| Tue 12 Feb 2002, 0:00 | | Liberty International Plc - Preliminary Announceme |
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LIBERTY INTERNATIONAL PLC
JSE share code: LBT
ISIN: GB0006834344
2001 PRELIMINARY ANNOUNCEMENT
12 February 2002
Enquiries:
Liberty International PLC:
David Fischel Chief Executive +44 (0)207 960 1207
Aidan Smith Finance Director +44 (0)207 960 1210
Public relations:
UK: Michael Sandler,
Hudson Sandler +44 (0)207 796 4133
SA: Nicholas Williams,
College Hill Associates +44 (0)207 457 2020
Robyn Hunt,
College Hill Associates +27 11 447 3030
Liberty International PLC is a major UK listed property group with
investment properties and other property-related investments of over GBP4.25
billion. The group's three areas of activity are Capital Shopping Centres
PLC, the leading UK regional shopping centre business, Capital & Counties
plc, the retail and commercial property business concentrated on Central
London with interests in California, USA, and investment activities in real
estate related financial market opportunities.
Preliminary Results for the year to 31 December 2001
Financial Highlights
* First annual results to reflect a full twelve months' impact from the
major restructurings in 1999 and 2000
* Investment properties and other property-related investments increased by
GBP245 million to a total of GBP4.25 billion
* Share capital and reserves of GBP2.4 billion, increased by GBP46 million
in the year
* Net debt of GBP1.7 billion (2000 - GBP1.6 billion) with debt to assets
ratio unchanged at around 40 per cent, an appropriate and efficient level
for a long term property business, and no significant debt maturities before
2009
* Completion of two major long-term "non-recourse" financings totalling
GBP1.28 billion, significantly strengthening and improving the group's long
term financial structure
* Net asset value per share (diluted) increased by 3.9 per cent to 827p
(2000 - 796p)
* Net revaluation surplus of GBP12 million on the basis of valuations
conducted by independent external valuers
* Resilient income streams with property investment income up 6.2 per cent
to GBP203.9 million compared with GBP192.0 million in 2000
* Recurring interest payable increased from GBP83.4 million to GBP119.9
million as a result of increased debt following GBP600 million share buy
backs in 2000
* Profit before taxation of GBP90.9 million including exceptional profits of
GBP11.4 million (2000 - GBP153.0 million including exceptional profits of
GBP20.2 million and realised gains on listed property shares of GBP24.3
million)
* Earnings per share before exceptional items of 24.49p (2000 - 32.05p
including 6.85p of earnings from realised gains on listed property shares)
* Total return (net asset value per share growth and dividend) for 12 month
period of 6.8 per cent
* Dividend per share increased by 4.6 per cent to 22.75p (2000 - 21.75p)
Donald Gordon, Chairman of Liberty International, commented:
"Liberty International's emergence as a focussed UK based property
enterprise gathered pace in 2001. In 1999, we commenced the process of
gaining independence from our former controlling shareholder. In 2000, we
achieved that in a manner which improved the efficiency of the group's
capital structure, by increasing our gearing to an appropriate level, and
further streamlined our structure through the acquisition of the outstanding
25 per cent interest in Capital Shopping Centres PLC. In 2001, we completed
our exit from financial services with the disposal of our unit trust
business.
Our full attention is therefore now directed to the energetic development
of our core property business, real estate related financial market
opportunities and the company's future dynamic growth. A number of positive
steps were taken in the year, particularly in increasing the programme of
major shopping centre and commercial development opportunities and in
strengthening and improving the group's long term financial structure.
The results for the year are a testimony to the underlying strength and
resilience of our business in the more challenging economic conditions."
Dividends
The Directors of Liberty International PLC have proposed a final ordinary
dividend per share of 12p (2000 - 11.5p) to bring the total ordinary
dividend per share for the year to 22.75p (2000 - 21.75p).
The following are the salient dates for the payment of the final dividend:
27 March 2002 Sterling/Rand exchange rate struck.
5 April 2002 Last date to trade cum-dividend on the
JSE Securities Exchange South Africa.
8 April 2002 Ordinary shares listed ex-dividend on the
JSE Securities Exchange South Africa.
10 April 2002 Ordinary shares listed ex-dividend on the London Stock
Exchange
12 April 2002 Record date for final dividend in London and Johannesburg.
2 May 2002 Dividend cheques posted to shareholders.
3 May 2002 Dividend payment day. Where previously requested,
dividend cheques available for collection from Registrar.
No dematerialisation or rematerialisation of shares will be possible on the
JSE Securities Exchange and no transfers between the UK and South African
registers may take place from 27 March to 12 April inclusive.
Contents
This document contains:
* Financial highlights
* Chairman's statement
* Preliminary results
* Review of operations
* Group financial review
Further Information
Liberty International PLC is today making a presentation to property
analysts in London. The full text of the presentation, which does not form
part of the Preliminary Announcement, is available today on Liberty
International PLC's website at www.liberty-international.co.uk, as are the
contents of this announcement.
