Interim Results

Capital & Regional PLC 18 September 2003 18 September 2003 INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2003 Capital & Regional plc, the co-investing property asset manager, today announces its unaudited interim results for the six months ended 30 June 2003. Highlights: • Increase in properties under management from £1.5b to £2.6b over the six month period including circa £500m from the acquisition of the fund management business of MWB; • Net asset value per share increased by 11.6% to 433p over the six month period on a fully diluted basis (31 December 2002 388p); • Profit before tax of £8.3m (30 June 2002 £4.4m before exceptionals of £7.2m); • Total return, including revaluation surplus, of £36.8m (30 June 2002 £16.6m); • A 4p interim dividend to be paid on 17 October 2003 (2002: 3.0p); • Planning permission granted for the Junction Fund's retail park development at Aylesbury; • Acquisition of Castle Mall Norwich. ISIS Property takes a 19.8% stake in the Mall fund. Commenting on the results, Martin Barber, Chief Executive said: "During the first six months of this year we have begun to see the rewards of the new strategy of converting the company into a co-investing asset manager". For further information: Martin Barber, Chief Executive Tel: 020 7932 8000 William Sunnucks, Group Finance Director Tel: 020 7932 8000 Michael Sandler / Wendy Baker, Hudson Sandler Ltd Tel: 020 7796 4133 CHAIRMAN & CHIEF EXECUTIVE'S STATEMENT During the first six months of this year we have begun to see the rewards of the new strategy of converting the company into a co-investing asset manager. The total portfolio under management has increased substantially from £1.5bn to £2.6bn. Profit before tax was £8.3m (30 June 2002: £2.8m loss) and our total return, including revaluation gains, was £36.8m compared to £16.6m for the same period last year. We are also pleased to report that fully diluted asset backing per share has increased 11.6% to 433p per share over the six month period. DIVIDEND Following the establishment of a strong flow of fee income from our asset management business, the Board has decided to increase the dividend from 3p to 4p per share. This will be paid on 17 October to shareholders on the register on 3 October 2003. SHOPPING CENTRES The Mall Fund Gross assets of The Mall Fund have increased from a year end figure of £724.8m to £978.4m. This includes two principal acquisitions completed in the half year: • The Mall Chester - £105.7m • The Mall Sutton Coldfield - £104.0m In addition, our ownership at The Mall, Epsom was consolidated with the purchase of the adjacent High Street, Waterstones unit for £1.6m. These transactions now bring the total square footage in the Mall Fund to 4.1m. Mall Fund performance for the half year was 8.0% ungeared and 12.1% geared. The annualised geared fund return since inception in March 2002 is 26.1%. Rental values excluding acquisitions made in the half year grew by 1.85% to £83m. Net rental annual income has risen to £71.25m, an increase of 4.5% on a like for like basis. In March 2003, the Fund's equity base was enhanced by a £31m investment by Scottish Amicable which diluted the Group's share of the fund from 49.4% to 45.8%. At the same time the life of the fund, and of the Group's management agreement, was extended from 10 to 15 years. Yesterday we announced that the Mall fund has agreed to buy the Castle Mall shopping centre in Norwich for £115m. ISIS Property, the vendor, is investing the entire proceeds in the Mall fund, diluting C&R's interest from 45.8% to 36.7%. RETAIL PARKS The Junction Fund The gross assets of The Junction Fund have increased from a year end figure from £536m to £749m at June 2003. The first six months performance was 7.4% ungeared and 11.1% geared. It is estimated that the rental values have increased in the period by 5.8%. Passing rent has risen by 8% on a like for like basis, and rent reviews are being achieved above expectations. In February 2003, The