Interim Results
Capital & Regional plc
16 September 2004
16 September 2004
CAPITAL & REGIONAL PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2004
Capital & Regional plc, the co-investing property asset manager, today announces
its unaudited interim results for the six months ended 30 June 2004.
Highlights:
• Property under management increased from £2.9bn to £3.2bn over the six
month period. Further acquisitions since 30 June 2004 have now
increased the total to £3.7bn.
• Return on equity was 15.6% including revaluation surplus for the six
month period (June 2003: 13.6%)
• Interim dividend increased by 25% to 5p (June 2003: 4p)
• Adjusted fully diluted Net Asset Value per share increased by 14.4% to
596p over the six month period (December 2003: 521p)
• Profit before tax £17.4m (June 2003: £8.3m)
Commenting on the results, Martin Barber, Chief Executive said:
"I am delighted with these figures, which provide further proof that our
business model is working. The impetus has continued into the second half and I
am confident that 2004 will be another good year for the company."
For further information:
Martin Barber, Chief Executive Tel: 020 7932 8000
William Sunnucks, Group Finance Director Tel: 020 7932 8000
James Benjamin / Andrew Hayes, gcg hudson sandler Tel: 020 7796 4133
CHAIRMAN'S & CHIEF EXECUTIVE'S STATEMENT
The first six months of 2004 have been very strong. Our funds are expanding,
our business model is working and the markets in which we are operating have
remained good. The total property portfolio under management grew from £2.9bn
to £3.2bn at 30 June and has since reached £3.7bn.
Return on equity for the six month period was 15.6% (2003: 13.6%). After the
interim dividend the adjusted fully diluted net asset per share rose by 14.4%
from 521p to 596p. This balance sheet number does not reflect the value of our
asset management business which is showing increasingly strong returns and is
clearly very valuable.
The profit before tax for the six months was £17.4m (2003: £8.3m). We are
increasing the interim dividend by 25% from 4p to 5p a share.
The Funds
The Mall Fund's portfolio has grown from £1.4bn last December to nearly £2bn at
the time of writing, making it one of the largest owners of covered shopping
centres in the UK. It now operates nearly 7m sq ft of retail space from 21
centres.
The first six months' return was 9.2% at the property level (ungeared) and 11.7%
at the fund level (geared). The annualised geared fund return since inception
in March 2002 is 32.4%.
Three shopping centres were acquired during the first half: the East Gate Centre
in Gloucester for £40m, the St. George's Centre in Preston for £102.5m and the
Galleries in Bristol for £123m. A further three centres have already been
acquired for £378.5m in the second half: the Blackburn Centre in Blackburn, the
Cleveland Centre in Middlesborough and the Chequers Centre in Maidstone.
The Mall Fund's equity base was enhanced in June by the contribution of The
Galleries, Bristol for £123m. Since then a further £68.4m has been raised from
17 new cash investors and has been fully utilised by the recent acquisitions.
There are now 26 investors in the fund and Capital & Regional's interest is
27.9%.
The Junction Fund's portfolio has increased from £757m last December to £844m at
June 2004. There has been one acquisition, the Great Western Retail Park in
Glasgow for £53m; and one disposal, the Cockhedge Centre in Warrington for £43m.
The first six months' performance was 9.6% at the property level (ungeared) and
13.8% at the fund level (geared). This has been driven by yield shift together
with some significant asset management initiatives. The annualised geared fund
return since inception in January 2002 is 25.0%.
The fund's development programme is moving ahead satisfactorily, contributing to
20% of the first 6 months return. In all, it has planning permission for
485,000 sq ft, adding a net 315,000 sq ft to the portfolio. The fund has
identified opportunities to develop approximately a further 500,000 sq ft and
additionally to undertake major reconfigurations and redevelopment of existing
space totalling 700,000 sq ft.
The consented space has been progressed as follows:
• Aylesbury: Phase I is fully let and due to complete in September
2004. Phases II and III are 50% pre-let by square footage with a start on site
planned for October 2004. Phases I and II represent 183,000 sq ft out of a
total consented sq footage of 199,000 sq ft.
• Bristol: The 100,000 sq ft Phase V extension started on site in June
2004 anchored by an 85,000 sq ft pre-let to Big W.
• Hull: Planning consent was obtained for a further Phase III 130,000
sq ft extension during the first six months. Phase IIIa of 57,000 sq ft (82%
pre-let by sq footage) is due to start on site in September 2004.
There are 4 investors in the fund and Capital & Regional's interest is 28.4%.
The X-Leisure Fund was created in March this year, gathering the three ex-MWB
leisure funds under one umbrella. The property manager is Capital & Regional
and the fund manager is Hermes, both operating under 15 year contracts. This
structure frees us to implement a longer term strategy with a common vision, and
to actively manage the properties in the portfolio.
