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CSO - Capital Shopping Centres Group Plc - Capital Shopping Centres Group plc
audited results for the year ended 31 December 2011
CAPITAL SHOPPING CENTRES GROUP PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: CSO
Issuer Code: CSCSCG
Capital Shopping Centres Group PLC
23 February 2012
Capital Shopping Centres Group plc audited results for the year ended 31
December 2011
RESULTS DEMONSTRATE CSC`S CONSIDERABLE PROGRESS IN 2011
- Transformational acquisition of The Trafford Centre
- Growth in net rental income and earnings per share
- Strong key operational metrics
- Growing the pipeline of projects
David Fischel, Chief Executive of Capital Shopping Centres Group PLC,
commented
"The results demonstrate CSC`s considerable progress in 2011. The
transformational Trafford Centre acquisition has driven our strong performance
and has exceeded our expectations. While the UK economic environment is
challenging, CSC is well positioned for growth with assets of uniquely high
quality, a considerable capital base, a committed management team and a
pipeline of future projects."
Enquiries:
Capital Shopping Centres Group PLC
David Fischel Chief Executive +44 (0)20 7960 1207
Matthew Roberts Finance Director +44 (0)20 7960 1353
Kate Bowyer Investor Relations Manager +44 (0)20 7960 1250
Public relations
UK: Michael Sandler/Wendy Baker,
Hudson Sandler +44 (0)20 7796 4133
SA: Morne Reinders, College Hill +27 (0)11 447 3030
A presentation to analysts and investors will take place at UBS, 1 Finsbury
Avenue, London EC2 at 09.30GMT on 23 February 2012. The presentation will also
be available to international analysts and investors through a live audio call
and webcast.
The presentation will be available on the Group`s website www.capital-shopping-
centres.co.uk.
A copy of this announcement is available for download from our website
www.capital-shopping-centres.co.uk.
Contents:
Highlights
Chairman`s Statement
Operating Review
Financial Review
Top properties
Directors` Responsibility Statement
Financial Information
Investment and Development Property
Other Information
Glossary
Dividends
NOTES TO EDITORS
Capital Shopping Centres is the leading specialist UK regional shopping centre
REIT
We own and operate 14 of the very best shopping centres, in the strongest
locations right across the country - that`s more than any other operator.
With over 16 million sq ft of retail space and a valuation of GBP7 billion,
our shopping centres attract 320 million customer visits a year. Every single
one of the UK`s top 20 retailers are in our shopping centres, alongside some
of the world`s most iconic global brands.
Our five major out-of-town centres and nine in-town destinations include ten
of the UK`s top 25 shopping centres. Our out-of-town centres include The
Trafford Centre, Lakeside, Metrocentre, Braehead, and The Mall at Cribbs
Causeway, and our in-town prime destinations include Cardiff, Manchester,
Newcastle, Norwich, Nottingham, Bromley, Uxbridge, Watford and Stoke-on-Trent.
This means that two thirds of the UK`s population are within a 45 minute drive
from one of our centres.
In November 2011, we acquired Broadmarsh shopping centre in Nottingham
bringing our portfolio to 15 centres.
We are a responsible and environmentally conscious participant in the
communities where we invest.
For further information see www.capital-shopping-centres.co.uk
This press release contains "forward-looking statements" regarding the belief
or current expectations of Capital Shopping Centres Group PLC, its Directors
and other members of its senior management about Capital Shopping Centres
Group PLC`s businesses, financial performance and results of operations. These
forward-looking statements are not guarantees of future performance. Rather,
they are based on current views and assumptions and involve known and unknown
risks, uncertainties and other factors, many of which are outside the control
of Capital Shopping Centres Group PLC and are difficult to predict, that may
cause actual results, performance or developments to differ materially from
any future results, performance or developments expressed or implied by the
forward-looking statements. These forward-looking statements speak only as at
the date of this press release. Except as required by applicable law, Capital
Shopping Centres Group PLC makes no representation or warranty in relation to
them and expressly disclaims any obligation to update or revise any forward-
looking statements contained herein to reflect any change in Capital Shopping
Centres Group PLC`s expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
Any information contained in this press release on the price at which shares
or other securities in Capital Shopping Centres Group PLC have been bought or
sold in the past, or on the yield on such shares or other securities, should
not be relied upon as a guide to future performance.
2011 HIGHLIGHTS
Operational highlights
Transformational acquisition of The Trafford Centre
- High quality income stream
- Valuation increased by GBP50 million to GBP1,700 million
- Integration and management changes
Strong key operational metrics
- Like-for-like net rental income has grown 3.6 per cent
- Occupancy remains strong at 97 per cent
- 198 new long-term lettings have added GBP9 million additional annual rent
for the Group
- Footfall is up a further 2 per cent following two years of growth. After a
flat autumn, December was up 7 per cent on 2010
- Positive impact on earnings and valuations with underlying earnings per
share up 7 per cent to 16.5 pence and property values stable
Growing the pipeline of projects
- Asset management initiatives underway, notably at Lakeside and Metrocentre
- Acquisition of Broadmarsh, Nottingham
- Planned capital expenditure of around GBP120 million, covering most centres,
plus progress on potential major extensions at Lakeside and Nottingham
- Acquisitions of land with potential for future development
Robust financial position
- New GBP375 million revolving credit facility evidence of access to funding
- Wholly owned assets, mostly freehold, make up 75 per cent of investment
properties by value
Financial highlights (1)
Twelve months ended 31 December
2011 (2) 2010 Change
Net rental income from
continuing operations GBP364m GBP277m up 31%
Underlying earnings GBP139m GBP97m up 43%
Property revaluation surplus GBP63m GBP501m n/a
Profit for the year GBP34m GBP529m n/a
Basic EPS continuing operations 2.9p 68.3p n/a
Underlying EPS 16.5p 15.4p up 7%
Dividend per share (including
proposed 10p final dividend) 15.0p 15.0p unchanged
31 December 31 December
2011 2010 Change
Market value of investment properties GBP6,960m GBP5,099m up 36%
Net external debt GBP3,374m GBP2,437m up 38%
Equity attributable to shareholders GBP2,922m GBP2,273m up 29%
NAV per share (diluted, adjusted) 391p 390p up 1p
Debt to assets ratio 48% 48% unchanged
(1) Please refer to glossary for definition of terms
(2) 31 December 2011 income data includes Trafford Centre results for the 11
months since acquisition
CHAIRMAN`S STATEMENT
Introduction
Capital Shopping Centres Group PLC is well placed to deal with the challenges
and opportunities arising from the current weak economic climate in the UK
which is further hampered by wider uncertainties.
Adverse conditions do not last forever and represent precisely the time when
those who can, should be laying the foundations for future growth - and we are
among them.
CSC has assets of uniquely high quality overall, a considerable capital base
and a committed and resilient management team. We aim to use the creative
energy of the organisation to improve CSC`s competitive position in the
shopping centre industry over the next few years.
Strengths of CSC
Let me enlarge on these strengths of CSC.
We have in 2011 been building a pipeline of active management projects and
growth options, detailed in the Operating Review which follows. This includes
planning applications and acquisitions, such as the Broadmarsh Centre,
Nottingham, a transaction which should unlock the opportunity for CSC to
upgrade the retail offer of Nottingham city centre after a long period of
stalemate.
We have benefitted from the transformational acquisition of The Trafford
Centre at the beginning of 2011, not only because of the high quality income
stream but also from the successful integration into CSC of its management and
ideas.
By any measure, we are robust operationally, with 97 per cent occupancy and
three consecutive years of overall footfall increases at our centres. 75
percent of our investment properties are wholly-owned and mostly freehold,
underpinning our GBP3.5 billion of shareholders` funds*, with our top quality
properties providing a two-fold assurance. First, the leading retailers want
to occupy, and shoppers to visit them; secondly, as a result, the performance
of the assets comes under less pressure in adverse conditions.
The successful completion in late 2011 of a new GBP375 million revolving
credit facility with five banks is testimony to the solidity of our financial
position and capacity for growth. So is the evident attractiveness of CSC as a
potential partner for long-term investors looking to participate in individual
assets. While banks may be withdrawing for regulatory reasons from UK property
lending, we see an encouraging range of other providers of debt and equity
stepping forward to take their place for quality assets.
All of this means that we are confident about the company`s ability to manage
the key operational risks confronting CSC, as addressed in the Operating
Review, of tenant failure and lease expiries. We are positioning the business
to emerge powerfully from the next two years during which the UK and Eurozone
economies may be expected to be at best subdued.
* - adjusted, diluted
Results for the year
We are pleased to have recorded in 2011 a creditable 3.6 percent increase in
like-for-like net rental income and a 7 percent increase in underlying
earnings per share. While capital values have been in effect stable, the
Trafford Centre acquisition and related capital raising have substantially
strengthened the Group`s balance sheet, and interest cover has notably
improved in the year.
People
Everywhere, people are of the utmost importance to CSC: the customers who
visit our shopping centres, our tenants, the retailers, and their staff, the
teams who run the centres and CSC`s head office employees.
We provide an uplifting experience for those who visit our centres and for
those who work in the Group a stimulating context for all they do.
I want to thank all our employees for the contribution they have made to the
attractiveness of our centres and the success of our activities. Our thanks
are also due to our executive team who have engineered the smooth absorption
of The Trafford Centre into our operations and, in particular, we welcome Mike
Butterworth as Chief Operating Officer.
I am also grateful to all my fellow Directors whose contributions to our
strategy and approach have been very valuable.
We have greatly appreciated the important contribution across our entire
business with stimulating ideas for many of our centres from John Whittaker in
the role of Deputy Chairman since January last year.
In September, we were delighted to welcome Lady Patten to the Board as a Non-
Executive Director and a member of the Remuneration Committee.
Kay Chaldecott stood down as an Executive Director of CSC, on 30 September
2011, after 27 years with the Group. Kay played an instrumental part in the
development and success of the Group`s shopping centre business. I would like
to thank Kay very warmly on behalf of us all for her years of dedication and
role as a member of the executive team.
I also want to express particular thanks to Ian Henderson who is standing down
from the Board, at our forthcoming Annual General Meeting, after seven years
as a Non-Executive Director including a period as Chairman of the Remuneration
Committee. Ian also played an important role in the demerger from CSC of
Capital & Counties, taking on the role of Deputy Chairman of that business in
May 2010.
Over the next two years, it is our intention to comply with Lord Davies`
recommendations as to the composition of Boards.
Remuneration
CSC has always been a cost conscious organisation in all facets of its
activities. In the case of executives, the Remuneration Committee aims for a
balance with base salary set below median and a greater emphasis on
performance related pay, commensurate with CSC`s business objectives and risk
profile, to provide an appropriately positioned overall level of remuneration.
Economic contribution and corporate responsibility
We have in 2011 commissioned a third party exercise to assess the economic
contribution of CSC`s regional shopping centres. For example, we now estimate
some 80,000 people are directly employed in our shopping centres with around a
further 25,000 indirect jobs also supported in the local economies.
Corporate responsibility is woven into the fabric of our business. We are
active in all the communities in which we are located and address with them
many local concerns, particularly focussing on youth, education and health
issues.
These local engagements extend to a national level in terms of our efforts to
meet a number of environmental targets - efforts that have been recognised in
a number of important national awards. Over the last five years, we have
reduced our energy use on a like-for-like basis by a significant 18 per cent
while we have increased recycling as a percentage of all waste from 33 per
cent to an impressive 75 per cent.
Dividends
The Directors are recommending a final dividend of 10.0 pence per share
bringing the amount paid and payable in respect of 2011 to 15.0 pence, the
same as 2010 and covered by the underlying earnings per share for 2011 of 16.5
pence. 2.5 pence of the final dividend (2010 - 5.0 pence) will be paid as a
Property Income Distribution (PID), subject to withholding tax as appropriate.
As previously highlighted, the rules governing UK REITs were recently amended
and scrip dividends are now eligible to be classified as a PID. To give the
company the additional flexibility this would provide, a resolution will be
proposed to shareholders at the forthcoming AGM in April 2012 to establish a
scrip dividend scheme. If approved by the AGM, and dependent on the stock
market conditions at the time, the Board could choose to offer a scrip
alternative for an individual dividend, including for the 2011 final dividend.
In particular, the level of the share price relative to the net asset value
per share would be taken into consideration.
Prospects
CSC has made very considerable progress in 2011, the first full year since the
demerger of Capital & Counties in May 2010, and we are well placed to continue
to develop the overall business.
As the retail market evolves, the scarcity value of CSC`s high quality assets
is increasing, together with the value of CSC`s operating skills. Our large
scale in the industry continues to be a benefit as we strengthen our key
relationships with retailers and improve our operating performance.
CSC is a single minded organisation, focused on one industry, in which a long-
term approach is crucial to be a successful participant. Our challenge for
2012 and beyond is to continue to optimise the performance of existing assets
while seizing opportunities to enhance returns further by creating new income
streams whether organically or by acquisition.
Patrick Burgess
Chairman
23 February 2012
OPERATING REVIEW
Introduction
CSC`s focus is on providing compelling retail and leisure destinations for
shoppers, with broad national coverage including 10 of the UK`s top 25
shopping centres.
Two thirds of the UK`s population live within a 45 minute drive of a CSC
shopping centre.
This scale and specialist approach gives CSC strong relationships with
retailers, providing opportunities for both CSC and the retailers` businesses
to develop.
CSC`s objective is to create long-term and sustainable income growth to drive
capital appreciation and hence attractive shareholder returns.
We made significant progress on the three key objectives for 2011, namely:
- continued enhancement of our centres
- growth in like-for-like net rental income
- integration of the Trafford Centre team and operations
We start 2012 with robust operating indicators.
Value creation through continued enhancement of CSC`s destinations
CSC aims to provide great retail and leisure experiences so that shoppers
prefer to spend their time at one of our centres than on one of the many other
activities competing for their attention.
By providing entertainment, a sense of theatre and catering outlets, as well
as the full range of major brands, our centres have recorded some 320 million
customer visits in 2011, almost a million a day.
Combined with the efficient delivery of facilities and operational services to
retailers, CSC aims to create an environment in which the retailers` brands
can flourish. This drives rental levels over the long term and reduces the
risk associated with tenant failures and lease expiries.
Four main aspects are central to CSC`s business proposition:
- Tenant mix
Retailers are highly aware of how their brand performs relative to competitors
and complementary offers. The right neighbouring stores guarantee a flow of
potential customers and cut down risk when investing in a new location. CSC
has been successful in attracting the brands customers most want to see - for
example 6 centres now have both Apple and Hollister. 33 new brands have been
introduced to CSC centres during 2011 and 14 new names brought to Wales at St.
Davids, Cardiff.
- Top quality centres
As several retailers have publicly commented, not all stores contribute
equally to their business. In focusing their investment on the stronger
centres that attract the highest footfall, retailers get the most cost
effective and reliable access to potential customers. CSC`s footfall has
continued rising over the last 3 years by contrast to UK retail footfall
statistics published by Experian which have shown falls.
- Minimal new supply
With minimal new supply of retail space at UK regional shopping centres,
retailers requiring larger spaces for flagship stores in the best locations
are driving rental levels forward. Recent lettings of larger space at The
Trafford Centre have created new higher levels of evidence for certain 2013
rent reviews. The competitive challenge for established shopping centres is to
reinforce the superiority of their tenant mix, experience and service over
other formats available to retailers and shoppers such as the traditional high
street, retail parks, outlet centres, superstores and online shopping.
- New initiatives
Retail is a dynamic sector, with shoppers and retailers attracted to locations
where something fresh is happening. A continuing trend in 2011 has been
improved catering, with a 25 per cent increase in CSC`s passing rent from
catering operators and almost 400 catering outlets now among CSC`s 2,500
units. Other projects are outlined below in Plans for major centres.
Capital expenditure and active management
In positioning CSC for the future, 4 planning consents have been obtained
during 2011 and a further 4 have been submitted and are awaiting
determination.
