Interim Results
Capital & Regional plc
21 September 2005
21 September 2005
CAPITAL & REGIONAL PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2005
Capital & Regional plc, the co-investing property asset manager, today announces
its unaudited interim results for the six months ended 30 June 2005.
Highlights
• Property under management increased from £4.0bn to £4.6bn over the six
month period (June 2004: £3.2bn)
• Total return on equity before exceptional items was 12.0%, despite removal
of SDLT relief in disadvantaged areas, for the six month period (June 2004:
15.6%*)
• Adjusted fully diluted Net Asset Value per share increased by 12.5% to
799p over the six month period (December 2004: 710p)
• Recurring pre-tax profit £9.8m** (June 2004: £7.8m)
• Interim dividend increased by 40% to 7p (June 2004: 5p)
• Loss before tax of £27.1m after exceptional items of £46.9m (June 2004:
£17.4m profit).
Commenting on the results, Martin Barber, Chief Executive said:
"There is no doubt that some parts of the retail sector have been finding the
last six months tough. However, where there have been failures we have quickly
found replacement tenants. We know that our occupiers benefit from our
management approach. The investment market remains strong, our business model
is working well, and I am confident that 2005 will prove to be another very good
year."
For further information:
Martin Barber, Chief Executive Tel: 020 7932 8000
William Sunnucks, Group Finance Director Tel: 020 7932 8000
Michael Sandler / James Benjamin, Hudson Sandler Tel: 020 7796 4133
* Note 12
** Note 2
Chief Executive's statement
Our business has continued to perform strongly during the first six months. The
funds have continued to grow, property by property business plans are being
implemented and the returns have been highly satisfactory.
Return on equity, before exceptional items, was 12.0% for the six month period
(see note 12) and our adjusted fully diluted NAV per share grew from 710p to
799p.
Drivers of total return
%
Underlying return 8.2
Yield shift 8.1
No SDLT relief in disadvantaged areas -4.3
Total return before exceptional items 12.0
Our return on equity, before exceptional items, would have been 16.2% had it not
been for the Government's decision to remove Stamp Duty Land Tax ("SDLT") relief
from disadvantaged areas. Our valuers immediately deducted 4% or £21m from the
value of all our property interests in disadvantaged areas reflecting the need
for the purchaser to pay the SDLT.
Our recurring pre-tax profit has increased from £7.8m to £9.8m or 13.8p per
share. This measure, which excludes the impact of performance fees and
associated variable costs, gives us confidence to increase our interim dividend
from 5p to 7p.
Our profit before tax and exceptional items is £20m, before an exceptional
charge of £47m. This is because we have been buying back our Convertible
Unsecured Loan Stock at a higher price than the original issue price, and
writing off the premium. The transaction is beneficial to shareholders because
the number of CULS which can be converted into ordinary shares falls, and the
premium paid is tax deductible.
The Funds
Fund performance in period to 30 June 2005 (6 months)
Geared return Ungeared return
% %
Mall 6.70 6.00
Junction 8.13 6.60
X-Leisure 8.20 6.30
Mall Fund: whilst there is no doubt that growth in retail sales both in volume
and value are weaker than 2004, we have been generally pleased with the
performance of our shopping centres. Interestingly, quality space that has
become available either through increasing corporate activity or retailer
failure has been readily taken up. While some high profile tenants have
suffered, the occupier market is selective and dynamic. Our vacancies have
grown from 3.5% to 5.0%, of which almost 40% are deliberate and are a
consequence of developments and reconfigurations associated with our active Mall
business plans.
The Fund has recently welcomed 3 new institutional investors, making a total of
32 investors. We continue to see clear evidence of the benefits of scale. This
was particularly evident in the first half of the year when the quality, scale
and diversity of the Mall's tenant base enabled £1,066,000,000 of its debt to be
securitised as Mall Bonds at a much reduced interest margin of 18bps. The
resulting saving of £6m per annum will flow through directly to investors as
increased distributions. The entire issue was rated triple A by all three
rating agencies, which re-affirms the quality of both the portfolio and the Mall
business.
During the half year the Fund grew from £2.1billion to £2.3billion, due to the
acquisition of a shopping centre at Main Square Camberley and valuation uplifts
totalling £70m (+3.3%). This surplus was partly caused by yield shift of around
23bps. As with all our funds the surplus was reduced by the removal of SDLT
relief for disadvantaged areas which reduced the valuations of eight of our
centres by £36.4m; 41% of the portfolio by value, compared to 12% of the
Benchmark.
Junction Fund: during the half year the Junction Fund acquired two further
retail parks in Telford and Slough, and has continued its active management and
development programme. As a result of new lettings, vacancy rates have fallen
by (50%). In particular work has started on site at Wembley and Thurrock and we
continue with site assembly and pre-letting work at Oldbury. The main retail
terrace at Hull is expected to be complete in September as is phase 2 of the
Aylesbury development.