We have already started to implement the business plan. First, a small park in
Dundee was sold. Since 30 June there has been a further small disposal in
Guildford, and two acquisitions:
• In July we acquired the 25% minority interest in the O2 centre for
£27m.
• In August we acquired the retail and leisure property at Brighton
Marina for £65m.
The X-Leisure Fund's portfolio now stands at £581m. There are 9 investors in
the fund and Capital & Regional's interest is 10.77%.
Joint Ventures and wholly owned properties
As at 30 June 2004, approximately 20% of the Group's property exposure was held
outside the funds in joint ventures and wholly owned properties. Key events
since our last report to you are:
Glasgow Fort - This out of town shopping park investment was sold to the
Hercules Unit Trust. Including amounts previously taken through revaluation
reserves, our share of the profit now totals £26m. The arrangements with
Hercules provides further incentives dependent upon leasing of the first phase
and profit sharing in respect of further phases.
The Swansea Retail Park - Leases have been exchanged on 75% of the floor space
to tenants including Next, TK Maxx, B&Q and Boots, with a further 11% in
solicitors hands. There are also rental guarantees in place for a further 10%
of the floor space. Completion of the development will take place this month.
Cardiff Retail Park - The Group has entered into an "Option to Purchase" this 32
acre site, which already has the benefit of a planning consent for a 100,000 sq
ft food store and 300,000 sq ft of bulky goods floor space. Discussions are
under way to widen the existing planning consent and negotiations are taking
place with anchor tenants.
Xscape - The Xscape at Milton Keynes is fully let and has performed well in the
first half. It maintained strong trading, footfall and dwell time levels
stimulated by focused seasonal marketing and promotional events. The Group cash
flow will benefit from this when the rent reviews due in 2005 are agreed.
Xscape Castleford, near Leeds, is establishing itself as a very successful
leisure/retail destination. Since the year end we have leased a nightclub, two
new bars, a restaurant and a family/children attraction. It won the award for
the best regeneration scheme in the Leisure Property Awards and has been
nominated as a best newcomer for tourism in the White Rose Awards and the best
new attraction in the Group Leisure Awards.
This month we are breaking ground on the third Xscape, in Braehead near Glasgow.
We are working in partnership with Capital Shopping Centres and financing
arrangements and lettings are proceeding satisfactorily.
Great Northern, Manchester - We are excited by the prospect of repositioning
this property and expect to make announcements fairly shortly on significant
progress.
Snozone - our snow slope business - Our operation at Milton Keynes has traded
well and is delivering increased profits. Castleford, near Leeds, has made an
excellent start, is also profitable and is exceeding expectations.
Financials
Funding: On a "see through" basis, including the Group share of all fund and
joint venture property investments, the Group has property assets of £956m and
net debt of £507m. Interest rates are fixed on £365m of the debt for periods of
between one and four years, and gearing is 114%.
Performance fees: We did not include any accrual for performance fees for the
first half year in 2003; but this year, with 2002 and 2003's strong performance
contributing to the calculation of the 2004 fees under the formula agreed with
the funds, we have made a prudent accrual of £11.2m during the first half year.
This amount is consistent with the amount provided in the fund accounts and
deducted from the distributions.
Jersey Unit Trusts: During the first half the Mall and Junction Funds became
Jersey Unit Trusts in order to enhance liquidity for investors. Since 30 June,
the X-Leisure Fund and the two Xscape partnerships have done the same. Capital
& Regional now holds its interests in these unit trusts via intermediary holding
companies resident in Jersey.
REITs
We are hopeful that the Government will announce in November that it will
introduce a tax transparent vehicle for property. It has had the benefit of
extensive representations from the operational side of the industry, as well as
from investors, as to what is needed to create a successful market. If the
right vehicle is made available, it should offer significant benefits not just
to the property industry but also to occupiers, whose efficiency should
ultimately be increased by lower costs and greater flexibility. The directors
believe that Capital & Regional, with its strong sectoral focus and experience
in the US REIT market is well positioned to be a leader in the new market.
Outlook
During the first half of 2004 we continued to see significant increases in the
value of retail investment properties in general. Our portfolios have also
benefited from active management and have been well positioned within their
sectors. Both the Mall and Junction Funds have outperformed their benchmark
indices. The impetus has continued strongly in the second half, and the outlook
for the year is good.
In the longer term, we are confident that our business model and management
approach will continue to deliver outperformance both to investors in our funds
and to shareholders in Capital & Regional.
Viscount Chandos, Chairman
Martin Barber, Chief Executive
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 2004 which comprises the consolidated profit and
loss account, the statement of total recognised gains and losses, the
reconciliation of movements in shareholders' funds, the consolidated balance
sheet, the summary cash flow statement and its related notes and related notes 1
to 14. 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 2004.
