of King Sturge by Jones Lang LaSalle (JLL), JLL have been appointed
as the valuers for Earls Court & Olympia, with the remainder of the Group`s
portfolio valued by CB Richard Ellis. The valuation conforms with the Royal
Institution of Chartered Surveyors ("RICS") Valuation Standards, and was arrived
at by reference to market transactions for similar properties. Fees paid to
valuers are based on fixed price contracts.
The main assumptions underlying the valuations are in relation to market rent or
business profitability, taking into account forecast growth rates and yields
based on known transactions for similar properties and likely incentives offered
to tenants.
Valuations are based on what is determined to be the highest and best use. The
Group`s investment in Seagrave Road, a car park supporting Earls Court, has been
valued as a site with development potential. The exhibition halls at Earls Court
& Olympia are fair valued as fully equipped operational entities, having regard
to trading potential.
There are certain restrictions on the realisability of investment property when
a credit facility is in place.
8 Trading property
The estimated replacement cost of trading property based on market value
amounted to GBP1.4 million (31 December 2010 - GBP1.4 million). During the year
impairment charges of nil (31 December 2010 - GBP0.1 million) were recorded
against trading property.
9 Trade and other receivables
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Amounts falling due after more than one year
Loan notes receivable 3.4 3.4
Other receivables 0.7 -
Prepayments and accrued income 7.1 9.0
Trade and other receivables 11.2 12.4
Amounts falling due within one year
Loan notes receivable 0.7 2.9
Rents receivable(1) 9.0 10.2
Other receivables 32.6 5.2
Prepayments and accrued income 16.1 8.5
Trade and other receivables 58.4 26.8
1) Includes exhibition and trade receivables
Included within prepayments and accrued income are tenant lease incentives of
GBP14.3 million (2010 - GBP9.6 million).
10 Cash and cash equivalents
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Cash on hand 17.9 12.7
Cash on short term deposit 167.3 169.8
Unrestricted cash and cash equivalents 185.2 182.5
Restricted cash 6.0 6.0
Cash and cash equivalents 191.2 188.5
Restricted cash relates to amounts placed on deposit in accounts which are
subject to withdrawal conditions.
11 Trade and other payables
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Amounts falling due within one year
Rents received in advance 19.0 22.0
Accruals and deferred income 22.9 26.5
Other payables(1) 25.2 14.2
Other taxes and social security 2.0 2.3
Trade and other payables 69.1 65.0
1) Includes sundry creditors and amounts due to joint venture partners
12 Borrowings, including finance leases
As at 30 June 2011
Carrying
value Secured Unsecured
GBPm GBPm GBPm
Amounts falling due within one year
Bank loans and overdrafts 6.2 6.2 -
Loan notes 2017 6.0 6.0 -
Borrowings, excluding finance leases 12.2 12.2 -
Finance lease obligations 1.2 1.2 -
Amounts falling due within one year 13.4 13.4 -
Amounts falling due after more than one year
Bank loans 2013 510.8 510.8 -
Bank loan 2017 111.5 111.5 -
Borrowings excluding finance leases 622.3 622.3 -
Finance lease obligations 7.1 7.1 -
Amounts falling due after more than one year 629.4 629.4 -
Total borrowings 642.8 642.8 -
Cash and cash equivalents (191.2)
Net debt 451.6
