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LIBERTY INTERNATIONAL PLC - FINANCIAL REPORT
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: LBT
Issuer Code: LILI I
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002 (REVIEWED)
Enquiries
Liberty International PLC
Donald Gordon, Chairman +44 20 7960 1201
David Fischel, Chief Executive +44 20 7960 1207
Aidan Smith, Finance Director +44 20 7960 1210
Public Relations
UK
Michael Sandler, Hudson Sandler +44 20 7796 4133
SA
Nicholas Williams, College Hill +44 20 7457 2020
Robyn Hunt, College Hill +27 11 447 3030
31 July 2002
LIBERTY INTERNATIONAL PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002
Liberty International PLC is a major listed property group owning 100 per cent
of Capital Shopping Centres PLC ("CSC"), the leading UK regional shopping centre
business, and Capital & Counties plc, a commercial and retail property
investment and development company.
Donald Gordon, Chairman of Liberty International, commented:
"Despite the turbulent conditions currently prevailing in the world`s
financial and securities markets, I am gratified that our chosen sectors in the
real estate markets, particularly our shopping centre business, have produced a
remarkably sound outcome in a highly volatile environment. The resilience of
our prime regional shopping centre assets is becoming more extensively
recognised and the 20 per cent improvement in the Liberty International share
price in the first half year is an encouraging and timely vindication of our
strategy, focus and efforts."
Results
* Net asset value per share (adjusted *) increased from 827p at 31 December
2001 to 836p at 30 June 2002 (30 June 2001 - 812p) after providing for 11.25p
interim dividend
* Six month revaluation surplus of GBP19.6 million (UK regional shopping
centres 0.5 per cent, UK retail and commercial - unchanged, USA 1.8 per cent)
* Total return for the six month period (net asset value per share growth and
dividend) of 2.5 per cent
* Net property investment income increased by 9 per cent to GBP108.1 million
(30 June 2001 - GBP99.3 million) with an underlying increase of 6 per cent on a
like-for-like basis
* Profit before taxation and exceptional items of GBP37.9 million (30 June
2001 - GBP39.1 million), with a small reduction reflecting GBP3.6 million lower
trading profits and approximately GBP2 million of additional interest incurred
in financing the property shares which produced the exceptional gains
* Earnings per share before exceptional items (adjusted *) of 10.82p
(30 June 2001 - 11.38p)
* Exceptional profits of GBP12.6 million (30 June 2001 - GBP13.1 million)
increasing profit before taxation to GBP50.5 million (30 June 2001 -
GBP 52.2 million).
Exceptional profits include GBP6.5 million on disposal of shares in other
property companies and GBP8.1 million on repurchase of CSC unsecured bonds.
The overall profit before tax on realisation of other property company shares
amounted to GBP13.3 million in the current period of which GBP6.8 million does
not appear in the profit and loss account either in the current or previous
periods as it had been recognised in revaluation reserves in 2001
* Basic earnings per share including exceptional profits of 12.96p
(30 June 2001 - 13.99p restated)
* Interim dividend increased by 4.7 per cent from 10.75p per share to 11.25p
per share
* net asset value and earnings per share have been adjusted to exclude the
impact of deferred tax on capital allowances (see Note 1 on change of accounting
policies in relation to the recently introduced FRS19)
Financial Position
* Debt to assets ratio constant at 40 per cent with aggregate net debt
unchanged at GBP1.70 billion
* Completion of GBP211 million 12 year, non-recourse term financing secured on
The Chimes, Uxbridge and The Glades, Bromley, further strengthening the group`s
long term debt structure
* In accordance with overall financing strategy of concentrating on
non-recourse asset specific debt, repurchase of a further GBP103 million of CSC
unsecured bonds. The original GBP350 million of CSC unsecured bonds in public
issue reduced to GBP135 million at 30 June 2002 (7 per cent of aggregate debt)
and further reduced since 30 June to GBP122 million
* Weighted average debt maturity of 12 years and weighted average interest
rate, largely fixed rate, of 6.9 per cent (6.4 per cent excluding
GBP230 million of historic Capital & Counties first mortgage debenture stocks)
* Cash balances of GBP186 million and unutilised committed facilities of some
GBP500 million at 30 June 2002
Property activities
* Commitment to major 510,000 sq.ft. regional shopping centre at Norwich being
developed by Lend Lease Europe. Construction scheduled to start in 2002 for
completion in 2005. CSC`s commitment estimated at GBP275 million, subject to
the level of rental income achieved which is currently estimated at GBP18
million per annum
* Outline planning permission obtained for Braehead Phase 2 development, a
major regeneration project on 145 acres, involving a mix of leisure, residential
and office uses anticipated to create over 2000 further jobs at Braehead
* Completion by Capital & Counties of GBP70 million King`s Reach, Southwark,
London and $119 million Serramonte Shopping Centre, San Francisco acquisitions
* Since 30 June 2002
- commencement of construction of GBP85 million MetroCentre extension for
2004 completion
- GBP32 million investment to increase interest in The Potteries Shopping
Centre, Hanley, Stoke on Trent from 35 per cent to 50 per cent
* Aggregate committed investment and development programme at CSC now
amounting to some GBP500 million.
* Significant pipeline of additional investment and development opportunities
including inter alia major new regional centres at Cardiff and Oxford and
extensions within many of CSC`s existing centres
Investment properties
* Investment properties of GBP4.2 billion of which UK regional shopping
centres comprise 78 per cent and retail in aggregate comprises 88 per cent
* Like for like increases in net property investment income
- CSC 7.7%
- UK retail and commercial 2.2%
- Overall 6.0%
* Valuation yields
- unchanged at CSC
- initial 6.8 per cent (31 December 2001 - 6.6 per cent) reverting to
8.6 per cent (31 December 2001 - 8.7 per cent) for UK investment properties of
Capital & Counties
* Strong lease maturity profile with average unexpired lease term of
11 years (CSC) and 6 years (Capital & Counties)
* Extremely low level of voids
- 20 units out of 1523 at CSC representing 0.5 per cent of passing rents
- 2 per cent of passing rents at Capital & Counties
* Active management
- 44 tenancy changes in the six month period at CSC
Trading
* Trading at CSC centres generally mirrors ONS non-food sales growth of
5.2 per cent for first six months
* Braehead, now in third year of trading, continues double digit growth in
retailer sales figures
* Uxbridge, into second year of trading in March 2002, shows encouraging and
strong year on year growth
* Lakeside continues monthly record of positive year on year sales growth
Other
* Trading of Liberty International shares on London Stock Exchange moved from
quote-driven SEAQ system to order driven SETS system, with a view to improving
liquidity and reducing dealing spread
* Liberty International`s FTSE ranking on the basis of market capitalisation
placed the company at number 100 as at the close of business on Monday 29 July
2002
Prospects
* Continued reversionary annual rental income potential at both CSC and
Capital & Counties in aggregate estimated at around GBP30 million.