Junction Limited Partnership was part of a consortium which acquired a substantial portfolio from Chartwell a subsidiary of Kingfisher. This transaction brought approximately £143m of new stock into The Junction. Our first rebranded Junction retail park opened in Hull in April with our first pre-let "Pod". The occupiers, which include Starbucks and Carphone Warehouse, are reporting good trade and the visitor numbers to the park and the dwell time have both increased. We heard last week that the planning permission for 159,000 sq ft of retail space had been granted for the Fund's site at Aylesbury. We expect building work to start later this year. The Glasgow Fort, Auchinlea Our retail park division has a joint venture with Pillar to develop a new retail and leisure park near Glasgow and we are pleased to report significant progress with a start on site made in March 2003. Leases have been exchanged so far for a total of £6.1m per annum representing approximately two thirds of the target rents for the first phase. The key tenants which have been signed to date include Next, JJB Sports, Virgin, River Island, Arcadia, Argos and Boots. It is expected that this project will be open for trade in Autumn 2004, and that the estimated total cost of this phase will be £124m. Swansea Retail Park The Group acquired this 30 acre site from Swansea City Council for £24m in July 2003 and construction has just started. It has planning consent for 322,000 sq ft of retail space and 30,000 sq ft of leisure space. Occupier demand has been encouraging with pre-lets obtained of more than 190,000 sq ft to destination anchors including a B&Q store of 102,000 sq ft. LEISURE X-Leisure In January 2003, we acquired a leisure property fund business from Marylebone Warwick Balfour which manages approximately £500m of leisure property held in three separate funds. The funds own 18 leisure assets with 2.9m sq ft of space, including Fountain Park in Edinburgh, Star City in Birmingham and O2 in North London. A team of 17 joined Capital & Regional and has been merged with the Capital & Regional unit which manages the Xscape joint ventures, led by PY Gerbeau. Since taking over, we have introduced a programme of seasonal events supported by marketing and PR campaigns. The effect has been to raise awareness in local communities and increase footfall. The number of voids in the portfolio has fallen. We have also started to focus on medium term business plans for adding value to each individual property. We are now starting to discuss with the investors of X-Leisure the possibilities for restructuring of the three funds. Xscape Our Xscape operations are progressing well. The Milton Keynes Xscape has seen consistent increases in footfall which is expected to exceed 6m visitors this year, a 22% increase on last year. This has resulted in increased rental values as the occupiers trade profitably. The Castleford Xscape is on programme for completion of construction at the end of September this year with an official launch in mid October. The project is on budget and on time. 81% of the floor area has been leased to date with detailed negotiations progressing with additional operators. We hope to commence our third Xscape at Braehead, Glasgow in partnership with Capital Shopping Centres in the summer of 2004. Great Northern On 30 May the Group entered into a 50:50 joint venture with AWG, the owners of the Great Northern Leisure and Retail Complex in Manchester. This property offers significant opportunities to use Capital & Regional's retail and leisure expertise to add value through new lettings and more imaginative use of the space available. The terms of the joint venture enable us to participate in a disproportionate share of the upside. OUTLOOK There is strong interest from investors, both institutional and private for property in the sectors in which we operate and this has contributed to the increased valuations. What is really important to us, however, is that our particular occupiers are generally trading well and demand for space is strong in all three of the sectors in which we operate. We see no reason in the medium term for either of these to change and therefore are confident of our future growth. INDEPENDENT REVIEW REPORT TO CAPITAL & REGIONAL PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2003 which comprises the profit and loss account, the statement of total recognised gains and losses, the reconciliation of movements in shareholders' funds, the balance sheet, the cash flow statement and related notes 1 to 13. 