Capital expenditure of GBP77 million is committed or accrued and there are a
variety of active management projects totalling around GBP120 million over the
next three years. In aggregate we anticipate creating a stabilised initial
yield on cost of around 10 per cent on these projects.
We have also acquired assets where they increase our strategic flexibility:
- In November we bought Broadmarsh, the second shopping centre in Nottingham,
for GBP73 million
- In two transactions since the year end which arose from our closer
relationship with the Peel Group, we purchased for GBP4.7 million a 31 acre
site adjacent to Braehead and obtained for 2.5 million an option over an
approximately 60 acre site in Southern Spain with planning consent for a major
regional shopping centre
Net rental income
Net rental income (NRI) of GBP364 million is 31 per cent above that of 2010
including eleven months of The Trafford Centre. On a like-for-like basis, it
has grown by 3.6 per cent for the year, with the majority of the relative
increase being recorded in the first half (up 6.1 per cent like-for-like) as
the effect of leases signed in 2010 flowed through.
Growth in like-for-like net rental income
(GRAPHIC REMOVED - PLEASE SEE PAGE 7 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
Individual centres showing strong recovery include Lakeside, up 5 per cent,
and Chapelfield, Norwich, up 10 per cent, due to improved occupancy levels and
tenant mix. The extension to St David`s, now 95 per cent committed,
contributed an extra GBP4 million. Conversely, flexible deals in preparation
for the planned extension at Victoria Centre, Nottingham, brought its NRI down
by 9 per cent.
Year ended Year ended
31 December 31 December
2011 2010
GBPm GBPm
Gross rental income 432 350
Head rent payable (26) (24)
406 326
Net service charge expense and void rates (9) (10)
Bad debt and lease incentive write-offs (6) (5)
Property operating expense (27) (34)
Net rental income 364 277
The Group`s net rental income margin increased significantly in the year as
operating costs reduced while income grew following the Trafford Centre
acquisition and leasing activity at the existing centres.
Property operating expense in 2011 includes GBP10 million of direct costs in
respect of the Group`s car park operations and a GBP7 million contribution
towards shopping centre marketing.
Occupancy
Occupancy remains high at 96.7 per cent (31 December 2010 - 97.7 per cent).
The bulk of the decrease can be attributed to tenants representing around 1
per cent of rent entering administration in the fourth quarter, compared to
none in the same period of 2010.
This brought the total of tenant failures for 2011 to 3 per cent of rent. The
first few weeks of 2012 have seen failures amounting to a further 2 per cent
of rent, the majority of which are still trading.
Lettings
Notwithstanding the deterioration in the UK macro environment in the second
half of 2011, steady progress has been made in securing new lettings. 198 long-
term lettings have been completed in the year increasing the annual rent for
those units by GBP11 million to GBP35 million in aggregate. Excluding
partners` interests, CSC`s share increased by GBP9 million to GBP29 million.
Lettings and ERV
The new rent on long-term lettings made during the year represented on average
96 per cent of ERV for those units, with upside potential beyond the base rent
from turnover leases in the majority of CSC`s lettings.
New rent on leases signed in the fourth quarter represented 98 per cent of
ERV.
Leases may be agreed below ERV for tenant mix enhancement, to retain
flexibility for a planned asset management initiative or for stabilisation of
a particular area of a centre. For example the fourth quarter included three
lettings at Victoria Centre, Nottingham, designed to build flexibility in the
run up to the proposed extension.
In all cases, the overall objective is long-term sustainable growth in net
rental income.
This has been demonstrated by the asset management approach at Chapelfield,
Norwich. Having been open for just three years before the downturn, the centre
had 18 tenant failures out of 94 units during 2008 and 2009 including CSC`s
only large format Borders store. A number of short-term leases were entered
into for immediate stabilisation, particularly of areas which had yet to
establish themselves within the new centre. With the objective of establishing
Chapelfield as the new prime pitch of Norwich, in 2010 and 2011 a number of
major brands were attracted to the centre at rental levels below ERV to
establish the best retail and catering mix. This created the ideal environment
to attract shoppers and other retailers, such that 2011 net rental income is
up 10 per cent, passing rent up 5 per cent, footfall up 13 per cent, retailer
sales up 9 per cent and the centre is 99 per cent let.
ERVs are adjusted at each valuation date to take account of market conditions;
see Investment property valuations.
At 31 December 2011 CSC had 132 short-term leases in place which represented 1
per cent of passing rent, 2 per cent of space and 4 per cent of ERV (2010 - 2
per cent, 4 per cent and 7 per cent respectively, excluding the Trafford
Centre).
Footfall
The number of customer visits to CSC centres increased by 2 per cent in 2011.
The second quarter of the year showed the highest increase relative to the
same period of 2010, followed by a flat autumn but a good run in to Christmas.
Chapelfield, Norwich, up 13 per cent, and Manchester Arndale, up 7 per cent,
have been consistently strong all year, as have Eldon Square, Newcastle, and
St David`s, Cardiff, up 6 and 5 per cent respectively in their second years
after significant extensions. Lakeside finished the year up 3 per cent, with a
2 per cent increase recorded in the fourth quarter. Some of the smaller
centres recorded small negative figures in the difficult environment including
The Potteries, Stoke-on-Trent, situated in a region whose economy has suffered
more than most.
Retailer sales
Retailer sales in CSC centres increased by an estimated 2 per cent in total,
out-performing the national trend. The benchmark BRC non-food like-for-like
index has indicated declines for the last five quarters.
The estimated occupancy cost ratio (rent to retailer turnover) for the group
including The Trafford Centre and St David`s, Cardiff, is 13.2 per cent
excluding anchor stores, compared to 13.7 per cent at 30 June 2011, continuing
the recent slight downward trend as sales continue to progress ahead of rental
increases.
Lease expiry profile
CSC`s average lease maturity has increased slightly to 7.5 years (31 December
2010 pro forma - 7.3 years), largely due to the progress made on the
significant level of expiries due in 2011 and 2012 at Metrocentre. Around two
thirds of these have now been settled or are in solicitors` hands.
The chart below sets out the forthcoming expiry profile. There is a
concentration of expiries in 2013 at The Trafford Centre, Cribbs Causeway and
The Potteries, Stoke-on-Trent. Our teams are pro-actively working with
existing and new retailers to create a tenant mix which generates higher
turnover for them and the rent levels that we want to achieve.
Lease expiry profile based on passing rent
(GRAPHIC REMOVED - PLEASE SEE PAGE 8 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND
AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK)
Plans for major centres
Trafford Centre (market value GBP1,700 million, planned expenditure GBP32
million): With significant enhancements to tenant mix in 2011 including the
first Banana Republic store in the north of England and extended anchor stores
for M&S and Debenhams, future development is focused on Barton Square. A
planning application to enclose the courtyard has been approved and other
tenant mix improvements are expected to follow.
Lakeside (market value GBP1,081 million, planned expenditure GBP17 million,
plus potential extension GBP180 million): Successful new openings in the
autumn include the 25,000 sq. ft. new concept Topshop/Topman flagship store to
be followed in late 2012 by Forever 21`s fourth UK store. A planning
application was submitted in December for a 325,000 sq. ft. extension
including a new department store, 30 to 40 new shops and restaurants and a new
transport hub. Discussions are progressing with major retailers.
Metrocentre (market value GBP864 million, planned expenditure GBP12 million):
A 15,000 sq. ft. terrace of restaurants, "MetrOasis", is now pre-let to 3
catering operators with the final unit in solicitors hands. Construction
started last month and the development is expected to open in the autumn. This
will further strengthen the ambience of the retail park and improve the
connections between the main centre and the retail park.
Braehead (market value GBP583 million, planned expenditure GBP12 million):
With Apple and Hollister plus a new restaurant cluster open and trading well,
plans have been drawn up to improve impact and sight lines on the upper mall
by increasing the height of shop fronts and moving escalators. We continue to
work with the local authority on a master plan for the mix of uses in the
broader Braehead area and, as part of these plans, have acquired an adjacent
31 acre site, currently a working dock, with future development potential.
Nottingham (Victoria Centre market value GBP333 million, Broadmarsh market
value GBP65 million): Nottingham ranks sixth in the UK in terms of available
comparison shopping expenditure but has suffered relative to other cities from
a lack of modernisation of its shopping centre provision. Following the
acquisition of Broadmarsh in the last quarter of 2011, we are optimistic about
the city`s potential assuming a pragmatic approach by the local authority. We
aim to bring forward proposals for complementary development to upgrade both
centres and the city centre overall.
Newcastle (Eldon Square market value GBP256 million, planned expenditure GBP16
million): Following the three stage redevelopment from 2005 to 2010
culminating in the highly successful St Andrew`s Way Mall extension, we intend
along with our local authority partner to reconfigure some of the less modern
areas with potential for rent enhancement.
Stoke-on-Trent (The Potteries market value GBP184 million, planned expenditure
GBP14 million): A planning application for a 58,000 sq. ft. leisure and
catering development has been approved. The leisure space is under offer to a
cinema operator, with good indications of demand for the 6 restaurants.
Construction is expected to start within the next 12 months for an opening in
2014.
Bromley (The Glades market value GBP174 million, planned expenditure GBP6
million): We are in the process of obtaining planning consent for a terrace of
5 restaurants overlooking the adjacent gardens. We received 10 offers from
catering operators for the 5 units and have comfortably exceeded the target
rent for the project.
International
CSC holds 4.1 million shares directly in Equity One, a US retail REIT, and
11.4 million redeemable joint venture units convertible on a one-for-one basis
into shares, as a result of the restructuring of our previous investment in
Californian property which was completed in January 2011. This provides an
effective 12 per cent interest in Equity One valued at GBP168 million based on
the 31 December share price of $16.98. Its annualised dividend is $0.88 per
share.
Equity One owns, develops and manages US neighbourhood shopping centres
anchored by supermarket chains. It has had an active and constructive year
with sales of non-core assets exceeding $700 million, including a $473 million
portfolio of 36 centres sold in a single transaction, and has been recycling
capital into high quality urban retail assets mainly in New York state and
California.
CSC`s interests in India comprise a 25 per cent interest in the shopping
centre developer, Prozone, and 11.4 million shares (9.9 per cent) in the
listed Indian retailer, Provogue, our joint venture partner in Prozone.
Provogue has announced terms for the demerger of Prozone as a separately
listed real estate company in 2012 which will result in approximately a 32 per
cent interest for CSC.
The economic and political uncertainties in India in 2011 led to both its
currency and stock market producing some of the worst falls in global markets
and the share price of Provogue, in common with many small market-
capitalisation stocks, showed a material decline in the year. Improved
sentiment as the rising interest rate cycle is considered to have peaked,
helped by the relaxation of rules relating to foreign investment in Indian
retailers and listed shares, has led to a significant rise in the stock market
and Provogue`s share price since the year end.
Prozone`s first shopping centre, Aurangabad, has recorded its first full year
of operations since opening in October 2010 with encouraging levels of trade
at the hypermarket, other anchor stores and catering outlets.
In 2012, work is expected to commence on three mixed-use projects in Indore,
Coimbatore and Nagpur, to be funded locally.
Prospects and priorities
Our base case assumption is that the UK economy will continue to experience
low growth for some time, with continuing risk of tenant failures and closures
on expiry of leases.
Our specialist skills and relationships enable us to manage those risks while
identifying and developing those shopping centres which have the most
potential to produce attractive returns over the medium to long term.
We consider that CSC is well positioned to create value as the market
recovers.
Our strategic priorities for 2012 are:
- to optimise the performance of our existing assets, prioritising medium-term
value creation
- to identify further initiatives and create the financing flexibility to
advance CSC`s business and deliver incremental returns
INVESTMENT PROPERTY VALUATIONS
Retail property investment market overview
As income yields appeared attractive relative to risk free investment returns,
the UK property market has in 2011 seen good demand for prime assets and
vendors reluctant to sell other than at robust levels. As a result, yields for
prime assets such as CSC`s have remained stable to slightly tightening.
By comparison secondary retail property, a category in which none of CSC`s
regional shopping centres would be classified, has had more variable pricing.
Yields have increased during 2011 as purchasers allowed for their expectation
of falling rents (see Market review), as the pool of potential lenders reduced
by well publicised withdrawals from UK real estate lending and with the
unresolved overhang of defaulted property in the hands of lenders.
Yield by retail asset class (source: DTZ)
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CSC`s property valuation performance
Full year First half Second half
2011* 2011 2011*
CSC like-for-like revaluation surplus 1.0% 1.2% -
IPD** capital growth 0.6% 1.1% -0.5%
CSC equivalent yield compression -14bp -11bp -8bp
IPD** equivalent yield compression -15bp -11bp -4bp
CSC change in ERV -2.2% -0.1% -2.2%
IPD** change in rental value index -0.9% -0.2% -0.6%
* The Trafford Centre is treated as like-for-like for the second half and for
the full year (compares to 31 December 2010 pro forma data)
** IPD monthly index, retail
Market values of CSC`s investment properties rose by an average of 1.2 per
cent in the first half of 2011 and were steady in the second half, compared to
IPD increasing 1.1 per cent and then falling 0.5 per cent.
Yields
CSC`s performance results from a slight tightening of equivalent yields, 11
basis points in the first half and 8 basis points in the second half, and
increases in passing rent partly offset by net reductions in ERV.
Comparison of CSC yield and 10 year gilt yield
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At 5.98 per cent, CSC`s weighted average nominal equivalent yield has
recovered 139 basis points from 7.37 per cent at the point where the market
troughed in June 2009 and remains 121 basis points above its level of 4.77 per
cent at the peak of the market in June 2007.
Further, with continuing reductions in the yields available from investment
grade bonds, the spread of CSC`s nominal equivalent yield over the medium-term
gilt yield represents a historic high of 400 basis points as illustrated by
the graph above, demonstrating the attractiveness of the income proposition.
ERV
ERVs are regularly adjusted to reflect the impact of transactions and changing
circumstances. The largest component of the ERV in the valuation calculation
is the passing rent, with any step up to estimated market rent being
discounted to match the timing of the relevant lease event.
CSC`s like-for-like ERV fell 2 per cent in the year, largely in the second
half, bringing the total reduction from its peak to 8 per cent. The aggregated
change in 2011 reflects the impact of variable performance between centres and
between areas within individual centres as commented on below.
Prime pitches tend to hold their own on the downside and lead the way in
demonstrating growth in the recovery. Weaker areas of centres are inevitably
more susceptible to tenant failures and are more difficult to relet. There is
greater churn, more availability and therefore more downward pressure on the
rents achievable, the risk of which tends to be reflected in a higher yield
until leasing evidence supports a new ERV level.
The interaction of yield and other valuation factors can be seen in second
half valuation changes at some of the centres:
- Lakeside`s value increased by GBP10 million. The improved equivalent yield,
down 6 basis points to 5.63 per cent, has more than offset a marginal
reduction in ERV in secondary malls. Lettings in prime areas above the tone of
GBP339 ITZA has not yet been reflected in adjacent unit ERV.
- Metrocentre`s value reduced by GBP10 million. Total ERV has reduced by 5 per
cent. However, expectation of some disruption from the expiry profile had been
factored into the previous yield. Thus the ERV reduction is largely offset in
the valuation by a 12 basis points improvement in the equivalent yield
reflecting the reduced uncertainty following the progress made on lease
expiries.
- The value of The Harlequin, Watford, reduced by GBP26 million, largely due
to a 12 per cent reduction in prime headline Zone A rent to GBP250 ITZA
reflecting recent lettings.
- The value of Manchester Arndale increased by GBP22 million. Following
consistent lettings well above previous tone and a strengthening tenant mix,
aggregate ERV has increased 1 per cent. Further, the equivalent yield improved
by 23 basis points to 5.74 per cent.
- The value of The Potteries, Stoke-on-Trent reduced by GBP14 million. Its
equivalent yield has increased 25 basis points to 7.50 per cent to reflect the
risks associated with a third of the rent roll due to expire in 2013.
Also aggregate ERV has reduced by 3 per cent reflecting recent lettings.