Deloitte & Touche LLP
Chartered Accountants
London
15 September 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
Notes £000 £000 £000
Turnover: Group income and share of joint ventures' turnover 28,494 13,318 44,010
Less: Share of joint ventures' turnover (3,328) (1,342) (4,554)
Group turnover 2 25,166 11,976 39,456
Cost of sales (3,935) (2,762) (6,445)
Gross profit 21,231 9,214 33,011
Profit on sale of trading and development properties 40 - 25
Administrative expenses (13,749) (8,662) (20,650)
Group operating profit 7,522 552 12,386
Share of operating profit in joint ventures and associates 8a 15,364 20,263 35,863
Total operating profit 22,886 20,815 48,249
Profit on sale of investment properties 185 1,398 5,242
Share of profit on sale of investment properties in joint 9,688 497 2,385
ventures and associates
Profit on ordinary activities before interest 32,759 22,710 55,876
Interest receivable and similar income 709 503 1,142
Interest payable and similar charges 3
- Group (3,278) (3,672) (7,287)
- Share of associates (9,664) (10,060) (19,789)
- Share of joint ventures (3,089) (1,220) (3,595)
(16,031) (14,952) (30,671)
Profit on ordinary activities before taxation 2 17,437 8,261 26,347
Taxation on profit on ordinary activities 4 (4,495) (2,691) (6,966)
Profit on ordinary activities after taxation 12,942 5,570 19,381
Equity dividends paid and payable (3,117) (2,505) (5,602)
Profit retained in the period 10 9,825 3,065 13,779
Earnings per share 5 20.9p 9.0p 31.4p
Earnings per share - diluted 5 18.1p 8.2p 27.3p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
(Unaudited) (Unaudited) (Audited)
6 months to Restated Year to
30 June 6 months to 31 December
2004 30 June 2003 2003
£000 £000 £000
Profit before tax 17,437 8,261 26,347
Movements in revaluation reserve:
Revaluation of investment properties 7,142 154 1,111
Revaluation of other fixed assets 240 (660) (620)
Revaluation of properties held in joint ventures and associates 42,502 31,644 80,870
(Loss)/gain on deemed disposals - (344) 4,498
Total gains and losses before tax 67,321 39,055 112,206
Tax shown in profit and loss account (4,495) (2,691) (6,966)
Tax on revaluation surplus realised (5,677) 54 (3,651)
Total tax charge (10,172) (2,637) (10,617)
Total recognised gains and losses for the period 57,149 36,418 101,589
Return on equity for the period 15.6% 13.5% 37.6%
See note 1 for details of the restatement.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(Unaudited) (Unaudited) (Audited)
6 months to Restated Year to
30 June 6 months to 31 December
2004 30 June 2003 2003
£000 £000 £000
Profit on ordinary activities after taxation 12,942 5,570 19,381
Equity dividends paid and payable (3,117) (2,505) (5,602)
Profit retained in the period 9,825 3,065 13,779
Share capital and share premium issued in period (net of 1,437 826 2,958
expenses)
Other recognised gains and losses relating to the period 44,207 30,848 82,208
Purchase of own shares (3,285) - (3,341)
LTIP credit in respect of profit and loss charge 988 - 1,184
Net increase in shareholders' funds 53,172 34,739 96,788
Opening shareholders' funds 367,126 270,338 270,338
Closing shareholders' funds 420,298 305,077 367,126
CONSOLIDATED BALANCE SHEET
(Unaudited) (Unaudited) (Audited)
As at Restated As at
30 June As at 31 December
2004 30 June 2003 2003
Notes £000 £000 £000
Fixed assets
Intangible assets 6 12,754 16,820 14,540
Investment property assets 7 60,547 35,074 51,457
Other fixed assets 12,533 12,676 12,282
85,834 64,570 78,279
Investment in joint ventures:
share of gross assets 152,631 151,699 183,769
share of gross liabilities (112,752) (106,628) (127,277)
8c 39,879 45,071 56,492
Investment in associates 8b 418,311 324,343 372,676
544,024 433,984 507,447
Current assets
Property assets 7 8,184 7,756 7,941
Debtors 35,051 27,050 24,476
Cash at bank and in hand 4,390 2,348 4,475
47,625 37,154 36,892
Creditors: amounts falling due within one year (35,555) (22,818) (37,232)
Net current assets/(liabilities) 12,070 14,336 (340)
Total assets less current liabilities 556,094 448,320 507,107
Creditors: amounts falling due after more than one year (108,819) (115,861) (113,283)
Convertible Subordinated Unsecured Loan Stock (24,543) (24,451) (24,497)
Provision for liabilities and charges (2,434) (2,931) (2,201)
Net assets 2 420,298 305,077 367,126
Capital and reserves
Called up share capital 10 6,381 6,219 6,311
Share premium account 10 166,941 163,534 165,574