* Strong competitive position and franchise as leading company in UK regional
shopping centre industry
- 3 out of town and 7 in-town centres
- 6 of UK`s top 15 centres
- over 180 million customer visits per annum
- catchment areas covering over one-third of UK`s population
- strong relationship with major retailers
- extensive experience of working with partners and local authorities
- active management approach treating shopping centres as businesses
- GBP500 million investment and development programme and other
opportunities will increase scale substantially
DIVIDENDS
The Directors have announced an increased interim ordinary dividend of 11.25p
per share (2001 - 10.75p per share) payable on 16 September 2002 to shareholders
on both UK and South African registers on the record date of
23 August 2002.
The Sterling/Rand exchange rate to determine the payment to be made to
shareholders on the South African register will be struck on 7 August 2002 and
will be announced on 8 August 2002. The shares will be shown as
ex-dividend on the JSE Securities Exchange South Africa on 19 August 2002 and on
the London Stock Exchange on 21 August 2002. The share registers will be closed
for transfers between the UK and South African registers from 7 until 26 August
2002 inclusive.
For this dividend payment, South African shareholders should note that the
last day to trade cum dividend is 16 August 2002, and that share certificates
may not be rematerialised or dematerialised between 19 and 23 August 2002, both
days inclusive.
2002 Interim Chairman`s Statement
Introduction
Against a backdrop of continuing troubled and extremely volatile financial and
securities markets, Liberty International`s first half year results have again
demonstrated the resilience of our business. We have reported strong underlying
growth in net property investment income based on an encouraging like for like
increase of 6 per cent. This fundamental measure based on recurring income
provides a better indication of the six month performance than the headline
profit and earnings per share numbers which are marginally below the comparable
period last year reflecting a reduced level of
non-recurring trading profits. Furthermore, some GBP6.8 million of exceptional
profits on investment activities in property shares actually realised in the six
month period under review were not recorded in the profit and loss account
either in the current year or last year as they were reflected in 2001 in
revaluation reserves as unrealised gains in accordance with the relevant
accounting standard in the UK. However, with a modest upwards revaluation of
our investment property portfolio, net assets per share have improved from 827p
to 836p, after providing for an increased interim dividend of 11.25p per share
(2001 - 10.75p).
Activity
The period has been one of vigorous activity. A major new shopping centre
opportunity has been secured at Norwich, Norfolk. Planning approval has been
obtained for Braehead Phase 2 and construction has recently commenced on site
following the receipt of all necessary third party consents at MetroCentre,
Gateshead for the GBP85 million extension which includes a new Debenhams
department store and 28 additional shop units. Our finances were further
strengthened in the period by a GBP211 million 12 year non-recourse term loan
secured jointly on The Glades, Bromley and The Chimes, Uxbridge. Our committed
development and investment programme now amounts to some
GBP500 million, which is fully funded by cash and existing loan facilities.
We have exceedingly promising projects in the formative stage at Oxford and
Cardiff while a number of the major assets in the existing regional shopping
centre portfolio have substantial plans for expansion and redevelopment. These
opportunities will become commitments only when we are satisfied as to their
viability and long term benefits for shareholders. Furthermore, reflecting our
strong competitive position in the UK regional shopping centre business, we
continue to receive a steady flow of other interesting opportunities, several of
which are currently being evaluated.
Financial Position
Since completion of the merger with Capital Shopping Centres (`CSC`) at the
end of 2000, we have made substantial progress in strengthening and streamlining
our financial structure through the use of asset specific
non-recourse financings linked to our major assets and ring-fenced from the
remainder of the group.
The exceptional flexibility, long term financial strength and competitive
interest costs which this structure provides the group have unfortunately not
been recognised by some debt rating agencies who erroneously persist in
regarding the financing strategy we have adopted as prejudicial to unsecured
bondholders` interests. One of the agencies, Fitch Ratings, saw fit to
downgrade the unsecured debt rating of CSC to below investment grade. This
rating completely ignores the positive implications, commercial realities and
integrity of a long established and respected parent company such as Liberty
International and its inherent responsibility and commitment to its major core
operating subsidiary. We are contesting vigorously this flawed rating approach.
In this context nearly GBP2.4 billion of shareholders` funds including some
GBP1.1 billion of completely unencumbered assets provide exceptional asset
coverage for the current remaining GBP122 million of unsecured bonds as set out
in the accompanying Financial Review. We have therefore recently found it
necessary to terminate the services of Fitch Ratings as we concluded their
misconceived analysis and mistaken conclusions were highly damaging to the
interests of CSC unsecured bondholders and also have negative consequences on
Liberty International. We are robustly pursuing the matter with a view to
ensuring the rating agencies take a more enlightened and practical approach to
our well planned and beneficial corporate financial strategies which are
particularly appropriate to the very large units which are a feature of the CSC
portfolio.
My firm conclusion emanating from the above regrettable experience is that
rating agencies should as a matter of urgency be subject to direct regulatory
supervision by the Financial Services Authority or equivalent regulatory body
and a mechanism for appeal against unfair ratings should be established. Some
of the rating agencies` activities and methodology appear to be currently
generating widespread concern and damage as they appear largely unaccountable
and unchallenged, despite their serious and sometimes controversial impact on
financial markets.
A portion of the proceeds of the long term financing referred to above were
used in the period to repurchase GBP103 million of CSC unsecured bonds,
absorbing the unwarranted supply and accommodating sellers of the bonds who were
influenced by Fitch Ratings` unnecessarily negative approach. These repurchases
reduced the amount in public issue, originally GBP350 million, to GBP135 million
at 30 June 2002 with a further GBP13 million repurchased subsequently reducing
the amount to a nominal value of GBP122 million. Consequently at this stage
unsecured corporate debt no longer plays a significant or relevant role in our
overall financing strategy, as it now amounts to only 7 per cent of our
aggregate debt and 3 per cent of total assets. At 30 June 2002, cash and
existing committed borrowing facilities amounted to over GBP600 million with the
group`s debt to asset ratio being maintained at a modest 40 per cent under long
term fixed rate, primarily
non-recourse, arrangements, implying an extremely strong financial position as a
base for undertaking new developments and opportunities in the future.
Financial markets
The period was marked by continued uncertainty in financial markets, as UK and
US equity markets, despite having already delivered two years of negative
returns, continued their unrelenting fall. Despite a strong initial
performance, during the six month period to 30 June the FTSE100 index fell by
nearly 11 per cent and has subsequently in July fallen significantly further.
In the US, the S&P500 index fell by 14 per cent in the first six months and
likewise further since 30 June. By contrast, the FTSE350 real estate index
increased by 11 per cent in the six month period and Liberty International`s own
share price rose from 483p to 583p, an increase of over 20 per cent.
The contrasting fortunes of property shares, and particularly those of Liberty
International, compared with the general stock market confirm the attractions
amid such uncertainty of the secure income streams and lower volatility of
property as an asset class. In our case, we have benefited from investors
increasingly appreciating that the UK regional shopping centre business, which
forms some 80 per cent of our overall activities, is an exceptionally sound and
resilient business.
Business performance
Our 10 major completed shopping centres with an open market value of around
GBP3.2 billion include six of the UK`s top fifteen shopping centres. These
strategic assets with some 8 million square feet of prime retail space have
considerable and unique scarcity value in the restrictive UK planning
environment. CSC`s shopping centres attract over 180 million customer visits a
year and have a catchment area covering over one third of the UK`s population.