- The Trafford Centre`s value increased by GBP50 million, as improved tenant
mix, including new flagship store openings, has reinforced its position as a
top prime centre. As such, the equivalent yield has contracted 10 basis points
to 5.52 per cent.
As illustrated by the chart below, there is significant increment between the
"topped up" net rent and the valuers` assessment of the ERV. The impact on the
valuation of the uplift is discounted for the time to the reversionary lease
event and is subject to assumptions regarding the level of running voids, any
re-letting period and the valuer`s expectation of incentives.
Aggregated estimated rental value (ERV)
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MARKET REVIEW
UK macro and consumer backdrop
In June 2009 the UK economy started to recover from the "credit crunch"
recessionary period but GDP dipped again in the last quarter of 2010. 2011
proved more difficult than generally anticipated with only 0.8 per cent GDP
growth overall. For CSC, this is most noticeable in the level of tenant
failures, at a very low level in 2010 but increased to 3 per cent of passing
rent in 2011. We expect UK economic output to grow only slowly for some time.
The appetite of both businesses and households to make investment and
borrowing decisions is being affected by the current constrained lending
markets and uncertainty relating to the euro-zone. Focus is firmly on downside
risks.
Consumer confidence remains at an extremely low level, below the previous
trough in winter 2008/9 according to the Nationwide benchmark metric.
Inflationary pressure on household costs, particularly from the fuel price
increases in 2011, whilst apparently starting to ease, is still well in excess
of wage increases. Combined with higher unemployment, this has brought the UK
average household disposable income down 7 per cent in the year to December
2011 according to the Asda benchmark index.
The UK retail environment
Faced with this spending squeeze, consumer habits have been changing. CSC`s
consumer feedback including from focus groups is stressing value for money and
convenience, including access to all their favourite brands.
National spending patterns have been shifting, notably with a higher
proportion of sales conducted online (from 8.6 per cent of all retail trade in
2008 to 12 per cent in 2011) and in the larger destinations both in cities and
out of town. With shoppers becoming more demanding in looking for their
preferred combination of product, experience and service, top shopping centres
such as CSC`s with a compelling mix of retail brands, catering and leisure
have shown increasing footfall and retailer sales in contrast to the UK
overall data which shows reductions.
The challenge to retailers has been to keep their business moving forward
while facing reduced disposable income and changing consumer patterns in the
face of supply chain inflation and, in some cases, limited access to capital.
Not all retailers have succeeded. Failures include business models challenged
by structural shift or prolonged sub-sector cyclical downturn, financing
structures unable to withstand the tighter financing market, businesses
focused on "big ticket" products and those simply losing their share to
competitors.
However the level of failures this winter has been well below that of winter
2008/9 when, in the immediate aftermath of the credit crunch, CSC lost 9 per
cent of the rent roll in two quarters by way of failures. The adept retailers
have been successfully focusing on cost control to improve margins and
returns.
As well as work on supply chains, several retailers have publicly initiated
programmes to exit their "tail" of underperforming stores. This will challenge
less successful locations, with potential for downward spiral, but is unlikely
to harm the best cities and centres where other expanding retailers including
international brands are competing for well-configured space in prime pitches.
Successful retailers are seeking out the most cost effective access to their
customers, be that through online or physical footfall, with the best located
stores and integration of online and physical brands. Various techniques are
being applied to drive traffic between the channels such as click and collect
options and access to pods for in-store access to online ranges. Four of CSC`s
centres have now launched mobile apps which provide shoppers with convenient
access to centre and retailer information and special offers. Several brands
which started without stores have now added a physical presence to extend
their reach - including, now in our centres, Simply Be and Amazon.
CSC`s position
The effect of this polarisation can be seen in the vacancy rates of different
retail property, with secondary shopping centres averaging over 15 per cent,
town centre properties over 10 per cent, the larger prime centres 8 per cent
and CSC`s centres 3 per cent.
Vacancy rates, UK retail property by class (source: PMA)
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To put this into context, of the UK`s total 1.4 billion sq. ft. of retail
floor space, only 14 per cent is within shopping centres and less than 5 per
cent is in the segments in which CSC specialises, the top 50 retail locations
or in major out-of-town regional centres.
David Fischel
Chief Executive
23 February 2012
FINANCIAL REVIEW
FINANCING STRATEGY AND FINANCIAL MANAGEMENT
In 2011 the Group`s financial management has focused on achieving the
successful integration of The Trafford Centre and continuing to address the
appropriate financial management and medium-term funding structure for the
Group.
Key points of note in the year
- Underlying earnings per share up by 7 per cent
- NAV per share at 391 pence; total return for the year 4 per cent
- New GBP375 million 5 year Revolving Credit Facility completed in November
2011
- Debt to assets ratio remains in targeted range at 48 per cent
- Interest cover ratio increased to 1.71x above the target level of 1.6x
As previously indicated, the debt to assets ratio reduced to 48 per cent at
the end of 2010 and remains at this level at 31 December 2011. This is within
the Group`s preferred 40-50 per cent range. It is pleasing to note that in
respect of our additional funding aim, to achieve interest cover greater than
1.6x, following an improvement in the year to 1.71x, this target has also been
achieved.
Acquisition of The Trafford Centre and associated Capital Raising
The Group successfully completed the acquisition of The Trafford Centre on 28
January 2011. Details of the opening balance sheet and the contribution to the
Group`s results are provided in Note 25. The Income Statement includes the
results of The Trafford Centre for the period from 28 January 2011 to 31
December 2011.
As part of the acquisition in January 2011, Peel subscribed GBP43.7 million
for 12.3 million ordinary shares and GBP23.7 million for convertible bonds
with a nominal value of GBP26.7 million converting into 6.7 million ordinary
shares at a conversion price of 400 pence, giving a total cash inflow of
GBP67.4 million.
Acquisition of Broadmarsh
The Group completed the acquisition of Broadmarsh, Nottingham, on 1 December
2011 for an initial cash consideration of GBP73 million. This initial
consideration is subject to an adjustment based on the opening net assets
position. It is anticipated that this adjustment will be finalised in the
first half of 2012. Details of the opening balance sheet and the contribution
to the Group`s results for the year are provided in Note 25.
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011
As has been widely reported, the general economic environment in the UK became
increasingly challenging as 2011 progressed and it is therefore encouraging
that the Group achieved a further year of growth in both like-for-like net
rental income and underlying earnings per share, two of the Group`s key
measures of performance. Property valuations have in aggregate been positive
and overall there has been a small increase in adjusted net asset value per
share.
Income statement
The Group recorded a profit for the period of GBP34 million, a reduction on
the profit of GBP529 million reported in the year ended 31 December 2010. The
major factors in the fluctuation from 2010`s result are valuation items. These
comprised a lower level of property valuation gain and a higher non-cash
charge arising from the change in fair value of the Group`s derivative
financial instruments. The derivatives are largely interest rate swaps used to
hedge the interest rate payable on a significant proportion of the Group`s
floating rate borrowings.
The 2011 results include a GBP63 million gain on property valuations which is
more than offset by a GBP193 million non-cash charge due to the movement in
the fair value of derivative financial instruments. In contrast, the 2010
results included a GBP497 million gain on property sales and valuations from
continuing operations and a GBP50 million adverse movement in the fair value
of derivative financial instruments.
The 2010 results also included a GBP83 million profit, largely due to property
valuation gains, from those businesses classified as discontinued operations,
namely Capco, which was demerged in May 2010, and C&C US, which was sold for
shares and instruments convertible into shares in Equity One, a US retail REIT
in January 2011.
As the fair value of the Trafford Centre net assets acquired of GBP756 million
exceeded the GBP703 million fair value of the consideration, based on the
Group`s share price on 28 January 2011 of 376 pence per share, negative
goodwill of GBP53 million arose on the acquisition. There has been a GBP1
million reduction to the negative goodwill figure compared to that disclosed
in the 2011 Interim results mainly due to finalisation of certain taxation
provisions. This negative goodwill is recorded in the Income Statement as a
gain on acquisition of subsidiaries.
The disposal of the C&C US business that was completed in January 2011
resulted in a gain of GBP40 million before tax. The results for the year also
includes an initial deferred tax provision of GBP14 million in respect of the
investment in Equity One shares and joint venture units received as
consideration, giving a net post tax gain of GBP26 million on the combined
impact of this transaction.
Exceptional costs in the period include finance costs of GBP48 million being
largely interest rate swap amendment costs.
Expenses relating to the two acquisitions completed in 2011, including
financial advice costs in relation to the Simon Property Group`s proposal,
amounted to GBP21 million in the period. These costs are classified as
exceptional administration costs.
The income statement includes two items arising from the Group`s interests in
India. The GBP9.0 million share of associate income from Prozone, the shopping
centre developer, is offset by the impairment of GBP8.7 million in the market
value of the 9.9 per cent interest in Provogue, the listed Indian retailer,
as the overall Indian stock market came under pressure.
Underlying earnings which excludes valuation and exceptional items, increased
by GBP42 million to GBP139 million, as shown in the chart below. Taking into
account additional shares issued as part of the Trafford Centre acquisition,
underlying earnings per share increased by 7 per cent to 16.5 pence.
The Group`s net rental income which increased by 4 per cent on a like-for-like
basis in the year benefitted from the continued growth in income at St
David`s, Cardiff, Lakeside and Chapelfield. More detail on the rental
performance is included in the Business Review.
Underlying net finance costs, which exclude exceptional items, increased by
GBP35 million in 2011, with the benefit of the interest rate swap amendments
undertaken in January 2011 offsetting the GBP42 million cost of the Trafford
Centre CMBS notes.
Ongoing administration expenses, increased from GBP23 million in 2010 to GBP24
million in 2011 wholly due to inclusion of the Trafford Centre, illustrating
the continued focus on tight control of administration costs.
Underlying earnings bridge
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Further details on underlying earnings can be found in the Other information
section of this report.
Balance sheet
The Group`s net assets attributable to equity shareholders have increased from
the GBP2.3 billion disclosed in the 2010 annual report to GBP2.9 billion, with
the increase largely resulting from the acquisition of The Trafford Centre and
the associated equity capital raised.
As detailed in the table below, net assets (diluted, adjusted) have increased
by GBP816 million from 31 December 2010 with the Trafford Centre acquisition
and the property valuation gain comprising the majority of the movement.
Balance sheet Pro forma
31 December 31 December 31 December
2011 2010 2010(1)
GBPm GBPm GBPm
Investment, development and
trading properties 6,903.7 5,076.5 6,718.9
Investments 203.7 45.2 218.6
Net external debt (3,374.2) (2,436.5) (3,188.6)
Other assets and liabilities (787.6) (539.2) (650.3)
C&C US net assets - 147.3 -
Net assets 2,945.6 2,293.3 3,098.6
Minority interest (23.5) (19.9) (19.9)
Attributable to equity shareholders 2,922.1 2,273.4 3,078.7
Fair value of derivatives (net of tax) 520.9 314.9 339.0
Other adjustments 45.9 88.7 55.5
Effect of dilution 3.8 - -
Net assets (diluted, adjusted) 3,492.7 2,677.0 3,473.2
Net external debt (3,374.2) (2,436.5) (3,188.6)
Debt to assets ratio 48% 48% 47%
NAV per share (diluted, adjusted) 391p 390p 390p
(1) Pro forma balance sheet at 31 December 2010 illustrates the impact of the
C&C US disposal and the acquisition of the Trafford Centre both having
completed at 31 December 2010.
The investments of GBP204 million as at 31 December 2011 comprise the Group`s
interests in the US and India. The investment in the US comprises 4.1 million
shares in Equity One, and 11.4 million shares in a joint venture with Equity
One, that the Group received in exchange for its interest in C&C US. Based on
the Equity One share price of $16.98 the Group`s investment has been valued at
GBP168 million at 31 December 2011. The Equity One share price has increased
to $19.81 as at 20 February 2012 increasing the value of the Group`s
investment to GBP192 million.
The fair value provision for financial derivatives, principally interest rate
swaps, included in other assets and liabilities above, increased by GBP201
million as UK interest rates remained at exceptionally low levels.
Adjusted net assets per share
As illustrated in the chart below, diluted adjusted net assets per share were
391 pence at 31 December 2011, an increase of 1 penny in the year. The
increase is the net result of the property valuation gain and the retained
profit for the year being offset by the 15 pence per share of dividends paid
in the year and the exceptional finance and administration costs.
Adjusted net assets per share bridge
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Cash flow
The cash flow summary below shows a net utilisation of cash in the year
largely to fund the acquisition of Broadmarsh, Nottingham and the exceptional
finance and other costs associated with the Trafford acquisition.
2011 2010
GBPm GBPm
Underlying operating cash generated 347.4 250.7
Net finance charges paid (201.4) (161.3)
Exceptional finance and other costs (68.7) (81.9)
Net movement in working capital (3.5) (8.3)
Taxation/REIT entry charge (41.1) (37.9)
Cash flow from operations 32.7 (38.7)
Property development/investments (26.9) (51.6)
Sale proceeds of property/investments 1.7 74.8
Other derivative financial instruments (8.3) (26.2)
Acquisition of businesses (72.8) -
Cash acquired with businesses 37.6 -
Cash sold with businesses (20.3) -
Dividends (125.6) (102.2)
Cash flow before financing and equity raises (181.9) (143.9)
Net debt repaid (36.8) (171.6)
Equity capital raised 68.4 222.4
Impact of discontinued operations - (248.7)
Other (4.1) 21.7
Net decrease in cash and cash equivalents (154.4) (320.1)
Investment in property related assets was mainly limited to existing
commitments in the period, with the most significant expenditure in the period
being in respect of Lakeside (GBP5 million), St. David`s, Cardiff (GBP4
million) and GBP3 million at each of Braehead, Eldon Square, Metrocentre and
the Victoria Centre.
The cash acquired/sold with businesses relates to the Trafford Centre and C&C
US respectively.
Net debt repayments of GBP37 million are discussed in the Debt structure
section below.
The table below illustrates that recurring cash flow covers the 2011 Interim
dividend of 5.0 pence per share that was paid in the year and the proposed
final dividend of 10.0 pence per share that if approved will be paid in 2012.
Year ended
31 December
2011
Dividends - cash cover pence per
share
Underlying operating cash generated 41.3
Net finance charges excluding exceptional items (24.0)
Convertible bond coupon (0.6)
Net movement in working capital (0.4)
Recurring cash flow 16.3
Dividends paid and proposed for 2011 15.0
Capital commitments
The Group has an aggregate cash commitment to capital projects of GBP77
million at 31 December 2011, including amounts accrued on the Group`s balance
sheet. In addition to the committed expenditure, the Group has an identified
project pipeline of around GBP120 million over the next three years. It is
anticipated that approximately GBP90 million relating to capital projects,
both committed and currently at the planning stage, will be incurred in 2012.
FINANCIAL POSITION
At 31 December 2011, the Group had net external debt of GBP3,374 million, an
increase of GBP185 million compared to the 31 December 2010 pro forma of
GBP3,189 million. In addition to cash balances of GBP91 million the Group had
undrawn facilities of GBP357 million at 31 December 2011, the GBP330 million
undrawn element of the new revolving credit facility agreed in November 2011
and GBP27 million on the St David`s, Cardiff, joint venture loan facility,
giving total headroom of GBP448 million.
Debt structure
The Group`s debt is largely arranged on an asset-specific basis, with limited
or non-recourse from the borrowing entities to other Group companies. It is
largely syndicated bank debt and CMBS structures with corporate-level debt
limited to the revolving credit facility.
Debt maturity profile
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The revolving credit facility which was scheduled to mature in mid 2013 was
refinanced in November 2011 as a first step towards a broader refinancing of
the Group`s asset specific debt. The revolving credit facility increased from
GBP248 million to GBP375 million, whilst reducing the initial margin from 200
to 175 basis points. At the same time, a reduction in utilisation fee levels
was also achieved. The refinancing was delivered in a challenging market.
The above table shows that the value of maturities peaks in 2015-2017.