Revaluation reserve 10 175,042 102,595 145,245
Other reserves 10 164 4,069 2,468
Profit and loss account 10 71,770 28,660 47,528
Equity shareholders' funds 420,298 305,077 367,126
Net assets per share 9 677p 495p 591p
Net assets per share - adjusted fully diluted 9 596p 439p 521p
SUMMARY CASH FLOW STATEMENT
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
Notes £000 £000 £000
Net cash (outflow)/inflow from operating activities 11 (8,085) 1,797 28,947
Distributions received from joint ventures 23,596 350 350
Distributions received from associates 6,295 8,116 14,344
Returns on investments and servicing of finance (4,080) (3,652) (7,920)
Taxation (6,349) (2,660) (5,496)
Capital expenditure and financial investment 14,626 19,677 8,442
Acquisitions, disposals and exceptional items (15,603) (44,158) (48,208)
Equity dividends paid (3,113) (2,482) (4,985)
Cash inflow/(outflow) before financing 7,287 (23,012) (14,526)
Financing:
Issue of ordinary share capital 1,437 826 2,958
Purchase of own shares (3,473) - (3,338)
Cash (outflow)/inflow from debt financing (5,336) 20,375 15,222
(Decrease)/increase in cash in the period (85) (1,811) 316
Reconciliation of net cash flow to movement in net debt (Unaudited) (Unaudited) (Audited)
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
(Decrease)/increase in cash in the period (85) (1,811) 316
Cash inflow/(outflow) from debt financing 5,336 (20,375) (15,222)
Change in net debt resulting from cash flows 5,251 (22,186) (14,906)
Net debt at beginning of period (130,839) (115,933) (115,933)
Net debt at end of period (125,588) (138,119) (130,839)
Analysis of net debt (Unaudited) (Unaudited) (Audited)
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Cash at bank 4,390 2,348 4,475
Debt due within one year (1,700) (200) (200)
Debt due after one year (128,278) (140,267) (135,114)
Net debt (125,588) (138,119) (130,839)
NOTES TO THE INTERIM RESULTS
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 2003.
The comparative figures represent the Group's results and cash flows for the
period from 1 January 2003 to 30 June 2003 and for the year from 1 January 2003
to 31 December 2003. The comparatives for the period to 30 June 2003 have been
restated to reflect our change in accounting policy for tenant incentives and
our change in accounting policy for own shares. There has been no effect on the
profit and loss account for the period to 30 June 2003. The effect on the 30
June 2003 balance sheet was to reduce net assets and shareholders' funds by
£27,000.
The comparative figures for the year ended 31 December 2003 do not constitute
statutory accounts but have been extracted from the statutory accounts for that
year, which have been filed with the Registrar of Companies. The auditors'
report in respect of the year ended 31 December 2003 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 (Unaudited) (Unaudited)
Joint Total Total (Audited)
Asset Snow ventures Wholly 6 months 6 months Year to 31
manage- Slope and owned to 30 June to 30 June December
ment business associates properties 2004 2003 2003
£000 £000 £000 £000 £000 £000 £000
Asset management fees 8,739 - - - 8,739 7,130 15,757
Performance fees 11,155 - - - 11,155 - 13,292
Snozone income - 4,444 - - 4,444 2,096 5,546
Rental and other income - - - 828 828 2,750 4,861
Group turnover 19,894 4,444 828 25,166 11,976 39,456
Share of joint ventures
and associates operating
profit - - 15,364 - 15,364 20,263 35,863
Direct expenses - (3,695) - (240) (3,935) (2,762) (6,445)
Amortisation of goodwill (575) - - - (575) (581) (1,162)
Net interest payable:
non and limited - - (12,198) - (12,198) (10,921) (22,545)
recourse
own borrowings (net) - - (2,316) (808) (3,124) (3,528) (6,984)
Contribution 19,319 749 850 (220) 20,698 14,447 38,183
Indirect expenses (13,174) (8,081) (19,488)
Profit on disposals 9,913 1,895 7,652
(net)
Profit before taxation 17,437 8,261 26,347
Net assets 25,216 698 331,262 63,122 420,298 305,077 367,126
No performance fee accrual was included for the first half year in 2003; but
this year with 2002 and 2003's strong performance contributing to the
calculation of the 2004 fees under the formula agreed with the funds, a prudent
accrual of £11.2m has been made during the first half year.
The performance fee income reflected is consistent with the cost of performance
fees in the Mall LP and Junction LP accounting shown in note 8b.