The Fund's performance was disproportionately affected by the removal of SDLT
exemption for properties in disadvantaged areas. 49% of its properties were
disadvantaged compared to 21% of the IPD index. The resultant impact on value
amounted to £20.3m. The high calibre of the portfolio should enable us to
outperform the market in the tougher market conditions that we are anticipating.
X-Leisure Fund: the Fund has been growing strongly this year. It has welcomed
four new investors and acquired new leisure parks in Aberdeen and Cambridge.
Value has been added as business plans have been implemented, in particular at
Star City in Birmingham and Tower Park in Poole. The ability to work closely
with tenants and invest relatively small amounts of new capital at the parks is
beginning to show good returns.
Fund investors have also benefited from increased market recognition of leisure
property as an attractive asset class. This has driven the favourable yield
shift during the half year which has continued into the second half. Further
evidence of the strength of the investment market is provided by the 8.2% total
return achieved in the first half, despite the £7.2m adverse impact of the
removal of SDLT relief for properties in disadvantaged areas.
The portfolio is becoming increasingly focused on assets which allow the C&R
management team to add real value. Three health clubs, which are good but "dry"
investments, have been sold.
Other UK property ownership activities
Xscapes: we now have three Xscape projects.
• Xscape Milton Keynes is five years old and the first rent reviews are
in the process of settlement. Initial indications are that a substantial rise
in rental income will be achieved.
• Castleford has now been operating for 18 months, and is trading well.
Footfall during the first half was 27% up on the same period last year.
• Our third Xscape at Braehead is under construction, and is scheduled
for completion in Spring 2006. Pre-lets have been very encouraging, with 68% of
the rental income now legally committed.
Swansea Retail Park: this wholly owned retail park development is now open and
trading strongly. The capital value is now £89m compared to total build costs
of £65m and we believe that there are opportunities for further increases in
value.
Glasgow Fort: we have received a further £2m from our share of this joint
venture development outside Glasgow which has been sold to the Hercules Fund.
The sale agreement entitles us to various further sums as certain milestones are
achieved.
Hemel Hempstead: this leisure facility has been acquired from Luminar Leisure
for £17m with a lease in place which can be terminated as development
opportunities arise. The purchase was completed on 7 September 2005 and we are
currently exploring the possibility of a mixed retail park and leisure scheme
with the local authority.
Great Northern: this large listed former warehouse development is expected to
come to life when London Clubs International opens its casino operation there in
early 2006. All regulatory approvals have now been received, and building work
to accommodate them has now started. The remainder of the vacant space is under
offer to a large nightclub operator.
German portfolio:
On 20 July 2005 we announced the formation of a joint venture with the Hahn
Group and the acquisition of a portfolio of 8 out of town retail centres in
Germany for €110m, of which €33m had been acquired before 30 June. Since then
we have completed the purchase of one other similar property and the total
portfolio now stands at €124m.
These properties have strong positions in their local markets due to tight
planning restrictions on further out of town retail development. They typically
yield around 7% after providing for landlord costs, and are financed with 70% to
80% bank debt on which the interest rate on the portfolio to date can be fixed
at under 4%. They are anchored by major German retailers such as Metro, Rewe
and Edeka.
We believe that property is a local business, and that management is key. For
this reason we have invested considerable time and effort into building a strong
working relationship with the Hahn Group, which will handle the local property
management and will also have a 10% stake in the portfolio.
The Hahn Group manages 120 single asset closed ended funds with a value of
€1.7billion, and there is potential for C&R to make further purchases as the
funds reach the end of their planned lives.
The earnings businesses
Property Management: our property management business produced £15.6m profit
before tax during the first half year. All three funds are earning performance
fees, which are included at the half year on an estimated basis. Our
performance related overhead is set against the performance fees, while the
fixed overhead is set against our very stable management fee income (see note
2).
Performance fees 30 June 30 June 30 Dec
2005 2004 2004
£m £m £m
Mall 12.11 9.20 22.8
Junction 4.84 2.00 7.3
X-Leisure 0.46 - 1.1
Total 17.41 11.20 31.20
Snozone: this business is building up a reputation for operating profitable ski
slopes. It uses little capital, and has continued to generate a useful earnings
stream in the first half.
Financials
Gearing: we measure gearing on a see through basis, including our share of fund
and JV debt although it is not shown on the balance sheet. On this basis our
debt was 125% of our equity, slightly up since December 2004 due to the CULS
repurchase programme as well as acquisitions in the Junction fund and Germany.
Changes to debt structure: the Mall securitisation has reduced the weighted
average cost of our debt from 5.82% to 5.41%. At the same time substantial new
interest rate swaps were entered into, and 82% of our see through debt is now
effectively fixed for 56 months, up from 29 months in December 2004. Our £1m
share of the unamortised setup costs for the previous bank facility were written
off in the second quarter.
Share issues: we raised £49.6 million through the issue of new share capital
during the first half, which was used to pay off debt incurred in buying back
the CULS.
CULS repurchases: we spent £62.8 million on repurchasing CULS during the first
half year. The financial impact has been explained above.