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. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. 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 polices and presentation applied to the interim figures are 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 the 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 group 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 on 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 2003. Deloitte & Touche LLP Chartered Accountants London 18 September 2003 CONSOLIDATED PROFIT AND LOSS ACCOUNT (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 Notes £000 £000 £000 Turnover: group income and share of joint ventures' turnover 13,318 21,980 34,998 Less: share of joint ventures' turnover (1,342) (7,350) (8,788) Group turnover 2 11,976 14,630 26,210 Cost of sales (2,762) (3,692) (5,763) Gross profit 9,214 10,938 20,447 Profit/(loss) on disposal of trading and development properties - 167 (1,023) Administrative expenses (8,662) (5,344) (14,261) Group operating profit 552 5,761 5,163 Share of operating profit in joint ventures and 8a 20,263 12,886 27,298 associates Total operating profit 20,815 18,647 32,461 Exceptional costs of a fundamental reorganisation - (7,178) (7,184) Profit/(loss) on sale of investment properties 1,398 (1,143) (789) Share of profit on sale of investment properties in associates and joint ventures 8b 497 - 2,609 Profit on ordinary activities before interest 22,710 10,326 27,097 Interest receivable and similar income 503 661 1,043 Interest payable and similar charges - Group 3 (3,672) (6,678) (10,649) - Share of associates (10,060) (5,371) (12,451) - Share of joint ventures (1,220) (1,700) (2,967) (14,952) (13,749) (26,067) Profit/(loss) on ordinary activities before taxation 8,261 (2,762) 2,073 Taxation 4 (2,691) (51) (1,220) Profit/(loss) on ordinary activities after taxation 5,570 (2,813) 853 Equity minority interests - (8) (8) Profit/(loss) attributable to the shareholders of the 5,570 (2,821) 845 Company Equity dividends paid and payable (2,505) (1,863) (4,333) Profit/(loss) retained in the period 10 3,065 (4,684) (3,488) Earnings/(loss) per share 5 9.0p (3.9)p 1.3p Earnings/(loss) per share - diluted 5 8.2p (3.9)p 1.2p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 £000 £000 £000 Profit/(loss) before tax 8,261 (2,762) 2,073 Movements in revaluation reserve: on investment properties 154 11 509 on other fixed assets (660) - (920) on properties held in joint ventures and 32,006 20,990 38,302 associates (Loss)/gain on deemed disposals (344) - 2,377 Minority interests - (8) (8) Total gains before tax 39,417 18,231 42,333 Tax shown in profit and loss account (2,691) (51) (1,220) Tax on revaluation surplus realised 54 (1,574) (3,556) Deferred tax - - (485) Total tax charge (2,637) (1,625) (5,261) Total recognised gains for the period 36,780 16,606 37,072 Return on equity for the period 13.6% 6.2% 14.6% RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 £000 £000 £000 Profit/(loss) attributable to shareholders of the Company 5,570 (2,821) 845 Equity dividends paid and payable (2,505) (1,863) (4,333) Profit/(loss) retained in the period 3,065 (4,684) (3,488) Share capital and share premium issued in period 826 806 868 Share capital purchased and cancelled in period (including expenses) - (50,845) (50,845) Other recognised gains and losses relating to the period 31,210 19,427 36,227 Net increase in/(reduction