The indirect expenses are not split between operations because the directors
believe it is not practical.
3. Interest payable and similar charges
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Bank loans and overdrafts 3,462 2,884 6,479
Other loans 877 877 1,754
4,339 3,761 8,233
Capitalised in period (1,061) (89) (946)
3,278 3,672 7,287
Share of associates 9,664 10,060 19,789
Share of joint ventures 3,089 1,220 3,595
16,031 14,952 30,671
4. Taxation
The taxation charge for the period is based on an estimate of the likely
effective tax rate for the current year.
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Current tax
UK corporation tax (at 30%) 4,780 2,131 6,330
Adjustment in respect of prior years (518) 23 832
Share of joint ventures tax - 3 -
Total current tax 4,262 2,157 7,162
Deferred tax
Origination and reversal of timing differences 233 534 (196)
Total taxation 4,495 2,691 6,966
Unprovided deferred tax 2,952 22,701 31,804
During the six month period, a significant part of the Group's property
interests has been transferred offshore. In addition the Auchinlea partnership
has sold its interest in Glasgow Fort. The Group has been advised that no
capital gains tax liability arises on these transactions, although the relevant
computations have yet to be submitted or agreed. The amount disclosed as an
unprovided Capital Gains Tax liability in the accounts at 31 December 2003 in
relation to these assets was £28.6m.
5. Earnings per share
Six months to 30 June 2004 (Unaudited)
Earnings Number of Earnings
£000 Shares per share
Basic 12,942 61,830,522 20.9p
Exercise of share options - 694,139
Conversion of Convertible Unsecured Loan Stock 669 12,670,912
Diluted 13,611 75,195,573 18.1p
Six months to 30 June 2003 (Unaudited)
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
Year to 31 December 2003 (Audited)
Earnings Number of Earnings
£000 shares per share
Basic 19,381 61,758,939 31.4p
Exercise of share options - 1,062,488
Conversion of Convertible Unsecured Loan Stock 1,218 12,670,912
Diluted 20,599 75,492,339 27.3p
The calculation includes the full conversion of the Convertible Unsecured Loan
Stock where the effect on earnings per share is dilutive. Own shares held are
excluded from the weighted average number of shares.
The Convertible Unsecured Loan Stock charge added back to give the diluted
earnings figures is net of tax at the effective tax rate for the year.
6. Intangible assets
Goodwill
Cost £000
At 1 January 2004 15,702
Reassessment of fair value (1,211)
At 30 June 2004 14,491
Amortisation
At 1 January 2004 1,162
Charge for the period 575
At 30 June 2004 1,737
Net book value
At 30 June 2004 12,754
At 1 January 2004 14,540
In the period the Group received £1,211,000 of deferred fees from the X-Leisure
fund. These were attributed a fair value of £nil at the time of acquisition.
7. Wholly owned property assets
Other fixed Investment Trading Total
property property property property
assets assets assets assets
£000 £000 £000 £000
Cost or valuation
As at 1 January 2004 11,800 51,457 7,941 71,198
Refurbishment and development expenditure - 14,648 243 14,891
Amortisation of short leasehold properties (40) (134) - (174)
Disposals - (12,566) - (12,566)
Revaluation 240 7,142 - 7,382
As at 30 June 2004 12,000 60,547 8,184 80,731
The property assets were valued at 30 June 2004, as follows: £000
DTZ Debenham Tie Leung Open Market Value 16,450
King Sturge Open Market Value 51,440
CBRE Limited Open Market Value 3,236
Directors Open Market Value 1,421
72,547
The independent property valuations as at 30 June 2004, were performed by
qualified professional valuers working for DTZ Debenham Tie Leung, Chartered
Surveyors and CBRE Limited, Chartered Surveyors and King Sturge, 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 Year to
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Associates 13,182 19,250 32,256
Joint ventures 2,182 1,013 3,607
15,364 20,263 35,863
8b. Associates (Unaudited)
(Unaudited) Restated
The Mall The Junction X-Leisure Total to 30 Total to 30
LP LP LP June 2004 June 2003
£000 £000 £000 £000 £000
Profit and loss account (100%)
Turnover 50,589 16,614 17,330 84,533 74,672
Property expenses (7,721) (947) (1,614) (10,282) (9,210)
Net rental income 42,868 15,667 15,716 74,251 65,462
Fund and property management expenses (17,304) (5,704) (1,459) (24,467) (6,212)
Administrative expenses (516) (391) (437) (1,344) (1,737)