CHAIRMAN'S STATEMENT
Introduction - A dynamic and focussed property enterprise
Liberty International's emergence as a focussed UK based property
enterprise gathered pace in 2001.
In 1999, we commenced the process of gaining independence from our former
controlling shareholder. In 2000, we achieved that in a manner which
improved the efficiency of the group's capital structure, by increasing our
gearing to an appropriate level, and further streamlined our structure
through the acquisition of the outstanding 25 per cent interest in Capital
Shopping Centres PLC. In 2001, we completed our exit from financial
services with the disposal of our unit trust business.
Our full attention is therefore now directed to the energetic development
of our core property business, real estate related financial market
opportunities and the company's future dynamic growth. A number of positive
steps were taken during the year, particularly in increasing the programme
of major shopping centre and commercial development opportunities and in
strengthening and improving the group's long term financial structure.
Key achievements of 2001
Key achievements of the year were
* opening of The Chimes, Uxbridge in March 2001, with tenant trading
exceeding all our expectations and full occupancy being rapidly achieved
before the year end
* encouraging retailer sales figures from our major regional centres, with
reporting retailers indicating 21 per cent growth at Braehead, Glasgow and 8
per cent at Lakeside, Thurrock in Essex
* assembling a significant shopping centre development and investment
programme, predominantly at the pre-development and planning stage
* completion of two major long term "non-recourse" financings, GBP730
million secured on Braehead and MetroCentre, Gateshead, and GBP550 million
secured on the Lakeside shopping centre
* advancement and upgrading of the commercial property business of Capital &
Counties plc, both in the UK and USA and in particular the GBP70 million
acquisition of King's Reach, Southwark, London
* aggregate exceptional profits from share investment and financing of over
GBP8 million, as we develop our range of activities in this aspect of the
business
* disposal of Portfolio Fund Management Limited, the group's unit trust
business, for GBP12 million, achieving an exceptional profit of GBP3 million
* a 3.9 per cent increase in diluted net asset value per share from 796p to
827p
* a positive combined income and capital return of 6.8 per cent, a testimony
to the underlying strength and resilience of our business in the more
challenging economic conditions
Capital Shopping Centres
Our focus on the country's major regional shopping centres, with ten
completed centres including six of the UK's premier fifteen centres,
provides major competitive and strategic strength. Our leading centres
continue to represent attractive and prime trading locations for retailers
aspiring to long term success in the UK and we have maintained effectively
full occupancy throughout the year.
The resilience of income streams, which increased from GBP136 million to
GBP146 million, our irreplaceable franchise from household names such as
Lakeside, MetroCentre and Braehead and the advantages of scale in the
business with over 180 million annual customer visits to our ten centres,
provide a powerful platform for profitable expansion and continued growth.
Capital Shopping Centres has now assembled an attractive development
programme for the future including the GBP80 million MetroCentre extension
scheduled for completion in 2004; a 50 per cent interest in the GBP220
million Oxford project where the outcome of a public planning inquiry is
awaited in 2002; Braehead Phase II including 145 acres of undeveloped land
surrounding the shopping centre; major longer term partnership
opportunities in Cardiff and Liverpool. From our existing portfolio, Eldon
Square, Newcastle and the Victoria Centre, Nottingham may also present
attractive development and investment opportunities in 2002. Other high
quality projects are also being assessed and evaluated.
Capital & Counties
Our quality commercial and retail property business again made excellent
progress. Income grew by 9 per cent on a like for like basis to GBP57.4
million. With negligible voids at 1 per cent and a conservative valuation
basis, this business has considerable potential.
Our commercial business is increasingly focussed on Central London, the
engine room of the UK economy. This focus was reinforced close to the year
end by the acquisition for GBP70 million of King's Reach, Southwark, a 32
storey office tower with significant refurbishment potential on London's
South Bank, conveniently close to the City of London.
Our US business, while representing only 3 per cent of the group's
overall assets, produced 6 per cent of the group's property investment
income. The positive gap between the yields available on property and the
cost of borrowing now makes the US more attractive as an investment market
than for some time, notwithstanding anticipated difficulties following the
collapse of the US equity bubble and the economic slowdown. Since the year
end, we have announced the acquisition of a major US regional shopping
centre, the Serramonte Center, in Daly City, immediately to the south of the
City of San Francisco, for $119 million with an initial yield of 9 per cent.
Valuations
After strongly rising property values for almost a decade since mid 1992,
a temporary slowdown was hardly unexpected in the light of tumbling equity
markets and diminishing investor and tenant confidence. However, with
little evidence of the excessive supply and overbuilding which characterised
the last downward cycle at the end of the 1980's, quality UK real estate
still appears well placed in the current environment to perform its long
standing role as a store of value given the strong and stable yield underpin
at current valuations.