to) shareholders' funds 35,101 (35,296) (17,238) Opening shareholders' funds 270,003 287,241 287,241 Closing shareholders' funds 305,104 251,945 270,003 CONSOLIDATED BALANCE SHEET (Unaudited) (Unaudited) (Audited) As at As at As at 30 June 30 June 31 December 2003 2002 2002 Notes £000 £000 £000 Fixed assets Intangible assets 6 16,820 - - Investment property assets 7 35,074 62,082 55,475 Other fixed assets 12,676 13,429 12,934 64,570 75,511 68,409 Investment in joint ventures: share of gross assets 151,807 117,763 77,857 share of gross liabilities (106,628) (69,787) (53,168) 8c 45,179 47,976 24,689 Investment in associates 8b 324,597 261,986 286,367 434,346 385,473 379,465 Current assets Property assets 7 7,756 15,158 7,773 Debtors 27,050 36,170 27,325 Cash at bank and in hand 2,348 5,865 4,159 37,154 57,193 39,257 Creditors: amounts falling due within one year (23,153) (31,750) (29,281) Net current assets 14,001 25,443 9,976 Total assets less current liabilities 448,347 410,916 389,441 Creditors: amounts falling due after more than one year (140,312) (157,863) (117,041) Provision for liabilities and charges (2,931) (1,108) (2,397) Net assets 2 305,104 251,945 270,003 Capital and reserves Called up share capital 10 6,219 6,171 6,175 Share premium account 10 163,534 162,693 162,752 Revaluation reserve 10 102,957 65,273 74,005 Other reserves 10 4,290 4,290 4,290 Profit and loss account 10 28,104 13,518 22,781 Equity shareholders' funds 305,104 251,945 270,003 Net assets per share 9 491p 408p 437p Net assets per share - diluted 9 433p 364p 388p SUMMARY CASH FLOW STATEMENT (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 Notes £000 £000 £000 Net cash inflow/(outflow) from operating activities 11 1,797 (13,202) 2,031 Distributions received from joint ventures 350 465 3,355 Distributions received from associates 8,116 1,880 9,418 Returns on investments and servicing of finance (3,652) (10,726) (15,085) 6,611 (21,583) (281) Taxation (2,660) (6,020) (7,606) 3,951 (27,603) (7,887) Capital expenditure and financial investment 19,677 636,049 673,039 23,628 608,446 665,152 Acquisitions, disposals and exceptional items (44,158) (254,448) (269,219) (20,530) 353,998 395,933 Equity dividends paid (2,482) (2,770) (4,623) Cash (outflow)/inflow before financing (23,012) 351,228 391,310 Financing: Issue of ordinary share capital 826 806 868 Purchase of ordinary share capital - (50,845) (50,845) Cash inflow/(outflow) from debt financing 20,375 (303,891) (345,741) Decrease in cash in the period (1,811) (2,702) (4,408) Reconciliation of net cash flow to movement in net debt (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 £000 £000 £000 Decrease in cash in the period (1,811) (2,702) (4,408) Cash (outflow)/inflow from debt financing (20,375) 303,891 345,740 Change in net debt resulting from cash flows (22,186) 301,189 341,332 Net debt at beginning of period (115,933) (457,265) (457,265) Net debt at end of period (138,119) (156,076) (115,933) Analysis of net debt (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 £000 £000 £000 Cash in hand and at bank 2,348 5,865 4,159 Debt due within one year (200) (3,450) (3,450) Debt due after one year (140,267) (158,491) (116,642) Total (138,119) (156,076) (115,933) NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies The interim financial information has been prepared on the basis of the accounting policies set out in the annual report for the period ended 31 December 2002. The comparative figures represent the Group's results and cash flows for the periods from 26 December 2001 to 30 June 2002 and from 26 December 2001 to 31 December 2002. The comparative figures for the period ended 31 December 2002 do not constitute statutory accounts but have been extracted from the statutory accounts for that period, which have been filed with the Registrar of Companies. The auditors' report in respect of the period ended 31 December 2002 is unqualified and did not contain a statement under Companies Act 1985 sections 237 (2) or (3). 