Share of joint venture's operating profit - 1,798 - 1,798 1,484
Operating profit 25,048 11,370 13,820 50,238 58,997
Profit on disposal of investment - 57 - 57 1,799
properties
Net interest payable (15,648) (9,914) (9,933) (35,495) (33,005)
Profit before and after tax 9,400 1,513 3,887 14,800 27,791
Balance sheet (100%)
Investment properties and joint ventures 1,582,740 834,252 500,665 2,917,657 2,212,410
Current assets 67,733 45,872 25,127 138,732 109,347
Current liabilities (73,828) (19,868) (126,947) (220,643) (115,852)
Borrowing due in more than one year (684,393) (395,971) (212,187) (1,292,551) (1,212,143)
Net assets (100%) 892,252 464,285 186,658 1,543,195 993,762
C&R interest at period end 29.90% 28.37% 10.77%
Group share of
Operating profit 8,468 3,226 1,488 13,182 19,250
Profit on disposal of investment - 16 - 16 497
properties
Net interest payable (5,290) (2,813) (1,070) (9,173) (9,724)
Profit for the period 3,178 429 418 4,025 10,023
Revaluation for the period 24,176 15,713 275 40,164 22,993
Investment properties and joint ventures 473,239 236,677 53,922 763,838 693,367
Current assets 20,252 13,014 2,706 35,972 33,979
Current liabilities (22,073) (5,636) (13,672) (41,381) (35,601)
Borrowing due in more than one year (204,634) (112,337) (22,853) (339,824) (366,980)
Associate net assets 266,784 131,718 20,103 418,605 324,765
Unrealised profit on sale of property to (294) - - (294) (422)
associate
Group share of associate net assets 266,490 131,718 20,103 418,311 324,343
Xscape Xscape
8c. Joint ventures Milton Keynes Castleford Auchinlea
Partnership Partnership Partnership
£000 £000 £000
Profit and loss account (100%)
Turnover 1,994 1,102 283
Property expenses (272) (583) (376)
Net rental income 1,722 519 (93)
Fund and property management expenses (50) (50) -
Administrative expenses (14) (16) -
Operating profit/(loss) 1,658 453 (93)
Profit on disposal of investment properties - - 19,343
Net interest payable (1,607) (1,514) (652)
Profit/(loss) before tax 51 (1,061) 18,598
Taxation and minority interests - - -
Profit/(loss) after tax 51 (1,061) 18,598
Balance sheet (100%)
Investment properties 78,885 61,378 -
Current property assets - - -
Current assets 3,918 5,633 55,058
Current liabilities (2,692) (4,506) (41,343)
Borrowing due in more than one year (46,800) (47,315) -
Net assets (100%) 33,311 15,190 13,715
C&R interest at period end 50% 66.7% 50%
Group share of
Turnover 997 718 141
Operating profit/(loss) 829 302 (46)
Profit on disposal of investment properties - - 9,672
Net interest payable (804) (1,009) (327)
Profit/(loss) before tax 25 (707) 9,299
Taxation and minority interests - - -
Profit/(loss) after tax 25 (707) 9,299
Revaluation for the period 1,348 990 -
Investment properties 39,443 40,939 -
Current property assets - - -
Current assets 1,959 3,757 27,529
Current liabilities (1,451) (3,011) (20,672)
Borrowing due in more than one year (23,400) (31,559) -
Joint venture net assets 16,551 10,126 6,857
(Unaudited)
8c. Joint ventures (cont) (Unaudited) Restated
Total Total
Morrison Merlin Others to 30 June 2004 to 30 June 2003
£000 £000 £000 £000
Profit and loss account (100%)
Turnover 2,909 - 6,288 2,684
Property expenses (454) - (1,685) (15)
Net rental income 2,455 - 4,603 2,669
Fund and property management - - (100) (50)
expenses
Administrative expenses (20) (241) (291) (586)
Operating profit/(loss) 2,435 (241) 4,212 2,033
Profit on disposal of investment - - 19,343 -
properties
Net interest (payable)/receivable (1,787) 15 (5,545) (2,394)
Profit/(loss) before tax 648 (226) 18,010 (361)
Taxation and minority interests - (1,400) (1,400) (9)
Profit/(loss) after tax 648 (1,626) 16,610 (370)
Balance sheet (100%)
Investment properties - - 140,263 202,808
Current property assets 72,500 - 72,500 72,500
Current assets 4,012 1,292 69,913 13,889
Current liabilities (2,974) (291) (51,806) (12,329)
Borrowing due in more than one year (62,500) - (156,615) (177,825)
Net assets (100%) 11,038 1,001 74,255 99,043
C&R Interest at period end 50%
Group share of
Turnover 1,455 - 3,311 1,342
Operating profit/(loss) 1,218 (121) 2,182 1,013
Profit on disposal of investment - - 9,672 -
properties
Net interest (payable)/receivable (894) 8 (3,026) (1,198)
Profit/(loss) before tax 324 (113) 8,828 (185)
Taxation and minority interests - (700) (700) (3)
Profit/(loss) after tax 324 (813) 8,128 (188)
Revaluation for the period - - 2,338 8,651