Our average lease length is 11 years, and the vast majority of the 1523 shops
are let to mainstream credit-quality retailers trading out of many of their best
locations. In addition we have a number of major new development projects of
equivalent quality which, when complete, will further strengthen our franchise
and competitive position within the UK shopping centre industry.
Our business continues to benefit from its substantial scale, our strong
relationship with leading retailers, our proven long term track record of
working successfully with partners such as local authorities and other shopping
centre investors and our highly experienced specialist active management
approach. Our consistent focus on dominant and strategic locations provides
significant defensive qualities in uncertain economic conditions.
The open market valuation of our regional shopping centres at 30 June 2002
produced an uplift after capital expenditure of GBP16.6 million (0.5 per cent)
with little variation in equivalent yields. In fact, with long dated gilt
yields below 5 per cent and short dated interest rates even lower, equivalent
yields around 6 per cent to 6.75 per cent do not appear at all demanding given
the reliability of cash flows derived from prime shopping centres. Quality
regional shopping centres which cannot be replicated have a strong scarcity
value and rarely change hands. It is interesting to note that prime unit high
street shops, which lack many of the attractions from an investment perspective
of a quality regional centre, have begun to trade at yields sometimes markedly
below the equivalent yields at which our centres are valued. This anomaly
reflects the weight of money looking to invest in real estate, and particularly
retail property, and the greater availability of assets of smaller lot sizes.
The Capital & Counties` business with some GBP900 million of commercial
properties includes a significant retail component of over GBP400 million.
The most recent major acquisition, the Serramonte Shopping Centre in the
San Francisco Bay area, showed a healthy increase in valuation to
$125 million from its $119 million acquisition price. In the UK, the
performance of retail assets clearly diverged from offices in the first half of
2002, with this outperformance looking set to continue for some time as office
markets suffer from oversupply and falling rental values and demand.
Stamp duty on property transfers
It would be inappropriate for the Chairman of a major UK property company to
issue a set of results without commenting on one of the major iniquities facing
the property industry today. Stamp duty on commercial property transactions is
currently levied on an ad valorem basis of 4 per cent. At the same time, the
securities industry is seeking to argue that 1/2 per cent applied to share
transactions is excessive and should be eliminated altogether. The property
industry, in seeking to present itself as a worthwhile alternative asset class
for investors and with a track record in the recent past to justify this claim,
is undoubtedly handicapped substantially by the excessive 4 per cent stamp duty.
The level of charge has already resulted in Liberty International substantially
curtailing the shorter term trading element of our overall property activities
as a productive return on capital is extremely difficult to achieve on trading
with stamp duty at this level. Long term damage to the industry is likely in
the current environment of lower overall returns when the stamp duty component
becomes a far greater drag on performance.
Share options
Accounting issues are highly topical at present and none more so than
accounting for the cost of share options. The Liberty International group had
some 4.8 million share options outstanding at 30 June 2002, representing 1.7 per
cent of our issued share capital. In order to ensure that no dilution to net
asset value arises upon exercise of these options, we have consistently arranged
over the last decade that these options are broadly matched by shares acquired
by an Employee Share Trust, with the balance sheet currently showing a holding
of 4.5 million shares at a cost of GBP21.6 million. The profit and loss account
has therefore reflected the cost of options throughout this period by way of an
increased interest charge, but, as the Employee Share Trust waives the dividends
on its Liberty International shares, the net cost has been negligible.
Dividends
The Directors have announced an interim ordinary dividend of 11.25p per share
(2001 - 10.75p per share) payable on 16 September 2002. The increase is in line
with our policy of progressive dividend growth and an interim dividend amounting
to approximately half the previous year`s dividend.
Capital Shopping Centres
During the half year, CSC`s shopping centres continued to attract excellent
support from both consumers and retailers, confirming the quality and strength
of CSC`s prime regional shopping centre portfolio. Through our active
management approach, a total of 44 tenancy changes have taken place across the
portfolio as we continually look to find ways to upgrade the retail offer in a
dynamically changing marketplace. Our centres continue to have good
reversionary potential, as the five yearly rent review process consolidates
rental levels across the portfolio, and our use of turnover related leases
enables us to participate in the retailers` sales performance.
The growth in retail sales at CSC`s centres on a comparable basis has
generally mirrored the retail sales growth reported by the Office of National
Statistics of 5.2 per cent for non-food sales for the 6 months to 30 June 2002.
Lakeside, Thurrock has continued its growth profile showing positive monthly
sales growth throughout the period. Braehead, Glasgow, now in its third year of
trading, continues to show double digit monthly retailer sales growth as it
consolidates its position within its catchment area. Retailers at The Chimes,
Uxbridge which commenced its second year of trading in March 2002 are also
reporting strong and encouraging growth.
After some preliminary work earlier in the year the main construction contract
for the redevelopment of part of the MetroCentre, Gateshead to provide a new
Debenhams department store, 28 additional shop units and an 1100 space car park
at a cost of GBP85 million started on site in July, with a planned completion
date of autumn 2004. The extension will significantly add to the retail offer
on both trading floors and substantially extend the prime retail trading area.
At Lakeside, the programme of enhancement to improve both the facilities and
the retail offer continues to be progressed. The majority of proposed works to
refurbish and modernise the malls are scheduled to take place in 2003 and the
ongoing remodelling of space to meet retailer and consumer demand is a
continuing process with a number of lettings to retailers new to Lakeside having
taken place this year.
Since 30 June, we have increased CSC`s share in the Potteries, Hanley from 35
per cent to 50 per cent. Discussions continue with Newcastle City Council for
re-gearing our lease at Eldon Square Shopping Centre and to redevelop the south
end of the centre.
The development programme was augmented in May when we announced legal
documentation had been exchanged with Lend Lease Europe in respect of the
Chapelfield Shopping Centre development in Norwich, where Lend Lease Europe will
act as developer while CSC will become the owner of the asset on completion.
Construction is anticipated to commence this year and completion is targeted for
autumn 2005. The Chapelfield Shopping Centre, anchored by a House of Fraser
department store, will be the dominant shopping centre in Norwich providing a
total of 510,000 sq.ft. of retail space and will provide an important addition
to our portfolio. Our commitment is estimated at
GBP275 million subject to the level of rental income achieved, for a freehold
interest in the completed centre.
Our joint venture with Land Securities to extend the St David`s Centre in
Cardiff with a major retail-led mixed-use extension of approximately
715,000 sq.ft. of retail space is making good progress with the intention
of submitting a planning application later this year.
We are still awaiting the Secretary of State`s decision to the Planning
Inquiry held in November 2001 into the proposals under a joint venture with
LaSalle Investment Management to double the size of the existing Westgate Centre
in Oxford. A decision by the Secretary of State is also awaited into the
Planning Inquiry which ended in February this year into the Walton Group
proposals for Chavasse Park, Liverpool where we are acting as development
consultants.
In March 2002, Renfrewshire Council resolved to give a favourable
determination to our outline planning application for the second phase of mixed
use development on the Braehead Phase 2 land of 145 acres. The main uses are
residential, business office space and a major leisure scheme.