As at 30 June 2011
Fixed Floating Fair
rate rate value
GBPm GBPm GBPm
Amounts falling due within one year
Bank loans and overdrafts - 6.2 6.2
Loan notes 2017 - 6.0 6.0
Borrowings, excluding finance leases - 12.2 12.2
Finance lease obligations 1.2 - 1.2
Amounts falling due within one year 1.2 12.2 13.4
Amounts falling due after more than one year
Bank loans 2013 - 510.8 510.8
Bank loan 2017 - 111.5 111.5
Borrowings excluding finance leases - 622.3 622.3
Finance lease obligations 7.1 - 7.1
Amounts falling due after more than one year 7.1 622.3 629.4
Total borrowings 8.3 634.5 642.8
Cash and cash equivalents
Net debt
As at 31 December 2010
Carrying
value Secured Unsecured
GBPm GBPm GBPm
Amounts falling due within one year
Bank loans and overdrafts 12.2 12.2 -
Borrowings, excluding finance leases 12.2 12.2 -
Finance lease obligations 0.9 0.9 -
Amounts falling due within one year 13.1 13.1 -
Amounts falling due after more than one year
Bank loan 2012 124.3 124.3 -
Bank loans 2013 409.7 409.7 -
Bank loan 2017 111.6 111.6 -
Borrowings excluding finance leases 645.6 645.6 -
Finance lease obligations 5.9 5.9 -
Amounts falling due after more than one year 651.5 651.5 -
Total borrowings 664.6 664.6 -
Cash and cash equivalents (188.5)
Net debt 476.1
As at 31 December 2010
Fixed Floating Fair
rate rate value
GBPm GBPm GBPm
Amounts falling due within one year
Bank loans and overdrafts - 12.2 12.2
Borrowings, excluding finance leases - 12.2 12.2
Finance lease obligations 0.9 - 0.9
Amounts falling due within one year 0.9 12.2 13.1
Amounts falling due after more than one year
Bank loan 2012 - 124.3 124.3
Bank loans 2013 - 409.7 409.7
Bank loan 2017 - 111.6 111.6
Borrowings excluding finance leases - 645.6 645.6
Finance lease obligations 5.9 - 5.9
Amounts falling due after more than one year 5.9 645.6 651.5
Total borrowings 6.8 657.8 664.6
Cash and cash equivalents
Net debt
13 Cash generated from operations
Six months Year Six months
ended ended ended
30 June 31 December 30 June
2011 2010 2010
Notes GBPm GBPm GBPm
Profit before tax 70.2 132.5 54.8
Adjustments for:
Gain on revaluation of
investment and development
property 3 (39.5) (133.3) (65.7)
Gain on sale of investment
property 3 (2.9) (1.3) -
Profit on sale of available
for sale investments (18.8) - -
Remeasurement of deferred
consideration 4.2 (0.7) -
Write down of trading property - 0.1 -
Impairment of other
receivables - 1.6 -
Depreciation 0.1 0.1 -
Amortisation of lease
incentives and other
direct costs (1.4) 2.5 (0.7)
Finance costs 4 18.5 40.3 20.7
Finance income (0.8) (1.4) (0.6)
Other finance costs 4 0.8 7.1 7.1
Change in fair value of
derivative financial instruments (5.7) 0.3 10.2
Changes in working capital:
Change in trading properties - (0.1) -
Change in trade and other receivables (1.1) (3.9) 0.8
Change in trade and other payables (2.4) (5.2) (4.1)
Cash generated from operations 21.2 38.6 22.5
14 Classification of financial assets and liabilities
The tables below set out the Group`s accounting classification of each class of
financial assets and liabilities, and their fair values at 30 June 2011 and 31
December 2010.
The fair values of quoted borrowings are based on the ask price. The fair values
of derivative financial instruments are determined from observable market prices
or estimated using appropriate yield curves at 30 June and 31 December each year
by discounting the future contractual cash flows to the net present values.