Investment properties - - 80,382 108,199
Current property assets 36,250 - 36,250 36,250
Current assets 2,006 748 35,999 7,250
Current liabilities (1,309) (100) (26,543) (12,758)
Borrowing due in more than one year (31,250) - (86,209) (93,870)
Joint venture net assets 5,697 648 39,879 45,071
9. Net assets per share
As at 30 June 2004 (Unaudited)
Net assets Number of Net assets
£000 shares per share
As per the balance sheet 420,298 63,810,345
Own shares held - (1,688,411)
Net assets per share 420,298 62,121,934 677p
Conversion of CULS (net of unamortised issue costs) 24,449 12,670,912
Exercise of share options 2,329 1,011,304
Capital allowances deferred tax provision 4,910 -
Adjusted fully diluted 451,986 75,804,150 596p
As at 30 June 2003 (Restated, Unaudited)
Net assets Number of Net assets
£000 shares per share
As per the balance sheet 305,077 62,189,911
Own shares held - (524,000)
Net assets per share 305,077 61,665,911 495p
Conversion of CULS (net of unamortised issue costs) 24,359 12,670,912
Exercise of share options 6,004 2,681,738
Capital allowances deferred tax provision 2,931 -
Adjusted fully diluted 338,371 77,018,561 439p
As at 31 December 2003 (Audited)
Net assets Number of Net assets
£000 shares per share
As per the balance sheet 367,126 63,112,003
Own shares held - (1,024,000)
Net assets per share 367,126 62,088,003 591p
Conversion of CULS (net of unamortised issue costs) 24,404 12,670,912
Exercise of share options 3,767 1,709,646
Capital allowances deferred tax provision 3,449 -
Adjusted fully diluted 398,746 76,468,561 521p
10. Reserves
Share Capital
Share premium Revaluation redemption Own Profit and
capital account reserve reserve shares loss account Total
£000 £000 £000 £000 £000 £000 £000
As at 31 December 2003 6,311 165,574 145,245 4,289 (1,821) 47,528 367,126
Issue of share capital 70 1,367 - - - - 1,437
Revaluation of investment
properties & other fixed
assets - - 7,382 - - - 7,382
Share of revaluation of JVs & - - 42,502 - - - 42,502
associates
Tax on revaluation surpluses
realised in the year - - - - - (5,677) (5,677)
Realised on disposal of
investment properties and on
dilution of interest in
associates - - (21,223) - - 21,223 -
Permanent diminution of
investment properties - - 1,136 - - (1,136) -
Credit in respect of LTIP - - - - - 988 988
charge
Purchase of own shares - - - - (3,285) - (3,285)
Amortisation of cost of own - - - - 981 (981) -
shares
Profit retained in the period - - - - - 9,825 9,825
As at 30 June 2004 6,381 166,941 175,042 4,289 (4,125) 71,770 420,298
11. Reconciliation of net cash (outflow)/inflow from operating activities
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Group operating profit 7,522 552 12,388
Profit on sale of trading and development properties (40) - (25)
7,482 552 12,363
Depreciation of other fixed assets 160 219 425
Amortisation of short leasehold properties 134 101 203
Amortisation of tenant incentives (11) (15) (144)
Amortisation of goodwill 575 581 1,162
Profit on disposal of fixed assets - (6) (6)
(Increase)/decrease in trade debtors, other debtors and (13,002) 60 3,144
prepayments
(Decrease)/increase in trade creditors, other creditors,
taxation and social security and accruals (4,537) (378) 10,616
Non cash movement relating to the LTIP 1,114 683 1,184
Net cash (outflow)/inflow from operating activities (8,085) 1,797 28,947
12. Debt valuation
The table below reflects the adjustment to the interim results, after the impact
of corporation tax, required to adjust the carrying value of fixed rate debt and
swaps to market value.
(Unaudited) (Unaudited) (Audited)
As at As at As at
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Fixed and swapped loans - on balance sheet 2,477 - 1,648
Group share of associates 3,129 (8,572) 517
Group share of joint ventures 1,139 (1,562) 618
Total 6,745 (10,134) 2,783
Increase/(decrease) in net assets net of tax at 30% (2003: 4,722 (7,094) 1,948
30%)
13. International Financial Reporting Standards
The introduction of international financial reporting standards for accounting
periods beginning on or after 1 January 2005 will have a significant financial
impact on the Group. The Group has therefore decided to delay the introduction
of IFRS for our statutory reporting by moving our year end forward by one day to
30 December 2004. The Group will still make disclosure of the impact of IFRS
elsewhere in our annual report.