We are intending that the leisure scheme will be progressed under a joint
venture with Capital & Regional for an Xscape Snow Dome. We anticipate
progressing the development of the other uses through a combination of land
sales, joint ventures and direct development. Within the Braehead shopping
centre, we have appointed SMG, the leading arena operator, to manage the
existing leisure amenities, incorporating the 4,000 seat multi-purpose arena and
curling and skating facilities.
CSC Enterprises, formed in 2001 to promote additional commercial opportunities
from advertising, branding and promotions is now beginning to establish a
revenue stream which in time is expected to generate a meaningful contribution
to profits.
Capital & Counties
Valuations of Capital & Counties` GBP900 million investment properties at
30 June 2002 showed an overall increase of GBP3 million from 31 December 2001,
but with some significant divergences in performance.
In Central London, the office and retail investments increased in value by 0.5
per cent, with appreciation at some properties due to approaching reversions
outweighed by reductions elsewhere due to potential lease expiry or in one case
tenant default at the company`s remaining City office building. Provincial
retail investments increased in value by 1.5 per cent. However, South East and
M25 offices fell by nearly 2.5 per cent due to yield shift and lower rental
value expectations.
Annual and estimated initial yield on the income producing UK investment
properties is now 6.8 per cent reverting to 8.6 per cent at today`s rental
values, compared with 6.6 per cent and 8.7 per cent respectively at
31 December 2001.
In the UK, the GBP70 million acquisition of King`s Reach on London`s South
Bank was completed in March and since 30 June 2002 arrangements have been
concluded for a GBP40 million non recourse bank loan secured on the property.
We have been exceedingly cautious for some time about office development. The
relatively small 58,000 sq.ft. office development at Uxbridge was completed in
February but currently remains vacant though there is some interest at present.
The only other new office development awaiting tenants is Capital Park,
Cambridge where a third of the 48,000 sq.ft. second phase building has been let.
At this development, we are currently in discussion for a prelet for the 39,000
sq.ft. third phase, though construction will not commence until this is secured.
Vacancies within the UK portfolio are currently still at a low level of
2.2 per cent of passing rents compared with 1.0 per cent at the year end, the
increase mainly resulting from the tenant failure mentioned above.
We have seen exceptional performance within the Central London assets over the
last five years but anticipate that the outperformance will temporarily halt in
today`s circumstances of slack tenant demand and an uncertain outlook. Office
rental growth is unlikely to resume in the near future with the market around
the M25 particularly soft. However a third of
Capital & Counties` Central London investments by value are high quality retail
units in the West End and it is anticipated that this element will continue to
perform well.
The recent introduction of the Draft London Plan, presented by the Mayor in
June, is of significance to all office investors and developers in Central
London. The Plan proposes intensification of significant development within
Central London and the Thames gateway. On the face of it, such potential
oversupply would be of concern. However, the Plan emphasises the need for mixed
use schemes and will require the inclusion of significant affordable housing.
Under these circumstances, it is difficult to envisage an early positive private
sector response, particularly in a slowing market and in what will inevitably be
a more complex planning environment.
Our other initiatives continue to make steady progress. The joint venture
established with Enterprise Centres has now been formalised as Capital
Enterprise Centres and has acquired a further site at Croydon. Another five
sites for workspace units are currently under consideration.
Capital Services has expanded further in the half year with turnover increasing
by 50 per cent. Since the last year end, Qudos Broadband continues to make
progress with discussions for implementation in hand
with a number of property owners.
In the US, values increased by 1.8 per cent after costs, helped by the uplift
on the first time valuation of the Serramonte Shopping Centre, San Francisco.
Pursuing the strategy of concentrating on larger assets with value-added
potential, two sales have been concluded. The remaining
non-Californian asset, Parkway Square in Seattle, was disposed of for
$11.7 million. The Jackson Square retail centre at Hayward, San Francisco was
sold after the end of the half year for $17.6 million, once we had successfully
completed our enhancement strategy for the property.
The potential capital gains tax inherent on these sales has been able
to be carried forward by reducing the base cost of the Serramonte asset.
Prospects
For several years, it has been quite apparent that the excesses of stockmarket
valuations would correct in a manner which would inevitably be painful. In
recent months, confidence in financial markets has been further eroded by
emerging tales of egregious corporate greed and dishonesty.
It would be unrealistic to expect these factors not to have some negative
economic impact over the next few years.
Nevertheless, we continue to believe strongly in the investment merits of
quality property which is undoubtedly now being recognised as a relative safe
haven for investors compared with equity markets as a whole. We look forward to
a sustained period in which investors will seek to upweight their property
investment allocations, which provides a firm underpin to current valuations of
direct property and indirectly to property company shares which are still
trading at significant discounts to net asset value.
While the momentum of capital growth on property in the next few years is
unlikely to achieve levels seen during the second half of the 1990`s, we are
confident that our business will continue to prosper as we focus on the
fundamentals of investing in quality property with secure income streams such as
our well located regional shopping centres.
Donald Gordon
Chairman
31 July 2002
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2002
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Restated* Restated*
Notes GBP`m GBP`m
GBP`m
Turnover 2 175.5 159.0 331.0
Property investment income:
Rents receivable 140.8 124.0 258.3
Service charge
and other income 29.5 24.3 41.0
170.3 148.3 299.3
Rents payable (24.3) (19.3) (45.0)
Property outgoings (37.9) (29.7) (50.4)
Net property investment income 108.1 99.3 203.9
Property trading 1.5 1.6 6.3
Investment and financial
services income 3.7 3.0 5.6
Realised trading gains on
listed property shares - 3.5 3.5
Administrative expenses (9.0) (10.3) (19.9)
Operating profit 2 104.3 97.1 199.4
Exceptional profit on
disposal of fixed assets
and subsidiaries 3 5.5 0.8 4.0
Profit before interest
and taxation 109.8 97.9 203.4
Interest payable less
receivable - recurring 4 (66.4) (58.0) (119.9)
- exceptional 3 7.1 12.3 7.4
Profit on ordinary
activities before taxation 50.5 52.2 90.9
Taxation on profit on
ordinary activities 5 (10.1) (9.3) (16.4)
Taxation on profit on
exceptional items (4.1) (3.9) (2.8)
Profit on ordinary
activities after taxation 36.3 39.0 71.7
Equity minority interests - (0.7) (0.9)
Profit for the period 36.3 38.3 70.8
Ordinary dividends
- paid and proposed (31.4) (29.1) (62.3)
Transfer to retained profit 4.9 9.2 8.5
Dividends per ordinary share 11.25p 10.75p 22.75p
Earnings per share before
exceptional items (adjusted) 13 10.82p 11.38p 24.49p
Earnings per share (basic) 13 12.96p 13.99p 25.89p
Earnings per share (diluted) 13 12.85p 13.95p 25.56p