Consideration is being given to replacing facilities early, although the
associated one-off costs remain high. However, this needs to be weighed
against longer term rates currently being low.
The Group intends to continue with a diversified funding structure, allowing
opportunistic access to bank and bond markets, whilst minimizing its cost of
funds. Despite the current uncertain economic outlook, demand for sterling
bond issuance backed by quality assets has remained strong.
During the year net debt repayments of GBP37 million were made, the most
significant item being the repayment of the GBP81 million loan secured on
Barton Square. An additional GBP56 million has been drawn on the St. David`s,
Cardiff joint venture loan facility, with the balance of the net repayment
being due to scheduled debt amortisation payments. At year end the revolving
credit facility was GBP45 million drawn, in part to fund the acquisition of
the Broadmarsh centre.
Pro forma (1)
31 December 31 December 31 December
Group debt ratios 2011 2010 2010
Debt to assets 48% 48% 47%
Interest cover 1.71x 1.56x N/A
Weighted average debt maturity 7.0 years 5.8 years 8.0 years
Weighted average cost of gross debt 5.6% 5.7% 5.9%
Proportion of gross debt with
interest rate protection 97% 94% 95%
(1) The pro forma figures include The Trafford Centre balances following the
acquisition which was completed on 28 January 2011
Hedging
The majority of the Group`s debt is floating rate. The Group uses interest
rate swaps to fix short-and medium-term interest obligations, reducing cash
flow volatility caused by changes in interest rates. The Group is currently
effectively fully hedged.
The table below sets out the nominal amount and average rate of hedging,
excluding lenders` margins, in place under current and forward starting swap
contracts.
Average
Nominal amount rate
In effect on or after: GBPm %
1 year 2,914 4.45
2 years 2,946 4.55
5 years 1,196 4.41
10 years 688 4.77
15 years 681 4.78
20 years 619 4.77
25 years 125 4.57
As detailed in the 2011 Interim results, the Group has a number of forward
starting interest rate swaps, which due to a change in lenders` practice can
no longer be used for hedging current or future anticipated borrowing needs.
Using the 31 December 2011 forward interest rate yields, these swaps have a
market value liability of GBP189 million. Based on these rates and values, it
is estimated the Group will be required to make cash payments of GBP15 million
in 2012. These payments will be reported as an exceptional finance charge and
will impact NAV (diluted, adjusted) as incurred.
Covenants
Full details of the loan financial covenants are included in the Other
Information section of this report. The Group is in compliance with all of its
corporate and asset-specific loan covenants. As detailed in that analysis, as
a result of improved property valuations and rental income levels, the
headroom over the minimum covenant levels has generally increased in the year.
Tax strategy and charge for the year
Being a Real Estate Investment Trust (REIT) significantly reduces the taxation
costs of the Group, but brings with it the requirement to operate within the
rules of the REIT regime. Since 2007, the Group has paid REIT entry charges of
GBP184 million in respect of the original property portfolio and subsequent
purchases with a further amount of GBP15 million to be paid in 2012. The Group
must also meet certain REIT requirements and conditions, but doing so results
in not having to pay tax on property income or gains on property sales, the
financial benefits of which to date amount to GBP200 million.
The Group`s approach to taxation is approved by the Board and is subject to
regular review. The Group maintains an open, up-front and no-surprises policy
in dealing with HMRC and as a result it is anticipated the Group will receive
a "low risk" rating from HMRC once the recent major corporate transactions are
fully absorbed into the Group. The Group seeks pre-clearance from HMRC in
complex areas and actively engages in discussions on potential or proposed
changes in the taxation system that might affect property tax and REIT
legislation.
The Group continues to pay tax on overseas earnings, any UK non-property
income under the REIT rules, business rates, and transaction taxes including
the REIT entry charge and stamp duty land tax. In the year ended 31 December
2011 the total of such payments to HMRC was GBP54 million. In addition, the
Group also collects VAT, employment taxes and withholding tax on dividends for
HMRC.
The tax expense in the period of GBP2.6 million comprises current tax on US
investments of GBP0.3 million and deferred tax largely on the revaluation of
interest rate swaps and investments of GBP2.3 million.
Matthew Roberts
Finance Director
23 February 2012
Top properties
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Directors` responsibilities
Statement of Directors` responsibilities
The Group`s Annual Report for the year ended 31 December 2011 contains the
following statement of Directors` responsibilities. Certain parts of the
Annual Report are not included within this announcement.
The Directors are responsible for preparing the Annual Report, the Directors`
Remuneration Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group and
Company financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. Under company
law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Group and the Company and of the profit or loss of the Group and Company for
that period. In preparing these financial statements, the Directors are
required to:
(a) select suitable accounting policies and then apply them consistently
(b) make judgements and accounting estimates that are reasonable and prudent
(c) state whether applicable IFRSs as adopted by the European Union have been
followed, subject to any material departures disclosed and explained in the
financial statements
(d) prepare the financial statements on the going concern basis, unless it is
inappropriate to presume that the company will continue in business
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company`s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and the
Group and enable them to ensure that the financial statements and the
Directors` Remuneration Report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS Regulation. They
are also responsible for safeguarding the assets of the Company and the Group
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
Company`s website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Each of the Directors, whose names and functions are listed in the Governance
section of the Annual Report confirm that, to the best of their knowledge:
(a) the Group financial statements, which have been prepared in accordance
with IFRSs as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group
(b) the Directors` report contained in the Governance section of the Annual
Report includes a fair review of the development and performance of the
business and the position of the Group, together with a description of the
principal risks and uncertainties that it faces
Signed on behalf of the Board on 23 February 2012
David Fischel
Chief Executive
Matthew Roberts
Finance Director
Consolidated income statement
for the year ended 31 December 2011
2011 2010
Notes GBPm GBPm
Continuing operations
Revenue 3 516.1 420.3
Net rental income 4 364.0 276.9
Net other income 5 7.8 0.7
Revaluation and sale of investment and
development property 6 63.0 497.2
Gain on acquisition of subsidiaries 25 52.9 -
Gain on sale of subsidiaries 26 40.4 -
Impairment and sale of other investments (8.7) (2.6)
Administration expenses - ongoing (24.1) (23.0)
Administration expenses - exceptional 7 (20.9) (15.6)
Operating profit 474.4 733.6
Finance costs 8 (198.9) (165.4)
Finance income 0.8 3.1
Other finance costs 9 (55.7) (75.1)
Change in fair value of derivative financial
instruments (193.4) (50.0)
Net finance costs (447.2) (287.4)
Profit before tax and associates 27.2 446.2
Current tax 10 (0.3) (0.1)
Deferred tax 10 (2.3) 2.8
REIT entry charge 10 - (3.3)
Taxation 10 (2.6) (0.6)
Share of profit of associates 9.0 -
Profit for the year from continuing operations 33.6 445.6
Profit for the year from discontinued operations - 83.0
Profit for the year 33.6 528.6
Attributable to:
Equity shareholders of CSC Group PLC
- Continuing operations 30.0 428.8
- Discontinued operations - 83.0
30.0 511.8
Non-controlling interest 3.6 16.8
33.6 528.6
Basic earnings per share
From continuing operations 12 2.9p 68.3p
From discontinued operations 12 - 13.2p
12 2.9p 81.5p
Diluted earnings per share
From continuing operations 12 2.9p 67.5p
From discontinued operations 12 - 13.0p
12 2.9p 80.5p
Details of underlying earnings are presented in the underlying profit
statement. Underlying earnings per share are shown in note 12c.
Consolidated statement of comprehensive income
for the year ended 31 December 2011
2011 2010
Notes GBPm GBPm
Profit for the year 33.6 528.6
Other comprehensive income
Revaluation of other investments (17.3) 17.2
Recognised in impairment and sale of other
investments 8.7 2.6
Recognised in gain on disposal of subsidiaries 26 (10.9) -
Exchange differences (5.5) (1.1)
Tax on items taken directly to other comprehensive
income 10 2.3 (2.8)
Other comprehensive income for the year (22.7) 15.9
Total comprehensive income for the year 10.9 544.5
Attributable to:
Equity shareholders of CSC Group PLC 7.3 527.7
Non-controlling interest 3.6 16.8
10.9 544.5
Total comprehensive income attributable to equity
shareholders
of CSC Group PLC arises from:
Continuing operations 7.3 432.6
Discontinued operations - 95.1
7.3 527.7
Consolidated balance sheet
as at 31 December 2011
2011 2010
Notes GBPm GBPm
Non-current assets
Investment and development property 14 6,896.2 5,051.0
Plant and equipment 5.1 4.1
Investment in associate companies 32.5 28.8
Other investments 15 171.2 16.4
Goodwill 25 9.3 -
Derivative financial instruments 22.7 24.2
Trade and other receivables 17 91.1 76.7
7,228.1 5,201.2
Current assets
Trading property 16 7.5 25.5
Current tax assets 4.0 4.1
Trade and other receivables 17 69.6 50.2
Cash and cash equivalents 18 90.7 222.3
C&C US - assets - 423.9
171.8 726.0
Total assets 7,399.9 5,927.2
Current liabilities
Trade and other payables 19 (278.3) (194.4)
Borrowings 20 (65.4) (46.0)
Derivative financial instruments (27.5) (9.3)
C&C US - liabilities - (276.6)
(371.2) (526.3)
Non-current liabilities
Borrowings 20 (3,546.1) (2,751.5)
Derivative financial instruments (535.7) (354.6)
Other provisions (1.2) (1.2)
Other payables (0.1) (0.3)
(4,083.1) (3,107.6)
Total liabilities (4,454.3) (3,633.9)
Net assets 2,945.6 2,293.3
Equity
Share capital 23 430.2 346.3
Share premium 564.1 20.4
Treasury shares 24 (29.5) (29.9)
Convertible bonds 21 143.7 -
Other reserves 318.7 526.5
Retained earnings 1,494.9 1,410.1
Attributable to equity shareholders of CSC
Group PLC 2,922.1 2,273.4
Non-controlling interest 23.5 19.9
Total equity 2,945.6 2,293.3
Consolidated statement of changes in equity
for the year ended 31 December 2011
Attributable to equity shareholders of CSC Group PLC
Share Share Treasury
capital premium shares
GBPm GBPm GBPm
At 1 January 2011 346.3 20.4 (29.9)
Profit for the year - - -
Other comprehensive income:
Revaluation of other investments - - -
Recognised in impairment
of other investments - - -
Recognised in gain on
disposal of subsidiaries - - -
Exchange differences - - -
Tax on items taken directly
to other comprehensive income - - -
Total comprehensive
income for the year - - -
Ordinary shares issued 83.9 543.7 -
Dividends paid (note 11) - - -
Convertible bonds - - -
issued (note 21)
Interest on convertible - - -
bonds (note 21)
Share-based payments - - -
Acquisition of treasury shares - - (0.2)
Disposal of treasury shares - - 0.6
Realisation of merger reserve - - -
83.9 543.7 0.4
At 31 December 2011 430.2 564.1 (29.5)
Attributable to equity shareholders of CSC Group PLC
Convertible Other Retained
bonds reserves earnings
GBPm GBPm GBPm
At 1 January 2011 - 526.5 1,410.1
Profit for the year - - 30.0
Other comprehensive income:
Revaluation of other investments - (17.3) -
Recognised in impairment
of other investments - 8.7 -
Recognised in gain on
disposal of subsidiaries - (10.9) -
Exchange differences - (5.5) -
Tax on items taken directly
to other comprehensive income - 2.3 -
Total comprehensive
income for the year - (22.7) 30.0
Ordinary shares issued - - -
Dividends paid (note 11) - - (127.8)
Convertible bonds 143.7 - -
issued (note 21)
Interest on convertible - - (5.3)
bonds (note 21)
Share-based payments - - 3.6
Acquisition of treasury shares - - -
Disposal of treasury shares - - (0.8)
Realisation of merger reserve - (185.1) 185.1
143.7 (185.1) 54.8
At 31 December 2011 143.7 318.7 1,494.9
Non-
controlling Total
Total interest equity
GBPm GBPm GBPm
At 1 January 2011 2,273.4 19.9 2,293.3
Profit for the year 30.0 3.6 33.6
Other comprehensive income:
Revaluation of other investments (17.3) - (17.3)
Recognised in impairment
of other investments 8.7 - 8.7
Recognised in gain on
disposal of subsidiaries (10.9) - (10.9)
Exchange differences (5.5) - (5.5)
Tax on items taken directly
to other comprehensive income 2.3 - 2.3
Total comprehensive
income for the year 7.3 3.6 10.9
Ordinary shares issued 627.6 - 627.6
Dividends paid (note 11) (127.8) - (127.8)
Convertible bonds 143.7 - 143.7
issued (note 21)
Interest on convertible (5.3) - (5.3)
bonds (note 21)
Share-based payments 3.6 - 3.6
Acquisition of treasury shares (0.2) - (0.2)
Disposal of treasury shares (0.2) - (0.2)
Realisation of merger reserve - - -
641.4 - 641.4
At 31 December 2011 2,922.1 23.5 2,945.6
Consolidated statement of changes in equity
for the year ended 31 December 2010
Attributable to equity shareholders of CSC Group PLC
Share Share Treasury
capital premium shares
GBPm GBPm GBPm
At 1 January 2010 311.3 1,005.7 (9.7)
Profit for the year - - -
Other comprehensive income:
Revaluation of other investments - - -
Recognised in sale of other investments - - -
Exchange differences - - -
Tax on items taken directly
to other comprehensive income - - -
Total comprehensive income for the year - - -
Ordinary shares issued 35.0 20.4 -
Dividends paid (note 11) - - -
Redemption and conversion of
convertible bonds - - -
Non-controlling interest additions - - -
Share-based payments - - -
Acquisition of treasury shares - - (20.9)
Disposal of treasury shares - - 0.7
Reduction of capital - (1,005.7) -
Demerger effected by way of
repayment of capital - - -
Other - - -
35.0 (985.3) (20.2)
At 31 December 2010 346.3 20.4 (29.9)
Attributable to equity shareholders of CSC Group PLC
Convertible Other Retained
bonds reserves earnings
GBPm GBPm GBPm
At 1 January 2010 6.7 286.9 820.2
Profit for the year - - 511.8
Other comprehensive income:
Revaluation of other investments - 17.2 -
Recognised in sale of other investments - 2.6 -
Exchange differences - (1.1) -
Tax on items taken directly
to other comprehensive income - (2.8) -
Total comprehensive income for the year - 15.9 511.8
Ordinary shares issued - 185.1 -
Dividends paid (note 11) - - (102.8)
Redemption and conversion of
convertible bonds (6.7) - 6.7
Non-controlling interest additions - - -
Share-based payments - - 1.0
Acquisition of treasury shares - - -
Disposal of treasury shares - - 5.3
Reduction of capital - - 1,005.7
Demerger effected by way of
repayment of capital - 38.6 (838.4)
Other - - 0.6
(6.7) 223.7 78.1
At 31 December 2010 - 526.5 1,410.1
Non-
controlling Total
Total interest equity
GBPm GBPm GBPm
At 1 January 2010 2,421.1 - 2,421.1
Profit for the year 511.8 16.8 528.6
Other comprehensive income:
Revaluation of other investments 17.2 - 17.2
Recognised in sale of other investments 2.6 - 2.6
Exchange differences (1.1) - (1.1)
Tax on items taken directly
to other comprehensive income (2.8) - (2.8)
Total comprehensive income for the year 527.7 16.8 544.5
Ordinary shares issued 240.5 - 240.5
Dividends paid (note 11) (102.8) - (102.8)
Redemption and conversion of
convertible bonds - - -
Non-controlling interest additions - 3.1 3.1
Share-based payments 1.0 - 1.0
Acquisition of treasury shares (20.9) - (20.9)
Disposal of treasury shares 6.0 - 6.0
Reduction of capital - - -
Demerger effected by way of
repayment of capital (799.8) - (799.8)
Other 0.6 - 0.6
(675.4) 3.1 (672.3)
At 31 December 2010 2,273.4 19.9 2,293.3
Consolidated statement of cash flows
for the year ended 31 December 2011
2011 2010
Notes GBPm GBPm
Cash flows from continuing operations
Cash generated from operations 29 323.0 226.8
Interest paid (250.0) (229.1)
Interest received 0.8 1.5
Taxation (2.2) 2.2
REIT entry charge (38.9) (40.1)
Cash flows from operating activities 32.7 (38.7)
Cash flows from investing activities
Purchase and development of property, plant and
equipment (26.9) (47.4)
Sale of property 1.7 64.4
Sale of other investments - 10.4
Purchase of other investments - (4.2)
Acquisition of businesses (72.8) -
Cash sold with businesses (20.3) -
Cash acquired with businesses 37.6 -
Other derivative financial instruments (8.3) (26.2)
Cash flows from investing activities (89.0) (3.0)
Cash flows from financing activities
Partnership equity introduced - 3.1
Issue of ordinary shares 44.7 222.4
Issue of convertible bonds 23.7 -
Acquisition of treasury shares (0.2) (1.4)
Sale of treasury shares 0.3 0.2
Cash transferred from restricted accounts 1.1 19.8
Borrowings drawn 101.4 518.7
Borrowings repaid (138.2) (690.3)
Interest on convertible bonds (5.3) -
Equity dividends paid (125.6) (102.2)
Cash flows from financing activities (98.1) (29.7)
Net decrease in cash and cash equivalents from
continuing operations (154.4) (71.4)
Cash flows from discontinued operations
Operating activities - 0.3
Investing activities - (1.2)
Financing activities - (69.0)
Cash and cash equivalents transferred on demerger - (179.2)
Effect of exchange rate changes on cash and cash
equivalents - 0.4
Net decrease in cash and cash equivalents from
discontinued operations - (248.7)
Net decrease in cash and cash equivalents (154.4) (320.1)
Cash and cash equivalents at 1 January 242.6 562.7
Cash and cash equivalents at 31 December 18 88.2 242.6
Notes
1 Accounting convention and basis of preparation
The financial information presented does not constitute the Group`s financial
statements for either the year ended 31 December 2011 or the year ended 31
December 2010, but is derived from those accounts. The Group`s statutory
accounts for 2010 have been delivered to the Registrar of Companies and those
for 2011 will be delivered following the Company`s annual general meeting. The
auditors` reports on both the 2010 and 2011 accounts were not qualified or
modified; did not draw attention to any matters by way of an emphasis of
matter; and did not contain any statement under Section 498 of the Companies
Act 2006.