IFRS: the Group's results for the period commencing 31 December 2005 will be
the first reported under International Financial Reporting Standards.
Outlook
Market conditions are undoubtedly tough for retailers, many of whom have
announced reductions in year on year sales. Our management approach is to
provide very strong marketing and promotional support at the property level
which increases footfall and dwell time and takes an increased proportion of the
spend within the catchment.
Our shopping centres have fared well as a result of this and we have found that
vacancies created by tenant failures have generally been quickly taken up, often
at higher rental levels.
We have not experienced any significant problems in our leisure properties and
overall are seeing increased rental values across our portfolio. When one adds
to this the regeneration efforts of our teams in reconfiguring our properties to
accommodate current market needs, our outlook is positive.
The investment market remains strong for the right retail property, and we have
seen investment yields fall by a further 0.2% over the last six months. We are
well aware that investment yields cannot continue falling indefinitely, and we
are also focusing on the size and quality of our recurring cashflows, which will
stand the business in good stead in a tougher economic climate.
Our business model is working well and we are looking forward to further growth
during the remainder of 2005.
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 2005 which comprises the consolidated profit and
loss account, the consolidated statement of total recognised gains and losses,
the reconciliation of movements in equity shareholders' funds, the consolidated
balance sheet, the summary cash flow statement and related notes 1 to 19. 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
policies 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 International Standards on Auditing (UK and
Ireland) 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 2005.
Deloitte & Touche LLP
Chartered Accountants
London
20 September 2005
Consolidated profit and loss account
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
Notes £000 £000 £000
Turnover: Group income and share of joint ventures' turnover 38,836 28,494 69,030
Less: Share of joint ventures' turnover (4,054) (3,328) (6,658)
Group turnover 34,782 25,166 62,372
Cost of sales (3,722) (3,935) (7,008)
Gross profit 31,060 21,231 55,364
Profit on sale of trading and development properties 3 3,119 40 327
Exceptional Group restructuring costs - - (1,994)
Other administrative costs (14,171) (13,749) (27,923)
Group operating profit 20,008 7,522 25,774
Share of operating profit in joint ventures and associates 9a 17,282 15,364 30,574
Total operating profit 37,290 22,886 56,348
Income from other fixed asset investments - - 445
Profit/(loss) on sale of investment properties and 233 185 (1,771)
investments
1,971 9,688 13,779
Profit on sale of investment properties in associates and
joint ventures
Profit on ordinary activities before interest 39,494 32,759 68,801
Interest receivable and similar income 1,176 709 1,872
Interest payable and similar charges 4
- Group (4,569) (3,278) (7,389)
- Share of associates (13,279) (9,664) (21,533)
- Share of joint ventures (2,979) (3,089) (7,493)
- Exceptional premium paid on buy back of Convertible (46,918) - (8,217)
Unsecured Loan Stock
(67,745) (16,031) (44,632)
(Loss)/profit on ordinary activities before taxation 2 (27,075) 17,437 26,041
Taxation credit/(charge) on ordinary activities 5 9,387 (4,495) (5,852)
(Loss)/profit on ordinary activities after taxation (17,688) 12,942 20,189
Equity dividends paid and payable (4,880) (3,117) (9,016)
(Loss)/profit retained in the period 13 (22,568) 9,825 11,173
(Loss)/earnings per share 6 (26.3p) 20.9p 32.2p
(Loss)/earnings per share - diluted 6 (26.3p) 18.1p 28.4p
Consolidated statement of total recognised gains and losses
(Unaudited) (Unaudited) (Audited)
6 months to Restated Period to
30 June 6 months to 30 December
2005 30 June 2004 2004
Note £000 £000 £000
Profit before tax and exceptional items 19,843 17,437 36,252
Exceptional items (46,918) - (10,211)
_______ ______ _______
(Loss)/profit before tax (27,075) 17,437 26,041
Movements in revaluation reserve:
Revaluation of investment properties 7,427 7,142 16,371
Revaluation of other fixed assets 390 240 280
Revaluation of properties held in joint ventures
and associates 36,115 42,502 105,358
Gain on deemed disposals 114 - -
Total gains and losses before tax 16,971 67,321 148,050
Tax shown in profit and loss account 9,387 (4,495) (5,852)
Tax on revaluation surplus realised - (5,677) (6,185)
Total tax charge 9,387 (10,172) (12,037)
Total recognised gains and losses for the period 26,358 57,149 136,013
Return on equity for the period 12 5.3% 15.6% 37.0%
Return on equity before exceptional items for the period 12 12.0% 15.6% 39.0%