* Restated for the effect of change of accounting policy in respect of
deferred tax (see note 1)
CONSOLIDATED BALANCE SHEET
As at 30 June 2002
As at As at As at
30 June 31 December 30 June
2002 2001 2001
Unaudited Restated* Restated*
Notes GBP`m GBP`m GBP`m
Fixed assets:
UK shopping centres 6 3,246.8 3,216.9 3,149.2
Other retail investment
properties 6 415.1 340.5 391.6
Other investment
properties 6 491.2 497.6 484.7
4,153.1 4,055.0 4,025.5
Other tangible assets
and investments 7 135.8 197.3 85.5
Intangible assets - - 5.8
4,288.9 4,252.3 4,116.8
Current assets:
Cash and near cash investments 186.4 84.2 109.4
Other short-term investments 1.2 1.9 20.7
Other current assets 8 135.4 118.4 116.4
323.0 204.5 246.5
Creditors: amounts falling
due within one year 9 (298.7) (270.8) (237.9)
Net current assets/
(liabilities) 24.3 (66.3) 8.6
Total assets less current
liabilities 4,313.2 4,186.0 4,125.4
Creditors: amounts falling
due after more than one year
Loans 10 (1,810.1) (1,707.9) (1,535.8)
Subordinated convertible debt 10 (64.5) (70.4) (182.3)
Other creditors (0.5) (0.5) (0.5)
(1,875.1) (1,778.8) (1,718.6)
Provisions for liabilities
and charges 12 (73.2) (67.6) (65.9)
Net assets 2,364.9 2,339.6 2,340.9
Capital and reserves:
Called up ordinary share
capital and reserves 2,364.9 2,339.6 2,324.9
Minority interests - - 16.0
Total shareholders` funds
including minority interests 2,364.9 2,339.6 2,340.9
Net assets per share
(adjusted) 13 854p 844p 856p
Net assets per share
(diluted, adjusted) 13 836p 827p 812p
* Restated for the effect of change of accounting policy in respect of
deferred tax (see note 1)
STATEMENT OF TOTAL RECOGNISED GAINS AND
LOSSES AND RECONCILIATION OF RESERVES
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Restated* Restated*
GBP`m GBP`m GBP`m
Statement of total recognised
gains and losses
Profit for the period attributable
to shareholders 36.3 38.3 70.8
Increase in valuation of
investment properties 19.6 21.8 11.7
Unrealised surplus/(deficit)
on other fixed asset investments 3.1 (3.0) (3.7)
Foreign exchange and other movements (2.3) 2.8 0.6
Total recognised gains and losses
for the period 56.7 59.9 79.4
Prior year adjustment (note 5) (59.1)
Total gains and losses recognised
since last annual report (2.4)
Reconciliation of movements
in shareholders` funds
Opening shareholders` funds
as previously stated 2,398.7 2,352.7 2,352.7
Prior year adjustment (note 5) (59.1) (54.4) (54.4)
Opening shareholders` funds (restated) 2,339.6 2,298.3 2,298.3
Recognised gains and losses
for the period 56.7 59.9 79.4
Dividends (31.4) (29.1) (62.3)
Cancellation of shares - (4.7) (8.7)
Shares issued on conversion of bonds - 0.5 32.9
Closing shareholders` funds 2,364.9 2,324.9 2,339.6
* Restated for the effect of change of accounting policy in respect of
deferred tax (see note 1)
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Unaudited Audited
GBP`m GBP`m GBP`m
Net cash flow from
operating activities 107.5 115.6 187.4
Returns on investments
and servicing of finance (67.2) (45.8) (117.9)
Taxation paid (5.6) (9.6) (24.9)
Capital expenditure
and financial investment (95.2) (69.5) (147.9)
Acquisitions and disposals - 32.9 35.9
Equity dividends paid (33.5) (31.5) (60.8)
Cash outflow before use
of liquid resources and financing (94.0) (7.9) (128.2)
Management of liquid resources (112.4) 29.1 39.3
Increase in financing (see* below) 196.4 17.0 111.0
(Decrease)/increase in cash
during the period (10.0) 38.2 22.1
Reconciliation of net cash flow
to movement in net debt
(Decrease)/increase in cash
during the period (10.0) 38.2 22.1
Cash (inflow) from increase in debt (104.8) (33.8) (127.5)
Non cash change in net debt 3.3 - 32.9
Cash outflow/(inflow) from decrease
in liquid resources 112.3 (33.1) (42.3)
Movement in net debt during the period 0.8 (28.7) (114.8)
Opening net debt (1,700.4) (1,585.6) (1,585.6)
Closing net debt (1,699.6) (1,614.3) (1,700.4)
* Analysis of financing cash flows
Borrowings drawn 363.9 804.0 1,030.8
Borrowings repaid and bonds cancelled (169.2) (774.8) (907.3)
Payments to acquire own shares - (7.7) (8.7)
Other financing cash flows 1.7 (4.5) (3.8)
196.4 17.0 111.0
INDEPENDENT REVIEW REPORT TO LIBERTY INTERNATIONAL PLC
Introduction
We have been instructed by the company to review the financial information set
out on pages 13 to 27 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors` responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors.
The Directors are responsible for preparing the interim report in accordance
with the Listing Rules of the Financial Services Authority which require that
the accounting policies and presentation applied to the interim figures should
be consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed.
A review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion of the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the
six months ended 30 June 2002.
PricewaterhouseCoopers, Chartered Accountants
London
31 July 2002
NOTES TO THE ACCOUNTS
1. Basis of preparation
The interim report is unaudited and does not constitute statutory accounts
within the meaning of s240 of the Companies Act 1985.
The financial information is prepared in accordance with applicable
accounting standards in the United Kingdom under the historical cost convention
as modified by revaluation of properties and investments.
Other than in respect of the adoption of Financial Reporting Standard 19,
Deferred Tax (FRS 19), the accounting policies set out on pages 74 to 76 of the
2001 Annual Report, dated 12 February 2002, have been used in the preparation of
this financial information.
Change of accounting policy
Deferred tax is not recognised in respect of valuation surpluses on
investments held for the long term where disposal is not contemplated in the
foreseeable future. However, the adoption of FRS19 has resulted in a change of
accounting policy for deferred tax on other timing differences. Deferred tax
is now provided for in full on all other timing differences including capital
allowances, irrespective of the likelihood of their eventual reversal.
Where appropriate, previously reported figures have been restated to
show the financial effect of this change in accounting policy as set out
in note 5.
2. Segmental information
Turnover
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Restated* Restated*
GBP`m GBP`m GBP`m
Property investment:
UK shopping centres 130.5 112.0 227.7
Commercial properties
United Kingdom 27.8 26.4 53.4
United States 12.0 9.9 18.2
Property trading 1.5 1.6 11.1
Investment and financial
services income 3.7 5.6 17.1
Realised trading gains
on listed property shares - 3.5 3.5
175.5 159.0 331.0
Geographical analysis:
United Kingdom 163.5 149.1 311.4
United States 12.0 9.9 19.6
175.5 159.0 331.0
Operating profit
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Unaudited Audited
GBP`m GBP`m GBP`m
Property investment:
UK shopping centres 79.1 70.4 146.5
Commercial properties
United Kingdom 21.7 22.5 45.5
United States 7.3 6.4 11.9
Property trading 1.5 1.6 6.3
Investment and financial
services income 3.7 3.0 5.6
Realised trading gains
on listed property shares - 3.5 3.5
113.3 107.4 219.3
Administrative expenses (9.0) (10.3) (19.9)
104.3 97.1 199.4
Geographical analysis:
United Kingdom 96.6 90.7 188.2
United States 7.7 6.4 11.2
104.3 97.1 199.4
3. Exceptional items
(a) Profit on disposal of fixed assets
and subsidiaries
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Unaudited Audited
GBP`m GBP`m GBP`m
Profit/(loss) arising on disposal
of investment properties (1.0) 0.1 0.2
Profit arising on disposal
of fixed asset investments* 6.5 0.8 0.7
Profit/(loss) arising on disposal
of subsidiaries - (0.1) 3.1
5.5 0.8 4.0
*Aggregate profits on realisation of fixed asset investments amounted to GBP13.3
million in the period to 30 June 2002. Of this, GBP6.8 million does not appear
in the profit and loss account in either the current or prior period as it was
recognised in revaluation reserves in 2001.