2. Segmental analysis Turnover, profit on ordinary activities before taxation and operations arise in the UK. Share of joint Total (Audited) ventures and (Unaudited) Period to 31 associates Wholly owned 6 months December Asset Snow slope £000 properties to 30 June 2002 management business £000 2003 £000 £000 £000 £000 Asset management fees 7,130 - - - 7,130 7,262 Performance fees - - - - - 2,781 Snow slope income - 2,096 - - 2,096 4,044 Rental and other income - - - 2,750 2,750 12,123 Group turnover 7,130 2,096 - 2,750 11,976 26,210 Share of joint ventures and associates operating profit - - 20,263 - 20,263 27,298 Direct expenses - (1,996) - (766) (2,762) (5,763) Net interest payable: non recourse - - (10,921) - (10,921) (14,956) own borrowings (net) - - (2,301) (1,227) (3,528) (10,068 Contribution 7,130 100 7,041 757 15,028 22,721 Indirect expenses (8,081) (14,261) Amortisation of goodwill (581) - Profit on disposals (net) 1,895 2,319 Profit before exceptionals 8,261 10,779 Exceptional items - - - - - (8,706) Profit before taxation - - - - 8,261 2,073 Net assets 18,629 349 274,276 11,850 305,104 270,003 No performance fee income has been recognised for the six months ended 30 June 2003 as the fees are based on performance over the full year, and it is not possible to estimate, at 30 June 2003, the amount of fees, if any, which might be earned for the year. NOTES TO THE FINANCIAL STATEMENTS (CONT) 3. Interest payable and similar charges (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 £000 £000 £000 Bank loans and overdrafts 2,884 6,151 9,498 Other loans 877 897 1,684 3,761 7,048 11,182 Capitalised in period (89) (370) (533) 3,672 6,678 10,649 4. Taxation The taxation charge for the period is based on an estimate of the likely effective tax rate for the year. (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 Current tax £000 £000 £000 UK corporation tax (at 30%) 2,131 167 580 Tax credit in respect of exceptional items - (1,509) (1,510) Adjustment in respect of prior years 23 (273) (274) Share of joint ventures tax 3 223 177 Total current tax 2,157 (1,392) (1,027) Deferred tax Origination and reversal of timing differences 534 1,443 2,247 Total taxation 2,691 51 1,220 5. Earnings/(loss) per share Six months to June 2003 Earnings Number of Earnings £000 shares per share Basic 5,570 61,907,166 9.0p Exercise of share options - 419,461 Conversion of Convertible Unsecured Loan Stock 598 12,670,912 Diluted 6,168 74,997,539 8.2p Six months to June 2002 (Loss) Number of (Loss) £000 shares per share Basic (2,821) 72,857,000 (3.9)p Exercise of share options - - - Diluted (2,821) 72,857,000 (3.9)p Period to 31 December 2002 Earnings Number of Earnings £000 shares per share Basic 845 67,339,312 1.3p Exercise of share options - 607,924 - Diluted 845 67,947,236 1.2p The calculation includes the full conversion of the Convertible Unsecured Loan Stock where the effect on earnings per share is dilutive. NOTES TO THE FINANCIAL STATEMENTS (CONT) 6. Intangible assets The MWB fund management business was acquired on 24 January 2003 for a total consideration of £31,357,000 which included MWB's 13.29% interest in Leisure Fund I, 5.72% in Leisure Fund IIa and 7.09% interest in Leisure Fund IIb. The fair value of the Limited Partner interests in the three funds acquired was £13,955,000. The remaining £17,402,000 has been treated as goodwill. No separate value has been attributed to deferred fees which may be receivable as their realisation is uncertain. The goodwill is being amortised over 121/2 years and the charge for the period is £581,000. 