The financial statements have been prepared in accordance with International
Financial Reporting Standards, as adopted by the European Union (IFRS), IFRIC
interpretations and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The financial statements have been prepared under the historical cost
convention as modified by the revaluation of property, available- for-sale
investments, financial assets and liabilities held for trading. A summary of
the more important Group accounting policies is set out in note 2 to the
Group`s financial statements.
The accounting policies used are consistent with those applied in the last
annual financial statements, as amended to reflect the adoption of new
standards, amendments, and interpretations which became effective in the year.
During 2011, the following standards, amendments and interpretations endorsed
by the EU became effective for the first time for the Group`s 31 December 2011
year end:
IFRS 24 Related Party Disclosures;
IFRS 32 Financial Instruments: Presentation (amendment);
IFRIC 14 IAS 19 - The limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction;
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments; and
Amendments arising from the 2010 annual improvements project.
These either had no material impact on the financial statements or resulted in
changes to presentation and disclosure only.
The following standard has been issued and adopted by the EU but is not
effective for the year ended 31 December 2011 and has not been adopted early:
IFRS 7 Financial Instruments: Disclosures (amendment)
This pronouncement is not expected to have a material impact on the financial
statements, but may result in changes to presentation or disclosure.
Additionally a number of standards have been issued but are not yet adopted by
the EU and so are not available for early adoption.
The most significant of these are:
IFRS 9 Financial Instruments;
IFRS 10 Consolidated Financial Statements;
IFRS 11 Joint Arrangements;
IFRS 13 Fair Value Measurements; and
IAS 28 Investments in Associates and Joint Ventures.
The impact of these on the Group is being reviewed. It is anticipated that the
earliest period that these standards may be applied will be the year ended 31
December 2013.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on management`s best
knowledge of the amount, event or actions, actual results ultimately may
differ from those estimates. Where such judgements are made they are included
within the accounting policies given in note 2 to the Group`s financial
statements.
The Group`s business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chairman`s
Statement and the Business Review. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are described in the
Financial Review. In addition note 34 to the Group`s financial statements
includes the Group`s risk management objectives, details of its financial
instruments and hedging activities, its exposures to liquidity risk and
details of its capital structure.
The Group prepares regular forecasts and projections which include sensitivity
analysis taking into account reasonably possible changes in trading
performance and asset values and assesses the potential impact of these on the
Group`s liquidity position and available resources.
Following the agreement of a new GBP375 million 5 year revolving credit
facility in December, the Group has increased its combined available cash and
undrawn facilities. At 31 December 2011 these totalled over GBP400 million.
The Group has no major asset- specific debt refinancing requirements until
2014.
Based on the most recent projections the Directors have concluded that there
is a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. Thus they continue to
adopt the going concern basis of accounting in preparing the Group`s financial
statements.
2 Segmental reporting
Operating segments are determined based on the internal reporting and
operational management of the Group. The Group is a UK shopping centre
focussed business and has one reportable operating segment being UK Shopping
Centres.
The principal profit indicator used to measure performance is net rental
income. All net rental income is derived from the UK Shopping Centres segment
and an analysis of net rental income is given in note 4.
The Group`s geographical segments are set out below. This represents where the
Group`s assets reside and where revenues are generated. In the case of
investments this reflects where the investee is located.
Revenue(1) Non-current assets(2)
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
United Kingdom 516.1 420.3 7,001.7 5,137.7
United States - - 168.5 -
India - - 35.2 39.3
516.1 420.3 7,205.4 5,177.0
1 Revenue is presented for continuing operations only
2 Non-current assets excluding derivative financial instruments and deferred
tax assets
3 Revenue
2011 2010
GBPm GBPm
Rent receivable and service charge income 508.6 410.0
Sale of trading property 7.5 10.3
Revenue 516.1 420.3
4 Net rental income
2011 2010
GBPm GBPm
Rent receivable 432.1 350.4
Service charge income 76.5 59.6
508.6 410.0
Rent payable (25.5) (23.7)
Service charge costs (82.1) (67.4)
Other non-recoverable costs (37.0) (42.0)
Net rental income 364.0 276.9
5 Net other income
2011 2010
GBPm GBPm
Sale of trading property 7.5 10.3
Cost of sales (7.0) (9.3)
Profit on sale of trading property 0.5 1.0
Write down of trading property (1.0) (0.3)
Dividends received from other investments 8.3 -
Net other income 7.8 0.7
6 Revaluation and sale of investment and development property
2011 2010
GBPm GBPm
Revaluation of investment and development property 63.0 500.6
Sale of investment property - (3.4)
Revaluation and sale of investment and development property 63.0 497.2
7 Administration expenses - exceptional
Exceptional administration expenses in the year totalled GBP20.9 million (2010
- GBP15.6 million) of which GBP17.6 million related to the acquisition and
integration of The Trafford Centre and GBP3.3 million related to the
acquisition of Broadmarsh, Nottingham.
8 Finance costs
2011 2010
GBPm GBPm
On bank loans and overdrafts 195.0 160.8
On convertible bonds - 2.3
On obligations under finance leases 3.9 4.0
Gross finance costs 198.9 167.1
Interest capitalised on developments - (1.7)
Finance costs 198.9 165.4
9 Other finance costs
2011 2010
GBPm GBPm
Amortisation of Metrocentre compound financial instrument 7.9 8.8
Cost of termination of derivative financial instruments and
other fees(1) 47.8 66.3
Other finance costs 55.7 75.1
1 Amounts are treated as exceptional and therefore excluded from the
calculation of underlying earnings.
10 Taxation
Tax expense for the year:
2011 2010
GBPm GBPm
Overseas taxation 0.3 -
Prior year items - UK corporation tax - 0.1
Current tax 0.3 0.1
Deferred tax:
On other investments 7.6 -
On derivative financial instruments (4.1) (2.6)
On other temporary differences (1.2) (0.2)
Deferred tax 2.3 (2.8)
REIT entry expense - 3.3
Total tax expense 2.6 0.6
The tax expense for the year is lower (2010 - lower) than the standard rate of
corporation tax in the UK. The differences are explained below:
2011 2010
GBPm GBPm
Profit before tax 27.2 446.2
Profit before tax multiplied by the standard rate in the UK
of 26.5% (2010 - 28%) 7.2 124.9
Capital allowances not reversing on sale - (4.2)
Disposals of properties and investments (8.9) (17.1)
Prior year corporation tax items - 0.1
Prior year deferred tax items (7.2) 1.0
REIT exemption - corporation tax (27.8) 6.8
REIT exemption - deferred tax (0.2) (130.8)
REIT exemption - entry charge - 3.3
Non-deductable and other items 3.1 7.7
Unprovided deferred tax 32.6 8.0
Reduction in tax rate 3.8 0.9
Total tax expense 2.6 0.6
Tax on items taken directly to other comprehensive income
is analysed as:
2011 2010
GBPm GBPm
Other investments (2.6) 2.9
Derivative financial instruments 0.3 -
Other temporary differences - (0.1)
Tax on items taken directly to other comprehensive income (2.3) 2.8
11 Dividends
2011 2010
GBPm GBPm
Ordinary shares
Prior year final dividend paid of 10.0 pence per share
(2010 - 11.5 pence per share) 85.2 71.4
Interim dividend paid of 5.0 pence per share (2010 - 5.0
pence per share) 42.6 31.4
Dividends paid 127.8 102.8
Proposed final dividend of 10.0 pence per share 85.4
Details of the shares in issue and dividends waived are given in notes 23 and
24.
12 Earnings per share
(a) Earnings per share
Basic and diluted earnings per share as calculated in accordance with IAS 33
Earnings per Share.
2011
Earnings Shares Pence per
GBPm million share
Continuing operations
Basic earnings per share(1) 24.7 840.9 2.9p
Dilutive convertible bonds, share options
and share awards - 0.6
Diluted earnings per share 24.7 841.5 2.9p
Discontinued operations:
Basic earnings per share(1) - 840.9 -
Dilutive convertible bonds, share options
and share awards - 0.6
Diluted earnings per share - 841.5 -
Continuing and discontinued operations:
Basic earnings per share(1) 24.7 840.9 2.9p
Dilutive convertible bonds, share options
and share awards - 0.6
Diluted earnings per share 24.7 841.5 2.9p
2010
Earnings Shares Pence per
GBPm million share
Continuing operations
Basic earnings per share(1) 428.8 627.8 68.3p
Dilutive convertible bonds, share options
and share awards 1.7 9.7
Diluted earnings per share 430.5 637.5 67.5p
Discontinued operations:
Basic earnings per share(1) 83.0 627.8 13.2p
Dilutive convertible bonds, share options
and share awards - 9.7
Diluted earnings per share 83.0 637.5 13.0p
Continuing and discontinued operations:
Basic earnings per share(1) 511.8 627.8 81.5p
Dilutive convertible bonds, share options
and share awards 1.7 9.7
Diluted earnings per share 513.5 637.5 80.5p
1 The weighted average number of shares used for the calculation of basic
earnings per share has been adjusted for shares held in the ESOP and treasury
shares. Basic earnings per share are stated after deducting interest on
convertible bonds recognised directly in equity of GBP5.3 million in the year
ended 31 December 2011 (2010 - nil) in accordance with IAS 33 Earnings per
Share.
(b) Headline earnings per share
Headline earnings per share has been calculated and presented as required by
the Johannesburg Stock Exchange listings requirements and is given for
continuing plus discontinued operations.
2011 2010
Gross Net(1) Gross Net(1)
GBPm GBPm GBPm GBPm
Basic earnings 24.7 511.8
Remove:
Revaluation and sale of investment
and development property (including
associates) (72.1) (66.3) (580.5) (547.5)
Impairment and sale of other
investments 8.7 8.7 2.6 2.6
Gain on acquisition of subsidiaries (52.9) (52.9) - -
Gain on sale of subsidiaries (40.4) (25.9) - -
Headline loss (111.7) (33.1)
Dilution(2) - 1.7
Diluted headline loss (111.7) (31.4)
Weighted average number of shares 840.9 627.8
Dilution(2) 0.6 9.7
Diluted weighted average number of
shares 841.5 637.5
Headline loss per share (pence) (13.3)p (5.3)p
Diluted headline loss per share
(pence) (13.3)p (4.9)p
1 Net of tax and non-controlling interest.
2 The dilution impact is required to be included as for earnings per share as
calculated in note 12(a) even where this is not dilutive for headline earnings
per share.
(c) Underlying earnings per share
Underlying earnings per share is a non-GAAP measure but has been included as
it is considered to be a key measure of the Group`s performance and an
indication of the extent to which dividend payments are supported by current
earnings.
2011
Earnings Shares Pence per
GBPm million share
Basic earnings per share from continuing
Operations(1) 24.7 840.9 2.9p
Remove:
Revaluation and sale of investment and
development property (63.0) (7.5)p
Share of associates revaluation of
investment and development property (9.1) (1.1)p
Impairment and sale of other investments 8.7 1.1p
Gain on acquisition of subsidiaries (52.9) (6.3)p
Gain on sale of subsidiaries (40.4) (4.8)p
Exceptional administration expenses 20.9 2.5p
Exceptional finance costs 47.8 5.7p
Change in fair value of derivative
financial instruments 193.4 23.0p
Tax on the above 1.6 0.2p
REIT entry expense - -
Non-controlling interest in respect of the
above 6.9 0.8p
Add:
C&C US underlying earnings included within
discontinued operations - -
Underlying earnings per share 138.6 840.9 16.5p
Dilutive convertible bonds, share options
and share awards - 0.6
Underlying, diluted earnings per share 138.6 841.5 16.5p
2010
Earnings Shares Pence per
GBPm million share
Basic earnings per share from continuing
Operations(1) 428.8 627.8 68.3p
Remove:
Revaluation and sale of investment and
development property (497.2) (79.2)p
Share of associates revaluation of
investment and
development property - -
Impairment and sale of other investments 2.6 0.4p
Gain on acquisition of subsidiaries - -
Gain on sale of subsidiaries - -
Exceptional administration expenses 15.6 2.5p
Exceptional finance costs 66.3 10.6p
Change in fair value of derivative
financial instruments 50.0 8.0p
Tax on the above (2.8) (0.4)p
REIT entry expense 3.3 0.5p
Non-controlling interest in respect of the
above 19.1 3.0p
Add:
C&C US underlying earnings included within
discontinued operations 10.9 1.7p
Underlying earnings per share 96.6 627.8 15.4p
Dilutive convertible bonds, share options
and share awards 1.7 9.7
Underlying, diluted earnings per share 98.3 637.5 15.4p
1 The weighted average number of shares used for the calculation of basic
earnings per share has been adjusted for shares held in the ESOP and treasury
shares. Basic earnings per share are stated after deducting interest on
convertible bonds recognised directly in equity of GBP5.3 million in the year
ended 31 December 2011 (2010 - nil) in accordance with IAS 33 Earnings per
Share.
13 Net assets per share
NAV per share (diluted, adjusted) is a non-GAAP measure but has been included
as it is considered to be a key measure of the Group`s performance.