Reconciliation of movements in equity shareholders' funds
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Year to
30 June 30 June 31 December
2005 2004 2004
£000 £000 £000
(Loss)/profit on ordinary activities after taxation (17,688) 12,942 20,189
Equity dividends paid and payable (4,880) (3,117) (9,016)
(Loss)/profit retained in the period (22,568) 9,825 11,173
Share capital and share premium issued in period (net of 49,548 1,437 1,870
expenses)
Other recognised gains and losses relating to the period 44,046 44,207 115,824
Purchase of own shares - (3,285) (3,285)
LTIP credit in respect of profit and loss charge 1,100 988 1,829
Net increase in equity shareholders' funds 72,126 53,172 127,411
Opening equity shareholders' funds 494,537 367,126 367,126
Closing equity shareholders' funds 566,663 420,298 494,537
Consolidated balance sheet
(Unaudited) (Unaudited) (Audited)
As at As at As at
30 June 30 June 30 December
2005 2004 2004
Notes £000 £000 £000
Fixed assets
Intangible assets 7 11,603 12,754 12,179
Investment property assets 8 112,523 60,547 82,938
Other fixed assets 13,018 12,533 12,500
137,144 85,834 107,617
Investment in joint ventures:
share of gross assets 155,672 152,631 150,644
share of gross liabilities (106,511) (112,752) (103,902)
9c 49,161 39,879 46,742
Investment in associates 9b 506,543 418,311 477,092
692,848 544,024 631,451
Current assets
Property assets 8 15 8,184 8,314
Debtors - amounts falling due after more than one year 21,205 11,155 3,904
Debtors - amounts falling due within one year 56,636 23,896 46,350
Cash at bank and in hand 5,570 4,390 4,427
83,426 47,625 62,995
Creditors: amounts falling due within one year (44,463) (35,555) (50,404)
Net current assets 38,963 12,070 12,591
Total assets less current liabilities 731,811 556,094 644,042
Creditors: amounts falling due after more than one year (159,579) (108,819) (127,302)
Convertible Subordinated Unsecured Loan Stock (4,580) (24,543) (20,372)
Provision for liabilities and charges - (2,434) (1,831)
Net assets 2 567,652 420,298 494,537
Capital and reserves
Called up share capital 13 7,068 6,381 6,404
Share premium account 13 216,235 166,941 167,351
Revaluation reserve 13 289,549 175,042 247,197
Other reserves 13 1,849 164 1,145
Profit and loss account 13 51,962 71,770 72,440
Equity shareholders' funds 566,663 420,298 494,537
Equity minority interests 14 989 - -
Capital Employed 567,652 420,298 494,537
Net assets per share 11 816p 677p 793p
Net assets per share - adjusted fully diluted 11 799p 596p 710p
Summary cash flow statement
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
Notes £000 £000 £000
Net cash inflow/(outflow) from operating activities 15 5,829 (8,085) 10,950
Distributions received from joint ventures 2,760 23,596 23,852
Distributions received from associates 3,150 6,295 9,137
Returns on investments and servicing of finance (4,478) (4,080) (9,346)
Taxation 7 (6,349) (9,613)
Capital expenditure and financial investment (13,398) 14,626 7,757
Acquisitions, disposals and exceptional items (3,665) (15,603) (20,278)
Equity dividends paid (5,900) (3,113) (6,226)
Cash (outflow)/inflow before financing (15,695) 7,287 6,233
Financing:
Issue of ordinary share capital 49,548 1,437 1,870
Purchase of own shares - (3,473) (3,285)
Purchase of Convertible Unsecured Loan Stock (62,755) - (12,433)
Cash inflow/(outflow) from debt financing 30,045 (5,336) 7,567
Increase/(decrease) in cash in the period 1,143 (85) (48)
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 30 December
2005 2004 2004
£000 £000 £000
Increase/(decrease) in cash in the period 1,143 (85) (48)
Cash (outflow)/inflow from debt financing (14,208) 5,336 (3,351)
Change in net debt resulting from cash flows (13,065) 5,251 (3,399)
Net debt at beginning of period (134,238) (130,839) (130,839)
Net debt at end of period (147,303) (125,588) (134,238)
Analysis of net debt (Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
Cash at bank 5,570 4,390 4,427
Debt due within one year (200) (1,700) (200)
Debt due after one year (152,673) (128,278) (138,465)
Net debt (147,303) (125,588) (134,238)
At 31 December
2004 Cash flows At 30 June 2005
£000 £000 £000
Cash at bank and in hand 4,427 1,143 5,570
Debt due within one year (200) - (200)
Debt due after one year (118,039) (30,045) (148,084)
Convertible Unsecured Loan Stock (20,426) 15,837 (4,589)
Total (134,238) 13,065 (147,303)
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 30
December 2004.
The comparative figures represent the Group's results and cash flows for the
period from 1 January 2004 to 30 June 2004 and for the period from 1 January
2004 to 30 December 2004.
The comparative figures for the period ended 30 December 2004 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 period ended 30 December 2004 is unqualified and did
not contain a statement under Companies Act 1985 sections 237 (2) or (3).