7. Wholly owned property assets Other fixed Investment Trading Total property assets property property property £000 assets assets assets £000 £000 £000 Cost or valuation As at 1 January 2003 12,500 55,475 7,773 75,748 Refurbishment and development expenditure - 5 - 5 Amortisation of short leasehold properties (40) (101) - (141) Disposals - (20,459) (17) (20,476) Revaluation (660) 154 - (506) As at 30 June 2003 11,800 35,074 7,756 54,630 Investment property assets at 30 June 2003 as per balance sheet 35,074 Tenant incentive adjustment at 30 June 2003 included in current assets 259 Total investment property assets as valued below 35,333 The investment property assets were valued at 30 June 2003, as follows: £000 DTZ Debenham Tie Leung Open Market Value 16,450 Insignia Richard Ellis Limited Open Market Value 3,605 Directors Open Market Value 2,733 Directors Net sale proceeds of properties sold after 30 June 12,545 2003 35,333 The Independent property valuations as at 30 June 2003, were performed by qualified professional valuers working for DTZ Debenham Tie Leung, Chartered Surveyors and Insignia Richard Ellis Limited, Chartered Surveyors. The properties were valued on the basis of Market Value, with the exception of 10 Lower Grosvenor Place, London SW1, which was appraised on the basis of Existing Use Value. All valuations were carried out in accordance with the RICS Appraisal and Valuation standards. 8. Associates and joint ventures 8a. Share of operating profit (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 £000 £000 £000 Associates 19,250 10,382 23,894 Joint ventures 1,013 2,504 3,404 20,263 12,886 27,298 NOTES TO THE FINANCIAL STATEMENTS (CONT) 8b. Associates Total to Total to The Mall The Junction X-Leisure 30 June 30 June LP LP LPs 2003 2002 £000 £000 £000 £000 £000 Profit and loss account (100%) Turnover 40,297 17,214 17,161 74,672 28,298 Property expenses (6,891) (779) (1,540) (9,210) (3,676) Net rental income 33,406 16,435 15,621 65,462 24,622 Fund and property management expenses (2,855) (2,135) (1,222) (6,212) (2,704) Administrative expenses (1,052) (490) (195) (1,737) (1,154) Share of joint venture's operating profit - 1,484 - 1,484 - Operating profit 29,499 15,294 14,204 58,997 20,764 Sale of investment properties - 1,799 - 1,799 - Net interest payable (13,665) (9,171) (10,169) (33,005) (10,489) Profit before and after tax 15,834 7,922 4,035 27,791 10,275 Balance sheet (100%) Investment properties and joint ventures 977,778 745,740 489,753 2,213,271 1,021,730 Current assets 49,137 33,611 26,599 109,347 36,568 Current liabilities (45,170) (21,369) (49,313) (115,852) (35,824) Borrowing due in more than one year (517,102) (404,433) (290,608) (1,212,143) (497,657) Net assets (100%) 464,643 353,549 176,431 994,623 524,817 C&R interest at period end 45.81% 27.7% 13.29% 5.72% 7.09% Group share of Operating profit 14,014 4,233 1,003 19,250 10,382 Sale of investment properties - 497 - 497 - Net interest payable (6,485) (2,539) (700) (9,724) (5,245) Profit for the period 7,529 2,191 303 10,023 5,137 Revaluation surplus for the period 15,440 7,619 188 23,247 14,363 Investment properties and joint ventures 447,881 206,570 39,170 693,621 510,865 Current assets 22,508 9,310 2,161 33,979 18,284 Current liabilities (20,691) (5,919) (8,991) (35,601) (17,912) Borrowing due in more than one year (236,864) (112,028) (18,088) (366,980) (248,829) Associate net assets 212,834 97,933 14,252 325,019 262,408 Unrealised profit on sale of property to associate (422) - - (422) (422) Group share of associate net assets 212,412 97,933 14,252 324,597 261,986 NOTES TO THE FINANCIAL STATEMENTS (CONT) Xscape Xscape Auchinlea 8c. Joint ventures Milton Keynes Castleford Partnership Partnership Partnership £000 £000 £000 Profit and loss account (100%) Turnover 1,898 - 352 Property expenses (210) - (150) Net rental income 1,688 - 202 Fund and property management expenses (50) - - Administrative expenses (104) (3) - Operating profit/(loss) 1,534 (3) 202 Sale of investment properties - - - Net Interest (payable)/receivable (1,593) - (528) Loss before tax (59) (3) (326) Taxation and minority interests - - - Loss after tax (59) (3) (326) Balance sheet (100%) Investment properties 74,290 40,783 87,950 Current assets 5,280 924 3,045 Current liabilities (2,297) (3,412) (2,385) Borrowing due in more than one year (46,800) (29,750) (38,775) Net assets (100%) 