2011
Net NAV per
assets Shares share
GBPm million (pence)
NAV per share attributable to equity
shareholders of
CSC Group PLC(1) 2,922.1 853.5 342p
Dilutive convertible bonds, share options and
awards 3.8 40.3
Diluted NAV per share 2,925.9 893.8 327p
Add:
Unrecognised surplus on trading properties
(net of tax) - -
Remove:
Fair value of derivative financial instruments
(net of tax) 520.9 58p
Deferred tax on investment and development
property and other investments 5.0 1p
Non-controlling interest in respect of the
above (30.4) (3)p
Add:
Non-controlling interest recoverable balance
not recognised 71.3 8p
NAV per share (diluted, adjusted) 3,492.7 893.8 391p
2010
Net NAV per
assets Shares share
GBPm million (pence)
NAV per share attributable to equity
shareholders of
CSC Group PLC(1) 2,273.4 685.8 331p
Dilutive convertible bonds, share options and
awards - -
Diluted NAV per share 2,273.4 685.8 331p
Add:
Unrecognised surplus on trading properties
(net of tax) 1.4 -
Remove:
Fair value of derivative financial instruments
(net of tax) 314.9 46p
Deferred tax on investment and development
property and other investments 47.7 7p
Non-controlling interest in respect of the
above (31.7) (5)p
Add:
Non-controlling interest recoverable balance
not recognised 71.3 11p
NAV per share (diluted, adjusted) 2,677.0 685.8 390p
1 The number of shares used has been adjusted for shares held in the ESOP and
treasury shares.
14 Investment and development property
Freehold Leasehold Total
GBPm GBPm GBPm
At 1 January 2010 3,363.6 2,819.0 6,182.6
C&C US balances transferred to assets
held for sale (338.0) - (338.0)
Additions 12.1 17.5 29.6
Disposals (36.1) (31.1) (67.2)
Transferred to trading property - (16.1) (16.1)
Surplus on revaluation 331.4 230.1 561.5
Transferred on demerger (653.1) (648.3) (1,301.4)
At 31 December 2010 2,679.9 2,371.1 5,051.0
Trafford Centre acquisition 1,650.0 - 1,650.0
Broadmarsh acquisition - 65.0 65.0
Additions 12.3 45.0 57.3
Disposals - (1.6) (1.6)
Transferred from trading property 11.5 - 11.5
Surplus on revaluation 41.5 21.5 63.0
At 31 December 2011 4,395.2 2,501.0 6,896.2
2011 2010
GBPm GBPm
Balance sheet carrying value of investment and development
property 6,896.2 5,051.0
Adjustment in respect of tenant incentives 101.9 86.8
Adjustment in respect of head leases (37.9) (38.7)
Market value of investment and development property 6,960.2 5,099.1
Included within investment and development property additions during the year
is GBPnil million (2010 - GBP1.7 million) of interest capitalised on
developments in progress.
The fair value of the Group`s investment and development properties as at 31
December 2011 was determined by independent external valuers at that date. The
valuations conform with the Royal Institution of Chartered Surveyors ("RICS")
Valuation Standards 7th Edition and with IVS 1 of International Valuation
Standards, and were arrived at by reference to market transactions for similar
properties.
The main assumptions underlying the valuations are in relation to market rent,
taking into account forecast growth rates and yields based on known
transactions for similar properties and likely incentives offered to tenants.
A summary of the market value of investment and development property by valuer
is given below:
2011 2010
GBPm GBPm
DTZ 4,012.6 3,978.9
Cushman & Wakefield 1,700.0 -
CBRE 931.4 845.2
Knight Frank 286.3 242.8
Others 29.9 32.2
6,960.2 5,099.1
Valuation fees are based on a fixed amount agreed between the Group and the
valuers and are independent of the portfolio value.
There are certain restrictions on the realisability of investment property
when a credit facility secured on that property is in place. In most
circumstances the Group can realise up to 50 per cent without restriction
providing the Group continues to manage the asset. Realising an amount in
excess of this would trigger a change of control and mandatory repayment of
the facility.
15 Other investments
2011 2010
GBPm GBPm
At 1 January 16.4 58.3
Additions 179.3 4.2
Disposals - (10.0)
Reclassification to intercompany (6.3) -
Revaluation (17.3) 17.2
Foreign exchange movements (0.9) -
Transferred on demerger - (53.3)
At 31 December 171.2 16.4
Additions represent the consideration received for C&C US
consisting of 11.35 million units, convertible into Equity One shares, and
4.05
million shares in Equity One (note 26). The reclassification to intercompany
results from the Trafford Centre acquisition and the elimination of the
Group`s investment in Trafford CMBS.
16 Trading property
2011 2010
GBPm GBPm
Undeveloped sites - 11.5
Property in development 3.2 11.1
Completed properties 4.3 2.9
7.5 25.5
The estimated replacement cost of trading properties, based
on market value at 31 December 2011, is GBP7.5 million (2010 - GBP27.4
million). GBP11.5 million in respect of undeveloped sites was transferred to
investment and development property during the year.
17 Trade and other receivables
2011 2010
GBPm GBPm
Current
Trade receivables 19.2 15.5
Other receivables 23.4 12.7
Prepayments and accrued income 27.0 22.0
69.6 50.2
Non-current
Other receivables 0.2 0.2
Prepayments and accrued income 90.9 76.5
91.1 76.7
Included within prepayments and accrued income are tenant lease incentives of
GBP101.9 million (2010 - GBP86.8 million).
18 Cash and cash equivalents
2011 2010
GBPm GBPm
Unrestricted cash 88.2 222.3
Restricted cash 2.5 -
90.7 222.3
Cash and cash equivalents per the statement of cash flows:
2011 2010
GBPm GBPm
Unrestricted cash 88.2 222.3
C&C US - classified as held for sale - 20.3
88.2 242.6
19 Trade and other payables
2011 2010
GBPm GBPm
Current
Rents received in advance 98.4 74.7
Trade payables 5.4 2.7
Accruals and deferred income 112.0 64.0
Other payables 17.3 16.0
Other taxes and social security 45.2 37.0
278.3 194.4
20 Borrowings
2011
Carrying
value Secured Unsecured
GBPm GBPm GBPm
Current
Bank loans and overdrafts 18.5 18.5 -
Commercial mortgage backed securities
("CMBS") notes 41.1 41.1 -
Loan notes 2014 2.5 - 2.5
Current borrowings, excluding finance leases 62.1 59.6 2.5
Finance lease obligations 3.3 3.3 -
65.4 62.9 2.5
Non-current
CMBS notes 2015 994.4 994.4 -
CMBS notes 2022 52.1 52.1 -
CMBS notes 2029 103.1 103.1 -
CMBS notes 2033 380.4 380.4 -
CMBS notes 2035 179.5 179.5 -
Bank loan 2014 114.8 114.8 -
Bank loans 2016 779.9 779.9 -
Bank loan 2017 506.8 506.8 -
Debentures 2027 227.1 227.1 -
CSC bonds 2013 26.8 - 26.8
Non-current borrowings excluding finance leases
and Metrocentre compound financial
instrument 3,364.9 3,338.1 26.8
Metrocentre compound financial instrument 146.6 - 146.6
Finance lease obligations 34.6 34.6 -
3,546.1 3,372.7 173.4
Total borrowings 3,611.5 3,435.6 175.9
Cash and cash equivalents (90.7)
Net debt 3,520.8
2011
Fixed Floating Fair
rate rate value
GBPm GBPm GBPm
Current
Bank loans and overdrafts - 18.5 18.5
Commercial mortgage backed securities ("CMBS")
notes 4.1 37.0 38.1
Loan notes 2014 2.5 - 2.5
Current borrowings, excluding finance leases 6.6 55.5 59.1
Finance lease obligations 3.3 - 3.3
9.9 55.5 62.4
Non-current
CMBS notes 2015 - 994.4 843.7
CMBS notes 2022 52.1 - 56.7
CMBS notes 2029 103.1 - 110.6
CMBS notes 2033 380.4 - 404.6
CMBS notes 2035 - 179.5 167.4
Bank loan 2014 - 114.8 114.8
Bank loans 2016 - 779.9 779.9
Bank loan 2017 - 506.8 506.8
Debentures 2027 227.1 - 215.5
CSC bonds 2013 26.8 - 26.9
Non-current borrowings excluding finance leases
and Metrocentre compound financial instrument 789.5 2,575.4 3,226.9
Metrocentre compound financial instrument 146.6 - 146.6
Finance lease obligations 34.6 - 34.6
970.7 2,575.4 3,408.1
Total borrowings 980.6 2,630.9 3,470.5
Cash and cash equivalents
Net debt
Net external debt (adjusted for Metrocentre compound financial instrument) at
31 December 2011 was GBP3,374.2 million.
2010
Carrying
value Secured Unsecured
GBPm GBPm GBPm
Current
Bank loans and overdrafts 16.5 16.5 -
Commercial mortgage backed securities
("CMBS") notes 25.4 25.4 -
Current borrowings, excluding finance
leases 41.9 41.9 -
Finance lease obligations 4.1 4.1 -
46.0 46.0 -
Non-current
CMBS notes 2015 1,005.9 1,005.9 -
Bank loan 2014 58.4 58.4 -
Bank loans 2016 749.1 749.1 -
Bank loan 2017 511.1 511.1 -
Debentures 2027 226.9 226.9 -
CSC bonds 2013 26.7 - 26.7
Non-current borrowings excluding finance leases
and Metrocentre compound financial
instrument 2,578.1 2,551.4 26.7
Metrocentre compound financial
instrument 138.7 - 138.7
Finance lease obligations 34.7 34.7 -
2,751.5 2,586.1 165.4
Total borrowings 2,797.5 2,632.1 165.4
Cash and cash equivalents (222.3)
Net debt 2,575.2
2010
Fixed Floating Fair
rate rate value
GBPm GBPm GBPm
Current
Bank loans and overdrafts - 16.5 16.5
Commercial mortgage backed securities
("CMBS") notes - 25.4 20.0
Current borrowings, excluding finance
leases - 41.9 36.5
Finance lease obligations 4.1 - 4.1
4.1 41.9 40.6
Non-current
CMBS notes 2015 - 1,005.9 794.6
Bank loan 2014 - 58.4 58.4
Bank loans 2016 - 749.1 749.1
Bank loan 2017 - 511.1 511.1
Debentures 2027 226.9 - 196.5
CSC bonds 2013 26.7 - 27.3
Non-current borrowings excluding finance leases
and Metrocentre compound financial instrument 253.6 2,324.5 2,337.0
Metrocentre compound financial
instrument 138.7 - 138.7
Finance lease obligations 34.7 - 34.7
427.0 2,324.5 2,510.4
Total borrowings 431.1 2,366.4 2,551.0
Cash and cash equivalents
Net debt
Net external debt (adjusted for Metrocentre compound financial instrument) at
31 December 2010 was GBP2,436.5 million.
The fair values have been established using the market value, where available.
For those instruments without a market value, a discounted cash flow approach
has been used.
The maturity profile of gross debt (excluding finance leases) is as follows:
2011 2010
GBPm GBPm
Wholly repayable within one year 62.1 41.9
Wholly repayable in more than one year but not more than
two years 87.2 44.3
Wholly repayable in more than two years but not more than
five years 1,893.3 1,124.7
Wholly repayable in more than five years 1,531.0 1,547.8
3,573.6 2,758.7
Certain borrowing agreements contain financial and other conditions that, if
contravened, could alter the repayment profile. The Group has undrawn
committed borrowing facilities. As at 31 December 2011 the Group had available
facilities of GBP375.0 million of which GBP330.0 million was undrawn (2010 -
GBP248.0 million) expiring in 2016. In addition there is a balance undrawn on
the St David`s, Cardiff, joint venture loan facility relating to the
development at the centre. The Group`s share of the undrawn amount is GBP27
million.
Finance lease disclosures:
2011 2010
GBPm GBPm
Minimum lease payments under finance leases fall due:
Not later than one year 4.7 4.1
Later than one year and not later than five years 17.9 19.1
Later than five years 71.3 74.2
93.9 97.4
Future finance charges on finance leases (56.0) (58.6)
Present value of finance lease liabilities 37.9 38.8
Present value of finance lease liabilities:
Not later than one year 3.3 4.1
Later than one year and not later than five years 13.3 15.3
Later than five years 21.3 19.4
37.9 38.8
Finance lease liabilities are in respect of leasehold investment property. A
number of the Group`s head leases provide for payment of contingent rent,
usually a proportion of net rental income, in addition to the rents above.
21 Convertible bonds
On 28 January 2011 the Company issued GBP127.6 million, 3.75 per cent
perpetual subordinated convertible bonds as part of the consideration for the
acquisition of The Trafford Centre (note 25). As a condition of the
acquisition the Company also issued to the Peel Group GBP26.7 million of
convertible bonds for a subscription amount of GBP23.7 million and an implied
issue price of the underlying shares of GBP3.55 per share.
A total of GBP154.3 million convertible bonds were issued and remain
outstanding at 31 December 2011. These are accounted for as equity at their
fair value on issue which totalled GBP143.7 million.
The convertible bonds can be converted at the option of the bondholder at any
time from 28 January 2013 at GBP4.00 per ordinary share, a conversion rate of
250 ordinary shares for every GBP1,000 nominal. Full conversion would result
in 38,579,250 ordinary shares being issued.
The convertible bonds may be redeemed at their principal amount at the
Company`s option on 28 January 2014 or any subsequent interest payment date
thereafter, or at any time once 85 per cent or more of the principal amount of
the bonds originally issued have been converted or cancelled.
During the year interest of GBP5.3 million has been recognised on these bonds
directly in equity.
22 Deferred tax provision
Under IAS 12 Income Taxes, provision is made for the deferred tax assets and
liabilities associated with the revaluation of assets and liabilities at the
corporate tax rate expected to apply to the Group at the time the temporary
differences are expected to reverse. For those UK assets and liabilities
benefitting from REIT exemption, the relevant tax rate will be 0 per cent
(2010 - 0 per cent), and for other assets and liabilities the relevant tax
rate will be the prevailing corporate tax rate in the relevant country.
Derivative Other
Other financial temporary
investments instruments differences Total
Movements in the
provision for deferred tax GBPm GBPm GBPm GBPm
Provided deferred tax
provision:
At 1 January 2010 (2.9) (4.5) 44.5 37.1
C&C US balances
transferred to held for sale - - (37.1) (37.1)
Recognised in the
income statement - (2.3) (0.5) (2.8)
Recognised directly in
other comprehensive income 2.9 - (0.1) 2.8
Transferred on demerger - 2.6 (2.6) -
At 31 December 2010 - (4.2) 4.2 -
Recognised in the
income statement 7.6 (4.1) (1.2) 2.3
Recognised directly in
other comprehensive income (2.6) 0.3 - (2.3)
At 31 December 2011 5.0 (8.0) 3.0 -
Unrecognised deferred
tax asset:
At 1 January 2011 - (15.7) (13.9) (29.6)
Income statement items - (23.4) (9.2) (32.6)
At 31 December 2011 - (39.1) (23.1) (62.2)
In accordance with the requirements of IAS 12 Income Taxes, the deferred tax
asset has not been recognised in the Group financial statements due to
uncertainty over the level of profits that will be available in the non-REIT
elements of the Group in future periods.
23 Share capital
GBPm
Issued and fully paid
At 31 December 2010 - 692,673,009 ordinary shares of 50p each 346.3
Shares issued 83.9
At 31 December 2011 - 860,347,169 ordinary shares of 50p each 430.2
On 28 January 2011 the Company issued 155,000,000 ordinary shares as part of
the consideration for the acquisition of The Trafford Centre (note 25). As a
condition of the acquisition the Company issued to the Peel Group a further
12,316,817 ordinary shares for cash at GBP3.55 per share.
During the year the Company issued a total of 357,343 ordinary shares in
connection with the exercise of options by former employees under the Capital
Shopping Centres Group PLC Approved Share Option Scheme and the Capital
Shopping Centres Group PLC Unapproved Share Option Scheme.
Full details of the rights and obligations attaching to the ordinary shares
are contained in the Company`s Articles of Association.
These rights include an entitlement to receive the Company`s report and
accounts, to attend and speak at General Meetings of the Company, to appoint
proxies and to exercise voting rights. Holders of ordinary shares may also
receive dividends and may receive a share of the Company`s assets on the
Company`s liquidation. There are no restrictions on the transfer of the
ordinary shares.