2. Segmental analysis
6 months to
Property Property Exceptional 30 June 2005 6 months to
Management Investment Snozone and Other Total 30 June 2004
£000 £000 £000 £000 £000 £000
Management fees 10,929 10,929 8,739
Net rents 25,056 25,056 20,360
Snozone income 4,741 4,741 4,444
Management cost (5,539) (1,464) (3,701) (10,704) (9,822)
Net interest expense (19,651) (19,651) (15,323)
Goodwill amortisation (576) (576) (575)
Recurring pre-tax profit 4,814 3,941 1,040 9,795 7,823
Performance fees 17,410 17,410 11,155
Cost of Performance fees (6,073) (6,073) (4,408)
Variable management expense (6,591) (6,591) (5,836)
Profit on disposals 5,302 5,302 9,913
Exceptional items (46,918) (46,918) (1,210)
Profit/(loss) before tax 15,633 3,170 1,040 (46,918) (27,075) 17,437
Revaluation surplus 44,046 44,046 49,884
Taxation (2,361) (1,993) (335) 14,076 9,387 (10,172)
Total return 13,272 45,223 705 (32,842) 26,358 57,149
Net assets/(liabilities) at 47,040 520,642 (30) - 567,652 420,298
30 June 2005
CRPM earns performance fees on the outperformance of the Funds. The performance
fees earned in the period to 30 June 2005, are £17.4m (30 June 2004: £11.2m).
Capital & Regional's property investment business bears a share of the cost of
the performance fees being £6.1m (30 June 2004: £4.4m). Performance fees
recognised in the period to 30 June 2005, are receivable by CRPM on 1 December
2006.
Included within property investment is £6.8m of net assets and £0.1m of profit
before tax arising from operations in Germany. The remainder of the Group's
operations are in the UK.
The performance fee income reflected is consistent with the cost of performance
fees in the Mall LP, Junction LP and X-Leisure LP accounting shown in note 9b.
The indirect expenses are not split between operations because the directors
believe it is not practical.
3. Profit on sale of trading and development properties
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
Net sale proceeds 11,819 - -
Cost of sales (8,700) 40 327
Profit on sale 3,119 40 327
4. Interest payable and similar charges
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
Bank loans and overdrafts 4,138 3,462 7,342
Other loans 431 877 1,612
4,569 4,339 8,954
Capitalised in period - (1,061) (1,565)
4,569 3,278 7,389
Exceptional premium paid on buyback of CULS 46,918 - 8,217
Share of associates 13,279 9,664 21,533
Share of joint ventures 2,979 3,089 7,493
67,745 16,031 44,632
5. 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 Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
Current tax
UK corporation tax 648 4,780 7,369
Adjustment in respect of prior years 424 (518) (1,147)
Share of joint ventures tax - - -
Total current tax 1,072 4,262 6,222
Deferred tax
Origination and reversal of timing differences (10,459) 233 (370)
Total taxation (credit)/charge (9,387) 4,495 5,852
Unprovided deferred tax 7,505 2,952 4,200
The loss for the period to 30 June 2005 arises from the exceptional costs
incurred in the repurchase of the CULS. We have recognised a deferred tax asset
of £7.7m relating to the exceptional loss, which is expected to be utilised over
the next two years.
During 2004, a significant part of the Group's property interests was
transferred offshore and the Auchinlea Partnership 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 deferred tax liability in the
accounts at 31 December 2003 in relation to these assets was £32.2 million.
6. (Loss)/earnings per share
Six months to 30 June 2005 (Unaudited)
(Loss) Number of (Loss)
£000 Shares per share
Basic and diluted (17,688) 67,214,633 (26.3p)
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
Period to 30 December 2004 (Audited)
Earnings Number of Earnings
£000 shares per share
Basic 20,189 62,727,988 32.2p
Exercise of share options - 625,543
Conversion of Convertible Unsecured Loan Stock 1,250 12,183,118
Diluted 21,439 75,536,649 28.4p
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.
7. Intangible assets
Goodwill
Cost £000
At 31 December 2004 and 30 June 2005 14,492
Amortisation
At 31 December 2004 2,313
Charge for the period 576
At 30 June 2005 2,889
Net book value
At 30 June 2005 11,603
At 31 December 2004 12,179
8. Wholly owned property assets
Investment Other fixed Trading Total
property property property property
assets assets assets assets
£000 £000 £000 £000
Cost or valuation
As at 31 December 2004 82,938 12,000 8,314 103,252
Refurbishment and development expenditure (964) - 12 (952)
Amortisation of short leasehold properties (134) (40) - (174)
Acquisitions 23,256 - - 23,256
Disposals - - (8,311) (8,311)
Revaluation 7,427 390 - 7,817
As at 30 June 2005 112,523 12,350 15 124,888
The property assets were valued at 30 June 2005, as follows:
Valuer Basis of valuation £000
Group properties DTZ Debenham Tie Leung Market value 4,406
CB Richard Ellis Limited Market value 990
Directors' valuations Market value 22,801
King Sturge Market value 89,120
117,317
Less: unamortised tenant incentives (4,794)
Total fixed property assets (as per balance 112,523
sheet)
Other fixed assets DTZ Debenham Tie Leung Market value 12,350
Total property assets 124,873
Properties held by joint ventures
Xscape Milton Keynes Partnership DTZ Debenham Tie Leung Market value 91,300
Xscape Castleford Partnership DTZ Debenham Tie Leung Market value 70,500
Properties held by associates
The Mall Limited Partnership DTZ Debenham Tie Leung Market value 2,316,000
The Junction Limited Partnership King Sturge Market value 1,264,000
X-Leisure Limited Partnership Jones Lang LaSalle Market value 634,000
The independent property valuations as at 30 June 2005, 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.