Gain to other
Carrying Gain to income comprehensive
value Fair value statement income
30 June 2011 GBPm GBPm GBPm GBPm
Cash and cash
equivalents 191.2 191.2 - -
Other financial
assets 71.2 71.2 - -
Total loans and
receivables 262.4 262.4 - -
Available for
sale investments 30.4 30.4 18.8 1.8
Total available
for sale
investments 30.4 30.4 18.8 1.8
Derivative
financial
instrument
liabilities (48.2) (48.2) 5.7 -
Total held for
trading
liabilities (48.2) (48.2) 5.7 -
Borrowings (642.8) (642.8) - -
Other financial
liabilities (78.5) (78.5) - -
Total loans and
payables (721.3) (721.3) - -
Loss Gain to other
Carrying to income comprehensive
value Fair value statement income
31 December 2010 GBPm GBPm GBPm GBPm
Cash and cash
equivalents 188.5 188.5 - -
Other financial assets 39.2 39.2 - -
Total loans and
receivables 227.7 227.7 - -
Available for sale
investments 66.3 66.3 - 21.5
Total available for
sale investments 66.3 66.3 - 21.5
Derivative financial
instrument liabilities (53.9) (53.9) (0.3) -
Total held for trading
liabilities (53.9) (53.9) (0.3) -
Borrowings (664.6) (664.4) - -
Other financial
liabilities (71.0) (71.0) - -
Total loans and
payables (735.6) (735.6) - -
15 Other provisions
Deferred
consideration Other Total
GBPm GBPm GBPm
At 1 January 2010 3.8 0.2 4.0
Credited to the income statement
- remeasurement of deferred consideration (0.7) - (0.7)
At 31 December 2010 3.1 0.2 3.3
Charged to the income statement
- remeasurement of deferred consideration 4.2 - 4.2
At 30 June 2011 7.3 0.2 7.5
Deferred consideration is the amount payable on the acquisition of the non-
controlling interests` share in Earls Court & Olympia. The provision has been
discounted, at the Group`s average cost of debt. The amount of deferred
consideration payable is based on a number of factors including a potential re-
development of the ECOA, with the final details of such a re-development
dependent on discussions with the owners of the adjacent land and the outcome of
the planning permission process. The maximum potential payment is GBP20.0
million.
16 Capital commitments and contingent liabilities
At 30 June 2011, the Group was contractually committed to GBP50.0 million (31
December 2010 - GBP45.0 million) of future expenditure for the purchase,
construction, development and enhancement of investment property.
The Group`s share of joint venture commitments included within this amount was
GBP0.6 million (2010 - GBP1.2 million).
17 Per share details
(a) Earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
millions millions millions
Weighted average ordinary shares in
issue for calculation
of basic earnings per share 639.3 621.9 621.9
Dilutive effect of share option awards 3.8 0.1 1.2
Dilutive effect of contingently
issuable shares 0.6 - -
Dilutive effect of matching nil cost
options 1.1 - -
Weighted average ordinary shares in
issue for calculation of diluted
earnings per share 644.8 622.0 623.1
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Profit used for calculation of basic
earnings per share 68.5 54.3 131.6
Dilutive effect of share option awards 0.6 - 0.5
Profit used for calculation of
diluted earnings per share 69.1 54.3 132.1
Basic earnings per share (pence) 10.7 8.7 21.2
Diluted earnings per share (pence) 10.7 8.7 21.2
Profit used for calculation of basic
earnings per share 68.5 54.3 131.6
Adjustments:
Gain on revaluation and sale of
investment and development property (42.4) (65.7) (134.6)
Write down of trading property - - 0.1
Fair value movement on derivative
financial instruments (5.7) 10.2 0.3
Costs of termination of derivative
financial instruments 0.8 7.1 7.1
Current tax adjustments (0.2) - (0.3)
Deferred tax adjustments 0.4 (3.1) (2.9)
EPRA adjusted earnings 21.4 2.8 1.3
Exceptional other income (0.3) - -
Remeasurement of deferred consideration 4.2 - (0.7)
Profit on sale of available for sale
investments (18.8) - -
Write down of trading property - - (0.1)
Impairment of other receivables - - 1.6
Demerger costs - 4.1 5.3
Current tax adjustments 0.1 - (0.8)
Deferred tax adjustments (0.4) 3.1 2.5
REIT entry charge - 0.1 0.1
Underlying earnings 6.2 10.1 9.2
Underlying earnings per share (pence) 1.0 1.6 1.5
EPRA adjusted earnings per share (pence) 3.3 0.5 0.2
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm Million GBPm
Profit used for calculation of basic
earnings per share 68.5 54.3 131.6
Adjustments:
Gain on revaluation and sale of
investment and development property (42.4) (65.7) (134.6)
Profit on sale of available for sale
investments (18.8) - -
Impairment of other receivables - - 1.6
Demerger costs - 4.1 5.3
Deferred tax adjustments (0.2) 10.3 9.2
Current tax adjustments 0.1 - (0.7)
Headline earnings used for
calculation of headline earnings per share 7.2 3.0 12.4
Dilutive effect of share options awards 0.6 - 0.5
Diluted headline earnings used for
calculation of diluted headline
earnings per share 7.8 3.0 12.9
Headline earnings per share (pence)(1) 1.1 0.5 2.0
Diluted headline earnings per share
(pence)(1) 1.2 0.5 2.1
1) Headline earnings per share is calculated in accordance with Circular 8/2007
issued by the South African Institute of Chartered Accountants (SAICA), a
requirement of the Group`s JSE listing. This measure is not a requirement of
IFRS.