At 23 February 2012, the Company had an unexpired authority to repurchase
shares up to a maximum of 85,904,610 shares with a nominal value of GBP43.0
million, and the Directors have an unexpired authority to allot up to a
maximum of 286,348,702 shares with a nominal value of GBP143.2 million.
Included within the issued share capital as at 31 December 2011 are 6,840,963
ordinary shares held by the Trustee of the Employee Share Ownership Plan
(ESOP) which is operated by the Company (note 24). At 31 December 2010 issued
share capital included 5,856,736 ordinary shares held by the Trustee of the
ESOP and 1,050,000 treasury shares. The nominal value of these shares at 31
December 2011 is GBP3.4 million (2010 - GBP3.5 million).
On 25 November 2011, the Company transferred for nil consideration 1,050,000
ordinary shares, which had been previously repurchased by the Company and were
held as treasury shares, to the Trustee of the Group`s Employee Share
Ownership Plan (ESOP) in accordance with Section 727 of the Companies Act
2006. Following the transfer, as at 31 December 2011 the Company no longer
holds any treasury shares.
24 Treasury shares and Employee Share Ownership Plan (ESOP)
The cost of shares in Capital Shopping Centres Group PLC held either as
treasury shares or by the Trustee of the Employee Share Ownership Plan (ESOP)
operated by the Company is accounted for as a deduction from equity.
The purpose of the ESOP is to acquire and hold shares which will be
transferred to employees in the future under the Group`s employee incentive
arrangements. Dividends of GBP0.79 million (2010 - GBP0.01 million) in respect
of these shares have been waived by agreement.
2011 2010
Shares Shares
million GBPm million GBPm
At 1 January 6.9 29.9 1.3 9.7
Acquisition of treasury shares 0.1 0.2 6.1 20.9
Disposal of treasury shares (0.2) (0.6) (0.5) (0.7)
At 31 December 6.8 29.5 6.9 29.9
25 Business combinations
Acquisition of The Trafford Centre
On 28 January 2011 the Group acquired 100% of the share capital of Tokenhouse
Holdings Limited (renamed CSC Trafford Centre Group Limited) for consideration
consisting of 155.0 million ordinary shares in the Company and GBP127.6
million, 3.75 per cent perpetual subordinated convertible bonds (the
"convertible bonds"). As a condition of the acquisition the Company also
issued to the Peel Group 12,316,817 ordinary shares for GBP3.55 each and
convertible bonds with a nominal value of GBP26.7 million convertible into
6,679,250 ordinary shares, for a subscription amount of GBP23.7 million and an
implied issue price of the underlying shares of GBP3.55 each. Total
exceptional administration expenses associated with the acquisition and
integration are GBP21.6 million of which GBP4.0 million were recognised in
2010 and the balance of GBP17.6 million in 2011.
Through its subsidiaries CSC Trafford Centre Group Limited owns and operates
The Trafford Centre in Manchester. Further details of the business are given
in the Business Review.
The fair value of the consideration paid has been assessed as GBP702.7
million, consisting of GBP582.8 million in respect of the ordinary shares and
GBP119.9 million in respect of the convertible bonds. The fair value has been
assessed using the Capital Shopping Centres Group PLC opening share price on
28 January 2011 of GBP3.76, being the share price at the point the acquisition
took place.
The fair value of assets and liabilities acquired is set out in the table
below.
Fair value
Book value adjustment Fair value
GBPm GBPm GBPm
Assets 1,653.6 (3.6) 1,650.0
Investment and development property
Plant and equipment 0.4 - 0.4
Cash and cash equivalents (including
restricted cash of GBP3.6 million) 41.2 - 41.2
Trade and other receivables 18.8 (12.9) 5.9
Total assets 1,714.0 (16.5) 1,697.5
Liabilities
Borrowings (833.3) (16.6) (849.9)
Trade and other payables (90.1) 15.6 (74.5)
Derivative financial instruments (17.5) - (17.5)
Total liabilities (940.9) (1.0) (941.9)
Net assets 773.1 (17.5) 755.6
Fair value of consideration paid 702.7
Gain on acquisition of subsidiaries 52.9
The book values disclosed are under IFRS and after allowing for the impact of
joining the REIT regime. The trade and other liabilities book value includes
the REIT entry charge of GBP33.0 million.
The fair value of the assets and liabilities acquired exceeds the fair value
of the consideration and as a result a gain of GBP52.9 million is recognised
in the income statement on acquisition. This gain reflects the CSC share price
at the date of the acquisition of GBP3.76 which, in accordance with IFRS 3
Business Combinations, is required to be used to assess the fair value of the
consideration for acquisition accounting purposes. The acquisition was however
agreed based on an issue price of the CSC ordinary shares of GBP4.00. The
difference between the agreed issue price of GBP4.00 and the share price at
the date the acquisition was completed of GBP3.76 is the principal reason for
recording an accounting gain on the acquisition.
Amounts disclosed have been adjusted from those reported in the Group`s
interim financial statements to reflect the finalisation of the review of the
acquired net assets and liabilities. This has resulted in an increase of
GBP1.4 million in the trade and other payables recognised with a resulting
reduction in the gain in the income statement.
During the year the acquired companies contributed GBP80.5 million to the
revenue of the Group and GBP25.4 million to the profit for the year. The
acquisition of The Trafford Centre has contributed GBP29.6 million to the
underlying earnings of the Group for the year including the deduction of
GBP5.3 million in relation to interest on the convertible bonds which is
deducted directly in equity. Had the acquisition taken place at 1 January 2011
the revenue of the Group for the year would have been GBP524.1 million and the
profit for the year would have been GBP36.3 million.
Acquisition of Broadmarsh
On 1 December 2011 the Group acquired a 100% interest in The Broadmarsh Retail
Limited Partnership for an initial cash consideration of GBP72.8 million. The
final consideration will be adjusted for the agreed net assets value of the
business at 1 December 2011 which is expected to result in a reduction to the
purchase price of GBP2.1 million. The fair value of the consideration is
therefore assessed as GBP70.7 million. Exceptional administration costs of
GBP3.3 million associated with the acquisition have been recognised in the
income statement.
The Broadmarsh Retail Limited Partnership owns and manages the Broadmarsh
Shopping Centre, Nottingham.
The fair value of assets and liabilities acquired is set out in the table
below.
Fair value
Book value adjustment Fair value
GBPm GBPm GBPm
Investment and development property 63.9 1.1 65.0
Trade and other receivables 1.6 (1.1) 0.5
Trade and other payables (4.1) - (4.1)
Net assets 61.4 - 61.4
Fair value of consideration paid 70.7
Goodwill recognised on acquisition 9.3
The fair value of the consideration exceeds the fair value of the assets and
liabilities acquired and as a result goodwill of GBP9.3 million is recognised
on the balance sheet on acquisition. This goodwill represents future cash
flows which the Group expects to receive as a result of the acquisition.
During the year the acquired business contributed GBP0.3 million to the
revenue of the Group and GBP0.1 million to the profit for the year. Had the
acquisition taken place at 1 January 2011 the revenue of the Group for the
year would have been GBP521.2 million and the profit for the year would have
been GBP53.0 million.
26 Disposal of C&C US
In 2010 the Group entered into an agreement with Equity One, pursuant to which
Equity One agreed to acquire the Group`s interests in its US subsidiaries (C&C
US), through a joint venture with CSC. The transaction was completed on 4
January 2011.
Consideration consisted of 11.35 million shares in the joint venture and 4.05
million shares in Equity One common stock. Based on the Equity One share price
on 4 January of $18.15 and an exchange rate on that day of 1.56, the
consideration had a fair value of GBP179.3 million at the date of the
transaction and the net assets exchanged had a book value of GBP147.3 million
including a deferred tax liability on investment property of GBP47.7 million.
After taking into account costs of the transaction of GBP2.5 million, and the
transfer of related hedging and foreign currency balances from equity of
GBP10.9 million, a profit of GBP40.4 million has been recognised in the income
statement as summarised in the table below.
GBPm
Fair value of consideration received 179.3
Book value of net assets (147.3)
Costs of the transaction (2.5)
Cumulative foreign currency and hedging balances transferred from
reserves 10.9
Gain on sale of subsidiaries 40.4
27 Capital commitments
At 31 December 2011, the Group was contractually committed to GBP34.6 million
(2010 - GBP90.1 million) of future expenditure for the purchase, construction,
development and enhancement of investment property. The majority of this is
expected to be spent in 2012.
The Group`s share of joint venture commitments included above at 31 December
2011 was GBP13.3 million (2010 - GBP63.0 million).
28 Contingent liabilities
As at 31 December 2011, the Group has no material contingent liabilities other
than those arising in the normal course of business.
29 Cash generated from operations
2011 2010
Notes GBPm GBPm
Continuing operations
Profit before tax 27.2 446.2
Remove:
Revaluation and sale of investment and
development property 6 (63.0) (497.2)
Gain on acquisition of subsidiaries 25 (52.9) -
Gain on sale of subsidiaries 26 (40.4) -
Impairment and sale of other investments 8.7 2.6
Depreciation 1.4 0.4
Share-based payments 3.6 1.0
Amortisation of lease incentives and other direct
costs (4.0) (5.3)
Finance costs 8 198.9 165.4
Finance income (0.8) (3.1)
Other finance costs 9 55.7 75.1
Change in fair value of derivative financial
instruments 193.4 50.0
Changes in working capital:
Change in trading property 6.5 4.5
Change in trade and other receivables (11.6) (21.1)
Change in trade and other payables 0.3 8.3
Cash generated from operations 323.0 226.8
30 Related party transactions
Key management(1) compensation is analysed below:
2011 2010
GBPm GBPm
Salaries and short-term employee benefits 4.6 7.2
Pensions and other post-employment benefits 0.3 0.3
Share-based payments 1.8 0.8
Termination benefits 0.9 0.5
7.6 8.8
1 Key management comprises the Directors of Capital Shopping Centres Group PLC
and those employees who have been designated as persons discharging managerial
responsibility.
As John Whittaker, Deputy Chairman and Non-Executive Director of CSC, is the
Chairman of the Peel Group, members of the Peel Group are considered to be
related parties. Total transactions between the Group and members of the Peel
Group are shown below:
2011
GBPm
Income 2.4
Expenditure (0.6)
Income predominantly relates to leases of office space and a contract to
provide advertising services. Expenditure predominantly relates to costs
incurred under the transitional services agreement and the supply of
utilities. All contracts are on an arms length basis at commercial rates.
Balances outstanding between the Group and members of the Peel Group as at 31
December 2011 are shown below:
2011
GBPm
Amounts owed by members of the Peel Group 0.1
Amounts owed to members of the Peel Group (0.1)
Under the terms of the Group`s acquisition of the Trafford Centre from the
Peel Group, the Peel Group have provided a guarantee in respect of Section 106
liabilities at Barton Square which as at 31 December 2011 total GBP10.6
million.
Additionally income of GBP3,000 was received during the year from a company
connected with John Whittaker which is not part of the Peel Group.
31 Events after the reporting period
At the General Meeting on 17 February 2012 shareholders approved the details
of two proposed transactions with the Peel Group. These transactions required
shareholder approval as John Whittaker, Deputy Chairman and Non-Executive
Director of CSC, is connected with the Peel Group. Details of the two
transactions are set out below.
The first transaction is the acquisition for GBP4.7 million from Clydeport
Properties Limited of a 30.96 acre site known as King George V Docks (West)
adjacent to CSC`s shopping centre at Braehead.
The second transaction is the acquisition for 2.5 million from Peel Holdings
Limited of a three year option alongside a refundable deposit of 7.5 million
to purchase two parcels of land in the province of Malaga, Spain; an
approximately 60 acre site which has initial planning consents for the
construction of a high-class regional shopping centre and leisure development,
and an adjacent approximately 14 acre site which is earmarked for possible
future development. Should CSC wish to exercise the option, CSC would expect,
subject to applicable law and regulation in force at the time, to be required
to seek further approval from shareholders at that time.
32 General information
The Company is a public limited company incorporated in England and Wales and
domiciled in the UK. The address of its registered office is 40 Broadway,
London SW1H 0BT.
The Company has its primary listing on the London Stock Exchange. The company
has a secondary listing on the Johannesburg Stock Exchange, South Africa.
INVESTMENT AND DEVELOPMENT PROPERTY (unaudited)
Property data as at 31 December 2011
Net
Market initial
value Yield
GBPm Ownership Note (EPRA)
As at 31 December 2011
The Trafford Centre, Manchester 1,700.0 100% 4.9%
Lakeside, Thurrock 1,081.0 100% 5.0%
A
Metrocentre, Gateshead 864.4 90% 5.3%
Braehead, Glasgow 582.5 100% 5.1%
B
Arndale, Manchester 369.6 48% 5.4%
Victoria Centre, Nottingham 333.0 100% 5.1%
The Harlequin, Watford 327.0 93% 5.3%
St David`s, Cardiff 286.3 50% 4.4%
Eldon Square, Newcastle upon Tyne 256.2 60% 4.7%
Chapelfield, Norwich 238.1 100% 5.7%
C
Cribbs Causeway, Bristol 219.5 33% 5.1%
The Chimes, Uxbridge 213.7 100% 5.9%
The Potteries, Stoke-on-Trent 184.3 100% 7.3%
The Glades, Bromley 173.9 64% 5.7%
D
Other 130.7
Total investment and development
property 6,960.2 5.14%F
As at 31 December 2010 5,099.1 5.32%
Gross
Nominal area
equivalent million
yield Occupancy sq ft E
As at 31 December 2011
The Trafford Centre, Manchester 5.5% 96.2% 2.0
Lakeside, Thurrock 5.6% 98.2% 1.4
Metrocentre, Gateshead 5.9% 96.3% 2.1
Braehead, Glasgow 6.1% 95.5% 1.1
Arndale, Manchester 5.7% 97.9% 1.6
Victoria Centre, Nottingham 6.4% 96.9% 1.0
The Harlequin, Watford 6.7% 97.9% 0.7
St David`s, Cardiff 5.9% 94.1% 1.4
Eldon Square, Newcastle upon Tyne 6.8% 94.1% 1.4
Chapelfield, Norwich 6.7% 99.0% 0.5
Cribbs Causeway, Bristol 6.1% 96.0% 1.0
The Chimes, Uxbridge 6.5% 98.6% 0.4
The Potteries, Stoke-on-Trent 7.5% 97.7% 0.6
The Glades, Bromley 7.3% 95.3% 0.5
Other 0.9
Total investment and development
property 5.98%F 96.7%F 16.6
As at 31 December 2010 6.30% 97.7% 14.1
31 December 31 December
2011 2010
GBPm GBPm
Passing rent 358.4F 283.1
ERV 448.9F 354.1
Weighted average unexpired lease 7.5 yearsF 7.0 years
Please refer to the Glossary for the definition of terms.
On a like-for-like basis (including The Trafford Centre) as at 31 December
2010 the nominal equivalent yield was 6.12 per cent, passing rent was GBP353.5
million and ERV was GBP459.0 million.
Notes
A Interest shown is that of the Metrocentre Partnership in the Metrocentre (90
per cent) and the Metro Retail Park (100 per cent). The Group has a 60 per
cent interest in the Metrocentre Partnership which is consolidated as a
subsidiary of the Group.
B The Group`s interest is through a joint venture ownership of a 95 per cent
interest in The Arndale, Manchester, and 90 per cent interest in New Cathedral
Street, Manchester.
C The Group`s interest is through a joint venture ownership of a 66 per cent
interest in The Mall at Cribbs Causeway and a 100 per cent interest in The
Retail Park, Cribbs Causeway.
D Includes the Group`s 67 per cent economic interest in Broadmarsh, Nottingham
and the Group`s 50 per cent economic interest in Xscape, Braehead.
E Area shown is not adjusted for the proportional ownership.
F Amounts quoted exclude Broadmarsh, Nottingham.