30,473 8,545 49,835 C&R Interest at period end 50.0% 66.7% 50% Group share of Turnover 949 - 176 Operating profit/(loss) 767 (2) 101 Sale of investment properties - - - Net interest payable (797) - (264) Loss before tax (30) (2) (163) Taxation and minority interests - - - Loss after tax (30) (2) (163) Revaluation surplus for the period 513 - 8,246 Investment properties 37,145 27,187 43,975 Current assets 2,641 616 1,523 Current liabilities (7,169) (2,274) (1,193) Borrowing due in more than one year (23,400) (19,833) (19,387) Joint venture net assets 9,217 5,696 24,918 Capital & Regional's share of net assets of Xscape Milton Keynes Partnership is less than its 50% interest due to the accumulated preferred return payable on additional non-equity capital provided by joint venture partners. NOTES TO THE FINANCIAL STATEMENTS (CONT) 8c. Joint ventures (cont) Total Total Morrison Merlin Others to 30 June 2003 to 30 June 2002 £000 £000 £000 £000 Profit and loss account (100%) Turnover 434 - 2,684 14,699 Property expenses 337 8 (15) (8,054) Net rental income 771 8 2,669 6,645 Fund and property management expenses - - (50) (50) Administrative expenses (371) (108) (586) (1,587) Operating profit/(loss) 400 (100) 2,033 5,008 Sale of investment properties - - - - Net interest (payable)/receivable (293) 20 (2,394) (3,311) Profit/(loss) before tax 107 (80) (361) 1,697 Taxation and minority interests - (9) (9) (276) Profit/(loss) after tax 107 (89) (370) 1,421 Balance sheet (100%) Investment properties - - 203,023 204,930 Current assets 75,896 1,244 86,389 26,371 Current liabilities (3,289) (946) (12,329) (18,463) Borrowing due in more than one year (62,500) - (177,825) (62,500) Net assets (100%) 10,107 298 99,258 150,338 C&R Interest at period end 50.0% 50.0% Group share of Turnover 217 - 1,342 7,350 Operating profit 200 (53) 1,013 2,504 Sale of investment properties - - - - Net interest (payable)/receivable (147) 10 (1,198) (1,655) Profit/(loss) before tax 53 (43) (185) 849 Taxation and minority interests - (3) (3) (138) Profit/(loss) after tax 53 (46) (188) 711 Revaluation surplus for the period - - 8,759 6,627 Investment properties - - 108,307 104,539 Current assets 37,948 772 43,500 13,224 Current liabilities (1,644) (478) (12,758) (14,869) Borrowing due in more than one year (31,250) - (93,870) (54,918) Joint venture net assets 5,054 294 45,179 47,976 NOTES TO THE FINANCIAL STATEMENTS (CONT) 9. Net assets per share As at 30 June 2003 Net assets Number of Net assets £000 shares per share Basic 305,104 62,189,911 491p Conversion of Convertible Subordinated Unsecured Loan Stock ("CULS") (net of unamortised issue costs) 24,359 12,670,912 - Exercise of share options 6,004 2,681,738 - Fully diluted 335,467 77,542,561 433p Deferred tax not provided (22,701) - - Loan fair value adjustment (note 12) (7,094) - - Triple net 305,672 77,542,561 394p As at 30 June 2002 Net assets Number of Net assets £000 shares per share Basic 251,945 61,711,015 408p Conversion of Convertible Subordinated Unsecured Loan Stock ("CULS") (net of unamortised issue costs) 24,268 12,670,912 - Exercise of share options 7,918 3,599,524 - Fully diluted 284,131 77,981,451 364p Deferred tax not provided (10,243) - - Loan fair value adjustment (note 12) (1,170) - - Triple net 272,718 77,981,451 350p As at 31 December 2002 Net assets Number of Net assets £000 shares per share Basic 270,003 61,746,441 437p Conversion of Convertible Subordinated Unsecured Loan Stock ("CULS") (net of unamortised issue costs) 24,314 12,670,912 - Exercise of share options 6,901 3,160,408 - Fully diluted 301,218 77,577,761 388p Deferred tax not provided (13,996) - - Loan fair value adjustment (note 12) (4,604) - - Triple net 282,618 77,577,761 364p NOTES TO THE FINANCIAL STATEMENTS (CONT) 10. Reserves Share Property Capital Share premium revaluation redemption Profit and capital account reserve reserve loss account Total £000 £000 £000 £000 £000 £000 At beginning of year 6,175 162,752 74,005 4,290 22,781 270,003 