(b) Interest payable less receivable - exceptional
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Unaudited Audited
GBP`m GBP`m GBP`m
Early termination of interest rate
hedging contracts - 8.4 8.9
Repurchase of CSC unsecured bonds 8.1 7.2 8.3
Repurchase of Liberty International
convertible bonds (1.0) (3.0) (8.7)
Other exceptional finance charges - (0.3) (1.1)
7.1 12.3 7.4
4. Interest payable less receivable
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Unaudited Audited
GBP`m GBP`m GBP`m
Interest payable (67.1) (63.0) (127.8)
Interest capitalised on developments 0.3 2.7 3.7
Interest receivable 0.4 2.3 4.2
(66.4) (58.0) (119.9)
Interest is capitalised on the basis of the average rate of interest paid on the
relevant debt applied to the cost of developments over the year.
5. Taxation
For the year ended 31 December 2001 the group accounting policy was to
provide for deferred tax to the extent that it was probable that a liability
would crystallize, on the liability method on short term timing differences.
Following the introduction of FRS19 this policy has changed with the effect that
deferred tax is now provided in full on all timing differences other than
revaluation surpluses regardless of their likelihood of reversal.
The taxation charge and deferred tax provision have been adjusted in respect of
prior years to reflect this change of accounting policy.
The deferred tax provision as at 31 December 2001 increased by GBP59.1m and
consequently reserves decreased by that amount. The tax charges for the periods
ended 30 June 2001 and 31 December 2001 have been increased by
GBP2.0 million and GBP4.7 million respectively, as set out below, and
consequently earnings per share for the periods ended 30 June 2001 and
31 December 2001 decreased by 0.73p per share and 1.72p per share respectively.
Six months Six months Year
ended ended ended
30 June 2002 30 June 2001 31 Dec 2001
Unaudited Unaudited Audited
GBP`m GBP`m GBP`m
Taxation on profit
on ordinary activities (7.6) (7.3) (11.7)
Adjustment for change
of accounting policy (2.5) (2.0) (4.7)
Taxation on profit
on ordinary activities (restated) (10.1) (9.3) (16.4)
Contingent taxation
At 30 June 2002 a provision of GBP375.9 million (31 December 2001 - GBP373.6
million, 30 June 2001 - GBP387.4 million) would be required if deferred taxation
were to be provided in respect of all revaluation surpluses before balancing
charges.
6. Investment properties
UK Other
shopping commercial
centres properties Total
GBP`m GBP`m GBP`m
Completed properties
at external valuation:
At 31 December 2001 3,207.4 817.9 4,025.3
Additions 7.6 80.3 87.9
Disposals - (8.2) (8.2)
Foreign exchange fluctuations - (6.4) (6.4)
Reclassification - completed developments - 14.8 14.8
Amortisation - (0.5) (0.5)
Surplus on valuation 16.6 3.0 19.6
At 30 June 2002 3,231.6 900.9 4,132.5
Properties under development at cost:
At 31 December 2001
(including GBP1.3 million
capitalised interest) 9.5 20.2 29.7
Additions 5.7 - 5.7
Reclassification - completed developments - (14.8) (14.8)
At 30 June 2002
(including GBP0.7 million
capitalised interest) 15.2 5.4 20.6
Investment properties
At 30 June 2002 3,246.8 906.3 4,153.1
At 31 December 2001 3,216.9 838.1 4,055.0
As at As at
30 June 2002 31 Dec 2001
Unaudited Audited
GBP`m GBP`m
Geographical analysis:
United Kingdom 3,959.4 3,929.1
United States 193.7 125.9
4,153.1 4,055.0
The group`s interests in completed investment properties were valued as at
30 June 2002 by external valuers in accordance with the Appraisal and Valuation
Manual of the Royal Institute of Chartered Surveyors, on the
basis of open market value, gross of purchasers` costs.
Investment properties are valued without deduction of purchasers` costs as the
directors do not consider such deduction to be appropriate. Full provision for
purchasers` costs at 5% in the UK and 3.5% in the US would amount to GBP161.6
million in respect of UK shopping centres and GBP42.1 million in respect of the
other commercial properties (31 December 2001 - GBP160.4 million and GBP39.0
million respectively, 30 June 2001 - GBP157.2 million and GBP41.0 million
respectively). The provision required in respect of contingent deferred
taxation disclosed in note 5 would be reduced by 30% of the above amounts if
provision had been made for these purchasers` costs.
7. Other tangible assets and investments
As at As at As at
30 June 31 December 30 June
2002 2001 2001
Unaudited Audited Unaudited
GBP`m GBP`m GBP`m
Investments - listed property shares
and units at market value 113.0 178.9 64.9
Investments - own shares 21.6 17.9 18.5
Tangible fixed assets 1.2 0.5 2.1
135.8 197.3 85.5
8. Other current assets
As at As at As at
30 June 31 December 30 June
2002 2001 2001
Unaudited Audited Unaudited
GBP`m GBP`m GBP`m
Debtors 67.0 50.1 48.6
Trading properties 68.4 68.3 67.8
135.4 118.4 116.4
The estimated replacement cost of trading properties based on market value
amounted to GBP72.1 million (31 December 2001 - GBP72.1 million, 30 June 2001 -
GBP70.6 million).
9. Creditors: amounts falling due within one year
As at As at As at
30 June 31 December 30 June
2002 2001 2001
Unaudited Audited Unaudited
GBP`m GBP`m GBP`m
Bank loans and overdrafts (note 11) 11.4 6.3 5.6
Trade and other creditors 188.4 158.0 121.3
Dividends payable 31.4 33.5 29.7
Accruals and deferred income 67.5 73.0 81.3
298.7 270.8 237.9
Trade and other creditors at 30 June 2002 includes GBP81.0 million in respect of
unsettled purchases of CSC unsecured Eurosterling bonds 2009 and 2013 and at 31
December 2001 includes GBP68.1 million in respect of the acquisition of King`s
Reach.