(b) Net assets per share
As at As at
30 June 31 December
2011 2010
GBPm GBPm
Basic net asset value used for calculation of basic
net assets per share 1,026.5 883.4
Fair value of derivative financial instruments 48.2 53.9
Unrecognised surplus on trading properties 1.1 1.1
Deferred tax adjustments (12.1) (12.5)
EPRA adjusted net asset value 1,063.7 925.9
Effect of dilution:
On exercise of options - -
Adjusted, diluted NAV used for calculation of
adjusted, diluted NAV per share 1,063.7 925.9
Fair value of derivative financial instruments (48.2) (53.9)
Deferred tax adjustments 12.1 12.5
Diluted EPRA NNNAV 1,027.6 884.5
Basic net assets per share (pence) 150.1 142.1
EPRA adjusted, diluted NAV per share (pence) 154.1 148.4
Diluted EPRA NNNAV per share (pence) 148.8 141.7
(c) Shares in issue
As at As at
30 June 31 December
2011 2010
millions millions
Shares in issue 683.9 621.8
Effect of dilution:
On exercise of options 4.8 2.2
On issue of contingently issuable shares 0.6 -
On issue of matching nil cost options 1.1 -
Adjusted, diluted number of shares 690.4 624.0
18 Share capital and share premium
The Companies Act 2006 removed the concept of authorised share capital with
effect from 1 October 2009.
Share Share
capital premium
GBPm GBPm
Issued and fully paid
At 31 December 2010 - 621,828,502 ordinary shares
of 25p each 155.4 89.1
Shares issued 62,100,000 ordinary shares of 25p each 15.5 6.0
At 30 June 2011 - 683,928,502 ordinary shares of 25p each 170.9 95.1
19 Related party transactions
Key management* compensation
Six months Six months Year ended
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBPm GBPm GBPm
Salaries and short term employee
benefits 1.9 1.0 4.2
Pensions and other post-employment
benefits 0.2 0.1 0.3
Share based payments 0.5 - 0.5
2.6 1.1 5.0
* Key management comprises the Directors of Capital & Counties Properties PLC,
and those Group employees who have been designated as Persons Discharging
Managerial Responsibilities ("PDMR").
20 Events occurring after the reporting period
On 21 July 2011 The Great Capital Partnership sold its investment property at
67/75 Kingsway, London for GBP16.6m (GBP8.4 million Capco`s share). The market
value of this property at 30 June 2011 was GBP16.4 million.
On 29 July 2011 the Group, entered into an Exclusivity Agreement with LBHF. The
agreement gives both parties one year of exclusivity in relation to discussions
around LBHF`s land and its inclusion within Sir Terry Farrell`s Masterplan. In
order to enter into the agreement the Group paid GBP15 million, GBP10 million of
which is refundable in the event a deal is not concluded.
APPENDIX 1
SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTY (unaudited)
1. Property data as at 30 June 2011
Market Initial Nominal Passing
value yield equivalent rent(1)
GBPm Ownership (EPRA)(1,3) yield(1,4) GBPm
Covent Garden 780.0 100% 3.67% 5.21%
Earls Court &
Olympia(2) 487.8 100%
The Great
Capital
Partnership 240.1 50% 4.43% 5.09%
Total
investment and
development
properties 1,507.9 48.3
Weighted
average Gross
unexpired area
ERV (1) lease(1) million(5)
GBPm Occupancy(1) years sq ft
Covent Garden 44.6 97.4% 8.8 0.8
Earls Court & Olympia(2) 5.9 1.7
The Great Capital Partnership 14.3 86.4% 7.7 0.7
Total investment and
development properties 64.8 3.2
1) As defined in the glossary.