Issue of share capital 44 782 - - - 826 Revaluation of investment properties & other fixed assets - - (506) - - (506) Share of revaluation surplus of JV's & associates - - 32,006 - - 32,006 Tax on revaluation surpluses realised in the period - - - - 54 54 Realisation of surplus on disposal of investment properties - - (2,548) - 2,548 - Loss on deemed disposal - - - - (344) (344) Profit retained in the period - - - - 3,065 3,065 At end of period 6,219 163,534 102,957 4,290 28,104 305,104 11. Reconciliation of net cash inflow/(outflow) from operating activities (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Period to 30 June 30 June 31 December 2003 2002 2002 £000 £000 £000 Group operating profit 552 5,761 5,163 (Loss)/profit on sale of trading and development properties - (167) 1,023 552 5,594 6,186 Depreciation of other fixed assets 219 174 482 Amortisation of short leasehold properties 101 101 203 Amortisation of tenant incentives (15) 344 308 Amortisation of goodwill 581 - - Profit on disposal of fixed assets (6) (5) (6) Decrease/(increase) in trade debtors, other debtors and prepayments 60 (6,087) 8,708 Decrease in trade creditors, other creditors, taxation and social security and accruals (378) (13,323) (13,850) Non cash movement relating to the LTIP 683 - - Net cash flow from operating activities 1,797 (13,202) 2,031 NOTES TO THE FINANCIAL STATEMENTS (CONT) 12. Debt valuation The table below reflects the adjustment to the accounts, after the impact of corporation tax, required to adjust the carrying value of fixed rate debt and swaps to market value. The figures include the group share of debt held by joint ventures and associates. (Unaudited) (Unaudited) (Audited) As at As at As at 30 June 30 June 31 December 2003 2002 2002 £000 £000 £000 Decrease in net assets 7,094 1,170 4,604 13. Copies of the Interim Report Copies of the Interim Report will be available from the Company's registered office at 10 Lower Grosvenor Place, London, SW1W 0EN when they have been printed. Additional information Property under management 30 June 2003 31 December 2002 £m £m Investment properties 35 56 Trading properties 8 8 Mall fund 978 724 Junction fund 749 536 Leisure funds 494 - Other joint ventures 278 133 Other properties under management 40 40 Total 2,582 1,497 Fund Portfolio information at 30 June 2003 Junction X-Leisure X-Leisure X-Leisure Mall Fund Fund Fund 1 Fund 2a Fund 2b Number of core properties 13 18 7 5 7 Number of tenants 1,069 284 42 79 59 Square feet (000) 4,096 3,571 919 1,226 741 Properties at valuation (note 1) £978m £749m £125m £231m £138m Initial yield % 6.99% 5.15% 6.97% 6.69% 6.81% Equivalent yield % (note 2) 7.40% 6.58% 7.90% 7.15% 7.34% Vacancy rate (note 3) 2.3% 6.4% 3.5% 2.8% 0.5% Net rental income (£m per annum) £71.2m £39.5m £8.7m £15.5m £9.4m Estimated rental value (£m pa) (note 4) £83.0m £50.9m £9.5m £17.8m £10.1m Rental increase (ERV) 1.84% 5.46% 1.69% 3.55% 2.43% Reversionary % (note 5) 7.72% 19.00% 8.49% 7.93% 5.88% Loan to value ratio 53% 54% 63% 64% 65% Underlying valuation change since 31 3.73% 4.56% 0.42% (0.26)% 1.61% December 2002 Increase in unit value or NAV since 31 7.70% 8.40% 1.12% (0.72)% 4.83% December 2002 Total return, annualised since 26.1% 20.2% 12.2% 3.0% (1.5)% inception C&R share 45.81% 27.70% 13.29% 5.72% 7.09% Notes: 1. Properties under management include tenant incentives which are transferred to current assets for accounting purposes (see note 8). 2 The equivalent yield is the nominal equivalent yield based on rents passing and estimated rental values at 30 June 2003. 3 The vacancy rate is based on the % of ERV 4 Estimated rental value at 30 June 2003 including vacant space and after deducting head and equity rents 5 The amount by which the estimated rental value, excluding that relating to vacant space, exceeds the rents passing at 30 June 2003 This information is provided by RNS The company news service from the London Stock Exchange

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