Analysis of capital return in the year
Revaluation
surplus*
Market value
2011 2010 2011
GBPm GBPm GBPm %
Like-for-like property 5,177.9 5,092.4 19.8 0.4
The Trafford Centre 1,700.0 - 46.5 2.8
Like-for-like property (including The
Trafford Centre) 6,877.9 5,092.4 66.3 1.0
Other 82.3 6.7 (3.3) n/a
Total investment and development
property 6,960.2 5,099.1 63.0 0.9
* Revaluation surplus includes amortisation of lease incentives and fixed head
leases.
Analysis of net rental income in the year
2011 2010 Change
GBPm GBPm %
Like-for-like property 272.1 262.6 3.6
The Trafford Centre and other acquisitions 77.5 - 100.0
Disposals - 1.0 (100.0)
Developments 14.4 13.3 8.3
Total investment property and development property 364.0 276.9 31.5
FINANCIAL COVENANTS (unaudited)
Financial covenants on asset-specific debt excluding joint ventures
Loan
outstanding at
31 January 20121 LTV
Maturity GBPm covenant
Metrocentre 2015 536.3 90%
Braehead 2015 324.2 N/A
Watford 2015 249.3 N/A
Nottingham 2016 244.5 90%
Chapelfield 2016 209.8 N/A
Uxbridge 2016 157.2 85%
Bromley 2016 135.3 85%
Lakeside 2017 514.5 75%
Total 2,371.1
Loan to Interest Interest
31 December 2011 cover cover
market value2 covenant actual3
Metrocentre 62% 120% 132%
Braehead N/A 120% 181%
Watford N/A 120% 139%
Nottingham 73% 120% 384%
Chapelfield N/A 120% 162%
Uxbridge 74% 120% 145%
Bromley 78% 120% 145%
Lakeside 48% 140% 211%
Total
The Trafford Centre
There are no financial covenants on the Trafford Centre debt. However a debt
service cover ratio is assessed quarterly and where this falls below specified
levels restrictions come into force. The loan to 31 December 2011 market value
ratio is 46 per cent.
Financial covenants on joint ventures asset-specific debt
Loan
outstanding at
31 January 2012 LTV
GBPm1
Maturity covenant
Cardiff 2014 93.44 70%
Xscape 2014 22.84 n/a5
Total 116.2
Loan to Interest Interest
31 December 2011 cover cover
market value 2 covenant actual3
Cardiff 33% 180% 237%
Xscape n/a5 120% 140%
Total
1 The loan values are the actual principal balances outstanding at 31 January
2012, which take into account any principal repayments made in January 2012.
The balance sheet value of the loans includes any unamortised fees.
2 The Loan to 31 December 2011 market value provides an indication of the
impact the 31 December 2011 property valuations could have on the LTV
covenants. The actual timing and manner of testing LTV covenants varies and is
loan specific.
3 Based on latest certified figures, calculated in accordance with loan
agreements, which have been submitted between 31 December 2011 and 31 January
2012. The calculations are loan specific and include a variety of historic,
forecast and, in certain instances, a combined historic and forecast basis.
4 50 per cent of the debt is shown which is consistent with accounting
treatment and the Group`s economic interest.
5 The Xscape LTV covenant is suspended until 1 April 2012. At that date the
LTV covenant will be 90 per cent. The loan to 31 December 2011 market value
was 85 per cent.
Financial covenants on corporate facilities at 31 December 2011
Interest
Net worth Net worth cover
covenant* actual covenant*
GBP375m facility, maturing in GBP750m GBP1,196m 120%
2016
Interest Borrowings/ Borrowings/
cover net worth net worth
actual covenant* actual
GBP375m facility, maturing in 209% 110% 26%
2016
* Tested on the Borrower Group which excludes, at the Group`s election,
certain subsidiaries with asset-specific finance.
The facility is secured on the Group`s investments in Arndale, Manchester and
Cribbs Causeway, Bristol.
Capital Shopping Centres Debenture PLC at 31 December 2011
Capital Capital Interest Interest
Loan cover cover cover cover
Maturity GBPm covenant* actual covenant actual
2027 231.4 167% 190% 100% 120%
* From 1 January 2012 the capital cover covenant reduces to 150 per cent.
The debenture is currently secured on the Group`s interests in The Potteries,
Stoke-on-Trent and Eldon Square, Newcastle.
Should the capital cover or interest cover test be breached Capital Shopping
Centres Debenture PLC (the issuer) has three months from the date of delivery
of the valuation or the latest certificate to the Trustees to make good any
deficiencies. The issuer may withdraw property secured on the debenture by
paying a sum of money or through the substitution of alternative property
provided that the capital cover and interest cover tests are satisfied
immediately following the substitution.
UNDERLYING PROFIT STATEMENT (unaudited)
For the year ended 31 December 2011
Six months
Year ended Year ended ended
31 December 31 December 31 December
2011 2010 2011
GBPm GBPm GBPm
Net rental income 364.0 276.9 186.1
Net other income 7.8 0.7 4.1
371.8 277.6 190.2
Administration expenses (24.1) (23.0) (12.3)
Underlying operating profit 347.7 254.6 177.9
Finance costs (198.9) (165.4) (100.8)
Finance income 0.8 3.1 0.2
Other finance costs (7.9) (8.8) (3.9)
Underlying net finance costs (206.0) (171.1) (104.5)
Underlying profit before tax
and associates 141.7 83.5 73.4
Tax on adjusted profit (1.0) (0.1) (0.3)
Remove amounts attributable to
non-controlling interest 3.3 2.3 2.1
Share of underlying loss of associates (0.1) - -
C&C US underlying earnings
included within discontinued operations - 10.9 -
Interest on convertible bonds
deducted directly in equity (5.3) - (2.9)
Underlying earnings 138.6 96.6 72.3
Underlying earnings per share (pence) 16.5p 15.4p 8.5p
Six months Six months Six months
ended ended ended
31 December 30 June 30 June
2010 2011 2010
GBPm GBPm GBPm
Net rental income 142.4 177.9 134.5
Net other income 0.4 3.7 0.3
142.8 181.6 134.8
Administration expenses (11.8) (11.8) (11.2)
Underlying operating profit 131.0 169.8 123.6
Finance costs (83.1) (98.1) (82.3)
Finance income 1.8 0.6 1.3
Other finance costs (4.4) (4.0) (4.4)
Underlying net finance costs (85.7) (101.5) (85.4)
Underlying profit before tax
and associates 45.3 68.3 38.2
Tax on adjusted profit 0.1 (0.7) (0.2)
Remove amounts attributable to
non-controlling interest 1.4 1.2 0.9
Share of underlying loss of associates - (0.1) -
C&C US underlying earnings
included within discontinued operations 6.5 - 4.4
Interest on convertible bonds
deducted directly in equity - (2.4) -
Underlying earnings 53.3 66.3 43.3
Underlying earnings per share (pence) 8.4p 8.0p 7.0p
GLOSSARY
ABC1 customers
Proportion of customers within UK social groups A, B and C1, defined as
members of households whose chief earner`s occupation is professional, higher
or intermediate management or supervisory.
Annual property income
The Group`s share of passing rent plus the external valuers` estimate of
annual excess turnover rent, additional rent in respect of unsettled rent
reviews and sundry income such as that from car parks and mall
commercialisation.
Debt to assets ratio
Net external debt divided by the market value of investment and development
property.
Diluted figures
Reported amounts adjusted to include the effects of dilutive potential shares
issuable under convertible bonds and employee incentive arrangements.
Earnings per share
Profit for the period attributable to equity shareholders of CSC divided by
the weighted average number of shares in issue during the period.
EPRA
European Public Real Estate Association, the publisher of Best Practice
Recommendations intended to make financial statements of public real estate
companies in Europe clearer, more transparent and comparable.
ERV (estimated rental value)
The external valuers` estimate of the Group`s share of the current annual
market rent of all lettable space net of any non-recoverable charges, before
bad debt provision and adjustments required under IFRS regarding tenant lease
incentives.
Exceptional items
Exceptional items are those items that in the Directors` view are required to
be separately disclosed by virtue of their size or incidence to enable a full
understanding of the Group`s financial performance.
Headline rent ITZA
Annual contracted rent per square foot after expiry of concessionary periods
in terms of zone A.
Initial yield to the Group
Annualised net rent (as per net initial yield (EPRA)) on investment properties
expressed as a percentage of the net market value, representing the yield that
would be foregone by the Group were the asset to be sold.
Interest cover
Underlying operating profit excluding trading property related items divided
by the net finance cost plus interest on convertible bonds recognised in
equity excluding the change in fair value of derivatives, exceptional finance
costs and amortisation of compound financial instruments.
Interest rate swap
A derivative financial instrument enabling parties to exchange interest rate
obligations for a predetermined period. These are used by the Group to convert
floating rate debt to fixed rates.
IPD
Investment Property Databank Ltd, producer of an independent benchmark of
property returns.
Like-for-like properties
Investment properties which have been owned throughout both periods without
significant capital expenditure in either period, so both income and capital
can be compared on a like-for-like basis. For the purposes of comparison of
capital values, this will also include assets owned at the previous reporting
period end but not throughout the prior period.
Loan-to-value (LTV)
LTV is the ratio of attributable debt to the market value of an investment
property.
NAV per share (diluted, adjusted)
NAV per share calculated on a diluted basis and adjusted to reflect any
unrecognised surplus on trading properties (net of tax), to remove the fair
value of derivatives (net of tax) and to remove deferred tax on investment and
development property, and other investments.
Net asset value (NAV) per share
Net assets attributable to equity shareholders of CSC Group PLC divided by the
number of ordinary shares in issue at the period end.
Net external debt
Net debt after removing the Metrocentre compound financial instrument.
Net initial yield (EPRA)
Annualised net rent on investment property (after deduction of revenue costs
such as head rent, running void, service charge after shortfalls, empty rates
and merchant association contribution) expressed as a percentage of the gross
market value before deduction of theoretical acquisition costs, consistent
with EPRA`s net initial yield.
Net rental income
The Group`s share of net rents receivable as shown in the income statement,
having taken due account of non-recoverable costs, bad debt provisions and
adjustments to comply with IFRS including those regarding tenant lease
incentives.
Nominal equivalent yield
Effective annual yield to a purchaser from the assets individually at market
value after taking account of notional acquisition costs assuming rent is
receivable annually in arrears, reflecting estimated rental values (ERV) but
disregarding potential changes in market rents.
Occupancy
The passing rent of let and under offer units expressed as a percentage of the
passing rent of let and under offer units plus ERV of un-let units, excluding
development and recently completed properties and treating units let to
tenants in administration as un-let.
Passing rent
The Group`s share of contracted annual rents receivable at the balance sheet
date. This takes no account of accounting adjustments made in respect of rent
free periods or tenant incentives, the reclassification of certain lease
payments as finance charges or any irrecoverable costs and expenses, and does
not include excess turnover rent, additional rent in respect of unsettled rent
reviews or sundry income such as from car parks etc. Contracted annual rents
in respect of tenants in administration are excluded.
Property Income Distribution (PID)
A dividend, generally subject to UK withholding tax at the basic rate of
income tax, that a UK REIT is required to pay to its shareholders from its
qualifying rental profits. Certain classes of shareholder may qualify to
receive a PID gross, shareholders should refer to www.capital-shopping-
centres.co.uk for further information. The Group can also pay non-PID
dividends which are not subject to UK withholding tax.
Real Estate Investment Trust (REIT)
A tax regime which exempts from corporation tax the rental profits and capital
gains of the REIT`s qualifying investment property activities. In the UK, the
regime must be elected into and the REIT must meet certain ongoing
qualifications, including the requirement to distribute at least 90 per cent
of qualifying rental profits to shareholders. The Group elected for REIT
status with effect from 1 January 2007.
Tenant (or lease) incentives
Any incentives offered to occupiers to enter into a lease. Typically
incentives are in the form of an initial rent free period and/or a cash
contribution to fit-out the premises. Under IFRS the value of incentives
granted to tenants is amortised through the income statement on a straight-
line basis over the lease term.
Topped-up NIY (EPRA)
Net initial yield adjusted for the expiration of rent free periods and other
unexpired lease incentives.
Total financial return
The change in NAV per share (diluted, adjusted) plus dividends per share paid
in the period expressed as a percentage of opening NAV per share (diluted,
adjusted).
Trading property
Property held for trading purposes rather than to earn rentals or for capital
appreciation and shown as current assets in the balance sheet.
Underlying earnings per share (EPS)
Earnings per share adjusted to exclude valuation movements, exceptional items
and related tax.
Underlying figures
Amounts described as underlying exclude valuation movements, exceptional items
and related tax.
Vacancy rate (EPRA)
The ERV of vacant space divided by total ERV.
Yield shift
A movement (usually expressed in basis points) in the yield of a property
asset.
Dividends
The Directors of Capital Shopping Centres Group PLC have proposed a final
dividend per ordinary share (ISIN GB0006834344) of 10.0 pence (2010 - 10.0
pence) to bring the total dividend per ordinary share for the year to 15.0
pence (2010 - 15.0 pence).
This dividend will be partly paid as a Property Income Distribution ("PID")
with a gross value of 2.5 pence per share and partly paid as a non-PID with a
value of 7.5 pence per share. The PID element will be subject to deduction of
a 20 per cent withholding tax unless exemptions apply (please refer to the
Special note below). The non-PID element will be treated as an ordinary
company dividend, and therefore SA shareholders may suffer a Dividends Tax of
10 per cent.
The following are the salient dates for the payment of the proposed final
dividend:
Thursday 17 May 2012
Sterling/Rand exchange rate struck
Friday 18 May 2012
Sterling/Rand exchange rate and dividend amount in SA currency announced
Monday 28 May 2012
Ordinary shares listed ex-dividend on the Johannesburg Stock Exchange
Wednesday 30 May 2012
Ordinary shares listed ex-dividend on the London Stock Exchange
Friday 1 June 2012
Record date for 2011 final dividend in London and Johannesburg
Tuesday 3 July 2012
Dividend payment day for shareholders
Should the Directors decide to offer shareholders a scrip alternative to the
2011 final dividend, shareholders will be advised no later than 11 May 2012.
South African shareholders should note that, in accordance with the
requirements of Strate, the last day to trade cum-dividend will be Friday 25
May 2012 and that no dematerialisation or rematerialisation of shares will be
possible from Monday 28 May to Friday 1 June 2012 inclusive. No transfers
between the UK and South African registers may take place from Thursday 17 May
to Sunday 3 June 2012 inclusive. South Africa introduces its new Dividends Tax
in April 2012, and our SA registrars, Computershare, will be writing to all SA
shareholders about this in the near future.
PID Special note:
The following applies to the PID element only of the 2011 final dividend:
UK shareholders: For those who are eligible for exemption from the 20 per cent
withholding tax and have not previously registered for exemption, an HM
Revenue & Customs ("HMRC") Tax Exemption Declaration is available for download
from the "Investors" section of the Capital Shopping Centres Group website
(www.capital-shopping-centres.co.uk), or on request to our UK registrars,
Capita Registrars. Validly completed forms must be received by Capita
Registrars no later than the Record Date, Friday 1 June 2012, otherwise the
dividend will be paid after deduction of tax.
South African and other non-UK shareholders: South African shareholders may
apply to HMRC after payment of the dividend for a refund of the difference
between the 20 per cent withholding tax and the UK/South African double
taxation treaty rate of 15 per cent. Other non-UK shareholders may be able to
make similar claims. Refund application forms for all non-UK shareholders are
available for download from the "Investors" section of the Capital Shopping
Centres Group website (www.capital-shopping- centres.co.uk), or on request to
our SA registrars, Computershare, or HMRC. Refunds are not claimable from
Capital Shopping Centres Group, the South African Revenue Service or other
national authorities, only from the UK`s HMRC.
Additional information on PIDs can be found at
www.capital-shopping-centres.co.uk/investors/shareholder_info/reit.
The above does not constitute advice and shareholders should seek their own
professional guidance. Capital Shopping Centres Group PLC does not accept
liability for any loss suffered arising from reliance on the above.
Sponsor:
Merrill Lynch SA (Pty) Limited
Date: 23/02/2012 09:07:06 Produced by the JSE SENS Department.
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