2) Includes the Group`s 50 per cent economic interest in the Empress State
Building (GBP102.5 million). Earls Court & Olympia does not report a passing
rent, ERV, occupancy or lease maturity due to the nature of its exhibition
business.
3) Initial yield (EPRA) at 30 June 2010 for Covent Garden was 4.07%, for GCP
5.06%.
4) Nominal equivalent yield at 30 June 2010 for Covent Garden was 5.19%, for GCP
5.37%.
5) Area shown is gross area of the portfolio, not adjusted for proportional
ownership.
2. Analysis of property by use
30 June 2011 Market value
Retail Office Exhibition Residential Total
GBPm GBPm GBPm GBPm GBPm
Covent Garden 645.2 104.3 - 30.5 780.0
Earls Court &
Olympia - 102.5 385.3 - 487.8
The Great Capital
Partnership 60.9 145.5 - 33.7 240.1
706.1 352.3 385.3 64.2 1,507.9
30 June 2011 ERV
Retail Office Exhibition Residential Total
GBPm GBPm GBPm GBPm GBPm
Covent Garden 35.6 8.0 - 1.0 44.6
Earls Court &
Olympia - 5.9 - - 5.9
The Great Capital
Partnership 3.6 10.2 - 0.5 14.3
39.2 24.1 - 1.5 64.8
3. Analysis of capital return in the period
Like-for-like properties
Market value
30 June 31 December
2011 2010
GBPm GBPm
Covent Garden 670.1 621.7
Earls Court & Olympia 486.6 480.8
The Great Capital Partnership 240.1 225.3
Total like-for-like properties 1,396.8 1,327.8
Acquisitions 111.1 -
Disposals - 52.6
Total investment properties 1,507.9 1,380.4
All properties
Covent Garden 780.0 639.8
Earls Court & Olympia 487.8 480.8
The Great Capital Partnership 240.1 259.8
Total investment properties 1,507.9 1,380.4
Revaluation surplus/(deficit)(1)
30 June
2011 Increase/
GBPm (decrease)
Covent Garden 37.4 6.0%
Earls Court & Olympia (12.2) (2.4)%(2)
The Great Capital Partnership 14.1 6.1%
Total like-for-like properties 39.3 2.9%
Acquisitions 0.2 -
Disposals - -
Total investment properties 39.5 2.7%
All properties
Covent Garden 37.7 5.2%
Earls Court & Olympia (12.3) (2.5)%
The Great Capital Partnership 14.1 6.1%
Total investment properties 39.5 2.7%
1) Revaluation surplus/(deficit) includes amortisation of lease incentives and
fixed head leases.
2) Revaluation decrease comprises Earls Court & Olympia (down 3.1%) and the
Empress State Building (no movement).