Included within directors' valuations is an amount of £22,581,000 being the
value of the Hahn portfolio, which was acquired shortly before 30 June 2005.
9. Associates and joint ventures
9a. Share of operating profit
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
Associates 14,617 13,182 26,181
Joint ventures 2,665 2,182 4,393
17,282 15,364 30,574
9b. Associates
(Unaudited) (Unaudited)
The Mall The Junction X-Leisure Total to 30 Total to 30
LP LP LP June 2005 June 2004
£000 £000 £000 £000 £000
Profit and loss account (100%)
Turnover 72,353 18,494 20,348 111,195 84,533
Property expenses (12,960) (608) (1,924) (15,492) (10,282)
Net rental income 59,393 17,886 18,424 95,703 74,251
Fund and property management expenses (25,258) (9,031) (2,265) (36,554) (24,467)
Administrative expenses (600) (584) (248) (1,432) (1,344)
Share of joint venture's operating profit 4,327 1,488 - 5,815 1,798
Operating profit 37,862 9,759 15,911 63,532 50,238
(Loss)/profit on disposal of investment (51) 383 89 421 57
properties
Net interest payable (28,718) (12,372) (12,735) (53,825) (35,495)
Profit/(loss) before and after tax (100%) 9,093 (2,230) 3,265 10,128 14,800
Balance sheet (100%)
Investment properties and joint ventures 2,313,894 1,254,854 632,961 4,201,709 2,917,657
Current assets 98,392 35,176 42,619 176,187 138,732
Current liabilities (107,158) (38,743) (32,433) (178,334) (220,643)
Borrowing due in more than one year (1,125,729) (633,998) (385,278) (2,145,005) (1,292,551)
Net assets (100%) 1,179,399 617,289 257,869 2,054,557 1,543,195
C&R interest at period end 26.31% 27.32% 10.81%
Group share of
Operating profit 10,195 2,666 1,756 14,617 13,182
(Loss)/profit on disposal of investment (14) 105 10 101 16
properties
Net interest payable (7,736) (3,380) (1,406) (12,522) (9,173)
Profit/(loss) for the period 2,445 (609) 360 2,196 4,025
Revaluation for the period 16,399 13,984 1,237 31,620 40,164
Investment properties and joint ventures 608,786 342,826 68,423 1,020,035 763,838
Current assets 25,887 9,610 4,607 40,104 35,972
Current liabilities (28,194) (10,584) (3,506) (42,284) (41,381)
Borrowing due in more than one year (296,179) (173,208) (41,649) (511,036) (339,824)
Associate net assets 310,300 168,644 27,875 506,819 418,605
Unrealised profit on sale of property to (276) - - (276) (294)
associate
Group share of associate net assets 310,024 168,644 27,875 506,543 418,311
9c. Joint ventures
Xscape Xscape Xscape
Milton Keynes Castleford Braehead Auchinlea
Partnership Partnership Partnership Partnership
£000 £000 £000 £000
Profit and loss account (100%)
Turnover 2,323 1,701 - 689
Property expenses (429) (881) - (43)
Net rental income 1,894 820 - 646
Fund and property management expenses (100) (100) - -
Administrative expenses (84) (66) - (19)
Operating profit 1,710 654 - 627
Profit on disposal of investment properties - - - 3,742
Net interest payable (1,579) (1,572) - (334)
Profit/(loss) before tax 131 (918) - 4,035
Taxation and minority interests 105 - - -
Profit/(loss) after tax (100%) 236 (918) - 4,035
Balance sheet (100%)
Investment properties 91,048 67,058 27,647 -
Current property assets - - - -
Current assets 3,604 5,398 1,061 12,994
Current liabilities (3,165) (4,063) (5,554) (6,677)
Borrowing due in more than one year (46,800) (48,793) (14,658) -
Net assets (100%) 44,687 19,600 8,496 6,317
C&R interest at period end 50% 66.7% 50% 50%
Group share of
Turnover 1,161 1,134 - 345
Operating profit 855 436 - 314
Profit on disposal of investment properties - - - 1,871
Net interest payable (789) (1,048) - (167)
Profit/(loss) before tax 66 (612) - 2,018
Taxation and minority interests 52 - - -
Profit/(loss) after tax 118 (612) - 2,018
Revaluation for the period 3,456 1,039 - -
Investment properties 45,524 44,728 13,824 -
Current property assets - - - -
Current assets 1,802 3,600 530 6,497
Current liabilities (1,582) (2,717) (2,777) (3,338)
Borrowing due in more than one year (23,400) (32,544) (7,329) -
Group share of joint venture net assets 22,344 13,067 4,248 3,159
(Unaudited) (Unaudited)
Total Total
Morrison Merlin Others to 30 June 2005 to 30 June 2004
£000 £000 £000 £000
Profit and loss account (100%)
Turnover 2,827 - 7,540 6,288
Property expenses (665) - (2,018) (1,685)
Net rental income 2,162 - 5,522 4,603
Fund and property management expenses - - (200) (100)
Administrative expenses (51) 12 (208) (291)
Operating profit 2,111 12 5,114 4,212
Profit on disposal of investment properties - - 3,742 19,343
Net interest (payable)/receivable (1,815) 10 (5,290) (5,545)
Profit before tax 296 22 3,566 18,010
Taxation and minority interests - - 105 (1,400)