10. Creditors: amounts falling due after more than one year
As at As at As at
30 June 31 December 30 June
2002 2001 2001
Unaudited Audited Unaudited
GBP`m GBP`m GBP`m
Secured
Bank loan due 2015 - non-recourse 537.6 544.2 564.0
Bank loan due 2014 - non-recourse 208.3 - -
Bank loan due 2011 - non-recourse 445.8 445.6 -
1,191.7 989.8 564.0
Debentures 2021 and 2027 230.0 230.0 230.0
Bank loan due 2016 172.5 172.5 172.5
Other fixed rate loans 83.9 42.1 49.8
1,678.1 1,434.4 1,016.3
Unsecured
Bank loans - 41.0 240.0
CSC Eurosterling bonds 2013 47.9 115.3 161.8
CSC Eurosterling bonds 2009 84.1 117.2 117.7
1,810.1 1,707.9 1,535.8
5.5% subordinated convertible bonds 2009 - - 80.3
6.25% subordinated convertible bonds 2006 64.5 70.4 102.0
Total debt falling due after
more than one year (note 11) 1,874.6 1,778.3 1,718.1
Other creditors 0.5 0.5 0.5
1,875.1 1,778.8 1,718.6
11. Debt
(a) Analysis of net debt
As at As at As at
30 June 31 December 30 June
2002 2001 2001
Unaudited Audited Unaudited
GBP`m GBP`m GBP`m
Debt due within one year (note 9) 11.4 6.3 5.6
Debt due after one year (note 10) 1,874.6 1,778.3 1,718.1
Gross debt 1,886.0 1,784.6 1,723.7
Cash and near cash investments (186.4) (84.2) (109.4)
Net debt 1,699.6 1,700.4 1,614.3
(b) Fair value of financial instruments
As at 30 June 2002 As at 31 December 2001 As at 30 June 2001
Balance Balance Balance
Sheet Fair sheet Fair sheet Fair
value value value value value value
Unaudited Unaudited Audited Audited Unaudited Unaudited
GBP`m GBP`m GBP`m GBP`m GBP`m GBP`m
Debentures
and other
fixed rate
loans
Sterling
C&C 9.875%
debenture
2027 150.0 208.8 150.0 211.1 150.0 190.1
C&C 11.25%
debenture
2021 80.0 119.2 80.0 120.2 80.0 105.0
CSC 6.875%
unsecured
bonds
2013 47.9 43.5 115.3 103.5 161.8 143.4
CSC 5.75%
unsecured
bonds
2009 84.1 74.6 117.2 101.9 117.7 99.7
US Dollars
Fixed rate
Loans 89.7 90.8 48.2 48.5 55.3 55.3
451.7 536.9 510.7 585.2 564.8 593.5
Bank loans
(LIBOR linked)1,369.8 1,369.8 1,203.5 1,203.5 976.6 976.6
1,821.5 1,906.7 1,714.2 1,788.7 1,541.4 1,570.1
Hedging
Instruments - 45.1 - 32.3 - 1.2
1,821.5 1,951.8 1,714.2 1,821.0 1,541.4 1,571.3
Convertible
Debt 64.5 83.7 70.4 79.7 182.3 212.9
The adjustment in respect of the above, after credit for tax relief, would
amount to 31p per share diluted (31 December 2001 - 25p, 30 June 2001 7p).
All other assets and liabilities are included in the balance sheet
at fair values.
12. Provisions for liabilities and charges
Deferred
Taxation Other Total
GBP`m GBP`m GBP`m
At 31 December 2001
as previously reported 3.4 5.1 8.5
Prior year adjustment 59.1 - 59.1
At 31 December 2001 restated 62.5 5.1 67.6
Net charge for the period 5.5 0.1 5.6
At 30 June 2002 68.0 5.2 73.2
13. Per share details
(a) Number of shares used in the calculation of:
30 June 31 December 30 June
2002 2001 2001
Unaudited Audited Unaudited
m m m (i)
Net assets per share
Basic 284.2 284.2 278.1
On conversion of bonds 13.4 14.5 37.7
On exercise of options 0.3 - -
Diluted 297.9 298.7 315.8
(ii) Earnings per share
Weighted average shares in issue 284.2 278.2 278.6
Weighted average shares held by ESOP (4.3) (4.6) (4.7)
Weighted average shares (basic) 279.9 273.6 273.9
Effect of dilution 13.7 35.3 40.0
Weighted average shares (diluted) 293.6 308.9 313.9
(b) Net assets per share
Net assets per share (adjusted) excludes the provision for deferred tax in
respect of capital allowances arising from adoption of FRS19 "Deferred Tax" (see
note "Change in accounting policy").
30 June 2002 31 Dec 2001 31 June 2001
Unaudited Restated Restated
GBP`m GBP`m GBP`m
Basic net asset value 2,364.9 2,339.6 2,324.9
Add back additional deferred tax
arising on the adoption of FRS 19 61.6 59.1 56.4
Adjusted net asset value 2,426.5 2,398.7 2,381.3
On conversion of bonds 64.5 70.4 182.3
Diluted, adjusted net asset value 2,491.0 2,469.1 2,563.6
(c) Earnings used in the calculation of earnings per share
Earnings per share before exceptional items (adjusted) excludes the
additional tax charge arising from the adoption of FRS19 "Deferred Tax"
(see note 1 "Change of accounting policy")
30 June 2002 31 Dec 2001 31 June 2001
Unaudited Restated Restated
GBP`m GBP`m GBP`m
Earnings used for calculation
of basic earnings per share 36.3 70.8 38.3
Exceptional items, net of tax (8.5) (8.6) (9.2)
Add back additional deferred tax
arising on the adoption of FRS 19 2.5 4.7 2.0
Earnings used for calculation of
earnings per share before
exceptional items (adjusted) 30.3 66.9 31.1
Earnings used for calculation
of basic earnings per share 36.3 70.8 38.3
Effect of dilution 1.4 8.1 5.5
Earnings used for calculation
of diluted earnings per share 37.7 78.9 43.8
(d) Other share information
In issue
30 June 2002 Conversion Callable
(i) Convertible bonds GBP`m price from
6.25% subordinated
convertible bonds 2006 60.2 450p 1 Jan 2004
Number
(ii) Movement in ordinary share capital m
At 31 December 2001 284.2
Bond conversions -
At 30 June 2002 284.2
(e) Additional information on net asset value per share
The table below sets out potential further adjustments which could be made
to adjusted net assets per share. The potential adjustments are shown for
illustration only. The adjustments reflect the full undiscounted value of
contingent assets and liabilities at the balance sheet date and therefore no
allowance has been made for the long term deferral of these liabilities.