4. Analysis of income in the period
Like-for-like properties
30 June 30 June
2011 2010 Change
GBPm GBPm %
Covent Garden 12.6 12.3 2.3%
Earls Court & Olympia 17.3 17.9 (3.3)%
The Great Capital Partnership 5.3 5.7 (6.7)%
Like-for-like properties 35.2 35.9 (1.9)%
Acquisitions 0.3 -
Disposals 1.1 2.4
Like-for-like capital 0.1 -
Total investment properties 36.7 38.3 (4.1)%
All properties
Covent Garden 13.1 12.9 1.5%
Earls Court & Olympia 17.4 17.9 (2.6)%
The Great Capital Partnership 6.2 6.8 (9.4)%
Other - 0.7
Total investment properties 36.7 38.3 (4.1)%
APPENDIX 2
UNDERLYING PROFIT 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
GBPm GBPm GBPm
Net rental income 36.7 38.3 69.0
Other income - - 0.1
36.7 38.3 69.1
Administration expenses (11.0) (7.7) (18.6)
Operating profit 25.7 30.6 50.5
Finance costs (18.5) (20.7) (40.3)
Finance income 0.8 0.6 1.4
Net finance costs (17.7) (20.1) (38.9)
Write down of trading properties - - (0.1)
Profit before tax 8.0 10.5 11.5
Tax on adjusted profit (1.8) (0.4) (2.3)
Underlying earnings used for
calculation of
underlying earnings per share 6.2 10.1 9.2
Underlying earnings per share (pence) 1.0 1.6 1.5
APPENDIX 3
FINANCIAL COVENANTS (unaudited)
Financial covenants on non-recourse debt excluding joint ventures
Loan
outstanding at
31 July 2011 (1) LTV
Maturity GBPm covenant
EC&O (5) 2013 106.8 N/A
Covent Garden London (6) 2013 222.5 75%
Covent Garden London (7) 2017 112.0 70%
Total 441.3
Loan to
30 June Interest Interest
2011 cover cover
Market value (2) covenant reported (3)
EC&O (5) N/A 150% 212%
Covent Garden London (6) 51% 120% 156%
Covent Garden London (7) 48% 120% 158%
Total
Financial covenants on joint ventures non-recourse debt
Loan
outstanding at
31 July 2011 (1) LTV
Maturity GBPm covenant
Empress State Partnership (8) 2013 75.3 (4) 75% (6)
The Great Capital Partnership (9) 2013 112.5 70%
Total 187.8 (4)
Loan to
30 June Interest Interest
2011 cover cover
Market value (2) covenant reported
Empress State Partnership (8) 73% 115% 141%
The Great Capital Partnership (9) 50% 120% 151%
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
accounting/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 the 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) Loan facility provided by Anglo Irish Bank Corporation PLC.
(6) Loan facility provided by a consortium of six banks with Lloyds TSB Bank PLC
acting as agent.
(7) Loan facility provided by NyKredit Realkredit A/s.
(8) Loan facility provided by a consortium of three banks with Eurohypo AG
acting as agent.
(9) Loan facility provided by a consortium of four banks with Eurohypo AG acting
as agent.
DIVIDENDS
INTERIM DIVIDEND
The Directors of Capital & Counties Properties PLC have proposed an interim
dividend of 0.5 pence per ordinary share (ISIN GB00B62G9D36) payable on 20
September 2011.
Dates
The following are the salient dates for the payment of the proposed dividend:
Thursday 11 August 2011 Sterling/Rand exchange rate struck
Friday 12 August 2011 Sterling/Rand exchange rate and dividend amount in
Rand announced
Monday 22 August 2011 Ordinary shares listed ex-dividend on the JSE,
Johannesburg
Wednesday 24 August 2011 Ordinary shares listed ex-dividend on the London
Stock Exchange
Friday 26 August 2011 Record date for interim dividend in London and
Johannesburg
Tuesday 20 September 2011 Dividend payment date for shareholders
South African shareholders should note that, in accordance with the requirements
of Strate, the last day to trade cum-dividend will be 19 August 2011 and that no
dematerialisation or rematerialisation of shares will be possible from Monday 22
August 2011 to Friday 26 August 2011 inclusive. No transfers between the UK and
South African registers may take place from Thursday 11 August 2011 to Sunday 28
August 2011 inclusive.
GLOSSARY
Capco
Capco represents Capital & Counties Properties PLC (also referred to as "the
Company") and all its subsidiary companies, together referred to as "the Group".
Capital Shopping Centres Group
Capital Shopping Centres Group represents Capital Shopping Centres Group PLC
(formerly Liberty International PLC) and all its subsidiary companies.
Diluted figures
Reported amounts adjusted to include the effects of potential shares issuable
under employee incentive arrangements.
ECOA
The Earls Court and West Kensington Opportunity Area.
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.
EPRA adjusted, diluted NAV
The net assets as at the end of the period including the excess of the fair
value of trading property over its cost and excluding the fair value of
financial instruments, deferred taxation on revaluations and diluting for the
effect of those shares potentially issuable under employee share schemes divided
by the diluted number of shares at period end.
EPRA adjusted, diluted NNNAV
EPRA adjusted, diluted NAV adjusted to reflect the fair value of derivatives and
to include deferred taxation on revaluations.