Profit after tax (100%) 296 22 3,671 16,610
Balance sheet (100%)
Investment properties - - 185,753 140,263
Current property assets 72,500 193 72,693 72,500
Current assets 4,832 511 28,400 69,913
Current liabilities (3,088) (654) (23,201) (51,806)
Borrowing due in more than one year (62,500) - (172,751) (156,615)
Net assets (100%) 11,744 50 90,894 74,255
C&R Interest at period end 50%
Group share of
Turnover 1,414 - 4,054 3,311
Operating profit 1,055 5 2,665 2,182
Profit on disposal of investment properties - - 1,871 9,672
Net interest (payable)/receivable (907) 13 (2,898) (3,026)
Profit before tax 148 18 1,638 8,828
Taxation and minority interests - - 52 (700)
Profit after tax 148 18 1,690 8,128
Revaluation for the period - - 4,495 2,338
Investment properties - - 104,076 80,382
Current property assets 36,250 97 36,347 36,250
Current assets 2,416 404 15,249 35,999
Current liabilities (1,365) (209) (11,988) (26,543)
Borrowing due in more than one year (31,250) - (94,523) (86,209)
Group share of joint venture net assets 6,051 292 49,161 39,879
10. Convertible Subordinated Unsecured Loan Stock
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
At beginning of the period 20,426 24,642 24,642
CULS purchased and cancelled in the period (15,837) - (4,216)
4,589 24,642 20,426
Unamortised loan issue costs due after one year (9) (99) (54)
4,580 24,543 20,372
Unamortised loan issue costs due within one year (91) (91) (91)
4,489 24,452 20,281
The Group has made the following CULS repurchases
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
Total repurchase cost 62,755 - 12,433
Nominal value repurchased (15,837) - (4,216)
Exceptional loss 46,918 - 8,217
The Convertible Subordinated Unsecured Loan Stock ("CULS") may be converted by
the holders of the stock into 51.42 (2004: 51.42) ordinary shares per £100
nominal value CULS in any of the years 1997 to 2015 inclusive, representing a
conversion price of 194p (2004: 194p) per ordinary share. The Company has the
right to redeem at par the CULS in any year from 2006 to 2016. The CULS are
unsecured and are subordinated to all other forms of unsecured debt but rank in
priority to the holders of the ordinary shares in the Company. The CULS carry
interest at an annual rate of 6.75%, payable in arrears on 30 June and 30
December in each year.
In accordance with FRS 4 "Financial instruments" the CULS are shown net of its
unamortised loan issue costs.
In accordance with FRS 4 "Financial instruments" the CULS are shown net of its
unamortised loan issue costs.
11. Net assets per share
As at 30 June 2005 (Unaudited)
Net assets Number of Net assets
£000 shares per share
As per the balance sheet 566,663 70,679,578
Own shares held (1,244,771)
Net assets per share 566,663 69,434,807 816p
Conversion of CULS (net of unamortised issue costs) 4,489 2,359,755
Exercise of share options 1,691 702,071
Capital allowances deferred tax provision 6,416 -
Adjusted fully diluted 579,259 72,496,633 799p
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 December 2004 (Audited)
Net assets Number of Net assets
£000 shares per share
As per the balance sheet 494,537 64,039,578
Own shares held - (1,688,411)
Net assets per share 494,537 62,351,167 793p
Conversion of CULS (net of unamortised issue costs) 20,281 10,503,109
Exercise of share options 1,897 782,071
Capital allowances deferred tax provision 5,807 -
Adjusted fully diluted 522,522 73,636,347 710p
12. Return on equity
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
Total recognised gains and losses 26,358 57,149 136,013
Opening equity shareholders' funds 494,537 367,126 367,126
Return on equity 5.3% 15.6% 37.0%
Exceptional items (net of tax) 32,842 - 7,148
Total recognised gains and losses before exceptional 59,200 57,149 143,161
items
Return on equity before exceptional items 12.0% 15.6% 39.0%
13. 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 2004 6,404 167,351 247,197 4,289 (3,144) 72,440 494,537
Issue of share capital 664 48,884 - - - - 49,548
Revaluation of investment properties & - - 7,817 - - - 7,817
other fixed assets
Share of revaluation of JVs & - - 36,229 - - - 36,229
associates
Realised on disposal of investment
properties and on
- - (1,694) - - 1,694 -
dilution of interest in associates
Credit in respect of LTIP charge - - - - - 1,100 1,100
Amortisation of cost of own shares - - - - 704 (704) -
(Loss)/profit for the period - - - - - (22,568) (22,568)
As at 30 June 2005 7,068 216,235 289,549 4,289 (2,440) 51,962 566,663
14. Minority Interest
The minority interest arises as a result of Hahn's investment in the German
portfolio and represents 14.6% of the interest in the portfolio.