30 June 2002 31 Dec 2001 31 June 2001
Unaudited Restated Restated
Pence Pence Pence
Net assets per share
(diluted, adjusted) 836 827 812
Contingent tax on
unrealised gains (note 5) (126) (125) (123)
Purchasers` costs (net of
contingent tax on unrealised gains) (48) (47) (44)
FRS 13 (net of tax) (31) (25) (7)
631 630 638
Effect of additional deferred tax
arising on adoption of FRS 19 (20) (20) (18)
611 610 620
SUMMARY OF CAPITAL SHOPPING CENTRES INVESTMENT PROPERTIES
30 June 2002 31 December 2001
Open True Open True
market equivalent market equivalent
Value yield* Value yield*
GBP`m % GBP`m %
Lakeside, Thurrock 905.0 6.08 900.0 6.08
MetroCentre, Gateshead 744.0 5.91 744.0 5.91
Braehead, Glasgow 437.0 6.23 437.0 6.23
Other M25 Centres 760.0 **6.17 738.6 **6.20
Other Centres 256.3 **6.75 258.2 **6.79
Other properties 63.4 63.0
3,165.7 3,140.8
Developments at cost 15.2 9.5
3,180.9 3,150.3
Investment in UK Prime
(23% interest)*** 65.9 66.6
3,246.8 3,216.9
* Leases provide for rent to be paid quarterly in advance. True equivalent
yield reflects the value attributable to this advance receipt of income
** Weighted average yields
*** The principal asset of UK Prime is an 80% interest in the Victoria Centre
Nottingham
SUMMARY OF CAPITAL & COUNTIES INVESTMENT PROPERTIES
Six months ended Year ended
30 June 2002 31 December 2001
Net Open Revaluation Net Open
Number property market surplus property market
of income value as % income value
properties GBP`m GBP`m of value GBP`m GBP`m
Central London 23 10.7 373.0 0.5 19.1 370.9
M25 & SE 11 5.7 178.5 (2.5) 11.0 168.0
UK Cities 9 5.3 155.7 1.6 14.0* 153.1
Total United Kingdom
Investment Properties 43 21.7 707.2 - 44.1 692.0
United States 10 7.3 193.7 1.8 11.9 125.9
Total Investment
Properties 53 29.0 900.9 0.3 56.0 817.9
* Includes GBP4.3million in respect of properties transferred to
CSC during 2001.
Completed properties by use:
30 June 2002 31 December 2001
Retail Offices Total Retail Offices Total
GBP`m GBP`m GBP`m GBP`m GBP`m GBP`m
Central London 123.0 250.0 373.0 115.9 255.0 370.9
M25 & SE - 178.5 178.5 - 168.0 168.0
UK Cities 144.9 10.8 155.7 142.7 10.4 153.1
Total United
Kingdom
Investment
Properties 267.9 439.3 707.2 258.6 433.4 692.0
United States 147.2 46.5 193.7 81.9 44.0 125.9
Total Investment
Properties 415.1 485.8 900.9 340.5 477.4 817.9
ANALYSIS OF NET PROPERTY INVESTMENT INCOME
Shopping Other
Total Centres Commercial
UK USA
GBP`m GBP`m GBP`m GBP`m
Six month period
ended 30 June 2001 99.3 70.4 22.5 6.4
Foreign Exchange (0.1) - - (0.1)
Edinburgh Property Portfolio
(no longer consolidated) (1.3) - (1.3) -
Sold properties (0.6) - - (0.6)
Developments, major capex
and acquisitions (6.2) (1.9) (3.1) (1.2)
Adjusted to 30 June 2001 91.1 68.5 18.1 4.5
Like for like growth 5.5 5.3 0.4 (0.2)
Adjusted to 30 June 2002 96.6 73.8 18.5 4.3
Sold properties 0.2 - - 0.2
Developments, major capex
and acquisitions 11.3 5.3 3.2 2.8
Six month period
ended 30 June 2002 108.1 79.1 21.7 7.3
Like for like growth % 6.0% 7.7% 2.2% (4.4)%
Financial Review
Change in accounting policy
Following the adoption of FRS19 "Deferred Taxation" and the consequent change
in accounting policy set out in note 1, deferred taxation is now provided in
respect of capital allowances despite the fact that it is extremely rare, in the
UK property industry, for these allowances to reverse and give rise to a
balancing charge. In fact transactions are usually structured so that timing
differences on capital allowances do not reverse. In line with property
industry practice, earnings per share and net assets per share have been
reported on an adjusted basis to exclude the impact of the provision for
deferred tax in respect of capital allowances.
Key features of the results
Consolidated profit and loss account
- Operating profit, a key measure of underlying performance, increased by
7 per cent to GBP104.3 million from GBP97.1 million
- Interest charge of GBP66.4 million (2001 - GBP58.0 million) with the
increase partly due to the holding costs of property shares realised during the
period and partly due to higher average borrowings in the period
- Interest cover stable at 1.65x (2001 - 1.70x)
- Adjusted tax charge of 20 per cent (2001 - 15 per cent) before taking into
account deferred tax under FRS 19
- Dividend increase reflecting increase in investment income
Consolidated balance sheet
- Investment properties increased from GBP4,055 million to GBP4,153 million
after net additions of GBP80 million, primarily the Serramonte shopping centre,
and a GBP20 million revaluation surplus
- Investments reduced from GBP178.9 million to GBP113.0 million after
disposals in the period
- Net borrowings unchanged at GBP1.7 billion (40% debt to assets)
- Shareholders` funds increased from GBP2,340 million to GBP2,365 million
(now stated after provision for deferred tax of GBP68.0 million)
Debt structure
The first half of 2002 has seen continuation of the group`s asset specific
finance strategy. The pro forma set out below shows the balance sheet as at 30
June 2002 assuming the non-recourse loans are fully drawn. The pro forma balance
sheet has been further analysed into the secured debt and associated assets and
the remaining unsecured debt and unsecured assets.
The pro forma statement of net assets shown below is based on the balance
sheet of Liberty International
as at 30 June 2002, adjusted only to reflect the transactions set out in the
notes below.
Analysis of Pro forma
30 June 2002
Secured Unsecured
Actual Pro forma assets and assets and
30 June 2002 30 June 2002 borrowings borrowings
GBP`m GBP`m GBP`m GBP`m
Secured assets 3,516 3,516 3,516 -
Unsecured assets 773 773 - 773
Total assets 4,289 4,289 3,516 773
Cash and near cash 186 413(1&2) 80(3) 333
Total assets
and cash resources 4,475 4,702 3,596 1,106
Other net liabilities (224) (143)(2) - (143)
Secured borrowings (1,689) (2,009)(1) (2,009)(4) -
Unsecured borrowings (132) (120)(2) - (120)
Subordinated convertible debt (65) (65) - (65)
Shareholders` funds 2,365 2,365 1,587 778
Net debt to total assets 40% 42% 55% -19%
Unsubordinated debt to
total assets including cash 11%
Notes
1 Includes an additional GBP320 million as a result of full utilisation of
non-recourse bank facilities
2 Other net liabilities reduced by GBP81 million to reflect settlement of
unsecured bonds purchased immediately prior to 30 June 2002, and unsecured
borrowings reduced by GBP12 million to reflect unsecured bonds purchased
since 30 June 2002, resulting in reduction in cash of GBP93 million.
3 Cash available only for capital expenditure on secured properties
4 Includes GBP730 million secured on MetroCentre and Braehead, GBP550 million
secured on Lakeside and GBP211 million secured on The Chimes and The Glades
with recourse only to those assets.
The importance of this analysis is to demonstrate that virtually all of the
group`s debt is in the form of secured, and largely ring-fenced, structures. The
remainder of the group`s debt only amounts to around GBP120 million of unsecured
bonds of CSC and GBP65 million of subordinated convertible debt.
The latter, if the Liberty International share price remains above the
conversion price of 450 pence, should convert early in 2004.
The unencumbered pool of assets (including cash balances) available to meet the
obligations to unsecured debt and other creditors amounts to over
GBP1.1 billion. The debt to assets ratio on the unsecured portion of the
balance sheet therefore amounts to 11% (9 times covered), compared with
the group`s overall ratio of 40%
(2.5 times covered).
Date: 31/07/2002 08:00:00 AM Produced by the JSE SENS Department