EPRA adjusted earnings per share
Profit for the period excluding gains or losses on the revaluation and sale of
investment and development property, write down on trading property, changes in
fair value of financial instruments and associated close-out costs and the
related taxation on these items divided by the weighted average number of shares
in issue during the period.
ERV (estimated rental value)
The external valuers` estimate of the Group`s share of the current annual market
rent of all lettable space net of any non-recoverable charges, before bad debt
provision and adjustments required by International Financial Reporting
Standards regarding tenant lease incentives.
Gross income
The Group`s share of passing rent plus sundry non-leased income.
Interest cover ratio (ICR)
Net rental income less administration costs divided by the net finance cost
excluding the change in fair value of derivatives and any exceptional finance
costs.
Interest rate swap
A derivative financial instrument enabling parties to exchange interest rate
obligations for a predetermined period. These are used by the Group to convert
floating rate debt to fixed rates.
Initial yield (EPRA)
Annualised net rent (after deduction of revenue costs such as head rent, running
void, service charge after shortfalls and empty rates) on investment properties
expressed as a percentage of the gross market value before deduction of
theoretical acquisition costs, consistent with EPRA`s net initial yield.
IPD
Investment Property Databank Ltd, producer of an independent benchmark of
property returns.
Liberty International
Liberty International represents Liberty International PLC (subsequently renamed
Capital Shopping Centres Group PLC) and all its subsidiary companies.
Like-for-like properties
Investment properties which have been owned throughout both periods without
significant capital expenditure in either period, so income 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 balance sheet date but not necessarily
throughout the prior period.
Loan-to-value (LTV)
LTV is the ratio of attributable debt to the market value of an investment
property.
Net rental income
The Group`s share of gross rental income less ground rents payable, service
charge expenses and other non-recoverable charges, having taken due account of
bad debt provisions and adjustments to comply with International Financial
Reporting Standards regarding tenant lease incentives.
GLOSSARY (continued)
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, and that the property becomes fully occupied and
that all rents revert to the current market level (ERV) at the next review date
or lease expiry.
Occupancy rate (EPRA)
The ERV of let and under offer units expressed as a percentage of the ERV of let
and under offer units plus ERV of un-let units, excluding units under
development.
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. Contracted annual rents in respect of tenants in
administration are excluded.
Section 34A of the Housing Act 1985
An amendment to the 1985 Housing Act to enable tenants to take control of the
management of their properties. The amendment establishes a procedure enabling
an organised group of tenants to require a local authority to transfer their
homes to a housing association or similar body registered with the Tenant
Services Authority (the social housing regulator). Tenants may form such a body
and seek the transfer of the property to that body. The legislation only applies
to social rented tenants of local authorities. It does not apply to tenants of
housing associations even where the ultimate owner may be a local authority.
Section 34A requires implementation by regulations yet to come into effect.
These regulations will be enacted by the Department of Communities and Local
Government.
No regulations have yet been made, although it is anticipated that draft
regulations will be issued in the form of a consultation document.
Tenant (or lease) incentives
Any incentives offered to occupiers to enter into a lease. Typically incentives
are in the form of an initial rent-free period and/or a cash contribution to
fit-
out the premises. Under International Financial Reporting Standards the value of
incentives granted to tenants is amortised through the income statement on a
straight-line basis over the lease term.
Underlying earnings
Profit for the period excluding impairment charges, net valuation gains/losses
(including profits/losses on disposals), net refinancing charges and swap
termination costs.
Weighted average unexpired lease
The unexpired lease term to lease expiry weighted by ERV for each lease.
Zone A
A means of analysing and comparing the rental value of retail space by dividing
it into zones parallel with the main frontage. The most. valuable zone, Zone A,
falls within a 6m depth of the shop Frontage. Each successive zone is valued at
half the rate of the zone in front of it. This blend is referred to as being
`ITZA` (`In Terms of Zone A`).
Sponsor: Merrill Lynch South Africa (Pty) Limited
Date: 03/08/2011 08:00:01 Produced by the JSE SENS Department.
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