15. Reconciliation of net cash (outflow)/inflow from operating activities
(Unaudited) (Unaudited) (Audited)
6 months to 6 months to Period to
30 June 30 June 30 December
2005 2004 2004
£000 £000 £000
Group operating profit 20,008 7,522 25,774
Profit on sale of trading and development properties (3,119) (40) (327)
16,889 7,482 25,447
Depreciation of other fixed assets 150 160 384
Amortisation of short leasehold properties 134 134 268
Amortisation of tenant incentives 486 (11) (763)
Amortisation of goodwill 576 575 1,151
Profit on disposal of fixed assets (1) - 1
(Increase) in trade debtors, other debtors and prepayments (16,240) (13,002) (29,538)
Increase/(decrease) in trade creditors, other creditors,
taxation and social security and accruals
2,735 (4,537) 12,169
Non cash movement relating to the LTIP
1,100 1,114 1,831
Net cash inflow/(outflow) from operating activities 5,829 (8,085) 10,950
16. 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 30 December
2005 2004 2004
£000 £000 £000
Fixed and swapped loans - on balance sheet 85 2,477 1,242
Group share of associates (9,271) 3,129 (810)
Group share of joint ventures (302) 1,139 (110)
Total (9,488) 6,745 322
(Decrease)/increase in net assets net of tax at 30% (2004: (6,642) 4,722 225
30%)
The change from £4.7m surplus to £6.6m deficit arises because the value of
medium term interest rate swaps have fallen during the period.
17. International Financial Reporting Standards
The Group's accounts for the year ended 30 December 2006 will be prepared under
IFRS. The interim results for the half year ended 30 June 2006 will therefore
be the first set of results published under IFRS. The IFRS conversion project
is progressing and we will update shareholders at the year end.
18. 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 of Directors on 20 September 2005.
19. Interim Dividend
The ex-dividend date is 28 September 2005 and the dividend payment date is 14
October 2005.
Additional information (Neither audited nor reviewed)
Property under management 30 June 2005 30 December 2004
£m £m
Investment properties 117 83
Trading properties - 8
Mall Fund 2,316 2,099
Junction Fund 1,264 1,010
Leisure Funds 634 597
Other joint ventures 262 226
Total 4,593 4,023
Fund Portfolio information at Junction
30 June 2005 Mall Fund Fund X-Leisure Fund
Number of core properties 22 19 16
Number of tenants 2,179 237 285
Square feet (000) 7,179 3,810 2,869
Properties at market value £2,316m £1,264m £634m
Initial yield 5.45% 3.70% 5.99%
Equivalent yield 6.04% 5.34% 6.71%
Vacancy rate 5.0% 3.90% 1.70%
Net rental income (per annum) £131.4m £51.9m £40.2m
Estimated rental income (per annum) £160.2m £70.1m £45.2m
Rental increase (ERV) 2.46% 5.00% 0.69%
Reversionary percentage 10.88% 5.29% 6.66%
Loan to value ratio 51.40% 50.30% 61.33%
Underlying valuation change since 30 December 2004 3.67% 4.70% 2.60%
Property level return 6.00% 6.60% 6.30%
Geared return 6.70% 8.13% 8.20%
Unit price (£1.00 at inception) £1.8473 £2.0136 £1.2204
C&R share 26.31% 27.32% 10.81%
Note:
1. Properties under management include tenant incentives which are transferred
to current assets for accounting purposes.
Glossary of terms
Adjusted fully diluted NAV per share includes the Market value is an opinion of the best price at which
effect of those shares potentially issuable under the the sale of an interest in the property would complete
CULS or employee share options. It excludes the unconditionally for cash consideration on the date of
capital allowances deferred tax provision. 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 Net assets per share (NAV) are shareholders' funds
to crystallise in practice and are therefore excluded divided by the number of shares held by shareholders at
when arriving at adjusted fully diluted NAV per share. the period end, excluding own shares held.
Contingent tax liability is the unprovided further Passing rent is the gross rent, less any ground rent
taxation which might become payable if the Group's payable under head leases.
investments and properties were sold at their balance
sheet values net of any tax losses which have not been
recognised in the balance sheet.
Return on equity is the total return, including
revaluation surplus, divided by opening equity plus
time weighted additions to share capital, excluding
CRPM Capital & Regional Property Management Limited is share options exercised, less reductions in share
a subsidiary company of Capital & Regional plc and capital.
earns the management and performance fees arising from
Capital & Regional's interests in the Funds.
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.
This information is provided by RNS
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Monday, 20th May 2024
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