Indeed, the unusual opportunity to invest in quality property at yields
exceeding the cost of borrowing has not been available for many years. This
implies an extremely favourable environment for powerful property companies
with access to finance to expand their business selectively and at the same
time to improve earnings for shareholders with potential for long term
capital appreciation.
Overall, capital returns from our shopping centres amounted to a negative
0.3 per cent, with the reduction caused not by falls in values but rather by
ongoing capital expenditure and in particular the final settlement of the
construction contract at Braehead and associated costs. The commercial and
retail valuation surplus amounted to 2.9 per cent (3.6 per cent in the UK
and 0.9 per cent in the USA). These valuations resulted in an aggregate
improvement in net worth of some GBP12 million for the year which we regard
as an excellent outcome in current economic conditions.
Also, in view of the uncertainty prevailing in the UK and international
markets, the valuers have adopted a somewhat more conservative stance in
their valuations at 31 December 2001. This is indicated by the slightly
higher weighted average yield basis of 6.15 per cent applied to all our
shopping centre assets compared with 6.03 per cent last year. Equivalent
yields on the UK commercial and retail business were overall unchanged at
8.4 per cent .
Reassuringly, income has increased across the shopping centre portfolio
and at our flagship centre, Lakeside, trading levels are recovering strongly
from the impact of the Bluewater centre which opened south of the Thames in
1999. Considerable effort is being made to achieve a more cohesive
marketing strategy involving all the retail activities in the Lakeside area.
Lakeside shopping centre itself at 1.37 million square feet is the largest
and core component of 4 million square feet of space, constituting the
largest overall retail aggregation in Europe, catering for all the
requirements of its customer base in Essex and the south east of England.
An interesting perspective on the scope still available within Lakeside's
catchment area is that first time visitors to Lakeside still amount to an
estimated 5 per cent of total visitors.
Results for the year
Net asset value per share increased from 796p to 827p, an increase of 3.9
per cent. Including the dividend of 22.75p, the total combined return for
the year amounted to 6.8 per cent.
Valuation surpluses contributed 4p to the increase in net asset value per
share, share buy backs and the repurchase and cancellation of convertible
bonds contributed 23p, and retained profits account for the balance of 4p.
This year's profits reflect the group's substantially reduced capital
base, as a consequence of the significant share buybacks in the second half
of 2000 amounting to over one-third of the issued share capital of Liberty
International and involving a payment of over GBP600 million. The buy
backs improved the efficiency of the company's capital structure, including
reducing the overall tax rate, but did result in an increased interest
charge in 2001. Further, 2000's abnormal level of one-off profits from
share trading activities and the disposal of businesses was not matched in
2001.
The most important measure of performance, net property investment
income, showed consistent growth from GBP192.0 million to GBP203.9 million
including a first time contribution for nine months from The Chimes,
Uxbridge of GBP4.3 million.
Profit before taxation for the year amounted to GBP90.9 million with
earnings per share of 27.6p or, excluding exceptional profits, 24.5p.
Exceptional profits amounted to GBP11.4 million before taxation in 2001,
notably including GBP9 million of gains on early termination of interest
rate swap arrangements and surplus of GBP8 million on the repurchase of
GBP112 million CSC unsecured bonds offset by the premium over book value of
GBP9 million on repurchase and cancellation of Liberty International
convertible bonds.
Dividend
Following the practice of the company to distribute the bulk of the year's
recurring revenue profits after tax by way of dividend, the directors are
recommending a final dividend of 12.0p, bringing the full year's dividend to
22.75p (2000 - 21.75p), an increase of 4.6 per cent.
Financial Position
After the group's gearing levels were increased substantially in 2000,
balance sheet financial ratios did not change materially in 2001. The debt
to assets ratio was maintained around 40 per cent of long term assets, as
investment properties increased from GBP4.0 billion to GBP4.1 billion and
net borrowings from GBP1.6 billion to GBP1.7 billion.
On a consolidated basis, interest cover (profit before interest and tax
divided by interest costs for the year) amounted to over 1.6 times.
The group's financial position therefore continues to be extremely sound
with debt levels appropriate for a long term property business. This is
particularly so when proper account is taken of the stable cash flows from
our assets and the benefit of the "non-recourse" debt structures entered
into in 2001 in reducing the risk to shareholders and unsecured bondholders
from a serious deterioration in the performance of the major assets, however
unlikely that may be.
Financing
Our financing strategy in 2001 was to combine a lengthening of the
group's debt maturity profile with an improvement in its efficiency, risk
profile and interest rate structure. Two major non-recourse financings;
first on MetroCentre and Braehead (GBP730 million) and secondly on Lakeside
(GBP550 million), raised GBP1.28 billion with 15 and 10 year maturities
respectively. Our move to asset specific, non-recourse finance structures
both suits our asset profile and reflects market conditions in capital
markets, where finance is available on this basis, with both longer
maturities and on finer margins.
These facilities replaced some GBP600 million of short term finance
connected