14. 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.
This interim report was approved by the Board on 15 September 2004.
Additional information (Unaudited)
Property under management 30 June 2004 31 December 2003
£m £m
Investment properties 61 52
Trading properties 8 8
Mall Fund 1,586 1,243
Junction Fund 844 757
Leisure Funds 504 501
Other joint ventures 218 332
Total 3,221 2,893
Fund Portfolio information at Junction
30 June 2004 Mall Fund Fund X-Leisure Funds
Number of core properties 18 16 19
Number of tenants 1,614 191 186
Square feet (000) 5,439 3,183 2,825
Properties at market value £1,586m £844m £504m
Initial yield 6.08% 4.55% 6.37%
Equivalent yield 6.62% 6.01% 7.11%
Vacancy rate 3.7% 7.5% 1.4%
Net rental income (per annum) £99.4m £40.1m £33.7m
Estimated rental income (per annum) £118.6m £48.4m £37.2m
Rental increase (ERV) 1.6% 2.1% -0.8%
Reversionary percentage 8.6% 11% 7.3%
Loan to value ratio 43% 47% 63%
Underlying valuation change since 31 December 2003 5.5% 7.1% 0.7%
Property level return 9.2% 9.6% 8.1%
Geared return 11.7% 13.8% 10.2%
Unit price (£1.00 at inception) £1.5738 £1.5546 £1.0247
C&R share 29.9% 28.4% 10.77%
Notes:
1. Properties under management include tenant incentives which
are transferred to current assets for accounting purposes (see note 8).
Glossary of terms
Adjusted fully diluted NAV per share includes the Open market value is an opinion of the best price at
effect of those shares potentially issuable under the which the sale of an interest in the property would
CULS or employee share options. It excludes the complete unconditionally for cash consideration on the
capital allowances deferred tax provision. date of valuation (as determined by the Group's external
valuers). In accordance with usual practice, the
Group's external valuers report valuations net, after
the deduction of the prospective purchaser's costs,
Capital allowances deferred tax provision In accordance including stamp duty, agent and legal fees.
with FRS19, full provision has been made for deferred
tax arising on the benefit of capital allowances
claimed to date. In the Group's experience liabilities
in respect of capital allowances provided are unlikely Passing rent is the gross rent, less any ground rent
to crystallise in practice and are therefore excluded payable under head leases.
when arriving at adjusted fully diluted NAV per share.
Return on equity is the total return, including
Contingent tax liability is the unprovided further revaluation surplus, divided by opening equity plus time
taxation which might become payable if the Group's weighted additions to share capital, excluding share
investments and properties were sold at their balance options exercised, less reductions in share capital.
sheet values net of any tax losses which have not been
recognised in the balance sheet.
Reversion is the estimated increase in rent at review
where the gross rent is below the estimated rental
CULS is the Convertible Subordinated Unsecured Loan value.
Stock.
Reversionery percentage is the percentage by which the
Earnings per share (EPS) is the profit on ordinary ERV exceeds the passing rent.
activities after taxation divided by the weighted
average number of shares in issue during the period
excluding own shares held.
Reversionary yield is the anticipated yield, which the
initial yield will rise to once the rent reaches the
estimated rental value.
Estimated rental value (ERV) is the Group's external
valuers' opinion as to the open market rent which, on
the date of valuation, could reasonably be expected to
be obtained on a new letting or rent review of a Total return is the group's total recognised gains and
property. losses for the period as set out in the Statement of
Total Recognised Gains and Losses (STRGL).
Equivalent yield is a weighted average of the initial
yield and reversionary yield and represents the return Total shareholder return is the growth in price per
a property will produce based upon the timing of the share plus dividends per share.
income received. In accordance with usual practice,
the equivalent yields (as determined by the Group's
external valuers) assume rent received annually in
arrears and on gross values including prospective UITF 28 "Operating lease incentives" debtors Under
purchasers' cost. accounting rules the balance sheet value of lease
incentives given to tenants is deducted from property
valuation and shown as a debtor. The incentive is
amortised through the profit and loss account.
Gearing is the Group's net debt as a percentage of net
assets, adjusted for the conversion of the CULS into
equity. See through gearing includes our share of non
recourse net debt in the associates and joint ventures. Vacancy rate is the estimated rental value of vacant
properties expressed as a percentage of the total
estimated rental value of the portfolio, excluding
development properties.
Initial yield is the annualised net rents generated by
the portfolio expressed as a percentage of the
portfolio valuation, excluding development properties.
IPD is Investment Property Databank Ltd, a company that
produces an independent benchmark of property returns.
Net assets per share (NAV) are shareholders' funds
divided by the number of shares held by shareholders at
the period end, excluding own shares held.
This information is provided by RNS
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